Widdup cashed-up: Hungry Lion preying on leveraged resources stocks in market’s moment of weakness

Hedley Widdup, who is set to become Lion’s CEO within weeks, is busier than ever looking at opportunities.

While Widdup is no stranger to most, being a respected mining commentator and presenter, less has been known about the company his father Robin founded in 1997 in Melbourne.

Lion was fortunate enough to raise A$100 million just weeks before the Bre-X scandal triggered a deep rout for mining stocks in the late 1990s.

Over its history, Lion has backed companies including East African Gold Mines, Consolidated Minerals, Independence Group, Catalpa Resources, MPI Mines, Redback Mining, Gallery Gold, Egan Street Resources, Indophil Resources and PlatMin.

The company has returned A$3.41 per share to shareholders, exceeding total shareholder returns of the ASX Small Resources Index.

During the pandemic, Lion exited two substantial Indonesian shareholdings, realising more than A$90 million cash. The company returned A$16.7 million to shareholders via dividends and a buy-back and has A$66.5 million of cash currently.

The investment philosophy

The small-cap resources space is down by about 70% since April 2022, which is where Lion sees the opportunity.

“We’re shopping at the bottom of the market,” Widdup said.

“If you invest at the right time, you can make 10 times your money – you can’t do that in BHP unless you want to hold it for 25 years.”

Widdup estimates the small, but experienced, Lion team assess 1000-1500 opportunities in a year.

Given Lion’s long history and deep connections, it often has access to opportunities that others don’t, which is how its A$3 million investment in pre-float explorer Plutonic came about.

While Lion holds several legacy assets offshore, its renewed focus is Australia.

“It’s cheaper, easier and the returns are still available,” Widdup said.

Lion’s current portfolio is gold-heavy, but it is also interested in base metals and the right lithium opportunity. Rare earths and uranium are of interest but on a “by exception only” basis.

“What we’re most interested in is the commodities that we feel have a risk and marketability profile which will enable a company to develop a new project from a greenfield stage on its own without taking huge undue risks,” Widdup said.

“Copper is very high on my agenda. All of the base metals, zinc and lead – they have big established markets – nickel.

“Clearly there’s a bit of sniffiness in the market about things like zinc and nickel in recent times, but if you’ve got a great project in any one of those, you’ll be able to mine it, you’ll make money from it, so our eyes are wide open for those.”

Lion likes to take a substantial chunk of a company but isn’t necessarily interested in board representation.

“If we’re backing the right people, we don’t need to do that,” Widdup said.

Growing portfolio

Lion has invested A$10.75 million in new investments since 2022, which have gained a collective 28% while the broader market has been falling.

Those investments are Western Australian gold explorer/developers Brightstar Resources, Saturn Metals, Great Boulder Resources and Alto Metals, Queensland base metals and gold explorer Sunshine Metals, New South Wales explorer Koonenberry Gold and Northern Territory greenfields explorer Plutonic.

Lion is looking to have up to 20 names in its portfolio.

Widdup indicated that further deployment was imminent, with two new investments worth around A$4 million likely in the coming weeks, as well as two follow-on investments worth A$5 million.

“The seven on the page there now and there’s two which I expect will find their way into the portfolio in the next two to four weeks,” Widdup said.

“So let’s say we’re nudging up against the point where we know the names we want to have, and we’re open minded to say, somewhere between five and 10 more, so you know that portfolio shaping is well advanced.”

The time is now

The Lion Mining Clock has become globally known and often copied.

Midnight or 12 o’clock signifies a crash and Lion called the start of the latest bust in late 2022, which has led to capitulation for microcap stocks.

Lion keeps a close eye on liquidity and other market signals like floats and deal activity.

According to the Lion Mining Clock, the time is around 4 o’clock.

Widdup said a good time to invest was between 4 and 5 or “just before the dawn” at 6, which signifies the start of a boom.

“It’s time to get up and get moving,” Widdup said.

“It’s time for us to be deploying a little more aggressively.”