Portfolio Review

65% YTD
Rockrose takeover and doubling down on Horizonte Minerals

Q3 2020 review – taking new positions after the Rockrose takeover and doubling down on Horizonte Minerals.

October 14, 2020 / 3 min read

Rockrose takeover and doubling down on Horizonte Minerals

The portfolio reached an all time high this quarter due to the takeover of Rockrose Energy (RRE) and significant news reported by my two biggest holdings. Arc Minerals signed an exclusivity agreement with Anglo American and Horizonte executed a mandate to arrange project financing in order to begin construction.

To be up 60% YTD seemed unimaginable the Q1 low of -57% due to the March market crash.

Position changes this quarter were centred around doubling down on Horizonte Minerals and taking an opening position in Longboat Energy (LBE) with the proceeds of the Rockrose takeover.

Asiamet Resources & Horizonte Minerals

Asiamet’s been a thorn in my side since beginning. I bought the top at 11.9p and have averaged down a dozen or so times since.

In July I reduced my holding as the short term opportunity cost of not increasing exposure to HZM at 3.74p seemed too big to ignore.

The Asiamet share price had been in steady decline for a long time, and it wasn’t reassuring when they had to comment on the negative press coverage surrounding Aeturnum.

I really like their assets and chairman Tony Manini seems very genuine, but they seem at the mercy of prospective partners and operate in a more challenging jurisdiction relative to Horizonte, who appear more in control of their own destiny with a clearer and simpler path to making material progress.

Initially it looked like a stroke of genius. Horizonte’s mandate announcement saw the share price rise to nearly 9p within a few weeks before cooling off slightly. However last week Asiamet announced that they’d signed a non-binding Heads of Agreement for KSK which saw the share price up 120% in 2 trading sessions. So great news on both fronts regardless.

Despite those developments i’ve no plans to reverse anything i’ve done so am going to stick with current allocations for now.

Rockrose Energy & Longboat Energy

The biggest adjustment this quarter came as a result of Rockrose being taken over. I bought the majority of my position at 640p in early 2019, and after dividends and tops up, sold just below the offer price with an overall profit of 89%.

A part of me had hoped the story could have gone on a bit longer, but the share price had softened significantly due to markets reaction to the pandemic so the offer came at a good premium. Did it undervalue the company based on cash? Probably. Did it reflect the risks and decommissioning costs? Possibly. We’ll never know. Overall profit is profit, and good profit is good profit. I know some considered it an incredibly favourable deal, so combined with all the uncertainties and volatility of a pandemic environment i’ve no complaints.

I’d been waiting to see where the Faroe Petroleum would next appear since DNO’s hostile takeover. In late 2019 they launched Longboat Energy with a £10m IPO with the aim to fast track creation of a new full-cycle North Sea oil and gas business.

Had I not been fully invested in Rockrose i’d probably have taken a position sooner, but the takeover made the decision for me.

12 months since IPO and still no assets/acquisitions. Undoubtedly high risk and will likely require plenty of patience, but getting in early alongside proven management seems a risk worth taking. Should they to get anything over the line i’d expect see a good return in time.

The oil price currently being sub $40 can’t harm prospective acquisition opportunities either.

Sylvania Platinum

The final transaction this quarter was to open a position in Sylvania Platinum (SLP) which is a low-cost PGMs producer in South Africa.

It’s not a large position but I was keen to lower overall portfolio risk being over-exposed to pre-revenue explorers/developers already. I wanted a producer with high FCF and no debt. It regularly kept appearing on my screeners, and based purely on the fundamentals it’s in strong shape with plenty of room for expansion.

It’s hard to gauge sentiment as it generates very little noise on Twitter, but that should probably be seen as a positive.