TSX, S&P to follow gold initiative with launch of global mining index

TSX Group Inc. and Standard & Poor's Corp. will launch a global index of the world's biggest mining stocks, building on their launch last year of a global gold index.

TSX Group, which runs the Toronto Stock Exchange, said yesterday it expects the S&P/TSX global mining index to launch in June. The component companies of the index haven't yet been determined, but the index "will track leading international mining issuers," the company said in a news release.

The index will initially be composed of the biggest mining stocks listed on North American exchanges. But that won't leave out big overseas publicly traded mining companies, as most of them have American depositary receipts listed on the New York Stock Exchange.

"With commodity prices strong and increased interest in this asset class, real-time information on global mining issues is critical," Steve Rive, vice-president of Canadian index operations for S&P, said in the same release.

In an interview, Mr. Rive said the index will reflect the global nature of the mining industry, and the fact that the underlying commodities trade on a global basis.

"In addition to bringing additional liquidity to mining listed issuers, it is expected structured products will also be created to serve investors in the markets," TSX Group said. It's those products, such as exchange-traded funds and derivatives linked to the index, that make the new index a money maker for S&P and TSX Group. Anyone wishing to launch such a product would pay licensing fees to the two partners who own the index. TSX and S&P also expect to sell data products and services to clients who want to access or reproduce the index.

TSX Group spokesman Steve Kee said the new index will not replace the existing S&P/TSX capped metals & mining index, which tracks TSX-traded mining stocks. This differs from the S&P/TSX global gold index, which was launched in December, and replaced the all-Canadian S&P/TSX capped gold index.

The new global index will also be considerably broader than the existing metals and mining index, both geographically and in terms of the range of miners included. While the current mining index is made up largely of base metal producers and excludes the big gold and coal miners, the new index will include gold, precious metals, base metals, coal, uranium and aluminum.

"It certainly was something that was missing," said Canaccord Adams mining analyst Orest Wowkodaw, noting that there hasn't been an effective way for investors to track the global mining sector.

TSX Group and S&P timed the announcement to coincide with the Prospectors & Developers Association of Canada conference, a major convention for the mining industry taking place in Toronto this week. The city has long been considered the global centre for the mining investment community -- 60 per cent of the world's public mining companies are listed on the TSX and TSX Venture exchanges, representing 1,274 companies with a combined market value of $322-billion -- and the TSX hopes the new global mining index will help further increase its business in the sector.

But while Toronto may have the bulk of public mining listings, the stocks that will dominate the new index will come from outside Canada. Based on market capitalization, the top seven stocks that would qualify for the index would all come from outside Canada, led by Australia's BHP Billiton Ltd. Alcan Inc., the biggest Canadian-based mining stock, would come in at No. 8, based on current market values.

Source : www.theglobeandmail.com