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Gold M&A buffers ASX capital raisings for 2019 in abysmal year for mining IPOs

The ASX fell from a decade-high in 2018 to a four-year low in metals and mining IPO capital raisings in 2019, but still outperformed both the Toronto and London exchanges in overall sector raisings thanks to healthy gold M&A activity.

While A$6.9 billion in IPO capital was raised in 2019 for 92 new listings across all sectors, just six were in metals and mining, which raised A$32.6 million, a stark drop from 2018 when Coronado Global Resources Inc. (A$774 million IPO), Jupiter Mines Ltd. (A$240 million) and Nickel Mines Ltd. (A$200 million) bolstered the sector's numbers.

Trigg Mining Ltd. (A$4.5 million IPO), African Gold Ltd. (A$4.5 million), Canterbury Resources Ltd. (A$6.1 million), Godolphin Resources Ltd. (A$7.5 million), Mont Royal Resources Ltd. and Macarthur Minerals Ltd. (both A$5 million) were the ASX's only metals and mining listings for 2019.

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ASX Listings Business Development Manager Josh Collard said metals and mining saw A$6.6 billion raised in for 2019 in the follow-in market, which saw A$51.6 billion raised across all sectors, taking the exchange's total capital raised for both IPOs and follow-ons to a total of A$58.5 billion.

The largest such deals were in relation to acquisitions, all in the gold sector, Collard said. The sale of the Kalgoorlie Super Pit to Northern Star Resources Ltd. and Saracen Mineral Holdings Ltd., along with St Barbara Ltd. acquiring Atlantic Gold Corp. earlier in the year were the largest follow-on offerings.

The ASX's total 2019 metals and mining capital raisings outperformed the sector totals for both the TSX (US$1.4 billion including the TSX-Venture & Canadian Securities Exchange) and the LSE (US$2.8 billion including AIM).

Canadian comparison

Though a CSA Global expert said in October 2019 that the TSX's cannabis boom had "peaked," Collard said there was still inbound interest from Canadian companies looking to supplement their Canadian listings with an ASX listing to access its capital market, citing Macarthur Minerals, which completed a dual listing on the ASX in December.

Collard said a road show to Canada late in 2019 revealed that the country's resources sector equity market is still struggling, having experienced a large decline in capital raised in the past two years amid an "immense amount" of cannabis companies that have listed.

One of the key differentiators from the ASX's peer exchanges is its offering of a single, main board listing venue only, with no junior market or the "potential pitfalls" that can come with those offerings, he said.

The ASX also offers relatively early entry into globally recognized S&P Indices at a far earlier age than peer exchanges, meaning passive investors are accessible sooner, he said.

"The Australian market is fortunate to be underpinned by our ever-growing pension pool, the fourth largest globally, and a lot of that money is mandated to domestic listed equities, so deal flow is important and the market is always on the lookout for quality projects," Collard said.

"Australia is also a global leader in the resources space, it is our largest sector on ASX by number of companies so there is no shortage of comps and there is a very deep bench of people that are experts in the space, be it research, capital raising and other relevant markets expertise."

Perth, Australia-based independent analyst Peter Strachan said gold has been trending up on the back of macro forces like trade wars and Middle East tensions, while bellwether base metals such as copper and nickel suffered despite London Metal Exchange stockpiles dwindling down to levels that would usually lift prices.

Aluminum prices also "haven't done much" despite stockpiles "trickling down" amid an oversupply situation, while China keeps building many smelters, which do not seem to be market-driven; while lithium producers have also struggled with low prices amid battery supply chain bottlenecks.

Strachan said macro forces have meant that many base metal companies have struggled to gain traction despite exceptional drill results, with the exception of the likes of gold producer Alkane Resources Ltd., which has benefited from gold prices, while its Boda copper-gold discovery in New South Wales, Australia, has also reenergized exploration in the state.