JUNIOR MINING
The rout in Singapore, which some analysts are describing as a bubble bursting, has already killed one mining deal. Will others follow?
Author: Kip Keen
Posted:
Tuesday
,
08 Oct 2013
HALIFAX, NS (MINEWEB) -
A swath of smallcap equities in Singapore collectively lost billions of dollars in market capitalization in trading Friday through Monday.
The Wall Street Journal portrayed the razing as a bubble burst. It reported that Singapore brokerage houses curbed client trading in what they saw as out of control valuations on some smallcap stock.
“I think [some brokers] were realizing there was a bit of a party going on [in the small-cap sector] and tried to reel it in,” Kevin Scully, Executive Chairman of NRA Capital, an equity research firm, said according to the WSJ.
The market pain was especially dizzying for three names each, to some degree, associated with the mining sector.
Junior gold miner LionGold lost some 80 percent of its shareprice, or just shy of $1 billion in market cap. Blumont, which was in the midst of putting together a takeover of an Australian coal miner, was down from S$2.02 to S$0.13 Friday through Monday. And Asiasons, reportedly an important LionGold shareholder, fell from over S$2.50 to S$0.15 over the same period.
The Singapore Stock Exchange tried to limit the damage. It froze trading in the above three equities Friday until part way through Monday. But it was to no avail, with losses Monday just as – if not more – brutal than Friday’s.
BROADER IMPACT
The crumbling shareprices was quick to reverberate beyond Singapore.
Friday, Blumont scuttled a proposed takeover of ASX-listed Cokal, a coal miner, though it did later push forward with a loan to Cokal as the two continued to talk about “further investment,” Blumont stated.
LionGold’s shareprice pummelling raises questions about whether it can pull off two ongoing deals, a S$202 million ($162 million) financing and a tentative takeover of London- and TSX-listed Minera IRL, a gold miner with mining operations in Peru and an advanced-stage gold project in Argentina.
To fund acquisitions, LionGold planned back in mid August to raise S$202 million at S$1.11 a share with three firms, Platinum Partner, Carnegie Hall Group and Spring Road Adivsors.
Of course, now trading for less than a quarter that price, it becomes improbable firms would take up LionGold shares at S$1.11 – if they already haven’t – which in turn would limit LionGold’s access to fresh cash to spend on new and ongoing acquisitions.
While a LionGold spokesperson could not be reached at presstime to comment on the financing, it does not appear to have been completed. LionGold lists the financing as pending in a corporate presentation dated September and has also said it expected to raise the S$202 million in October or November.
Platinum Partner President Uri Landesman, reached by email Monday, declined comment on the status of the financing.
LionGold’s changing shareprice fortune also redraws its relative position in talks with Minera. LionGold went into negotiations with more swagger; a junior gold producer with a $1.1 billion marketcap and heady financing prospects looking over a fellow gold junior with a roughly $40 million marketcap.
Now it’s much different picture. LionGold’s marketcap is a fifth what it was just days ago and it’s financing leverage is much diminished.
Singapore smallcap rout imperils mine deals
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