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If the final fortnight of July proved anything, it was that Australia’s capital markets are open for business again.
More than $1 billion flowed into at least 60ASX capital raisings between July 20 and August 4, producing the busiest reporting period of the year and signalling a marked improvement in investor sentiment after months of subdued activity.
However, the billion-dollar headline only tells part of the story. The real contest wasn’t necessarily raising the money, it was competing for the available funds.
With dozens of companies approaching the market at the same time, institutional investors had the luxury of being selective. They backed projects moving towards production, acquisitions capable of creating value and management teams that could clearly explain how every new dollar would be spent. Others still found funding, but generally on much tougher terms.
The next three companies illustrate how judgement was dispensed by the market in the last fortnight under very different scenarios.
Discount: 11.1 per cent to the pre-raise closing price.
Joint lead manager: Petra Capital/Canaccord Genuity
One of the reporting period’s standout resource transactions belonged to Saturn Metals, which secured firm commitments for a $100 million placement before launching a fully underwritten $5 million share purchase plan to accelerate development of its Apollo Hill gold project in Western Australia.
Petraand Canaccord assembled one of the strongest institutional books of the fortnight, reinforcing confidence in what is increasingly viewed as one of Australia’s more significant undeveloped heap leach gold projects. The size and quality of the book suggests the brokers had little difficulty finding institutional support despite the nine-figure raise.
An 11.1 per cent discount was sufficient to attract strong demand without signalling distress, an important distinction in today’s market.
Since the raise, Saturn’s shares have traded 15 per cent above the issue price, suggesting investors have strongly endorsed the company’s strategy. For Saturn, the raising wasn’t simply about strengthening the balance sheet. It was another step towards becoming a mine developer rather than just another explorer.
Discount: 66.7 per cent to the pre-raise closing price.
If Saturn Metals demonstrated where institutions were prepared to back quality, Lotus Resources highlighted the price investors still demand for taking on additional risk.
The company assembled one of the reporting period’s largest and most sophisticated funding packages, combining fresh equity, convertible notes and inventory-backed finance to support the restart of its Kayelekera uranium mine in Malawi.