It's been a really busy couple months here - a visit to the Yukon to meet with some very interesting stories over there, presenting at a 'weird shit' investment conference in London, an upcoming visit to Serbia to see an emerging story, and lots of portfolio management as markets have been volatile and presented some new opportunities since we last wrote.
Yukon
I was lucky to be invited on the Yukon Mining Alliance site tours during June, and visited the sites of 8 juniors and met with a few others. I will write separately regarding a few of the most interesting (in my opinion at least!) stories there.
Uranium
As mentioned before, I am now mostly out of the uranium miner equities. My presentation at the conference in London was actually a pair trade within the sector, shorting Boss and Paladin and going long NXE and DNN. This was primarily due to disjointed valuations based on their primary projects. Whilst I felt the Canadian names were realistically valued, the Australians were trading at 2-3x the Canadians, based on projected cash flows modeled at the same U price. This valuation discrepancy has been trending together over time, however now that U prices are at or near equilibrium pricing, there is no logical reason for the gap to continue to exist. Since I wrote the article (mid May) the Australian equities are each off 25-30% whilst the Canadians are flat. I'm now suggesting to close the trade as it has moved substantially in a short space of time, but the longer term argument is still valid, and they should be monitored for another opportunity to launch the same trade.
Elsewhere in Uranium land I have now re-established a full position in physical uranium, as I believe the risk/reward is now offering asymmetry again. If you recall I left this position on 8th February when U prices weren't far off their peak of $106/lb. Now that spot prices are back into a more normal arena and have shown support around the $85/lb mark, along with the fact that YCA.L has been trading at a c15% discount to NAV, you can pick up U via Yellowcake at around the $73/lb mark, substantially less than the closing June term price of $79/lb. My YCA position is 15% of my portfolio, with an average cost base of £5.80/share. I am not expecting fireworks immediately, however there remains substantial supply risk and I'd prefer to be in the game at this point of the cycle than on the sidelines watching. The news of the increased tax charges out of Kazakhstan has given me the confidence to fully re-establish the position.
First Pacific
I have initiated an 8% position in First Pacific, trading on the SEHK. They are trading at stupidly low multiples of EBITDA, having sold off along with every other HK stock. However they are somewhat unique in that all of their custom comes outside of China/Taiwan so I think they should survive any issues that may arise there. In addition, they conservatively value their individual holdings, with multiple analysts feeling there is substantial upside if these were valued at open market rates. Whilst I don't see any immediate catalyst helping unlock that discount, I do like buying things when they're half price, it helps underpin the current valuation and gives plenty of upside should things go well. It's hopefully a position to put to the back of the portfolio, forget about and review in a few years time.
GCP
GCP has performed well and is up c10% since I started my position. I think with a softening rate picture it should continue to re-rate and I'm expecting an approx 50% return on my position within a 12-18 month period.
Sintana Energy
I have been playing around with Sintana Energy and Galp Energia for a couple of months too. The common theme is their offshore Namibia oil field discovery called Mopane. This is a highly prospective discovery and Galp are currently looking for a farm in partner to help develop it. There should be plenty of news flow upcoming and Sintana has some other licenses in the same area that should start seeing drilling later this year. I think there is definitely some asymmetry with Sintana, and Galp should continue to see support around the 18-19 euro mark. I don't particularly like the insider selling at Sintana, though it appears to have now abated and the directors concerned still hold the vast majority of their holdings. My conservative estimates for Sintana based on Mopane alone suggest a share price of C$1.70-2.00. If they have any success with the other licenses, we could easily see $4-5 a share by end 2025. Sintana and Galp are both a 5% position size for me currently.
Other plays
I have taken a small starter position in Nat Gas ahead of what I expect to be a cold European winter. For the moment this shall remain a purely speculative play, but I see more chance of upside than downside at present. I have also bought several sector ETFs for a trade recently - I'm long France, Mexico and Argentina. I don't see any of these being long term holds but for each their own reason I think there is short term upside to be had. I also had success with the NTR/MOS pair trade, which recombined correlation and I exited at a healthy 40% profit within 5 weeks. I will continue to monitor this pair to reinitiate the position if the market allows. I continue to look at MSTR/BTC too, but the market isn't being kind and it's not the time to re-enter this one yet. MSTR just announced a 10-1 stock split which will support their equity for the moment so one to keep an eye on but no planned action currently.
NTR/MOS recombining after a short separation.
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