Late last week I decided to introduce some nickel stocks into the portfolio. Nickel remains one of the most bombed out commodities. The price peaked at over US$50,000/t in 2007 and at $28,000/t in 2011. At the current price of just over US$10,000/t around half of the world’s production is loss making, which can’t carry on indefinitely. Sure this may be a slow burn – but by playing this theme through junior miners with good projects awaiting better market conditions I think the potential upside will be multiple times. So I bought:

• 13,000 Panoramic Resources (ASX: PAN) at A$0.17. Bought on Friday and in a rare piece of good luck the company announced Monday  it planned to IPO its gold asset. The market loved it – up 38% since. Not sure the spin out of an asset to the market justifies that sort of response, as it is far from a done deal, but I will take it anyway. More substantively, Panoramic has resources totalling over 250kt of contained nickel (in ground value of $2.8bn at today’s price) and potential production of 20ktpa with limited capex to get there as it is mostly restart of mothballed operations that could work at a nickel price of $13,000/t.
• 100,000 Horizonte (AIM: HZM) at 2p. Sure, with a market cap of £13m it may be difficult to envisage how this micro-cap will finance the $500-600m required for even a small scale ferronickel operation. But that doesn’t change the fact that they have managed to amalgamate the best ferronickel asset in Brazilian by hoovering up unwanted early stage assets from Teck and Glencore. Following the experience of Vale, Anglo and Glencore at Onca Puma, Barro Alto and Koniambo respectively, ferronickel may be a bit of a dirty word in the short term, but Araguaia (HZM plus GLEN’s project of the same name) is absolutely a world class asset and I believe there will be a buyer for this longer term. Bear in mind Vale paid US$876m for an undeveloped Onca Puma in 2006 and you have the order of magnitude upside. Considerable patience required though.
• I am also watching Poseidon resources but haven’t pushed the button yet. Looks really cheap as well but I don’t like the convertible debt in a non-cash generative company even if it is a few years out. May still bite.

Mining sector looking overbought, and I was down to just 1% in cash, so I have sold today:

• 150 RIO at £25.24, and
• 60 PHPD (the palladium physical ETF) at $60.93.

No fundamental reason here on value grounds or long term outlook – rather just reducing the most overbought of the stocks in the Contrarian Portfolio to give myself a small war chest in expectation of a sector pullback.

The value of Contrarian stands at £149,210 with £8,002 in cash. Portfolio below. The portfolio currently consists of 24 stocks which is towards the top end so I might look for something to exit. Think it would be good practice to cut a loser (and run my winners) although my instinct is as always the opposite.