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 & Rio Tinto 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 Zinifex $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
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ASX:LSX lionselection.com.au 171 7