Long-term solutions for the Mining Sector at the centre of the JSE’s Empowerment Segment

The Johannesburg Stock Exchange continues to drive growth and transformation

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The Johannesburg Stock Exchange continues to drive growth and transformation by providing long-term solutions for the Mining Sector through the JSE’s Empowerment Segment.

As the largest stock exchange in Africa, the Johannesburg Stock Exchange is a fully electronic, efficient and secure market with world-class regulation, trading and clearing systems, settlement assurance and risk management. The JSE has operated as the market place for trading financial products for over 130 years, raising capital of over R14 trillion across 11 industries.

This long standing reputation has allowed the JSE to be at the forefront of establishing a highly regulated BEE share trading platform, having broken new ground in 2011 with the change of listing requirements as well as rules and directives to cater for BEE shareholders. As the imperative for transformation increasingly occupies the South African narrative, we are proud to have pioneered an environment that fosters equal opportunities for previously disadvantaged individuals to own a stake in a company and participate in its growth.

Since 2011 when Sasol BEE shares listed on the exchange, the JSE’s Empowerment Segment has grown exponentially and improved its structure to enhance transparency, compliance and efficient clearing of BEE securities. The Financial Services Board’s directive to BEE schemes to obtain licensing in terms of the Financial Markets Act or change their operating models in response to the development of over-the-counter (OTC) platforms to trade shares catalysed the myriad advancements over the years.

“Companies were also required to verify that the party is BEE-qualified, in accordance with the Department of Trade and Industry’s (DTI) codes for companies, namely 51% black owned or 51% black controlled using the look-through process,” says Donna Nemer, Director: Capital Markets at JSE.

The JSE’s Empowerment Segment, which has a total market capitalisation of R41 30 954 785, has welcomed the listing of BEE share schemes from as early as 2015 when MTN Zakhele & Sasol Inzalo began trade. These were followed by Vodacom’s YeboYethu share scheme in the third quarter of 2016.

“Broad-based share ownership by black shareholders is increasingly at the top of the agenda for listed companies. Having seen over 100 000 black people being able to hold a beneficial interest in Vodacom SA through investing in YeboYethu shares, the JSE looks forward to seeing more listings from other sectors, particularly mining,” she adds.

The country’s proposed new Mining Charter, is aimed at distributing South Africa’s mineral wealth more widely, and will apply the “once empowered, always empowered” principle to mining companies as long as these companies met the previous 26% black-ownership requirement. This segment enables the listing and trading of securities among black South Africans only and can be used in the mining sector as well.

“More and more companies are increasingly looking at permanent empowerment solutions and the BEE Board is therefore an attractive option in that regard,” says Standard Bank’s Richard Stout.

“While it’s an option that has value, many issuers see it more as part of a solution rather than a solution in its own right and in isolation. Apart from the JSE’s Empowerment Segment listings, the JSE’s Fast Track listing process continues to gain popularity. Three mining companies, Orion Minerals, Alphamin Resources and KorePotash, listed on the JSE using this method since 2017. This process allows international companies already listed for 18 months or longer on other exchanges to secondary-list on the JSE’s Main Board or AltX quicker than they normally would,” he says, adding that these types of Fast Track listings save time and costs without compromising any regulatory standards.

From an equities perspective there has been an increase interest in permanent capital vehicles. Listing options include Investment Holding Companies or Special Purpose Acquisition Companies (SPACs), which provide a permanent source of capital for managers/promoters which can be tapped again through follow-on issuances more efficiently than the traditional pools of liquidity on which private equity has historically relied. Examples of this could be potentially listed BEE investment holdings companies or specialised focused mining funds that raise capital for the sole purpose of making acquisitions in the sector.

SPACs have a defined period of 24 months in which acquisition need to be made and all capital raised is held in escrow which allows additional protection mechanism and an orderly way in which funds are redistributed back to shareholders should they fail to make an acquisition in the defined period. Since the introduction of the SPAC rules, the JSE has had eight SPACs listings with a combined capital raised in excess of R3billion and the opportunity exists for mining focussed SPACs.

Recent mining listings

ASX-listed potash exploration and development company Kore Potash’s ordinary shares were admitted to trading on the AIM market of the London Stock Exchange as well as the JSE’s Main Board in April 2018. Part of the reason for choosing to list on the JSE was that, “South African markets have the financial depth and knowledge of African mining to support the type of fundraising that will see us through raising money to build the Kola project,” says Kore Potash’s Chairperson, David Hathorn.

The JSE listing is in line with the Company’s strategy to better access capital markets where there is a strong understanding of large scale African projects, attract a broader investor base and improve its capital raising ability. It also provides an additional market for trading of the Company’s shares for the Company’s existing and prospective South African shareholders. In addition, the JSE listing will allow prospective South African investors to obtain foreign exposure through domestic channels, deepening the Company’s potential investor pool of capital.

Orion Mineral, an exploration company focusing on zinc, copper, nickel, gold and platinum-group elements in South Africa and Australia, secondary listing on the JSE in 2017 via the Fast Track listing process, which is for companies which have been listed on the ASX, the London Stock Exchange, the New York Stock Exchange and the Toronto Stock Exchange for a period of at least 18 months.

Alphamin Resources, which is developing the Bisie tin mine in the Democratic Republic of the Congo, completed a secondary listing on the JSE after raising $56.1m through a private placement of shares.

The JSE continues to apply rigor to capital raising solutions for the mining sector and the refinement of the BEE offering.

Patrycja Kula-Verster, Primary Markets, Business Development Manager at the JSE

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