Commodity prices are up – some more than others – and confidence in the future seems higher than it has been in recent years, writes Laura Cornish.Nonetheless, the industry has definitely changed and the ability to secure cash will never be quite as easy. Investors are seeking greater certainty around return on investment and are shaky about where the market will be just six or 12 months from now. We remain on unstable ground in that regard.
But, and this is a big but, I am watching our African juniors push forward with gusto. Initial public offerings (IPOs) are on the rise and the latter half of this year has seen new listings – which if I’m not mistaken is nearly a 100% increase from the number of new listings achieved in 2016 (I refer specifically to Africa-focused mining companies here).
And Mining Review Africa’s timing could not have been more perfect to highlight this (our November edition will be distributed at the Mines & Money conference in London).
It seems London’s Alternative Investment Market (AIM) is attracting the most interest for said listings. Between August and October AIM has welcomed two new entrants – Altus Strategies and Cora Gold - and a third new player, AfriTin is looking to add its name to the list before the year ends.
London's big institutional investors are seen as more risk averse and this is the primary reason for new parties to consider this market.
“London is an excellent place to list if your business is focused on exploration in Africa – the city is well suited to Africa geographically and as a sophisticated market is well placed to finance larger projects requiring significant capital,” says Altus Strategies CEO Steve Poulton. Altus Strategies is an exploration company at heart and has over 10 projects across Africa which it is exploring at present.
Some may consider a new listing a risky move. I read an article recently noting that although six small mining companies have listed in London this year, four of those are now trading below their offer price (despite an increase in metal prices).
The article cited a senior MD at Macquarie who noted that “there isn’t a strong conviction that another sustainable cycle upwards is on the way” and he cautioned companies to explore mergers and acquisitions or hold off on a listing until more certainty around market conditions is known.
For now, it remains to be seen if new listings was the right action taken but time will tell. I hope it is – our industry has been struggling long enough and we need a market turnaround – at least one that inspires confidence in the rest of Africa as South Africa remains in political turmoil which is positioning the local industry for ruin.