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New Gold and Metals & Mining Indices launched at Diggers and Dealers
This year, adding to the abundance of good news stories to be expected in such buoyant conditions for the industry, delegates were greeted with the significant announcement that Standard and Poor's had launched two new real-time mining indices in the Australian market to coincide with the beginning of the conference - the S&P/ASX 300 Metals & Mining Index (XMM) and the S&P/ASX All Ordinaries Gold Index (XGD).
ASX has worked closely with Standard and Poor's, listed companies and mining industry bodies in the development of these indices. ASX participation in this initiative is part of a plan to promote and foster a supportive domestic capital market environment for this vital sector of the Australian economy. Exports of mineral commodities continue to underpin the strong performance of our economy. The resources sector now accounts for more than 20 per cent of total ASX domestic market capitalisation, and around one-third of listed companies by number. Other activities during the year included ASX joining the efforts to persuade the Federal Government to introduce tax relief to encourage investment in much needed resource exploration. ASX made an extensive budget submission arguing the case to the Federal Treasury earlier this year.
The new indices will enhance the profile of the Australian Metals and Mining and Gold sectors both domestically and internationally and contribute to their long-term success — to the direct benefit of the companies that make up these sectors. The new indices will also benefit investors, providing important benchmarks and performance indicators for these key segments of the Australian equity market.
Representatives of ASX and Standard and Poor’s were on hand in the Diggers and Dealers exhibition hall to promote the new indices and delegates visiting the ASX stand gave strong indications of support for the initiative. One astute delegate successfully estimated in advance the closing value of the Gold Index at the end of the second day and went on to win a bottle of Penfolds Grange.
The introduction of the indices has also received strong support from mining industry bodies. Expressing his support Mitchell H Hooke, Chief Executive, Minerals Council of Australia and Chair, Finance Group, Minerals Exploration Action Agenda said,
“Capital markets have never been more global, more transparent, nor more competitive. Comprising around 8.5% of Australia’s GDP the Australian minerals industry is a foundation for Australia’s future economic prosperity.
Continued growth and prosperity is dependent upon attracting investment. This in turn is a function of differentiating the sector’s performance in equity markets. The introduction of real-time sector specific resources indices should better promote the minerals industry’s performance, better facilitate investor marketing and assist investor decision making”.
The Association of Mining & Exploration Companies’ (AMEC) Chief Executive, Dr Justin Walawski said the 160-member strong association had lobbied for the adoption of the new indices, with AMEC’s preference being for real-time indices:
“We’re supportive of these indices. The evidence suggests real-time indices are far more successful in terms of the profile that they obtain with industry, with media and with investors. We hope that both institutional investors as well as smaller shareholders can use them as a mechanism to assess their returns and the performance of the sector at the junior to mid-tier end. In turn, we would then hope it provides some incentive for greater investment as well.”
Dr Walawski said the Federal Government’s Mineral Exploration Action Agenda Implementation Group had also strongly backed the proposed establishment of the indices.
The S&P/ASX 300 Metals & Mining Index (XMM) is based on the S&P/ASX 300 Index and is comprised of companies that are classified as being in the Metals & Mining industry under the GICS classification system. It includes producers of aluminium, gold, steel, precious metals & minerals, coal and also diversified metals & minerals. Being based on the S&P/ASX 300 Index, the stocks included in the S&P/ASX 300 Metals & Mining Index will meet the same liquidity criteria that are applied to all companies included in the broader index universe. In addition, the weighting that any one company will have in the index will be based upon the free-float adjusted market capitalisation of the company. The index will be rebalanced in line with the rebalancing of the broader S&P/ASX 300 Index.
The S&P/ASX All Ordinaries Gold Index will include companies that are included in the Gold subindustry of the All Ordinaries Index. The constituents of the S&P/ASX All Ordinaries Gold Index will be drawn from the All Ordinaries universe of companies and will follow the All Ordinaries index methodology. Therefore, companies included in this index are not filtered for liquidity or adjusted for free-float. For this reason, the index will include a wide range of companies, and will therefore serve as an ideal broad market indicator for the Gold industry. The index will be rebalanced in line with the rebalancing of the broader S&P/ASX All Ordinaries Index.
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