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Home Stock in Focus – APAC Resources
July 16, 2026

Stock in Focus – APAC Resources

Jordan Lipson, Portfolio Manager, Cromwell Phoenix Global Opportunities Fund

Cromwell Jordan Lipson Portfolio Manager

Gold Exposed Stocks – An Update

In the performance commentary section of the September 2025 quarterly report, we discussed the portfolio’s exposure to gold miners and gold-exposed securities, a theme that had grown into a meaningful part of the portfolio. Given the eventful period that has followed, an update is warranted.

As a reminder, the Fund seeks out securities trading at discounts to readily assessable net asset values (NAVs), or special situations offering strong risk-adjusted returns. Gold miners are unusually well suited to this approach. Unlike most businesses, the value of a gold miner’s primary output can be observed directly, in a deep and liquid spot and futures market, which makes its NAV genuinely assessable. Towards the end of 2024, the share prices of many gold miners were simply not reacting to a rising gold price. A clear gap opened up between the value of the underlying assets and the prices being asked for them, and we saw an opportunity.

Our exposure

We established a meaningful exposure in November 2024, to a basket of particularly attractively priced stocks. As the gold price climbed, we generally topped up. This may seem counterintuitive, buying more as the commodity became more expensive, but it followed directly from the leverage described previously. A higher gold price lifted the NAVs of these miners faster than the metal itself, while their share prices continued to lag. In many cases the discount to NAV widened rather than narrowed, and we added accordingly.

As those discounts eventually began to close, and as the gold price reached levels that we found somewhat uncomfortably high, we started to slowly decrease our exposure to the sector. With the benefit of hindsight, these sales were both too early and not significant enough.

 

Recent performance

Amid a volatile macroeconomic and geopolitical environment, the gold price retreated from its highs over the period. It fell approximately 12% during the quarter and now sits around 25% below its January 2026 peak. After a long period in which the gold price moved rapidly higher, the direction of travel reversed.

In this environment, gold stocks detracted from performance. It is worth keeping this in perspective. Despite the weakness of the period, these securities have been significant contributors to returns over the life of the Fund. Over the quarter, ASA Ltd (NYSE:ASA) was down 16.4%, Oceana Gold (TSX:OGC) fell 20.6% and Alkane Resources (TSX:ALK) was more resilient, off 3.0%. One holding, however, disappointed for reasons that went well beyond simple weakness in the sector.

APAC Resources

APAC Resources (SEHK:1104) is a holding company with major exposure to a variety of mining companies. Its key holdings are based in Australia and have been well known to Phoenix for a long time. We initiated a position at the very start of the Fund’s life, drawn by underlying assets we found attractive and by a very large discount to NAV, with that NAV predominantly made up of listed securities, and therefore readily assessable.

We also formed the view that the market’s perception of APAC, related to its poor governance, was overstated. Over time, we believed the company’s actions validated that view. There were numerous positive changes, including improved disclosures, the initiation of investor presentations, the publication of monthly NAVs, and a corporate restructure that could potentially have allowed more capital to be released from the vehicle. The underlying investments also performed extremely well, including a managed fund of mining securities that produced spectacular performance.

As the NAV grew and the discount closed, we realised much of our position. Those sales more than covered the original cost of the shares, and we still retained a position of around 2%. To that point, the investment had unfolded very much as we had hoped.

APAC then disappointed. During the June 2026 quarter the company announced a rights issue at roughly a 33% discount to the last traded share price and a massive discount of approximately 71% to the prevailing NAV. A deeply discounted rights issue of this kind transfers value from those who cannot, or choose not to, participate. While the rights issue would at least have allowed us to participate and so minimise our own dilution, it was clearly a poor reflection on APAC’s governance.

Subsequently, weakness in markets and in the gold price led the underwriters of the rights issue to terminate their contract, and the rights issue was cancelled. While the dilution will now no longer take place, the reputational damage has been done. APAC dropped around 44% over the quarter and closed the period trading at more than a 66% discount to its NAV. We retain a 1.7% position and will decide what to do with it as more information is disclosed.

“For all the frustration of its recent conduct, it is worth recording that the investment has been extremely successful over its life, delivering an internal rate of return of 37.2% across the five and a half years it has been held in the portfolio. “

Where to from here?

The remaining gold positions continue to look attractive at current gold prices, though the opportunity is no longer as extreme as it once was. Reflecting both our earlier trimming and the moves within the sector, total exposure to gold securities, including APAC, now sits at approximately 9.5% of the portfolio.

This exposure hurt over the period, and the episode with APAC was a genuine disappointment. Taking a step back, however, the theme has been a meaningful contributor to the Fund, both in absolute terms and relative to the benchmark over its life. As ever, we will keep a watchful eye on the sector and let valuation guide our positioning from here.

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