“They see the valuation side, and then we’re looking at the risk side,” Lion Selection Group (ASX:LSX) Managing Director Hedley Widdup explains to Mining.com.au.
The sentiment is apparent when contrasting Lion’s investment process with other groups.
In conversation with this news service, Widdup says the company is focused on implementing a low-risk profile across its portfolio, which currently covers 12 investment assets in Australia.
Lion’s current portfolio ranges from the grassroots stage, all the way through near-term producers that predict to be producing gold in the next 18 months.
“As an equity investor, you take all the risks often of an undeveloped project, but through the prism of an operator,” Widdup tells this news service.
“The perceived performance that you might get from the commodity is then diminished by issues that come along in the ability to sell the product and how the asset performs.”
Of Lion’s 12 Australian-based investments, nine of those projects are focused on gold exploration.
“The final point of the portfolio is having an overall risk profile of the portfolio which is deliberately low, trying to be in things that whilst there’s upside in it, they’re not going to tear down the value of the rest of the things,” Widdup says.
“We have a very high confidence in them delivering because they are not subject to a major discovery risk: they can sell their product, it’s an easy liquid product, or they can produce a product, and they’re funded.”
Lion most recently invested $2 million into Cannindah Resources’ (ASX:CAE) $15 million placement to fund drilling and exploration across the Mt Cannindah Project in Queensland, as reported by Mining.com.au.
The investment group describes Cannindah’s drilling plans to focus on the “large and potentially valuable” pencil porphyry at the Southern Porphyry target.
Watching the watchlist
Lion has a watchlist of around 50 junior explorers that have previously piqued its interest, allowing Lion to keep track of its valuation versus risk understanding for the portfolio.
“If there was going to be anything that was a new addition to our portfolio, the strong likelihood is that it comes off of that watch list,” Widdup says.
“We’ve got a reasonable idea of what we’d like to be adding to the portfolio, we just don’t know when we can.
“Something could happen tomorrow that would change my mind about what the next week looks like.
“I could say, this is what I think I’m going to do for the next two weeks, and tomorrow I could be made a liar.”
Another key point in Lion’s investment process is tracking the company’s management team.
The company puts emphasis on investing in assets controlled by people that align with Lion’s work values.
“There’s a lot of things we’ve looked at, and we’ve just come to the perspective that there’s a big plus or minus on what we think the asset might be because of the prism of the person that we’re looking at it through,” Widdup adds.
“We don’t tend to invest in the market, we tend to invest in fresh equity.
“I think they’re all candidates for us following our money. In our portfolio, we’re largely very happy with the people, assets, and output combinations.
“I would expect us to be following our money rather than trimming any of those positions through 2026.”
Founded in 1997, Lion Selection Group is focused on paying sustainable dividends from surplus investment proceeds, while balancing investment requirements with market conditions and capital growth.
The investment group, which has a market capitalisation of $146.11 million, is attending the RIU Explorers Conference in Fremantle, Western Australia being held from 17-19 February. Mining.com.au is an official media partner of this year’s event.
Write to Maddison Elliott at Mining.com.au
Images: istock, Cannindah Resources
