Capstone Mining, Corsa Coal Corp and Canyon Service contributed the most to the fund in the fourth quarter, adding +2.07%.

Capstone is a base metal company, with three producing copper mines in the US, Mexico and Canada. The strong move in the price of copper was the main reason Capstone’s stock appreciated by almost 27% last quarter.  As the copper price approached the $2.50/lb mark, Capstone layered on a number of hedges for 2017, removing some of the company’s leverage to copper prices. In January, the company released operating and capex guidance which underwhelmed investors. Capex is forecast to be higher than originally forecast and will likely hamper the company’s ability to lower its AISC (all in sustaining cost). In the last month, the fund took profits and reduced its weight in Capstone in favour of other base metal companies.

Corsa Coal is a leading supplier of premium quality metallurgical coal, an essential ingredient in the production of steel. The stock appreciated over 500% in the last year, and 24% in the fourth quarter. We have consistently trimmed this position throughout the year, in order to maintain a prudent weight in the portfolio.   At current coal prices, Corsa Coal is cash flow positive and has the ability to grow its low cost production of metallurgical coal.  At the time of this report, the fund still had a 1.5% weight in the stock.

Canyon Services is a Western Canadian based company focussed on delivering pressure pumping services for the oil and gas industry.  Of the fracking companies in Canada, Canyon has maintained one of the strongest balance sheets during the energy downdraft.  Prudent management has allowed Canyon to take advantage of opportunities that arose. In 2009, the company had approximately 38,000 hydraulic horse power (HHP) and by 2015 Canyon had grown to 255,000 (HHP). With our expectation that the bottom in oil and gas pricing is behind us, Canyon is in great position to take advantage of increasing demand for oil and gas fracking.

Skeena Resources, Asanko Gold Inc. and Prometic Life Sciences detracted -1.3% from the portfolio in the fourth quarter.  Skeena and Asanko are both gold stocks, which suffered from the price of gold price falling over $150/oz in the quarter.  There was no specific news in either name to warrant their poor performance.

Asanko Gold is a very well managed gold company operating in Ghana. Last year the company successfully built and declared commercial production in their Obotan Project (Phase I).  With AISC of $781/oz, Asanko is one of the lowest costs gold miners in the industry. The company is now proceeding with Phase II of the project which should give Asanko favourable growth for the next few years.  With the price of gold deteriorating sharply post the US election, we have added to most of the gold producers in the portfolio, including Asanko.

Skeena Resources is a junior Canadian mining company focused on developing base and precious metal properties in Northwest British Columbia by consolidating properties in the Golden Triangle area. The company’s primary activity is development and further exploration of the past producing Snip gold mine (acquired from Barrick). The company is currently drilling its property and we anticipate news in the next few months.

Prometic is a biopharmaceutical company that has been a long time holding in the portfolio.  Prometic was originally purchased in 2013 at 30 cents and has added considerable value to the fund’s over the last 3 years.  Given the stocks elevated market value, sizable cash burn and lack of new drug approvals, we exited the position in December at prices between $2.30 and $2.60.

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