How significant are mining stocks to the overall health of the Australian Securities Exchange (ASX)?

The importance of mining stocks to the ASX can be measured using various metrics. In terms of market capitalization, mining stocks make up 34% of the total, while the number of mining stocks listed as a proportion of total listed companies is closer to 50%. This is a significant figure and is evidence of the crucial role that mining stocks play in the ASX. The ASX has a long history of listing mining companies, dating back to 1851 when the Melbourne exchange was established during the gold rush in Victoria. As a result, the Australian market has served as a platform for mining exploration and development companies. Our entry requirements encourage small, junior exploration companies to list on the exchange. The minimum requirement to list is for a company to have net tangible assets of at least A$3 million, of which at least A$1.5 million must be working capital. We have rules that allow for companies that are raising money for companies to explore and develop, not to have a track record of revenue.

How does the ASX compare to similar global exchanges in terms of raising mining capital?

The ASX and the TSX have been around for a long time in the mining space, and the capital markets have developed an ecosystem around which well-informed investors, a community of analysts, and professional groups who understand mining. This is one of the main benefits of the ASX; we are a well-developed, reputable international exchange in a country that has a strong focus on mining as an industry. We offer real opportunities for junior companies, whereas the exchanges in London are more geared towards larger mining companies. The Hong Kong and Singapore exchanges have made moves to make their rules more inclusive to mining companies. Previously, they required companies to have a track record of revenue or profits, but these requirements have now been relaxed. At this stage, however, neither of these exchanges is a market for junior companies.

There has been some talk about creating a flow-through shares structure similar to that of Canada’s, but so far nothing has emerged in Australia. As many juniors speak of the need to have a similar program, why has the idea not taken hold in Australia?

We have examined the possibility of creating a similar structure here in Australia, but after canvassing our investor base, we found that most people were happy with a single market. Nevertheless, it was clear that we needed to make some changes within that market to be more accommodating to smaller companies. One of those changes was to make it easier for companies to raise capital by effectively increasing our 15% cap per annum to 25% for companies under A$300 million market capitalization. Our approach has been slightly different in that we have retained one market but made changes to recognize the difference in capital needs of companies. For many years, the ASX required that a company that wished to raise more than 15% of its capital in a 12-month period either had to receive shareholder approval, or issue those shares pro-rata to its shareholders. For smaller, capital-hungry companies, this did not address their specific needs; now for companies under A$300 million, they are able to receive shareholder approval to increase their capital from 15% to 25%.

Can you describe the current state of mergers and acquisitions for resources companies in Australia?

At the beginning of the century, there was a significant amount of mergers and acquisitions activity that resulted in a lack of mid-tier miners on the exchange. However, this has since been replenished, and we now have a good representation of mining companies in the A$250 million – A$1 billion valuation range. In fact, this is an area that we have focused on in terms of helping companies access the global financial markets. Our Spotlight Series has been successful in allowing companies to better access the financial markets in London, New York, Hong Kong and Singapore.

What are the key advantages for mining companies listed on the ASX?

The ASX distinguishes itself from other major platforms for capital raising because it is in the Asian region. We are increasingly becoming global in our outlook, with over 200 mining companies listed on the ASX with projects in Africa and over A$6 billion raised for African projects over the last five years. Global investors are comfortable getting exposure to mining opportunities in developing regions through an ASX-listed company, which provides them with the security needed to invest in emerging markets. The ASX is also a reputable exchange with robust regulations in terms of mining disclosure. This is the future for the ASX, as more exploration takes place around the world.