29 July 2024
The Australian - Money Talks: Hedley Widdup’s Lion Selection Group searches for gold explorers with ‘multiple exit points’
Gold prices move back in the direction of all time highs in the US on Friday, climbing to almost US$2390/oz as consumption data from the States brought hopes of fresh rate cuts.
The continued threat bullion is posing to all time highs has a number of mining experts confident the precious metal will continue to find support around these levels, with prices averaging more than US$2300/oz for the past three months.
For a sense of perspective gold, currently 23% above the 2023 average which was previously the highest on record, never averaged more than US$2000/oz in any single month until this year.
Fuelled by rate cut hopes, geopolitical uncertainty, central bank buying – especially in China – and war, the safe haven commodity has proven anyone who thought it old-hat foolish.
Lion Selection Group (ASX:LSX) CEO Hedley Widdup, whose listed fund manager invests in junior miners and exploration projects and predominately ASX listed gold stocks, is among those with a positive outlook on gold's future.
He thinks Chinese central bank buying, which has trickled down to rising investment from Chinese retail investors in eastern ETFs, has become a major source of demand.
"That's encouraging from a gold forward looking perspective, but it makes it a lot harder to read," Widdup said.
"You can get all wound up about how many Chinese middle class investors there are, and if every single one of them wanted to purchase an gold every year, that's an awful lot of demand.
"We know that the Chinese market can be quite faddish, and we know it can embrace those fads from a retail investing perspective to match the whims of what might be a more centrally conceived idea as well."
But for now his read on gold generally is that it is "robust".
"So rather than speculating that it's going to move heavily I'm more than comfortable with it at current levels, or even a slight weakening in the short term," he said.
"But I think in the medium term, it's probably got quite a bit of robustness to it, which seems a bit firmer than most of the other mineral commodities, particularly when you reflect on the conditioning of the various economies that need to be in place to push commodities to new highs."
With that in mind, Lion has been adding to its Aussie gold exposure of late, deploying cash that had accumulated on its balance sheet after pulling $74 million in 2022 from the sale of its stake in the Pani JV in Indonesia.
Antipa Minerals (ASX:AZY)
Among those investments was a $2 million plunge into seasoned explorer Antipa Minerals as part of a $6.75 million capital raising in June which will make Lion a 4% holder of the Paterson province gold explorer.
Antipa already controls 1.8Moz of gold in the resource at its 100% owned Minyari Dome project and is among the largest landholders in the province that plays host to the legendary Telfer mine and two of Australia's largest recent gold discoveries – Newmont Corporation's (ASX:NEM) 7Moz Havieron and Rio Tinto's (ASX:RIO) 8Moz Winu.
AZY also has existing exploration JVs outside Minyari Dome worth tens of millions with majors Newmont, Rio and IGO (ASX:IGO).
Drilling is being undertaken at the flagship Minyari Dome to boost the economic potential posted in a 2022 scoping study, which used gold prices in Aussie dollar terms more than $1000/oz below spot rates. But it also comes with Newmont, an 8.6% holder of Antipa, putting its non-core Telfer gold mine up for sale after its 2023 takeover of Aussie giant Newcrest and Rio facing permitting hurdles at Winu.
The upshot is Antipa could be an attractive piece in a broader consolidation of Paterson province resources to feed the Telfer plant, or as a standalone project in a higher gold price environment.
Widdup said the multitude of exit points that Antipa offered to extract value from Lion's investment made it a strong proposition.
"We think that they've built themselves into a really interesting situation there, and we can see that in the industry purchasing of resources in order to match them with processing facilities is a theme which is going to be really important, probably more so than it has been in the last two decades," he told Stockhead.
"Antipa, if you like, is a bet each way.
"There are multiple potential long-term exit points here. I can see a case that's pretty clear where they could build a project and go to production, and I can see another case, which is equally viable, that might see them included in someone else's consolidation theme.
"It's nice to have more than one way through that."
Lion previously had exposure to LionOre, a TSX nickel success story that engineered a C$6.4 billion takeover by Norilsk Nickel at the top of the China boom driven nickel market in 2007.
Led by former LionOre Australia geology manager Roger Mason as MD along with other ex-LionOre executives, Widdup said Antipa also has proven success on its management team.
"In this case, we're quite comfortable with their ability to judge which is going to be the best way to lean," Widdup said.
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
At Stockhead, we tell like it is. While Antipa Minerals and Brightstar Resources were Stockhead advertisers at the time of writing, they did not sponsor this article.
By JOSH CHIAT
Find Out More