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Primary Strategic Investments

Our Primary Strategic Investments are in Mount Gibson (ASX: MGX) which is listed and operating in Australia and in the year ended 30 June 2018, we also acquired investments in Tanami Gold NL (“Tanami Gold”) (ASX: TAM). The net attributable profit from these Primary Strategic Investments for 1H FY2023 was HK$2,057,000 (1H FY2022: Net loss of HK$105,467,000).

In October 2022, APAC participated as a sub-underwriter of the rights issue of Prodigy Gold NL (“Prodigy Gold”) (ASX: PRX), a gold exploration company listed on the ASX. After completion of Prodigy Gold’s rights issue, the Group’s shareholding in Prodigy Gold increased from below 20% to 49.9%. In accordance with Hong Kong Financial Reporting Standards, APAC is considered to have control over it and commence accounting for it as a subsidiary. In 1H FY2023, the post-acquisition loss from Prodigy Gold attributable to shareholders of the Company amounted to HK$1,804,000.

Mount Gibson

Mount Gibson is an Australian producer of direct shipping grade iron ore products. Mount Gibson owns the Koolan Island mine off the Kimberley coast in the remote north-west of Western Australia. Mount Gibson developed the Shine Iron Ore Project, located 85km north of Extension Hill, but suspended operations in November 2021 due to the drop in iron ore price and the high freight costs.


Ore sales at the Koolan Island Restart Project restarted in April 2019, and achieved commercial production in the June quarter 2019. The restart project had 21 million tonnes of 65.5% Fe reserves. Mount Gibson is almost through a planned elevated waste mining phase, and as a result we have seen increased production in the recent December 2022 quarter.


Mount Gibson reported a net profit after tax of A$7 million for 1H FY2023 from sales of 1.1 million tonnes. Operating costs were high in 1H FY2023 as Mount Gibson used interim crushing arrangements while the processing plant was being repaired and waste mining is not yet fully complete. The repairs will be completed in March 2023 quarter and costs will improve through the 2023 calendar year.


Sales guidance for the year ending 30 June 2023 (“FY 2023”) is 3.2 - 3.7 million tonnes.


Mount Gibson cash and cash equivalents including subordinated notes and financial assets held for trading at end 1H FY2023 was A$41 million and the company has drawn A$25 million on its revolving credit facility.


The Platts IODEX 62% CFR China index fell steadily through most of 1H FY2023, from roughly US$110 per dry metric tonne (“dmt”) in July 2022 down to US$75 per dmt in early November 2022 but then rebounded to end the year back at US$110 per dmt. The price is currently around US$120 per dmt. The fall in iron ore price was driven by weak economic activity in China due to the Zero Covid Policy, but rebounded as China reopened faster than expected, although some uncertainty remains over the level of infrastructure related stimulus and the trajectory of the property market.

Tanami Gold

Tanami Gold We currently own 46.3% of Tanami Gold.

Tanami Gold’s principal business activity is gold exploration. It holds 50% of the Central Tanami Project and has a cash balance of A$32 million. In May 2021, Tanami Gold entered into a binding agreement with Northern Star Resources Limited (“Northern Star”) (ASX: NST) to establish a new 50-50 Joint Venture covering the Central Tanami Project. Northern Star agreed to pay A$15 million cash to increase its ownership in the project from 40% to 50%, and going forward both parties will be jointly responsible for funding exploration and development activities. This agreement was completed and Tanami Gold paid A$5 million cash to fund its share of the joint venture activity.

Prodigy Gold 

APAC owns 49.9% of Prodigy Gold.


Prodigy Gold is a gold exploration company listed on the ASX. It holds a large footprint of exploration tenements in the Tanami region in the Northern Territory, Australia. Some of its tenements are held in joint venture with partners such as Newmont Corporation and IGO Limited. Prodigy Gold restarted its exploration activities in 2022 after several years of restrictions related to the COVID-19 pandemic. Prodigy Gold reported a net loss after tax of A$2.2 million for 1H FY2023. At the end of December 2022, Prodigy Gold has a cash balance of A$8.1 million.


The focus of Prodigy Gold for 2023 will be exploration on the Northern Tanami project area and continue with its strategy to divest non-core assets.


Financial Assets at Fair Value through Profit or Loss

Financial assets at fair value through profit or loss comprise mainly the Group’s investments in Metals X Limited (“Metals X”) and Resource Investment. As at 31 December 2022, APAC had significant investments representing 5% or more of the Group’s total assets in Shougang Fushan Resources Group Limited (“Shougang Fushan”) (HKEX: 639) and Metals X (ASX: MLX).

Significant Investments


Brief description of principal businesses of the investee companies of the significant investments held by the Group:


Our investment in Shougang Fushan generated a fair value loss of HK$88,783,000 with carrying value as at 31 December 2022 of HK$312,844,000.

Shougang Fushan is a coking coal producer listed on The Stock Exchange of Hong Kong Limited. Its principal businesses are coking coal mining, production and sales of coking coal products in China. It has 3 mines located in China with reserves of 69 million tonnes of raw coking coal at 31 December 2021 and during six months ended 30 June 2022 Shougang Fushan produced 2.7 million tonnes raw coking coal. 2022 guidance is for 5.3 million tonnes of raw coking coal, in line with the production rate achieved in the first half of calendar year 2022.

At the time of writing its results for the year ending 31 December 2022 are not yet available. The market capitalisation of Shougang Fushan in February 2023 is around HK$13.7 billion, while its working capital reported at 30 June 2022 is HK$6.7 billion and it generated EBITDA of HK$3.3 billion in six months ended 30 June 2022.

Chinese steel demand has been relatively muted as the construction industry has been slower to rebound. Even though coking coal inventories in China are low, steel mill margins are also low which is limiting their desire to restock.

Our other notable investment is in Metals X. The carrying value of Metals X as at 31 December 2022 amounted to HK$365,120,000 (As at 30 June 2022: HK$325,449,000) represented approximately 8.4% (As at 30 June 2022: 7.3%) of the total assets of the Group. In 1H FY2023,our investment in Metals X generated an unrealised gain of HK$39,671,000 (1H FY2022: Gain of HK$342,584,000) which was accounted for in profit or loss.

Metals X is focused on implementing its life of mine plan at Renison mine, and development of the high grade Area 5 deposit is nearly complete. During 1H FY2023, the Renison mine produced 1,887 tonnes of tin (net 50% basis) down 22% year-on-year (“YoY”), and the average realised tin price of A$29,428 per tonne was down 37% YoY.

Tin prices steadily weakened through most of 1H FY2023, but then started to rebound in early November 2022 again because of sentiment around China’s reopening. During the period, tin price fell from above US$27,000 per tonne to US$18,000 per tonne, and then rebounded and the current price at time of writing is US$27,500 per tonne. Demand for semiconductors and solar PV remains strong. We remain comfortable with the medium term outlook for tin due to the lack of significant supply growth and new demand for tin from the growing electrical vehicle and energy storage industries.

Resource Investment    

The investments in this division comprise mostly minor holdings in various natural resource companies listed on major stock exchanges including Australia, Canada, Hong Kong, the United Kingdom and the United States. Our investments focus on select commodities within several commodity segments, namely energy, bulk commodities, base metals and precious metals.

Resource Investment posted a fair value gain of HK$54,447,000 in 1H FY2023 (1H FY2022: HK$172,283,000), which after accounting for segment related dividend and other investment income and expenses, resulted in a segment profit of HK$114,919,000 (1H FY2022: HK$212,830,000).

Our Resource Investment division includes, among other investing strategies, the two resource portfolios announced in August 2016, with additional natural resource focused strategies subsequently established and focused on large caps and specialist opportunities. The aim of the portfolios is to produce a positive return using Company funds as well as to create a track record to attract potential third-party investments in the future. These various portfolios are managed under the Resource Investment segment of the Company, which is separate to the Company’s large strategic stakes. Our portfolios have a global long-only mandate (cannot short stocks) and strict parameters on market capitalisation, liquidity, development stage (exploration through to production) and jurisdiction to manage risk.

The Mining Portfolio focuses on investments in small and mid-cap companies involved in battery metals, base metals, precious metals, uranium, bulks and other hard rock commodities. Since its inception on 1 October 2016, the Mining Portfolio has delivered a return on investment of 423.0% to 31 December 2022, which is an outperformance of 418.1% against its benchmark (currency adjusted equal weighting of ASX 200 Smallcap Resources, FTSE AIM All Share Basic Resources and TSX Venture Composite) return of 4.9%. A full breakdown of the Mining Portfolio’s periodic performance against its benchmark is presented in the table below.


The Energy Portfolio is primarily focused on the oil, gas and renewables sectors. From inception until end of 2019, the portfolio was focused on oil and gas sectors only, but at the end of 2019, the mandate for this portfolio was expanded to include investments in renewables, and with a broadened sector of investments, from February 2020 (before the full impact of the COVID-19 Pandemic) to December 2022, the Energy Portfolio has generated a return on investment of 118%.


Precious metals (majority gold exposure) generated a net fair value profit of HK$35,331,000 in 1H FY2023. As at 31 December 2022, the carrying value of the Precious segment was HK$376,387,000 (As at 30 June 2022: HK$319,354,000). Our largest gold investment in the Resource Investment division is in Northern Star (ASX: NST) which generated a fair value gain of HK$32,824,000 with carrying value as at 31 December 2022 of HK$90,736,000. We also own Wheaton Precious Metals Corp. (NYSE: WPM) which generated a fair value gain of HK$2,786,000 with carrying value as at 31 December 2022 of HK$27,426,000.

Northern Star is the second largest gold company in Australia and owns high grade underground mines in Western Australian and Alaska. In 1H FY2023 its production was 764,000 ounces of gold, and it generated net mine cash flow of A$244 million. In FY 2023 its production target is 1,560,000 - 1,680,000 ounces of gold.

The gold price weakened through 1H FY2023, falling to a low of in US$1,620 per ounce in early November 2022 but as the United States Dollars came off its peak and central banks buying ramped up, gold price rebounded and is currently around US$1,860 per ounce.


Bulk commodities segment generated a fair value gain of HK$5,568,000 in 1H FY2023 despite variable iron ore and coal prices. As at 31 December 2022, the carrying value was HK$566,858,000 (As at 30 June 2022: HK$552,081,000). Our largest investment in this segment during 1H FY2023 is in Shougang Fushan (HKEX: 639), which generated a fair value loss of HK$88,783,000 and had a carrying value as at 31 December 2022 of HK$312,844,000.

Base Metals

Base Metals segment (a mix of copper, nickel and zinc companies) delivered a fair value loss of HK$10,146,000 in 1H FY2023. The copper and nickel prices increased by 5% and 41% respectively while zinc price fell 3%. The Base Metals segment includes our investment in China Hongqiao Group Limited (HKEX: 1378) which had a carrying value as at 31 December 2022 of HK$12,529,000.


The Energy segment (mix of oil and gas, uranium and renewables) had a fair value gain of HK$9,817,000 in 1H FY2023. Our significant Energy investments include National Atomic Company Kazatomprom JSC (LSE: KAP), which generated a fair value gain of HK$980,000 and had a carrying value as at 31 December 2022 of HK$51,565,000.


We also have a fair value gain of HK$10,529,000 from the remaining commodity (diamonds, manganese, rare earths, lithium and mineral sands among others) and non-commodity investments in 1H FY2023 and had a carrying value as at 31 December 2022 of HK$171,619,000 (As at 30 June 2022: HK$177,578,000). This includes our investment in Pilbara Minerals Limited (ASX: PLS), which generated a fair value gain of HK$15,071,000.

Commodity Business

Our iron ore offtake at Koolan Island recommenced as the mine restarted operations, and we continue to look for new offtake opportunities across a range of commodities. For 1H FY2023, our Commodity Business generated a segment profit of HK$6,993,000 (1H FY2022: HK$50,192,000).

Principal Investment and Financial Services

The Principal Investment and Financial Services segment, which covers the income generated from loan receivables, loan notes and other financial assets. For 1H FY2023, this segment reported a loss of HK$15,957,000 (1H FY2022: Profit of HK$24,843,000).

Money Lending

The Group engaged in money lending activities under the Money Lenders Ordinance of Hong Kong. For 1H FY2023, the revenue and profits generated from money lending formed part of results of the Principal Investment and Financial Services segment.

Outstanding loan receivables net of loss allowances as at 31 December 2022 amounted to approximately HK$391,368,000 (As at 30 June 2022: HK$362,698,000). During the period, the Group has provided for impairment losses on its loan receivables of approximately HK$8,676,000 (1H FY2022: Reversal of impairment loss of HK$404,000).

Forward Looking Observations

We are cautiously optimistic on the outlook for commodities in 2023 given China is still in the early stages of its reopening, with a potential for further stimulus measures to get the economy back on track after a tricky 2022 where activity was impacted by lockdowns. However the equity market is likely to remain volatile, and we are concerned that the US Federal Reserve will have to keep rates higher for longer than the market expects, leading to overall economic weakness.

We remain selective with our investments in the near term, and continue to look for high quality opportunities which will generate attractive returns over the long run. Our mining and energy investment portfolios are the platform for future mining and energy investments. Our largest investment is in Mount Gibson which is focused on ramping up production at the Koolan Island mine as it completes its large waste stripping program in the coming year, which will position it for strong free cash flow generation in coming years.

(update as of 27 February 2023)
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