Lowell Resources Funds Management Ltd · ASX:LRT
Lowell Resources Funds Management — Lowell Resources Fund — AIA Investment Summit 2019
42 slides from Lowell Resources Funds Management's conference presentation, Mar 20, 2019
Slide 1: Presentation for the AIA Investment Summit
For personal use only LOWELL RESOURCES FUND Presentation for the AIA Investment Summit Sydney 15th March 2019
Slide 2: Disclaimer
Disclaimer For personal use only Important Notice • This presentation does not constitute investment advice. Neither this presentation nor the information contained in it constitutes an offer, invitation, solicitation or recommendation in relation to the purchase or sale of units or shares in any ju
Slide 3: Fund Summary
Fund Summary For personal use only Overview 10 years performance (net of fees) Fund size (6 March 2018) A$15.6 m 450 400 Units on issue 2.8m units 350 Unit price (1 March 2019) $4.60 300 250 Avge Liquidity (per day) 600 units 200 Discount to NAV 18.5% 150 100 Number of unit holders ~500 50 Listing s
Slide 4: Emerging Companies – ASX Index
Emerging Companies – ASX Index For personal use only S&P/ASX Emerging Companies Index 1600 1500 1400 1300 1200 26% fall 1100 in 2018 1000 900 800
Slide 5: Significant Performers
SIGNIFICANT PERFORMERS For personal use only • Au-Ag-Pb-Zn-Ba deposit in Bosnia • Invested $285k at 19cps (mostly as seed) Adriatic Metals • Value now $1.2m at A$0.81/sh • 50% of 300koz pa Gruyere gold development in WA Gold Road • Invested $294k at 16cps • Value now $1.6m at A$0.90/sh Resources • C
Slide 6: Investment Committee
Investment Committee Members For personal use only John Forwood, Chief Investment Officer Joined LRFM in November 2016 Mr Forwood is a qualified lawyer and geologist with more than 25 years experience in the resources sector. He has over 17 years of resources financing experience with RMB Resources,
Slide 7: Fund Investments by Commodity
Fund Investments by Commodity For personal use only PORTFOLIO AS AT 28 FEB 2019 V, Al2O3 & TiO2 Fertilisers 2% 2% Energy Other 3% Battery 4% Gold Cu/Zn/Ni 42% 23% Cash 4% O&G Classified by main commodity 20% of investee company’s lead project.
Slide 8: Portfolio by Company
Portfolio by Company For personal use only 28 Feb 2019 $1.80 Millions $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $-
Slide 9: Commodities vs Stocks
Commodities vs Stocks For personal use only
Slide 10: Tech Stocks vs Gold Price
Tech Stocks vs Gold Price For personal use only Potential next move: A fall in NASDAQ & corresponding rise in Gold
Slide 11: Central Bank Gold Purchases
Central Bank Gold Purchases For personal use only 2008 GFC changed central banks’ view of gold
Slide 12: US$ Real Interest Rates
US$ Real Interest Rates Correlation to Gold Price For personal use only Inflation higher than US$ interest rates, is generally positive for the gold price
Slide 13: Gold Equities vs S&P
Gold Equities vs S&P 500 For personal use only
Slide 14: Investing in resource equities
Investing in resource equities For personal use only Capitalising on value accretion: optimal stage Full Production LRF Target Investment Stage Initial Production Reserve Financing Discovery Drilling ▪ Leverage: milestone investing “value accretion Exploration model” ▪ LRF focus is on the period fro
Slide 15: LRF Portfolio by Project Stage
LRF Portfolio by Project Stage For personal use only Portfolio Value by Stage of Project 28 Feb 2019 30% 25% 20% 15% 10% 5% 0% Grass Roots Exploration & Feasibility Pre Development Development Production Cash Resource
Slide 16: Gas: LRF increasing exposure
Gas: LRF increasing exposure For personal use only • China's government has recognised the importance of gas in its clean energy strategy. It has set an aggressive target with gas to account for around 10% of energy consumption by 2020 Morgan Stanley Oct 2018 • To achieve that, gas consumption needs
Slide 17: Copper
Copper For personal use only • M&A competition for copper deposits emerging • Refined copper inventories decreasing Global Copper Supply/Demand Forecast (source Rio Tinto, Sept 2018)
Slide 18: Investment Overview & Objective
Investment Overview & Objective For personal use only Overview Investment Objective ▪ LRT’s investment objective is to maximise absolute returns to its ▪ Lowell Resources Funds Management Ltd (“LRFM” or unitholders over the medium to longer term, along with annual “The Manager”) manages the Lowell R
Slide 19: Historical Performance
Historical Performance For personal use only Investment Portfolio Performance (IPP) 1Investment performance figures reflect the historic performance of Lowell Resources Fund, net of fees 2 Methodology for calculating total return is based on MorningStar, which assumes reinvestment of dividends Stron
Slide 20: The Manager
The Manager For personal use only Lowell Resources Funds Management Ltd Stephen Mitchell, Chairman Richard Morrow, Director Joined LRFM in February 2011 Joined LRFM in November 2017 Mr Mitchell has over 30 years’ experience in the resources sector with Mr Morrow is an equity partner with Melbourne-b
Slide 21: Portfolio Characteristics
Portfolio Characteristics For personal use only Weightings 28 Feb 2019 Portfolio by Geography of main project 28 Feb 2019 Unlisted LSE/AIM 3% 2% Cash Asia/Pacific, 4% TSX 3% 9% Cash, 4% North America, 9% Africa, 13% Europe, 12% South America, 11% Australia, 47% ASX 82%
Slide 22: Stock Selection
Stock Selection For personal use only Top down focus Criteria • Macroeconomics ✓ Management • Equity markets ✓ Geographic location 1 ✓ Geological setting ✓ Resource/reserve magnitude • Market sectors ✓ Grade, metallurgy • Commodities 2 ✓ Stage ✓ Infrastructure and market • Resource categories ✓ Indi
Slide 23: Our Investment Process
Our Investment Process For personal use only ▪ LRF will typically hold less than 5% shareholding ▪ Allows a range of exit alternatives in relatively illiquid stocks ▪ In a boutique fund, these positions can still ‘move the needle’ for performance
Slide 24: Case Study: Syrah Resources
Case Study: Syrah Resources For personal use only Syrah Resources Limited (ASX: SYR) 7.00 LRF exits investment ▪ Australian-based industrial minerals and 6.00 technology company, with a focus on graphite in Mozambique 5.00 ▪ LRF’s first investment in SYR was in 4.00 December 2009, at around $0.18/sh
Slide 25: Case Study: Kidman Resources
Case Study: Kidman Resources For personal use only Kidman Resources Limited (ASX: KDR) 2.50 ▪ Fast-growing Australian resource company, focused on gold and lithium, located near Southern Cross, in the Archaean 2.00 Forrestania belt of Western Australia ▪ LRF’s first investment in KDR was in August 1
Slide 26: Lowell – a unique investment opportunity
Lowell – a unique investment opportunity For personal use only • Fund focus - One of the very few investment funds that offers exposure to the junior resources sector across Australia and global stock exchanges in unlisted and listed companies • Successful track record for 10+ years - Superior perfo
Slide 27: Contact
Contact For personal use only Lowell Resources Funds Management Limited Cremorne Capital Limited Investment Manager Responsible Entity ACN 006 769 982 ACN 006 844 588 AFSL 345674 AFSL 241175 Address Address Level 6, 412 Collins Street, 8 Chapel Street, Melbourne VIC 3000 Richmond VIC 3121 Tel: (03)
Slide 28: Resources Through 2019: Trump, Trade Wars, Tariffs and Tax
RESOURCES THROUGH 2019. CONSIDERING TRUMP, TRADE WARS, TARRIFS AND TAX March 2019 White Paper prepared by Lowell Resources Funds Management Limited, Investment Manager of the Lowell Resources Fund For personal use only Overview Global markets are in a state of flux, with the major equity indices sho
Slide 29: For personal use only
Central banks, and governments in general, are playing a key role in stimulating economies globally, through interest rate standstills or even potential cuts in key economies such as the US and Europe, as well as Australia. Government sector stimulus is also increasing in China, with a massive credi
Slide 30: For personal use only
According to the Federal Open Market Committee, US GDP growth rate will be 3% in 2018, slowing to 2.3% in 2019 and 2.0% in 2020, and 1.8 percent in 2021, with the FOMC attributing the slowdown to the trade war. The impact on China and other smaller economies may be more significant. The 2018/19 fina
Slide 31: The Resource Sector
Announcements by the European Central Bank that it would end its bond purchases, at the same time as reducing its growth forecasts, proved most inopportune. As a result, Mario Draghi has been forced to quickly backtrack. The ECB is reinstating its program to lend to commercial banks at zero interest
Slide 32: For personal use only
Chart: Commodity index relative to the S&P 500 share price index showing periods of drastic underperformance by commodities, including the present, followed by resurgence in the early 1970s and late 1990s-early 2000s. From Bloomberg. For personal use only Crude oil ended the year weak, but gold show
Slide 33: For personal use only
reductions. A report from the OECD in November 2018 predicted a “fragile soft landing” as global growth declines to around 3.5% in 2019-2020 with China slowing to its lowest rate in 30 years. The strong selloff in global markets during late October and persisting through November 2019 was ascribed t
Slide 34: The Economic Cycle
The Economic Cycle Drawing on the Smoot-Hawley 1930’s analogy, market research reports such as Edelson Wave, among others, recognize a similar pattern emerging in the current interplay of global politics, economics and debt. For personal use only Mutually reinforcing patterns in demographics, intere
Slide 35: Gold
Gold Gold has represented an unsurpassed store of value for thousands of years but is subject to extreme fluctuations in investor interest. As mentioned above, Central Banks’ strategies are currently supportive of the gold price – indirectly as real interest rates remain historically low, and direct
Slide 36: For personal use only
but until then, many US unconventional producers appear to be break-even at best, with many companies reportedly heavily indebted and reliant on cheap financing, which may continue for the mid term if interest rate rises stay on hold. Well production rates decline rapidly for shale oil, necessitatin
Slide 37: Natural gas
Natural gas US natural gas supply continues to surge. The Energy Information Agency (EIA) reported that natural gas supply is now growing at rates exceeding 1 bcf/d per month, the fastest ever. Furthermore, gas is more For personal use only than competitive with coal and renewable energy sources for
Slide 38: Other Base Metals
Increased demand for copper at a time when mine supply is becoming more constrained should result in a lengthy copper bull market. Given the multibillion-dollar capital costs involved, higher copper prices are inevitable. In respect of copper supply, most of the largest copper mines are very old and
Slide 39: Uranium
similar statement, and the largest lithium battery producer in China Contemporary Amperex Technology also plans to halve the amount of cobalt in its batteries. On the supply side, 60% of the global cobalt supply is sourced from the DRC, where political instability and increases in cobalt mining roya
Slide 40: Potential Scenarios
Budding signs of synchronous global growth earlier in 2018 failed to materialize, but growth may emerge in the coming year. The US economy has been re-supported by the Fed’s extension of lower interest rates, despite the waning impact of Trump’s tax cuts. Under these circumstances, a renewed rise in
Slide 41: Important Notice
IMPORTANT NOTICE • This paper does not constitute investment advice. Neither this paper nor the information contained in it constitutes an offer, invitation, solicitation or recommendation in relation to the purchase or sale of units or shares in any jurisdiction. • A copy of the Product Disclosure
Slide 42: For personal use only
• Any Forward Looking Statements in this presentation speak only at the date of issue of this presentation. Subject to any continuing obligations under applicable law and the ASX Listing Rules, the Responsible Entity and Investment Manager of the Lowell Resources Fund does not undertake any obligati