Alberta Exchange: smaller is better?

It may be the least visible of the four Canadian exchanges, but for junior mining companies trading on the Alberta Stock Exchange, smaller can sometimes be better.

Free from the red tape and bureaucratic style of the more prestigious Toronto and Vancouver Exchanges, the 74-year-old Alberta Exchange offers listed companies a more personalized hands-on approach to raising money.

The rules and regulations aren’t as stringent and you get fabulous service, said Paul Walker, president of Toronto-based San Paulo Explorations (ASE), one of 730 companies represented on the Alberta exchange.

“When you are doing a private placement, you talk to the person who makes the decisions and you tend to get an answer on the spot,” he said.

Listed on Alberta since 1983, San Paulo had only $25,000 in the bank and 200 shareholders when Walker applied for a listing. “It took about three weeks to get listed,” said the San Paulo president who expects to wait much longer before having his company listed on the Toronto exchange.

Founded to serve as a market place for securities in junior resource companies, the Alberta Stock Exchange is still dominated by junior mining companies. In 1987, resource companies accounted for about 35% of all new listings and approximately 51% of all listed companies.

Of the 870 issues (representing 730 companies) posted for trading on Dec 31, 170 were industrial, 345 were resource based, and 55 were combined resource and industrial. An additional 160 were Junior Capital Pool companies, according to the exchange.

While most of those listings are largely speculative in nature, the exchange is growing in size and stature. According to listings officer Marc Brener, the Alberta Stock Exchange has experienced a 50% increase in trading activity in each year since 1976.

In 1987, the Alberta Stock Exchange underwent unprecedented growth as both share volume and share value increased by more than 100% from the previous year. New company listings were up by over 200% to 370 from 1986 levels.

Brener attributed the increase in listed companies to a number of factors including a rebound in oil prices, flow-through share financing, the junior capital pool and the Alberta Stock Savings Plan (ASSP).

Since it was introduced in 1986, 21 issues have raised over $83 million in equity capital through the ASSP program, Brener said.

The Canadian Exploration and Development Incentive Program (CEDIP) has also benefited junior resource companies, said Brener. By May 19, 5,420 companies had applied for CEDIP which was set up by the federal government to assist in the development of resource properties.

Approximately 80% of applicants for the exploration portion of CEDIP were received from activity generated in Alberta. That compares with 14% from Saskatchewan, 3% from Ontario, 2% from B.C. and 1% from other provinces and territories.

In a bid to streamline its procedures to cope with a growing number of listings, the Alberta Exchange recently conducted an extensive review of its listing policies and procedures. The new policies were incorporated in a manual for use by companies and their advisors.

The ASE also adopted the standards set out in the securities commissions’ National Policies 2A and 2B for engineering reports submitted in connection with property acquisitions.

“Before the national policies were introduced, the Alberta Exchange had no guidelines relating to what information mining companies had to provide in their engineering reports,” said ASE legal counsel Gail Harding.

In another attempt to develop a more efficient marketplace, the ASE recently computerized the floor trading system. As a result, the system allows automated trade execution for approximately 50% of the listed issues.

Computer systems have also been developed to monitor unusual increases in share volumes and share prices and to assist in the early detection of trading irregularities.

Future development plans include a data base of listed company information for access by the public and the installation of remote trading terminals in the officers of securities firms.

While the Alberta Exchange offers its listed companies exposure to Western Canada, it tends to be ignored by foreign investors, said Walker. That is why Walker will apply this year to have his company listed on The Toronto Stock Exchange.

“When investors from outside Canada are attempting to invest in Canadian securities, they won’t look past the Toronto exchange, said Walker. “To foreign investors, it is the one with the highest visibility.”

Nevertheless, Walker says San Paulo will continue to be listed in Alberta. “The ideal situation is to be listed on both exchanges,” he said.