Golden Prospect Precious Metals (LSE:GPM) — Company Update from Portfolio Managers

0:01 Good morning, and welcome to the GOLDEN PROSPECT PRECIOUS METALS LIMITED company update. Throughout this recorded presentation, investors will be in listen only mode. The questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses what is appropriate to do so. Before we begin, I would like to submit the following poll.

0:31 And I would now like to hand you over to fund manager, Robert Crawford. Good morning to you. Hi. Good morning. Thank you very much for the intro. Yeah. So we're we're gonna quick run through the the the fund and the company and and what our strategy is. But, yeah, please, many questions as possible. We're we're very happy to answer them. So appreciate this sort of different levels of understanding on the fund. So apologies if I'm repeating or or going a little basic for some of you. So as I kind of flick through, so, you know, a quick snapshot. You know, this is a precious metal mining focused investment trust. So So investment trust means it's closed ended. We think that leaves us very well placed to invest in names that we think are the most attractive on a value and opportunity basis rather than kind of chasing liquidity.

1:25 We are very much actively managing this fund. So it's a clear differentiator versus some more generic ETFs, which are clearly more liquidity focused and large cap focused. As a result, this leads us to kind of focus more on names that are what we term sort of small and mid cap focus, which we'll touch on later, kind of leaves us in that $300,000,000 to around $2,000,000,000 kind of market cap range. That's kind of where we see the best opportunity. You know, as you can see, you know, gross assets there of around 47,000,000 sterling. You know, it's gone slightly higher since that date set at September 30, but we have to report to the the fact sheet data. So around 61 holdings, but actually it's, you know, it's a high conviction portfolio, which you can see by that concentration across the top 10, just just below 59%.

2:21 The fund does have some gearing, which we kind of actively use depending where where we see see the market at at kind of given time or or whether we choose to have incremental... Sorry, additional flexibility. But just in how how we sort of position more broadly, So you can see there, you know, heavy weighting towards gold over 80%. You know, we do really like silver on a top down. We think the bottom up. Finding names that we think are both interesting and attractive value is a bit more difficult. Hence, you know, not being a larger weighting than that, but we can kinda talk to that in more detail. And also some exposure across the PGMs and what is termed here as base metals, but still have a material precious metal aspect to those.

3:08 Just in how we're we're positioned currently, so heavy weighting towards producers, primarily down to, you know, what's been a kind of prolonged sort of bear market for for mining juniors. But, you know, we do see significant value opportunities there, but we prefer companies that are generally in control of their own destiny on a cash flow basis. And, you know, that's partly down to market timing and happy to talk about that more if people have questions later. So... Yeah. Quick quick background on on Keith and I. So, yeah, I've I've been... I'm a geologist by education. I've been focused on resources equities for for twenty years now. And, Keith, if you wanna... Since about '92.

3:56 And Yeah. And and and, basically, I I do more of the chemistry side of things. And both Rob and I have a fairly good aligned view on top down macroeconomics and bottom up catalyst events and raw cash flow based valuations.

4:19 Yeah. And then just to to a little more of what what we're trying to offer here. So, you know, we believe we offer investors an opportunity to to kind of get access through UK vehicle into global fresh metal mining equities. That... Yeah. You can kinda see here across, you know, relative performance versus here we've put in the New York Stock Exchange gold books in index and gold price. Sorry. That chart slightly compressed, but the fund currently trading at a discount to NAV. But what we've seen is gold price pushing continually higher, continually making new all time highs, and we see a material opportunity across the sector, which given the moves we're seeing are now now posting records record free cash flow levels for the sector.

5:09 Yeah. One of the key aspects to this is

5:16 sorry, one of the one of the key aspects here is that cost inflation pressures for the sector of these materially. So that's meaning that with this latest lift up in the gold price that we're starting to see material improvement in free cash flow generation across the sector more broadly. We see incremental opportunities across our names that we think are better placed to benefit from that because they're not seeing the same cost pressures feed through. Equally, you know, if we don't see that kind of shift in sentiment from what has been fairly lackluster view towards the the more junior mining sector, if we don't see that shift, we think ultimately that will rectify itself via a pickup in M and A or acquisitions or mergers, which we've certainly seen across a number of our core holdings where we've seen mergers lead to material alpha post that as you see greater index inclusion and sort of greater scale and therefore profitability and funding through development projects.

6:18 So we break down break out the top 10 here just to kind of give a bit of the flavor. Obviously, there is a number of other holdings below that, but, you know, these are kind of our more more conviction position. So as you can see, around 77% weighted towards producers. What I would flag within that strategy is, you know, across much of our top 10 is we have a real weighting there towards producers with development assets. A key reason for that is that we see a real opportunity there towards rerating. So we like names that, as I said earlier, are self funded. But also we see catalysts in that rerating as those those assets come through into production. And we think that's kind of gonna be a material driver over the next six, twelve months rather than just focusing on value names.

7:04 We prefer value with catalysts, and you can see that across Caliber, Emerald, West African, and Aurobanda, especially which which very much fit that bill. I will move on slightly from that, but I mean, I I would also flag around the the market cap side as well. That just kind of points to where we kinda see that sweet spot. So as well as having those catalysts for a potential rerating, we also like benefits from things like moving up into greater index inclusion because that drives more passive flows, which can be an incremental source of outperformance. We also like names that often don't have an entirely logical listing such as, you know, with an Australian asset being UK listed. At some at some point in the not too distant future, they'll look to an Australian list and that will then drive incremental flows from from passive funds and index players out of Australia. So it's those kind of hidden sort of supportive tailwind catalysts we also look for within that process.

8:08 So yeah, precious metals, there's a question here. We've got gold at all time highs. People must, people wouldn't be incorrect in in potentially questioning, should you be buying something when it's at all time highs? You know, we we think actually within the equities themselves, we think they've materially lagged that upside performance in the gold price. And as a result, have reason to catch up, but we'll touch on that in a bit more detail. But I think more importantly for gold price itself, which, you know, kind of timely as we're, you know, as we're just seeing Trump having won the US election or most probably won the US election, not not necessarily fully confirmed, but almost certainly has. What we are seeing or what we will see on a policy basis is a continued continued increase in in government debt. So we've got The US continuing to run a $3,000,000,000,000 deficit, that likely continues.

9:07 But we'll also see greater trade protectionism. So, you know, trade tariffs on on the likes of China, which will likely continue to lead to a a selling down of US treasuries by China. And as a result, likely looking to continue to add to their gold reserves. As ultimately, you know, gold remains a reserve currency that isn't beholden to a counterparty such as in the way that the US dollar is. And that has always, you know, that has been a sort of notable shift that we've seen post the Russian invasion of Ukraine, where where The US was able to weaponize the US dollar on Russia. So that's kind of led to a steady central bank demand, and we don't see any shift in that over the next decade and certainly not from today's political developments.

9:52 There are some other aspects there which is we probably don't have time to go into more detail, but jewelry demand clearly has softened more broadly against higher pricing, but that's already happened. What we have seen is a real pickup in bar and coin purchases by by retail. You know, we see reason for that to likely continue. You know, in China, there's been there's been a significant part of that and part of that down to the weak Chinese property sector. So that's reduced their investable universe. And as a result, we've seen increased buying for for physical goals, but as well as the sort of broader protection that it provides. But ultimately, yeah, we think there is a very constructive backdrop towards precious metals over this medium and long term and, you know, even, you know, even despite the very strong performance we've had more recently.

10:46 We touched on it there with US debt. We think, you know, increasingly increasingly this this will come into question. You know, clearly, it's unsustainable to run a to run a a deficit of around 3,000,000,000,000 per year. Trump has been pretty clear around wanting to wanting to continue kind of focus on growth, continue with sub... Subsidies and continue with spending. So we don't necessarily see any any near term respite in that. So, you know, does does that become a near term issue? We don't... Know, it's hard to call the timing on it, but we do think that in the background, this will continue to gain more and more attention given the unsustainability of it. Just to put in perspective, that $3,000,000,000,000 a year deficit that they've been running is relative to a total tax take $4,500,000,000,000.

11:36 So, yeah, when we look to, you know, why now and why does the can not get kicked down the road as it has done for the last, you know, fifteen, twenty years or as for this chart with, you know, about thirty years worth of of history. The real difference now is that debt is at a a much increased level, but also rates have just materially increased and it's become it's become very difficult with increasing increasing amount of debt issuance to get rates notably lower. So against that higher rate backdrop for US treasuries, that increasingly brings into question the sustainability of paying interest. So, ultimately, there are two solutions to this. You have to tax more or you have to spend less.

12:24 And if we see that, that would ultimately have a knock on to sort of broader economic impacts across The US and therefore the globe. So we could see kind of further further knock on for that, and we think that provides a supportive backdrop for gold. And as a minimum, justifies an increasing allocation by by generalists as we kind of move forward even if we don't get a day of day of ultimate sort of reckoning or or or kind of more extreme view on that. ETFs gonna touch on that as well because, you know, one of the things we focus on the pressure metal side is on flows. So we've had, you know, as you can see for this below chart, the dark blue line, you can see ETF holdings had been steadily selling for, well, for the the for the last few years.

13:15 And and we flagged that because it has a a bigger delta impact in in the swing from selling to buying, whilst overall not the largest component of gold demand is important in that it drives that incremental flow more materially. So what we are seeing here is we have steady strong central bank demand. We've had retail soften for the jewelry side, but bar and coin remains resilient. And now we've seen ETF buying return after a steady period of selling. And one of the key drivers to this is expectations around rate cuts across the globe with The US obviously being one of the main focal points for global financial markets.

14:01 But this expectation for shifting into a rate cutting cycle is leading to more financial investment in gold and we see that showing up in ETF holdings. Incrementally that tightens the supply demand balance and it's supportive of the gold price itself. So yeah, just on the miners versus the physical metal. So it's our belief that the miners are known to be lagging precious vessel itself. In this case, kind of we've we've put the mining indices versus the gold price, and it's kind of moved more in a in a kind of one to one correlation rather than a kind of two to one or or or three to one correlation that you would expect to get from the operating leverage that you receive from a mining equity versus versus the gold price itself. So, you know, to put in simple numbers, if gold were to move from $2,000 to $3,000, that's a 50% increase. But for for a miner where costs were $1,000 per ounce, that would be a 100% increase in their effective earnings, and and that's what we mean through the the operating leverage that the miner should achieve.

15:15 So that in itself isn't entirely unjust if we look to the history of where gold mining or precious metal mining stocks how they've been operating. So if we look at that post 2020 period when we had the initial lift in in gold price, the gold miners initially rallied and then gave back much of the gains. And you can see that you can kind of see that showing in the in the price chart here for for our fund. And that's because margins then compressed for the miners themselves despite the higher revenue line because of increasing costs. But what we've seen more recently... So, you know, GOLDEN of breaking the shackles around $2,000 per ounce in March, and then we're sat around $2,007.20 today.

16:01 That's a 35% increase, but we've seen very little cost inflation feeding through for the sector overall. And we're still at the sort of early stages of that. But if we look more anecdotally across the names that we cover, we're actually seeing pockets of cost deflation across inputs such as as fuel, such as steel. And many of those labor pressures that we saw post COVID have really started to ease, especially in countries like Australia, where you can see, you know, as for that prior breakdown of our top 10, you can see we have a large weighting because we think there is a additional benefit there from that easing easing labor pressure.

16:43 And I will pass on to Keith from this chart. Thanks, Rob. Yeah. We end up talking quite a lot about macro factors and the the precious metal space. But I'd say Rob and I often take a a relatively agnostic view to the actual metal price even though we still think that the longer term fundamentals point towards higher real gold prices than we see at the moment. But the point to note for this fund is that there's been one, a sharp retracement in overall valuations of gold companies since the heyday and prior peaks in share prices that we saw. And and as we we try to outline, we feel that the attributes of the closed end trust lend themselves to some of the less liquid names across the board. So we wouldn't necessarily look to chase the large cap names where there's most liquidity. We would look for projects that are valued at a discount to their net asset value. The chart that we see here just tries to represent the relative valuation differences from the large liquid names, which is the blue line at the top, which have come back somewhat to be valued at price to net asset values just a little bit above NAV based on the current spot gold price.

18:04 Then we have

18:06 medium term... Medium sized producers in the red line. Then we've got some of the developers in the green, which are trading at substantial discounts and then exploration below that. And I would say that our portfolio, which I'll come back to in a little bit, is very much biased towards those projects which have attractive cost basis and self funding growth behind them and that are trading at a discount to price to net asset value, which we think gives the investor an extra degree of comfort that they're not just playing the gold price itself here. There is valuation upside if the metal price stays where it is, or in many cases, even if it were to pull back, if there is any price sensitivity.

18:56 And that's really the the best image that we can put forward to try and and illustrate that to investors in in... Well, frankly, any investments that we look at, but certainly relevant for the for the gold sector. If we flip forward another slide, I would say this really ties back with Rob's earlier comment as to is gold really worth. And I think that inherently brings us into a discussion on Fiat. And gold price is hitting real and nominal highs in dollar terms. If we look outside the dollar, it's even better. And I think that's a key note to put forward to particularly UK investors.

19:42 You know, the

19:45 received price in US dollars is going up. The cost base in US dollars for a lot of the production that we have is is actually going down because the currencies are weakening and the local cost elements that many of the miners have is therefore seeing an improved outlook for margin expansion, which is also benefiting from some cost inflation easing as we see it. And maybe we'll see some deflation, but I wouldn't push that too far. But the fact is this is, I think, a very important point to put across because if people increasingly question the extent to which governments can just continuously push up the the debt funding ceiling in The US or manipulate our 50,000,000,000 extra borrowing requirements in The UK. These are just some clear and more topical examples of of what we have continued to see and will probably continue to see, then I think, ultimately, it just raises the question as what is a a pound or even a dollar worth or a peso, and having some real assets as insurance and protection on your portfolio is very important.

20:59 Even at current nominal highs,

21:02 gold is a fraction of overall central bank reserves, and we just suspect that whilst there might be a pause in central bank buying, overall, there is a trend towards the dollarization, and that will be reflected more so in non dollar currencies. If we flip forward, another important point to get across is the fact that these are depleting assets. And certainly, we look at the larger names and the likes of Newmont, perhaps more recently, though, I wouldn't push that too far. Ultimately, the production has largely stagnated over the last half decade. And one thing that's been very obvious is an unwillingness really to conduct exploration in order to replace depleting reserves.

21:52 As a result, we have, at least more recently, started to see a pickup in m and a, and we feel that that is another angle that will lend itself to a valuation expansion, particularly in the smaller and medium sized sweet spot in market cap that Rob referred to earlier as the larger cap names look to basically try and replace reserves, if not try and provide some growth themselves. And and that's just, you know, we've had a couple of names in the portfolio that have been been acquired. Perhaps laterally, we've seen things like Silvercrest.

22:31 We've seen Carrora, which has an Australian asset subsumed into some of the assets. Now we don't necessarily directly invest for m and a. It just happens to be a byproduct of the type of attributes that we would look for in assets in low cost, high growth, good valuation with potential sort of district scale expansion and self funded growth. Those are all attributes that anyone in their right mind would would like. And I think, crucially, when it comes to looking at m and a on today's world rather than, say,

23:04 at the turn of the decade when I think gold companies very much fell out of favor there when you were trading back on price to net asset value multiples of something like two and a half or more times. There was just a disconnect. You're issuing very expensive equity for still expensive equity. And now that we've seen those those lines really correct against the backdrop of the higher nominal prices we referred to in the earlier chart, I think there's a degree of of

23:35 normality back in the system now that means there's less sort of shareholder resistance to m and a, and perhaps that remit is coming back into the corporate sphere. If we jog forward, you know, we've mentioned central bank buying. At the moment, perhaps, you know, it's... It has taken a little bit of a backseat mainly because one of the largest buyers, the People's Bank of China, has gone on pause temporarily. We had seen a sell down in its US treasury holdings. That still very much represents a risk should trade and sanction lines harden further. But broadly speaking, I think battle lines on that score are being drawn. And largely across the board, most central banks have a longer term intention to dedollarize, and one of the easiest ways to do that is to buy gold, and it still represents a very small proportion of overall Chinese and most central bank reserves across the board. So ultimately, we've seen a bit of a a shift around in terms of the makeup of overall demand.

24:45 Yes. Jewelry's perhaps taken a bit of a backseat. Central banks primarily led by People's Bank of China has, but other central banks are continuing to be net purchases overall. But taking up the slack, as Rob outlined earlier, is ETFs, the financial sector, which is a little bit more interest rate sensitive. And similarly, I think investment buying retail bar and coin, which has taken up some of the slack from from jewelry. But don't forget, despite all of that, the nominal price of gold is still seemingly well supported. I don't want to label that one too much, but I do think that central banks are very aware that they do want to continue to dedollarize.

25:31 I think another little topic on the side is we're not just limited to talking about gold. We do like silver, and it's quite a sort of specialty metal in in some of its attributes. You know, it is the most conductive element. And I think as we move down the electrification and digitization tracks, this is something which becomes very much to the fore of what is industrial demand that, unlike gold, represents 50% of the consumption of all units. And, you know, at the moment, we're sitting at, you know, towards the high end of the gold versus silver ratio. So in the mid eighties, number of ounces of silver you'll buy with an ounce of gold. There's no objective way of viewing that value. There's more of a subjective assessment of potential reward versus risk for investing in it, but it does play into photovoltaic cells moving from n to p type, which can seem a little bit more silver and and and other sort of specialist needs in in the digital world.

26:37 The other factor is that Rob and I do cover broader commodities, and 80% of silver supply comes from base metal byproducts. Now if we are getting potentially some slowdown in the industrial sector and output of industrial metals, then so 80% of byproduct supply will also, at the margin, start to to move down. So we think that, you know, that as ever in commodities, it's a supply demand balance factor. And and we think that that still looks quite favorable subjectively from a gold to silver price ratio and probably a little bit more objectively on the supply side with the risk of potential continuation of the shortfalls that the the Silver Institute keep pointing to as occurring over the last number of years.

27:28 And for that reason, we do like silver if we can get it. It's just quite difficult. A lot of the geologically silver only ore deposits are located in in particularly Mexico, which has its own

27:44 its own risks, one of which at the moment is actually a strengthening peso in the short term. But I I don't want to label that too much. It's something that we do broadly like. I will pick up perhaps on other themes later on, but I think the points here are looking at the broader market, the investment opportunity elsewhere is looking a little bit restrictive at the moment. We don't really want to go into risky industrial assets. If anything, some of the the trade friction that is likely to continue just puts a bit of a lid on it. The overall key themes that Rob referred to are all in play. And I think that, you know, the de dollarization and the ever rising debt to GDP ratios that we see, I think, are the... Are some of the fundamental reasons to provide some insurance in your portfolio to ultimately gradual currency depreciation or devaluation in in even stronger terms if you... If you're in perhaps a more fragile emerging market.

28:49 We like the fact, though, that in this portfolio, you don't have to rely on a stronger gold price, quite the opposite. We think the valuations of the companies in the size spectrum that we look at offer you with the potential for considerable rerating in any event. They all have very low cost of production. And as we outlined earlier, are able to self fund growth. The margin outlook is is picking up, and and we think, ultimately, this is something that probably has some pretty good momentum that can be sustained certainly in the equities, if not in the gold price itself. We are looking as ever for good opportunities in the silver space. And I'd say one other angle that we don't really mention in this presentation, but it's certainly starting to screen out now is is the platinum group metal space where I think everyone's a little bit worried about the outlook for car sales. They've probably lowered their price expectations of PGMs, which are using auto catalysts, which is one of the largest markets for PGMs.

30:02 But the crucial factor that we think is is likely to influence that market is, again, the supply side. And PGMs are dominated by South Africa, certainly for platinum. And with the reduction in price that we've seen of the PGM metals, with the hardening actually of a a slightly more stable South African rand, which... To which many of the PGM mining companies are just as sensitive to as the metal prices. The only thing that's keeping production on at the moment is a chrome credit. And should there be a weakening of steel demand as is quite possible, we would say probable for the steel industry as the Chinese domestic consumption reduces, then that credit might unwind and hasten the supply correction. And for that reason, we've started to look a little bit more since the sort of fact sheet date that that this presentation relies on at the PGM sector, and we wouldn't be surprised if that starts to rise over the coming months and quarters.

31:08 But the outlook is pretty good, we think, for the equities and the precious metal sector, and it's crucial that we think you... That you try and provide some protection to your overall portfolios. We've picked out some examples of some of the largest stock names that we've got here, really just to give you a flavor for the type of investment that we look to undertake. Rob and I meet hundreds of companies. We've often seen assets number of times over with different guises of management. Management, I think, is one of the crucial things that is really played out in in any investment process on top of a fundamental view of looking at news flow and catalysts and evaluation. And Emerald Resources is run by management that's built several mines under budget on time.

31:57 And one of his latest groups that he's been involved with is Emerald Resources that brought on arguably quite a tricky Cambodian asset. It was mildly refractory. It's a fine grind, but they've done a tremendous job. That operation itself has an all in sustaining cost, I think, of something of about 900, maybe a bit less US dollars, but it's got some growth potential around existing pits. Latterly, he's acquired the ownership... Full ownership of an Australian asset, which is self funding growth in... And that is gonna provide, you know, a material increase in output from something approaching a 100,000 ounces annualized at its last quarterly results with about a $900 cash cost to roughly more than double that in the next couple of years or two and a half years once that is fully ramped up at around a thousand dollars US cost, and it's just a classic example. Now we've seen a bit of a rewriting in this one as that chart shows you. But even now, we're not convinced that some of the growth opportunities that he has in both the medium and even the longer term are fully appreciated in the the net asset value for that group.

33:13 There's a... There's some valuation premium we think due for the longer term growth prospects for this group. And even if we put it in its spot, it's trading at something like point 8.85 times, which is actually at the richer end of the type of PNEV valuation spectrum that we would look at. Perhaps no surprise we've been rotating some of the proceeds that we've made in this one into other situations that have more recently come our way in in this market. Greatland Gold being one of them that was referred to in the top 10 earlier, which is, you know, a buyout of a a majority owned major that that set it up for some... A really quick turnaround in development. That's Emerald. Another one is Caliber. This one actually was based off short mine life underground assets that it owns in Nicaragua, and it consolidated some more ground and reserve from b two gold that was looking to exit Nicaragua.

34:12 It copes very well with the perceived political environment there. It's one of the largest contributors to the tax coffers and has always been protected through any of the periods of uncertainty that have, you know, affected the share price as we see there in October 22 when Rob and I actually took the opportunity to buy some more. In addition though, latterly, they have also been consolidating, and they bought a mine called the Valentine Mine in Canada, and they are now

34:46 developing that one. And that will see them take production from something like 200,000 ounces annualized at their latest q three production update to something near a 500,000 ounces on an annual basis into run rate certainly from the end of twenty twenty six. Again, with a very good US cash cost of something approaching $1,400. And it, unlike, you know, the the rerating that we've already seen affect things like Emerald to a large degree, it's only trading at something like point 3.35 times net asset value at current spot gold. But again, it's got a management team that we keep in contact with regularly, has a very good track record on the consolidation of assets that it's generally acquired either around the existing Nicaraguan assets and certainly seems to be the case with the more recent Valentine operation that it's got. One factor that is also, I think, skewing the risk reward opportunity in favor of this one at the moment is the Valentine Mine is is basically a potential new district scale operation. Think, well, it's got about three main pits that will feed a central processing plant, but it's also finding new zones of mineralization in between those, and that is along the strike of some 10 plus kilometers.

36:16 And we just think that this is gonna see substantial reserve growth and mine life extension that, again, just warrant, you know, continuing to hold this one in the top 10 to a, you know, significant degree. It's got quite a high strip initially. Certainly, we're looking at something like 10 to one. We'll see how that optimizes and looking at the broader sector and, again, how we've seen things for the moment with a declining oil price and likely is not diesel price. Things with a high strip, we'll see a better risk of costs coming in below while we get some potential oil price pressure coming through. So again, we think in the medium term, the life of mine costs of this might be might be more attractive than is currently being assumed in the net asset values of this development asset.

37:09 And that really is, I think, a conclusion of mine. If we were to to jog into no doubt questions and answers, the one thing before we do that is I'd just like to really highlight to investors at the moment that we've got a sub share entitlement issue, which comes in at towards the end of this month. And that will give you the right to buy shares at a considerable discount to the current share price. I think if I haven't got the... One of the digits wrong, it's about 35.94p per share. Might be 34.9... No. No. It's 35.94. Just short of 36p, that's clearly well below the current share price. And so you are getting a free option at the moment in terms of owning these. And I would just say, like, from our own experience, please make sure if you're on a retail platform that you put in your subscription for those and make sure you have sufficient funds in the equivalent of your fund and share accounts because we've had follow-up calls from investors where their full vote hasn't been deployed into take up rights because there wasn't sufficient funds in the account. So just make sure you've got your ducks lined up if, hopefully, you're in a position to to take those up.

38:26 Perfect. Robert, Keith, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen. While the company take a few moments to read those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via investor dashboard. I'm Robert Keith. As you can see, we have received a number of questions throughout today's presentation. And if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I will pick up from you both at the end. Thank you. You. Take the first one. Well, I I might just add a little bit to that final comment from Keith. Yeah. Just on that, I mean, obviously, we give no advice in any way of whether people should subscribe or not. But, yeah, obviously, you know, just flagging that the share price is above that subscription level.

39:20 Yeah. What... As... And I... Yeah. I was gonna say, so for any any rights that are not up taken, an additional aspect to that is that they would then go through an effective... A sort of institutional auction. So even if people did not take up their rights, they would like the the... In a position assuming that the that the rights were saleable, that they would receive some funds to offset most of most of that effective differential. But yes, so sorry, moving on to moving on to the question. So the first one we have here is, given the sector is experiencing record free cash flows, what is the likelihood of increased M and A activity in the short term? Does the fund have a strategy to capitalize on or avoid risks associated with potential M and A moves?

40:10 So yeah, look, I mean, we we kind of touched on that with a with a few points and yes, it's very much true that we are seeing record free cash flows. You know, our our view is for the sector overall, and this would include some of the larger caps, is that we will in... We'll see an increase in in buybacks and and dividends. But we know in The US, US investors quite like buybacks. So we would encourage we would encourage the sector overall to increase that. We think that it's important to bring back some of the more generalist type investors because particularly on the institutional side because they they generally quite like buybacks and would help drive some incremental flows into the sector. Yeah. One of points I think we've kind of made a few times through that presentation is that, yeah, there is a valuation differential, especially on the names we're focused on. So there is clear accretive logic for an increase in m and a.

41:07 We know a lot of the management teams from larger corporates have been cautious on m and a given given shareholder pressure to focus on on capital returns and improving balance sheet. But there has been a real shift. And we're hearing from from some recent conferences such as the BBQ Creek conference out in Colorado that there has been a pickup in in... Well, it's quite clear that there's a a shift in management sentiment towards further m and a and activity on that. As far as our strategy, you know, we just focus on quality companies, quality assets in good jurisdictions with scale. And also with management teams, you know, it's it's... One of the key things in our sector is always to focus on quality management teams. And within that, those management management teams, it could be more open to transactions as well.

41:57 And logical deals rather than kind of protecting their jobs per se. You know, we like teams and we see that with... Especially with the likes of Emerald where they have a large share ownership and therefore incentivized to to transact if that makes sense. But, you know, where we've seen it, most of the activities more being on mergers, which we we kind of touched on with some m and a. But we see that kind of general consolidation for the sector as being positive as larger companies, therefore, start to compete with effective larger companies, and you get a multiple appreciation on top of the operate... Operating improvement as well. So, yeah, that's kind of how we positioned it. Generally, focus on quality, and as a result, we've had a lot of m and a activity because of those assets that we focused on. And I think that that we had another question. Are there any

42:48 regions or as currently prioritized for growth? I don't think we would necessarily discriminate specific regions. It's just a question of, ideally, does this have, for once of a round number, say, 5,000,000 ounces of gold and the potential to grow from there? You know, those are type of deposits that will be mines rather than maybe mines, and that, with the right management, will be something that we would look at. We're not shy of political risk, which is, I guess, an immediate follow on question. You know, we have got things like West African resources, which is in Burkina Faso, which has had a a couple of queues.

43:29 Again, you know, they represent a very large proportion of the tax take in those countries. They have been proven to be very good operators even through COVID. You know, they were quite pragmatic as was the government. And they've coped with some, you know, some of the other issues that come along with queues. And if we look at the net asset value at spot, you know, it's over 5 Aussie dollars versus a share price at the moment of under 2. And, you know, when it comes to assessing geopolitical risks, you know, if it's that sort of order of discount, it wasn't long ago that there's actually only about $1.20. When you're looking at that, there's already a good degree of expropriation risk or some such discounted in the share price.

44:18 And, you know, we're very aware of that. And, you know, now we've had a little bit of a rerating. We appreciate that there is a a right level of discount that these type of assets should be on, but we just recycle some of the proceeds from these, you know, shorter term sales into other opportunities as they come along. And we are quite diligent at trying to have some sort of approach like that where we can rotate out of things that have rerated to stocks that have perhaps missed out, and that's what we've really been doing.

44:55 There's another question. How does the softening of Chinese demand for gold impact portfolio strategy? I don't think it really does. We try to be... It's probably taken a little bit of a tailwind out of, you know, the obvious comments that we've referred to in the last twelve months that that the dollarization process has been very much driving central bank net purchasing. So, yes, that's taken a bit of a backseat. I'd say in similar vein, so has a a temporarily, at least, more price conscious Chinese retail buyer. Though, if you turn it around to India, which is still now the largest population, one of the largest buyers of jewelry, they've just taken the opportunity to buy gold because they reduced the the gold import taxes there because so much of it was going black market.

45:46 So, you know, that that type of thing also plays in as a little bit of an offset to it. But other segments of the market come in, and I think the real crux of realizing why GOLDEN ownership is good is that I think it comes back to some fundamental issues on government borrowing. And and for that reason, I think retail purchasing of coin and bar is probably a more telling factor that, you know, that is very much a question in in the broader in a broader sense now and something that's clearly also influencing the ETF buying by the financials that we've seen now turn the corner for, what, four, five months. And and that is taking up the slack ultimately. So I don't think China really does affect it too much.

46:34 Yeah. I mean, I'd I'd add to that. I mean, actually, I think, you know, there... There's official data and then there's this sort of reality behind it. I mean, we have seen a a mild softening in in Chinese jewelry demand, but actually demand's been very strong. Yeah. There was... We've seen the central bank officially state that they've stopped purchasing gold having been steady buyers for the last, you know, four months. But the reality is actually we think we think China... Chinese Central Bank will continue to be strong buyers, and there's a high probability that they are significantly adding at the moment. And it's just whether it makes official data or not. You know, the clear reason for that is what is the incentive? Well, we know they're reducing US treasuries. They're worried about US influence over them. And as a result, they're, you know, reducing treasuries and gold is gold is a... Is one of the best sources of capital for independence and protection against against impacts from other states. So, you know, we expect Chinese to remain a strong buyer for the central bank for for decades, if not, you know, you know, if not many years.

47:39 On the more retail side, you know, we took... Touched on it with jewelry there. But, you know, going forward, you know, the Chinese property sector, you know, we're we're very cautious around. You know, we've seen a material correction there in in expectations and new starts for construction in China, but there's a few aspects to that. Firstly, they have an excess in property inventory. They've also got a major demographic problem. So, you know, our view is actually the Chinese property sectors and investment investment universe for the the Chinese consumer is is materially reduced. And, you know, in what's a fairly captive capital market, property has been a major focus for investment within China. And now we're in a in a market where you've got excess inventories.

48:25 Prices are are being reset lower, but, you know, it still feels fairly early stage. And then behind that, we've got a major demographic issue as given one child policy as we kinda move, you know, later into the back end of this decade and certainly through into the thirties. So, you know, that leaves gold as increasingly attractive as a as a... An option for investment to the Chinese consumer. So we expect that to remain strong, Keith touched on it with with India. So, you know, India and China have some of the strongest, you know, inherent, you know, cultural linkage to gold and gold for investing.

49:01 And, you know, we we expect them to remain strong going forward. Might pick up one of these other questions. So, yeah, given the US election, how optimistic are we for future prospects? So, our expectation is is that Trump would be more positive for for GOLDEN if Harris had won. So the reasons for that being is, you know, trade protectionism, tariff threats to China, that would likely see stronger purchasing by the Chinese and other other nations more more globally. Also, you know, probably the... Probably more aggressive on spending. So government spending, so we'd likely see, you know, very much a continuation, although both are quite aggressive on on spending plans, but would likely see a greater increase on on The US US debt levels and continued running of the deficit.

49:57 So that creates that kind of incremental uncertainty. I guess the other question is around wars, there's a real debate around, you know, what is the war premium on on gold. You know, Trump's clearly stated that he would look to try and reach a ceasefire with Russia Ukraine in the near term. You know, no no clear statement on how how that would look or how how we would get there. So, yeah, we're kind of dubious on how much of a premium there really is around

50:27 around the walls per se. Given when we have seen escalation in those scenarios, we haven't kind of seen material shifts to the upside. But, undoubtedly, there there there may be an aspect to that. But we don't see that as a a a major risk. But, you know, as, you know, it is... It's still a risk to sort of be noted, but, you know, also, we have our focus is on the equities and the bottom up and the miners who are implying a lower gold price anyway. So we feel there's a a good window of protection within that.

51:02 Did you wanna say that one or I can take... I can I can? Yeah. There... There's a question again and again. With large gold producers indicating a potential increase in dividends and share buybacks, how might this influence the fund's future allocation strategy? I think we tried to touch on that earlier. Where we see the better valuations at the moment are those that are generating substantial cash and are actually redeploying it into good value growth. So, you know, that's, for example, the top two holdings that I talked through briefly. If you can't find growth of sufficient scale, you either shrink and pay it back, which allows you a smaller base from which you can then try and grow. But I think a lot of the larger cap names, which we're already trading at at premiums to NAV, probably need to do this in order to maintain those type of valuations.

51:51 But equally, you know, they will probably only be modest because they do need to grow their reserves. And, you know, there's only a... An extent to which they can play around with cutoff grades, which might see the overall mind grade come down in order to get answers up, but without much of a meaningful change in their overall costs and profitability. So I I I just think that it's... The major note is that the valuations have corrected quite substantially at the current gold price versus those levels that previously with the overexpansion for share for share exchange, you know, some ten years ago, I think had the finger pointed at corporates. Now that sort of shareholder finger is allowing them and actively, I think, liking some of the m and a that's taking place. And as a result, we still think that the better value proposition for investors isn't in the large cap names and, you know, a modest inflation offset dividend.

52:53 It's in the the potential rerating that we see on the the investments that we've got in the portfolio.

52:59 Fantastic. Robert, Keith, thank you for addressing those questions for investors today. And, of course, the company can review all questions submitted today. I will polish those responses on investment company platform. But before redirecting investors to provide you with their feedback, which is particularly important to the company, Robert O'Keith, could I please ask you for a few closing comments? I'll I'll take it up first, and it's really just to reiterate that please go on to any platforms that you have just to make sure you're not missing out on any opportunities that... For the sub share issue. I think our style is to meet lots of companies get a temperature for the outlook of their operating prospects. The outlook for the gold price, think, is set fair at the moment.

53:46 When you're investing in this trust, you don't have to purely rely on a higher gold price. Certainly, it helps. But I think you should hopefully get some comfort that there's a rewriting potential on the discounted price to NAVs that we have in this. Yeah. Look, I'd say that we've got we've got precious metal gold at all time highs. We've got stocks that kind of lag that move higher. We're seeing record free cash flow generation. We're seeing increased M and A. So buybacks, dividends, I think, are going be positive for the sector overall in bringing investors back. We have been kind of cautious after seeing that kind of prior cost increases, compressed margins. It really does feel like a noticeable shift in the sector. And I think this generous investor still remains very much underweight, and there's still a fairly low participation versus historic of kind of more retail investors on a on a global basis, especially in in kind of Canada and Australia. So we think there's

54:48 a real opportunity for a rerate. We think there's a great opportunity, especially within the names we're focused on, you know, that value with catalyst proposal or that discussion we think kind of really gives those catalysts coming into, you know, the next six, twelve months to to lead to a rerate of those underlying names. So, yeah, we think that's an exciting opportunity going forward. And thank you very much for your time. Thank you. Perfect. Robert, Keith, thank you once again for updating investors today. Could I please ask investors

55:18 not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of GOLDEN PROSPECT PRECIOUS METALS LIMITED, we'd like to thank you for attending today's presentation, and good afternoon to you all.