Increasing Stock Exchange Relevance for Mining Companies

Since its creation in 1994, the Mexican Stock Exchange (BMV) has increased by 300%, boasting an investment total of US$520.5 billion at the end of 2013. The BMV Extractive Index, based on mining and agricultural companies listed on the BMV, recorded a 29% drop in value by the end of January 2014 relative to January 2013. This drop has been largely accredited to the drop in metal prices, which severely affected companies such as Fresnillo and Minera Frisco. As the mining markets have begun to regain a measure of color in their cheeks, this drop subsided in 2014 as the Extractive Index saw an 8.1% rise over the course of the year. Despite this welcome news, the BMV still does not stand out as a preferred stock exchange for mining companies to raise their capital, unlike the Toronto Stock Exchange (TSX) which consistently succeeds in attracting players in this sector. To combat this trend, BMV has launched efforts to make it more attractive and easier for companies to become listed. “We have not been competitive enough, we have not created nor facilitated the access to the market,” says Pedro Zorrilla Velasco, Associate Director General of Corporate Services and Institutional Relations at the BMV.

Zorrilla Velasco states that not all companies need to be listed on the exchange, but he believes that the decision to not commit fully to the Mexican mining market should come as a result of strategic analysis as opposed to a lack of understanding about how the market works. This misunderstanding also stretches to how corporate governance can and should be implemented within the company. To overcome these barriers, the BMV is initiatively promoting the market and the instruments that it offers for companies to grow and access capital. The stock exchange has focused great efforts on the dissemination of information regarding corporate governance and institutionalization of companies, both of which are prerequisites for listing in the BMV. “The stock exchange can help a company maintain direction in order to profit from a well-defined strategic vision and strategic plan,” Zorrilla Velasco expresses. “Once a company is listed on the exchange it is obligated to meet certain commitments. Liquidity and stock price formation become important for the company as well.” Mining enterprises need to pay attention to market conditions when considering an Initial Public Offering (IPO). Due to market conditions, Zorrilla Velasco stresses that 2014 was not a successful year for IPOs, a situation which can affect the whole market. “IPOs are very important for providing the market with enough floating shares to assure reasonably good market activity,” he states. Taking this importance into consideration, the BMV assumes the task of preparing and structuring IPOs for those companies looking to list on the stock exchange. The future will tell if mining companies take this opportunity.