How important is the mining sector to Cormark Securities?

Cormark Securities (Cormark) is an independently owned institutional brokerage based in Toronto comprised of roughly 90 employees and covering a variety of industries. Our Canadian presence naturally makes mining a significant part of our franchise. For context, five of our 16 research analysts are focused on the sector, with two bankers also dedicated to the space. 

We pride ourselves on establishing relationships with companies early in their evolution and working with them to grow their story with our institutional client base. It is always a success for us when we can work with a new and/or overlooked company to raise awareness of an investment opportunity, fostering it through exploration, development, and production.

What trends are you seeing with regards to mining investment and finance?

Mining is cyclical and constantly evolving. That said, gold is a staple in this space and tends to consistently attract the widest investment base. Copper also garners foundational interest and is becoming even more topical with the growing electrification and green energy narratives. Other commodities come in and out of vogue, including the likes of graphite and rare earth metals. As of late, lithium has been very topical given its role in the evolving battery space. 

M&A activity has become a larger portion of our business recently. In the base metal industry, and mining sector in general, juniors often do not have the balance sheet to develop their projects, and so at some point require the help of a major. We are also seeing said majors take steps to grow organically by developing projects already within their own portfolios. However, these organic opportunities are finite and we anticipate established producers will inevitably have to look to acquisitions for growth, also remaining cognizant that many of the larger scale projects capable of ‘moving the needle’ for a major are in fact held by juniors. 

How do client backgrounds impact their mining investment strategies?

Given our clients’ institutional nature, they are market savvy. That said, we work with both resource-focused and generalist funds. The former typically have technical backgrounds in mine engineering or geology and are usually more comfortable looking to higher-risk exploration and development investment opportunities, whereas generalists tend to migrate towards established producers in an effort to gain leveraged macro exposure to a given commodity.

What is the relationship between retail and institutional investment in mining?

Interest in mining ebbs and flows and is often influenced by greater market trends. While the support of a cornerstone investment from a marquee institution can significantly bolster interest in a story from other investors, said investment is typically made with a longer-term horizon in mind. In the meantime, the other investors also look to daily liquidity as a sign of a stock’s health and mechanism to navigate a position. However, said liquidity, which is typically driven by generalist retail investors, can suffer when market attention is attracted to other sectors, for example technology.

Have you noticed any recent changes in the Canadian government's stance on foreign investment in the local mining industry? 

The government is definitely becoming more protective, albeit via measures that seemingly require greater clarity and consideration. It is understandable that the government would look to safe harbor projects located within Canada from certain foreign investment, but the treatment of projects owned by Canadian-listed companies that are located outside the country is controversial, in turn raising concern that companies may look to listings outside of Canada to facilitate foreign investment.

What markets are Cormark monitoring for the future?

Chile and Argentina are both markets of interest in the base metals space, particularly with respect to copper. The Vicuña District straddling said countries’ border has attracted major interest from the likes of BHP and Lundin Mining, aided in part by recent fiscal reform in Argentina. The district is clearly positioned to become one of the world’s next key sources of copper in a market facing a significant medium- to-longer-term supply deficit. Cognizant that global hunger for large scale developments entails significant capital consideration, we are interestingly seeing increased investment appetite from the Middle East.