June 2016

LIKEMINDEDPEOPLEliberty markets prosperity

June 2016 IssueLIKEMINDEDPEOPLEliberty markets prosperity

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Your issue this month will be slightly abbreviated. I was caught a bit off guard last week when my wife went into labor a few weeks early — while we were out of town.

Our baby — a girl named Story-Rose — came on June 2 in Austin, TX. As such, I’m a bit off my normal schedule.

No fluff. Let’s slice right to the point.

Energy

CERF Incorporated (TSX-V: CFL)

Oil investing continues to be a tough game.

I believe it will remain tough a bit longer.

We gave CERF Incorporated some time to turn itself around — and it certainly tried to — but the pressure of low oil prices and the reduction in related spending has simply been too tough a cross to bear for this provider of oilfield equipment.

CERF tried to diversify by leaning on its waste management division and making strategic acquisitions, but the numbers recently released for the first quarter mean it’s time for us to walk away. We have plenty of opportunity elsewhere to put this capital to work.

Sell CERF Incorporated (TSX-V: CFL) at market.

First Trust NASDAQ Clean Edge (NASDAQ: QCLN)

It’s not hard to see the future of energy is renewable. This ETF will help you capture that growth.

But make no mistake, this is a long play. We’ve held this fund since 2014 and we’ll continue to hold it and buy more.

Last year saw the most renewable energy capacity installed ever at 148 new gigawatts. Nearly $286 billion was invested in renewables worldwide. And it’s still just a tiny fraction of world production.

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As it gets cheaper and more efficient it will continue to make inroads. And growing from such a small base means its use — and the value of the major companies behind it — will grow by many multiples.

This fund will allow you to capture that growth in your portfolio as it happens.

The First Trust NASDAQ Clean Edge (NASDAQ: QCLN) fund holds 42 companies in the space with a heavier weighting toward solar and enabling technologies for renewable installations. More on the fund here.

It is a buy at market price.

Fission Uranium (TSX: FCU)(OTC: FCUUF)

I have told you for a few years now that Fission’s 100%-owned Patterson Lake South project, which hosts the Triple R deposit, is the best undeveloped uranium asset in the world.

I have a history of being early.

Now, that designation is official. The Mining Journal — one of the industry’s most-read publications — has rated the project as the number-one undeveloped uranium project in the world. Criteria used include resource quality, grade, location, and anticipated costs.

Fission has the best of all those things. The asset is massive at over 100 million pounds with several zones not even included in that estimate. It is extremely high-grade. It’s in the Athabasca, a region with a long history of uranium mining and processing. And it is low cost with the PEA showing OPEX of just US$14.02 per pound.

We’ve known all this for some time now. The market is just now realizing it.

I like when people are catching up to us. It is good to lead from the front.

Here’s how The Mining Journal ranked it:

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Like the gold market has done over the past few months, when the uranium market turns around it will be swift.

Fission is in the best position to capture significant upside when that happens.

It is a buy under C$0.70, and is trading a few cents below that. Get it before it’s gone.

Fission 3.0 (TSX-V: FUU)(OTC: FISOF)

Fission’s offspring has a great shot at significant upside as well, albeit for different reasons.

While Big Fission is a play on a single giant asset, Fission 3.0 is more of a generator of uranium projects.

It has 27 projects in the Athabasca Basin, seven of which are currently joint ventured out.

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It also has a large land package in the Macusani district of Peru. It will spend half a million dollars this summer on a 1200 meter drill program at that Peruvian project.

Some 24 holes will follow up mapping and prospecting work done by Fission 3.0’s technical team — the same team that discovered Patterson Lake South.

And there may be a lithium kicker.

Lithium is no doubt a market darling right now, and the Macusani district is known to host it right alongside uranium deposits.

These are the first holes on the property, so we could be getting some exciting news releases after the holes are drilled.

And again, this is just one of nearly 30 shots on goal for Fission 3.0, which currently trades with a tiny C$16M market cap.

Fission 3.0 (TSX-V: FUU)(OTC: FISOF) is a buy under C$0.09, and it’s trading right there right now.

Uranium Energy Corp. (NYSE: UEC)

When The Mining Journal crowned Fission’s Patterson Lake South the best undeveloped uranium project in the world, it made another interesting statement in its opening remarks:

The projects most feasible in today’s environment — on a capital expenditure and operating cost basis — are either high grade and carry a large production profile (such as those in the Athabasca Basin), or come with low-cost mining and processing methods (such as those amenable to in-situ recovery (ISR)).

UEC is in that latter category, with a mere $21 cash cost of sale per pound — meaning it could make money at today’s spot price of $28/lb.

But UEC isn’t doing that. It has no contracts to fulfill, meaning it is completely leveraged to the price of uranium, which further means that when uranium prices start to take off shares of UEC can really fly.

You can see that happening now. After a sharp slide last year and a fairly quiet start to this year, shares of UEC have taken off in a hurry the past few weeks.

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They are up 40% in the past month on no news at all. I have feelers out to my network to find a reason for the rise, although the reason may be as simple as the market finally seeing a uranium bull market approaching.

We have been buying UEC below $0.85 for a long time.

Now, in just a few days it has rocketed past that price.

This only underscores our nature as contrarians, and the need for you to buy our positions when the market isn’t looking. Because all of a sudden it is, and then it’s too late.

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IncomeOur MLPs went quickly off to the races after recommendation in the March issue.

CVR Partners LP (NYSE: UAN)

We’re up a quick 40% on this nitrogen fertilizer play. And we’ve also collected a $0.27 quarterly dividend, which should’ve hit your account on May 16.

We bought in CVR at $7.11 and it currently trades at $9.55.

We are only buying new shares below $8.15.

I suspect you’ll still have the chance to do that this summer.

PBF Logistics (NYSE: PBFX)

We’re also up a quick 22% on PBF. And you should have received a $0.42 quarterly dividend on May 31.

This was simply a case of good timing.

Oil was trading below $40 when we bought into this pipeline play in mid-March. Now, oil is trading over $50.

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Our holding in PBF has translated into a similar win. But unlike oil prices themselves, PBF is paying us 7.54% annually on top of the capital gains.

PBF Logistics (NYSE: PBFX) is a buy under $20. It currently trades at $22.76.

Set your limit orders for a summer slowdown.

IDT Corp. (NYSE: IDT)

IDT has completed its spinoff of Zedge, an app that allows you to personalize mobile devices with free, high-quality ringtones, wallpapers, home screen app icons, and notification sounds.

As the company will tell you:

The Zedge smartphone app, available in the Google Play, iTunes and Microsoft Market app stores, has been installed over 190 million times, has more than 32 million monthly active users, has averaged among the top 25 free applications in the Google Play store in the U.S. for the past six years and is ranked in the top 10 most popular free apps in the iTunes Entertainment category.

On June 1 you should have received one share of Zedge (NYSE: ZDGE) for every three shares of IDT you owned.

Let’s figure out our new cost basis. (Please note I will include fractional shares in my example. You would have received cash for fractional shares. I also use 100 shares for portfolio purposes.)

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We bought IDT in May 2015 at $17.27 per share.

If we had 100 shares of IDT, we now have 33.33 shares of Zedge.

The spinoff was completed on May 26, 2016. On that day, IDT closed at $14.48 per share and Zedge closed at $5.20 per share. The value of the two stocks together was $19.68.

That means IDT accounts for 74% of your cost basis, since $14.48 divided by $19.68 is 74%. And we then know that Zedge accounts for 26% of our cost basis.

Then we just multiply those percentages by our original cost basis to find our new cost basis for each.

74% of $17.27 is $12.78. So that is our cost basis for IDT.

26% of $17.27 is $4.49. So that is our cost basis for Zedge.

Combined, the value of both shares is now more than we paid for our original position in IDT. But not by much.

I’m moving both stocks to hold and we will look to exit when there’s a little more space between the value of our original buy-in and the new combined value of both positions.

You will of course continue to collect the IDT quarterly dividend. The next one will be $0.19 and will be paid on June 17.

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Safety from Centralized PowerNegative rates. The Brexit. An unhealing global economy. The evil choice of Hillary or Donald.

We need more safety than ever. And the markets know it. Gold is up 17% on the year, but has been higher than that.

And our gold stocks — as they always do — have rallied right along with it. We’re currently up double digits on all of them:

• Midas Gold — up 18%

• Almaden Minerals — up 50%

• Almadex — up 50%

• Roxgold — up 82%

We aren’t going to chase them higher. As I said in the uranium section above, the time to buy these stocks is when no one is looking. I’ve been urging you to do that for the past two years.

I can remember fielding questions why we continue to buy Midas when it was trading below C$0.30, when all it was doing was going down.

And then... boom: Midas is now trading above C$0.60, having doubled in the past three months.

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Let’s get up to speed on what we own, then I’ll add something new for you to buy.

Roxgold (TSX-V: ROG)(OTC: ROGFF)

We have certainly had patience with Roxgold, and it has paid off.

We’ve been in the stock since September 2014 at a price of C$0.75.

We’ve been down by as much as 40% since then.

But we’re now up 89%.

Its Yaramoko mine in Burkina Faso is expected to begin production in June, marking the official graduation of Roxgold from developer to producer. It’s expected to produce 120,000 ounces in its first year.

It’s high grade at over 15 grams per tonne, so the company doesn’t have to move a lot of rock to generate serious cash flow. It will make more money per tonne of rock crushed than most other gold mining companies.

The company is fully funded. There is a satellite deposit that can be incorporated into the mill feed. And there is exploration upside.

CEO John Dorward discussed some of these attributes recently on BNN. You can watch that here.

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We are only buying below C$0.75/US$0.60. The stock trades at C$1.35/US$1.05, and doesn’t look like it wants to slow down.

If it ramps much higher as production ramps up, we will look to bank some profits.

Here is a recent analyst upgrade from Raymond James:

Roxgold — ROG-TSXV — SB1 — C$1.70 Target

We are raising Roxgold to Strong Buy (from Outperform) and maintaining our target price of C$1.70. Roxgold is our top pick in the gold developer group. Our upgrade reflects recent share price weakness and a highly compelling return to target. We had only recently downgraded Roxgold to OP2 due to a surge in its share price, but shares have trimmed ~20% since that time, versus GDXJ -13% over same time period – unjustifiably, in our view. Earlier this month, Roxgold announced first gold pour ahead of schedule at its flagship, 90%-owned 55 Zone mine in Burkina Faso. We believe the stock will return to an earlier trend of outperforming the group as the operation achieves commercial production in the coming quarter, and the company increasingly underlines the viability of an expansion of low cost production at 55 and the satellite Bagassi South zone. We model Roxgold as fully-funded to positive cash flow. Roxgold currently trades at a 0.7x P/NAV (versus junior producer peers at 1.0x), and at 4.1x P/2017E CFPS (versus junior producer peers at 7.9x).

Almadex (TSX-V: AMZ)(OTC: AXDDF)

Almadex controls all the properties and royalties that used to be under the Almaden Mineral umbrella.

It is a prospect generator with current exploration programs in Canada, the U.S., and Mexico.

Its most recent news is the confirmation of a copper-gold porphyry system at the Encinal Target at the El Cobre project, which it 100% owns, and where mineralization is exposed at surface in at least four zones.

Almadex announced last week assay results for three recent holes drilled there. It noted: “All holes intersected intense propylitic and/or phyllic alteration associated with quartz-pyrite veining, typical of the outer fringes of a porphyry system.”

One hole returned a meter of over 109 gram per tonne gold, but that looks to be an anomaly.

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Still, the rest of the results clearly demonstrate the potential of Encinal, and that’s just one of several targets. More drilling will be done.

Almadex has doubled in the past month.

It now trades at C$0.42.

We are not buying new shares at this time.

New Buy: Ivanhoe Mines (TSX: IVT)(OTC: IVPAF)

Ivanhoe Mines (TSX: IVN)(OTC: IVPAF), like many mining companies with quality assets, is ultra-cheap right now and, incredibly enough, it’s sitting on a HUGE platinum deposit — the largest such discovery in 80 years.

It is led by billionaire mining maven Robert Friedland, so you also get everything that comes with that name.

Since 2007, Ivanhoe Mining Ltd. has focused its exploration activities on defining and advancing the down-dip extension of its original Platreef discovery, now known as the Platreef Deposit, in South Africa. It owns 64% of that project, with the remainder owned by a Japanese consortium and Ivanhoe’s broad-based black economic empowerment (B-BBEE) partners.

In addition to this project, the company has

• The 47% owned Kamoa, the world’s largest undeveloped, high-grade copper deposit; and

• The 68% owned Kipushi copper-zinc project that is currently being drilled out.

The Kamoa Project in Congo is one of the world’s largest unmined copper deposit at some 53.3 billion pounds, and the Kipushi Project, also in Congo, has historic estimates showing 11 billion pounds of zinc and over 1 billion pounds of copper.

However, the company is focused on Platreef, and for good reason. It is now at the Pre-Feasibility Stage, with those economics reported in early 2015.

The Platreef platinum/palladium, gold, rhodium deposit is characterized by its very large vertical thicknesses of high-grade mineralization and a platinum-to-palladium ratio of approximately 1:1, which is significantly higher than other PGM discoveries in the region.

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The project borders several long-established mining projects, but sports some massive advantages that will allow it to avoid the problems plaguing competitors.

First, it was granted mining rights on this deposit after lengthy and detailed collaboration with the Department of Mineral Resources, other national and provincial government offices, local community representatives, and members of Ivanhoe’s project team.

Everyone who is affected by the project approves of it, creating goodwill between the company, country, and community that cannot be under-appreciated after the recent strikes.

Second, the shallow depths of the deposit, thickness of useful ore, and geography of the project will allow Ivanhoe to utilize a highly mechanized process to extract the ore.

Workers will enjoy much safer working conditions and higher wages because of specialization with modern mining equipment.

Third, a pre-feasibility study (PFS) in 2015 showing a large underground mine with initial four-million-tonne per year (Mtpa) concentrator, doubling to 8 Mtpa, and then a third expansion to 12 Mtpa.

Initial average annual production will be 433,000 ounces of platinum, palladium, rhodium, and gold, plus 19 million pounds of nickel and 12 million pounds of copper. First concentrates are expected in 2019.

Pre-production capital requirements are $1.2 billion. That would put Platreef at the low-end of the cash cost spectrum with an estimated cost of $322 per ounce of platinum, palladium, rhodium, and gold.

All this translates to an after-tax net present value (NPV) of $972 million with an 8% discount rate and an after-tax internal rate of return (IRR) of 13%. Ivanhoe owns 64% of the project.

With a mix of platinum, palladium, gold, and rhodium, Platreef has the highest concentration of PGM and gold in Africa, at some of the lowest costs.

The project itself isn’t fully defined yet. Both the south and west sides are open to expansion and we can expect some more test drilling in the future.

The property will be developed, and it will be profitable. Further discoveries will only boost value.

Taking 64% of estimated NPV of $972 million, plus 95% of the $2.55 billion NPV of the Kamoa

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Project, you arrive at a potential value of $3.52 billion. That doesn’t include any of the value at the Kipushi Project.

With 772.2 million shares out, that implies a share price of ~$4.56.

Ivanhoe Mines (TSX: IVN)(OTC: IVPAF) is a buy under C$1.00/US$0.78.

Company website here.

The Next LevelWe have discussed Stellar’s customer (and now partner) Neovacs getting FDA approval to extend phase IIb clinical trials for its IFNα Kinoid treatment for Lupus to the United States. That trial is now going to happen in 19 countries, and data from it should be out mid next year.

Stellar has also reported Q2 2016 results and operational updates. Revenue in the quarter was 74% higher than the same quarter last year ($326,335 vs. $187,627), and revenues in the first six months were 103% higher than last year ($814,495 vs. $400,228).

Total expenses were up slightly (3% for Q2, 10% for the first six months) but nowhere near as fast as sales are growing. The net loss was sharply higher and primarily attributed to “fluctuations in noncash gain/loss in fair value of warrant liability.”

The company remains in a strong financial position with $8.1 million in working capital.

Additionally, Stellar announced the joint venture that was proposed with Neovacs in January is now official. The terms are now finalized and the new company will be called Neostell. It will be 70% owned by Neovacs and 30% owned by Stellar.

Under the agreement, the two companies will combine their skill sets to manufacture and sell all types of conjugated vaccines to pharmaceutical customers worldwide.

This is another shot on goal and source of potential revenue as it now can manufacture vaccines instead of just selling the KLH they need as an ingredient. There are dozens of KLH-based immunotherapies advancing through various stages of clinical trials, and even more in preclinical development.

They will all need KLH and, if approved, a knowledgeable manufacturer for their products.

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So all the fundamentals for Stellar are strong, though the stock has been weak.

And finally, Stellar’s partner, OBI Pharma, will present data about its recent Phase II/III study for its KLH-based breast cancer therapy to the 2016 American Society of Clinical Oncology (ASCO) Annual Meeting in Chicago. The meeting is being held this week.

A Phase III pivotal study is now being designed.

As the Maxim Group concluded in an equity update last week:

We see the OBI news as a positive for Stellar and further validation of KLH-based approaches in immune oncology. Our model has always assumed that as Stellar’s KLH partners grow and advance clinically, so does Stellar with increasing demand for KLH.

Follow the partners: Stellar is supplying KLH to multiple companies for the development of therapeutic vaccines (active immune therapy) for indications including breast cancer, ovarian cancer, lupus, and Alzheimer’s disease. Thus, any one company’s success flows through to Stellar.

Stellar is a drug dealer to drug dealers, in the simplest of terms. That’s why I like it. And it will only take one of them hitting the big time for Stellar to hit the big time as well.

Stellar Biotechnologies (NASDAQ: SBOT) remains a buy under $5.00.

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Wrap-UpRight now, we’re sitting on the best portfolio we’ve ever had. We returned double digits in 2013, 2014, and 2015... but 2016 — now that the gold market is starting to turn — is looking even better.

There are plenty of buy-rated stocks available in the portfolio... and I am of course always on the prowl for more.

I have been warning about the instability of the insane global monetary policy we’ve witnessed for years now. The see-saw I’ve used to describe it will soon tilt the other way.

When it happens, it will happen fast. And many will wonder what happened.

We won’t.

We’ll be too busy counting gold gains.

Call it like you see it,

Nick Hodge Founder, Like Minded People

Like Minded People, Outsider Club LLC Copyright © 2016, 111 Market Place, Suite 720, Baltimore, MD 21202. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Like Minded People or Outsider Club LLC does

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