If you haven't already noticed, initial public offerings (IPOs) usually take advantage of industry strength in their timing. Copper mining company 29Metals is no different, with the possibility of it becoming the second-largest IPO so far this year.
The strategic timing is set to make the most of the red metal's soaring price. Increasing demand for copper has pushed the commodity's price up 44.5% in the last year. As of today, the conductive element is going for roughly US$9,810 per tonne.
Let's take a look at the details of 29Metals and its anticipated IPO.
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Billion-dollar copper company in the making?
Firstly, 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 producing mines and a Chilean exploration project.
A little 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 is forecasting that it will achieve $658.4 million in revenue for the 2021 financial year, which would be a 25% increase on its 2018 revenue. The copper miner also expects net profit after tax of $39 million for the year – more than double its 2018 profit.
Credit Suisse, Macquarie Capital, and Morgan Stanley are jointly conducting the IPO. The brokers were closing their books at 12.30pm today, so now it's a waiting game to see if the deal gained enough interest.
Bids were to be placed in 5 cent increments between $2 and $2.40 per share. However, closer to the books closing, that price range had narrowed to between $2 and $2.10. If the order books were filled, 29Metals could be looking to list at an enterprise value of between $1.05 billion and $1.2 billion.
What's driving interest in copper shares?
Investors have been gobbling up shares in copper mining companies over the past year. There are various catalysts at play, namely the power and constructions sectors, and electric vehicles.
S&P Global has reported the surging pace of electrification means global copper production will need to rise by an estimated 3% to 6% by 2030. Analysts are expecting a lack of new mines and exploration will lead to demand outstripping our global supply.
Analysts at Goldman Sachs have even gone as far as to say copper is "the new oil". Additionally, Goldman slapped a price target of US$15,000 per tonne on the commodity by 2025. The analysts pointed to electric vehicles, solar power, and wind power being three key drivers for green copper demand.
What's next for 29Metals?
If 29Metals managed to rally enough interest, a prospectus will be filed with the Australian Securities and Investments Commission.
From there, the mining company will hit the ASX boards on 23 June 2021, joining the likes of OZ Minerals Ltd (ASX: OZL) and Sandfire Resources Ltd (ASX: SFR).
