The mining sector looks poised to dominate the ailing IPO market again in 2023 following the worst year in a decade for initial public offerings on the Australian Securities Exchange (ASX).
In 2022, the resources sector represented the lion’s share of all floats with almost 60% of IPOs, as ongoing challenging macroeconomic conditions, higher interest rates, cautious investors, and widespread earnings downgrades decimated the share market.
While share markets generally struggled globally last year, the ASX in particular took a hit in 2022. The All Ordinaries is down 8.07% over the past year, with the S&P/ASX 200 dipping 6.56%.
However, 2023 looks to be starting off in the right direction, buoyed by mining and resources companies seeking to go public and test equity markets.
Mining to make up majority of January and February IPOs
According to the ASX’s list of upcoming floats and listings, there are 10 IPOs scheduled for January and February alone and almost all are resources and exploration companies.
The majority of these companies have exposure to the green energy and battery-related markets.
ACDC Metals, (road safety technology company) Acusensus, Dynamic Metals, Gold Hydrogen, Greentech Minerals, High-Tech Metals, Patagonia Lithium, South-East Queensland Exploration, Tiger Tasman Minerals, and VHM Limited are due to list in Q1 2023.
Comparatively, there were 59 new listings on the ASX in the first six months of 2022, according to an HLB Mann Judd report. New listings in the materials sector dominated the market at the time, representing 44 of the 59 new entrants with 71% of all new listings coming from Western Australia.
That activity slowed down considerably as the year progressed, with the HLB Mann Judd IPO Watch Australia Mid-Year Report noting the lack of later listings reflected the broader market, with factors such as inflationary fears, geopolitical instability, and interest rate rises affecting markets worldwide.
There were 89 new listings reported coming from the energy and materials sector last year, a 56% decline from 202 new in 2021 – the biggest year for resources IPOs since the height of the mining boom in 2007.
Online trading platform IG says it is foreseeable that the headwinds and issues dominated over the past six months will continue to be of concern for investors throughout 2023.
“With the potential slowdown in monetary tightening and the cooling of inflation, some of the forces that have been dragging on shares in 2022 have (a) good chance to ease and generate investment opportunities.”
Resources companies offering the right returns
In terms of overall performance, IG says that the energy market (44.44%) topped the ASX in 2022, followed by utilities (35.8%), and materials (11.71%).
Staying true to form, mining also delivered some of the larger listings last year.
Of particular note, Firefinch (ASX:FFX) spin-off Leo Lithium (ASX:LLL) listed in June to raise $100 million. Today (5 January) the company has a $592.81 million market capitalisation.
In August, Leo Lithium Managing Director Simon Hay told Mining.com.au when compared to many other recent demergers, the Leo Lithium spinout was quite unique.
“In our case, we are one of the rare demergers where the child was bigger than the parent”
“In our case, we are one of the rare demergers where the child was bigger than the parent.”
Despite the mining sector dominating IPOs, there have been some casualties in touted listings.
On 29 November, Mining.com.au reported that Argonaut Resources (ASX:ARE) had extended the IPO of Orpheus Minerals to provide eligible Argonaut shareholders a better opportunity to participate.
Under the prospectus for the IPO issued in October, Orpheus was seeking to raise $6 million via the issue of 30 million shares at an offer price of $0.20 per share, which would have given the company a market capitalisation of more than $11.14 million.
However, on 12 December the company withdrew the float as it did not meet the minimum subscription condition. A supplementary prospectus was then lodged with ASIC with the company reporting it will work with relevant stakeholders to determine how best to progress Orpheus’s portfolio of prospective uranium exploration assets.
Looking ahead, it appears green energy and battery-related exploration companies will continue the rally on the ASX with debuts, as mentioned earlier.
ASX-listed companies producing green energy and battery metals such as copper, cobalt, nickel, graphite, rare earths, and lithium, have enjoyed increasing metals prices driven by surging global demand for electric vehicles (EVs) and sustainable battery power.
Write to Adam Orlando at Mining.com.au