Investors & Media
In the media
Listing
Source: Ulster Business
Publication: Ulster Business (Main)
1 September 2005
In this, the last in a series of three articles, Francis Martin of BDO Stoy Hayward in Belfast describes the firm's recent experiences during the flotation of Shanta Mining Limited which went to market on July 12 this year.
We have, in our previous two articles, discussed the advantages of an AIM listing, the roles of the advisors involved and the likely timescales from inception to flotation, but how do these slightly academic accounts of an AIM float compare with the real thing?
BDO Stoy Hayward in Belfast was engaged as reporting accountants and tax advisors to Tanzanian gold exploration company, Shanta Gold Limited in March this year, at which stage only the nominated advisors (NOMAD) and the 'competent person' - in this case a firm of geologists required to report on the company's assets for the purposes of the admission document - had been engaged, so we were reasonably early into the fray!
The Shanta Board had already been assembled and had an impressive mix of directors - executive and non-executive - with City and mining credentials and previous listing experience. Our first task was to investigate and advise upon a suitable tax structure to allow the raising of funds in the UK, the exploration and ultimate mining of assets in Tanzania and the flexibility to acquire or dispose of particular mining licences and projects flexibly and without incurring prohibitive taxation charges.
This involved a trip around the globe (figuratively speaking!) while the most advantageous holding company jurisdiction could be identified. Eventually, Guernsey was agreed upon, it being more practical to gather large numbers of directors in a Channel Island than the Caribbean for the purposes of board meetings!
OPINION
Two of the key tasks of the reporting accountant are to review the financial statements of the company for the previous three years for inclusion in the short form report (In fact, the reporting accountant has to issue an opinion on these financial statements), and to review the working capital projections of the company for the 12 months succeeding the admission to the market.
This involved a trip to Tanzania to review accounts, audit files and to assess the reasonableness of the projections. We had been warned that many African companies were administrative hornet nests and our clients were no exception. When planning the trip, it transpired that no accounts or statutory filings had been prepared for the company - ever! Our trip, therefore, ended up being the catalyst for a large amount of administrative and accounting work by our African legal and accounting counterparts. We set off for a 48-hour visit to Tanzania in April.
Returning from what was an enjoyable - if not slightly frenetic - trip, the listing had begun to gain momentum. African, UK and Guernsey lawyers had begun drafting and verifying the admission document information, and the brokers and marketeers had been engaged. Despite the large amount of work and effort being put into the listing, difficulties in getting information from our Tanzanian counterparts meant that the end of the May deadline for listing was beginning to look very doubtful. This, it was felt, could have been a problem in that the appetite for gold exploration companies by AIM was being pushed to the limit as more and more companies went for flotation. We had confidence in Shanta, its board and assets, but that was no guarantee of a successful float. On the positive side, preliminary meetings with investors had gone well and a sense of urgency flowed through the advisors. As draft upon draft of legal documents, accountants reports, working capital documents, geologist reports and admission documents began to flow steadily, countless conference calls were set up between Belfast, London, Tanzania, Switzerland and Capetown, each call resulting in a flurry of activity for days afterwards. As the pressure mounted, there were heated exchanges between brokers, NOMAD's and lawyers as the documents began to converge into one admission document. At this stage, it was important for all advisors to review each and every draft as we noted that numbers and names would occasionally mysteriously change between drafts!
Also at this stage, as advisors began forming their final versions of documents and opinions, a lot of his had a knock-on effect on our work as reporting accountants. This involved us reconsidering our work and issuing what turned out to be seven iterations of our report.
Once the placing proof of the admission document was ready and the marketing roadshows were underway, the brokers began to finalise the offer price. Despite the market cooling a little, the strength of Shanta's board and assets resulted in a very satisfactory price being struck. All had gone well in the closing days and a flurry of board meetings and signings culminated in Shanta being successfully admitted on 12 July this year.
Listing on AIM can be a rollercoaster ride but with the right set of experienced advisors, a lot of the ups and downs can be removed and access to the excellent AIM market can be achieved.