Garimpeiro has a milestone birthday coming up that he would rather forget. Let’s just say the milestone event has prompted him to think about easing back on trying to monitor the hundreds of junior explorers out there.

It’s why he had a look during the week at the listed investment trust Lowell Resources Fund (ASX:LRT). It has a sole focus on emerging mining explorers and oil and gas juniors, the idea being to get in early on the likely 10-baggers.

Garimpeiro confesses that the look at Lowell was prompted by his knowledge of an early investment by the fund in lithium-nickel stock Azure (ASX:AZS) when it was trading at 30c. Mid-week Azure was a $2.70 stock as excitement over its Andover project continued to build.

Lowell does not disclose the number of shares it holds in the 80 or stocks it is currently invested in. But in the case of Azure, there has been enough of them to ramp Azure’s representation to 12.8% of the $50 million fund as of June 30.

Azure and some other wins has had the effect of late of widening the discount between Lowell’s mid-week unit price of $1.30 and the net asset value (NAV) per unit of $1.5355 (a 9-month high) to about 15%. Like all listed investment trusts, Lowell units historically trade at a discount to NAV of 6-30%.

So the current 15% discount is about mid-range and to Garimpeiro’s way of thinking, it is a handy discount to have for exposure to Azure’s continuing upside and the upside that might or might not come from the 80 or so other juniors inside the fund.

For the those getting lazier as the years roll by, it also removes the need to keep on top on of the always fast moving goings on in the exploration space. What’s more, the fund is a dividend payer which of course is unheard of in the junior space.

For the FY2023 the distribution was 7.02c a unit compared with 11.57c in FY2022. So the fund is also a high yield thing in the sector.

The runaway share price of Azure and some other lithium explorers held in the fund means lithium exposure accounted for 24% of the fund at June 30, up from 6.5% previously – go Azure.

Gold exposure was sitting at 31%, down from 50% previously due to the sector getting beaten up, and the fund’s exit from stocks like De Grey (ASX:DEG) and Genesis Minerals (ASX:GMD) after having invested in them when they were low down the value chain.

There was another recent win for the fund with the Ramelius bid for Musgrave (ASX:MGV, 6.7% of the fund). Other significant exposures include Predictive (ASX:PDI, 4.5%), Saturn (ASX:STN, 2%), Caravel (ASX:CVV, 3.7%), Alvo (ASX:ALV, 3%) and Queensland gas developer Comet Ridge (ASX:COI, 3%).

The exits from De Grey and Genesis show that stocks in the portfolio is a moveable feast.

The general rule is that stocks are targeted when they are in the discovery/resource expansion phase and get moved on – hopefully at a profit – once they enter the boring feasibility/financing and construction phase.

Former exploration geologist/resources finance guy John Forwood heads the stock picking team at Lowell as the chief investment officer. He recently answered one of the biggest questions out there in the junior exploration market – what is the next sector to take off after the amazing run in lithium?

Writing for the Stockbrokers and Investment Advisers Association, Forwood nominated uranium, graphite and copper.

“The energy transition has driven the demand for lithium, but many other minerals are ‘critical’ to this transition. It is virtually certain that as the world decarbonises, other minerals such as uranium, graphite or copper will see similar booms,’’ Forwood suggested.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

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