Early last week I was scratching my head for mining stocks in my portfolio to sell, and amidst the turbulence of the sector (down almost 3% today) the head-scratching has continued.

Now some may say today doesn’t look like a good selling day for a Contrarian. But in the context of the price movement this year, today’s sector move is small beer. What I worry about is that broader market weakness could trigger a far more significant correction in a sector that has moved very rapidly.

So continuing with the theme of selling stocks most likely to move with the index (rather than smallcaps with low liquidity and potential company-specific surprises), but this time trying to avoid stocks which have already fallen sharply, I sold today:

• 55 PHPD – a palladium ETF which holds the physical metal. At $706/oz the palladium price is up 40% since I bought the ETF, and down just 3% from its 6 month peak;
• 40 Caterpillar (New York: CAT) – up just 15% since I bought it but down only 1% from last week’s 6-month high. I might be tempted to buy these back lower down (but not within 30 days or HMRC will bite me).

Following the sales, Contrarian Miner has £12,039 in cash. A nice warchest.

The value of the Contrarian Portfolio stands £160,079 down less than 1% since I last posted which I am very pleased with.

Today I found myself faced with a dilemma – I feel like the mining sector (up 43% since the beginning of June) is overdue a short term pullback  but looking through the Contrarian portfolio I struggled to find anything to sell.

Usually I find myself selling whatever is up strongly and particularly where I’ve made >100%. But at the top of my leader-board are Caledonia Mining (+125%), Lonmin (+115%) and Firestone Diamonds (+107%) – all shares I still like, with plenty of potential upside.

There are perhaps a few shares in the portfolio I have doubts about. Keras Resources and Nevsun spring to mind as stocks where I am not sure I am aligned with the choices management have made since I invested. For Nordgold the value gap relative to peers has increased rather than narrowed since I bought and I’m now wondering whether it will ever close the gap given the lack of free float and with the proposed move to an LSE full list seemingly on the back burner. But none of these strike me as particularly good reasons to sell  – all of these stocks have significant upside potential and none look toppy.

So instead I have picked on the large caps in the portfolio that should most closely follow the performance of the mining sector – reducing my holding in Antofagasta (selling 550 shares at 558p) and selling the remainder of my shares in Rio Tinto (130 at 2512p). Nothing wrong with ANTO but not a stock I can get too passionate about. RIO was bought in late 2015 as a relatively safe sector play with the key attraction being a strong balance sheet – that now seems less of a reason to hold. The Contrarian Portfolio could probably do with at least one large diversified miner, but I’m not convinced Rio is my first choice given its commodity mix (too much iron ore) and ultra-conservative strategy.

The value of Contrarian stands at £160,795 today with £6,769 now in cash. The portfolio is up almost 61% since I started in November, compared to the FTSE 350 Mining (total return) index up 35% over the same period.

Horizonte (London: HZM) shares are down c6% today to 1.85/2.0p (you have to love the spread on some of these AIM stocks, so wide you can’t quote a single meaningful price).

The weakness seems to be on the back of closing of the Glencore deal creating a potential overhang. Given I’m buying with a 2-3 year time horizon and expectation of multiple times upside, for me the closing of the transaction is a significant positive – together with the recently announced additional licence areas cementing Araguaia as a world class development project.

So I see the weakness today as an opportunity and I have bought a further 175,000 shares at 1.9p.

Contrarian stands at £152,499 today with just £461 in cash so time to sit on my hands.

I really like the prospects for nickel- the price hit US$10,755/t yesterday, its highest level in nearly a year as the Philippine government continued to up the rhetoric in its crackdown on mining companies. But the price is still well below the marginal cost of around US$13,000/t and it seems to me that gap could close rapidly.

For me the best way to capitalise on the upside for nickel is through juniors,  but I am well aware of the risks associated with investment in a single junior mining company – not least that management goes off on a tangent (see Keras Resources, down 40% in a week since the company admitted its small scale gold strategy is not – yet –  working).

So I have chosen a set of three juniors to play the nickel theme:

• Panoramic Resources (ASX: PAN). I was already a holder of this stock but last week bought another 15,000 shares at A$0.21/share. Previously a producer, the company mothballed its mines in response to low prices. They can quickly be brought back on line with potential production of 20ktpa at cash costs of US$10-12,ooo/t it needs a nickel price of slightly more than US$13,ooo/t to start to come back on stream. The company has an enterprise value of US$63m of which theoretically cUS$11m is Gum Creek gold soon to spin off through IPO.
• Poseidon Nickel (ASX:POS). A new holding for me I bought 100,000 shares today at A$0.065. Like Panoramic, Poseidon holds mothballed mines which have produced recently and can readily be brought back to life – in Poseidon’s case assets bought from Norilsk. Again operating costs are $10-12,000 and it needs a price of $12,000-13,000/t for these assets to think about restart. We are not far off that already.  The lithium potential may add to the story depending on your view (personally I am a contrarian and hence Lithium is not high on my wish list right now, but there it is).
• Horizonte Minerals (London: HZM). Hoping to add to the 100,000 shares I already own. This is rather a different beast to the two Aussies – a greenfield project in Brazil that will need a higher nickel price to justify investment. But world class in scale and I think a fantastic opportunity for the long term. I like management who have stuck to the strategy despite tough times.

Elsewehere in the Contrarian Portfolio, Maurel et Prom is up 36% today to €3.85 after the Chairman and CEO, Henin, agreed to sell his 24.5% stake in the company to Indonesian State firm Pertimina at €4.20/share with a kicker to €4.70/share if the oil price exceeds $65/barrel for more than 90 consecutive days in 2017.  Shares still trading as a significant discount to the offer price and to what I think is their value so I will continue to hold.

Contrarian stands at £153,134. Portfolio below.