Listing mining firms<\/p>\n
Almost four years after the delisting of the first mineral
\nprospecting company ever traded on the Jakarta Stock Exchange
\n(JSX), the government is again prodding mining ventures to raise
\nfunds from the capital market. Director General of General Mining
\nKuntoro Mangkusubroto confirmed last week that the Capital Market
\nSupervisory Agency had allowed mineral prospecting companies to
\nfloat shares on the Surabaya Stock Exchange (SSX).<\/p>\n
The JSX apparently no longer wants to deal with any mineral
\nprospectors after its bad experience with PT Minindo
\nPerkasasemesta in 1992, a prospector of gold, copper and nickel.
\nMinindo was actually designed to be a test case for other
\nprospectors intending to raise funds from the capital market. But
\nit was delisted a few months later, due to the combination of an
\ninternal management dispute and an allegedly questionable
\nfinancial report.<\/p>\n
Though the country is a trove of mineral resources, the JSX
\nand SSX have yet to learn to deal with mineral prospectors. The
\ndomestic investing public also must be educated in the prospects
\nand risks of investing in mineral prospecting ventures. That is
\nquite different from the stock exchanges in such countries as
\nCanada and Australia, which have listed thousands of mineral
\nprospectors in special sections called mining boards. There are
\nalready three mining companies listed on the JSX, but all of them
\nhave made impressive production records and are therefore no
\nlonger mineral prospectors in the real sense.<\/p>\n
Listing mineral prospecting companies is indeed distinct from
\nmost other businesses in that the former is assessed not on the
\nbasis of their balance sheets, but on the valuation of their
\nmineral reserves. A mineral prospector does not offer past
\nperformances, but future wealth. Since stock exchanges usually
\nrequire a company intending to go public to have made profits in
\nat least the previous consecutive years, most mineral prospectors
\nare obviously disqualified because they cannot show profit
\nrecords, but also future wealth potential based on the mineral
\nreserves they find. They are therefore treated specially in most
\nstock exchanges and are listed under the so-called mining board.<\/p>\n
That does not, however, mean that investing in mineral
\nprospectors is simply a gamble. True, mining is a risky business.
\nYet, the high risk also bears a potentially large windfall. In
\nthe developed countries, many people who call themselves \"the
\nreal investors\" love the stocks of mineral prospecting companies.
\nThere have been many instances where the investors suddenly find
\nthat their investment value has skyrocketed after their
\nprospecting companies announce new mineral discoveries.<\/p>\n
Given the risks, listing requirements for mineral prospectors
\nare very tough. The most crucial of them is the valuation of
\nmineral reserves by independent geologists. No wonder the
\nprospectus for a share offering by a mineral prospecting company
\nis very bulky, containing hundreds of pages of reports and
\nsupplements by independent geologists and other experts and
\nanalyses of development costs and future market prospects of the
\nminerals to be produced.<\/p>\n
Learning from the JSX's bad experience with Minindo, the SSX
\ntherefore should make thorough preparations before approving an
\ninitial public offering. An educational campaign for mineral
\nprospectors, securities companies and the investing public is
\nalso required to acquaint them with the technicalities as well as
\nthe prospects and risks of investing in mineral prospecting
\ncompanies.<\/p>\n
The SSX must do it right this time. Many promising small
\nmining ventures have failed to enter production because of
\nfinancial problems. The stock exchange can play a very pivotal
\nrole in helping mineral prospecting firms, most of them usually
\nsmall ventures, develop mineral resources.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/listing-mining-firms-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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