Plenty of action today for porfolio stocks

Xcite Energy is moving up nicely today to 350p to buy. What a bargain XEL was at 300p early last week. With reserves upgrade due in the next 2-3 weeks I think there will continue to be plenty of upside here.

Amazing that Weatherly Int. is down again today by 3%. Have topped up yet again and now holding a little too many for comfort. But when stock is drifting down like this its a good time to buy. Calling the bottom is an impossible task and 12p feels pretty comfortable.  Same goes for Solomon Gold which is down to 27P to buy. When everyone else loses interest, this is the time to buy, not on the spikes when the momentum investors are back.

Topped up on Weatherly International

With Weatherley (WTI) dropping today to 12.25p to buy, I have taken the opportunity to buy more. After buying Xcite around £3 a couple of days ago, I have taken a little off the table (plenty left there).

WTI is a favourite because :

• Copper production is already happening at the company's Matchless and Otjihase mines
• Forward sales already contracted to with Louis Dreyfus Commodities commencing in May 2011 at a fixed price of US$9,750/tonne. (total forward sales of 1,925 tonnes), 20% of anticipated production from May 2011 for 17 months.
• China Africa Resources flotation expected in April/May 2011 (WTI shareholders will receive shares in the new company)
• Blackrock now hold 16% of the company

Previous post on ITV reminds me to have courage in your conviction

The 2 main holdings in my portfolio, Xcite Energy (xel) and Weatherly (wti) aren't exactly performing at the moment.

In fact, you can say that Xcite's performance has been dire. In the last 3 weeks the share price has dropped by nearly a pound, or 25%. From excessive optimism about a takeover, now there is excessive pessimism as we flirt with the 300p level. As i posted, earlier today, I really liked ITV back in January 2010, purely on a fundamentals. I bought at 58p, watched the shares go below 50p and then sold from boredom around 60p a couple of months later. The shares hit 93p yesterday! Yes you would have to hold a year to have this gain, but it does demonstrate that if you have done the research and bought for the right reasons, patience can be your friend.

I first bought Xcite Energy in November 2010, on the basis that it had an excellent prospect in the North Sea. Of course then it was risky, since Conoco had failed to make the field flow in the 1980's. In December, Xcite proved the oil could be flowed at a good rate. Risk removed, yet at 308p right now, we are not much higher than pre December. In Q4 the Rowan Norway rig arrives on the Bentley field, in early 2012 the company will be producing 15,000 barrels a day and the field is 100% owned by Xcite. I have been buying on this latest sell off, I'm sure patience will be rewarded.

As for Weatherly, its the same story. There's not been a great deal of movement on this AIM copper play (its the only one on AIM). Though production is gearing up nicely to over 4000 tonnes of copper in 2011 and Blackrock now 16% of the company, the shares are going no where fast. Stuck at 11-12.5p for weeks. However, on a fundamental basis this has to go higher, hence I am buying on any opportunity and it is now my no.2 holding.

In summary, my ITV experience has taught me again to stick with conviction contrarian buys. Buffett employs this with great success, when he likes a stock he buys more during periods of opportunity. He bought Coke when everyone else was selling during the Classic Coke disaster in the 1990's (when they launched a sweeter formula to rival Pepsi, but soon had to change back after a consumer backlash from loyalists of the original flavour). His dividend payment per share is now higher than the purchase price!

New Weatherly Investor presentation March 2011

Link to new Weatherly International (WTI) investor presentation (March 2011):

http://www.rns-pdf.londonstockexchange.com/rns/1215C_-2011-3-1.pdf

Production of copper is forecast to be 4200 tonnes in 2011 and 7900 in 2012 from the Matchless and Otjihase mines (see page page 21). This equates to $41.5 million this year (at $9900/tonne) and $78 million in 2012.

Blackrock confirmed with 16.7% stake in WTI.

In summary - strong revenue and profit growth, strong institutional support

(see previous summary http://contrarianinvestoruk.blogspot.com/2011/01/weatherly-international-namibian-copper.html)

Contrarian Investor UK company reviews to end February 2011

The following company assessments have been made to February 2011:

• Gulf Keystone Petreoleum (GKP)- http://contrarianinvestoruk.blogspot.com/2011/02/gulf-keystone-petroleum-interesting.html
• Xcite Energy(XEL) -http://contrarianinvestoruk.blogspot.com/2011/01/xcite-energy-should-prove-highly.html
• Range Resources (RRL)- http://contrarianinvestoruk.blogspot.com/2011/02/range-resources-look-to-have-good.html
• Weatherly International (WTI)- http://contrarianinvestoruk.blogspot.com/2011/01/weatherly-international-namibian-copper.html
• MeDaVinci (MVC) (Orogen Gold)- http://contrarianinvestoruk.blogspot.com/2011/02/medavinci-ugly-duckling-could-it-be.html
• Vialogy (VIY) - http://contrarianinvestoruk.blogspot.com/2011/02/vialogy-some-good-technology-but-can-it.html
• Sareum Holdings (SAR) - http://contrarianinvestoruk.blogspot.com/2011/02/sareum-holdings-pharmaceutical-cancer.html

Of the 7 companies reviews, Weatherly, Xcite Energy have made it into the Contrarian Investor UK portfolio, though Range Resources was close.

Market moves up after London Stock Exchange closes for 4 hours

With oil prices stabilising as the end game in Libya seems close as regards Gaddafi, markets responded nicely with the FTSE 100 up 90 points to 6,006 and the Dow Industrials is up 65 to 12,130.  Lots of gains across the board. Some degree of risk appetite has undoubtedly returned with a lot of the AIM stocks that have bombed in the last week bouncing., for example, Kurdistan oil explorer, Gulf Keystone was up over 10%.

The London stock exchange was down all morning after a new software system which was installed 2 weeks ago, sprang a glitch. Hopefully when the LSE merge with the Canadian TSX, they can use their software!

Most of the stocks in the Contrarian Investor UK portfolio are having a good day, Bowleven, Sirius, Weatherly, Encore are all up, the only exception is Rockhopper which is down a couple of pence. Nice to see Xcite Energy up 2.5% today after yesterday's top up. Now I need to see some RKH action, up, not down!

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.

Portfolio review of the week - 12th February 2011

The FTSE 100 finished up 43 points at 6,063, a rise of 1% for the week on news that Egyptian president Hosni Mubarak had stepped down. The Dow Jones Industrial Average rose 44 points, or 0.4%, to 12,273, a rise of 1.5% on the week. It was the Dow's highest close since June 2008. WTI Oil futures dropped a dollar yesterday to $85, on the news from Egypt.

The Contrarian Investor UK Portfolio had a mixed week, with gains from Xcite Energy (XEL) tempered by a large fall in Rockhopper (RKH), though XEL represents a much larger part of the portfolio. The unexpectedly large drop in RKH, meant that my margin requirements were looking a little stretched and therefore I reluctantly had to close a couple of Xcite spread bets late on Friday, albeit at a profit, and my portfolio still has a lot of Xcite with news just around the corner.

Xcite Energy(XEL) -  Xcite finished down 3p on Friday, but a gain of 25p on Wednesday meant that it finished the week at £3.82, a rise of 20p on the week. The rig signing deadline with British American Offshore for the Rowan Norway rig passed yesterday (this was the second extension) with no news. Given the company normally issue an RNS the day after a signing deadline, it is pretty much certain an RNS will be forthcoming on Monday. Wednesday's rise was partly related to a FT.com story that there was "vague talk of a takeover" (see previous post http://contrarianinvestoruk.blogspot.com/2011/02/xcite-energy-ftcom-quotes-vague-bid.html). As I stated earlier it was frustrating to have to close some spread bets on Friday, but there is still plenty there to benefit from upside from a good RNS. The key document, the CPR reserves report is expected anytime in the next month, and you never know, it might be sooner than we were all led to believe.

Rockhopper (RKH) - Unfortunately buys on Thursday and Friday were poorly timed with a subsequent 17% fall on Friday afternoon, but my previous post (http://contrarianinvestoruk.blogspot.com/2011/02/rockhopper-1410-3-disappoints-market.html) illustrates why I wasn't panicked into selling like many others on the drop.

ARM Holdings (ARM) - A short on chip designer, ARM holdings, was closed for a profit after the shares hit all time highs this week.

Bowleven (BLVN) - An update from the Sapele 1 well in Cameroon didn't do much to help the shares this week. They finished down 2.5% at £3.29. Several failures in the AIM oil sector this week (Rockhopper, Nautical, Encore) plus perhaps the changes at CMC holdings seems to have contributed to a lot of volatility. Bowleven remains a core holding for medium term gains particularly with a second rig being mobilised in February to accelerate appraisals.

Weatherly International (WTI) - The RNS from 8th February was good news. "mining activities have resumed at both the Otjihase and Matchless mines with ore being blasted and stockpiled awaiting commissioning of the concentrator. The commissioning of the concentrator is progressing well and the plant will resume normal operation in accordance with the programme. Weatherly expects to have sufficient quantities of concentrate to commence transport to Walvis Bay in March with the first revenues to be realised from concentrate sales shortly thereafter." This remains a very promising share with Copper prices at all time highs and production ramping up.

Sirius (SXX) and Angel (ANGM) - Nothing to report. Where is that gold shipment report Elias Jones?(Chief Exec. Angel) - what's all this talk you've been on holiday!!??

Portfolio review of the week - 5th February 2011

The Dow Jones Industrials ended the week up 2.3% after a 30 point rise on Friday to 12,092 and the FTSE 100 closed the week at 5,997, a rise of 2% for the week.

A mixed non-farm payroll jobs report yesterday gave the markets confidence that the U.S. Federal Reserve would not move quickly to raise interest rate or curtail the quantitative easing programme where it creates money to buy government bonds and other financial assets, in order to increase the supply of money in the economy. Since early 2009 the U.S. government has spent or committed $2.3 trillion dollars to this programme. The theory is that by buying bonds and taking them off the market, the Federal Reserve pushes up their prices and push down their yields which mean lower interest rates for borrowers and encourages spending. In addition, it encourages investors into stocks and corporate bonds which offer higher returns than government bonds and hence it is generally good for investors. The downside of the programme is that it creates inflationary pressure in the economy since in effect the central bank is printing money. The Bank of England has also spent £200 billion on quantitative easing.

On the Contrarian Investor UK portfolio front its been a relatively stable week with just a couple of small additional purchases in Rockhopper Exploration (RKH).

Xcite Energy (XEL) - Xcite finished at £3.62, after a 6p rise on Friday but down 8p for the week. The revised rig deadline of February 11th is now the focus with the speculation behind the delays in signing with British American offshore for the Rowan Norway Jack-up rig intensifying. I agree with the view that it is strange that that the contract signing has been delayed for the second time when the cost and specification of Rowan Norway have been known for so long.  I am sure there is something underlying this further postponement - either waiting for early visibility of the CPR (Competent persons report) which will move oil resources to official reserves which is due for publication late February or early March, or a farm in deal or even takeover with a third party. It would be very surprising if the weeks of extra delays are just due to lawyers bickering about contractual terms. t is also interesting that Xcite called on the SEDA (Standby equity drawdown agreement) for an additional £5 million this week, is this drawdown needed for the rig? With February 11th not aware, all will become clearer this week.

Bowleven (BLVN) - Cameroon oil explorer Bowleven had a better day yesterday with a 2.3% rise to £3.57 giving a flat week. No news to report on this one but the Sapele 1 drill update cannot be far away.

Rockhopper (RKH) - A 5% rise on the week but no leaks at all from the progress of the 14/10-3 North Falklands basin well. It's a case of watch and wait.

Weatherly International (WTI), Sirius Minerals, (SXX) Angel Mining (ANGM) -Again nothing to report but I am surprised that an update on gold shipping has not been forthcoming from Angel given it was expected in January. A reasonable 4% rise on WTI as we await further news on the listing of CAR (China Africa Resources) on AIM which is due in April and which WTI shareholders will get an automatic holding.

Next step should be more interesting on the RNS front, potentially we have - Xcite Energy (rig news), Angel (gold shipment update), Bowleven (Sapele 1 update) and most importantly Rockhopper (14/10-3 well update). Hopefully more to write about next week!

Imagination Tech (IMG) - Unfortunately this fell through a stop loss and position closed.

Portfolio review of the week - 30th January 2011

Rioting in Egypt over the rule of President Hosni Mubarek sent shares down on Friday with the Dow Jones Industrial Average down 166 points, or 1.39%, to 11,823 (the biggest drop since November 16th 2010) The Dow fell 0.4% on the week, its first weekly drop in nine weeks. The FTSE 100 index dropped 1.4% to end at 5,88, a 0.25% drop on the week.

The issues in Egypt drove up oil by 5% to $89 (see previous post: http://contrarianinvestoruk.blogspot.com/2011/01/oil-surges-on-egypt-issues.html) and sentiment in the U.K. wasn't helped by news that a U.K. consumer confidence index dropped eight points in January to -29, the lowest figure since March 2009 and only the sixth time in 35 years it has dropped by so much. Despite the oil price surge, oil stocks were mainly in the red.

The fall in the markets was overdue since after 8 weeks of rises on the U.S. markets, a correction was to be expected and the Egyptian situation was the catalyst for a sell off and profit taking. Further volatility can be expected this week and at times like this opportunities for buying can be excellent as uncertainty and the bears take hold of sentiment. 2011 will be a volatile year in the markets.

There has only been once change in the portfolio this week with the addition of Namibian copper miner, Weatherly International (WTI) (see post - http://contrarianinvestoruk.blogspot.com/2011/01/weatherly-international-namibian-copper.html).

Xcite Energy (XEL):  It was good to see Xcite rising on Thursday and Friday after drifting for some many weeks following the oilbarrel.com presentation, finishing at £3.71. Given the market environment at the tail end of last week and general negative oil company sentiment it was reassuring to see a rise. There has been lots of rumours doing the rounds about Xcite this week, with FT Alphaville claiming that it was in takeover talks. The deadline for the rig signing is tomorrow and I am surprised they have left it to the wire. Director of Business Development, Charles Lucas-Clements said at the Oilbarrel conference that investors should not be worried and that the deal would be done but why wait until the 31st? Although I have dismissed the takeover rumours as just that, rumours, it does seem strange and as Lucas-Clements said at Oilbarrel, "don't sell you will see this share double or triple". Perhaps he was referring to February 2011 not a later date on a bid? I guess we'll find out soon enough! Hopefully an RNS tomorrow morning to explain what's happening. Even if a takeover is nonsense then news that they have got the Rowan Stavanger, instead of Rowan Norway, until Talisman Norway need it would be fabulous as production timings would be accelerated. If the Competent Person's report is due in February it would also be good to get an update on progress.

Bowleven (BLVN) - Wild oscillations in the share price this week with the price dropping to 330p on Thursday before rebounding to finish at 355p. News that JP Morgan had offloaded some of their stake and a feeling that this seller was out of the way took the pressure off. I am still surprised that the share price has dropped quite so much with so much good news from Cameroon but market sentiment is not as rosy as it was a few weeks ago.

Rockhopper (RKH) - Little change as the rumour mill starts on progress at the 14/10-3 exploration well. News likely later in the week. Frankly there's so much rubbish on the bulletin boards on RKH I can't even face ploughing through them!

Sirius Exploration (SXX) - A sharp sell off this week after the news from the North Dakota exploration drill (see post - http://contrarianinvestoruk.blogspot.com/2011/01/todays-sirius-minerals-action-is-par.html). The shares dropped 17% to 17.25p. I continue to hold for the reason's cited in the post above.

Imagination technology (IMG) - A 4% drop this week to 368p on no news. I continue to hold but may be one to cull this week as now close to 10% below my buy point.

Angel Mining (ANGM) - We still await the news of the dore shipment for the Nalunaq mine which was promised in January. Time running out? - news on Monday perhaps or another delay?

Weatherly International- a Namibian copper company with plenty of potential

Weatherly International (WTI) has been on my watch list for quite a while now and last week it was added to the Contrarian Investor UK portfolio on the market sell off precipitated by the Egyptian crisis. WTI is not an easy company to research with a complicated history and varied assets some in production others in development. It certainly is a turnaround story having come back from the brink in 2009 during the global financial crisis when its shares dropped to a couple of pence after being close to 30p in 2007. It has a full portfolio of assets, some already in production, so there is no exploration risk.

Background and assets
AIM listed, Weatherly International (WTI), was founded in 2005 by Australian Rod Webster (current Chief Exec).

In 2006 Weatherley bought the insolvent assets of Ongopolo, a Namibian copper producer, with the objective of turning around the performance of its mining and smelting operations. However, by 2008 a global collapse in copper prices meant the project was uneconomic despite production of 2645 tonnes of copper and the mines were mothballed or shut in October of that year with production ceasing in December 2008. Focus moved to the smelter which was subsequently converted to a stand-alone tolling business.

Weatherly has the following major mining interests in Namibia:
Copper assets :Working Otjihase, Matchless, Development: Tschudi open pit, Tsumeb West, Tsumeb Tailings
Zinc assets: Berg Aukas

It also has Manganese assets in Burkina Faso with partner Wadi but this has been put on hold due to licence and railway issues.

The existing licences and resources are sufficient to sustain a copper mining business capable of 20,000 tonnes per annum at an average industry cost of production for the next ten years. Mining was restarted in July 2010 at the Otjihase (3.2 million tonnes at 1.6% JORC) and Matchless mines (0.7 million tonnes at 1.8% JORC) (Central Operations) and full production is expected by the Second Quarter of 2011.

About Namibia
Namibia is a country in southern Africa whose western border is the Atlantic Ocean with a population of just over 2 million. It shares land borders with Angola and Zambia to the north, Botswana to the east and South Africa to the south and east. It gained independence from South Africa on 21 March 1990 following the Namibian War of Independence. Its capital and largest city is Windhoek. For an African country it is considered a stable, democratic country.

Funding
In mid 2010 a $7 million fund raising was complete with Louis Dreyfus Commodities Suisse S.A. Later in the year, the smelter (Kombat) was sold for $3.3million to Grove Export, contributing to a $9 million profit. In November 2010, the company raised further £4.4 million with a placing at 5p.Weatherly also has the benefit of $140 million of carried forward tax losses to offset agains future profits.

Major shareholders
Dundee Precious Metals 7.56%
Bank Windhoek 6.34%
RAB Special Situations Master 5.86%
Webster, Rod J 5.11% (Chief Exec. of Weatherley)
Gartmore Investment 4.73% (reduced following a disposal on January 12th)
Martinick, Dr Wolf G 3.60% (Chairman of Weatherly)
Ezenet 3.42%

Third party deals
In 2009 DPM (Dundee Precious Metals) subscribed for over 40 million shares in Weatherley at 3p per share for £2m, the company also signed a LOI (letter of Intent) with East China Mineral Exploration and Development Bureau (ECE) where they would subscribe for a 50.1% stake in WTI for £16 million. This latter deal with ECE was cancelled in 2010 when the Smelter assets were sold to DPM.

In July 2010, Weatherly signed a Memorandum of Understanding (MOU) with East China Mineral (ECE) to establish a joint venture company (ECE 65%, WTI 25%, WTI S/H 10%) to pursue development of Berg Aukas Lead/Zinc project in Namibia and set up a new UK company, China Africa Resource (CAR). In September, WTI signed a legally binding Implementation Agreement with ECE, whereby ECE will provide funding of £4.8 million for the transfer of the Berg Aukas mine to CAR. Weatherly will distribute 10% of its 35% shareholding in CAR to its shareholders as a dividend in specie.

The company entered into an off take agreement with Louis Dreyfus Commodities Metals in mid January 2011 for around 10% of total production to effectively de risk the initial start up phase. The forward sales contract entered is for 975 tonnes of copper to be delivered progressively over an 18 month period at a fixed price of $9,260 per tonne (current copper price is $9,489/tonne). Concentrate production is expected to commence in mid February and the first delivery under the forward sale contract is scheduled for the end of April.

Future development
The Tschudi open pit already already has enviromental approval. Production estimated at 11,000 tonnes of copper by 2013.

Financials
The company currently has a market capitalisation of £68 million with 535 million shares in issue. Debt is £4.6 million (as of 2010) with cash of $14.7 million (£9.2 million). The company Chairman (Martinick) and Webster (Chief Exec) own 46.6 shares, 8.7% of the company.

SWOT
Strengths
Producing copper assets at  Otjihase (3.2 million tonnes at 1.6% JORC) and Matchless mines (0.7 million tonnes at 1.8% JORC) with minimum 5 year mine life
Copper price strong at close to $9500 per tonne
Low cost of production $3,258 per tonne at Otjihase and Matchless
No exploration risk
$140 million of losses able to offset future production
Good institutional shareholder base e.g. Gartmore and Blackrock
Namibian government large shareholder which may derisk licences etc.

Weaknesses
Success geared to copper price
Activity focused on one country - Namibia (but low risk for Africa)
Blighted history
AIM listed so volatile

Opportunities
Investors in Weatherley will get shares in CAR (China Africa Resource) when CAR is floated in AIM in Spring 2011-  Weatherly will distribute 10% of its 35% shareholding in CAR to its shareholders as a dividend in specie.
Good development pipeline e.g. Berg Aukas, Tschudi open pit
Continued weakening of dollar boosts commodity prices priced in U.S. dollars

Threats
Delay in listing of China Africa Resources
Namibian political situation (considered low risk)
Delays in production ramp up at Otjihase and Matchless copper mines
Further fund raising (low risk due to forward selling contract with Louis Dreyfus Commodities Metals
Collapse in copper demand and price e.g. China

Outlook
If every falls into place during Q1 2011, things look very positive for Weatherly given its undemanding rating and low market capitalisation of just £68 million. With full scale production from Otjihase and Matchless of over 4000 tonnes in 2011 and close to 8000 tonnes in 2012 plus some interesting development projects such as Tschudi coming on stream in 2013 . So this should be a year to put its past mistakes behind it and look forward to 2012 and 2013. If we conservatively assume net profit of $4,500 per tonne of copper in 2012 and production of 7500 tonnes, that would make earnings of $34 million (£21.5 million).

The usual risks of investing in Africa have been reduced by Rod Webster's excellent work in getting the Namibian government to have a large shareholding and thus incentive for future success.

NOTE FOR THIS POST:
I may well have missed a pertinent fact for WTI. Please comment here or contact me directly to correct any errors or inform me of any additions. It's a complicated but compelling story. Thanks!