Specialist mining fundie brings unique deal structure to resources market

In the lead up to this week’s The Insider: Meet the Fund Manager, Dan Porter from PURE Asset Management sat down with Reach Markets to provide a bit of information about his investment strategy, industries of interest and view on the market.

In the lead up to this week’s The Insider: Meet the Fund Manager, Dan Porter from PURE Asset Management sat down with Reach Markets to provide a bit of information about his investment strategy, industries of interest and view on the market.

Dan has a 15 year history as an equity analyst at top tier investment banks, including attaining the role of Director at UBS in London, where he was the lead analyst in the equity research team covering European Building Materials and Construction. He made his move into small caps as the Head of Resources and Mining Services equity research at Wilsons, before jumping over to PURE and eventually launching their resources fund.

The wholesale PURE Resources Fund is a hybrid credit fund targeting 25-50 investments. The fund’s extensive bottom-up, credit-based investment process, seeks to identify high quality businesses with the potential for extraordinary growth. Dan seeks to fund mispriced companies when they are under-researched and under-valued by the investment market.

There is theoretically quite a broad investment universe that Dan has access to, however the practicalities of mining – namely expense and scale –  narrows down the investable universe. Their thorough due diligence approach then refines this down even further. The result being a much better risk-adjusted return in what is traditionally a volatile sector.

The main ones to initially think about are Proven or Probable JORC reserves, with ample amounts of Measured and Indicated JORC resources for future conversion. Then there are feasibility studies, which should outline robust project economics with sensitivity analysis that exhibits a tolerable risk profile when reviewed in line with Dan’s outlook for the commodities and inputs that the operation is exposed to. Of course, all these project attributes have to be backed up with regulatory approvals – and a licence to mine is essential. It also goes without saying that quality of management is way high up on priority list for Dan, and they spend a long time getting to know a team before making an investment.

Projects with large capital expenditure requirements also don’t usually make the cut, which largely excludes the commodities that typically require big projects such as lithium – where it is not unusual to see projects requiring over $1 billion to get up and running

Three commodities that the PURE resources fund does have exposure to is gold, gas and tungsten. Within this sector, Dan will speak about three companies that are ASX-listed, and how some of these gold opportunities have recently graduated from developer to producer – and in turn, have delivered some impressive margins.

While unlisted investments are not out of the picture, Dan does admit that it becomes more difficult for the opportunity to meet their criteria given the significantly reduced ability for a private company to tap equity markets for an injection of capital if things are not going to plan. It is quite often the road taken when mining companies have issues with their operations, especially during the initial ramp up of production – and the financiers want an extra buffer standing in the way of a foreclosure. As Dan says, things can go wrong with mining, and part of PURE’s due diligence process includes an external consultant with expertise in the area in focus.

Join Daniel Porter this Friday, 1st September at 12pm (AEST) on our The Insider: Meet the Fund Manager webcast to hear about his favourite stocks, investment strategy, market insights and more. There will also be an opportunity to ask questions during the session. To book yourself in, click here.

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