Mining Markets Set To Expand 2021 Trends Into 2022
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Market trends that experienced significant transformations in 2021 are likely to define the course of 2022 for international mining companies and investors, according to market expert Dean McPherson
As Head of Business Development for the Global Mining division of both the Toronto Stock Exchange and the TSX Venture Exchange, McPherson’s experience within the mining industry’s investment climate is quite extensive. His experience is particularly applicable to the movement of Canadian and American investments into mining jurisdictions in emerging and developing economies, such as those located in Latin America. “Latin America is our second largest region in terms of presence, with Mexico taking the largest representation.” In terms of magnitude, the investments that go through the McPherson’s exchanges rank fourth in capitalization, having raised US$56.9 billion in 2020, only surpassed by the US, UK and Hong Kong stock exchanges. The size of these investments is particularly relevant to the global mining landscape, as McPherson is quick to emphasize: “37 percent of the mining equity raised between 2016-2022 was through TSX/TSXV while 52 percent of global financing in mining in the same period was also through TSX/TSXV.”
When directing his expertise towards the current state of mining markets, McPherson identified five market trends that experienced definite change in 2021 which would likely show up again as leading factors in investment decisions for 2022. The first one was the market interest in ESG, which McPherson characterized as “becoming front and center of the investment decision center in 2021, and will likely continue to play that role and take a leading role in investment decisions in the sector in 2022.” McPherson explained that mining companies were responding positively to inquiries investors and the exchanges were making into their ESG practices, centering them within their business plans to address all concerns that could limit or qualify investment decisions. These inquiries were severely accentuated in 2021 and were likely to continue impacting the industry’s course in 2022.
The second trend places emphasis on environmental concerns and the impact surrounding climate change. 2021 was a key year for the mining industry’s environmental awareness, as McPherson notes that a number of key declarations and dialogues that took place in COP26 identified the industry’s key role in both the global carbon footprint as well as the energy transition that will prove necessary to address it. Additionally, global emission reduction targets are likely to drive an acceleration in demand for metals involved in the manufacturing of batteries, electrical infrastructure and EV components throughout 2022. As a result, mining investors will be spending the year favoring projects that can promise both an approach that could reduce the carbon footprint of mining operations while simultaneously prioritizing metals and minerals listed as applicable to the development of green technologies and products.
The third trend is commodity prices being driven by the current relationship between base metal supply and demand, which was significantly unbalanced in 2021 in a way that will continue to create a number of opportunities for investors well into 2022.
The fourth trend is the rise in M&A activity that was very much talked about in 2020 and 2021 continuing into 2022 as competition to secure supply lines that became fragile in the pandemic increases. McPherson provided the example of Australia, a jurisdiction characterized by companies that “used to work exclusively within their national borders but are now expanding and diversifying, particularly into markets in the Americas.” This trend is partially illustrated by the activity in the exchange in terms of new company listings, which McPherson describes in positive terms: “In 2021, 80 new mining companies listed, compared to 57 in 2020. Equity capital raised went up to US$10 billion against US$7.5 billion in 2020.”
The fifth and final trend concerned the impact of the pandemic, which McPherson predicted would continue to be a top-of-mind concern for investors throughout this year. While 2021 radically changed the outlook on this issue when compared to 2020, there is still a fundamental caution to how the market perceives the effect of COVID-19, especially after Omicron has replicated some of the shutdown procedures that characterized the pandemic’s early stages. In this sense, McPherson believes that “volatility will continue to loom large over the mining markets, despite the stability of other factors that underpin it.”