Despite the high-gold price and improving investor sentiment towards the mining industry, mining new issues on the three main junior mining markets, AIM/LSE, TSX/TSX-V and ASX, for 2020 look likely to come in at the lowest levels for three years (Figure 1).
Figure 1: The Number of New Mining Issues
Source: Mining and Metals Research Corporation
The global economic downturn and uncertainty created by the COVID-19 Pandemic have caused many private mining companies to delay coming to market, so could this result in a bumper year for IPO’s in 2021?
To date, there have been 40 new mining issues on the AIM/LSE, TSX/TSX-V and ASX, and while there are many potential initial public offerings (IPO’s) slated for the fourth quarter (Q420) on some exchanges it looks likely that that the number of new issues will be down from 50 in 2019 and below the levels seen in 2018 (103) and 2017 (118).
TSX & TSX-V
Toronto has continued to be the most popular destination for mining new issues this year with 27 completed to date, compared to seven in Australia and six in London, continuing Toronto’s dominant position in the junior mining space since 2007. This includes the high-profile dual listing of Australian major, Newcrest Mining Limited (ASX: NCM, TSE: NCM, PNGX: NCM), which sought a North American listing as part of its strategy of pursuing growth in the Americas, following its acquisition of 70% of the Red Chris Mine in Canada during 2019 and its other investments in Ecuador.
Despite its continuing dominance in terms of the number of new issues in Toronto, figures remain lower than in previous years – 35 in 2019, 55 in 2018 and 69 in 2017. Several junior mining companies are currently considering an IPO on TSX-V in 2021, including Red Rock Australasia.
Red Rock Australasia
Red Rock Australasia is a private joint venture between Power Metal Resources PLC (LON:POW) and Red Rock Resources PLC (LON:RRR). Given that the company has 2,188km2 of gold exploration acreage in the Victoria Goldfields of Australia you might assume that the company would be seeking to IPO on the ASX, but that isn’t the case.
Red Rock Australasia is planning to float on the TSX-V during 2021. It has opted for the TSX-V over other markets, as investors on the TSX/TSX-V already have a breadth of knowledge regarding the potential of the Victoria Goldfields.
This knowledge base has built up following Kirkland Lake Gold’s (TSE:KGI) acquisition of the Fosterville Gold Mine, the IPO of Fosterville South Exploration (CVE:FSX), which is currently up from 650% on its flotation price and the progress made by Nubian Resources Ltd (CVE:NBR) at its Yandoit and Fosterville East projects.
The management of Red Rock Australasia also believes that in general, junior mining companies on the TSX-V have higher-market valuations compared to the other junior markets.
LSE & AIM
In London, the total market value of junior mining companies’ new issues is down from GBP1.15bn in 2019 to just GBP291mln to date in 2020 but the average amount raised by these junior companies has actually increased to GBP47mln during 2020 to date, from GBP11mln in 2019.
While this is still well below the average of GBP195mln raised in 2018, which was the highest level for 10 years, the fact that the average amount raised is up during a year of severe political and economic turmoil is impressive and demonstrates the deep pools of capital that exist in London for the right mining business.
Figure 2: Total Market Value and Average Amount Raised from New Junior Mining Issues in London
Source: Mining and Metals Research Corporation
The large pool of institutional investors in London is driving some high-profile dual listings during Q420, including Wheaton Precious Metals Corp (TSE:WPM) and Yamana Gold Inc (TSE:YRI, NYSE:AUY). Endeavour Mining Corporation (TSE:EDV) is also considering a dual listing in London or potentially New York in 2021.
Junior mining companies considering an IPO in London include: Cornish Lithium; Tirupati Graphite
Cornish Lithium is currently a private UK-registered company that has just raised an eye-watering GBP3.5mln through crowdfunding. The company is advancing its Cornish lithium brine project through the pilot plant phase with a GBP4mln investment from the UK Government via its Getting Building Fund. The company is also advancing its hard rock lithium project, also located in Cornwall.
The company is planning to float in London during 2021 to gain access to institutional funding to move its projects towards production. With assets in Cornwall and its share register dominant by investors from the UK, a London listing is considered to be the best option for its shareholders.
Tirupati Graphite is an unlisted UK registered public company. The company is a fully integrated specialist graphite and graphene producer, with operations in Madagascar and India. Tirupati is the process of completing its IPO on to the LSE and expects to commence trading before the end of the year. The company is coming to market to raise funds to be able to grow its business both at the downstream and upstream processing ends, faster than internal capital sources would allow.
Tirupati chose London because of its central location and time zone, which are favourable for its operations in Madagascar and India. Also important to the company was the city’s reputation as a capital market that attracts investment from all over the globe and the high-standard of regulation associated with the market.
In Australia, new issues to date this year currently stand at seven, which is level with those seen during 2019; however, a flurry of mining IPOs are slated for Q420 on the ASX, so this number could rise to as high as 16. This would still be way off the number of new issues in 2018 (35) and 2017 ( 33) but is a strong performance from the ASX given current market conditions.
Junior mining companies that are planning to float on the ASX include Deterra Royalties (DRR); Duke Exploration (DEX); Megado Gold (MEG); Native Mineral Resources Holdings (NMR); and Miramar Resources (M2R).
Looking forward to 2021
A global emergence from the COVID-19 pandemic combined with governments increasing their expenditure on infrastructure, rising metal prices and the large volume of delayed IPOs in 2020 could make 2021 a bumper year for mining new issues.
The TSX is likely to continue its dominance as the most popular market for junior mining new issues, with the large pools of finance and liquidity that are readily accessible. The large volume of high-profile dual listings in London combined with several junior companies also seeking am AIM/LSE dual listing demonstrates that London’s financial institutions are once again increasing their exposure to the sector, which could lead to increased numbers of larger mining companies coming to London. Mining investors on the ASX will be anxiously awaiting the closure of some deals in Q420. A strong Q420 for the ASX could be a leading indicator of the momentum for 2021.
The author would like to thanks Julian Russo and Dean McPherson from the Toronto Stock Exchange & TSX Venture Exchange, and Kimberley from the Australian Stock Exchange for assisting with the collection of the data for the article.