Investing

Robert Friedland's Ivanplats IPO could be a game changer

A successful IPO could signal a shift in the current unfriendly financing conditions.

CB_Robert_Friedland

(Photo: Bloomberg/Getty)

Where there’s Robert Friedland, there’s hype, and that might be just what the junior mining sector needs right now. The billionaire promoter’s initial public offering of his African mining venture, Ivanplats Ltd., is being watched by analysts and fellow junior miners alike. A successful IPO could signal a shift in the current unfriendly financing conditions.

More than 60 million shares of the former Ivanhoe Nickel and Platinum will be up for grabs on the Toronto Stock Exchange for $4.50 to $5.40 each. The objective is to raise more than $327 million—which would be Canada’s largest mining IPO in more than a decade—and the development of the company’s African copper projects is riding on those funds.

Convertible bondholders are also putting Vancouver-based Ivanplats on a clock because, if the company’s $165-million worth of previously issued bonds are not redeemed for stock by Nov. 10, rates on the debt could reach repayments of just under 19%. But the company—with almost 600 shareholders—confirms this deal will go to market before the end of October.

“If that [IPO] were to go off successfully, then obviously that would be a very big marker for other mining companies to go forward,” says Gavin Graham, president of Graham Investment Strategy. “Let’s put it this way. If anybody can do it, it would be Mr. Friedland. He has the ability to find major mineral deposits and then get them into production in association with major mining companies.”

Some of Friedland’s past money-makers include the 1996 sale of his Voisey’s Bay nickel property to Inco for $3.1 billion and the 2009 sale of Ivanhoe Energy’s American oil and gas operations to Seneca Resources Corp. in a $40-million deal.

According to the Ivanplats prospectus, released back in September, most of the funds raised will be put toward several projects throughout the continent, including its US$2-billion Kamoa copper project in the Democratic Republic of Congo, which has 9.2 million tonnes of measured and indicated resources and 12.5 million tonnes inferred.

There are a few factors that could stand between Friedland and his next big project, though, not the least of which is its timing. A survey by PricewaterhouseCoopers called 2012’s third-quarter market for IPOs “lacklustre” as there were just seven new issues with a total value of $271 million recorded on all Canadian exchanges, compared with 20 issues worth $537 million for the same period last year. Coupled with sinking commodity prices and general investor shyness around junior miners, Ivanplats will have to convince investors to pry open their wallets for a piece of a project with unknown potential located in the high-risk Congolese jungle.

But the timing of the Ivanplats IPO may not be as bad as many think. Both the U.S. Federal Reserve and the European Central Bank recently announced new quantitative easing measures that will inject more liquidity into securities markets as well as stoke fears of inflation, explains Graham. Ivanplats’ copper and zinc projects may look appealing as a hedge against inflation.

And just a few big deals could generate their own momentum as soon as the fourth quarter, adds Dean Braunsteiner, national IPO services leader at PwC. He says there are several “very significant IPOs in the pipeline that could revive the total IPO market and turn around the year.” Other junior miners are therefore looking at the Ivanplats IPO as their industry’s game changer.