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Nord Gold plc (Nord Gold), a leading gold producer of over one million ounces of gold per annum, announced its intention to float on the premium segment of the London Stock Exchange on 3 June 2021.
Should the offer proceed, it would comprise a secondary sell-down of existing ordinary shares with no primary element. The company will not receive any proceeds from the offer and reported that admission will provide, among other reasons, the opportunity for a wider range of capital raising options, which could be used towards potential development plans such as the company’s geographically diversified development pipeline including one of the largest West African brownfield projects, and other standalone development and exploration projects in Canada, French Guiana, Russian Federation and Burkina Faso.
From a market perspective, the Group predicts future strength in the demand for and price of gold. In the registration document, Nord Gold reported on the current relatively low global demand for gold, which in 2020 decreased by 14.3% and declined alongside production by 3.7%. At the start of March 2021, gold prices dropped to an eight-month low at £1,223 a troy ounce due to pandemic related disruptions and economic distress. However, gold prices have since risen 10% since the beginning of March to £1,374 a troy ounce. The company reported:
‘the outlook for gold demand is strategically positive, as investment demand is currently expected to remain strong on the back of continued uncertainty in the global financial markets and inflation expectations… The Group also believes that demand for gold will be supported by economic recovery in the emerging markets, with demand from China and India recovering from the lows of last year…’
The recovery of the gold market is somewhat reminiscent of what was seen in 2008, which Nord Gold intends to take advantage of this time around. When the global financial crisis hit, the price of gold increased significantly, and in August 2011, gold traded to a then record high price of £1,187 per ounce.
Gold is historically a safe bet for investors, and companies operating in this sector appear to have been undeterred by the post-pandemic dip in gold prices. Both Chaarat Gold Holdings Limited and Serabi Gold plc undertook placings in February and early March 2021 respectively, to fund ongoing development projects. Soldgold plc also offered a placing to raise £53.1m in April 2021 for similar motives.
The transaction feeds in to an ongoing trend of initial public offerings (IPOs) from mining companies, with five companies admitted to trading in 2020 and admissions from Cornish Metal Inc (AIM) and Caerus Mineral Resources plc (Main Market) in the first half of 2021. Should Nord Gold go ahead with its IPO, it will be the third mining company to join the LSE in 2021. For more information on sector trends in IPO and secondary offerings, see our Market Tracker Trend Report: Trends in UK Equity Capital Markets 2020/21.
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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.
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