Features, Opinion

Mining IPOs quick out of the blocks

By Tony Featherstone

The recovery in mining floats has gone up a gear as more resource companies take advantage of buoyant sharemarket conditions to raise capital and list on the ASX.

Fifteen initial public offerings (IPOs) in mining and energy have closed so far this calendar year (to end-April 2021). That’s almost half of all IPOs on the ASX.

As Australian Resources & Investment (AR&I) went to press, another 18 resource companies had live IPOs, according to AR&I analysis of ASX admissions data.

This year’s strong start for mining floats follows 24 resource-sector IPOs in 2020 that raised up to a combined $190 million in a difficult funding market.

The median share-price gain (over the issue price) from resource IPOs from 2020 is 23 per cent (at end-April 2021). Remarkably, only six mining IPOs from last year have lost investors money (see table).

Three factors are driving the mining resources recovery. The first is the collective performance of resource shares, underpinned by higher commodity prices and improving global growth.

The S&P/ASX 200 Resources Index, a barometer of 38 materials and energy stocks on the ASX, returned 42 per cent over one year to end-April 2021, outperforming the broader market.

Second, the Australian sharemarket had a stronger recovery after crashing in March 2020 amid COVID-19 fears. The S&P/ASX 200 Accumulation Index is up almost 33 per cent over one year.

A sharemarket rally typically unleashes a wave of IPO activity because cashed-up investors are more likely to back new listings and speculative companies. That helps mining explorers.

Third, expectation of a strong rebound in global economic growth – and continuing high commodity prices – is an ideal backdrop for mining floats.

In early April, the International Monetary Fund (IMF) upgraded its global economic growth forecast for the second time in three months. The IMF now predicts the world economy will expand by 6 per cent in 2021.

Expectations of higher global growth are boosting commodity prices. The Reserve Bank Index of Commodity Prices was up 28 per cent over the year to end-March 2021 (based on the currencies of five major industrial countries). Higher commodity prices are a boon for mining floats.

If global growth continues to surprise on the upside, and commodities remain elevated, activity in mining IPOs could boom in 2021. There is significant pent-up demand for resource floats after years of low float volumes and a stagnant IPO market.

That does not suggest capital-raising conditions are easy for resource IPO hopefuls or that all floats are achieving their minimum subscription or a sufficient spread of shareholders to meet ASX Listing Rules requirements. But mining IPO conditions are the best in at least five years.

A noticeable feature of resource IPO activity in the past 18 months has been companies raising a larger amount of capital – a sign of improving investor demand for resource-sector offerings.

Resource listings in 2021

IPOs 2021 Featherstone Report

Torrens Mining kicked off this year’s resource IPO market with its listing in early January. Torrens sought up to $10 million to develop its Mount Piper and Club Terrace projects in its Victorian gold portfolio. Both projects are in areas with promising historic exploration.

Australian Gold and Copper (AGC), another January listing, sought $7-$10 million. AGC will hold three projects in the Central Lachlan Fold Belt in New South Wales. The company says its portfolio has multiple near-term discovery opportunites. Early exploration results have been promising.

OzAurum Resources listed in February after seeking up to $18 million through an IPO. Sponsored by Canaccord Genuity, OzAurum is developing two gold projects in Western Australian-based tenements assembled over three decades.

Among other floats, Auric Mining successfully listed in February after its $6.5 million IPO.

Auric had agreements to acquire a portfolio of prospective gold exploration and development projects in the Widgiemooltha and Norseman regions of WA. The company’s share price rallied in late March after promising exploration results.

DDH1 Limited was by far the market’s largest mining IPO with its $150 million listing in March 2021. Launched in 2006, DDH1 says it provides drilling technologies to obtain spatially accurate representative geological information. DDH1 has a fleet of 961 mineral drilling rigs.

Genmin, another larger mining IPO, sought $20-$30 million and listed on the ASX in March. Genmin is a central West African-focused iron ore explorer with projects in the Republic of Gabon. Genmin is also one of few Africa-focused mining IPOs on the ASX in recent years.

Bastion Minerals sought $5-$6 million to identify high-quality precious- and base-metal projects in the mineral-rich mining regions of the Coastal Cordillera in the Atacama region of northern Chile. The Coastal Cordillera region is host to multiple world-class gold projects (including the Maricunga Belt) and copper deposits. Bastion listed on the ASX in March.

Elsewhere, Tulla Resources sought $78 million in its IPO and listed on the ASX in March. Tulla continued the run of mining floats raising larger amounts in 2021.

Tulla’s key asset is a half-interest in the Central Norseman gold project, a historical gold mine located near the town of Norseman in the Goldfields of WA that has produced over 5.5 million ounces of gold since operations began in 1935. The other half-interest in the project is held by ASX-listed Pantoro. It acquired that interest from Tulla Resources via a farm in and joint-venture agreement.

Firebird Metals, an April listing, sought up to $5.5 million in its IPO to develop the Oakover project, about 90 kilometres east of Newman in WA’s East Pilbara Manganese Province. Oakover comprises one granted exploration licence and two exploration applications.

In gold exploration, Medallion Metals sought $12.5 million in its April IPO. Medallion’s Ravensthorpe gold project and Jerdacuttup project are in the Southern Goldfields-Esperance region of WA, approximately 550 kilometres south-east of Perth.

Kincora Copper sought up to $10 million to accelerate its drilling activities in up to three projects within the Lachlan Fold Belt. High-priority drilling commenced in April 2020 and continues at Kincora’s flagship Trundle project within the Lachlan Fold Belt, yielding promising copper and gold results.

Peregine Gold, this year’s smallest mining IPO by capital raised, had a good start after seeking $2.5 million at 20 cents a share. Peregine had the right to acquire the Pilbara gold project, an early-stage exploration project in WA’s famed Pilbara region.

Best performers from 2020

Caspin Resources topped last year’s resource IPO rankings. After listing in late November 2020, its 20-cent shares raced to 69 cents by end-April 2021.

Caspin sought up to $6 million to develop the Yarawindah Brook and Mount Squires projects in WA. Caspin was spun out of Cassini Resources.

Desert Metals also starred. After listing a week before Christmas at 20 cents a share, it shot to 74 cents before easing to 55 cents by late April.

Desert Metals sought $5 million to develop its wholly-owned package of exploration licences on the north-west margin of the Yilgarn Craton of WA.

Dynamic Drill and Blast Holdings (DDB) was another IPO standout. The company services the civil and mining industries from full-production drilling to specialty blasting.

DDB sought $5 million in an August 2020 IPO and its 20-cent shares raced to 45 cents by end-April 2021. The company announced two new contracts with mining, as well as contract extensions.

Among other floats, Siren Gold, an October listing, rallied from a 25-cent issue price to 31 cents by January 2021. Siren was among the larger resource IPOs in 2020 with a $10 million offer.

Underwritten by Morgans Corporate, Siren has the Reefton gold project on the South Island of New Zealand, which has been explored and mined for hard-rock and alluvial gold since the discovery of gold there in 1870.

Soon after listing, Siren announced promising exploration results at its Alexander River and Big River tenements, within the Reefton gold project.

Manuka Resources was another top IPO performer by share-price gains since listing. Its 20-cent shares traded at 43 cents at end-April 2021 after the company sought $7 million at 20 cents a share through a float in July 2020.

Manuka owns the Wonawinta silver and Mt Boppy gold projects in NSW. Wonawinta has a 50.9-million-ounce silver mineral resource that complies with the Joint Ore Reserves Committee Code (JORC). Manuka says it is set to become Australia’s largest primary silver producer, commencing in third-quarter 2021.

Tony Featherstone is a former managing editor of BRW, Shares and Personal Investor magazines. The information in this article should not be considered personal advice. It has been prepared without considering your objectives, financial situation or needs. Before acting on information in this article consider its appropriateness and accuracy regarding your objectives, financial situation and needs. Do further research of your own and/or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. IPO information can change quickly if companies do not raise their minimum subscription or attract enough shareholders to meet ASX Listing Rules. All prices and analysis at April 29, 2021.

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