23.03.2012 Global capital markets: where does your equity story fit, Tim Goldsmith
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This document discusses global capital markets and where mining equity stories fit within them. It provides an overview of PwC's global mining network and credentials advising mining IPOs. It then analyzes mining IPO trends, including some examples from 2011. Key messages are that IPO volumes are expected to increase in 2012, particularly in Asia, and there has been a shift towards emerging markets in terms of the composition of large mining companies and future growth in stock market capitalization. The document concludes by discussing considerations for mining companies regarding which market to list their equity story in.
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23.03.2012 Global capital markets: where does your equity story fit, Tim Goldsmith
- 1. Global Capital Markets – where does your equity story fit? Mines and Money, Hong Kong March 2012 www.pwc.com/mining
- 2. PwC Presenter 2 Partner, PwC Australia Global Mining Leader PwC Australia China Practice Leader Tim Goldsmith E mail: tim.goldsmith@au.pwc.com Tel.: +61 (3) 8603 2016 Mob.: +61 (0) 419 201 877
- 3. PwC PwC Global Mining Network 3 We are a network of firms in 158 countries with close to 169,000 people who are committed to delivering quality in assurance, tax and advisory services 168,710 1,500 PwC has in excess of 1,500 mining professionals across the globe located in all significant mining territories We have been providing professional services to mining companies for over 100 years. We audit: • 25% of Top 40 global mining companies • 37% of the FTSE 100 • 32% of ASX listed mining companies • 24% of the TSX listed mining companies
- 4. PwC Our selected mining deal credentials IPO on the Official List of the LSE £581m pwc March 2010 Reporting Accountant IPO on the Official List of the LSE $3,042m pwc December 2007 Reporting Accountant IPO on AIM $60m pwc September 2010 Reporting Accountant IPO on the Official List of the LSE £707m pwc July 2010 Reporting Accountant I IPO on the Official List of the LSE $185m December 2007 pwc Reporting Accountant IPO on the Warsaw Stock Exchange $1,960m pwc July 2011 Reporting Accountant 4 IPO on AIM and TSX $100m pwc February 2007 Reporting Accountant IPO on TSX $280m Reporting Accountant pwc December 2010 $3bn acquisitions and listing on the Official List of the LSE Introduction only pwc Feb/Jun 2011 Reporting Accountant IPO on the Main Board of the HKEx $1,900m December 2006 Reporting Accountant pwc First listing of Hong Kong Depository Receipts on HKEx Introduction only December 2010 pwc Reporting Accountant pwc
- 5. PwC IPO volumes are expected to restart growing in 2012 ... despite continuing volatility and a disappointing H2 2011 • China and HK the largest contributors to overall IPO volumes • 51% of all IPO proceeds raised in Asia in 2011 – although significantly less than 65% in 2010 • EMEA volumes almost matching Americas’ – boosted by ‘jumbo’ IPO of Glencore and Spanish banks’ floats • Recovery in the US market, with a number of successful PE exits and technology floats 5 Source: Thomson ONE
- 6. PwC 6 Over 250 IPOs cancelled or postponed globally in 2011 Recent deals have been vulnerable to market volatility and changes in investor risk appetite – although pipeline is the strongest since GFC Source: Yahoo Finance Eye of the storm and impact of the financial crisis Eurozon e financial crisis Sovereign debt crisis
- 7. PwC Some of mining stories of 2011 Conditions remained difficult, but good stories still sold Company Market Country of ops Amount raised Comments Glencore International PLC LSE, HKEx Swiss/Int’l $9.8bn London and HK listing of the largest commodities trader in May 2011, merger with Xstrata in progress Resourcehouse Ltd HKEx Australia Cancelled Major Australian iron ore and coal group pulled $3.6bn PO after a number of attempts to attract Chinese investors Evraz LSE Russia Introduction only Russian steelmaker moved up from GDRs to premium listing and entered FTSE 100 Erdenes Tavan Tolgoi LSE, HKEx Mongolia Postponed One of the largest coal deposits in the world, initially expected to list on LSE, HKEx and MSE JSW SA WSE Poland $1.9bn One of the largest IPOs in Europe in 2011, privatisation of largest coking coal producer in Europe Vallar plc / Bumi plc LSE EM/Indonesia $1.1bn July 2010 IPO of a SPAC raising $1.1bn, followed by $3.3bn acquisition of Indonesian coal interests completed in Feb 2011, with premium listing on the LSE in June 2011 PhosAgro LSE Russia $0.7bn Russian potash producer floating in London in July 2011 at lower valuation Polymetal LSE Russia $0.8bn Russian gold miner moved up from GDRs to premium listing and entered FTSE 100 Nord Gold LSE Russia Postponed Gold-mining unit of Severstal withdrew $0.7bn listing due to market conditions 7 Source: Thomson ONE
- 8. PwC Continuing popularity of gold and coal Increasing competition between key financial centres Increased activity from PE funds, SWFs and SOEs Secondary and dual listings in HK, success mixed Resource nationalism driving listing decisions Current trends and outlook Mining sector remains one of the hottest for IPO activity in 2012 8 Cross-border listings of emerging market miners Governments seeking to raise funds via privatisations Spin-offs and demergers to continue
- 9. PwC Longer term global shift in capital markets Emerging markets could account for over half the global market capitalisation in 20 years 9 2030: Global market cap composition • Over the next 20 years, the market capitalisation of companies listed on stock exchanges in emerging markets is expected to rise from 31% to 55% of the total global market cap. • This shift will be driven by higher GDP growth and deeper capital capacity in those markets. • The market capitalisation of Chinese companies is expected to outstrip the US by 2030 and reach $41.4 trillion. Source: Goldman Sachs ; Global economics paper No: 204
- 10. PwC Shift in power base of the mining industry • Composition of Top 40 miners also shifting to emerging markets • Additional new players on the horizon (e.g. traders, new emerging market IPOs) Source : PwC Analysis 10
- 11. PwC What is your equity story – and who will buy it? Development Early production Maximising value of asset portfolio Commodity synergies Proximity to emerging market customers Positive commodity prices outlook Well thought through capex plans Good access to transportation routes Efficient cost management Understanding stage of development Competition and market share Quality of resource base Market position of assets Off-take agreements Credibility of management 11 Established production Exploration
- 12. PwC Does the whole equal more than the parts? Creating a compelling investment proposition Key considerations 12
- 13. PwC How does your equity story influence your choice of market? 13 Regulation and process Ease of further fundraising Market Domestic Regional International Global Regulated/ Unregulated Single/primary or Dual/secondary listings Valuation Ongoing obligations Corporate governanceLikely investor base Geographic proximity Market size and liquidity
- 14. PwC Evolution of the mining industry capital markets Increasing choice for issuers and strong competition amongst exchanges 14
- 15. PwC At 31 December 2011 London Australia Toronto Hong Kong Main Market AIM ASX TSX TSXV Main Board Total number of issuers 1,376 1,143 2,079 1,588 2,249 1,326 Total market cap, US$ bn 5,584 101 1,198 1,967 48 2,247 Number of international cos 312 225 96 194 158 24 No. of mining issuers listed 44 136 687 371 1,274 69 Mining market cap, US$ bn 405 20 308 391 28 243 Average market cap, US$ m 9,205 147 448 1,054 22 3,522 New mining IPOs in 2011 3 9 49 6 42 7 Proceeds of mining IPOs in 2011, US$ m 10,907 67 471 202 145 2,124 Average raise 3,636 7 10 34 3 303 Total mining equity raised in 2011, US$m 10,972 378 7,273 4,813 1,007 3,419 Comparison of stock exchanges Converted at:USD:AUD of 1.02, USD:CAD of 0.98, USD:GBP of 1.55, HKD:USD of 7.76 sources: World Federation of Exchanges, stock exchanges, ThomsonOne data, PwC research 15
- 16. PwC Which market – which investors will buy your story? LSE • Significant liquidity and appetite for resource companies • Leading exchange for inbound listings • Global diversified miners account for c.30% of market value of sector • Well developed market infrastructure including large number of mining analysts and investors • High concentration of small cap companies • Investors have significant experience with international exploration & development assets • Proximity to US capital • Fewer large scale IPOs • Flexible listing regime • Lower trading volumes than other global exchanges ASX TSX HK • High concentration of mid/small cap companies • Investors have significant experience with international exploration & development assets • Rio Tinto and BHP Billiton account for over 2/3 of mining sector value • Limited large scale IPOs in resources • Fewer number of resource companies, large Chinese SOEs • Investors less familiar with international miners although increasing interest • Lack of understanding of exploration assets, companies with only inferred resources not eligible to list • Complex regulatory process • Limited analyst coverage • Higher proportion of retail investors • Largest listing venue for copper companies by market value, strong presence of precious metals • Most international venue, particularly well represented Russia / CIS and Africa • Most diversified listing venue with balanced mix across all commodities • Largest listing venue for iron ore by market cap • Predominantly projects in Australia, SE Asia and increasingly Africa • High concentration of precious metal companies especially gold • Uranium and potash miners well represented • International companies mainly from US and Australasia • Largest listing venue for coal companies by market value • Proximity to Chinese base is an advantage 16
- 17. PwC Dual and secondary listings – is it worth it? It takes time to create liquidity in a new market and may not work for all 17 South GobiGlencore Rusal BHP Billiton Rio Tinto Kazakhmys Source: Factiva. Average trading volume for last 12m or shorter period if newly listed
- 18. PwC Which market – considerations to help your decision 18 Likely investor base Management track record Commodity fit, degree of diversification Size and stage of development of assets, extent of capital required Quality and risks of assets Geographic proximity Location of management Location of mines Proximity to emerging market customers, especially China Market Market capitalisation and liquidity Number of listing location peers Total money raised from resource IPOs Presence of mining analysts Regulation and process Admission criteria, including CPR requirements Ongoing obligations Speed and cost Index inclusion Where to list a mining company?
- 19. Key decisions on the road to an IPO Strategy and equity story, which businesses/assets to float Tax and legal structuring, holding company location Choice of market and timing People and resources, key management Appointment of advisors, esp Mineral Expert Financial reporting and track record audit requirements Management information systems Transparency and corporate governance Board composition Start of preparation IPO launch 19
- 20. PwC Have you got your equity story right? Are you clear about your strategy? Summary Are you ready? Have you got an up to date Competent Person’s Report? Have you decided which market best suits you? PwC Services: IPO Readiness Which Market? Governance and controls Reporting Accountant Tax structuring Pipeline remains strong with fundamental demand and supply drivers in place 20
- 21. Thank you This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2012 PricewaterhouseCoopers LLP . All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.