Mining happens all around the world, but at the corporate level, the industry is concentrated in Canada. It’s said that about 80% off all capital for mining projects is raised in Canada. This is due to a combination of history and Canada’s still huge resource wealth.
It’s like Hollywood is for movies. You don’t have to go there to make one, but it sure helps to be close to movie stars, professionals in various support industries, and pools of capital that are familiar with the industry.
This is why so many of the companies I invest in are Canadian. They trade on the Toronto Stock exchange. But I’m not Canadian and don’t live there. So, like many of my readers, I need to access the Canadian markets from the US.
A few Canadian companies do have US listings, but not many. The easiest way for US residents to buy stocks that only have Canadian listings is via the US OTC “pink sheet” market. Market makers buy the stocks in Canada and sell them in the US via these listings.
But I was taught that it’s best to avoid using the pink sheets. These secondary US listings are infamous for being the home of many shady offerings in the past. Perhaps more critical for those who know what they’re doing is that they have lower trading volumes. That can make it difficult to sell if there’s ever an urgent need to get out. Frankfurt “listings” are similar.
As it happens, my full-service broker has a system that buys Canadian stocks either in the US or Canada, whichever is cheaper. I have to admit that I’ve seen several times this year when his system got me cheaper shares in the US than I would have gotten in Canada. Once was when gold first fell below $1,300 this year, and the Canadian markets were closed. I was able to get the stock I wanted in the US.
So I’m modifying my position. The US OTC markets have their benefits. My broker tells me that they are much improved in terms of liquidity these days. This makes them a better option for some than I had appreciated.
But still, I’m glad my broker will be able to sell my Canadian shares in Canada if I ever need to exit in a hurry.
As a side note, I also have to say that I’m very pleased with the Robinhood trading platform I use for US stocks. It’s a bare-bones system that doesn’t give me access to the deeper market data my broker does. But it works flawlessly, and it’s free.
For anything more complicated, however, I’m happy to have an excellent broker on my side. (Click here to see my list of recommended brokers.)
