Big funds are getting back into small cap miners like it’s 2016 again
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It’s taken a bit of time for big investment funds to again warm to small cap miners, but it looks as if the dollars are now starting to flow.
Coal may not be as much on the nose as some may think, with Stanmore Coal (ASX:SMR) having received a takeover bid as well as adding Sydney-based Regal Funds Management to its register.
Since early August, Regal has amassed a 5.7 per cent stake in Stanmore — now making it a substantial shareholder — by progressively buying shares for a total of $25.1m.
The increase in stake came at the same time Golden Investments – part-owned by Indonesian company Golden Energy & Resources – tabled a $239.2m cash bid for Stanmore.
Meanwhile, investor interest in Bellevue Gold (ASX:BGL) has been rapidly increasing, especially following a November 20 tweet by mining tycoon Tolga Kumova that the company had “rediscovered the old Bellevue lode”.
Visible gold was uncovered in all 11 recent drill cores with two potentially discovering a new hanging lode.
“More visible gold thanks. Corporates are going to need a pretty cheque book [in my opinion],” Mr Kumova said.
$BGL @BellevueGold Seems the guys have rediscovered the old bellevue lode. Its doesnt go down it goes north and south. I wonder if it all flattens out like Viago lode @SteveParsons345 More visible #gold thanks. Corporates are going to need a pretty cheque book IMO. https://t.co/EyXyfGvbVe
— Tolga Kumova (@KumovaTolga) November 20, 2018
Shares rallied almost 10 per cent to an intra-day high of 52.7c on the exchange of 3.4 million shares.
On the same day, the Bank of Nova Scotia bought more shares on market, raising its stake to 11.14 per cent from 9.85 per cent.
Hedley Widdup, director of junior resources focused investment firm Lion Selection Group, believes the current market volatility has provided an opportunity for instos to take a bigger position and for new investors to join the register.
“I suspect it’s one of those things where quite a few investors who might have missed the 2016/17 run see an opportunity now and wouldn’t mind holding some positions,” he told Stockhead.
“Groups that are already in would definitely see it as an opportunity. Groups that weren’t in I would say almost certainly are looking at it saying, ‘well if we missed it the first time maybe now is the time’.”
There doesn’t seem to be a particular commodity trend though, with small cap resources players from several different sectors attracting institutional backing.
Lithium producer Tawana Resources (ASX:TAW), uranium explorer Boss Resources (ASX:BOE), nickel and cobalt explorer Jervois Mining (ASX:JRV), zinc explorer Superior Lake Resources (ASX:SUP) and Euro Manganese (ASX:EMN) are among those that have investment funds on their respective share registers.
Gold hopeful Geopacific Resources (ASX:GPR), mineral sands producer MZI Resources (ASX:MZI) and uranium explorer Vimy Resources (ASX:VMY) are among 179 mining companies that West Perth-based Resource Capital Funds (RCF) has invested in since it was formed in 1998.
Though RCF did sell down some of its stake in Vimy this month — pocketing $3.4m from the on-market sale — and is no longer a substantial shareholder.
Typically small and micro caps have found it hard to attract funds to their registers because often they have an “index mandate or a market cap minimum threshold”, Mr Widdup said.
“I’ve heard so many small company MDs and CEOs just say ‘well look people won’t even take meetings because they just say well you’re below the mandate so too bad’ and that’s micro-caps but it’s also a few juniors,” he noted.
But that doesn’t mean all investment funds are closed off to the idea of injecting cash into the little guys.
“As the market gets more frothy, they always seem more prepared to stretch on those kinds of things in order to get into an opportunity that they like,” Mr Widdup said.
“Generally speaking if there’s an institutional investor and they want to be in a situation they will find a way around whatever rules they’ve got in a lot of cases.”