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If you haven’t noticed it yet, Initial Public Offerings (IPOs) typically capitalize on industry strength in their timelines. Copper mining company 29Metals is no different, with the potential for it to become the second-largest IPO so far this year.
The strategic timing is set to make the most of the surging price of the red metal. Growing demand for copper has pushed up the price of the raw material by 44.5% in the past year. To date, the conductive element costs approximately US $ 9,810 per tonne.
Let’s take a look at the details of 29Metals and its early IPO.
A billion dollar copper business in the making?
First of all, what is 29Metals? It’s not exactly a household name like BHP Group Ltd. (ASX: BHP) or Rio Tinto Limited (ASX: RIO). The copper-focused miner operates two Australian production mines and a Chilean exploration project.
More specifically, the miner’s portfolio includes Golden Grove in Western Australia – with a production rate of 1.4 million tonnes per year. Its other Australian project is Capricorn Copper in Queensland – with a production rate of 1.8 million tonnes per year.
29Metals expects to reach $ 658.4 million in revenue for fiscal 2021, which would represent a 25% increase over its 2018 revenue. The copper miner also expects a net profit after tax of $ 39 million for the year, more than double its 2018 profit.
Swiss credit, Macquarie capital, and Morgan stanley jointly lead the IPO. The brokers were closing their books at 12:30 p.m. today, so now it’s a game of waiting to see if the deal has generated enough interest.
Bids were to be placed in 5-cent increments between $ 2 and $ 2.40 per share. However, closer to the close of the books, that price range had narrowed to between $ 2 and $ 2.10. If order books were full, 29Metals could look to register an enterprise value between $ 1.05 billion and $ 1.2 billion.
What is driving interest in copper stocks?
Investors have gobbled up shares of copper mining companies over the past year. Different catalysts are at play, namely the electricity and construction sectors, and electric vehicles.
Global S&P signaled the frantic pace of electrification means that global copper production will need to increase by about 3% to 6% by 2030. Analysts expect a shortage of new mines and exploration will result in demand exceeding our global supply.
Goldman Sachs analysts have even gone so far as to say that copper is “the new oil.” In addition, Goldman has set a price target of US $ 15,000 per tonne on the raw material by 2025. Analysts pointed out that electric vehicles, solar power and wind power were the three main drivers of demand for green copper.
If 29Metals succeeds in generating sufficient interest, a prospectus will be filed with the Australian Securities and Investments Commission.
From there, the mining company will arrive on the boards of ASX on June 23, 2021, joining the likes by OZ Minerals Ltd (ASX: OZL) and Sandfire Resources Ltd. (ASX: SFR).