It sure ain’t broke. In 2010 the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSX-V) attracted 208 new mining listings, compared to 75 for the ASX and 23 for AIM. Of those, a record 36 were international, an indication that foreign companies are increasingly attracted to the exposure the Toronto market can provide to mining-savvy investors and analysts.

Listed companies raised a total of $17.8 billion, down from $22.8 billion in 2009 but still well ahead of the next contender, the LSE, at $2.1 billon. Gold remained the dominant focus, with 41% of total market capitalization associated with the yellow metal. Potash was next, followed by uranium and copper.

Last year was an equally good year for investors in North American-listed companies (those listed for at least 12 months on TSX, NYSE or NASDAQ) as the S&P/TSX Global Mining Index surged 33.7%. The index slipped slightly in early 2011, with a March 24th YTD performance of negative 1.2% as uprisings in the Middle East, higher oil prices and a devastating earthquake in Japan rocked global markets.

Toronto-based Canada Lithium was particularly hard hit when the company announced that it had been overly optimistic in calculating resources for its $220 million development project in Quebec after closing a $126.5 million bought deal financing. Its shares plummeted 65% between January and the end of March.

“(Resource miscalculation) happens from time to time and it’s not good for the industry when it does,” observed Jay Kellerman, head of the global mining group at law firm Stikeman Elliot.

While the pace of mining listings declined in the first two months of 2011 to 23 from 30 during the same period in 2010, equity financings doubled on both markets. On the TSX-V, mining companies raised $1.1 billion before Feb 28th, up from $550 million in 2010, while companies listed on the senior exchange raised $2.3 billion, up from $1.2 billion the previous year. Half of the TSX value is attributed to Ivanhoe Mines Ltd $1.2 billion IPO.

Although it’s too soon to tell if the uptick in equity financings is the beginning of an annual trend, Ungad Chadda, senior VP of the Toronto Stock Exchange, attributes some of the renewed activity to companies finally raising money for exploration spending after a 15-year period when spending was almost stagnant.

Resistance to debt on the wane

Miners are notoriously reluctant to take on debt because they have been burned by sudden downturns in metals markets so many times in the past (it was just a couple of years ago that a heavy debt burden brought the mighty Teck Corp. to its knees, for instance).

But shareholders are increasingly asking managers to use public and bank debt instead of equity to finance projects and they are responding, says Egizio Bianchini, co-head of BMO Capital Markets Corp.’s metals and mining group,

“Debt is a bad word in this sector, but we have a whole new generation of investors that are pushing companies to bring their balance sheets more in line with other industrial sectors.”

One of the most controversial debt-financed deals is Perth-based Equinox Minerals $4.8-billion hostile takeover bid for Toronto-based Lundin Mining Corp. Lundin rejected the bid on the grounds that the price is too low, the geopolitical risk too high, and the US$3.2 billion in new debt Equinox plans to take on untenable.

Lundin preferred a friendly merger with its neighbour down the street, Inmet Mining Corp, but that $9 billion deal was called off when the Panamanian government insisted that Inmet use gas instead of coal to power its Cobre Panama copper project, altering the economics of the prize asset.

And in a market where paying a premium for assets has become the norm, a merger of equals can be a hard sell to shareholders.

“When you have a lot of hungry wolves and you are trying to do a deal with low premiums, that’s always risky,” says Bianchini. “You have to have another form of protection because you don’t have a premium to help you.”

Proxy voting firm Institutional Shareholder Services (ISS) advised Equinox shareholders to vote in favour of the hostile bid, saying the strategic rationale is sound, the risks apparently manageable and the corporate governance issues few. But just as Resource Calculator was going to press, the mighty Chinese miner Minmetals entered the fray with a $6.3-billion hostile bid for Equinox, representing a 33% premium to Equinox's share price. The Chinese have generally preferred passive interests in North American ventures, so the bid may signal a bolder, more aggressive approach by China to secure resources.

At press time, Lundin was seeking other potential buyers.