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Mining IPOs Head For Toronto

Isabel Turner And Erin Hamilton - Wed 21 Nov, 2007

So, what to do if you are a minnow, new boys on the block and an explorer to boot? According to E&Y, the guys are all packing their bags for Toronto. Minings share of Toronto's stock market is even greater than London's AIM market. Around two-fifths of the index - around 1,300, no less! So what if its reputation and prestige are not as great? The fact is, Toronto is offering the money! They are very open minded in Canada. Especially in uranium and diamond stocks! Investors are extremely gung-ho by London standards. And there seems to be lots of them. It's frontier territory out there!

No news, as I pointed out to Isabel, is good news. Announcements of new mining companies arriving onto London’s AIM market are less frequent than they have been for a while. Makes it all the easier to keep an eye on the existing community, I say.

Miners have been popping up from all over the place. High metal and diamond prices have been raising both hopes and viability on previously dud mines. Such exponential growth makes a diarist’s life a hard one!

Mining companies are the second biggest group on AIM. (Amazingly, food production comes top.) A fifth of the companies there are in mining. Or are aspirants, being explorers!

Consultancy and accountancy group Ernst & Young (E&Y), who’ve made a bit of a bee line for the sector, have just done a count. Apparently there were 22 mining initial public offerings (IPOs) on AIM over January to end September this year. They raised £139.4m.

Last year, however, the count was 59 IPOs raising a total of £618.4m. And the year before, in 2005, the total was 79 IPOs, pulling in £492m.

Mining floats were down to 2.5% of all AIM IPOs in the survey period. That’s way down from recent history - 6.2% in 2006, 7.6% in 2005 and 8.3% in 2004.

What’s going on? The accountants say market conditions have got trickier for mining AIM listings. To blame are all the obvious candidates. The credit squeeze tops E&Y’s list of worries. The banks have been acting as a wet blanket on the boards of would-be stock market listers. No one wants a failed issue on their hands.

Don’t even try it, they’ve been told, unless you are really special. Only if the story is a really good one, and a bit different, are they getting the thumbs up.

There is also the other factor that it is a bit crowded in there. Many funds are up to their allocation on mining.

Fund managers might be able to find a bit of space for one that is going to start making money soon. Who wants to wait around for years and a possible metal price collapse! (There must be an awful lot of explorers out there very relieved that they came to AIM yonks ago.)

Large companies are definitely facing a better reception than mining minnows. Well respected management teams are also getting a hearing. Not that there are a lot of new issues of any kind around at the moment. Discretion is definitely better than valour until the market’s nerves improve.

Mining is actually doing not badly when it comes to getting its share. A mere four future AIM floats are currently listed for London, one a gold miner. (Who can resist gold right now?) And of 11 recent share AIM issues, two were miners.

There’s easier money for miners already quoted. The market for secondary issues seems to be as strong as ever. AIM miners raised a total of £1.93bn from secondary issues from in the first nine months of the year.

That is almost double what they raised in 2006 - £1.08bn was raised in 2006.

One reason for the hike is that this was for bigger sums for the bigger and established names. So, bigger fees, too. And, less risk.

The service industry for mining issues has changed. The huge international investment houses have moved in. E&Y points out that RBC Capital Markets, BMO Nesbitt Burns, JPMorgan Cazenove and Credit Suisse are among the larger banks now active on AIM.

These groups say that they have tightened up due diligence on issues. That they are only bringing the better quality issues to the market. Certainly there haven’t been the numbers of scandals and failures that might have been expected from such a rapidly growing quoted mining sector.

So, what to do if you are a minnow, new boys on the block and an explorer to boot? According to E&Y, the guys are all packing their bags for Toronto. Mining’s share of Toronto’s stock market is even greater than London’s AIM market. Around two-fifths of the index - around 1,300, no less! So what if its reputation and prestige are not as great? The fact is, Toronto is offering the money!

They are very open minded in Canada. Especially in uranium and diamond stocks! Investors are extremely gung-ho by London standards. And there seems to be lots of them. It’s frontier territory out there! A Canadian Chamber of Business presentation actually bullet points “The high risk culture of Canada’s junior mining sector”.

They like small companies. Canada has not set out its stall for the mega listings. Toronto has built its brand as a specialist in the small and medium mining stocks.

There are lots and lots of local minnows on the Toronto Stock Exchange, and the smaller Canadian venture exchanges. Brokers seem to find plenty of business for them among local investors alone.

And for foreign minnows as well. Having been hustled out of a lot of international issues by London in past years, Toronto is quite happy to hustle back. Toronto has been at the forefront of selling itself to the new miners in Africa, Central Asia and China, for example.

Canada’s numbers are a bit different to AIM’s. The exchanges’ website spells it out. In the first nine months of 2007, 53 new mining companies have listed on TSX and 74 have listed on TSX Venture Exchange. TSX and TSX Venture mining issuers raised US$12.2bn in equity capital financing on TSX in the first nine months of 2007, surpassing the US$11.0bn raised in 2006.

So, even if you are a mining minnow and only an explorer at that, you’re never going to be short of a market!

Regards,

Erin and Isabel

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