Alufer Mining has become the latest company to pull plans for a London flotation after poor demand for the shares prompted a scaled-back private fundraising.
The decision to pull plans to raise $40m in an admission to Aim, which it had been hoped would value the venture at up to $200m, followed a roadshow across Europe, Australia and Canada among 50 institutional investors.
The aborted flotation would have been just the fourth – and largest – fundraising in a mining IPO in London so far this year.
Danny Keating, Alufer’s chief executive, said the decision to abandon the flotation came amid a reluctance among investors to offer a premium above a $95m valuation placed on the company – which hopes to begin bauxite mining in the west African state of Guinea within two years – at its last fundraising.
“Through the first quarter of the year the world seemed a better place and the markets were reasonable, but in the last seven weeks through April and May the markets have deteriorated,” said Mr Keating.
“We got close to raising the full $40m, but we were meeting fund managers putting the proposal to investment committees who said they were under pressure to sell stock or hold cash, and the only way they would buy equity is if it was very cheap,” he added. “That’s not the right thing to do for existing shareholders.”
Instead of proceeding with the IPO at dilutive levels, the bauxite miner has agreed to raise $6m in a private placing with new investors at $2.24 a share, along with $6m in loans.
Mr Keating said the additional funding would be enough to finance the development of its Bel Air project 15km from Guinea’s coast with production scheduled to commence by early 2014. But the scaled-back fundraising would see it delay work on its other adjacent bauxite mining projects – Labé and Kindia.
Half of Alufer’s equity is currently held by its chairman Adonis Pouroulis, founder and chairman of FTSE 250 constituent Petra Diamonds and AIM-quoted Chariot Oil & Gas.
In March, Rare Earths Global of China raised $10m – compared with an initial upper target of $50m – at 247p on Aim, valuing the company at $250m (£157m).
Its fellow Aim debutant Bushveld also raised £5.46m in March at 20p a share, giving the South African miner a market capitalisation of approximately £56.7m.
In the same month Papua Mining, a gold and copper prospector with exploration licences in Papua New Guinea, raised £7m at 44p in the first new issue on Aim by a mining company this year to double the equity value.
But Alberta Coal, a Canadian mining venture planning to develop coal seams to export to Asia, has so far failed to complete plans to raise £30m in an offering of half its equity in London announced in March. The company confirmed its intention to proceed with its flotation when market conditions improve.
Kosovo-focused stone miner Fox Marble, Chilean-based processor Copper Bay, and U3O8 Holdings – a uranium development company focused on South America – are among mining companies that have also delayed plans for admission to Aim in recent months.