It’s the largest mining IPO since Aston Resources listed on the ASX in 2010 following a $400 million raising.
Manganese producer Jupiter Mines — which is chaired by former BHP boss Brian Gilbertson — hit the Australian bourse this morning after completing a $240 million raising.
The debut may have disppointed investors however. The shares immediately traded at less than their 40c issue price.
The shares (ASX:JMS) fell as low as 36.2c and were trading at 37.7c by 12.20pm AEST — with almost 20 million changing hands.
“This is a superb mine and it has long life ahead of it — at least 100 years,” Mr Gilbertson said at the ASX listing ceremony.
“That means that when your grandchildren are getting married and going out to buy their cutlery for their home it will have in it manganese that comes from our Tshipi mine… and by that time I can tell you that most other producers will be long gone.”
Investors are watching the debut closely, given Jupiter’s (ASX:JMS) promise of high returns.
“You don’t get those kinds of deals very often, it’s certainly not your average size mining IPO,” Hedley Widdup, a fund manager for investment firm Lion Selection Group, told Stockhead ahead of today’s listing.
“What it indicates beyond any doubt is the pool of money that is available for mining investment has swollen from 2015-16 to now.”
One of the key factors in the success of Jupiter’s IPO is the fact that it has a high quality operating asset and cash flow.
“I think if they were bringing something that was a little bit more of a pedestrian marginal asset, it might’ve been a struggle,” Mr Widdup said.
Jupiter has a 49.9 per cent stake in Tshipi é Ntle Manganese Mining, which operates the open pit Tshipi Borwa manganese mine in the Kalahari manganese field located in the Northern Cape of South Africa.
Roughly 80 per cent of world’s known economic manganese resources are contained in the Kalahari manganese field in South Africa.
Tshipi, which has a 100-year life, is located just north of Sishen and is adjacent to South32’s large open-cut Mamatwan mine that has been operating for decades.
Manganese is a steel-hardening material which is also used in the production of batteries.
Chief Priyank Thapliyal told Stockhead the company, which was previously listed on the ASX, has come a long way from when it delisted in 2014.
“We were still building the mine, so this was at that time still a project development story and what we really didn’t want to do was to build a project, which we believed from day one was a great asset because it was a hundred-year life asset, against the backdrop of constant questioning from our shareholders why the share price is going down,” Mr Thapliyal said.
“But now when we are doing the IPO this is a very different beast, it’s an operating company, it’s pumping cash, it’s currently sitting with 1.5 billion rand ($160.7 million) in the bank.”
Mr Thapliyal said in the past two years Tshipi had returned $150 million, more than covering the initial $100 million build cost.
“The implied yield is about 10 per cent when the manganese price was at $4.50 levels,” he said.
“The manganese price right now is trading north of $7. The expectation in the market based on our sales is that the first six months dividend is going to be much, much higher than what it has been over the last two years.
“Prices will go up and down but [Tshipi] will still be producing. It has never lost money in the last five years of operation, even when the prices went as low as $1.35.”
Around $225 million of the IPO was taken up by institutional investors, with the remaining $15 million going to retail investors. But demand was closer to $300 million, according to Mr Thapliyal.
Jupiter has no plans to add any projects to its portfolio but Mr Widdup sees the possibility of a deal involving the company down the track and that is made much easier as a publicly listed company.
Mr Gilbertson brought Billiton to the London market in 1997 and in 2001 the company merged with BHP.
“Whilst this isn’t an exit for him and his backers, I strongly suspect that it probably puts them in a situation where they could consider a much more broad range of exits,” Mr Widdup said.
“If you want to sell a company privately it’s a lot harder to argue your value up than if you’ve got a market valuation on it.
“I doubt he would declare himself a seller, but if one comes along with an offer that becomes much more likely once it’s a listed company.”
The focus for Jupiter now is delivering 250 million rand worth of cost savings, along with optimisation work with neighbour South32.
Mr Thapliyal also hinted at some potential consolidation in the Kalahari.
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