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Class of 2013 ASX Minerals IPOs

Funding at a Decadal Low

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John Sykes, Allan Trench

Last year, we picked 2012 as the bottom of the Australian minerals IPO cycle. We were wrong - with 2013 subsequently bringing the poorest performance of the sector in the past decade. This continued decline raises the very significant question of whether IPOs can sustain the long-term growth of Australia's mining industry. Just 12 new minerals companies managed listings in 2013, raising a total of $AUD56.1 million. In particular, driven by the sharp downturn in the gold price, the relative share of gold-focused IPOs fell, despite consistently strong performance of the gold companies that did achieve a listing. With only limited funds available, ASX IPOs are increasingly focused on Australia, which may be seen as a politically safer option for exploration and mining investment. This has come primarily at the expense of Africa, despite the latter being the cheapest continent in the world in which to make high quality mineral discoveries - so this switch in focus may not represent an overall positive development for the industry over the longer term. Within Australia, although Western Australia and Queensland continued to attract significant IPO funds, the greatest intensity of funding again went to an eastern state - New South Wales. This may surprise parties interested in South Australia and the Northern Territory, which although ranked amongst the most attractive regions in the world for minerals exploration (and notably higher than the well-funded NSW) attracted no significant funds from the domestic minerals IPO sector. Overall, the median capital raising size of just $AUD2.5 million has dropped well below the pre-boom median of $AUD4 million. In conjunction with estimated administration costs of $AUD1 million per annum, this suggests that only a minimal amount of exploration will actually be achieved through the funding secured through 2013 minerals IPOs.