Johannesburg - Junior South African miners are battling to raise funds for projects made viable by the commodities boom, and mining executives on Tuesday said they should consolidate or seek listings on alternative markets.
Alternative stock markets including Johannesburg's AltX, London's AIM and Toronto's Venture Exchange, have seen a jump in
small-to-medium sized gold, platinum or coal exploration firms eager to raise funding to cash in on the commodity's boom.
Despite the commodities boom, some junior miners were finding it difficult to get their hands on new cash, especially where the companies had potential projects "in the middle of nowhere", far away from infrastructure mining executives said.
"As long as metal prices soar, even marginal projects will become viable, but we are at a critical stage where projects are finding it difficult to be financed," said Bernard Swanepoel, a former chief executive of gold producer Harmony Gold.
"I expect that there is unashamedly going to be consolidation among juniors in platinum, coal and so on."
Swanepoel, who quit Harmony a year ago, is a director of To The Point, a consultancy that helps companies grow. He was the key
speaker at a meeting for junior minors on raising capital.
His firm has offered to buy out minority shareholders in Village Main Reef Gold Mining Co, which the market expects to herald mergers and acquisition activity that could see Village take up smaller players as it seeks to consolidate.
Swanepoel said coal mining was the next big thing in South Africa, with state-owned utility Eskom, which relies on coal to produce the lion's share of its electricity.
Eskom has plunged into the short-term coal market to prevent power shortages it suffered earlier this year which saw mines come to a standstill. The coal export market is also booming.
"Coal is the next hot thing in South Africa," he said.
Swanepoel backed rights issues for listed firms as a way to raise funding, citing AngloGold Ashanti, which raised $1.7bn to help trim its big forward sales contracts.
Start-ups
Gerard Kemp, chief investment officer of Africa's biggest private equity fund, the $1.3bn Pamodzi Resources Fund, said equity funds were an option, but admitted that private equity funds had their own agenda in terms of running companies.
"There's not a lot of money out there and debt is expensive for start-ups," Kemp added.
He said exploration firms favoured listing in Toronto. Canada has a large share of the world's listed mining firms, and start-ups are popular among investors, he said.
Noah Greenhill, chief marketing officer at Johannesburg's AltX, said the five-year old AltX has seen a steady rise in new listings by mining firms, as well as dual listings, but on a smaller scale versus Toronto and London's alternative markets.
"It takes time to gain traction for this kind of market," Greenhill said.
Braemore, a nickel and platinum producer, was the latest London-listed company to list on the Johannesburg bourse, and this was a key avenue for a new pool of finding, he said.
"Where is the downside to dual-listing? It's a marginal extra cost for maximum value, you simply can't lose," he said. "Its an additional pool of capital for projects."
- Reuters