Sandon Capital Activist Fund's commentary for the month ended September 30, 2024.
The Fund return for September 2024 was 2.6%, bringing total returns (net of all fees and expenses) since inception to the equivalent of 10.0% per annum. Cash levels ended the month at approximately 3%.
The largest positive contributors were Nuix Ltd (ASX:NXL) (+1.0%), Wellard Ltd (ASX:WLD) (+0.9%), Midway Ltd (ASX:MWY) (+0.9%), BCI Minerals Ltd (ASX:BCI) (+0.9%) and Fleetwood Ltd (ASX:FWD) (+0.7%). These were partially offset by Coventry Group Ltd (ASX:CYG) (-0.8%) and COG Financial Services Ltd (ASX:COG) (-0.8%).
WLD reached an agreement to secure full and unencumbered ownership of the M/V Ocean Drover (Drover) for a cost of US$5 million. Previously, the registered owner of the Drover defaulted on the reconveyance of unencumbered title to WLD originally due to take place on 30 June 2023. The pragmatic outcome achieved negated the need for lengthy and expensive litigation that WLD would have otherwise taken to enforce their rights. Concurrently, the WLD Board has commenced a strategic review of the company to determine the best path forward now that it is a single ship business following the previously announced sale of the M/V Ocean Ute, completed on 3 September 2024.
MWY continued its strong run following an excellent FY24 result which included the resumption of the normal dividends and the announcement of a large, special fully franked dividend. The company also announced that it has been appointed by Rio Tinto to develop Pongamia seed farms to test its viability as a sustainable renewable diesel feedstock. Midway will design, execute and manage approximately 3,000 hectares of Pongamia seed farms and associated biodiversity plantings from a new office in North Queensland. We believe this is another important step in MWY developing a carbon and plantation management business. The company is now partnered with one of the world’s largest insurance companies (Munich Re) and one of the world’s largest mining companies as it seeks to grow its burgeoning carbon credit management business.
BCI announced that it had received the long-awaited Commonwealth Government approval for the Optimised Mardi Project. This important milestone allows operations to commence and enables further construction in the northern area of the project footprint. As of early September 2024, construction of the salt-first component of the Mardie Project has progressed steadily, with 48 per cent already completed, and over $700 million of BCI Minerals shareholders’ funds invested. BCI remains on track for the first shipment of salt in the December quarter of 2026. As a producer, the company should become a significant supplier of high-quality industrial salt to global markets for many decades to come. Over the next 12 months, we look forward to further progress on the construction of the saltfirst project, as well as progress towards a final investment decision on the sulphate of potash (SOP) plant.
Following much press speculation, Macquarie Asset Management (MAM) announced an agreement for the sale of its stake in AirTrunk. GDC is a unitholder in the fund managed by MAM that holds the equity interest in AirTrunk. GDC’s proceeds from the transaction are expected to be $123 million, a significant premium (68%) to the last reported carrying value. Closing of the transaction is conditional upon approval from the Foreign Investment Review Board, which we expect to take at least several months. Once the transaction closes, we expect the proceeds to be returned to unitholders.