London Stock Exchange is a leading international capital market that is home to 163 mining companies, which account for approximately 18% of the total market capitalisation of all listed mining firms worldwide. These figures alone reveal that the London market is not exactly a well-kept secret amongst the international mining community, even though it is situated outside the world’s two largest mining hubs by number of companies – Toronto and Australia. Both of these capital markets were conceived after the discoveries of immense mineral riches in the mid-19th century and both have subsequently benefited from a century and a half of sustained mining activity. This begs the question of how has London managed to fiercely compete with these deep-rooted mining finance houses, despite having a smaller domestic industry?
The answer, according to London Stock Exchange’s head of international business development, primary markets, Tom Attenborough, is the international nature of the London market, both in terms of issuers and investors and the strength of the ecosystem that supports them.
“The over 2,100 companies that are listed across the Main Market and AIM are businesses that operate in over 100 countries around the world.
“We are very diverse in terms of issuer nationalities, so London offers a global peer group for companies to be benchmarked against. This is particularly true in mining, whereby the nature of the sector demands an international focus.”
From an investor perspective, London provides access to all major international markets during the trading day, thanks to its position at the epicentre of modern time zones. International time zones are calculated in accordance with the Royal Observatory in Greenwich – just a 9 km journey from London Stock Exchange’s offices in Paternoster Square.
“London markets open at 8am when the Asian trading is still up and running and we are open two hours into the US trading day before markets close at 4.30pm. Investors from around the world are active during our trading day, and that gives a very diverse investor base that trades through London.”
In addition, London has accumulated a significant amount of expertise in the mining industry. A complex mining ecosystem has been shaped by dedicated fund managers and a huge quantity of research coverage on the sector down the years.
“Here you will find a very substantial ecosystem that knows and cares about the mining sector. That critical mass is important for the London markets,” says Attenborough.
Liquidity is also important, as it is for companies operating in all sectors, but especially in the mining industry, which has recently faced several internal challenges such as rising exploration and production costs.
“Being in a market where you can generate meaningful liquidity and investor following has been very important for issuers. We have seen a few issuers add a London listing over the last 12 months because these businesses want to access a more diverse investor base and generate a following in the UK market.
“Even if they aren’t raising capital, building liquidity in the London market is important for them.”
Home to giants and juniors alike
While London Stock Exchange remains home to three of the five largest publicly traded mining companies – BHP, Rio Tinto and Glencore – it also attracts miners from every stage of the development cycle, from concept and early stage through to production.
“It is notable that of all the mining companies listed here, around 100 of those are sub-US$100 million market cap. There are some very small companies listed here and I think that again speaks to the attractiveness of London and our ability to support companies of all stages and sizes.
“There is the AIM market at the smaller end, and the Premium Segment of the Main Market for much larger companies. In between is the Standard Segment of the Main Market, which is what a number of the international companies looking to dual list have chosen.”
Recent examples of mining companies dual listing in London include Danakali and MOD Resources in 2018. Both companies have projects in Africa and listed on the Main Market in addition to their listings on the Australian Stock Exchange.
Overall, London delivered a healthy volume of new listings from the mining sector last year, with 11 companies choosing to list on its markets, in a combination of initial public offerings (IPOs) and secondary listings.
At the larger end of the market, Kazakhstan’s state-run uranium producer Kazatomprom listed global depository receipts (GDRs) on the Main Market in November 2018 – the largest IPO in the sector across Europe, the Middle East and Africa. The IPO valued the world’s largest uranium producer at around $3 billion.
Meanwhile, several smaller mining firms joined AIM in 2018, including South African fertiliser company Kropz and Republic of Congo-focused Kore Potash. Kropz listed in November with a market cap of $123 million, while Kore Potash debuted with a $79 million market cap in March.
However, the growth in new listings from the mining sector last year was tinged with disappointment when long-term issuer Randgold Resources delisted from the London market, following its acquisition by Barrick Gold.
“Whilst it’s always disappointing to see companies leave our market, I think there are opportunities for other companies to benefit from investors who may have additional capital to invest as a result,” says Attenborough.
This type of opportunity may continue to crop up across equity markets this year after several high-profile mining M&A deals were completed in the first quarter of the year, particularly in the gold sector.
“We keep an eye on M&A, but our focus is to support companies coming to London, accessing the deep and liquid pools of international capital and London’s global investor base.”
Mining companies with projects and operations in Africa have continued to gravitate towards London in recent years, including the aforementioned dual listing companies Danakali and MOD Resources, but also companies such as Cora Gold and AfriTin Mining have joined AIM in the last 18 months.
London listing an Africa-focused company makes sense from a trading logistics perspective, as the UK’s time zone is closely aligned with much of the continent, but the steady stream of Africa-focused miners joining London Stock Exchange speaks more to London investors’ strong understanding of the African market.
“Across all sectors, we have over 110 African companies listed here. It is a continent that London investors have spent lots of time focusing on and understanding the different dynamics of each country and market.
“We are very proud of the fact that London-based emerging and frontier market investors are familiar with countries across Africa. They understand the geographies and the political and currency factors to take into account, in a way that may not be true in other financial centres globally.”
Duly recognising the importance of supporting high growth African businesses, London Stock Exchange Group (LSEG) recently published the second version of its Companies to Inspire Africa report, which identifies a wide range of dynamic African businesses across a range of sectors.
In addition, LSEG is also collaborating with African stock exchanges through its business support and capital raising initiative to support high growth private companies, ELITE. The initiative launched in Morocco in 2016 in partnership with the Casablanca Stock Exchange and expanded into West Africa in partnership with Bourse Régionale des Valeurs Mobilières (BVRM).
LSEG has also signed an MoU with the Nairobi Stock Exchange in Kenya for a similar partnership, and through LSEG Technology the Group works closely with a number of African exchanges, including the Johannesburg Stock Exchange, providing trading software and technology.
Despite the healthy pipeline of listings coming in from the mining sector and beyond, an unavoidable macro-concern has been looming across the London market since the UK voted to leave the European Union in June 2016.
While the political uncertainty caused by the referendum outcome has caused some delays to investment decisions, it is evident that widespread fear has not enveloped across UK markets when considering London’s pipeline growth in recent years, particularly in terms of international listings.
“The international nature of our market is arguably as strong as ever. In 2017, nine of the largest 10 IPOs on the London market were non-UK businesses. Last year, three of the largest five were international businesses.”
“Many of our international issuers have voted with their feet. They look at a listing as a route to provide access to liquidity, access to investors, a sensible and transparent governance regime, and an ecosystem that can nurture these businesses.
“All these things have always made London an attractive place for international companies to list and none of that has changed,” Attenborough asserts.
Returning to the mining sector, Attenborough believes London Stock Exchange’s 2019 pipeline remains strong, despite various macro-challenges, such as the US-China trade discussions, impacting the sector outlook.
In March, London welcomed the IPO of Kazakh vanadium producer Ferro-Alloy Resources Group, in what is set to be the first of several listings from the mining sector on the London markets in 2019.