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Western Australia's COVID-19 response, low interest rates seen driving ASX IPOs

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Western Australia's COVID-19 response, low interest rates seen driving ASX IPOs

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ACH Minerals' Ravensthorpe gold project.
Source: ACH Minerals

Experts say high gold prices, low interest rates and Western Australia's superior COVID-19 management are ensuring the ASX continues its impressive IPO run which is on track to exceed the number of metals and mining listings in 2019.

After a four-year low in metals and mining IPO capital raisings in 2019 following a decade-high in 2018, July 2020 saw listings by gold and silver producer Manuka Resources Ltd. and rare earths hopeful Australian Strategic Materials Ltd as well as a backdoor listing by Suvo Strategic Minerals Ltd.

They followed Westgold Resources Ltd.'s demerger of Castile Resources Ltd. and IPOs of gold and base metals juniors Kaiser Reef Ltd. and Cobre Ltd.

"There was a view that banks might be a better option, but with low interest rates those funds are just chasing yield and it really does feel like that money has started to flow back into equities," BDO corporate finance partner Adam Myers said, adding that money is flowing back into exploration in particular.

"There's a lot of interest out there from a broad range of investors, and every broker we talk to isn't really concerned about getting the minimum fund raising," Myers said.

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West Australian attraction

While record gold prices make such explorers attractive, Myers said the fundamentals like grade and quality management still ring true for investors, and "it's an added bonus if the project is in Western Australia," where there were just three active COVID-19 cases as of Sept. 9.

"A lot of investors can see that border restrictions are designed to ensure the state's mining economy can continue, so there's a degree of confidence that the government doesn't want to threaten the mining industry at all with a pandemic that shuts down operations," he said.

Allan Kelly, executive chairman of gold explorer Miramar Resources Ltd. due to list Oct. 14, said Western Australia's strong history of gold exploration and ease of access given lack of virus restrictions meant that "it wasn't a hard sell."

Interest from Legend Mining Ltd.'s nickel-copper discovery at Fraser Range and Greatland Gold PLC at Havieron, where partner Newcrest Mining Ltd. reported hitting 1 meter at 100 g/t gold on Sept. 10, also has investors asking "what's next," Kelly said.

One of the bigger IPOs to come is ACH Minerals Pty. Ltd. set to rebrand as Medallion Metals with a prospectus due this month seeking to raise A$30 million.

ACH will split the Great Southern project it bought from Silver Lake in 2016 into two projects — Ravensthorpe gold, on which a feasibility study and environmental permitting was completed in July, and Jerdacuttup.

Paul Bennett, who will be Medallion's managing director, told S&P Global Market Intelligence that an investment decision is due by the end of 2021 on Ravensthorpe, which has a 673,000-ounce resource, with planned average annualized production of 61,000 ounces per annum for at least 5.5 years.

SIV Asset Management Ltd. will relist as Ragusa Minerals on Sept. 28 to explore Zimbabwe's Bubi Greenstone Belt for gold, and Jupiter Mines Ltd. confirmed on Sept. 4 it would spin out its West Australian Mount Mason and Mount Ida direct shipping iron ore projects.

Siren Gold is also set for a A$10 million IPO on Oct. 6 focusing on a package of permits in the Reefton Goldfield on New Zealand's South Island. Coda Minerals Ltd. is also planning a A$6.5 million IPO targeting ground near BHP Group's South Australia Oak Dam copper discovery.

Pan Asia Metals Ltd. also has downstream ambitions for its lithium and tungsten projects in Thailand it will explore with funds from its listing due Sept. 23, after Canada-focused coking coal developer Montem Resources Ltd.'s Sept. 11 IPO.