David Robertson, Business Correspondent
The London Stock Exchange (LSE) gains its first Mexican listing next month when Fresnillo, the world's largest silver miner, seeks a £4 billion IPO, putting it in the FTSE 100.
The company wants to raise money from British investors to fund the expansion of its Mexican mines, one of which was discovered by Spanish conquistadors in 1554.
Fresnillo's arrival in London is part of a shift in corporate Latin America towards capital raising in the City, rather than Madrid or New York.
The London Stock Exchange is cultivating its links with Central and South America by holding roadshows to encourage companies to list on the FTSE and the Alternative Investment Market (AIM). The LSE has met chief executives in Sao Paolo and Lima. Further roadshows are planned in Chile and Argentina.
Hochschild, a Peruvian silver and gold miner, became the first Latin American company to float in London for a century when it listed in November 2006. Its shares have since risen 20 per cent. Andrew Wray, a cor- porate financier at JP Morgan Cazenove, said: “New York used to be in the backyard for Latin American companies but they are increasingly turning to London, particularly resources companies, as so many others are listed here.”
Fresnillo plans to sell about 25 per cent of its shares in London, raising £450 million initially and up to £1 billion in total. This would give it a market capitalisation of about £4 billion - sufficient to enter the FTSE 100. The remaining shares will be held by Penoles, a diversified Mexican miner that has decided to spin off its precious metal assets to create Fresnillo.
Penoles' precious metals division produced 34.4 million ounces of silver last year and a further 280,000 ounces of gold. Its turnover was $648 million (£328 million). The new company is named after its largest mine, which is located in the Zacatecas region of central Mexico. Fresnillo also has a gold mine in the Sierra Madre mountain range of northern Mexico and another in central Mexico.
The company will use the money raised in the IPO to pay off debt, finance the expansion of the Fresnillo mine and develop three other mines.
Jaime Lomelin, chief executive of Fresnillo, said: “Penoles was founded 120 years ago and has operated through revolutions and through crises but we felt that now was the time to demerge the precious metal assets. We believe they will get a higher valuation in a separate company and allow management to focus on developing this business.”
Mr Lomelin added: “The LSE has done an excellent job in marketing the benefits of London. We looked at several stock exchanges but chose London because it has all the big mining houses and investors from all over Europe and the Middle East.”