London prepares for wave of IPOs

Finance

Market activity in London will receive a boost in coming weeks as the local bourse prepares for its first sizeable new mining entrants, coupled with the first significant initial public offerings (IPOs) since the middle of 2008.

Two resource company offerings are already underway, with a third said to be on the cards within the next few months. In addition, Baker Steel Capital Managers plans to raise £70 million (US$105 million) as it floats a pre-IPO investment fund in mid-April (see page 17).

The marketing of a new vehicle for Barrick Gold Corp’s African assets is currently underway as the Toronto-based company prepares to raise up to a reported US$1 billion. African Barrick Gold plc will remain about 75% owned by the gold giant, and join the likes of Randgold Resources plc and Petropavlovsk plc on the main market. The company is said to be selling 100 million shares at a range of £5.5-6.5/share.

At the end of July last year, Randgold raised US$300 million to fund its developing gold mines in Africa.

Guinean iron-ore company Bellzone Mining plc has also announced its intention to trade on the AIM market within several weeks. The company is seeking to raise about US$100 million to complete a feasibility study on its Kalia project in the West African country.

Bellzone will join the likes of African Minerals plc and London Mining plc, also holders of large iron-ore resources. According to London Stock Exchange data, the market value of these two companies made up over 10% of the overall value of miners on AIM at the end of February.

The IPO of Brazilian iron-ore developer Ferrous Resources Ltd is also expected to take place as soon as May.

Ernst & Young’s Mining Eye index gained 173% in 2009, a reversal of the decline that took place over the latter half of 2008. This was the largest annual rise since the index was established in 2004. However, the Mining Eye ended 2009 still 40% off its all-time high achieved in March 2008.

The last plus-US$100 million IPOs on the London market were those of New World Resources NV and Fresnillo plc, announced in May 2008. The companies raised £1.3 billion and £913 million, respectively.

At the time of its listing in November last year, London Mining placed 37.24 million shares, raising £71.5 million.

In the first half of last year, massive rights issues from some of the world’s largest miners were a key feature as the global economic downturn put a strain on the sector. Xstrata plc and Rio Tinto plc raised over £11 billion between them in rights issues (announced in March and June, respectively).

Global credit-market activity has also heightened in recent weeks, with Vedanta plc, Vale SA and commodities trader Glencore International AG all announcing bond issues.