Juniors await visa cash flow
Changes to Australia’s significant investment visa regime could offer a ray of hope to the beleaguered junior mining sector as new money flows into locally listed small cap stocks.
The Federal Government’s new rule mandates $1.5 million of the required $5 million capital go into listed investment funds. Complying funds must prioritise investments into companies with a market capitalisation of less than $500 million.
Investors must put up to $500,000 into venture capital or private equity funds, with the balance allowed into individual stocks, bonds and managed investment vehicles such as infrastructure trusts.
Sources say as many as 2000 people a year could seek the investment visas, pushing $10 billion of new capital into the Australian market. Of that, $3 billion would flow into listed small cap stocks.
That could be a catalyst for a new wave of investment in WA’s junior miners and explorers.
A number of local advisory firms are already believed to be looking at opportunities to form new funds, and others are said to be considering establishing private equity vehicles to focus on consolidation plays in resources or agricultural investments.
PCF Capital managing director Liam Twigger said a significant portion of the new capital could flow into mining and resource stocks.
“There are funds already in place and the market could be receiving the benefit of those funds by September,” he said.
“There is a huge appreciation and interest in Australian mining from the Chinese. They recognise they are materially undervalued and there is a huge interest in migration and becoming residents in Australia.”
The immediate beneficiaries are most likely to be mid-tier producers — Saracen Mineral Holdings, Panoramic Resources and St Barbara all sit below the $500 million market-cap level — but Westoz Investment Com-pany executive director Philip Rees said the money would eventually flow into smaller development and exploration plays.
Westoz would not be a complying fund under the new rules, and Mr Rees said it would adopt a wait-and-see approach to the creation of new funds.
But he said the long investor capital strike for Perth’s junior resource plays meant there was plenty of value for new funds if overseas capital began to flow.
“If we had another $100 million to invest now that would be an area we’d be looking at because we have an overriding view there are some opportunities in that space to show some pretty decent returns,” he said.
