Is the London Stock Exchange’s golden age of mining over?
The London Stock Exchange isn’t short of mining stocks that call the UK capital home.
The City’s stock exchange hosts primary listings for giants such as Australian miner Rio Tinto, Swiss operator Glencore and Anglo American, as well as Chilean copper producer Antofagasta and Africa-based gold miner Endeavour Mining.
The London Stock Exchange has long been considered the gold standard for listing destinations to those in the mining sector, but are those perceptions changing?
The struggles of Glencore and Anglo American
On the one hand, certain big-name miners are going through tough times, reflecting badly on the group as a whole within the London eco-system.
Glencore and Anglo American come immediately to mind when one considers the recent struggles.
In 2021, Anglo American reported record revenue of $41.6bn (£32.8bn) and underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $20.6bn (£16.3).
Earnings then dropped to £11.4bn in 2022 and down another 40 per cent to £7.9nbn in 2023 and shares in the company have lost 40 per cent of their value in the past year.
Many of Anglo’s issues stem from what it describes as ‘cyclical lows’, or bottoming demand for its particular specialities, such as energy transition metals like palladium and rhodium, which have seen supply gluts gut value.
Shine has gone, too, from Anglo’s diamond business, De Beers, which has suffered badly at the hands of a cooling Chinese consumer market and the general hedging against big-purchase precious gems in general.
Hostile takeover rumours have been swirling about Anglo during the strife, ranging from full-blown ground-up re-invention to targeted unit spin-offs, including that of the diamond business.
Glencore, similarly, is stuck with underperforming or languishing asset classes amidst a flagging 2023 regarding investor returns.
Having paid $6.9bn (£5.4bn) for Canadian coal miner Teck’s steelmaking coal business at the end of last year, the company has come under fire for not seemingly knowing its role as a miner within the energy transition.
But various key investors, like Australian hedge fund Tribeca, say the company needs to double down on the coal play and make of it what Shell is doing with fossil fuels; make hay while the sun shines.
Time for a change?
Tribeca has also been one of the more vocal peddlers of the argument that London is losing its mining touch and last month called for Glencore to abandon its London listing and head down under.
For the London Stock Exchange, this brings back bad memories of 2022, when BHP moved its primary listing to Sydney and with Glencore already planning a New York listing for its soon-to-be spun off coal business, who’s to say they couldn’t move out of London altogether?
Michael Scherb, chief executive of London-based Appian Capital Advisory, recently told the Financial Times that London needs to loosen requirements on companies on both the main market and the junior AIM market in order to revitalise the City as a hub for mining capital.
He said: “If you look at what Toronto or even Australia have done better, it’s to open up more risk-on capital.
“The London markets can do more to attract that type of capital by loosening some of the listing requirements, mining company boards are being approached by bankers and other exchanges with a pitch that you get better valuations in New York or Toronto, so London needs to do more to counteract this.”
AIM to win
Scherb’s views on the AIM market deserve further scrutiny.
Out of the 174 mining companies listed in London, 107 are on AIM and have a sub-£100m market cap.
It is this market where London potentially has the opportunity to shift its focus away from the big players to the smaller developers going after key metal exploration to drive a new era of London-listed mining stocks.
“Things like rare earths and battery metals and the big speight of gold producers that we’ve seen in years past – we think there’s some good exciting companies in the pipeline and AIM is a good place for them,” one source within the London Stock Exchange told City A.M.
“The mining sector is an important sector in London, yes we are spending our time marketing in other areas as well but there is a real history in London that we do not want to ignore,” they said.
Mining feels unloved by the markets at the minute and within London, there has certainly been increased focus on trying to attract major listings from rising technology companies – the wound from the loss of semiconductor manufacturer ARM and its $54bn (£46bn) IPO to New York is still raw.
Mining has undoubtedly become a smaller part of the overall London Stock Exchange pie.
But it’s still a half a trillion dollar sector with 170 companies overall and accounts for 17 per cent of the world’s market cap in mining – more than the Australian and Toronto exchanges combined.
However, even if the AIM market continues to foster a kind of small-cap mining talent, the key to fixing London’s mining PR image will be for its headline stars like Glencore and Anglo American to break out of their funks.