Miners' Mexican wave could yet overwhelm FTSE
By Andrew Hill
Friday Apr 11 2008 14:55
us.ft.com
Say when. The appetite of London investors for large mining companies seems insatiable. If the flotation of Fresnillo goes through next month, and the Mexican silver and gold miner joins the FTSE 100, that will make 10 on Britain's blue-chip index, many with their roots outside the UK.
Given that the reason such companies come to London is to tap into the enthusiasm of sophisticated commodity investors and analysts, it's amusing how desperately they dislike being compared with each other. Take a look, though. Fresnillo has all of its assets in Mexico and is majority owned by a 121-year-old Mexican listed group, which is in turn indirectly controlled by the Mexican who will be Fresnillo's chairman. Kazakhmys, which has most of its assets in Kazakhstan, is 45 per cent owned by its Kazakh chairman. Vedanta Resources, with principal operations in India, is 54 per cent owned by its Indian chairman and his family.
The mining sector is no place for British nationalist sentiment, though (unless coal, slate or perhaps tin are your chosen commodity). Even Rio Tinto, which some investors might consider to be a British blue-blood among the non-doms, is dual-listed in the UK and Australia (one complication of its fight to avoid takeover by similarly structured BHP Billiton (NYSE:BHP) ).
The appearance of Fresnillo - a company that did not exist until recently except as part of another group, Peñoles, known mainly to Mexican stock market aficionados and commodity buffs - underlines the oddity of London's IPO process.
In the interests of investor protection, prospectuses and research reports are heavily vetted by lawyers and bankers, then circulated among sophisticates like samizdat publications. Non-executive directorships are assembled and revealed late in the process. At Fresnillo, Lord Cairns, formerly of SG Warburg and BAT Industries, and Guy Wilson, a partner at Ernst & Young, are set to join the board. But the full list, including three Mexican non-execs, cannot be made public until after the company's first official board meeting on Tuesday.
It is good that companies from Almaty to Mexico City now recognise that serious investors expect them to submit to London's most stringent requirements on transparency and governance. Companies seeking secondary listings in London should not be allowed to pass themselves off as part of this closely followed and properly regulated elite.
But ahead of formal trading, even soon-to-be-PLCs are subject to a compressed timetable, draconian rules on what can be said publicly and hard-sell marketing. All of which makes this a highly unsatisfactory exercise and puts ordinary investors at a disadvantage when the shares of large but lesser-known companies are finally available for purchase in the open market. |
