A Company digging for tanzanite, a violet gemstone one thousand times rarer than diamonds, has become the latest mining company to list on London's junior market, AIM.
The flotation yesterday of TanzaniteOne takes the number of miners on AIM to 74, by far the largest sector, with a market capitalisation totalling £3.6bn. It came as another company, River Diamonds, said it would list next week, having raised £1.7m.
But the pair demonstrate a shift in investor interest away from the most speculative exploration companies towards outfits with producing mines.
TanzaniteOne, headquartered in South Africa, raised £5m with a placing at 42p, and its shares went to a premium, closing at 44.5p. It mines, trades and markets the gems, and said it would use the additional funds to explore for new sources of the gemstone. Tanzanite was discovered in 1967 and the world's only known source is in a 5km strip of land near Mount Kilimanjaro in northern Tanzania.
Jonathan Guy, a mining analyst at the small-companies broker Seymour Pierce, said AIM had become the market of choice for smaller international mining companies, and a virtuous circle had developed. The creation of large companies such as Peter Hambro Mining, the Russian gold digger, had attracted more fund managers to the sector, which brought more interesting ventures to AIM.
"UK investors appear to be more comfortable than their US, Canadian or Australian peers about the high political risks associated with doing business in Africa and central Asia," Mr Guy said. "Australian investors can be quite parochial and in Canada there are incentives to invest in domestic mining companies, but because the UK doesn't have a domestic mining industry, we are more inclined to invest overseas."
Miners have raised £196m from AIM flotations this year, compared with £49m for the whole of 2003. River Diamonds will be the 20th company to float. Just 14 floated last year.
River Diamonds said it had raised more than originally planned - £1.7m compared with its original target range of £1m-£1.5m. The money will buy machinery to help boost production at its first diamond project in Brazil.
The factor linking TanzaniteOne and River Diamonds is that they both have producing assets, making them less risky that pure exploration plays. Many of the companies floated earlier this year are trading at below their issue prices, as investors have become more cautious.
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