News

December 04, 2008

Grafton Resource Investments Attempts To Unclog Illiquidity In Junior Mining Stocks

By Charles Wyatt

One swallow doesn’t make a summer, but it is very encouraging to see a new mining fund appear which is expressly intended to unclog markets for junior mining companies. Grafton Resource Investments will follow the business model of its successful predecessor Resource Investment Trust and offer its shares to institutions in return for parcels of shares in companies it considers to have above average potential. As a result market overhangs will be reduced and liquidity should improve. Mind you, David Hutchins and Kjeld Thygesen who will act as fund managers for Newland Fund Management LLP are not being entirely altruistic as Newland is going to charge a 1.5 per cent annual management fee up to US$100 million mark and then a 1.0 per cent fee over US$100 million. In addition, they will make a semi-annual performance charge of 20 per cent on returns above eight per cent, subject to a high water mark.

You get what you pay for in this life, and these two can point to Resource Investment Trust and show that it started at a similar stage in the mining cycle and outpaced most of the competition over the next four years. It launched in early 2002 as a self managed investment trust. The initial portfolio worth £15 million was created exclusively by stock swaps. Over the three years from April 2003 to April 2006 it outpaced both City Natural Resources and Merrill Lynch World Mining, but in 2006 it...