Lowell Resources Funds Management Ltd · ASX:LRT
Lowell Resources Funds Management — Lowell Resources Fund — Private Wealth Management APAC & Greater China Summit 2018
28 slides from Lowell Resources Funds Management's conference presentation, Oct 22, 2018
Slide 1: Lowell Resources Fund
LOWELL RESOURCES FUND Private Wealth Management APAC & Greater China Summit Macao, October 2018
Slide 2: Disclaimer
Disclaimer 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 jurisdiction. • A copy o
Slide 3: Fund Summary
Fund Summary Overview 10 years of outperformance (net of fees) Fund size (30 Sept 2018) A$19.3 m Units on issue 2.8m units Unit price (30 Sept 2018) $5.55 Options on issue 1.2m options Number of unit holders ~500 Listing summary Exchange ASX Code LRT Characteristics of the Fund Nature of Fund Long o
Slide 4: Experienced Investment Committee
Experienced Investment Committee 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, including 13 year
Slide 5: Fund Investments by Commodity
Fund Investments by Commodity V, Al2O3 & TiO2 Fertilisers Energy Other 3% 1% 4% Battery 4% Cu/Zn/Ni Gold 18% 43% Cash 12% As at 30 Sept 2018. Classified by main commodity of investee company’s O&G lead project. 15%
Slide 6: Commodities vs Stocks
Oil Crisis 1973/74 \ Gulf War 1990 incrementum a a GFC 2008 Median: 4.15 (W) er Dot-Com Bubble - , commodities) =~’ Bubble 1971 1975 1995 2015 2019 2023 1987 1991 1999 2003 2007 2011 1979 1983 — SPGSCITR Commodity Index/S&P 500-Ratio
Slide 7: Tech Stocks vs Gold Price
Tech Stocks vs Gold Price Bubbles: Tech (NASDAQ Composite) vs Commodity (Gold) Each Dot Is a Trading Day: 1971(Nixon Shock) - Present —-—Day © LastPont Unear (Day) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 NASDAQ Composite 3,000 2,000 1,000 First Macro Capital $- $200 $400 $600 $800 $1,000 $1,200 $
Slide 8: Central Bank Gold Purchases
LOWELL RESOURCES FUNDS MANAGEMENT Central Bank Gold Reserves tonnes 35,000 34,000 33,000 32,000 31,000 30,000 29,000 28,000 27,000 Rest of World 26,000 25,000 So = nN o sz wo oo > 2) a o - N o T+ w o ~ i] So =] So So =] o =] =] =] [=] = = = = = = - c = o o o o o o o oO o o o o oO o o Oo o o o N N N
Slide 9: US$ Real Interest Rates Correlation to Gold Price
US$ Real Interest Rates Correlation to Gold Price
Slide 10: Gold Equities vs S&P 500
Gold Equities vs S&P 500 ame HUI/S&P 500
Slide 11: Gold Equities Leverage
Gold Equities Leverage Gold Equities US$ Gold Price
Slide 12: Investing in resource equities
Investing in resource equities Capitalising on value accretion: optimal stage Full Production LRF Target Initial Production Investment Stage Reserve Financing Discovery Drilling ▪ Leverage: milestone investing “value accretion Exploration model” ▪ LRF focus is on the period from discovery to reserve
Slide 13: Gas and LNG
Gas and LNG • 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 to rise by more than 13% pa over the n
Slide 14: Base Metals
Base Metals Copper Zinc 5 yr history ___ Zn price ___ Zn stockpiles Global Copper Supply/Demand Forecast (source Rio Tinto, Sept 2018) • Major Zn mine closures in recent years (1Mtpa) • Zn demand growing at 2.5-3.0% • M&A competition for copper pa (400ktpa) deposits emerging • Refined copper invento
Slide 15: Deep Value examples
Deep Value examples Examples of Holdings in the Fund Portfolio Investee Co Commodity Market Cap NPV of Project P/NPV Ironbark Zinc Zinc USD$19m US$1.034bn1 0.02 Technology Vanadium USD$24m US$1.3bn2 0.02 Metals Cardinal Gold USD$117m US$586m3 0.20 Resources Amarillo Gold Gold USD$21m US$194m4 0.11 M
Slide 16: Investment Overview & Objective
Investment Overview & Objective Overview Investment Objective ▪ LRT’s investment objective is to maximise absolute returns to its ▪ Lowell Resources Funds Management Ltd (“LRFM” or unitholders over the medium to longer term, along with annual “The Manager”) manages the Lowell Resources Fund distribu
Slide 17: Historical Performance Total shareholder return (TSR)
Historical Performance Total shareholder return (TSR) LRT Res 300 ASX 200 10 year 10.8% 2.2% 7.7% 1Investment performance figures reflect the historic performance of Lowell Resources Fund, net of fees 2S&P/ASX Resources 300 index and S&P/ASX 200 index have been used for comparison, which assumes rei
Slide 18: The Manager Lowell Resources Funds Management Ltd
The Manager Lowell Resources Funds Management Ltd Stephen Mitchell, Chairman David Hobday, Director & Retiring Investment Committee Member Joined LRFM in February 2011 Joined LRFM in January 2004 Mr Mitchell has over 30 years’ experience in the resources sector with experience in Dr Hobday is a geol
Slide 19: Recent Distribution History
Recent Distribution History ▪ As a unit trust, the LRF must distribute all taxable profits to unitholders NAV Distribution Distribution amount (pre distribution) Distribution yield (%) (financial year) (A$m) (A$m) 2011 1.5 16.5 8.9% 2012 0.5 17.4 2.8% 2015 0.4 13.4 3.3% 2017 1.0 20.0 5.0% ▪ Over the
Slide 20: Fees
Fees Lowell Resources Fund The Lowell Resources Fund currently has the following management fee structure: Management fee The higher of: a) A$25,625 per month plus 0.63% per annum of Total Gross Investments (“TGI”) of the Fund; or Note: this management fee includes fees paid to b) 2.16% per annum of
Slide 21: Portfolio Characteristics
Portfolio Characteristics INVESTEE COMPANY TYPE GEOGRAPHY BY PROJECT LSE/AIM, 2% Cash, 12% Unlisted, 11% Asia / Cash Australasia US / Canada TSX, 10% Africa Europe Central America / Caribbean South Australia America ASX, 64%
Slide 22: Largest Investments – 30 Sep 2018
Largest Investments – 30 Sep 2018 Company Commodity Listing code % of gross investments Laguna Gold Zinc/Gold unlisted 9% Gold Road Gold ASX: GOR 6% Tinka Resources Zinc TSXV: TK 5% Indago Energy Oil & Gas ASX: INK 5% Cardinal Resources Gold ASX: CDV 4% Adriatic Metals Zn/Cu/Au/Ag ASX: ADT 3% Cash 1
Slide 23: Stock Selection
Stock Selection 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 ✓ Indicative economics • Ind
Slide 24: Our Investment Process
Our Investment Process ▪ 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 25: Case Study: Syrah Resources
Case Study: Syrah Resources 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/share 3.00 ▪ Accumulated
Slide 26: Case Study: Kidman Resources
Case Study: Kidman Resources 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 1.50 2013 ▪ Accumulated
Slide 27: Lowell – a unique investment opportunity
Lowell – a unique investment opportunity • 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 performance over the short,
Slide 28: Contact
Contact 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) 9642 0655 Tel: (03) 96
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