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If you want diamonds, head down to London’s Hatton Garden. For musical instruments, you need to go a mile or so further west to Denmark Street. And if you want to invest in a mining company, the London Stock Exchange has historically been one of world’s top destinations.
For years, the market built its reputation as the home of an array of global natural resources companies. The likes of Rio Tinto, Anglo American, Fresnillo and Antofagasta have been among the mainstays of the mining offering, while BP and Shell have led the way for the oil & gas sector.
BHP’s potential bid for fellow miner Anglo American threatens to put a dent in that hard built reputation. If successful, it would deprive London investors of a £34bn company that has been listed in the city for a quarter of a century.
That reputation has already suffered some blows. In 2018, the City lost its biggest gold mining company when Randgold Resources was bought by Canada’s Barrick Gold for $6bn. And BHP itself has already taken a chunk out 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, it said that the move would make the company “more efficient and agile” and would better position it for “continued performance and growth”.
Regardless of whether BHP succeeds in its quest to buy Anglo, there could be more damage on the way. Last month, hedge fund Tribeca Investment Partners suggested that Switzerland-based Glencore — which has been listed in London since 2011 — should move its listing to Australia, arguing in a letter to the company that “London is no longer the home of mining”.
Over in oil & gas, it emerged last year that in 2021 Shell had considered moving its listing to the US, while there have been mutters this year about a possible bid for BP, which would remove it from the London Stock Exchange.
Valuations play a part, as they have for the numerous other UK-listed companies that have decided recently that they would rather have their shares traded elsewhere. In a note earlier this month, analysts at investment bank Liberum found that mining companies in the UK trade at much steeper discounts to their US peers than companies in other sectors. Their higher exposure to the slowing Chinese economy is one of the reasons, according to Liberum analyst Joachim Klement.
Perhaps London investors have tired of a sector that has not always made itself the easiest to back. Mining has had more than its fair share of troubled companies. Kazakh miner ENRC, which delisted in 2013 after a range of governance problems, has cast a long shadow. More recently, Endeavour Mining fired its chief executive at the start of this year over an alleged irregular payment instruction. And there have been plenty more.
London still has a lot going for it as a centre of natural resources investment. There is a deep pool of experts in the city who know how the industry works, from investors and analysts to lawyers and economists. And while Shell might have considered a move to the US, it decided instead to cement its presence in London by ditching its dual Amsterdam/London listing and switching to a primary listing in the UK capital. For now at least.
But there is no denying that the City’s position is increasingly under threat as Sydney, Toronto and New York vie to attract companies. The disappearance of Anglo would only add to the impression that perhaps London’s best days as a natural resources centre are behind it. In that sense, it would be more damaging than the failure to attract the IPO of chip designer Arm last year, or the £4.3bn take-private of cyber security firm Darktrace by Thoma Bravo announced last week.
Reputational changes don’t always happen overnight. Often it’s just 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 home of London’s second-hand book trade. These days, you are more likely to find coffee shops and restaurants. The second-hand book shops have almost died out entirely.
