Base metals explorer S2 Resources may have sunk on debut but its listing is a success in itself, says managing director Mark Bennett.
In a reflection of the uncertainty hanging over the resources industry, Mr Bennett said challenging conditions and the costs associated with an initial public offering would have prevented S2 from listing independently.
"It is nice to demerge S2 with a chunk of money, these assets and the people, and go full speed from day one but otherwise it would have been very difficult," Mr Bennett said.
A small graphite company and BHP Billiton's spin-off South32 are the only two other mining companies to list on the Australian Securities Exchange in 2015. Many explorers are cash-drained and reinventing themselves, predominantly as technology companies.
S2 was spun out of Perth-based nickel play Sirius Resources as part of its merger with larger diversified miner Independence Group and began trading on the ASX on Monday.
The stock hit the boards at 22¢ before closing down at 17¢ after a high-volume day of trading. Analysts warn S2 faces a volatile first few weeks on the boards as many of the shareholders it inherited from Sirius make early calls on the stock.
Mr Bennett, the former boss of Sirius, said he anticipated high volume in S2's early days of trading "as that sorts itself out".
Bell Potter analyst Peter Arden said he was surprised to see S2 trade lower initially but said it was a reflection of the "difficult times for high risk exploration companies generally" and the stock was likely to recover in time.
Deutsche Bank analyst Brett McKay said he expected considerable movement in the S2 share price until its "natural owners" emerged.
"Some of the big funds with a mandate to hold on to whatever they want, they are likely to hang on to it for a while and see how it goes but for some of the funds, their mandates won't allow them to hold onto it or, from a portfolio construction point of view, it just doesn't fit," Mr McKay said.
The stock has been provided some stability from its largest shareholder, veteran Perth prospector Mark Creasy who holds about 35 per cent.
The demerger allowed S2 to start life with $22 million cash, experienced Sirius staff and a portfolio of exploration assets.
"It is like being at the start of Sirius all over again, only much more advanced," Mr Bennett said. "We don't want to over-promise but there are certainly expectations. With exploration there is a lot that is out of your control but, rightly or wrongly, we believe we can do it all again."
The exploration company's key focus initially will be drilling at its Baloo gold deposit, with a maiden resource expected to be announced early next year.
As well as joint venture exploration efforts in Sweden and Finland, S2 is also evaluating numerous offers it has received from third parties keen to partner with the new company.
"We have got more [offers] than we can poke a stick at at the moment," Mr Bennett said. "It's coming from Australia, Europe, North America, Africa…ranging from entrepreneurial individuals through to smaller junior explorers who don't have much cash, all the way through to a couple of companies with market caps in excess of $10 billion."
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