K92 is a gold production company operating the Kainantu Gold Project in the Eastern Highlands province of Papau New Guinea. The company has successfully commenced production from the Kora Gold Deposit (via mining the Kora Northern Extension); a high-grade deposit allowing the company to increase production and lower costs. Gold production at Kora is targeted to ramp up operations over the coming months with significant opportunity to expand Kora, which is open in all directions and strongly mineralized. Multiple porphyry targets also exist within the large regional land package. Last quarter due to negative headlines regarding Barrick’s Porgera mine and their negotiations with the government, K92’s stock price was negatively impacted. At that time, we took advantage of the lower price and increased the portfolio’s position. The stock has since recovered and continues to provide strong operational results and exploration success. We have trimmed the position on recent market appreciation, but K92 continues to be the portfolio’s largest position.

Ero Copper is a base metal mining company operating the Mineracao Caraiba (MCSA) mine complex in Brazil. The company is aggressively increasing their high-grade reserves, maximizing their mill’s throughput, leveraging installed infrastructure and extending the mine life. The company has exceeded expectations on production growth, costs and reserves. An inflection point for the company’s drilling program occurred in December with the discovery of nickel sulphides and PGM mineralization at Siriema. Given the positive outlook for copper, the portfolio continues to hold a significant position in Ero Copper.

HLS Therapeutics is a specialty Pharmaceutical company focused on the acquisition and commercialization of late-stage development, commercial-stage promoted and established branded pharmaceutical products in the North American market. The company’s focus is on drugs that target the central nervous system and the cardiovascular area. The management team are veterans in this discipline with a strong track record. The company has licensed the drug Vascepa, for distribution in Canada. In the fourth quarter, Health Canada approved the use of Vascepa to reduce the risk of cardiovascular events in statin-treated patients with elevated triglycerides. This drug also received all necessary approvals for distribution in the US from the FDA. This drug should provide strong revenue growth for HLS in the coming quarters. The stock has done well leading up to the year end with the positive announcements. We have recently reduced the position after the stock moved from $18.00 to $24.00 in December.

Last quarter, Valeura Energy Inc., Kew Media Group and Reunion Gold Corp collectively cost the portfolio -2.3%.

Valeura is a natural gas producer focused on appraising and developing unconventional gas and condensate in the Thrace basin in Turkey. Although the Devepinar-1 well test was encouraging, investor optimism is tempered by a commingled flow rate that was worse than anticipated. Unfortunately, more work will be required to understand the results and there will be a lack of news over the next few months. We continue to hold the position until we get greater clarity on the results. We expect to see management in the coming weeks and will adjust our strategy accordingly.

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