Small Talk: Timis raises £80m for Africa

  • @AlistairDawber

African Minerals, the Aim- listed exploration company led by executive chairman and colourful small-cap sage Frank Timis, last week raised another £80m. Proceeds will be used to build a 120km road connecting its Tonkolili iron ore project in Sierra Leone with a railway line.

Mr Timis said: "This fund-raising, together with the conditional CRM equity deal and two off-take agreements, places the company in a very strong position to realise iron ore production from Tonkolili during the first quarter of 2011." A total of 20m new common shares in African Minerals will be underwritten at a price of 400 pence per share.

The placing comes two weeks after Chinese state-owned China Railway Materials Commercial Corp (CRM), a steel-trading firm, took a 12.5 per cent stake in African Minerals. That deal, worth £152.6m, will also see CRM agree to buy between 4m tonnes and 8m tonnes of iron ore each year from the Tonkolili mine, over at least the next 20 years.

African Minerals has been promising tie-ups with bigger partners since September last year, when it issued a statement to the stock market saying it was in talks with a number of interested parties, including "a Chinese consortium". As part of the placing, African Minerals has granted CRM a 60-day option to subscribe in cash for up 14.4 per cent of the placing.

Limited IPO activity is a mixed blessing for Aim

Like the certainty that night follows day, a new year brings a new load of data. Aim Advisers Inc, a California-based group that helps US companies list on the London exchange, was the latest to churn out the statistics last week. Not all its findings make comfortable reading.

The group says that in the short term there are few prospects of the numbers of initial public offerings (IPOs) returning to a more "normal" level. Aim Advisers shows that of the 102 IPOs on Aim in 2008 and 2009, only 26 came last year: "On the surface, this may appear to be a very positive sign of future IPO activity but the vast majority were for 'investment vehicles' funded to target distressed real-estate/ commercial businesses, or small speciality finance companies," they say.

"During 2009, 10 of the 13 IPOs [77 per cent] were for 'investment vehicles', whereas during 2008 only 13 of the 38 IPOs [34 per cent] were of this nature, consistent with the historic levels of 39 per cent and 38 per cent in 2007 and 2006."

The lack of IPOs is a problem for liquidity and for advisers' fees, but put together with the increased number of companies that left Aim last year, the market is in need of a fillip. That may be that investors have not abandoned the market, Aim Advisers say, as evidenced by the strength of secondary offerings and share placements.

But one should consider why equity raisings take place: often it is to fund research or exploration, and that will be comforting to those running Aim as these activities are the reasons for the exchange in the first place. It should also cause concern, however, with several groups raising money from distressed positions.

AIM set for 'decade of growth' says LSE

Despite the mixed data from Aim Advisers, the London Stock Exchange, which runs Aim, reckons that the index is set for a "decade of growth".

The claim, which is made in conjunction with the specialist publication Growth Company Investor, follows research that shows that Aim is healthier than we'd imagined. According to the numbers, 82 per cent of Aim chief executives say they could raise funds on the market if necessary, while 41 per cent of private investors said that they expect to be more active on Aim in 2010.

The survey also indicates that the average Aim-listed group is in better shape than it was a year ago, with the average market capitalisation of an Aim-listed company jumping from £24.3m in 2008 to £43.8m last year; 528 companies grew revenues at double-digit rates in their last annual results.