Investment Matters

Company News

Australian Equities sub-portfolio

Clients’ positions in Boral (positive impact) have been sold in full, capping off what has been a successful period of ownership.

Shares in Boral were first purchased in September of 2019. Further purchases as the market fell brought clients’ average cost base to $3.66. Shares were subsequently sold this week for $7.37, a return of 88% over the average client holding period.

Last week, Seven Group Holdings increased its unconditional offer to shareholders. Its revised offer is now $7.30-$7.40 per share.

Subsequently, Boral’s share price has risen to levels as high as $7.38. We see that much of the upside we saw in Boral is already priced in at these levels.

Furthermore, Seven Group has significantly increased its holding (currently 26%), which is likely to grant it greater control of the company.

We see Boral as a less attractive investment with a narrower base of shareholder representation, particularly at a time where the effective allocation of surplus capital is important.

While our holding period was shorter than we had anticipated, we are pleased that the position has provided a significant return to clients over the last year and a half.


IGO Limited (positive impact) announced that it has completed its purchase of the stake in Tianqi's lithium business. The rationale for our recent investment in IGO was that the company is transitioning from a nickel/gold producer to a nickel/lithium producer, taking advantage of the global moves to battery technology.

A new JV has been formed, with Tianqi owning 51% and IGO 49%. The key assets are a 51% stake in the world-class Greenbushes Western Australia lithium “hard rock” mine (one of the lowest cost and highest grade deposits) and 100% of the Kwinana refinery (one of the most modern and automated refineries globally).

Battery minerals remain a key thematic exposure for the portfolio heading into the 2020 financial year.

Aurelia Metals (positive impact)

Our view of Aurelia Metals as a gold and base metals producer with significant valuation upside was confirmed this week.

The company released updated drill results for three of the important growth prospects: Great Cobar, Federation and Karios.

  • Great Cobar is adjacent to Peak Mine (Cobar NSW). The new drill results at Great Cobar continue to develop the narrative that Aurelia Metals is “copper ready”. The Cobar Region has produced copper & gold since 1870. Since our first visit to the Cobar region, the value uplift from linking the Great Cobar into Aurelia’s Peak Mine area has been apparent. These drill results continue to reaffirm this value.
  • Kairos is an extension of its underground Peak Mine in Cobar. The iode is expected to provide significant ores to the mill from FY22 onwards. The nature of mining in this region produces variability in grade, hence quarterly reports can reflect periods of exceptionally high productivity, and other periods that are less so. The market links the volatility in earnings to the pattern of mining, and in our view too heavily discounts the share price for such volatility. We are patient and are happy for the mine to produce great results in the long run.
  • Federation has the potential to be a significant base metal (Zn+Pb) producer, with the company continuing its “in-fill” drilling program. This week saw a continued run of exceptional results. Located 10kms south of Aurelia's Hera Mine which is coming towards the end of its life, Federation will add significant value to both yearly earnings and long-term value in our view.

Income sub-portfolio

Threat Protect Notes (negative impact) have been repriced. The carrying value of units have been repriced from $0.40 to $0.15, reflecting our conservative view of the recent operating performance of the business.

However, it is important to note this does not diminish the rights to the repayment of the amount outstanding in full, should the company have the capacity to do so.

We have continued to engage with the company to produce an optimal outcome for all stakeholders.


The above market commentary represents the views and opinions of First Samuel Pty Ltd. Such market commentary contains information of a general nature only. Such market commentary is not intended to provide a sufficient basis on which to make any investment decision and should not be taken as such. It has not taken into consideration your objectives, needs or financial situation. Before making decisions in relation to any financial product, you should always obtain and read any relevant Product Disclosure Statement or information statement and seek personal financial advice.