Saturday, November 04, 2006
UK small cap market dries up for new mining listings, capital - analysis
UK small cap market dries up for new mining listings, capital - analysis
mergermarket
Story The small cap market for UK-listed mining groups has ground to an almost complete halt, say industry observers.
While the market participants said that the impact was more on new listings, they noted that there was also a knock-on impact on the level of M&A activity in the sector.
A UK-based source said that the market for new listings on London’s Alternative Investment Market [AIM] had now effectively dried up completely in the mining sector, and that it was also extremely difficult for small and mid-sized firms to raise capital for exploration work. Several sources confirmed that a number of new listings had been pulled over the last six months due to lack of investor interest, and noted that a smaller company had to have a “unique story” to tell in order to successfully list in the UK in the present climate. The source cited African miner Goldplat [market capitalisation GBP 7.8m/EUR 11.7m)] as such a company, as the group already had existing production and so a guaranteed revenue stream before it listed this summer.
An executive at a UK mining company noted that the unwillingness of the market to provide small and mid-tier groups with the capital to develop their reserves could lead to a wave of consolidation, with mining majors such as Anglo American, Rio Tinto, Falconbridge and BHP Billiton consolidating smaller companies at a relatively discounted price.
The sources pointed to the record high commodity prices as in fact deterring new small cap listings, simply because the pre-listing valuations of such groups were considered too high. The industry players also cited a series of disappointing oil and mining listings on AIM as making investors wary of putting money into purely exploration initial public offers.
However, another industry executive did note that the AIM market had been cyclical throughout its existence, always going in bullish spurts of three to six months, to be followed by a downturn of a similar length.
Source mergermarket
mergermarket
Story The small cap market for UK-listed mining groups has ground to an almost complete halt, say industry observers.
While the market participants said that the impact was more on new listings, they noted that there was also a knock-on impact on the level of M&A activity in the sector.
A UK-based source said that the market for new listings on London’s Alternative Investment Market [AIM] had now effectively dried up completely in the mining sector, and that it was also extremely difficult for small and mid-sized firms to raise capital for exploration work. Several sources confirmed that a number of new listings had been pulled over the last six months due to lack of investor interest, and noted that a smaller company had to have a “unique story” to tell in order to successfully list in the UK in the present climate. The source cited African miner Goldplat [market capitalisation GBP 7.8m/EUR 11.7m)] as such a company, as the group already had existing production and so a guaranteed revenue stream before it listed this summer.
An executive at a UK mining company noted that the unwillingness of the market to provide small and mid-tier groups with the capital to develop their reserves could lead to a wave of consolidation, with mining majors such as Anglo American, Rio Tinto, Falconbridge and BHP Billiton consolidating smaller companies at a relatively discounted price.
The sources pointed to the record high commodity prices as in fact deterring new small cap listings, simply because the pre-listing valuations of such groups were considered too high. The industry players also cited a series of disappointing oil and mining listings on AIM as making investors wary of putting money into purely exploration initial public offers.
However, another industry executive did note that the AIM market had been cyclical throughout its existence, always going in bullish spurts of three to six months, to be followed by a downturn of a similar length.
Source mergermarket
