Primum Non Nocere
In June 2022, we launched Mangrove Investor’s New Energy investment research project. It’s hard to believe we are nearly a year into publication.
We all share a common desire for investment ideas that are about more than a quick profit. We wanted to focus on ideas that could both make money AND benefit our communities.
Now “benefit our communities” is an arm-wavy, kumbaya idea. What does that mean, anyway? Well, it means different things to each of us. But I always thought of it through the lens of the famous Hippocrates quote applied to companies:
“Primum Non Nocere – First Do No Harm.”
As a financial analyst, I’d noticed that some companies put profits ahead of safety for their workers and the communities.
British Petroleum (BP) is a horrifying example. In 2010, a colleague called me right after the devastating BP oil spill. I was the oil and gas expert back then. He wanted to know if BP’s stock fell too far. Had the market over-reacted and should he buy it?
He was focused on the money-making opportunity. I was physically sick.
His point was that immediately following the disaster, the stock was at its lowest risk. I pointed out that the oil spill wasn’t a statistical fluke. Instead, it was the direct result of poor management. Instead of reducing our risk, it simply identified it. It was like a rotten rung in a ladder. When one breaks, that doesn’t lower the risk of the rest breaking. Instead, it demonstrates that the wood is rotten.
BP is a fitting example of this problem. In 2005, the company had a massive explosion at its Texas City oil refinery. That was a precursor to the oil spill just five years later. The explosion at Texas City occurred because of lax safety procedures.
The oil spill and subsequent interest in profiting from it, crystallized my desire to avoid these bad actors. And our stock market is full of examples. That’s why we created Mangrove Investor.
The most common feedback I received was, “You can’t find good investments to meet that standard.” I would argue that the naysayers were wrong. It does take us more time to vet our companies. But we weren’t looking for the easy road. And we are happy to put our track record up against anyone.
That said, this issue marks a full year. So, we wanted to take the opportunity to review our portfolio positions. Some, like Jade Power Trust, worked out exactly like we’d planned. Others, like Li-Cycle Holdings disappointed us.
In this issue, we’re going to revisit each position. We’ll touch on the investment outlook for each one. And we’ll advise on whether to buy, hold, or sell.
Let’s get to it.
Brookfield Renewable Partners (BEP)
Brookfield Renewable Partners is one of our original recommendations. It paid us nearly $1 per share in dividends so far. As of the close on May 5, we have an 9% loss on the position. This has more to do with our timing – June 2022 wasn’t a great time to launch a newsletter. However, the company’s outlook remains excellent.
In March 2023, Brookfield Energy and its partners agreed to acquire Origin Energy, Australia’s largest integrated power generator. Origin provides 24% of Australia’s energy. About 4.5 million Australians get their power from Origin.
Brookfield sees a potential to grow its business in Australia through additional solar, batteries, EV chargers, heat pumps and rooftop solar installations. The company will fund the corporate debt, asset financing, and sales of assets. The company expects to generate up to $1.5 billion in proceeds from asset recycling.
This deal is exactly what Brookfield needs to do to continue to grow. It diversifies the company’s portfolio, which will reduce its risk to shareholders. And Australia is an excellent location for a company like Brookfield to grow. It brings a needed expertise in renewable energy technology.
Recommendation: We are still bullish on BEP and recommend a BUY up to $40/share. We recommend a 25% trailing stop on this position
Altius Renewable Royalties (ATRWF)
Altius Renewable Royalties is another of our original research targets. We love the royalty business model. Its parent company, Altius Minerals, made a ton of money in royalties over the years.
As with Brookfield, we are down 10% on the position mostly because of the timing of our launch.
Altius Renewable Royalties will announce its first quarter financial results on May 5th. The forecast is $1 million for the quarter, compared to $600,000 in the first quarter of 2022.
To put this into further perspective, Altius Renewable Royalties only generated $0.9 million in revenue in all of 2022. The company expects to hit its target of $5.5 million to $6.5 million for the year. That’s exactly the kind of growth we want to see.
Recommendation: We are still bullish on Altius Renewable Partners and recommend a BUY up to $7/share. We recommend a 25% trailing stop on this position.
NexGen Energy (NXE)
Nexgen Energy is the third of our original research targets. They are building a huge uranium mine in Saskatchewan’s Athabasca Basin. As with Altius and Brookfield, our timing with NexGen wasn’t good. We are currently down 16% on this position.
They are one of the pioneers of our New Mining philosophy. They engage their community in a positive way. That reduces our risk, as investors.
NexGen partnered with the Clearwater River Dene Nation to create a 100% indigenous owned and operated gravel supply company in Northwest Saskatchewan. NexGen needs gravel to build its Rook 1 project. The company bought a $4.1 million gravel crusher. The new company will produce gravel for northern communities’ road infrastructure. The new business will create more than $36 million in revenue in its first three years.
This is a notable example of our New Mining principal in action. You can’t move a mine. And the Rook 1 project requires a massive investment in capital before it ever begins producing. By partnering with the community, NexGen Energy will create the kind of goodwill that we need to bring the mining industry forward.
Recommendation: We remain bullish on NXE and recommend a BUY up to $4/share. We recommend a 25% trailing stop on this position.
Canadian Premium Sand (CPS.V)
Canadian Premium Sand is building an industry-leading solar glass manufacturing facility in Manitoba. The company has a huge, ultra-pure sand deposit that reduces its cost, dramatically.
We recommended the position on July 4, 2022. We are currently up 56%.
This remains one of my favorite investments in our portfolio. In January, the company released the results of its bulk sand quality tests. The results show that all they need to do is a simple scrub and separation process to get glass-quality sand from its deposit. They have buyers for 120% of their initial glass production locked in with commercial agreements. It’s exciting.
With just a C$40 million market cap, this stock has a lot of room to climb:
Recommendation: We remain bullish on CPS.V and recommend a BUY below C$0.50/share. We recommend a 50% trailing stop on this position.
Capstone Copper (CS.TO)
Capstone Copper is a diversified base-metal mining company formed out of the merger of Capstone Mining and Mantos Copper in 2021. It will produce 260,000 metric tons of copper in 2024.
We recommended it in August 2022, for its current copper production and its development projects. It’s the best performing stock in the portfolio, up 123% in just nine months.
In February 2023, Capstone put out a list of catalysts for 2023:
- Updated Cozamin Mine Plan – First Quarter 2023
- ESG strategy launch – First Quarter 2023
- PV4 Feasibility Study – First Half 2023
- Mantos Blancos Phase II Feasibility Study – Second Half 2023
- Mantoverde Phase II Feasibility Study – Second Half 2023
- Updated Santo Domingo Feasibility Study – Second Half 2023
- Commissioning of Mantoverde Development Project – Before Year End 2023
Each of these milestones will provide investors with context for Capstone going forward. And the company is now cashed up. It just raised C$328 million by selling 57.5 million shares at a price of C$5.70 per share.
The fact that shares are trading up at C$5.53 each right now tells us that the market loves the story and is still on board.
Recommendation: TAKE PROFITS. While we remain bullish on Capstone, we should book some profit on this position. We recommend you sell half your position for a 125% gain. That more than covers our original investment. And it means the rest of our position is pure profit.
Jade Power Trust (JPWR-UN)
We recommended Jade Power Trust in August 2022, for its portfolio of alternative energy projects. And it was acquired just a few months later.
It’s time to close our position in Jade Power. I know many of you wish you owned more of it! We bought the trust in August 2022 and earned $3.35 in distributions. However, as we detailed in the past, another power company acquired the trust’s assets. We are going to close our position with a 50% gain.
Recommendation: SELL. Jade Power was a great investment, but with the sale, the trade is over. Sell to close all your remaining units. We will close this position with a solid 50% gain in just nine months.
Li-Cycle Holdings (LICY)
We recommended Li-Cycle in August 2022, because of its innovative lithium-ion battery recycling plans. The company continues to build out its infrastructure, but its share price doesn’t reflect that. We are down 35% on our position.
Li-Cycle is my favorite underperforming stock. The company is doing great thinks. The share price, however, isn’t. On April 12, 2023, the company announced a new partnership. It will be VinES’ long term strategic recycling partner. VinES Energy Solutions develops advanced lithium-ion batteries for mobility. Li-Cycle will evaluate a possible recycling Spoke near VinES’ manufacturing facility.
On April 17, 2023, Bloomberg announced that Li-Cycle won its New Energy Finance (BNEF) Pioneers Award. This is a prestigious recognition of the impact of Li-Cycle’s innovative Hub and Spoke design for its recycling process. Li-Cycle’s first Hub is under construction in Rochester New York. When it commissions later in 2023, it will be the first source of recycled battery-grade lithium in North America. Once it is fully operational, it will be one of the largest suppliers of lithium in North America.
Recommendation: HOLD. We remain optimistic that Li-Cycle will become a leading battery recycler in North America. The issue is that: “the market can remain irrational for longer than we can remain solvent”. And that’s what we see right now with Li-Cycle. We have a 40% draw down so far. I wouldn’t buy more shares or start a new position until this trend reverses. We recommend you Hold your position in Li-Cycle for now.
Ivanhoe Electric (IE)
Ivanhoe Electric is another of our New Mining ambassadors. The company has a high-tech approach to copper exploration. And it comes from a group (Ivanhoe Mining) that understands how to integrate mining into a community in a positive way. We recommended Ivanhoe Electric in September 2022 and are up 20% on our position.
I’ll be honest, I dove into Ivanhoe Electric after seeing its Chairman Robert Friedland speak at a conference. Their motto is Re-Inventing Mining for the Electrification of Everything. It’s a perfect fit for New Energy. I like the copper exploration and technology pieces. I’d like to see them spin off the vanadium flow batteries. They don’t really fit with the rest of the company.
Recommendation: We are strongly bullish on IE. We recommend a BUY up to $13/share. We recommend a 25% trailing stop on this position.
Sprott Physical Uranium Trust (U-UN.TO)
We recommended Sprott Physical Uranium Trust in November 2022 to track the uranium price without the additional risk of mining companies. The Trust holds uranium in two locations and moves with the commodity price. We are down 5% on our position to date.
The uranium price took a breather, just as we jumped in. Since September 2021, the stock traded in a range, between $13 on the low end and $20 on the high end. My expectation is a slow bull market that continues for the next several months.
Recommendation: We remain bullish on uranium going forward. We recommend a Buy below $14 per share on Sprott Physical Uranium Trust and use a 25% trailing stop.
Adventus Mining Corporation (ADZN.V)
We recommended Adventus Mining in December 2022, for its advanced copper exploration projects and its impressive backers. It comes from the Altius Minerals family of companies. These are top notch project analysts. That reduces our project risks, considerably. We are currently down 33% on our position.
Adventus Mining has an impressive portfolio of copper projects in Ecuador. El Domo is in development, with permits expected in the third quarter of 2023. Copper production should occur in 2025. Its two exploration stage projects – Pijili and Santiago are permitted for drilling. The company would like a partner for them. This is a promising investment that will take time to bear fruit.
Recommendation: HOLD. Adventus is a highly speculative junior mining company. We expect the trend in copper to lift this stock going forward. However, the trend isn’t our friend right now. We recommend a Hold for now and use a 50% trailing stop.
Genie Energy (GNE)
We recommended Genie Energy in January 2023 as an alternative to natural gas power in the Northeastern U.S. In December 2022, a severe storm highlighted the problems with power distribution in the densely populated area. The density and overlapping nature of the governments in the region makes new pipelines nearly impossible to construct. The only way to increase power supply in many areas will be through solar and wind projects.
That’s where Genie Energy is excelling. We are up 45% in just four months on our position.
On April 18, 2023, the company announced that it broke ground on the 4-megawatt solar array in Perry New York. The project will supply solar power sufficient for over 440 homes. The project requires 9,000 solar panels. They company did an excellent job in partnering with the community. From the press release:
“New York’s community solar program is leading the way to bring the benefits of clean, affordable solar energy to residents and businesses across the state,” said Nathan Knapke, Director of Community Solar for Genie Solar Energy. “For the Perry project, we not only will lower electricity bills for hundreds of local subscribers, but we also plan to utilize highly-skilled, local personnel from Perry and its immediately surrounding areas for critical tasks during the project’s construction including land preparation, panel installation, and electrical work.”
Recommendation: We remain bullish on GNE. It continues to unlock value and compete with its peers in the Northeast. We recommend a BUY up to $16 per share and use a 25% trailing stop on this position.
Skyharbour Resources (SYH.V)
We recommended Skyharbour Resources in February 2022 as an area play on one of the world’s richest concentrations of uranium. The company continues to execute its plan, but its share price is down 8% so far.
Skyharbour now holds nearly 1.25 million acres over twenty-four properties. They hold one of the largest portfolios in the Athabasca Basin, which hosts some of the highest-grade uranium deposits in the world. You can see the map of Skyharbour’s properties here. On April 17, 2023, the company announced the addition of eight new uranium exploration properties:
- Highway Project
- CBX Project
- Shoe Project
- Snow Project
- Elevator Project
- 914 Project
- 914N Project
- Karin Project
Skyharbour’s CEO Jordan Trimble said:
“We have been actively staking new mineral claims and adding to our substantial uranium project portfolio in the Athabasca Basin. These newly acquired projects are strategically located and are geologically prospective with very little modern exploration having been carried out on them. They complement our more advanced-stage exploration assets including Russell Lake, Moore and South Falcon Point, and provide additional ground to option or joint-venture out to new partner companies as a part of our prospect generator business. Executing on this part of the business, Skyharbour has signed option agreements with seven different partners that total over $34 million in partner-funded exploration expenditures, over $22 million in stock being issued and just under $15 million in cash payments coming into the Company, assuming that all of these partner companies complete the full earn-ins at their respective projects.”
Our investment thesis is a rising uranium price and an increase in interest in new uranium projects. Skyharbour’s plan to acquire great uranium exploration ground and lease it to partners fits our outlook perfectly.
Recommendation: Skyharbour is a highly speculative junior mining company. They continue to execute their business plan well. We want to give them 18 months to see how they perform. We recommend a BUY up to C$0.45 per share and use a 50% trailing stop on this position.
Eat Well Investment Group (EWGFF)
We bought Eat Well Foods in March 2023 because food is a major consumer of energy. The company’s shares are down 19% on no news.
Eat Well is out ahead of the trend on plant-based foods. And the market outlook is strong:
We haven’t heard much from our agribusiness since it announced that it was recapitalizing in December 2022. I would speculate that they are stuck at the moment. They have to get through all the financials before they can talk to us again.
Eat Well’s share price isn’t doing anything at the moment:
This is a ‘wait and see’ situation. I’ll update you as soon as I know something.
Recommendation: HOLD. Eat Well Group is a highly speculative play on the energy of food. We need to see how they perform in the next few months before we reiterate our buy recommendation. Please use a 50% trailing stop on this position.
Electra Battery Materials Corp (ELBM)
We recommended Electra Battery Materials in April 2023, as a North American source of recycled lithium. We are currently down 4% on our position.
Our outlook is that recycled battery metals will be in huge demand over the next decade. Tax incentives passed in the Inflation Reduction Act will bring battery manufacturers move to North America. With Electra Battery Metals, we now own the two most advanced battery recyclers (along with Li-Cycle).
Recommendation: We believe battery recycling must become a huge business in North America over the next five years. We want to own the best companies to take advantage and ELBM is one of them. Buy shares up to $2.00 each and use a 50% trailing stop on this position.
Remember, all of these positions are “idealized”.
We know most of you will buy well after we publish, and at different prices. Our goal with our portfolio track record is to keep score of our research ideas.
However, we are not portfolio managers or registered investment advisors. Our work is purely research. Each company should be evaluated for your personal investment needs. That’s why we produce so many different ideas. We know that not all of our ideas fit all of your requirements.
We track the price performance of these stocks from the time we recommend them to the time we recommend you sell. You should never buy shares of a company without doing your own research. Make sure each position is consistent with your investment criteria, particularly your risk tolerance.
Thanks for being part of our growing Mangrove Investor community. We’d love to hear from you about your experience so far. You can let me know (cheers and criticism welcome!) at wecare@mangroveinvestor.com.
Sincerely,
Matt Badiali
