Mining IPOs predicted to surge in 2010
03 February 2010
AIM listed mining companies managed to raise nearly £1 billion from investors last year ahead of what analysts reckon will be an opening of the floodgates for a fresh round of IPOs in 2010.
A report by business advisory firm Grant Thornton shows that AIM miners raised £958 million in secondary fundraisings during 2009 – a figure that soars to £12bn when mining groups on London’s Main market are counted. The secondary figures represent the best year ever, bar 2007, for AIM mines, with December proving to be the best month when £240 million was raised.
Despite the heady numbers, there were just two London listings by miners during the year, meaning that the surging flow of investor cash was mostly confined to companies that were already on the market. Gerry Beaney, Grant Thornton’s head of capital markets, believes the market's strong preference for secondary fundraisings reflected a more risk-averse approach on the part of investors.
“They were willing or perhaps obliged to support their existing portfolio rather than invest in new companies,” he said. “Nevertheless, the fact that investors snapped up vast amounts of new equity by listed mining companies demonstrates their keen interest in the sector.”
Beaney says that following unprecedented activity in recent months, there is now an expectation that mining companies will raise record amounts of capital on global stock exchanges in 2010.
Renewed confidence
Of the two mining companies that managed to secure a listing in 2009, both were on AIM and together they raised a total of just £1 million. The performance reflected a generally dire admissions record for the market last year, which only recorded 36 new listings, raising a total of £740 million.
There was greater IPO activity among mining and metals companies in Australia, with ten IPOs on the Australian stock exchange raising approximately US$250 million, with US$18 billion raised through secondary issues. Busier still was the Toronto exchange which raised C$22 billion through equity financings.
However, Beaney is confident that the London Stock Exchange will increase its market share of IPOs because of its attractiveness to international investors who value its corporate governance standards and the transparency that they provide.
He added: “Even for exploration companies, the long term underlying fundamentals are strong. Once confidence returns to markets, there will come a point where the risk-weighted returns from investment in exploration projects will exceed the cost of capital. At that point, we can expect to see renewed IPO activity on AIM and on other world markets. After all, today's exploration company is tomorrow's producer.”
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