Contrarian Miner is up 3% in the past week to £108,059 against the FTSE 350 Mining Index down 3% over the same period.

The key driver of the week’s performance is the 26% rise in Amara Mining following firstly positive results from the optimised pre-feasibility and then today a recommended (shares + warrants) offer from Perseus mining.

Amara shares are up 18% today to 11.75p but nevertheless remain 10% below the share portion of the Perseus offer (which is 0.68 Perseus shares or 13p at today’s Perseus share price) even before taking into account the value of the warrants (theoretically another 1.68p per share). I’ll need to take a closer look at Perseus before making up my mind what to do should the offer proceed, but given the significant gap between the offer on the table and the share price it seems to me sensible to hold for now in any event. The optimised PFS reflects a post tax NPV10 of US$473m for the Yaoure project at US$1,200 gold, which provides me with ample comfort  there is value in the stock even should the deal fall through for any reason.

Have done a bit of portfolio reshuffling:

• I have sold the remainder of my Petra Diamonds shares (3000 at 92p) on Friday. The half year results were awful and on top of that the company is flagging it will most likely need banks to waive the June covenant test as well. I suspect a recapitalisation may be needed, and I am unconvinced that’s what the current share price reflects;
• I have bought a further 10,000 Wentworth at 31.5p as well as a further 15,000 Firestone at 20.8p. Have been waiting for an opportunity to buy these stocks cheaper on an off day for the sector, but finally decided the opportunity cost of sitting with more than 10% of the portfolio in cash is higher than the extra penny or two on the share prices of these stocks.

I’ve today sold 2,500 LMI at 91p realising a loss of 18% on these shares (my average in was 112p with the bulk of my holding bought in the rights issue at 100p), but retaining 5,200 shares for the longer term.

I initially intended to invest c£5,000 in Lonmin , but when the nil paid rights were trading near zero I bought more and subscribed for the shares in the hope of a short term bounce once the rights issue was behind the company. Far from materialising, the shares continued to plummet to a low of under 40p and I found myself in a  “short term trade gone wrong becomes long term investment” scenario.

In my view, the long term outlook for platinum is >30% above current levels and that means Lonmin offers very significant long term value. However, (despite the recent bounce in the platinum price) at spot rand basket prices Lonmin is still cash flow negative by around US$100m a year and that is clearly not sustainable even if the recapitalisation has removed the immediate funding pressure.

And so,while I am happy to remain an investor in Lonmin, I was uncomfortable with it being my biggest single investment. Following the recent sharp rise in the shares, it seemed sensible to take the opportunity to reduce my holding from c7% to <5% of the portfolio – a level at which I feel more comfortable to weather any short term volatility.

Over the next week I will be looking to do a bit more “rebalancing” of the portfolio –  reducing my gold exposure and topping up some of my smaller holdings but I am also on the lookout for one or two new things to add. Ideas welcome, particularly smallcap or non-UK.

More than 3 months since I started Contrarian Miner, I finally have the pleasure of seeing the portfolio in profit. The value stands at £105,158 up 11% since I last posted on 10 Feb. Top gainers have been Antofagasta (+25% since my last post), Amara Mining (+20%), BHP Billiton (+19%), and Fresnillo (+16%).

In the past fortnight the FTSE 350 Mining Index (TR) has outperformed the less volatile Contrarian Miner portfolio (although Contrarian is 14% above the index since inception).

I have today sold 450 of my 800 FRES at £9.62. The shares are up 39% since I bought them against the silver price up just 6%. The latest quarterly production results looked solid enough (silver production at the top end of guidance and gold exceeding guidance) and further production growth is forecast for this year. So there is no particular reason to sell. But I bought Fresnillo largely because of a solid balance sheet and the ability to generate profits even at low silver prices rather than any particular positive view on its operational outlook. As such, its significant outperformance relative to silver looks to me like a profit taking opportunity.

Contrarian Miner currently has £7,684 in cash and while that’s higher than it should be, today is more of a selling than a buying day. In fact, I am struggling to curtail the itch to sell everything that moves today.

I think I said on Monday I was fighting the urge to sell too early on CEY.

Today with the shares up a further 2% since Monday, I have given up the fight and sold half (4,000 shares at 76p each realising a profit of 24% on them).

Nothing wrong with the company, indeed if anything it is looking more solid than ever.

But I am feeling a bit more confident in the prospects for the resources sector and think Contrarian Miner needs a bit more spice (and a bit less gold). So am replacing CEY with stocks I think have further to run.

The new stocks I am adding to the portfolio are:

• Wentworth Resources (London: WRLW) – A small cap oil and gas play in East Africa. The gas is now in production with the price fixed by long term contract. Volumes will ramp up in due course with upside potential as and when demand grows. After tax NPV on their share in this is $153m (their figure) against an EV of <$110m so not only are you buying into this solid asset at a discount but you get the rest of the exploration portfolio free. I have bought an initial 10,000 shares at 29.8p and may add more;
• Firestone Diamonds (London: FDI). Three diamond stocks is no doubt too many, but I have been wanting to buy FDI for a while so am taking the opportunity. Recent updates from the company on mine development are reassuring – project looks on track and management appear confident. Funding through to first production is a little tighter than I would like it to be ($9.8m in headroom excl. the standy facility or U$25m with it) but currency remains a slight tailwind on this and there may be opportunities to bring forward first production a smidgeon. I have bought 15,000 at 17.75p.

Contrarian Miner portfolio is up 4% since 4th Feb to £94,153 – its highest level since 10th December – with precious metals stocks leading the charge (Lonmin +26%, Goldcorp +10%, Roxgold +8%, Centamin +7%, Nevsun +7% and Semafo +6% since 4th Feb).

Catching my eye is the significant outperformance of Centamin. I bought this stock primarily because of its defensive characteristics – low cash costs and all in sustaining costs and thus cash generative at spot, with net cash on the balance sheet and dividend paying.

A good operating performance in Q4 means Centamin met full year 2015 production guidance. The company expects to produce more gold in 2016 at lower cash costs and AISC. That coupled with a 10% increase in the gold price since I bought the shares has resulted in a 22% rise in the share price. It feels as though the company has put the tough year it had in 2014 behind it, and investor confidence has recovered significantly.

That makes the  Contrarian in me feel like heading for the door, but with no particular reason to do so I am fighting the urge. That said, I am looking for 100% upside for Contrarian Miner in 2 years and I am not convinced Centamin offers that so this is not a fundamental long term holding for me.

A long overdue update on Contrarian Miner, which is down 3% in the past month to £90,483 against the mining index which is unchanged on its 4th February levels, somewhat closing the previous gap between the portfolio and the index as shown in the chart below.

What strikes me more, is the extent to which today’s figure mask the meltdown of the last month. The FTSE 350 mining index has bounced back 20% from its 20th January low. And while Contrarian Miner’s greater exposure to gold and other more defensive plays has meant it has been less volatile, individual stocks have seen significant movements  – Petra Diamonds ends down just 1% to 83p but visited 69p on the way following its IMS.

Earlier this month, I thought it a good idea to add some oil to the portfolio, and in the absence of enough time to do my homework properly on oil stocks, I bought 250 shares (£2,724) in OILB.L as a shortcut (its an ETFS Brent Oil ETF). Its up 10% since I bought it.

I have £5,896 in cash in the portfolio, and plenty of ideas of what to do with it. But today does not feel like a buying day so I will sit on my hands a little longer.

For those of you about to descend on Cape Town for the annual Indaba circus, I can report it is sweltering here. Bring shorts.