Resource World Magazine

AUST R ALIAN UP DAT E The difference between Australian and Canadian juniors by Greg Barns Australian explorer Coventry Resources [CYY-TSXV; CVY-ASX], like others from down under, has listed on the TSXV. The company also consolidated its shares at a ratio of 1:5, reflecting the fact that the Canadian market likes companies which have small amounts of shares outstanding, in contrast to the Australian practice of having, in some cases of small juniors, over 1 billion shares. Coventry merged with an existing TSXV company and a share consolidation reduced outstanding shares from 240 million to 69 million. Why is there such a difference in shares of small Australian resource companies compared to their Canadian counterparts? In both jurisdictions, the way in which juniors issue shares is similar. A company looks at a project, gives the vendor shares and cash or simply shares. Raising capital is also similar. One goes to the market offering shares, often with a free warrant. What is different is the number of shares involved.  One reason for the difference is that JUNE 2013 in the case of the latter the rules governing the  float or Initial Public Offering (IPO) prescribe higher minimum numbers of shareholders and minimum holding of stock than the Canadian rules. The Australian Stock Exchange rules state that an IPO requires at least 400 shareholders, each holding a parcel of at least A$2,000 of shares, with at least 25% being held by persons who are not related parties of the company.  There is also a minimum offer price of A$0.20. These rules mean that the number of shares issued after a successful IPO is generally of the order of around 70 to 100 million, depending on the amount being raised at the IPO,  which is generally A$3-5 million. It's no wonder then that shares on issue climb over the first five years after an IPO as juniors raise exploration funds. The TSXV requirements for listing are $1,000,000 held by public shareholders, 1,000,000 free-trading public shares, 200 public shareholders with a board lot and no resale restrictions, 10% public float and 20% of issued and outstanding shares in the hands of public shareholders. The comparison between the rules on numbers of shares and shareholders tells the story as to how it is that ASX exploration and mining juniors are awash with shares. The large number of shares of Australian juniors often deters institutional investment, because of the dilution factor.  By contrast, it's not uncommon for Canadian juniors of a similar market capitalization to have funds on their register.  For Australian companies listing on the TSXV and which carry out a share consolidation, this is a major attraction. The optics to the investor of a share register that has thousands of investors holding not more than around 10% of a company's shares can be off putting, but if an institution or two has a sizeable stake in the company, that sends a signal that the company is a serious player. One wonders if the rules were harmonized would that lead to many more dual listings and a better spread of investment opportunities for Australian and North American investors. n www.resourceworld.com 39

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