WESTERN Australian-based resources companies are experiencing mixed results from their plans to list on the Australian Securities Exchange this year.
A struggling global economy has caused companies to hesitate at the prospect of raising funds through an initial public offering (IPO).
Just 14 companies Australia-wide listed on the bourse in the first two months of the calendar year, down from 29 in the same period a year earlier.
Early this year, accountancy firm HLB Mann Judd forecast that a lacklustre market performance during the December 2011 quarter would continue.
HLB Mann Judd partner Lucio Di Giallonardo told WA Business News this was the case in January, but there had been improvement since.
“In January the market did not start off as buoyant as last year,” Mr Di Giallonardo said.
“There was only a little activity about with some floats being carried over from last year pending a pick-up in market sentiment.
“In February we saw that activity had picked up again. As a result, we have a strange set of circumstances and we’re not exactly sure where IPO activity will end up at the end of this year.”
The lack of demand from investors for new stocks forced two companies to withdraw plans to list on the ASX last week.
Lugansk Gold and Melrose Gold Mines, both subsidiaries of Perth-based Korab Resources, advised the market they would no longer be seeking their planned admission to the bourse.
“Due to volatile domestic and global market conditions … the boards of both Melrose and Lugansk have independently determined they will not be able to obtain admission to the ASX,” Korab said in a statement.
“In 2011, IPO activity was at its lowest level since 2001, and there have been no signs of improvement to date in 2012.”
Lugansk owns the Bobrikovo gold and silver project in the Ukraine, while Melrose has several gold projects in the eastern Goldfields, Gascoyne and Pilbara regions of WA.
Despite the poor IPO environment, Perth-based African oil explorer Pura Vida Energy has defied sentiment by successfully listing and adding value to its market capitalisation.
The company debuted on the ASX on February 14 after raising $4 million with CPS Securities as lead manager to secure assets off the coast of Morocco and to fund exploration.
Pura Vida’s stock surged following the initiation of independent research on the company by UK broking and advisory firm, N+1 Brewin.
After trading started on 20 cents Pura Vida has since peaked above 40 cents and, according to N+1 Brewin’s analysis, will continue its rise to 80 cents over the next 12 months.
Pura Vida managing director Damon Neaves said the company recognised it was testing the market at a challenging time when investor sentiment was down.
“Our timing wasn’t great but that was largely governed by the necessity to close the Moroccan deal and fund our activities there,” Mr Neaves said.
“Having said that, we were oversubscribed and now we are benefitting from the positive sentiment returning, and we will ride that wave to some extent.
“I guess we are an example of what can be achieved even in difficult times as our experience has been overly positive.”
Another Perth-based energy play, Sunbird Energy, has also experienced a positive run of results since listing in January with a $9 million IPO, the largest for any resources company.
Since the listing, Sunbird has risen by about 50 per cent on the back of its strategy to develop coal seam gas projects in Africa.
Sunbird is hoping to produce gas from projects in South Africa and Botswana where a growing demand for the product currently outstrips supply.
Resources companies dominate upcoming floats on the ASX, with 21 of the 27 lodged with the bourse when WA Business News went to print looking to raise funds for the sector.
Perth-based, Mongolian coal explorer Bold Resources undertook a seed raise last month ahead of a planned listing later this year.
Bold has not lodged a prospectus, but director Ean Alexander confirmed to WA Business News that the company was targeting an April listing.
Mr Alexander was positive in his view of the equity markets ahead of an IPO for Bold, but cautioned they would not be open for every company in every sector.
“We believe that companies like Bold, who offer a unique proposition in the market with a strong board and executive ability, will have strong local and international investor support,” Mr Alexander said.
“Lesser offerings will continue to struggle.”
