Capital raise is targeting 22 000 smaller shareholders. From Moneyweb.
“Democratising the financial markets” is arguably one of the more abused shibboleths in SA, but Northern Cape junior miner Orion Minerals is on a campaign to change that.
It has just completed a R92.3 million fundraising drive among professional investors and is now extending the same offer to its 22 000 retail investors.
It expects to raise a further roughly R60 million from this exercise to feed its exploration projects at the Prieska Copper Zinc Mine and the Okiep Copper Project in the Northern Cape.
This is small change in the grander scheme of things, but what’s unique about the cash-for-shares fundraising drive is the appeal to retail investors, not just the teams in Sandton and Cape Town with big chequebooks.
The company says it wants to bring vibrancy back to the JSE by appealing to smaller investors and giving them a front seat in one of the few junior mining groups going all-in on South Africa.
The JSE has seen a steady stream of delistings in recent years as companies complain about the high cost of compliance and lack of investor support. Outside the top 100 JSE companies, there’s little investment research, which means these often fly under the radar.
Another interesting aspect of the Orion fundraise is that South Africans have upped their shareholding from about 41% to nearly 50%. By the time the latest capital raise is finished on 23 July, that figure could tip past the 50% mark.
Given the paucity of investment in new mining projects in SA, Orion has become something of a standard bearer for junior miners. SA has a dreadful reputation among international miners because of BEE laws and regulations that are tone deaf to their complaints. The costs and risks of starting a new project in SA are formidable.
Orion’s success could start to shift these perceptions.
Retail investors left out in the cold
Some background: Unlike Australia (where Orion is headquartered), SA makes no legal distinction between professional and retail investors.
That creates some perverse behaviour, which in practice means cash-for-share fundraising drives invariably favour the professionals, leaving the retail investors out in the cold. Companies raising cash can get the job done with a few phone calls to their larger institutional investors and tick the compliance boxes rather than go to the trouble of reaching out to thousands of smaller investors.
The regulations are further skewed to institutional investors through tax benefits and a broking community that has steadily moved into fund management.
Doing a fundraise with retail investors needs a prospectus outlining the investment offering and growth prospects, signed off by professionals. Going straight to the big fund managers, who already have their own internal analysts, is the much quicker route to go.
“Effectively, what we are doing is bringing Australian Stock Exchange (ASX) practices into the SA market,” says Orion CEO Errol Smart.
“We already have a loyal shareholder base in SA, and we want to support and grow that base.
“I have been approached repeatedly by our South African smaller shareholders who are excited by Orion’s plans in the Northern Cape and have been disappointed when they have not been able to participate in Orion’s capital raisings that are limited, due to regulatory reasons, to professional investors. However, the SPP [share purchase plan] is an instrument that facilitates participation for all existing eligible South African shareholders.”
Share purchase plan
The SPP is pitched at A$0.015 or ZAR 18 cents up to a maximum of R365 000 per investor.
The minimum investment is R2 000.
Orion was trading this week at 19 cents.
