A recent snapshot of 100 mining companies listed on the TSX and TSX Venture Exchange confirms that a mining super cycle, driven largely by growth in China, officially ended in 2013.
That's bad news for B.C., where a majority of Canada's 1,700 publicly-listed mining companies are headquartered.
The good news is that B.C. also has a thriving technology sector, and tech stocks are officially hot again.
"The knowledge-based industries have absolutely benefited from investors moving out of natural resources," said Graeme Falkowsky, managing director, corporate finance advisory, for Deloitte.
According to EY's recent Canadian Mining Eye Fourth Quarter 2013 report, the value of EY's Canadian mining index — a group of 100 mining companies listed on either the TSX or the TSX Venture Exchange – dropped 45% in 2013.
One need only look at the share value of publicly-traded high-tech companies like Vancouver's Avigilon Corp. (TSX:AVO) to see where some of that money might have gone. Avigilon's stock has nearly tripled in one year, putting its market cap at $1.3 billion. Even Ballard Power Systems Inc. (TSX:BLD) – which has never turned a profit since it was founded in 1979 and saw shares sink to a low of $0.59 at the beginning of 2013 – appears to be staging a comeback. Its share price hit $2.47 in January. The company says it's poised to break even for the first time in 27 years.
Another good indicator of the tech comeback is the tech-heavy Nasdaq.
"The Nasdaq, which is the best indicator of a growth market, is up almost 30% this year," Falkowsky said.
"We are showing about a $680 million public market financing activity in 2013 across the primary sectors of technology and IT, clean tech and also the life sciences sector," said Bill Tam, CEO of the BC Technology Industry Association.
"That's just in B.C."
A tech comeback on the heels of mining's decline is a movie B.C. has seen before, according to Harry Jaako, president of Vancouver venture capital firm Discovery Capital. In 2001, half of the $2 billion raised on the Canadian Venture Exchange (now the TSX Venture Exchange) went to junior technology companies.
"Mining was dead then, too," Jaako said.
But he added that, this time around, other sectors are also lacklustre. "Fixed income returns are terrible, derivatives suffer from a lack of interest rate volatility, bond markets are unattractive, energy prices are flat, housing is perhaps overvalued – which holds back new development – so what investment sector is left? Technology."
Renewed interest in "knowledge-based" industries – health care, biotechnology, clean tech and information and communication technology – has been fuelling mergers, acquisitions and initial public offerings.
One local example is Aquinox Pharmaceuticals Inc., which raised $18 million in April 2013 and at the end of January filed a prospectus to list on the Nasdaq.
The last B.C. biotech to list on the Nasdaq was OncoGenex Pharmaceutials Inc. (OGXI) in 2008. (Tekmira Pharmaceuticals Corp. [TSX:TKM] listed on the Nasdaq in 2010 but had been on the TSX since 2007.)
In mid-2013, UrtheCast Corp. (TSX:UR) – which recently put two high-definition Earth observation cameras on the International Space Station – went public through a reverse takeover valued at more than $46 million.
Around the same time, European entertainment giant RTL Group bought a 51% stake in Vancouver's BroadbandTV for $36 million, and in August 2013, HootSuite raised $165 million in series B financing. •
Increased liquidity has resulted in a flurry of acquisitions of and by B.C. technology companies. In January alone, there were several acquisitions:
- Burnaby's Digital Payment Technologies was acquired by T2 Systems for close to $30 million;
- Sierra Wireless (TSX:SW) acquired In Motion for US$21 million;
- HootSuite acquired uberVU (amount undisclosed);
- Vancouver's IQmetrix acquired Web Werkz (amount undisclosed);
- Vancouver's Gauge Mobile was acquired by Toronto's Juice Mobile (amount
undisclosed); and - Richmond's Transoft Solutions Inc. acquired Simtra AeroTech AB.
