Took advantage of a second day of market weakness yesterday to put some of Contrarian’s cash to work, buying:

• A further 70 Caterpillar (New York: CAT) at $75.33;
• An additional 75 PHPD at $57.22 (this is a physical palladium ETF – i.e. it holds the actual metal as the backing for each share so should track the palladium price very closely apart from a small mgt fee) – I already had a fairly substantial holding but I really like palladium;
• 4000 Ophir Energy (London: OPHR).

So why Ophir?

The shares fell 28% in three days after the company announced that the Schlumberger deal to fund their major Fortuna FLNG project had fallen through. Whilst we are scanty on details, it would appear to be commercial rather than technical considerations which scuppered the deal. This puts back the timing of that project, possibly significantly, and there is no certainty a new deal can be found on similar commercial terms.

But…

• The Fortuna project itself still looks robust (albeit at slightly higher gas prices), and the $450-500m capex estimate is relatively bite sized (for LNG where capex usually runs into the billions)
• The company has a market cap of $684m and, unusually for a producing oil and gas company a significant net cash position ($355m) giving an EV of just $329m.
• In addition to the (albeit now unfunded) FLNG project, Ophir has low cost ($15/bbl) producing assets in SE Asia with 55MMbo of 2P reserves and Indonesian gas to come on stream in H216. And loads of exploration acreage.

This may be a slow burn, but I believe the upside is 3-4x the current share price.

Pretty flat today, Contrarian stands at £129,615, and I now have just £3,421 in cash.

Contrarian Miner is down 4% today, to £131,550. Whilst it is never that much fun to watch £5,000 disappear overnight, the portfolio is down just 1% since I last posted on 20th April against the FTSE350 Mining Index down 11% so I am feeling OK. Portfolio performance has been helped by the fact that 15% of the portfolio was in cash when I last posted, as well as good performance from some of the gold stocks – Roxgold +15%, Caledonia Mining +11% and Goldcorp +9%.

I have taken advantage of today’s market weakness to top up two existing holdings, buying:

• 1250 Tullow at 247p (down 12% today)
• 1500 Maurel et Prom at €3.12 (down 3% today)

Both are holdings I have been wanting to add to, but in the case of Tullow I thought I had missed the boat as it has been so strong. With Tullow off 12% today I got a chance.

That still leaves me with £12,770 in cash, and while I have a few ideas for it I am trying to sit on my hands. Itchy fingers also keep wanting to sell Roxgold (up 98% from where I bought it) but I tell them no – gold has broken out of downward trend and could do almost anything.

Still waiting for that buying opportunity.

Contrarian Miner now stands at £132,993. Over the past week the Contrarian portfolio is up 4%, lagging the FTSE 350 Mining Index which is up 7%. So I suppose its “could do better” for me this week, but it doesn’t feel like it.

With BHP Billiton up a further 2.7% this morning despite a mixed set of quarterly production numbers, I sold the remainder of my holding (350 shares at 987p). I may well want to own these again in future, but for now I feel its the one stock that has really travelled too far too fast and there are better opportunities elsewhere.

With the proceeds (more or less) I have bought a further 60,000 shares in Altona Mining at 9.4c a share.The shares haven’t really moved at all since I bought the first tranche a month back, so I am happy this is a fine time to buy more even within a sector that is feeling generally overbought.

That still leaves me with cash of £19,607 – too high but every time I find something to buy I seem to find something else to sell.

Portfolio performance relative to index below.

So much for the buying opportunities I was looking forward to. Contrarian Miner is up another 2% today to £131,135.

I have just sold half of my shares in Roxgold (ROG:V)  being 7500 shares at C$1.13/share, banking a 75% profit on them.

At the current gold price the company would generate around US$50m in cash each year, which makes for a seemingly generous FCF yield of 13% based on the current EV of just over US$380m.

However, the reserve life of the mine is c8yrs, so at the current gold price the mine would generate cUS$400m in undiscounted free cash flow over the life of mine compared to an EV of US$380m.

Sure the gold price could rise or additional resources could be converted to reserves. But given that its a pre-production asset in Burkina Faso, I’d say its pretty fairly priced right now and am taking some profit. Haven’t decided what to do with the other half – I have a nasty habit of selling things too early so I am tempted to hang on for a bit and see what happens.

I now have £19,030 in cash or 15% of the Contrarian Portfolio. It should be starting to burn a hole in my pocket no matter how overbought the market may be or I’m going to suffer from nasty cash drag. But the contrarian in me wants to sell and not buy on a day like today.

Portfolio below….

A quick update on Contrarian Miner’s performance – following last week’s China-led mining rally the portfolio stands at £128,552 (up over 28% since inception against the FTSE 350 Mining total return index which is up 8% over the same period). Of the portfolio a significant £14,716 is currently in cash – the mining sector has moved a little too much in a straight line in the past two weeks and expect there may be better buying opportunities later this week or next.

Late last week I sold half of my BHP Billiton shares at 893p per share – realising an 8% loss but given the 23% rise in the space of a week I was pretty happy with that price. I bought BHP early on as a relative safe haven given the perceived “strong” balance sheet in what was an extremely volatile market . It has been one of the worst performing stocks in the portfolio – and that serves me right for buying a company that I don’t like because its viewed as “safe” rather than following my own (contrarian) views.

Likewise selling Anglo American at 288p in December has proven to be by far my worst exit. Serves me right for selling a company I liked because I was scared of what the market might do to the share price in the short term.

See below for the full Contrarian portfolio. I like the current geographic and commodity mix but I do need to deploy that excess cash. I’ll be aiming to do so by topping up  recent purchases which remain relatively small holdings currently.

When I last posted a comment on Amara Mining on 29th February, I mentioned that despite the uplift in price following the offer from Perseus, the share price was not reflecting the full value of the Perseus share portion of the offer and was ascribing no value to the warrants. At the time I said that although I was not sure whether I wanted to hold Perseus shares longer term, “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”.

Now with the acquisition approved by shareholders and soon to close, the gap between offer value and share price has narrowed (or indeed closed depending on your view of the value of the warrants). So I have just sold all 41,000 Amara shares I held at 16p per share, realising an 82% profit on my average purchase price of 8.8p.

I will need to think what to do with the resulting cash as I already had £5,506 prior to this. However that can be tomorrow’s problem – for once I thought I would get this to you hot off the press.

Contrarian currently stands at £123,946.

I last posted on Contrarian Miner on 7th March, so firstly an overdue update on portfolio performance. Contrarian is up 4% since 7th March to £121,719 against the FTSE 350 Mining TR index which is down 10% over the same period. Since inception Contrarian Miner is up 21% against the mining index which is flat.

Last week I made a few changes to the portfolio, introducing some fresh ideas. I have added two Australian copper juniors:

• Altona Mining (ASX: AOH, Mkt Cap A$50m) – bought 60,000 shares at A$0.06. In my opinion Altona Mining’s Little Eva project looks very doable  (cash costs around $3,600/t but low capital intensity).  And they already have (subject to deal completion) a Chinese partner to fund the majority of the capex with the remainder sitting in cash in their bank. Clearly the deal could fall through, however at an EV of A$6m (market cap of A$50m and cash of A$44m) that’s a risk I’m willing to take particularly as their significant cash balance gives them space to weather the storm if needs be.
• Highland Pacific (ASX: HIG, Mkt Cap A$56m) – bought 90,ooo shares at A$0.06. Highland Pacific has an interesting portfolio of significant projects in Papua New Guinea in which it is the minority partner. It owns 20% of the massive Frieda River copper project in PNG (previously an Xstrata project but now been pursued as a slightly small scale project by Panaust/Guandong Rising). It also has a share in the completed $2.1bn Ramu Nickel operation – this will need a higher nickel price to work but they were free carried through construction and in effect its a free option on the nickel price. Lastly they have recently JV’d with Anglo American on their Star Mountain copper-gold exploration project. It may take time, but it seems to me all of these are world class projects and that is definitely not reflected in the current A$56m market cap.

I have partly funded these new purchases through the sale of  half of my holding in Keras Resources (200,000 shares at 1.08p). I bought this micro-cap stock at 0.47p per share because I like the management and the African assets. Over the past 3 months it has morphed into a small-scale Australian gold producer and without having had a really close look I am not entirely convinced I am excited about the change. In any event with the stock up over 100% I sold half – sod’s law it is up a further 40% since. I have also sold the remainder of my Gem Diamonds (2,250 shares at 109p) but retain diamond exposure through FDI.

Portfolio below.

In the past week the Contrarian Miner portfolio is up 8% to £117,186, slightly lagging the FTSE 350 Mining index which is up 11% on the week. Key drivers of portfolio performance this week have been Lonmin (+85%), micro-cap Keras Resources (+31%), BHP Billiton (+17%) and ETFS palladium ETF (PHPD) up 14%.

As previously flagged, I have continued to reduce the gold exposure of the portfolio, selling 900 Semafo last week at C$4.95/share (a 59% profit) but keeping 1,800. I also sold 2,000 Lonmin on Friday at 154p – a 38% profit – the shares powered upward last week on an improvement in the platinum price coupled with confirmation from the company that restructuring efforts are on track, and it seemed to me a sensible time to take some more money off the table .The shares look heavily overbought, and whilst they may still have considerable long term value they are unlikely to continue to travel in a straight line. I still have 3,200 shares in Lonmin which seems ample.

As promised, I have put some of the cash in the portfolio to use, adding three new holdings:

• Caterpillar Inc – 70 shares at $69.50/share. It may be a while before the more upbeat sentiment in the mining  and oil sectors translates to new orders, but I think the >70% peak to trough fall in mining sector orders for Caterpillar provides an idea of the long term upside. The balance sheet does not look overstretched even in current depressed market conditions.
• Maurel et Prom (Paris: MAUP) – bought 1500 at EUR2.98/share. Considered buying Nigerian oil and gas co Seplat and then decided MAUP was a better entry point. The company has a diversified set of cash flow generative African oil and gas assets – Gabonese oil, Tanzanian gas (they are the operator for the Mnazi Bay development in which Wentworth has a share) and Nigerian oil and gas (through share in Seplat). The balance sheet looks in reasonable shape and there is also a significant exploration portfolio (albeit on the backburner).
• Tullow. Have been watching Tullow for a while now and finally decided to press the button. Sure, I could have got them 50% cheaper in January, but the balance sheet issues look a lot more manageable at US$39/bbl oil than they did at US$29/bbl (chart below is helpful here). Net debt totals $4.0bn with US$1.9bn cash and debt headroom. Cash flow should turn positive from Q4 16 once the TEN project in Ghana comes on line (Jul/Aug this year).

Latest portfolio snapshot is below. I have £5.9k in cash which remains a little on the high side but not burning a hole in my pocket.

I have today sold the remainder of my holding in Centamin at 96.9p per share, realising a 59% profit. Gold bulls may question the sale, but 39% of the Contrarian Miner portfolio was in gold, I have been looking to reduce that.

Centamin is a solid enough company with a strong balance sheet and Sukari is a low cost producer.However, I’m not convinced there is significant value upside here, and hence am taking profit.

At today’s gold price the Sukari mine generates approximately US$160m in cash flow after tax (AISC of $900/oz and target production rate of 500koz per annum). Of that, 50-60% is attributable to Centamin (once the Government profit share kicks in) thus giving them c$83m in attributable free cash flow from Sukari. And then Centamin spends just over US$30m a year in exploration outside Sukari and other costs leaving c$50m a year in free cash flow for the group. On the current EV of US$1270m that is just under 4% FCF yield which to my mind is not enough to justify investment. Particularly given the unresolved legal issues relating to the mining licence (at small risk but nevertheless one that cannot be entirely ignored in my view).

The Contrarian portfolio stands at £108,758 currently – little changed on yesterday.

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.