Small Talk: London Mining succeeds in joining alternative big boys
Monday 09 November 2009
We may still be in recession, but those that say the Alternative Investment Market (Aim) is coming back to life can point to the listing on Friday of London Mining to further strengthen their case.
Despite its name, the group has not secured licences to start digging up parts of Neasden or Crouch End – the London Mayor Boris Johnson is not quite that bonkers. Instead, it has permission to look for iron ore in Sierra Leone, Saudi Arabia, Greenland and China.
The very fact that a mining group has managed to list on Aim at all is worthy of note, but in London Mining's case the achievement is doubly impressive. The group has managed to raise £70m, placing the shares with 30 institutional investors. The company is also listing on the Norwegian stock market and already has $230m (£138m) in cash after selling off assets to ArcelorMittal last year.
For a long time, Aim investors have insisted that they are only prepared to back those mining groups that have significant assets and in most cases already have revenues to show for their endeavours: the days of getting hand-outs to fund overseas adventures are well over. London Mining is in production in China, with its site in Sierra Leone set to come into production next year.
"London Mining's admission to Aim, combined with today's placing of shares into the market from pre-existing shareholders, gives us both the liquidity and exposure we need in a market that understands mining," says the chief executive Graeme Hossie. "We are fully funded to reach all of our key milestones, including full development of the Marampa mine in Sierra Leone next year to its first phase of production.
"Our objective is to become a mid-tier supplier of bulk commodities to the global steel industry, with a particular focus being directed towards iron ore."
Mr Hossie added that one of the group's ambitions was to move to the London Stock Exchange's main list.
Coming to a train near you
TrainFX, which is owned by the Aim-listed outfit RAM Investment Group, will announce this week it is set to sign a six-figure contract with a UK rail operator to install its technology on its trains. TrainFX operates information screens on trains, something which we will all get used to in the coming years thanks to tighter EU regulations on what information is available to rail passengers. The firm reckons that before long it will have installed its TV-like screens on a number of rail networks.
Rise in Aim exits masks welcome news
While London Mining's inclusion on Aim is certainly a highlight, elsewhere the haemorrhaging of companies on the index is not slowing. Indeed, Deal Monitor, an Aim market research group, said last week that the number of businesses leaving the market was up by 60 per cent in October, with 24 companies decided to give up their public listing.
It has been a torrid year for the index with 239 groups already having left this year, up from 196 at the same stage in 2008. Deal Monitor says that "a significant proportion of companies leaving Aim during October stated that their main reason for de-listing was that staying on Aim was not in their best interest". The company's analysts added: "The most common reasons cited were poor liquidity, low share prices, burdensome regulatory requirements, and the cost of remaining listed outweighing the benefits."
Of the groups leaving Aim in October, only three did so because they went into administration or liquidation, down from five in September and seven in October 2008. Eight firms left the market because of takeovers, with two leaving because they failed to implement successfully their investment strategies, as required under the stock-exchange rules.
"The increase is not necessarily a sign things are about to get worse for Aim and its constituents," said Richard Gill, the editor of the Aim Deal Monitor. "We can take heart from the fact that fewer firms are exiting the market as a result of financial distress, suggesting that the worst of the recession is now over for smaller firms. In addition, the recent trio of initial public offerings and steady stream of acquisition activity on the market suggests that the economy is slowly improving."
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