LICs recently got a hell of a razzing on Strawman.
Well, I was in the front row of the toothless mob, pitchfork in one hand burning torch in the other screaming: “Liberty! Fraternity! No Performance Fees! Down with Management Fees!” As far as I know during and after the pile-on no one was electronically guillotined. But it was a narrow escape for Reasoned Thought.
Now with what I have to say below I take a shallow breath, bow my head, stare vacantly at the ground in front of my toes and awkwardly accept the “Strawman Hypocrite of the Month” award.
With Gold and copper prices on a run, Lion Selection Group (ASX:LSX) looks interesting.
LSX is a LIC that specializes in mining stocks, principally small cap Australian domiciled mining stocks, most often gold stocks.
It has been listed for about 10 years now and the executive chair is the founder, Robin Widdup who owns about 12%. It is run by his son Hedly a geologist.
LSX has a market cap of $63m @ the selling price of 44.5 cents/share.
The balance sheet is made up of:
Cash of $66.6m
Legacy investments $10.5m
New investments $11.7m
Tax liability -$0.5m
Total value of $88.3m (see LSX latest April Presentation)
On the above LSX is trading at a discount to NTA of around 29%. A pretty hefty discount.
The Legacy investments include unlisted tin interest in Morrocco and unlisted gold interests in Japan, rock phosphate in Tunisia and gold in Mongolia. Pretty hairy stuff and after the tribulations they had in Indonesia they have shifted away from overseas mining investments.
Let say these Legacy investments are only worth half what they say, only $5.2m.
The discount to NTA becomes around 23%. Still pretty good.
What are the new investments?
They are primarily small holdings in ASX listed companies: Saturn Minerals, Brightstar resources, Sunshine metals, Alto, Great Boulder Resources and Koonenberry Gold. Also a $2m investment in Plutonic an unlisted entity with mineral leases in the Northern Territory. Total value around $12m.
What is LSX charging shareholders for their expertise? Last year management costs ran at about 2.7% of asset value. Not excessive given what they are investing in and their relatively small asset base.
You can hear Hedly Widdup talk on Money of Mine below:
Where are we in the Mining Investment Cycle? With Hedley Widdup (youtube.com)
(Anyone who can survive an Aussie high school with a name like Hedly has to have something going for him).
It is anybody’s guess if these guys strike it big or just make good money for shareholders over the next 12 - 18 months. However this looks pretty good way to invest in the current gold/copper boom with limited downside.
A stab at valuation at a 10% discount to NTA – 56 cents.