Originally posted by Dazedandconfused
Hi Bollingenuity
Some months ago I looked at DGR and I found it impossible to understand all of the cross ownership relationships.... so decided it was too hard for me. My worry with companies which essential are really investment vehicles rather than focused businesses is... what's in it for the retail investor? The register is likely to be very top heavy, the SP doesn't have to reflect the value of the assets held and the corporate structure is likely to be opaque. In short... my suspicion is these things might be set up to suit the main holders and nothing more.
Having said that... I do think there can be value in running the FA ruler over some of the things that such companies hold [if those assets can be bought into independently]. A couple of examples...
Kirkland Lake [KLA] listed last year on the ASX. Its main asset in Oz is the Fosterville gold mine which seems very profitable but KLA has the bulk of its assets in Canada. KLA does appear to be something of an investment vehicle for Eric Sprott. In that regard it holds something like 10% of DEG. Sprott has made a big bet on the conglomerate gold story which was all the rage this time last year. DGO also has about 7% of DEG. Both companies hold instruments which will allow them to increase their holdings.
In recent weeks ALK announced 2 strategic purchases. An 8.8% buy of CAI [Calidus... a gold explorer in WA] and a 12% buy of EXU [Explaurum ... also a WA junior gold explorer].
Both KLA and ALK seem sound enough as investments.... but the real question is how much growth outlook do you get for your buck? KLA currently seems appropriately priced and ALK is a perennial disappointment. On the other hand DEG, CAI and EXU might be undervalued specs which, if they can demonstrate their value, will bring a greater return for the retail investor by buying directly into them. As always it is a gamble.... but at least one can be assured that some hefty due diligence has gone into the moves done by the large corporate interests.
[Disclosure: I sometimes hold DEG, looked hard at CAI but have never bought and I know next to nothing about EXU.... just throwing these things up for the sake of the discussion]
Hey mate. I guess the dream for holders of these proxy stocks is that they get lucky enough to be early investors in something exceptional. Whether management will ever realise that asset value and elect to return it to holders is another question.
I held DEG, ARV and VXR during the Wits 2.0 thematic but haven't revisited since because the volumes haven't returned. I feel like the conglomerate hype might have another leg in it eventually. Watched KLA when it first listed since Sprott seems to have the golden touch, but the liquidity wasn't there so I passed. Not holding any goldies right now which is unusual for me.
ARE/AIS are my highest conviction plays right now too leading into drilling later this month (hopefully). Would expect both these to run once drilling begins despite the weakness in commodities. I just want to be holding something that goes into meltdown over a "massive sulphides" type announcement and Torrens seems like it fits the bill
Also holding a slab of TNG which I think are the most likely to have a successful Vanadium mining operation of any ASX-listed plays. It may take them a couple more years to get it humming but the commodity price has been cranking upwards and I think that the mining license and finance are both likely to cause re-rates. Voting to remove the chairman at the moment so a risky and possibly rewarding time to be involved.
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