Still hanging on there in Sirius Minerals but surely time for turn

It feels like Sirius Minerals has been falling for ever, with the share price hitting just over 13p today. In mid-January all seemed to well with the price moving over 21p, following news of the York Potash acquisition. Every was celebrating what a great company Sirius was and how the potash price was going into orbit , now  "doom and gloom" pervades the bulletin boards. Investors are fearing a return to the days of 2p, which wasn't that far away in 2010. The board seem to be desperately trying to hold up the share price with the odd RNS, but short term holders aren't convinced and the price drifts ever lower. The market makers are happy to move the price down to try and attract some buyers, but if nothing else they attract some sellers as stop losses are breached, confidence collapses, fear grips the heart of private investors etc. etc.

I am well down on Sirius on my remaining positions after making some money back in January. I am a believer that the Sirius story is genuine and not some sort of smokescreen to "screw" the stupid private investor. The company has built a good collection of potash assets around the world and Dakota and NE England give plenty of hope for the future. Yes it is disappointing that a deal with the Chinese may not materialise in Australia but that is not a reason for Sirius to move back to 2p. I am holding despite the ugly red mark on my account and trust the board to deliver on the "potash dream" over the next 18 months. SXX is not a 1 month story, it will play out over the next 12 months. Investors must have patience and forget the doom mongers on the bulletin boards. Of course I may be wrong, and we  will again head sub 10p, but my bet is once the African/Middle East crisis is over, we are more likely to see 20p than 2p!

Hurray, a positive day at last for the portfolio, despite FTSE falls!

Despite a nasty day for the FTSE 100 (down 73 to 5,924) and Dow Jones Industrials (currently down 100 to 12,114) it was a positive day for most of the Contrarian Investor stocks. News that The Bank of England’s Monetary Policy Committee (MPC) had moved a little closer to lifting interest rates when it met earlier this was announced today as Spencer Dale, the Bank's chief economist, joined Andrew Sentance and Martin Weale, who voted for higher rates the previous month, in calling for a rate hike. So the vote to retain U.K. base rates at 0.5% was 6-3. No doubt the MPC will be worried about the rising oil price with its impact on inflation and negative influence on economic growth.

Bowleven (BLVN) had its second day of gains, finishing up 10p at 323p with it being reiterated as a Goldman Sach's conviction buy. Goldman has said that recent share underperformance has created an attractive entry point into the stock - "We view the upcoming drilling campaign offshore Cameroon positively, with recent success at the Sapele prospect helping to de-risk the surrounding acreage,". The target price was cut to 578p from 623p, with drilling at the Cameroon Sapele-1 prematurely halted because of high pressure gas which the drilling equipment was not specified to handle. Things appear to be calming down a little in Cameroon, with President Paul Biya reportedly not running for re-election later this year after 28 years in power.

Xcite (XEL) finished up 6.5p at 344p and even Rockhopper (RKH) was in the blue, up 3p at 235p. Could this be the end of the Rockhopper slide at last? Disappointing to see Weatherly international move up only 2% after the positive comments on the interim results report.  The one glitch was the continued slide in Sirius Minerals (SXX) to 13.38p, down 5%.

I took the plunge and bought North Sea oil play, Encore Oil (EO) as it has been on my watch list for a while and around 120p it should be a strong entry point. Didn't want to buy yet another oil company but its North Sea so less risky, oil is going through the roof and frankly I've been struggling to find many decent bets outside of commodity stocks so far.

Oil price continues to rise on fears of Africa and middle east contagion

The FTSE 100 is currently down 58 points to 5,929 and the Dow Jones Industrials is down 42 to 12,175 as investors finally start worrying about rising oil prices and its potential impact on economic growth. Brent crude oil is up $3.8 to $109 a barrel.

The closure of oil production and refining in Libya has sent oil prices up to levels not seen for 2.5 years. As Civil war seems a distinct possibility in Libya, with Gaddafi's refusal to step down from power, the reassuring words from OPEC that they can increase supply has done little to reassure oil traders. Talk that Gaddafi may deliberately sabotage Libya's oil field's before he is forced from power as a final act of the "mad dog" hasn't helped sentiment. Troops disloyal to Gaddafi have taken second city Benghazi.

Safe haven's continue to be the flavour of the week with U.S. treasury bonds and gold rising (gold hit $1409 an ounce today) as fear begins to infect investors after weeks of euphoria. Riskier assets like AIM stocks are continuing to be sold off.

Finally, an opportunity to buy stocks for better value after weeks of rises meant there were little cheap targets to be had. This volatility will continue for the foreseeable future until the situation in Africa and the Middle East becomes clearer."Be greedy when others are fearful"!

Sponsors for Contrarian Investor uk

If anyone is interested in sponsoring the Contrarian Investor uk Blog exclusively please contact me at contrarianinvestoruk@gmail.com with the revamp in progress.

Wanted - designer for blog revamp!

I am looking to revamp the Contarian Investor blog/website next month with a brand new look. I would be grateful if those with the necessary experience could contact me with a quote and credentials to contrarianinvestoruk@gmail.com. Thanks

Next Contrarian Investor review

So far on my potential list for the next Contrarian review are:
MeDavinci (MVC) - soon to be Oregon Gold
Motive Television (MTV)
Ceramic Fuel Cells (CFU)
Proteome Sciences (PRM)
Anglelsey Mining (AYM)

Further ideas appreciated! But please tell me why they are undervalued and what is the forthcoming news flow which will rerate the shares. Time is always short!

Proactive investors article on Weatherly

From Proactive Investors: http://www.proactiveinvestors.co.uk/companies/news/25803/weatherly-international-upbeat-on-2011-25803.html

Weatherly International upbeat on 2011

9:05 am by Sergei Balashov

Weatherly International (LON:WTI) expects first sales revenues in March after restarting production “at an opportune time given the current climate of high copper, and precious metal prices”.

In its interim report the company said that it will now increase its exploration efforts to add to its JORC compliant inventory of 623,645 tonnes of copper.

The company was focused on returning to production during the period after placing its Namibian mines on care and maintenance in 2008. The decision was influenced by the recent surge in copper prices, which have jumped from US$2.80/lb in June 2010 to the current US$4.30/lb.

Concentrator and the mines have now been fully commissioned and are operational.

Forward sales have so far covered about 20% of the output from central operations for first 18 months of production at average weighted price of US$9,500 per tonne with first sales revenues expected next month.

The board has authorised forward selling of up to 35% of the company’s output from the mines for a period of 18 months.

The report was met with a positive response from investors as shares in Weatherly climbed 3% in early deals.

The business kept its losses to US$3.7 million in the six months to 31 December 2010, comprising operating losses before depreciation of US$3.2 million associated with the cost of maintaining and redeveloping the mines, depreciation charges of US$1.6 million, and profit of US$1.1 million from disposal of Kombat and other property.

Cash in the bank at 31 December stood at US$15 million following a share placement to raise £4.45 million (US$7 million) in November.

Taking advantage of silly valuations on Xcite and Rockhopper

Lets look at Rockhopper (RKH) first :

Market capitalisation = £600 million at 231p a share.
Cash in bank = £200 million
Proven reserves = 170 million barrels  of oil @ $5 dollars a barrel = $850 million (£524 million at £1=$1.62)
Cash + reserves = £724 million, i.e. £124 million greater than market cap

The market is pricing Rockhopper at less than the oil it has found at Sea Lion plus cash. it is highly unlikely that all 7 wells due in 2011 will be unsuccessful i.e. there is reserves upgrade. Lets not forget that Brent crude hit $108 a barrel.

The lets look at Xcite (XEL):

Market capitalisation = £550 million at 346p a share
Cash in bank =  approx £25 million
Proven reserves = 166 million barrels = $747 million @ $5 a barrel (plus discounting by 10% since heavy oil at Bentley)= £461 million.
Assuming pessimistic CPR upgrade in reserves to 200 million barrels = $900 million @$5 a barrel and heavy oil discount= £555 million

Xcite is currently priced on the basis of a 200 million field at only $5 a barrel with no upside from the CPR or on the future exploration licenses. As a reminder on the Xcite story, here's my post from January: http://contrarianinvestoruk.blogspot.com/2011/01/xcite-energy-should-prove-highly.html

After selling a big chunk of Xcite a couple of weeks ago on the takeover rumours I have bought a nice slug first thing today together with Rockhopper. Hopefully fundamentals will finally prevail on these stocks. I also bought more Weatherly International (WTI) on interim results as the story is now very compelling (http://contrarianinvestoruk.blogspot.com/2011/01/weatherly-international-namibian-copper.html).

Weatherly International Interim results RNS

Weatherly International (WTI) have just issued their interim report, all looks on track with excellent prospects. Top class company! The dividend from the China Africa Resources (CAR) AIM flotation in April will be most welcome.

RNS Number : 6695B

Weatherly International PLC

23 February 2011

Summary highlights for the six months ended 31 December 2010

Financial
· Cash at bank US$15 million as at 31 December 2010
· Net assets of US$32.1 million as at 31 December 2010

Corporate and operational

·    Successful restart  at Central Operations

·    US$7.0 million loan from Louis Dreyfus

·    Share placement raising £4.45 million  (US$ 7.0 million) in November 2010

·    Sale of Kombat mine completed, US$3.2 million received in total

Post Half Year End

·      Concentrator and the mines have now been fully commissioned and are operational

·      Forward sales of approximately 20% of the output from Central Operations for first 18 months of production at average weighted price of US$9,500 per tonne

·      First sales revenues expected March 2011

·      Contract awarded to drill the Tsumeb tailings as prelude to a full feasibility study

Chairman's statement

Half Year Statement

We are pleased to report Weatherly's results for the half year ended 31 December 2010.

During this period we recorded a loss of US$3.7 million comprising operating losses before depreciation of US$3.2 million associated with the cost of maintaining and redeveloping the mines, depreciation charges of US$1.6 million, and profit of US$1.1 million from disposal of Kombat and other property.  

Cash in the bank at 31 December, 2010 totalled US$15 million.

During this period our focus has been on the next stage of development of our Company. This involves not only returning our mines to production in accordance with our programme, but laying the foundations for further development and corporate growth.

Our plans for reopening the mines have involved the recruitment of senior staff and the strengthening of the boards of our operating companies in Namibia with some significant appointments. We have recruited Craig Thomas as Chief Operating Officer and two non-executive directors, Titus Haimbili and Frans Ndoroma, who join Cleophas Mutjavikua on the boards of our operating companies. We have been able to move quickly into production as a result of the measures taken to maintain the mines in good order since production ceased at the end of 2008.

We also entered into an off-take agreement with Louis Dreyfus Commodities Metals Suisse SA ('Louis Dreyfus Commodities') who also provided US$7.0 million of funding for the project.

With copper prices at a high level, the Board has adopted a cautious approach to risk management and has authorised forward selling of up to 35% of our output from the mines for a period of 18 months. To date we have contracted to sell approximately 20% of our projected output in two tranches: the first at US$9,260 per tonne and the second at US$9,750 per tonne. We shall continue to monitor copper prices and projections in the context of our overall strategy which is to guarantee minimum levels of revenue from our mines, particularly during the critical start-up period.

In November we undertook a placement of our shares raising £4.45 million (US$7.0 million) which also served as a catalyst to reshape our shareholder base. We are pleased to welcome all our new shareholders. Blackrock who participated in the placement and were allotted 12 million shares have now taken their total holding in the Company to 65.6 million shares (12.25%) having acquired a large part of the Dundee Precious Metals Inc shareholding.

Operational Update

Central Operations

Mining at Otjihase and Matchless has been under way since January and the company is now pleased to announce that all parts of the mine have been fully commissioned. This includes the concentrator, conveyor hoists and all of the machinery that is necessary to make the mine fully operational. Delivery of the concentrate to Walvis Bay is imminent and the first revenue is expected to be received in March. We believe that we have the right management, contractors and framework in place to sustain a viable and profitable operation which will serve as the platform for the future development of the Company.

Tsumeb Tailings

We are undertaking a formal investigation into the feasibility of copper production from the old tailings dump at Tsumeb. We are examining this urgently as it provides the potential to exploit an existing resource and increase our copper production with relatively low investment.  Accordingly, we have awarded a contract to Dump and Dune, a South African company, to mobilise at the beginning of March, 2011.  The Tsumeb tailings dump comprises residues from the old Tsumeb mining operations and contains an historical (non-compliant) resource of 16mt grading 0.71% copper.  It is also known to contain significant concentrations of lead, zinc and silver.  The company has engaged consultants Coffey Mining to prepare a resource statement and report that will comply with the AIM requirements. Sedgman Engineering, who is currently managing the Tschudi feasibility study, has also been engaged to determine the most suitable retreatment process that can take advantage of the existing Tsumeb concentrator and infrastructure.  

Tschudi Feasibility Study

The open pit-able resource at Tschudi remains a key element in our strategy for increased copper production. Currently the base case is to produce around 10-13,000tpa of copper over a life of at least ten years.Metallurgical testwork is continuing at the AMDEL laboratories in Perth under the auspices of Study Managers, Sedgman.  Results to date support the development of a stand-alone open pit operation based on either heap leaching the transitional ores followed by flotation of the primary ores or simply flotation of both ore types.  Final selection of the processing route is awaiting the results of column leachwork that has been running since last year and the latest round of flotation testwork.  With high precious metal prices, the recovery of silver has become an increasingly important element in determining the preferred metallurgical route.  

China Africa Resources Plc

In January we signed the Implementation Agreement with East China Mineral Exploration and Development Bureau ('ECE'), for the newly formed jointly managed company, China Africa Resources Plc ('CAR'). We are now working on the detailed documentation required for the listing. This transaction, when completed, will involve the distribution of 10% of the entire share capital in CAR to our shareholders as an in specie dividend. This will leave Weatherly with a 25% interest in a very exciting growth opportunity with an ambitious Chinese partner.    

Exploration

The company intends to accelerate its planned extension drilling of the Tschudi syncline. By doing so, it may be possible to incorporate any significant increases in the resource into the feasibility study without unduly delaying the final report. Drilling of Tsumeb West and other areas contained in the exploration licence is scheduled for later in the year.

Appointments

With so many projects going forward we are now in a position to recruit top mining executives to strengthen our team across the full range of our activities. We have appointed Dominic Claridge, an experienced mining engineer, to oversee the development projects at Tsumeb, Tschudi and Berg Aukas (on behalf of CAR).  With an increased focus on exploration we shall be making a further appointment to oversee our exploration activities in Namibia. We are also recruiting an experienced mine manager for Central Operations to support the excellent work carried out by Craig Thomas, our Chief Operating Officer. These are all key appointments that will support the future development of the Company.

Outlook

The company is now back in production at an opportune time given the current climate of high copper, and precious metal prices. We have an excellent pipeline of projects and a more than capable team of people to see these projects to fruition. We shall be increasing our exploration efforts with the aim of adding to our already substantial JORC compliant inventory of 623,645 tonnes of copper. The spin-out of CAR with one of China's largest mineral groups, ECE, offers enormous opportunity and we are still hopeful that there will be an early resolution to our involvement in the Tambao manganese project in Burkina Faso.  All in all, 2011 promises to be a very exciting year for the company.  

Xcite Energy has further drawdown on equity drawdown agreement

RNS just released from Xcite Energy that it is getting another £5 million from the SEDA (Standby equity drawdown agreement) with Yorkville. No sign of that CPR RNS that we have all been waiting for. Incredible to think that the Xcite share price was where it is today before the December 2010 flow test, which was a break or break for the Bentley field. Mmmm...

23 February 2011

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES

TSX-V, LSE-AIM: XEL

23 February 2011

Xcite Energy Limited

("Xcite Energy" or the "Company")

Drawdown on Equity Line

Xcite Energy announces that it has drawn down on its Standby Equity Distribution Agreement ("SEDA") with YA Global Master SPV Ltd ("Yorkville") in the amount of GBP5 million (CAD$7.975 million). This draw down has been undertaken at a price of GBP3.38 (CAD$5.40) per share and will result in the issue of 1,480,754 ordinary shares of no par value in the capital of the Company (the "New Ordinary Shares") to Yorkville.

Subject to the terms of the SEDA and except in accordance with Canadian securities laws and with prior written approval of the TSX Venture Exchange, the shares issued to Yorkville under this draw down may not be sold or otherwise traded on or through the facilities of the TSX Venture Exchange or otherwise in Canada or to or for the benefit of a Canadian resident until the date that is four months and one day from the date of issue.

Application will be made for the admission to AIM ("Admission") of the New Ordinary Shares upon approval of the share issue by the TSX Venture Exchange. The New Ordinary Shares will rank pari passu with the Company's existing issued Ordinary Shares.