Thursday, June 22, 2017

Zinc warehouse stocks continue to fall

zinc warehouse stocks

Link:

Zinc starred with a 3.4% jump to US$2631.50 per tonne, the highest level this month.

According to Bloomberg, London Metal Exchange stockpiles fell for the 25th consecutive day to the lowest level since January 2009, with inventories available for delivery the lowest since 2008.

Despite the sluggish climate for base metals, zinc has actually risen by 8.3% in the past two weeks.

I am still bullish on zinc and Nevsun (NSU).

Tuesday, June 20, 2017

Rio Tinto begins new exploration in Mongolia

Reuters:

Anglo-Australian miner Rio Tinto has started new exploration work in Mongolia's Gobi desert after a gap of around five years, in a sign that Mongolia is having some success at bringing back foreign investors.

(snip)

Andrew Stewart, managing director and chief executive officer of Australian copper-gold explorer Xanadu Mines , said Mongolia was back on the radar for many investors.

Stewart said exploration was underway about halfway between the Oyu Tolgoi project and Xanadu's Kharmagtai copper-gold project, south-east of Ulaanbaatar.

The Mongolian economy needs foreign direct investment. Hopefully this will be the start of a trend.


Mongolian economy back in growth mode

World Economics:

Market Growth Index grows further to the highest level in 3 years.

Business confidence continues to grow rapidly.

Price inflation remains low.

The Sales Manager Index is now over 50, which indicates growth, and is moving higher. This new found growth is due to increased coal and copper exports. The Presidential election is next week and hopefully after that is complete we can see some movement on getting some of the big projects, like Tavan Tolgoi, moving forward.

Monday, June 19, 2017

Closed out Enzo Biochem trade at $10.75

Got in to ENZ on 6/12/17 at $9.80

Closed the position today 6/12/17 at $10.77

Profit on 200 shares $194

I still have an open short position in ARIS


Still think this one is poised for a fall. Really overbought and MACD looks like it is going to roll over.

Vietnam Opportunity Fund a way to buy Vietnam at a 20% discount

One of my long term investing themes is the continued modernization and urbanization of emerging and frontier market countries.

The inexorable rise of China over the last twenty five years has caused investors to look for countries starting from a small economic base with potential for long term growth and wealth creation.

I have been watching Vietnam for some time and have been investing in the country for a couple of years. The country has many interesting characteristics that cause me to believe that it is on a long term trend of consistent high growth.

One of the main things I look at when analyzing a country is the demographics of the country. Vietnam is a country of approximately 92 million people. This is a larger population than the UK, France, or Germany.

An important note about the population of Vietnam is that it is growing and mostly younger with the median age being 30 years old.

Vietnam demographic chart


The above chart indicates a country with more young people than older people. This is excellent because younger people spend more money. They are creating families, buying houses, cars, and having babies. They are consumers. One of the problems in the west is the demographic decline of its populations. Too many old people who do not spend money.

This younger population is coming of age right in the sweet spot of Vietnam's development as more of them continue to enter the middle class.

Vietnamese middle class in 2020 and 2030


As the chart from Nielsen shows Vietnam's middle class will grow to 44 million in 2020 and a whopping 95 million by 2030. This tsunami of middle class consumers should propel the Vietnamese economy for decades to come.

The country does have a communist form of government but I think the leaders are adopting the Chinese model of allowing capitalist enterprise as long as the communist party of Vietnam maintains political power.

Economic conditions and the business environment in the country continue to improve as Vietnam moved up nine spots on the World Bank's ease of doing business rankings. I expect the government will continue to make it easier for business to be conducted in the country. However, these things take time and the party will want to make sure reforms are done in an orderly manner such that political control can be maintained.

One of the best ways I have found to gain exposure to the growth of the Vietnamese economy is through shares of the Vietnam Opportunity Fund (OTCPK:VCVOF). The fund also trades on the London Stock exchange VOF.

VOF is a closed end fund and therefore is traded on a stock exchange. This has resulted in the price of the fund trading for below the net asset value of the fund for many years. The current discount to NAV is approximately 20%. This allows investors to buy $1.00 of a growing dynamic economy like Vietnam for $.80.

A couple of things to note about VOF. The first is that the fund managers are Vietnamese and based in Vietnam. This is a plus as they speak the language and are close to the action. The second important thing to note is that 8% of the funds assets are invested in private equity deals.

I like this fact as it gives the fund optionailty in pursuing investments that may be cheaper and have more upside than a regular equity investment. This may be part of the reason the shares sell at a discount.

The management of the fund recognizes the discount to NAV and has been a regular buyer of the funds shares in an attempt to narrow the NAV. Over time this will have a cumulative effect that should benefit shareholders. Link to recent fund report chock full of info on the fund and the Vietnamese economy and markets.

In conclusion I believe an investment in the Vietnam Opportunity Fund allows the average investor to have a stake in a dynamic emerging market that has decades of growth in front of it. Buying at a twenty percent discount to NAV is a great deal also.

Three catalysts for a uranium rally

Sunday, June 18, 2017

Ukraine grain exports surge

Kyiv post:

combine harvesting wheat crop


(snip)

Ukraine’s grain exports increased to 40.2 million tons in the 2015–2016 marketing year, which runs from July to June next year, up from 32.3 million tons in the 2013–14 marketing year.

Better still, Ukraine’s grain industry has the potential to boost exports to 60 million tons within the next three to four years — if the country’s transport logistics are improved.

(snip)

In 2016, Ukrainian agricultural exports accounted for 12 percent of the country’s gross domestic product of $93.26 billion. About 39.6 percent of Ukraine’s agricultural exports were grain, and last year’s $6.1 billion in earnings from grain exports accounted for 17 percent of the country’s total export revenues of $36.4 billion.

This is the reason why I have invested in agricultural enterprises Astarta and Agroton. Although both farm in Ukraine shares are listed on the Warsaw exchange. I use Fidelity to trade on the Warsaw Exchange. They are both still undervalued.

CEO of Alterra Energy gives thoughts on renewable sector

On My Radar:

renewable energy wind and solar


Ross Beatty's, Chairman of Alterra Power,  comments:

We are living in as profound an energy revolution as the switch from wood to coal and coal to oil…

Solar is here, it is cost competitive, it is one-tenth of the cost it was 10 years ago.

We’ve had a revolution in the transmission of energy and in things like better refrigerators, better light bulbs.

Coal and uranium (think nuclear fuel) driven power are dinosaur products. Uranium, it is extremely expensive to produce and there is lots of it around.  The main use is in producing electricity.  Solar will take over.  Bearish on uranium.

Bullish on copper. It is an electricity metal.  Copper is used in new renewable energy, pumps, cars, etc.  It is a winning metal.  It is going to go up.

Silver is a winning metal… its biggest use was in photography. That’s gone.  The biggest use today is in digital products, every computer, cell phone, and new use in photo-plutonic energy storage cells.
He sees no investment advantage in most commodities… bearish on iron ore and coal.

Need a game changer to get excited about metals. New uses.  In most metals, deflation is a reality but there are spots.  Spots are where people are using it in their everyday lives…copper and silver.

Renewable energy – Solar will take over. It is so much cheaper.

I agree with some of these comments and I am on the fence on others. I work in the renewable energy field. The one thing holding it back in my view is it is intermittent. The wind does not always blow and the sun does not shine at night.

Until this is solved and cost effective storage comes online I do not think renewable energy can reach its full potential.

I do not agree with him on nuclear power. It is clearly growing as there more nuclear power plants in service and under construction than ever before. It is clean baseload power and countries like China and India will have it in there energy mix along with renewables. It would be profoundly stupid to have all of ones energy supply based on an intermittent source.

I do like these renewable energy companies because they are the current zeitgeist and are being helped along by government mandate. Regardless of what one thinks about that it does matter.

By the way it is possible to subscribe to that newsletter On My Radar.




Saturday, June 17, 2017

Colombian natural gas dynamics and Canacol Energy shoutout

Seeking Alpha:

The flag of Colombia


Colombia's thirst for natural gas has been expanding at a rapid rate and in comparison to its South American neighbors its reserves of around 4.8 trillion cubic feet are quite small. Despite these relatively low reserves Colombia was natural gas self-sufficient up until 2016 when booming demand and supply constraints forced it to import natural gas for the first time ever. This heralded the end of decades of self-sufficiency creating a significant opportunity for natural gas producers.

Of greater concern for Colombian policy makers is that a combination of a sharp uptick in demand coupled with growing supply constraints is causing demand to significantly outstrip supply. 

(snip)

Canacol has formed a special purpose vehicle to construct a new private gas pipeline connecting its gas facility located at Jobo to the Promigas operated pipeline at Sincelejo. The pipeline is forecast to be completed by December 2017 and will transport 40 MMscfpd to Canacol's customers in Cartagena. It also will lift the company's production flow rate to 130 MMscfpd and expand to 230 MMscfpd by 2018, giving its earnings a healthy lift.

I am waiting for the pipeline to be completed so that Canacol's delivery of gas can be increased. This should happen by the end of the year. Obviously there is risk but the market exists and the country is hungry for gas.

Cyprus to partner with Israel and Greece to tap natural gas bounty

Cyprus Mail:

offshore oil drilling rig


Cyprus, Greece and Israel said on Thursday they would speed up plans for the development of a pipeline channeling gas to Europe from newly discovered east Mediterranean reserves.

European governments and Israel agreed in April to move forward with a Mediterranean pipeline project to carry natural gas from Israel to Europe, setting a target date of 2025 for completion.

(snip)

The planned 2,000-km pipeline aims to link gas fields off the coasts of Israel and Cyprus with Greece and possibly Italy, at a cost of up to €6 billion

(snip)

Israel has discovered more than 900 billion cubic metres (bcm) of gas offshore, with some studies pointing to another 2,200 bcm waiting to be tapped. Along with the European market, it is exploring options to export to Turkey, Egypt and Jordan.

Cyprus’ Aphrodite gas field holds an additional 128 bcm, and Cypriot waters are expected to hold more reserves.

The discovery of tremendous quantities of natural gas offshore Cyprus is another reason I am bullish on Cyprus. It will take some time to develop these natural gas reserves. However, once complete Cyprus will realize a big windfall. Bank of Cyprus is the way I am playing the continued growth in the Cypriot economy.
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