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Important - The contents of this blog are the personal opinions of the individual contributors and should not, under any circumstances, be construed as direct investment advice. Every effort is made to ensure the accuracy of all third party links and data but Spreadbet Magazine Ltd cannot guarantee their accuracy and nor should the material be relied upon in making any investment decisions by its readers. Spreadbet Magazine Ltd accepts no liability for any losses incurred by readers in making decisions as a consequence of the material posted on this blog.

Shooting from the hip - topical, informed and opinionated posts each & every day!



Past performance is not necessarily a guide to the future, returns are before the application of Titan’s fees, tax legislation can change and you should always take independent advice in relation to your own financial circumstances.

Hot off the digital press - Download the October edition of Spreadbet Magazine



Zanaga Iron Ore revisited - awaiting the catalyst of the project equity component news

We covered ZIOC back in 2013 in the September edition of this magazine and the buy case at that time can be seen on pages 8 – 16 HERE

Like the rest of the mining spectrum in recent weeks, in particular the junior plays, ZIOC has been veritably battered by the perfect storm of weak equity markets, a falling iron ore price and continued poor sentiment within the sector. However, following a discussion with IR head Andrew Trahar last week I personally believe that the time is ripe for a re-look at the stock, particularly given the stabilisation in the iron ore price in recent weeks, finding a floor around $80/t and rebounding at the time of writing to $83/t.

For many industry observers, it seems that a new normal of sub $100/t for Iron Ore is now being planned in investment profiles and this is likely to create a sea change in many projects that are presently sitting on the drawing board. Thankfully, in ZIOC’s case, the project in the Republic of Congo sits right at the very bottom of the cost curve as the chart below illustrates

One analyst accurately models the company’s landed cost assuming $25 of freight/shipping costs at around $55/tonne. Only Vale presently delivers iron ore cheaper and this is likely to be a big bargaining point in the project consortia negotiations.

The recent change in the project (ZIOC’s partner being mining giant Glencore) to that of a staged development process is a positive and greatly increases the probability of the mine coming to fruition. With licenses in place, the completion of the Pre-Feasibility study and the Congolese Government also coming to the party in enhancing the attractiveness of the project through very attractive tax breaks such as a 5 year tax holiday and then a low 15% rate thereafter, the investment profile sits squarely at the top of the pile on a global Iron Ore project basis. It is fair to say that the Republic of Congo also view this as a very important project.

Usefully, Edison have modelled an equity value for ZIOC based upon various iron ore prices and a range of discount rates as we can see in the table below.

Their assumptions work on a 10% discount rate and a long term $90/tonne iron ore price. If one is even more conservative and assumes an $80/tonne IO price and a discount rate of 12.5% then the equity value that pops out is $619m (highlighted green square). Based on current FX rates this equates to circa £400m. The current market cap of ZIOC is just over £37m. That is quite a buffer zone in our opinion. Should iron ore prices actually recover back over $100/t then the NPV and uplift element to the ZIOC equity should the project complete becomes eye watering.

In my discussion with Andrew Trahar last week he relayed that the company is looking at multiple scenarios to ensure that the NPV of the project is ultimately delivered to shareholders: from an outright sale of the project by ZIOC & Glencore to a third party to a variant of either increased stake sale or dilution in exchange for future royalties. My question was posed “is it not time to look to exit the project completely?” and the retort was that the major shareholders who hold 72% of ZIOC Plc’s equity believe that even with a healthy premium of 100-200% to the current market value being offered that this does not come even close to what the real value of the project is and hence no appetite for exit at this critical stage in the venture.

From a stock price perspective, the seller that was prevalent in 2013 (circled below) seems to no longer be around (certainly the volume does not show this out and there have been no RNS of holding movements in months) and the feeling from the company is that the weakness in the price has been a mixture of jaded and forced retail investor selling and market makers marking down the stock in sympathy with other IO plays.


Our game here at Titan is to buy low but with a large buffer zone built into a stock price and, ideally also when a stock has been overlooked or beaten down unjustifiably. To us, the metrics of ZIOC now have become even more compelling with the news flow this year, in particular the staged development basis and, given its position on the global IO cost curve, our expectation that the equity and debt funding package is highly likely to be successfully completed during the next year.

One important element that was made public in the most recent analyst note however is that the company is currently taking to a variety of equity participants in the project and there is a decent likelihood of news on this being concluded before the year is out. That means weeks given the date today of 19 October, should this occur, we expect to see a very material re-rating of the stock given the near 90-95% discount to NPV on even conservative IO price forecasts.

There are presently a number of stocks in the littered landscape that is the mining and oil E&P sector that presently hold out the promise of being potential ten baggers. If ZIOC successfully conclude the equity and debt package and move this project towards production in in the next 3 years then we believe the odds of the company delivering these types of returns will shorten dramatically as news flow is released into 2015.

We remain resolutely long ZIOC and believe this to be another fantastic asymmetric risk/reward offering in the mining space.

CLEAR DISCLOSURE: EXPOSURE TO ZANAGA IRON ORE SHARES IS HELD BY RICHARD JENNINGS AND TITAN INVESMENT PARTNERS FUNDS. This piece should not be taken as an advocation to buy (or sell) shares in this company and you should always take independent financial advice in relation to your own circumstances.


Lessons from a distant past: Bernard Baruch. By Frederik Vanhaverbeke

In the third of a new series for SBM Frederik Vanhaverbeke, author of Excess Returns: A comparative study of the methods of the world’s greatest investors, looks at how some of the world’s greatest investors are so successful.

A man with no special pipeline of information will study the economic facts of a situation and will act coldly on that basis. Give the same man inside information and he feels himself so much smarter than other people that he will disregard the most evident facts.

—-Bernard Baruch

Next in my series that discusses some of the top investors featured in my book Excess Returns: a Comparative Study of the Methods of the World’s Greatest Investors we now look into a famous investor of the first half of the 20th century: Bernard Baruch. Although he was maybe not a value investor pur sang (e.g., he also speculated in sugar), his advice on stock investing is definitely invaluable.

Baruch’s first piece of advice to those new to the investment world is that they should never delude themselves that making money on Wall Street is easy.

Beating other investors at their game can only be done through some kind of edge. And this edge can only be fostered by having a deeper knowledge about one’s stocks than other market participants. In his words, “In no field is the old maxim more valid – that a little knowledge is a dangerous thing – than in investing.”

In order to acquire a deeper level of knowledge Baruch advocated full dedication to the investment process, a focus on the fields one knows best (i.e., focus on one’s circle of competence), a focused portfolio (i.e., limiting the number of stocks in one’s portfolio), and independence (i.e., doing one’s own due diligence without influence from others).

Bernard Baruch

Although many people would like to believe otherwise, Baruch warned that there are no shortcuts on Wall Street. He warned against tips because most tipsters (e.g., friends, family, shoeshine boys) know only the hot stories (and seldom the cold economic figures) of stocks. He even warned that acting on so-called inside information is dangerous because insiders often don’t look at the facts in an unbiased way.

The most valuable lessons from Baruch are probably related to investment intelligence.

According to Baruch, intelligent investors accept with equanimity the fact that they are often wrong. They are not overconfident and don’t try, for example, to pick tops and bottoms. Intelligent investors focus first and foremost on the investment process, and look only in the second place at the results.

Indeed, the worst that can happen to an amateur investor is to make a lot of money through an investment approach that offers no edge in the market, as this may prompt him/her to plunge even deeper in the market (with possibly disastrous consequences further down the road). Also, intelligent investors have the courage to act on their convictions, even if these actions feel uncomfortable.

Finally, Baruch stressed the importance of detached reflection. During difficult times in the market he protected himself against a loss of discipline by constantly reminding himself of the basic principles of investing. Likewise, whenever he lost money he performed a root cause analysis to avoid repeating the mistake.

The lessons from Bernard Baruch are not that much different from the advice of numerous other top investors over the last fifty to hundred years as described in my book. Knowing that his advice comes from another era is reassuring as it illustrates that these recommendations are timeless and will remain valid for many decades to come.

The next article of my series returns to the present and discusses the view on investing of the business partner of Warren Buffett: Charlie Munger.

Read more about Bernard Baruch’s investment methods in Frederik Vanhaverbeke’s new book Excess Returns: A comparative study of the methods of the world’s greatest investors, published by Harriman House


Zak Mir Video Blog On Bulletin Board Heroes: Bacanora Minerals, UK Oil & Gas and Westminster Group


Spreadbet Magazine editor Zak Mir takes a look at the technical position of some of the bulletin board stocks of the moment amongst private investors.

Here are the key points from today’s video:

Bacanora Minerals (BCN)

The shares are displaying a possible resumption of the initial July rally after an unfilled gap to the upside to start this week.

While there is no end of day close back below the latest gap at 44p one would be looking to a journey to the top of a falling price channel at 70p by the end of next month.

Only cautious traders would wait on a clearance of the former July 62p support zone as a buy trigger for a new leg to the upside.

UK Oil & Gas (UKOG)

UK Oil & Gas shares have been making progress within a rising trend channel from the end of May based at the 200 day moving average now at 0.87p.

The latest price action is a two day rebound from below 200 day line.

While there is no end of day close back below the 200 day moving average the upside for UK Oil & Gas should be towards the September resistance at 1.70p plus over the next month.

Westminster Group (WSG)

The shares look to have finally rebounded off the floor of a broadening triangle which has dominated the daily chart since the start of the year.

The best way forward now is probably to look to buy into any weakness towards the April line at 30p.

Only an end of day close back below the 2014 triangle floor would delay the prospect of a rebound to as high as the September resistance zone towards 50p.



The Morning News Update with Shire, Whitbread, Go Ahead and ASOS

FTSE 100

Shire (SHP) - AbbVie terminates offer for Shire, with the break fee of $1.635 billion now payable.

Meggitt (MGGT) - has secured  a multi-million dollar contract for an advanced wheel and braking system for Gulfstream Aerospace’s new G500 and G600 business jets.

William Hill (WMH) - Group net revenue grew 23% in Q3 and 12% in the year-to-date.

Whitbread (WTB) - Underlying profit before tax up by 18.5% to £256 million in the six months to 28th August.

FTSE 250

Go Ahead (GOG) - Trading in the first quarter has been robust and full year expectations for both bus and rail operations remain unchanged.

Informa (INF) - Current trading remains on track with full year expectations unchanged

Ophir Energy (OPHR) - announces the successful Drill Stem Test on the Fortuna-2 well in Block R, Equatorial Guinea. Ophir holds 80% of Block R and GEPetrol 20%.

Small caps

ASOS (ASC) - pre-tax profits down by 14% at £46.9 million in the year to August.

Northern Petroleum (NOP) - Canada drilling and production update - the company’s initial three wells have been producing at a combined restricted rate of approximately 140 barrels of oil per production day.

Amara Mining (AMA) - the 2014 drilling programme at its Yaoure Gold Project in Côte d’Ivoire is complete.  

Ortac Resources (OTC) - has received the final set of assay results from the systematic trenching programme recently completed by Andiamo Exploration on the Yacob Dewar deposit located within the Haykota exploration concession area, Eritrea.

InterQuest (ITQ) - is launching a review of options to maximise value for shareholders including a potential sale of the company.