In the biggest capital raise to hit the ASX in some time, the L1 Gold Fund Ltd (ASX: LGF) is looking to raise up to $1 billion in new capital to target investments in undervalued mid-cap gold companies.
In the fund's initial public offer prospectus, lodged with the ASX, it says it intends to raise a minimum of $500 million and up to $1 billion in new shares priced at $2 each.
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Opportunities in gold
The fund said the strategy thereafter would be to invest across a range of securities in the gold sector.
As it said in its own words:
The Company has been established to invest predominantly in the gold sector, constructing a portfolio of Australian and international Securities (including shares, options or debentures in listed or unlisted gold mining companies in Australia or overseas) and Other Eligible Investments (which may include derivatives, such as gold futures contracts, and potentially also minority or temporary holdings of title to gold), but with the Company predominantly investing in Securities and Other Eligible Investments that are listed on a securities exchange.
But the fund also intends to invest in an "opportunistic" manner, "in other precious metal sectors (such as silver, platinum and palladium), which will involve selective investment in these sectors where the Manager identifies compelling risk-adjusted opportunities.''.
The prospectus said the fund will aim to generate positive absolute returns over the medium to long term, being more than three years, and will achieve this by holding both long and short positions in stocks.
The prospectus adds:
As the Investment Strategy seeks to identify assets that are undervalued or overvalued by the market, the Company produces investment returns from income generated by the relevant assets (eg capital growth or dividends) or by a future correction of the market. By way of example, the Company may hold a Long Position in shares of a mid-cap mining company in Australia or overseas that the Manager deems to be undervalued. The initial focus of the Company will be to invest in a set of high conviction, primarily mid-cap1 existing gold producers that the Manager believes to be significantly undervalued. The Manager will look for the most compelling opportunities across the entire listed peer group of such gold producers globally, a significant portion of which the Manager expects to be in the form of listed international Securities. The decision to initially focus a significant portion of the Company's portfolio on mid-cap gold producers is due to the Manager's view that there are attractive valuations, near-term earnings growth potential and a significant breadth of investment opportunities within this part of the gold sector.
The fund expects its initial portfolio to be made up of about 15% Australian-listed equities, 34% international equities, and the remainder in exchange-traded derivatives.
The fund expects its shares to start trading on the ASX on April 24.
