MoneyTalks is Stockhead\u2019s regular drill down into what stocks investors are looking at right now. We\u2019ll tap our extensive list of experts to hear what\u2019s hot, their top picks, and what they\u2019re looking out for.<\/p>\n
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Today we hear from Lion Selection Group\u2019s Hedley Widdup.<\/p>\n
Lion Selection Group (ASX:LSX)<\/a> is known for their mining clock, a concept developed and used by the small cap mining investment company to determine how close we are to the top of a new resources cycle.<\/p>\n As the clock moves around, money flows into the sector, driving a boom in mining equity prices.<\/p>\n Lion Clock. Pic: Supplied (LSX)<\/p>\n When money moves out of the sector, it becomes harder to raise money.<\/p>\n Based on the invention, a crash starts at midnight which can be instantaneous like it was during the Global Financial Crisis (GFC) in 2007, or it can be more of a slow burn like it was during the downturn of 2011 that lasted through to 2015.<\/p>\n Markets then go through a bust <\/a>and boom at 6 o\u2019clock when activity measures really start to tick up.<\/p>\n \u201cWe\u2019re currently sitting at two o\u2019clock and that implies we\u2019re at the start of a down cycle, so liquidity is falling which potentially leads to great opportunities,\u201d Widdup told Stockhead<\/em>.<\/p>\n While it can be difficult to see turning points even if we are looking out for them, from his point of view, as the market weakens opportunities begin to move into the value range that investors are happy to pay.<\/p>\n \u201cThe market is very defensible at two o\u2019clock,\u201d Widdup said.<\/p>\n \u201cWe\u2019ve got $70 million in cash earmarked for investing in this space because we know, more than anything else \u2013 and without knowing the timing \u2013 that this market will turn around,\u201d he said.<\/p>\n \u201cWe know roughly what it will look like when it does, we just don\u2019t know when it will but we\u2019re going to have a well-established portfolio of things that we bought very cheaply when the time comes.\u201d<\/p>\n \u00a0<\/p>\n Widdup tends to cast his eyes across all the different commodities ASX companies are exploring and trying to develop projects in but has a particular focus on gold and base metals.<\/p>\n \u201cGold is the lowest risk of all the commodities and base metals follow close behind because they\u2019ve both got dependable fundamentals,\u201d he said.<\/p>\n \u201cWe tend to understand gold and base metals better than some of the newer age things and we\u2019re happy to take a position in\u00a0 those too but probably in lower volumes.\u201d<\/p>\n \u201cGold is moving at the moment, and I think everyone has a sense of confidence in it for that reason.\u201d<\/p>\n Widdup believes the depth and liquidity of the gold market has deepened, particularly from the perspective of central banks.<\/p>\n \u201cThe non-Western aligned central banks have become very, very interested in gold in just under a decade,\u201d he says.<\/p>\n \u201cYou\u2019ve seen the likes of the Chinese, Turkish and Russian government\u2019s become buyers of gold in a short period of time and I think that is probably part of the catalyst that we\u2019re seeing at the moment.\u201d<\/p>\n \u00a0<\/p>\n From Widdup\u2019s point of view, the market has weakened and gold equities have been the most downtrodden while other headline indices in Australia have moved sideways.<\/p>\n \u201cGold has had a more robust price uplift in the last six months, but it\u2019s been more of a tickle than a real shove,\u201d he says.<\/p>\n \u201cWhen you look at what\u2019s going on in the gold market, you can subscribe to conspiracies if you like or you could just talk about the offset between a global financial market, which has got a fair bit of risk in it.<\/p>\n \u201cGold is a product which a lot of people use to try and preserve their purchasing power, so it tends to get purchasing interest when times start to wobble,\u201d Widdup explains.<\/p>\n \u201cAnd if there\u2019s any sort of distrust in the US dollar, it\u2019s a pretty reasonable play as there\u2019s a lot of debt behind the US dollar these days.<\/p>\n \u201cWith all those things combined, now\u2019s not a bad time to take a position in gold.\u201d<\/p>\n \u00a0<\/p>\n \u201cIf i had to get stock specific, Sunshine Metals is trading at about a $15 million market cap and the hits from their\u00a0Liontown resource in QLD have been monstrous,\u201d he says.<\/p>\n \u201cI mean stuff like 20m at 18.21g\/t gold, plus they\u2019ve realised there\u2019s a precious metals-rich part of that deposit which has been poorly tested,\u201d he said.<\/p>\n \u201cThe ability to develop a predictive model and then hit things off the back of it is rare, the managing director \u2013 Damien Keys \u2013 thrives where there\u2019s been datasets that have been created but just haven\u2019t been squeezed hard enough, or not squeezed at all.<\/p>\n \u201cHe\u2019s got 30 years of data at his fingertips there and he\u2019s going through it, licking his lips and finding things.\u201d<\/p>\n Widdup says SHN is his top pick on the basis that it is cheap, and they\u2019ve been able to have success off their geographical model, which sits amongst a resource.<\/p>\n \u201cIf they were to apply that model to other targets in the area, of which there are plenty, I see a long happy history in front of them, especially if they can get a few holes in the right places to start with,\u201d he said.<\/p>\n \u00a0<\/p>\n For a bit more of a pure-gold play, Lion Selection Group also have an investment in Saturn Metals, the owners of an enormous low-grade gold resource in Western Australia at the Apollo Hill project.<\/p>\n \u201cIt\u2019s about 50km from Leonora, a place where people talk about gold consolidation, but I don\u2019t think Saturn plays a role in that at all.<\/p>\n \u201cI think Saturn has a very, very individual future there given what they have done in the last 12 months, which is demonstrate that the metallurgy on this low-grade resource is exceptionally well suited to heap leach processing and that provides a very, very low processing cost,\u201d he says.<\/p>\n \u201cSaturn\u2019s project is very interesting and if it in the North American market, it would be capitalised well over 100 million bucks but here in the Australian market, it\u2019s a little bit misunderstood.<\/p>\n \u201cThat said, it\u2019s got a register of fabulous institutions, several out of the North American market funnily enough, and a very competent team of managers.\u201d<\/p>\n \u00a0<\/p>\n \u201cAlto\u2019s Sandstone project has a resource inventory of reasonably high grade for very shallow ounces, ~832,000 ounces at roughly 1.5g\/t,\u201d Widdup says.<\/p>\n \u201cI see Alto as the keystone to somebody else\u2019s arch, there are three or four companies that could use their ounces which would obviate the need to build a process of your own.<\/p>\n \u201cBut in a better market, Alto would be able to raise money and drill its own resources and build their resource out to a threshold to be able to manage your own development. And I can see there is ample geology within their package to do that.\u201d<\/p>\n \u00a0<\/p>\n The other gold stock Lion Selection Group have invested in for over two years now is Great Boulder Resources.<\/p>\n \u201cWe\u2019ve topped our investment in the company probably three or four times along the way,\u201d Widdup said.<\/p>\n \u201cTheir geology (at the Side Well project) is on the regional fold on the other side of the Meekatharra Goldfield, which has been mined on and off but reasonably continuously for well over a century.<\/p>\n \u201cThis area has been locked in but not very thoroughly and there are some old workings, I think a lot of people have thought the old timers got the best of it and it just never took off.<\/p>\n \u201cBut GBR have managed to get some holes in the ground on part of this trend in a very small patch about 18 months ago and found gold each time,\u201d he continued.<\/p>\n \u201cNow that they\u2019re the first to be able to scratch the surface, all of a sudden, we\u2019re answering the question of \u2018what does the eastern side of the Meekatharra goldfield look like\u2019.<\/p>\n \u201cThat opens up a huge swath of geology, maybe a 20km strike, which could be very productive plus there\u2019s development process infrastructure very near there so I think it\u2019ll be exciting to see how they play out over the next two or three years.\u201d<\/p>\n \u00a0<\/p>\n Stock picks share prices today:<\/p>\n\n \ufeff<\/span><\/span><\/span>\u00a0<\/p>\n At Stockhead<\/em> we tell it like it is. While Sunshine Metals is a Stockhead<\/em> client, it did not sponsor this article.<\/p>\n <\/span><\/p>\n The post MoneyTalks: Lion Selection Group finds pride in these four small-cap gold stocks<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Which sector of the market is Widdup looking at right now?<\/h2>\n
Time for gold positioning is NOW<\/h2>\n
Which ASX stocks is Widdup looking at?<\/h2>\n
Sunshine Metals (ASX:SHN)<\/a><\/h2>\n
Saturn Metals (ASX:STN)<\/a><\/h2>\n
Alto Metals (ASX:AME)<\/a><\/h2>\n
Great Boulder Resources (ASX:GBR)<\/a><\/h2>\n