Categories: General Market Commentary
Topics: General Market Commentary

Smaller mining companies seek IPOs but deals remain modest

Smaller mining companies seek IPOs but deals remain modest

By Zandi Shabalala | LONDON
 

Stock market flotations of smaller mining and metals companies are set to pick up this year, although a return to the flood of deals five or six years ago remains unlikely while investors rebuild their bruised confidence in the sector.

A continued rally in metals prices is galvanizing some firms into raising capital on exchanges across the world to fund exploration and plow cash into existing projects, with others also preparing initial public offerings.

But with investors' memories fresh of a bloodbath in mining stocks in 2015, the firms' ambitions are modest: they are joining small-capital indexes or listing on junior markets in deals typically worth $10 million or less - far from Glencore's $10 billion flotation in 2011 when commodities were booming.

"We are at the early stages of a cyclical recovery so you would expect to see the first signs of resurgence in the IPO market," said Michael Rawlinson, Global co-head of Global Mining and Metals at Barclays.

So far this year, the bulk of IPOs have been in Australia, where nine mining companies have already filed to list their shares on the Australian Stock Exchange. That compares with 10 new issues for the whole of 2016.

Lee Downham, head of EY's global mining & metals transaction advisory services, said the small-cap indexes in Toronto, London and Australia would see the bulk of initial activity until investors built up the confidence for larger cash calls.

"The sector needs to regain shareholder confidence before the bigger fundraising takes place," he said.

Investors were stung when mining indexes in London, Australia and Toronto fell between 27 and 50 percent in 2015, with Anglo-American losing 75 percent of its value.

However, commodity prices began their revival last year, sending Anglo-American back up nearly 300 percent and making it the best performing blue chip in London, albeit from a low base.

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