[miningmx.com] – THE Johannesburg Stock Exchange (JSE) could become a valuable source of capital for foreign-listed mining companies seeking up to $250m and perhaps as much as $500m in equity finance.
Rajat Kohli, global head of mining and metals for Standard Bank in London, said there was an opportunity for secondary listings of mining companies on the JSE, especially those seeking to raise capital from the outset.
This was owing to a change in the offshore holding limits allowed to South African institutions, and the fact that the Cape-based funds had a sophisticated understanding of mining companies and commodity markets. “I think the JSE will play more important role for African mining projects down the line,” said Kohli.
Asked to be more explicit on the scope of investment the JSE could attract, Kohli said: “In terms of quantum, they would probably look to raise $100m up to $500m. Perhaps $500m would be the upper limit, but they could raise $250m comfortably,” he said.
Ivan Glasenberg, CEO of Glencore Xstrata, last year heralded the mining group’s secondary listing in Johannesburg by saying Africa was increasingly an important area of activity for the company, and that South African investors were sophisticated.
Standard Bank’s optimistic outlook for the JSE seems to fly in the face of current sentiment about South Africa’s mining sector which is heavily influenced by strike activity in the gold and now the platinum sector.
Kohli was non-committal on what he thought of the platinum wage impasse, now in its fifth day, but he acknowledged that foreign investment in South Africa companies had declined while foreign direct investment has also slackened.
However, the bank’s view of South Africa was in the context of an anticipated improvement in the commodity, and equity markets in particular, compared to 2013 – a year described by Kohli as “sobering”.
“We are seeing an upturn in business; the mood is more optimistic, but it is more cautious,” he said. “There’s still de-leveraging (debt reduction) required in sector.
“China is back on track but its growth is moderated; the equity markets are weak, the credit market open, but selective, and investors are cautious on over-spending”.
