FMG, PLS, MIN + Gold

[Continuation of discussion started on SDF thread]

@thunderhead1 and @long_haul

Not sure if you are referring to the resources sector in general or specifically to MIN, but the resources sector, in general terms, is known to be a BUY-STRAW-HATS-IN-WINTER kind of game, and my sense is that a winter is certainly befalling the resources sector at the moment.

So one of my tasks in coming days will be to look at how the stocks in the sector are being priced, and what kind of future commodity price profiles they are pricing in.

I had a look at FMG a few weeks ago, because it had fallen hard, but didn't like what I saw there. Scope for ideologically-driven, capital misallocation is high.

Ditto for PLS; that sector looks absolutely horrible, with seemingly close to zero barriers to entry has left the world awash with lithium which has mushroomed almost overnight, ostensibly for a demand trajectory that is not turning out all that it was cracked up to be.

MIN I like just as little; my sense is that they started off as a credible mining services/contract crushing business and recycled the proceeds of that business into, effectively, creating their own captive customers by building mines which, frankly, seem to be at the poorer end of the quality spectrum. And in the process, they've blown a big hole in the balance sheet which is going to take years to fix (unless shareholders are called on do the job).

Resources is already a hard-to-sleep-easy sector as it is, so on the very infrequent occasion I venture there, I don't stray further than the companies that operate the high-quality, top-tier mines which have no risk of transforming from assets into liabilities, as many of them do when the commodity cycle gets gnarly enough.

As for gold, it really isn't my thing, because I'm unable to understand what drives the gold price, although I recognise it has acted as an inflation hedge over the long-term (but then again, equities have offered an even better inflation hedge). In terms of predicting a major structural event such as a global crisis or a a sudden de-dollarisation dynamic, that's out of my scope of operation, so I don't try.

However, I sense I do inadvertently have exposure to gold, but it is only indirect- in the form of my shareholding in LYL, which has a demonstrated habit of designing and building, at decent profit, gold processing plants (mostly in Africa where there is no pathological aversion to mining projects, as exists in the developed world).