Litchfield proves the market hasn’t completely lost its appetite for IPOs

Only five new floats have hit the ASX this year, with just five more in the current pipeline
Litchfield Minerals in the latest addition to the bourse, listing last Friday
The Northern Territory-focused critical minerals explorer raised $5 million for its IPO

Did someone say IPO?

Those three letters were mentioned a lot – 384 times in fact – between mid-2020 and the end of last year.

But, so far in 2024, there have been just five new listings on the ASX.

That’s a far cry from the smorgasbord of 202 which joined the bourse in 2021 alone.

There’s no question the market was happy to feast on anything brand spanking new in the wake of the COVID-19 pandemic, but it appears investors have now lost their appetite for the good-old fashioned IPO.

According to the ASX, there are just five new floats in the pipeline – and there’s no guarantee they will all become listed entities.

Having said that, each member of the IPO Class of 2024 to date has been relatively successful.

With some very high-profile investors in its corner, lithium hunter Kali Metals (ASX:KM1) is currently up 76% on its opening price back on January 8.

Mick McMullen’s Metals Acquisition (ASX:MAC) and The Australian Wealth Advisors Group (ASX:WAG) are both up ~24% on their issue prices.

And while Infini Resources (ASX:I88) is down 12.5% on its debut, the lithium and uranium explorer did deliver investors an impressive first-day return of 85%.

Welcome to the bourse

Litchfield Minerals (ASX:LMS) hit the ASX last Friday morning following an oversubscribed $5 million IPO which was solely managed by boutique advisory firm Alpine Capital.

The Northern Territory-focused critical minerals explorer’s debut didn’t come with a great deal of fanfare, even though the newcomer executed a near-flawless IPO.

LMS was founded by father-and-son prospectors Michael and Matthew Pustahya (the latter is now the company’s managing director) and only lodged its prospectus to become a public company in late January.

Speaking to Stockhead shortly after the company’s shares began trading for the first time, LMS chairman Peter Eaglen was impressed with the investor appetite for a new IPO in what remains a challenging market.

“It’s a tough market, but we only wanted a small raise, just enough to run this first drill programme,” he says.

“A lot of people go out and try and fund everything, but you just can’t do that. So we went very small – deliberately very small – just to work up these first lot of targets at Mount Doreen. And if that doesn’t work, we’ve got a big manganese lease to go and explore over at Lucy Creek near the Queensland border.

“What we found from this process was investors want something highly prospective, but then they also want to see there’s some sort of future beyond that.”

There’s a first time for everything

This was Eaglen’s first ever IPO despite a +35-year career in the mining game, headlined by a stint leading assurance activities for Rio Tinto (ASX:RIO).

Aside from learning a few new acronyms to add to his resources vocabulary, Eaglen says there were few surprises from a process which others in his position have previously vowed never to repeat.

“There were a few things I came across which I have to say I was completely ignorant about, but I really enjoyed the learning process of it all,” he says.

“It’s a process that forces you to stop and think. They don’t put these rules out to stop people getting on the stock exchange, I learnt there’s actually some very good reasons why things are the way they are.”

Often the main challenge small-capped companies face when undertaking an IPO is achieving a minimum spread of 300 non-associated investors.

As Eaglen and the LMS team found, this often means having to scale back lucrative bids from potential retail investors.

“We had two groups from WA who each wanted to throw $1 million our way, but unfortunately that kills your spread and it becomes ‘thanks very much guys, but we actually can’t accept’,” Eaglen says.

“Those tactful and sensitive conversations are actually the harder conversations to have rather than meeting the stock exchange rules and all that.

“We ended up cutting a few of the bigger retail investors back and finished with a spread of about 350 or something like that, which was great. But coming out of my mouth, it probably sounds easier than what it was.”

Hitting the ground running… almost

Despite its best efforts to be drilling as soon as the trademark bell at the ASX was rung, LMS has been forced to wait just that little bit longer to begin its maiden campaign at Mount Doreen – about 350km north-west of Alice Springs – due to about 70mm of rainfall in the project area last week.

It appears to only be a minor setback which is largely offset by the fact LMS is taking full advantage of road infrastructure recently put in by the Australian and Northern Territory governments.

“We’ve got a two-lane bitumen sealed road going right past our lease now, so what was once a seven-hour drive from Alice Springs is now just three,” Eaglen says.

“The workers who built the road actually had their camp site on our lease before they moved 70km to the north so there’s gen sets and all that ready for us to hook into.

“Very conservatively, we’re saying to the market that come April we’ll easily have the rigs spinning.”

LMS shares closed at 19c following its first day of trading.