Hochschild Mining - London Stock Exchange

Hochschild Mining
Tapping resources for expansion
In the first year after its £270.38 million listing on the Main
Market of the London Stock Exchange in November 2006,
Hochschild Mining expanded its operations from three
mines in one country to six mines in three countries,
namely Argentina, Mexico and Peru.
According to Roberto Dañino, the company’s deputy
chairman and executive director, “Financing growth was a
key driver behind going public. Listing on the Main Market
has given us the financial resources to achieve our goal of
doubling production by 2011”.
Before choosing the London Stock Exchange, the
company’s management spent one and a half months
interviewing advisers and assessing alternative exchanges.
Mr Dañino notes that, “The fact that we aspire to be a
global player meant that it was important for us to list with
our peers. And the principal mining companies are listed in
London”. The listing process took four and a half months
after the appointment of the company’s advisers, all of
whom are leaders in their fields.
A long-term perspective
According to the deputy chairman, regulatory concerns
were not a factor in the decision to list in London. He
notes that, “Many people talk about companies listing
in London in order to avoid Sarbannes-Oxley. This was
not a relevant factor since we believe that regulatory
frameworks will converge towards the middle ground
over time. We took a long-term view and decided that
London is best for long-term value creation”. A long-term
perspective is not new to the company, originally founded
in 1911.
* Source: Bloomberg data, June 2006 – September 2007
At present, Mr Dañino notes that, “London is by far
the leading market for equity financing”. A total of
US$12.66bn equity financing has been raised by mining
companies on the Main Market and AIM over the past
21 months, compared to $3.04bn and $6.14bn on the
New York and Toronto stock exchanges respectively,
according to Mr Dañino.* “These numbers speak for
themselves. There are 209 mining companies listed in
London compared to 42 in New York.”
More than just fund raising
The former prime minister of Peru believes that the
company’s experience since listing has proven that it
made the right decision. In addition to providing capital,
going public has also brought “… a much fuller pipeline
of deals coming to us from junior mining companies”.
Since flotation the company has signed half a dozen joint
venture agreements to develop projects with juniors in
addition to the new mines it has developed on its own.
Furthermore, going public has given the company
“… access to debt financing on terms which were not
previously available”. Prior to listing, for example, loans
were more likely to be subject to restrictive covenants
stipulating the need to hedge against adverse interest or
exchange rate movements. In terms of bolstering lenders’
confidence of the company’s ability to repay its loans,
listing may be regarded as a substitute to hedging.
Mr Dañino also cites the fact that the company’s
“… increased visibility has facilitated the process of
recruiting top-notch professionals” as an additional
benefit of listing. In combination, the factors cited above
place the company on a strong footing to expand.
Broadening the investor base
Equally important is having a strong investor base.
By listing, the company has taken the biggest step
towards broadening its shareholder, transforming itself
from a family-owned business to a publicly traded
company with a free float of 29%. The deputy chairman
remarks that listing has been “… an intensive process
which has required a tremendous amount of work.
The key to completing the process efficiently is to
have the best advisers”.
The company’s minority shareholders are presently
“… primarily long-term institutional investors who trade
less frequently than retail investors. Since they believe in
our story they are holding onto their shares. The flip side
is less liquidity. However, we believe that this issue will
be resolved over time”. Importantly, the company has
already attracted good coverage. Mr Dañino notes that,
“… at this point, seven leading investment houses have
initiated coverage” of the company, which is a constituent
of the FTSE 250 index.
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The company takes a long-term view of the past as well
as the future. Mr Dañino remarks that, “As the first Latin
American company to issue stock on the Main Market
for over 100 years, we have a responsibility to set a
good example”. Antofagasta was the first Latin American
company to list on the London Stock Exchange, in 1888.
Mr Dañino is hopeful that many more Latin American
companies will raise capital in London in the near future.
London is by far the leading market for
equity financing. A total of US$12.66bn
equity financing has been raised by mining
companies on the Main Market and AIM over
the past 21 months.