PCF targets $4bn opportunity

Australian mining and exploration companies have been urged to target North American investors, with PCF Capital Group saying this strategy could bring $4 billion into the local industry.

Speaking at the Amec conference yesterday, PCF director Liam Twigger said more Australian companies should follow the lead of Gold Road Resources, which is developing the Gruyere gold mine.

North American institutions have acquired 40 per cent of Gold Road’s shares.

This holding corresponds to the average stake North American institutions hold in the top 30 mining stocks on the Toronto exchange.

By comparison, they hold only 27 per cent of the top 30 Australian mining companies.

Mr Twigger said if North American institutions increased their holdings in the top 30 ASX mining stocks by 13 per cent, this would deliver approximately $4 billion in new investment into the market.

He suggested this number was likely to be much larger given North American institutions are very comfortable with Australian mining risk and investing in advanced exploration and development opportunities.

Therefore they are likely to invest well beyond the top 30.

Mr Twigger said junior companies need to meet three characteristics in order to attract market support.

They need to have a clear pathway to production, some relativity between their market value and the capital they require for their project, and capacity to pay back the capital in about three years.

Australian companies targeting North American investors also need a strong marketing effort focused on traveling there on a quarterly basis rather than just presenting at a gold conference once a year.

Mr Twigger said another opportunity for juniors was to attract backing from a major mining house.

This was an emerging trend, with South32 and St Barbara among the established miners to have invested in a junior explorer.

Another trend was the growth of exchange traded funds.

The largest are Van Eck’s gold ETFs, which have trebled to $US14.2 billion since the start of 2016.

Mr Twigger said ETFs were essentially passive index huggers, with many trading on the back of an algorithm, and had no interest in the strength of a management team, a company’s development pipeline or exploration potential.