Dollars raised from mining IPOs dip down in 2008: Ernst & Young

Quarterly IPO report reveals credit crunch hitting the exploration-stage companies the hardest

(Vancouver, 2 July 2008)—Although we’ve seen roughly the same number of mining initial public offerings (IPOs) this year as we did in 2007, the total proceeds raised is significantly lower, Ernst & Young says.

“That means the credit crunch is hitting the mining sector’s exploration-stage companies,” says Tom Whelan, Ernst & Young partner and Canadian mining industry leader.

Although the appetite for exploration-stage IPOs is shrinking, Whelan foresees continued IPO demand for mining companies at or near production stage. Senior mining companies do very little exploration these days, so they are more than willing to buy juniors who’ve found an appealing resource. “The credit crunch has really hit the grassroots exploration phase of the IPO market hard, and so many are ripe for takeovers. We’re anticipating many more mining mergers and acquisitions in the second half of this year.”

Despite the fact that cash raised is on the decline, Canadian IPO activity on the whole continues to be dominated by mining. This year, more than 80% IPOs in Canada have been in the mining sector. “Although the continued activity is good for mining, this finding means we’re not seeing very much action in other sectors at all,“ Whelan says.

In a recent global mining transactions survey, The year of the hunters and the hunted, Ernst & Young found 90% of mining companies expect to complete a transaction in the next two years. A further 40% will have to make acquisitions in order to meet the market’s growth expectations.

“At the end of the day, this is about supply and demand,” Whelan concludes. “Booming economies like China and India have infrastructure demands that far exceed resource supplies, and the mining sector will need to work hard to meet those demands.”

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