What Are the Fund's Four Favourite Mining Shares?

TL;DR

The fund’s four highlighted mining shares are Mag Silver, Petra, Burdine, and Metro Mining, spanning silver, diamonds, a Mongolian project, and bauxite. Its top-10 weighting fell from about 50% to 42% as capital moved toward smaller and mid-cap companies with stronger growth prospects. Read on to see the investment case for each company and why the fund favors growth and low costs over mining dividends.

Transcript

the main changed the funds exposure over the last 12 months would be a reduction in our energy overweight and they reduction in our mining underweight as we've transitioned out to more defensive energy names like ExxonMobil into some of the more fundamentally attractive mining stories WC coupled with that there's also been a shift from our larger c... Read More

Key Insights

• 📛 Fund has shifted towards more defensive energy names like ExxonMobil and attractive mining stories.
• 👲 Portfolio has moved from larger cap to smaller and mid-cap companies, focusing on higher growth prospects.
• 🥹 Mag Silver and Petra are standout holdings in the Acorn and sapling spaces, respectively.
• 👲 Recent investments in Burdine and Metro Mining highlight the fund's interest in small-cap companies with promising projects.
• ❓ Dividend payouts from miners may not be reliable due to the cyclical nature of commodity prices.
• 👀 The fund's investment approach includes being contrarian and looking for unloved stocks with catalysts for change.
• 👨‍🔬 Ideas for investments come from various sources, including internal discussions, sell-side research, and conferences.

Questions & Answers

Q: What are the fund’s four favourite mining shares?

The four highlighted mining shares are Mag Silver, Petra, Burdine, and Metro Mining. The fund groups Mag Silver among its “acorns” and Petra among its “saplings,” while Burdine and Metro Mining are recent small-cap investments.

Q: Why does the fund favor Mag Silver?

Mag Silver is developing what the fund considers one of the best undeveloped silver resources in partnership with its 12% shareholder, Fresno. A deeper zone called Val de Canas Deep could increase the resource from around 15 million tons of high-grade material by roughly 50%, making the mine potentially larger and more profitable than previously expected.

Q: What makes Petra an attractive mining investment?

Petra owns the Cullinan diamond mine, described as one of the world’s oldest and most prolific diamond mines. Following a large investment that stretched Petra’s balance sheet, the mine is positioned to double production and halve costs, which the fund expects could generate strong cash flow and potentially dividends.

Q: Why did the fund invest in Burdine?

Burdine has a wholly owned project in Mongolia and a seasoned team that has operated there for more than 20 years. Initial drill holes showed high-grade, continuous, wide zones near the surface with good metallurgy, while the project’s district-scale potential suggests it could become very large.

Q: Why is the fund excited about Metro Mining?

Metro Mining has a bauxite project in northern Queensland with an internal rate of return above 80% and a 17-year mine life. The fund considers this type of company rare in the bauxite space and recently invested a substantial amount in it.

Q: How has the fund’s portfolio allocation changed over the last 12 months?

The fund reduced its overweight position in energy and its underweight position in mining, moving toward defensive energy names such as ExxonMobil and more fundamentally attractive mining opportunities. It also shifted from larger companies toward smaller and mid-cap businesses with stronger growth prospects.

Q: How concentrated is the fund in its top 10 holdings?

A year earlier, about 50% of the portfolio was allocated to its top 10 holdings; that figure is now about 42%. The reallocated capital moved into smaller, higher-growth companies the fund calls its acorns and saplings.

Q: Are mining shares suitable for dependable dividend income?

The fund does not consider miners a strong dividend play because their dividend levels ultimately depend on cyclical commodity prices. Investors seeking dependable dividend payments may therefore be disappointed, while the fund places greater value on growth and low costs.

Summary & Key Takeaways

• The fund has decreased its energy overweight and mining underweight, transitioning into more defensive energy companies like ExxonMobil and attractive mining stories.

• The portfolio has shifted from larger cap to smaller and mid-cap companies, with a focus on higher growth companies with strong growth prospects.

• The fund is particularly excited about Mag Silver, which is developing one of the best undeveloped silver resources, and Petra, which owns the prolific Cullinan diamond mine.