Hedley Widdup Lion Selection Group

Virtual Gold Conference August 2021 www.lionselection.com.au What investors never get told But should

Or they might get burned

ASX:LSX lionselection.com.au 2 1. The Problem with People

2. Some Margins Never Change

3. Cinderella

ASX:LSX lionselection.com.au 3 The Problem with People

People will pay far more for something they don’t understand than something they do

ASX:LSX lionselection.com.au 4 Value evolution Overshoot / Undershoot / Approximate

ASX:LSX lionselection.com.au 5 ASX 300 Materials Index Index Price / Index PE

Early boom: equity market foresees earnings before they are delivered

ASX:LSX lionselection.com.au 6 SOURCE: IRESS Data Some Margins Never Change

Known fact: Commodities go up Ignored fact: And so do costs (especially including invested capital)

ASX:LSX lionselection.com.au 7 Gold Price ASX Gold Index Cashflows VS Gold price

Windfall Gold Prices: 2008-2012 Gold back in Windfall Territory now

In 20 calendar years, the ASX Gold Index has: Operating • Generated A$49.3B operating cash flows • Invested A$59.2B

Investing

Pre-Financing Cash Flow

ASX:LSX lionselection.com.au 8 SOURCE: IRESS Data Dividends BHP & Copper & Iron Ore

BHP RIO

ASX:LSX lionselection.com.au 9 SOURCE: IRESS Data (Not) Investing in the Future ABS data: Australian exploration and mining capex

Exploration expenditure – matches cyclical trends

Capital expenditure – not (yet) re-started

ASX:LSX lionselection.com.au 101 0 SOURCE: Australian Bureau of Statistics Cinderella

Famous for two things ✓ won the hand of the prince  hopeless at keeping an eye on the time

ASX:LSX lionselection.com.au 111 1 Mining & Exploration IPOs Bellwether of liquidity ASX100 Resources Index Triple Flag: 1995-2021 2007 Canada’s largest Boart Longyear $2300m 2021 Mining IPO in 9 years DDH1 $150m 2006 2008 Tulla Resources $78m Aditya Biria $299m Ivanhoe Australia $125m MLG Oz $70m Dyno Nobel $1030m 29Metals: 29Metals $527m 2010 Australia’s largest 1995 Mungana Goldfields $76m 2004 Aston Resources $400m Lihir $608m Mining IPO in over a OceanaGold $100m Kula Gold $80m $1350m 2018 decade Excel Coal $130m Jupiter Mines $240m Nickel Mines $200m 1997 ? Highlands Pacific $210m

Lion Selection $100m

Exploration IPOs Exploration Number of Mining / / Mining of Number

ASX:LSX lionselection.com.au 121 2 SOURCE: IRESS Data, ASX Announcements – a LOT of them Funds raised by Miners: TSXV Canada is on fire

$ Flows:

Favours junior miners (TSXV miners raised 55% of money raised by miners in Canada)

Inflating capitalisations (highest [ever ?])

Setting records (most raised by junior miners since 2011)

ASX:LSX lionselection.com.au 131 3 SOURCE: S&P Global Liquidity shows: last leg of the cycle Large and rapid equity performance, but watch out for midnight…

2020

2019

2017

2016

ASX:LSX lionselection.com.au 141 4 1. The Problem with People

(equity market is inflating risk assets to extreme values) 2. Some Margins Never Change

(investing, in a rush to be the most responsible, but won’t contain costs) 3. Cinderella

(she forgot it was almost midnight)

ASX:LSX lionselection.com.au 15 ASX:LSX lionselection.com.au 16 Thank you

@HedleyWiddup

W lionselection.com.au

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