It used to be a case of simply riding off the positive sentiment in commodity prices, but with those years now well and truly behind us the companies making it work are taking a different approach.
With investors wary of pouring cash into speculative plays, some of the industry’s most successful IPOs in recent times have attracted attention by proving up the business before going to market.
A case in point is Stavely Minerals, which raised $A6.1 million in a slightly oversubscribed offer last year after presenting the market with a drill-ready exploration program.
Graphite developer Valence Industries also made a good start, leveraging off the existing brownfields development at its Uley mine in South Australia and finishing the year 173% above its listing price.
“If you’re a resources company trying to get on the market at the moment you’ve got to have something compelling,” HLB Mann Judd partner Marcus Ohm told ILN sister publication MiningNews.net.
“Obviously commodity prices aren’t great so there’s got to be some story or you’ve got to develop the assets to try and generate a bit of interest.”
Tough times continue
Despite the handful of mining IPOs that went well last year, the overall numbers are still well down on previous years.
Things are also grim in the wider resource industry, with oil and gas explorer Winchester Energy recording the worst performing IPO across all sectors.
This quiet show from resources is nothing new, and Ohm told MiningNews.net it highlighted the new approach miners were taking.
“In the past, because there’s been a lot more investor sentiment towards commodity prices a lot of those companies have just been able to list, get public money in and then do the work,” he said.
“At the moment the sentiment is just not there, so the only way around that is to generate a bit of interest in the business model.
“Companies that have done well have invested their own money in the assets.”
HLB’s new IPO Watch report showed five out of 58 or 9% of 2014 listings were from the materials sector, and those offers comprised of less than 1% of the total funds raised.
In 2013 about 14% of total listings were materials stocks and in 2012 the share hit 79%.
For the wider market 2014 was a story of large cap IPOs, particularly in healthcare.
The float of Medibank Private, which dominated the headlines for weeks and raised $A5.7 billion, was perhaps the best example on this front.
Mining shells under the spotlight
The falling number and value of resource IPOs was already well-known before the latest figures came out. So too was mining’s other big trend in 2014 – backdoor listings.
Experts are still divided on how big the backdoor trend is for mining at the moment, but on the accounting side Ohm said there was a lot of interest in finding miners amenable to a reverse takeover.
“I made a comment about six months ago to somebody that we had a few shell companies, and I had about 20 phone calls in relation to it,” he said.
“There’re plenty of people out there at the moment who’ve got a project and want to put it into a shell.”
But while there are plenty of struggling miners being eyed for a backdoor listing, not every company is attractive for new businesses.
“People want a nice clean balance sheet, they want a register where they don’t have someone with a strategic stake, and they want a board that’s willing to maybe walk away from the company,” Ohm said.
“If you’ve got a good shell at the moment and the board’s willing to walk, people will be all over it.”
