Abstract
2012 recorded the some of the lowest numbers of ASX listings and amounts of Australian IPO capital raised in recent years. Although performance was on average positive and IPOs have been shown to outperform the mining sector as a whole in recent years, these positive notes disguise potential problems in the equity funding of minerals exploration in Australia.
An analysis of trends in the 2012 IPOs dataset shows few well performing and viable ideas, with the best (and perhaps only) performing subset being gold exploration in Western Australia. Levels of exploration and IPO performance for key Australian minerals markets, such as iron ore, coal and base metals is weak; whilst there also seems at present to be little interest in longer term potential growth markets, such as uranium, fertiliser commodities and a variety of esoteric* metals and minerals markets, suggesting longer term problems in the industry may be accumulating.
Recent trends in the ‘offshoring’ of IPO focus may be stalling, and whilst there is continued growth in the number of offshore focused IPOs, there is a split with IPOs now Australian focused or foreign focused, as smaller capital raisings make funding geographical diversity in an IPO portfolio difficult to sustain. Most offshore focused IPOs in 2012 struggled, raising questions as to how technical and non-technical risk is assessed by early-stage resources companies. Exploration within Australia ‘followed the gold’ concentrating on the Western Australian and Victorian gold fields. Several Australian states are seeing virtually no new exploration activity funded by minerals IPOs.
Behind these geographic and commodity trends is also a material reduction in both the amount of capital raised in total and the size of individual IPOs, which have now fallen below 2001-2006 (pre-boom) levels. This observation further restricts the number of viable strategies that can be pursued by new minerals companies, with many essentially starting as a public company in immediate survival mode. Although the minerals IPO sector is almost certain to pick up in 2013, without a substantial increase in overall funding, average capital raising and a much wider variety of geographic and commodity focus the whole concept of IPOs as an effective and efficient market mechanism to fund grassroots minerals exploration is open to question.
An analysis of trends in the 2012 IPOs dataset shows few well performing and viable ideas, with the best (and perhaps only) performing subset being gold exploration in Western Australia. Levels of exploration and IPO performance for key Australian minerals markets, such as iron ore, coal and base metals is weak; whilst there also seems at present to be little interest in longer term potential growth markets, such as uranium, fertiliser commodities and a variety of esoteric* metals and minerals markets, suggesting longer term problems in the industry may be accumulating.
Recent trends in the ‘offshoring’ of IPO focus may be stalling, and whilst there is continued growth in the number of offshore focused IPOs, there is a split with IPOs now Australian focused or foreign focused, as smaller capital raisings make funding geographical diversity in an IPO portfolio difficult to sustain. Most offshore focused IPOs in 2012 struggled, raising questions as to how technical and non-technical risk is assessed by early-stage resources companies. Exploration within Australia ‘followed the gold’ concentrating on the Western Australian and Victorian gold fields. Several Australian states are seeing virtually no new exploration activity funded by minerals IPOs.
Behind these geographic and commodity trends is also a material reduction in both the amount of capital raised in total and the size of individual IPOs, which have now fallen below 2001-2006 (pre-boom) levels. This observation further restricts the number of viable strategies that can be pursued by new minerals companies, with many essentially starting as a public company in immediate survival mode. Although the minerals IPO sector is almost certain to pick up in 2013, without a substantial increase in overall funding, average capital raising and a much wider variety of geographic and commodity focus the whole concept of IPOs as an effective and efficient market mechanism to fund grassroots minerals exploration is open to question.
| Original language | English |
|---|---|
| Publisher | Centre for Exploration Targeting, University of Western Australia |
| Number of pages | 10 |
| Place of Publication | Australia |
| Volume | Issue 23, p 24-33 |
| Publication status | Published - Mar 2013 |
