2023 Progress thru end of Feb

So we're nearing the end of February and I thought it was time to take stock of how the year is panning out. So far our core portfolio is up 11.35% YTD, versus 4.63% in the S&P 500. Glad to see we're still outperforming despite the start of the year having seen a bounce for long duration assets. We are still mostly avoiding stocks that do well in a low rate environment, with the prediction that we will see another wave of inflation later this year.

We've been quite busy reorganising the portfolio this year, taking some time to reposition ourselves cleverly and making the most of the positive sentiment in the market. We have exited our positions in BASF and Heidelberg Cement, clocking a return of 22% and 39% respectively over a 5 month period. We were fortunate to exit BASF ahead of its earnings call. I see valuations no longer being the absolute steal they were in late summer and now reflect probably an optimistic view of the European energy situation. Europe was lucky this winter to avoid the worst of the predictions, but the structural problems remain, and without any rapid improvement in the Russia/Ukraine conflict, I see gas and coal recommencing their rise in early summer putting pressure on these stocks. I may have exited a touch early, but I felt the risk/reward was now more balanced and it's always sensible to book respectable gains when the outlook is still so uncertain.

We are now holding more like 40% in cash (actually mostly T bills accruing a healthy 5% pa) ready for things to soften a little in the coming months. We opened and closed some short dated OTM put options in GDXJ for a 300% gain in a month as the index had become rather overbought which has now corrected itself. We have also added an AAPL Aug 23 bear put spread which is up 20% so far. We continue to hold this position but will look to exit the trade on any bounce. We utilise these options as hedges to market volatility which we are expecting to continue to through 2023.

With regards to Uranium we have been continuing to add to our position in F3 Uranium on weakness and are encouraged by the recent step out results they have published. We have also been continuing to migrate our U.UN position to YCA as and when the discounts to NAV have allowed. This has proven profitable so far. Much more recently we have reopened a position with ISO Energy with the view there are several catalysts ahead in 2023 which could be supportive of their valuation. We were also due to participate in the infamous GLO financing, which has regrettably been postponed for the moment pending some legal action in Niger. We hope to be able to participate in their next raise and in the meantime will be adding to our position in the open market.

In other themes we have been procuring PBR.A and EC and are on the search for other Brazilian value plays that we can access (quite unbelievably our primary broker, IBKR, doesn't support trading on the Brazil B3 exchange). Outside of Brazil we have been increasing our position in ABRA silver, which has a severe warrant overhang due to end in May. They continue to put out impressive results with the drill, and we believe the warrant overhang is causing some overhead pressure on the share price in the short term, which should bounce once we have worked through the warrants.

Finally we have been busy trying to find asymmetric opportunities in the gold mining space after a tough 2022 for the sector. We are still very supportive of a strong gold price in the years ahead and valuations in this sector have come off notably since the summer of 2020 and now offer some compelling entry points. We have been focussed on finding plays that could 5-10x in a relative quick timeframe (1-3 years) with, in our view, rather limited downside. This is not an exact science and each position only represents a small % of our overall portfolio, and we are taking a basket approach to this concept. We have so far initiated positions in ATLY on the TSXV (Altaley Mining) and GPR on the ASX (Geopacific Resources). Both in our view offer tremendous upside, if management can deliver change and bring the respective stories back to some credibility. Both could equally go to 0 if they continue to fail to deliver what they promise. We have several others on our radar and are waiting patiently on the sidelines for the moment to pounce.