The repository of mineral wealth that can be found in SA is among the world’s largest. Given this, mining companies are going to remain relevant long into the future. While the mining industry has faced some uncertainty over recent years, the global outlook for the sector, together with the relative improvement in commodity prices, has been supportive of new investment in the industry.

The mining sector was a key factor in the founding of the JSE in late 1887 and remains vitally important today. There are currently 53 basic resources companies listed on the bourse, including mining and industrial metals and mining. Some R15.5 billion was raised in the metals and mining sector in 2017, compared to R9 billion in 2016 – an increase of 72%. This was primarily driven by M&A activity and capital raising due to improved fundamentals.

In addition, several mining houses saw increased share prices, including Kumba Iron Ore (119% increase over the year), Exxaro Resources (67% increase over the year), Glencore (36% increase over the year), Anglo American (27% increase over the year), Gold Fields, South 32 (19% increase over the year) and African Rainbow Minerals (13% increase over the year). Although there were no new listings of basic resources companies in 2016, macroeconomic conditions changed for the better, and two mining companies listed on the JSE in 2017 – Orion Minerals and Alphamin.

The Orion Minerals and Alphamin listings are particularly interesting because they are inward listings. The fact that these companies have come to SA to raise capital is a very good sign; one that shows how the investment ecosystem is positioned to be a catalyst for growth for the mining industry. And not just in SA but further into Africa – Alphamin’s assets include a tin mine in the DRC.

Indeed, the JSE continues to be an attractive destination for listings from the rest of Africa, or for access to the rest of Africa. Accessing rest-of-Africa equity exposure via the exchange offers global investors liquidity in a well-regulated environment – one of the best-regulated exchanges in the world. A cross-listing on the JSE has the potential to attract global investors seeking access to the swiftly expanding economic growth opportunities in countries across the continent.

The JSE also plays an important role in helping small-cap mining companies raise capital, offering two boards on which to list, namely the Main Board and AltX – the latter being better suited to smaller entities. Several mining firms are currently listed on the AltX, including Chrometco, Central Rand Gold, BSi Steel, Jubilee Platinum, Kibo Mining and Buffalo Coal. Moreover, the JSE continues to provide a great platform for companies to raise capital on listing, and for additional capital raising once listed. For example, certain of the AltX-listed companies had successful capital raisings on the JSE in 2017 – some R180 million in total.

A listing on the JSE offers several benefits for issuers, including access to capital (debt and equity); improved access to capital via secondary capital raised; a diversified shareholder base and access to larger and complementary pools of capital; increased visibility through research coverage and increased investor interest; and access to capital from emerging markets investors focused on companies with African assets.

Improved commodity prices have recently led to a more positive sentiment in the mining sector, and an overall optimism. I believe the sector will be driven by several key themes, including the global outlook for economic growth and the consequent impact on global commodity prices, and the global outlook for inflation and interest rate policy and the impact this may have on gold prices.

Given that the mining industry is so heavily regulated, the changing face of regulation will have a significant impact on the sector, as will the outcome of the impending political change in the country. There will also be some opportunities for unbundlings and scope for M&A activity. 2018 is set to be an exciting year for the mining industry.

Donna Nemer
Director: Capital Markets

Image: Wilnicque Rall