If you want diamonds, go to Hatton Garden in London. For musical instruments you have to travel about a mile and a half further west to Denmark Street. And if you want to invest in a mining company, the London Stock Exchange is historically one of the top destinations in the world.
For years, the market has built its reputation as home to a wide range of global natural resource companies. Companies like Rio Tinto, Anglo American, Fresnillo and Antofagasta are among the mainstays of the mining supply, while BP and Shell have led the way in the oil and gas sector.
BHP’s potential bid for fellow Anglo American threatens to damage this hard-built reputation. If successful, it would deprive London investors of a £34 billion company that has been listed in the city for a quarter of a century.
This reputation has already taken a few hits. In 2018, the city lost its largest gold mining company when Randgold Resources was bought by Canadian company Barrick Gold for $6 billion. And BHP itself has already withdrawn part of London’s status. In 2022, it changed its structure from a dual listing in London and Sydney to a primary listing in Australia. At the time, he said the move would make the company “more efficient and agile” and better position it for “continued performance and growth.”
Whether or not BHP succeeds in its quest to buy Anglo, the damage could be even greater along the way. Last month, hedge fund Tribeca Investment Partners suggested that Swiss company Glencore – listed in London since 2011 – should move its listing to Australia, arguing in a letter to the company that “London is no longer the birthplace of ‘mining “.
In the oil and gas sector, it emerged last year that in 2021 Shell had considered moving its listing to the United States, while rumors circulated this year of a possible bid for BP, which would remove it of the London Stock Exchange.
-Valuations play a role, as do the many other UK-listed companies that have recently decided to prefer their shares to be traded elsewhere. In a note published earlier this month, analysts at investment bank Liberum found that UK mining companies were trading at much deeper discounts to their US counterparts than companies in other countries. sectors. Their higher exposure to China’s slowing economy is one reason, according to Liberum analyst Joachim Klement.
Perhaps London investors are fed up with a sector that hasn’t always been the easiest to support. The mining sector has seen more than its fair share of struggling companies. Kazakh mining company ENRC, which was delisted in 2013 after a series of governance problems, casts a long shadow. Most recently, Endeavor Mining fired its CEO earlier this year over an alleged irregular payment instruction. And there were many others.
London still has much to offer as a center for natural resource investment. There is a large pool of experts in the city who know how the industry works, from investors and analysts to lawyers and economists. And while Shell could have considered expanding into the United States, it instead decided to consolidate its presence in London by abandoning its dual Amsterdam/London listing and moving to a primary listing in the British capital. For now at least.
But it is clear that the City’s position is increasingly threatened as Sydney, Toronto and New York compete to attract businesses. Anglo’s demise would only add to the sense that London’s best days as a natural resource center may be behind it. In that sense, it would be more damaging than last year’s failed IPO of chip designer Arm, or Thoma Bravo’s reported £4.3 billion takeover of cybersecurity firm Darktrace. last week.
Reputation changes don’t always happen overnight. Often it’s little by little until there’s not much left. Just around the corner from Denmark Street and its musical instruments is Charing Cross Road, once the headquarters of London’s second-hand book trade. Nowadays you are more likely to find cafes and restaurants. Used bookstores have almost completely disappeared.
