ECM Review Snapshot: Key trends for Energy and Resources

It gives us great pleasure to bring you a concise overview of The Australian ECM Review 2023, covering significant developments in the market, tailored specifically for our energy and resources clients.

Here are our top 5 highlights:

IPO dynamics – Critical minerals at the fore

Despite subdued overall IPO activity, the ASX remained a hotspot for resources companies, hosting 75% of all IPOs. Critical minerals emerged as a focal point, with numerous IPOs targeting opportunities in lithium, rare earths, and gold. Whilst 2023 saw fewer listings, those companies that did list had a higher market capitalisation as compared with the previous year. The standout listing for 2023 was the IPO of Redox – the largest listing since November 2021 and the largest IPO in 2023 by some margin. Herbert Smith Freehills acted on the listing of Redox. Other notable listings were for rare earths elements miners Brazilian Rare Earths Limited and VHM Limited.

Alternate approaches to listing – Chemist Warehouse’s reverse takeover of Sigma

HSF is advising on Chemist Warehouse’s reverse takeover of Sigma Healthcare, which will see Chemist Warehouse come to the ASX as one of Australia’s largest private companies (as compared to the smaller sized companies that usually undertake reverse takeovers).  The transaction structure enabled a merger with Sigma and was more streamlined than an IPO for Chemist Warehouse as the ASX did not require it to re-comply with ASX’s admission requirements. Smaller resources sector companies are well acquainted with reverse takeovers as a strategy to achieve a listing (and assist with spread requirements) and the Chemist Warehouse / Sigma transaction indicates it is an approach that is worthwhile exploring for larger unlisted entities as well.

Secondary raisings recap

Secondary raisings over $50 million predominantly involved resources companies, emphasising the capital intensity of resource businesses, the need to raise capital to fund exploration activities and the fact that many resource companies are funding projects and exploration pre-cash flow. The most common structures were placements combined with share purchase plans (43%) and placements alone (29%).

Purpose for secondary raisings

Funds raised were primarily directed towards exploration, asset acquisitions, and balance sheet optimisation. Companies like Azure Minerals Limited and Bowen Coking Coal Ltd focused on exploration and production activities, while others pursued strategic acquisitions.

2024 outlook

Despite recent volatility, Australian capital markets are poised for continued IPO activity, especially for small-cap exploration firms across all commodities. Critical minerals-focused companies are expected to undertake further capital raisings to meet the growing demand driven by the global energy transition.

To learn more, check out the full HSF Australian ECM Review 2023.

Subscribe to HSF Mining Notes to receive insights direct to your inbox.