Exploration Financing & Consolidation Fuel Mining Sector Optimism

• Olive Resource Capital reported a strong start to 2025, with a 23–24% net portfolio gain through April, driven primarily by key gold and copper investments.
• Major contributors to performance include Omai Gold Mines and Troilus Gold, both nearly doubling in value; Arizona Sonoran has also appreciated by ~30%.
• The firm maintains a >50% allocation to precious metals, emphasizing advanced-stage projects with strong takeover or development potential.
• The team discussed Gold Fields' $2.4B acquisition of Gold Road, highlighting valuation premiums, jurisdictional quality, and the broader M&A trend in gold.
• Southern Cross Consolidated raised over C$120M in equity for its Sunday Creek project—a rare feat for a pre-resource explorer—reflecting renewed investor appetite in Australia.

Derek Mcpherson (Executive Chair) and Sam Pelaez (President, CEO, and CIO) of Olive Resource Capital provided timely insights into portfolio performance, investment strategy, and major movements in the gold and resource sector. Their discussion comes at a time of increasing investor interest in mining equities, especially as macro uncertainty, gold price strength, and M&A activity shape capital flows. 

Portfolio Performance: A Strong Start to 2025

Olive Resource Capital posted a net portfolio return of approximately 23–24% in the first four months of 2025, based on reported results through April 30. This figure is after all fees and expenses, reflecting actual returns available to investors.

Key contributors include:

• Omai Gold Mines: Described as the largest mining position in the portfolio (~14% of assets), OMI has appreciated nearly 100% year-to-date. Sam, who is also a director of the company, highlighted its strong stock performance as pivotal.
  
• Troilus Gold: Another top-five position, Troilus has also doubled in value this year.
  
• Arizona Sonoran: While copper prices have only modestly increased (~10%), this undervalued asset has risen about 30%, helped by renewed investor attention and strategic developments, including Hudbay’s involvement.
  

Other contributing positions include Sailfish Royalty, where a convertible investment has performed well following activation of its put feature, and Silver47, a silver-focused equity showing strength alongside broader precious metals gains.

Although the team noted that their return might trail a pure gold fund, they believe their diversified resource mandate - covering both mined and agricultural commodities - adds long-term resilience and balance.

Portfolio Construction: Fundamental vs. Liquid Exposure

The investment team divides its holdings into two categories:

• Fundamental Investments: These are typically smaller-cap, less liquid positions taken based on deep analysis of company fundamentals, relative valuation, and development timelines. Omai and Arizona Sonoran are examples. Such positions are less reactive to macro shifts but are seen as high-upside if held through the cycle.
  
• Liquid Positions: These are mid- to large-cap equities that can be traded in and out quickly, allowing the team to respond to macroeconomic changes. Current allocations in this bucket also lean toward gold.

The firm maintains a precious metals allocation of just over 50%, with a dominant gold weighting, modest silver exposure, and minor exposure to PGMs. Two non-resource investments limit some flexibility but do not materially affect the core focus.

Sam emphasized that they prefer advanced-stage mining projects that are likely to be built in this cycle—either via acquisition or full project financing. These investments are positioned to benefit most from the current commodity environment and the increasing appetite for takeovers.

Goldfields-Gold Road Merger: Strategic Consolidation in Australia

The show shifted to analyzing recent M&A activity, particularly Gold Fields' acquisition of Gold Road Resources, which was jointly developing the Gruyere project in Western Australia.

Key deal details:

• Transaction size: $2.44 billion USD
• Effective acquisition cost (adjusted for other holdings): ~$1.7–1.8 billion USD
• Gruyere project: Producing ~340,000 oz/year, with 6 million oz in resources
• Valuation metrics:
  
  • ~$600/oz of resource
  • ~$10,000 per annual ounce of production
    

The duo noted that this pricing is above traditional benchmarks (typically 5–12% of gold price or ~$200–400/oz). While high, they believe it may reflect several qualitative factors:

• Gruyere is a producing, high-quality asset
• Western Australia is one of the top-tier jurisdictions globally
• Gold Fields is actively upgrading its portfolio, having previously invested in Canada as well
• Valuations may be forward-looking, with a possible bullish gold outlook above $3,000/oz
  

They drew comparisons to Agnico Eagle, noting that premium valuations can be justified by jurisdictional strength and asset quality. While they were not shareholders in either Gold Road or Gold Fields, they acknowledged that such deals are important market signals.

Compass, Episode 14

Southern Cross Consolidated: A Rare Nine-Digit Raise

The duo devoted considerable attention to the unexpected yet significant $120M+ financing for Southern Cross Consolidated, a pre-resource exploration company focused on the Sunday Creek project in Victoria, Australia.

This development was framed as:

• A clear signal of new capital entering the junior mining space
• A vote of confidence in high-grade, high-upside gold systems
• A milestone for management, led by Mike Hudson, in delivering a long-term vision
  

Sunday Creek is viewed as one of the best exploration assets currently, with strong drilling results, high-grade mineralization (including antimony), and significant upside potential along strike. The transaction gives Southern Cross enough funding to aggressively drill over the next 24 months without returning to market. This flexibility is rare and strategically important in the exploration sector.

Comparative valuation:

• Southern Cross trades at ~$400/oz based on its exploration target
• This is comparable to the premium price paid by Gold Fields for its portion of Windfall in the Osisko deal (~$430/oz)
• Analysts noted that while such valuations seem rich, they often reflect quality and strategic value—not just ounces in the ground
  

The financing also marked a milestone for Olive Resource Capital itself. The team had been shareholders in Mawson Gold, Southern Cross’s predecessor, and realized a 100% return as they exited in anticipation of this raise.

Australia vs. Canada: A Diverging Pace of Activity

The duo also reflected on a broader theme: Australia’s apparent leadership in mining investment cycles. Several recent events reinforce this:

• $5B De Grey takeover
• Gold Fields-Gold Road deal
• Southern Cross raise
• Strong equity performance from names like Northern Star and Evolution
  

Compared to Canada, where permitting delays and slower capital flows are often cited concerns, Australia appears to be moving faster. While Olive Resource Capital maintains a global mandate, they acknowledge the challenges of accessing high-quality Australian assets, which often trade at premiums.

Still, they emphasized that premium valuations can be earned, citing Southern Cross as a case study. High valuations are not inherently a deterrent; they must be weighed against asset quality, jurisdiction, and strategic positioning.

What This Means for Investors

The Compass episode offers a measured but optimistic take on resource investing in mid-2025. Olive Resource Capital is performing well, with top holdings in gold and copper appreciating strongly. The team continues to focus on advanced-stage assets that align with the current upcycle in commodities.

Two broader market signals stand out:

• M&A is accelerating, with majors like Gold Fields consolidating production and enhancing portfolio quality
• Capital is returning to high-grade exploration, as evidenced by Southern Cross’s rare nine-digit financing

Australia is setting the pace, but the underlying message for investors is clear: the resource market is reawakening. Active managers who combine jurisdictional insight, valuation discipline, and a flexible portfolio structure are best positioned to capture upside in this evolving environment.