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Global Capital Markets – where does your equity story fit?
Mines and Money, Hong Kong
March 2012
www.pwc.com/mining
PwC
Presenter
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Partner, PwC AustraliaGlobal Mining LeaderPwC Australia China Practice Leader
Tim Goldsmith
E mail: [email protected].: +61 (3) 8603 2016 Mob.: +61 (0) 419 201 877
PwC
PwC Global Mining Network
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We are a network of firms in 158 countries with close to 169,000 people who are committed to delivering quality in assurance, tax and advisory services
168,710
1,500PwC has in excess of 1,500 mining professionals across the globe located in all significant mining territories
We have been providing professional services to mining companies for over 100 years.
We audit:
• 25% of Top 40 global mining companies
• 37% of the FTSE 100
• 32% of ASX listedmining companies
• 24% of the TSX listed mining companies
PwC
Our selected mining deal credentials
IPO on the Official List of the LSE
£581m
pwc
March 2010
Reporting Accountant
IPO on the Official List of the LSE
$3,042m
pwc
December 2007
Reporting Accountant
IPO on AIM
$60m
pwc
September 2010
Reporting Accountant
IPO on the Official List of the LSE
£707m
pwc
July 2010
Reporting Accountant
I
IPO on the Official List of the LSE
$185m
December 2007
pwc
Reporting Accountant
IPO on the Warsaw Stock Exchange
$1,960m
pwc
July 2011
Reporting Accountant
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IPO on AIM and TSX
$100m
pwc
February 2007
Reporting Accountant
IPO on TSX
$280m Reporting Accountant
pwc
December 2010
$3bn acquisitions andlisting on the Official
List of the LSE
Introduction only
pwc
Feb/Jun 2011
Reporting Accountant
IPO on the Main Board of the HKEx
$1,900m
December 2006
Reporting Accountant
pwc
First listing of Hong Kong Depository Receipts on HKEx
Introduction only
December 2010
pwc
Reporting Accountant
pwc
PwC
IPO volumes are expected to restart growing in 2012... despite continuing volatility and a disappointing H2 2011
• China and HK the largest contributors to overall IPO volumes
• 51% of all IPO proceeds raised in Asia in 2011 – although significantly less than 65% in 2010
• EMEA volumes almost matching Americas’ – boosted by ‘jumbo’IPO of Glencore and Spanish banks’ floats
• Recovery in the US market, with a number of successful PE exits and technology floats
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Source: Thomson ONE
PwC 6
Over 250 IPOs cancelled or postponed globally in 2011 Recent deals have been vulnerable to market volatility and changes in investor risk appetite – although pipeline is the strongest since GFC
Source: Yahoo Finance
Eye of the storm and impact of the financial crisis
Eurozone financial crisis
Sovereign debt crisis
PwC
Some of mining stories of 2011Conditions remained difficult, but good stories still sold
Company MarketCountry of ops
Amount raised
Comments
Glencore International PLC LSE, HKEx Swiss/Int’l $9.8bnLondon and HK listing of the largest commodities trader in May 2011, merger with Xstrata in progress
Resourcehouse Ltd HKEx Australia CancelledMajor Australian iron ore and coal group pulled $3.6bn PO after a number of attempts to attract Chinese investors
Evraz LSE RussiaIntroduction
onlyRussian steelmaker moved up from GDRs to premium listing and entered FTSE 100
Erdenes Tavan Tolgoi LSE, HKEx Mongolia PostponedOne of the largest coal deposits in the world, initially expected to list on LSE, HKEx and MSE
JSW SA WSE Poland $1.9bnOne of the largest IPOs in Europe in 2011, privatisation of largest coking coal producer in Europe
Vallar plc / Bumi plc LSE EM/Indonesia $1.1bnJuly 2010 IPO of a SPAC raising $1.1bn, followed by $3.3bn acquisition of Indonesian coal interests completed in Feb 2011, with premium listing on the LSE in June 2011
PhosAgro LSE Russia $0.7bnRussian potash producer floating in London in July 2011 at lower valuation
Polymetal LSE Russia $0.8bnRussian gold miner moved up from GDRs to premium listing and entered FTSE 100
Nord Gold LSE Russia PostponedGold-mining unit of Severstal withdrew $0.7bn listing due to market conditions
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Source: Thomson ONE
PwC
Continuing popularity of gold and coal
Increasing competition between key financial centres
Increased activity from PE funds, SWFs and SOEs
Secondary and dual listings in HK, success mixed
Resource nationalism driving listing decisions
Current trends and outlookMining sector remains one of the hottest for IPO activity in 2012
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Cross-border listings of emerging market miners
Governments seeking to raise funds via privatisations
Spin-offs and demergers to continue
PwC
Longer term global shift in capital marketsEmerging markets could account for over half the global market capitalisation in 20 years
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2030: Global market cap composition
• Over the next 20 years, the market capitalisation of companies listed on stock exchanges in emerging markets is expected to rise from 31% to 55% of the total global market cap.
• This shift will be driven by higher GDP growth and deeper capital capacity in those markets.
• The market capitalisation of Chinese companies is expected to outstrip the US by 2030 and reach $41.4 trillion.
Source: Goldman Sachs ; Global economics paper No: 204
PwC
Shift in power base of the mining industry
• Composition of Top 40 miners also shifting to emerging markets
• Additional new players on the horizon (e.g. traders, new emerging market IPOs)
Source : PwC Analysis
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PwC
What is your equity story – and who will buy it?
Development
Early p
roduct
ion
Maximising value of asset portfolio
Commodity synergies
Proximity to emerging market customers
Positive commodity prices outlook
Well thought through capex
plans
Good access to transportation
routes
Efficient cost management
Understanding stage of
development
Competition and market share
Quality of resource base
Market position of assets
Off-take agreements
Credibility of management
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Established production
Exploration
PwC
Does the whole equal
more than the parts?
Creating a compelling investment proposition Key considerations
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PwC
How does your equity story influence your choice of market?
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Regulation and process Ease of further fundraising
Market
Domestic
Regional
International
Global
Regulated/
Unregulated
Single/primary or
Dual/secondary
listings
Valuation
Ongoing obligations
Corporate governanceLikely investor base
Geographic proximity
Market size and liquidity
PwC
Evolution of the mining industry capital markets Increasing choice for issuers and strong competition amongst exchanges
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PwC
At 31 December 2011 London Australia Toronto Hong Kong
Main Market
AIM ASX TSX TSXVMain Board
Total number of issuers 1,376 1,143 2,079 1,588 2,249 1,326
Total market cap, US$ bn 5,584 101 1,198 1,967 48 2,247
Number of international cos 312 225 96 194 158 24
No. of mining issuers listed 44 136 687 371 1,274 69
Mining market cap, US$ bn 405 20 308 391 28 243
Average market cap, US$ m 9,205 147 448 1,054 22 3,522
New mining IPOs in 2011 3 9 49 6 42 7
Proceeds of mining IPOs in 2011, US$ m
10,907 67 471 202 145 2,124
Average raise 3,636 7 10 34 3 303
Total mining equity raised in 2011, US$m
10,972 378 7,273 4,813 1,007 3,419
Comparison of stock exchanges
Converted at:USD:AUD of 1.02, USD:CAD of 0.98, USD:GBP of 1.55, HKD:USD of 7.76sources: World Federation of Exchanges, stock exchanges, ThomsonOne data, PwC research
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PwC
Which market – which investors will buy your story?
LSE
• Significant liquidity and appetite for resource companies
• Leading exchange for inbound listings
• Global diversified miners account for c.30% of market value of sector
• Well developed market infrastructure including large number of mining analysts and investors
• High concentration of small cap companies
• Investors have significant experience with international exploration & development assets
• Proximity to US capital
• Fewer large scale IPOs
• Flexible listing regime
• Lower trading volumes than other global exchanges
ASX TSX HK
• High concentration of mid/small cap companies
• Investors have significant experience with international exploration & development assets
• Rio Tinto and BHP Billiton account for over 2/3 of mining sector value
• Limited large scale IPOs in resources
• Fewer number of resource companies, large Chinese SOEs
• Investors less familiar with international miners although increasing interest
• Lack of understanding of exploration assets, companies with only inferred resources not eligible to list
• Complex regulatory process
• Limited analyst coverage
• Higher proportion of retail investors
• Largest listing venue for copper companies by market value, strong presence of precious metals
• Most international venue, particularly well represented Russia / CIS and Africa
• Most diversified listing venue with balanced mix across all commodities
• Largest listing venue for iron ore by market cap
• Predominantly projects in Australia, SE Asia and increasingly Africa
• High concentration of precious metal companies especially gold
• Uranium and potash miners well represented
• International companies mainly from US and Australasia
• Largest listing venue for coal companies by market value
• Proximity to Chinese base is an advantage
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PwC
Dual and secondary listings – is it worth it?It takes time to create liquidity in a new market and may not work for all
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South GobiGlencore Rusal
BHP Billiton Rio Tinto Kazakhmys
Source: Factiva. Average trading volume for last 12m or shorter period if newly listed
PwC
Which market – considerations to help your decision
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Likely investor base
Management track record
Commodity fit, degree of diversification
Size and stage of development of assets,
extent of capital required
Quality and risks of assets
Geographic proximity
Location of management
Location of mines
Proximity to emerging market
customers, especially China
Market
Market capitalisation and liquidity
Number of listing location peers
Total money raised from resource IPOs
Presence of mining analysts
Regulation and process
Admission criteria, including CPR
requirements
Ongoing obligations
Speed and cost
Index inclusion
Where to list a mining company?
Key decisions on the road to an IPO
Strategy and equity story, which businesses/assets to float
Tax and legal structuring, holding company location
Choice of market and timing
People and resources, key management
Appointment of advisors, esp Mineral Expert
Financial reporting and track record audit requirements
Management information systems
Transparency and corporate governance
Board composition
Start of preparation
IPO launch
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PwC
Have you got your equity story right? Are you clear about your strategy?
Summary
Are you ready? Have you got an up to date Competent Person’s Report?
Have you decided which market best suits you?
PwCServices:
IPO Readiness
Which Market?
Governance and controls
Reporting Accountant
Tax structuring
Pipeline remains strong with fundamental demand and supply drivers in place
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Thank you
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
© 2012 PricewaterhouseCoopers LLP . All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
