one down sise31 Dec 2017 19:16
By Clara Denina and Barbara Lewis
LONDON (Reuters) - Lacklustre performances by small mining companies on the London Stock Exchange are driving rivals in need of cash to find alternative ways to raise capital, either by merging or turning to other markets such as Toronto.
Six small miners have listed in London this year, up from two last year, but four of those are now trading below their offer price despite a rally in metals, led by a 27 percent jump in copper and aluminium prices and a 10 percent rise for gold.
London hosts the world's biggest mining companies, including Rio Tinto (L:RIO) (AX:RIO) and BHP Billiton (L:BLT) (AX:BHP), but the poor performance of newly listed miners and other small miners trading in London is pushing some to change their plans.
On Tuesday, Condor Gold (L:CNDR), a Nicaraguan gold miner whose share price is down 10 percent this year, said it had received conditional approval for a secondary listing in Toronto, where it hopes valuations will be higher.
"London is not a great place to be listed as a junior explorer. There is not a clear understanding of what we do," said Mark Child, the company's chairman and chief executive.
Metal development company Phoenix Global Mining (L:PGMH), which listed in London at the end of June, will also consider North American listings at a future date, its CEO Dennis Thomas said.
Toro Gold, which operates in Africa, started preparing for a London listing with the help of Bank of Montreal (BMO) and corporate advisor Numis Securities earlier this year but has shelved its plans, sources said.
Toro Gold, Numis and BMO were not immediately available for a comment. "It is still a difficult time to raise money through IPOs for the mining sector ... because the price recovery is in its reasonably early stages," said Lee Downham, head of EY's global mining & metals transaction advisory services.
Small mining companies, which are often betting on exploiting valuable resources in a few concessions, can eventually enjoy far bigger stock market price increases than major firms with sometimes limited opportunities for growth.
But in the early years, they may struggle to balance the heavy spending needed to get mines up and running with a lack of revenue, meaning some need regular capital injections.
London's big institutional investors, however, are seen as more risk averse than those in major mining centres such as Canada and Australia, particularly when it comes to relatively illiquid shares they cannot get out of quickly, bankers say.
Besides Russia's Polyus (L:PLZLq), which has China's Fosun International (HK:0656) as its cornerstone investor, and Rainbow Rare Earths (L:RBWR), which mines rare earth materials needed for renewable energy storage, the miners that listed in London this year are down 13 percent on average. Precious metals specialist Jangada Mines (L:JANJ) is down more than 20 percent.
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