Surge in mining IPOs in 2010 – Grant Thornton

Finance

Over the next 12 months mining companies are expected to raise record amounts of capital on global markets, according to a Grant Thornton study.

“Following unprecedented activity in recent months, we expect mining companies to raise record amounts of capital on global stock exchanges in 2010,” said Gerry Beaney, head of capital markets at Grant Thornton UK.

While there were very few initial public offerings (IPOs) globally in 2009 and none on AIM, existing UK listed mining companies raised almost £12 billion (US$19 billion) through secondary issues, according to the study. The Toronto exchange raised C$22 billion (US$20.8 billion) during the year.

Mr Beaney said the large amount of secondary fundraisings reflected a risk-averse approach by investors.

“They were willing to or perhaps obliged to support their existing portfolio rather than invest in new companies,” he said, adding: “Nevertheless, the fact investors snapped up vast amounts of new equity by listed mining companies demonstrates their keen interest in the sector.”

Once confidence returns to the market, exploration companies, because of strong underlying fundamentals will also benefit, according to the study.

 “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,” said Mr Beaney.