PCF Capital founder Liam Twigger has revealed plans to raise up to $350 million for a cryptocurrency token that will back a new investment fund for gold mining juniors, in what would be the most significant Australian blockchain-related deal to date.
PCF Capital founder Liam Twigger has revealed plans to raise up to $350 million for a cryptocurrency token that will back a new investment fund for gold mining juniors, in what would be the most significant Australian blockchain-related deal to date.
Speaking at the Precious Metals Investment Symposium in Perth today, Mr Twigger announced the FutureGold fund, which he said would provide a new capital source for junior miners.
Cryptocurrencies are electronic mediums of exchange relying on blockchain technology, meaning they are secured through encryption and tracked on a ledger distributed across multiple nodes.
About 2000 of these currencies have been created globally, many of which funded technology initiatives, and draw their value from anticipated demand for an underlying asset.
FutureGold plans to issue about 5 million crypto tokens, to raise up to $US250 million ($350 million).
Mr Twigger, who will be executive chairman of the fund, and his team will allocate the cash across around 20 to 30 gold miners in need of capital to undertake exploration and development work.
In return, one possible model would be for FutureGold to earn a royalty of up to 5 per cent of gold production, Mr Twigger said.
He touted the benefit of this model as non-dilutionary for equity holders.
The fund would then pay a dividend to token holders, or buy back tokens.
Another reason for choosing the royalty model was that most Australian gold juniors traded at an equity valuation of about $US36 per ounce of gold reserves.
Royalty streams were valued at about $US50/oz to $US200/oz, Mr Twigger said.
He said there had been a significant suffocation of capital for junior miners in recent years.
In Canada, for example, risk capital had moved towards cannabis companies, while the increasing prominence of exchange traded funds had reduced the number of institutions with discretionary capital available.
Locally, heightened restrictions on juniors by the ASX made it more difficult for mining hopefuls to raise capital for projects, Mr Twigger said, with rules introduced in the past 18 months meaning much tougher disclosure requirements.
“I know they've fixed this up to an extent,” he said.
“A junior might have a $10 million market cap and they might have a requirement of $150 million and the whole basis of promoting that project is being able to promote the economics.
“Ninety-nine per cent of juniors explore, discover, and then joint venture or sell.
“”Very few go into production … it just showed a complete misunderstanding of what the junior sector is all about.
“The mind boggles.
“I was trying to put that in millennial speak and I was thinking it’s a bit like signing up for Tinder and having to put your marriage credentials up.”
But a lot of work will need to be done to hit Mr Twigger’s ambitious target for the fund to be ready in the March quarter of next year.
FutureGold need to make its way through the regulatory process, while also developing the technology to back the cryptocurrency.
Mr Twigger said he was already in discussions with providers for an off-the-shelf solution, it was not clear at the time of publication if blockchain technology itself would be necessary to underpin the workings of the fund.
He said the use of blockchain would disrupt more traditional funding sources.
"I'ts about the democratisation of capital. We don't see anyone from Wall Street, from Silicion Valley, from the New York pension funds (buying into cryptocurrency), its a retail driven development," Mr Twigger said.
"It will match investors’ increased demand for new and dynamic investment products and the gold mining sector’s challenge to raise development funding."
