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A small point maybe but in the recent Proactive webinar, Bill Morgan, CFO, quantified the financial cost of COVID-19 to the company. He estimated that it was costing some US$100,000 per month. Of course, if there was a full-blown lockdown the cost would go through the roof. But, so far, it seems quite modest.

My understanding is that President is viewed rather differently in Argentina from how it’s viewed in London. From an Argentine perspective, it’s seen as a local mid-sized oil (And gas) producer (Easy to forget that the International Finance Corporation and Trafigura are both major shareholders - And both appear keen to see the development of Argentina’s energy sector). While in London it's viewed as a small expat outfit in South America. And that view is compounded by the prism of AIM - with its abundance of resource sector lifestyle companies.

Taking a step back. It’s clear that it’s a producer rather than an explorer. And, putting aside a global economic collapse, it’s very likely to be producing at least 4,000 BOEPD by the year-end and that’s factoring in no drilling in H2 2020. Let’s say that 50% is oil with the remaining portion being natural gas (At the start of the year, oil made up some 95% of output). With a “Criollo” barrel set at US$45, the company has an effective floor for much of its output. Crucially, it now has an enlarged pipeline through which it can transport its gas out of Estancia Vieja. The project was commissioned in March 2020, on time and budget.

The bulk of its production is from its Rio Negro assets (Break-even of US$21.50). And it's dealing with a tiny number of buyers - the likes of Shell and Trafigura. So payment is not an issue. As for the depreciation of the Peso, the impact on the company has been negligible - an added cost of some 1% of turnover.

On the downside, the company seems intent on drilling in Paraguay (US$10-12 million). Should it succeed, then it will be a game-changer but it’s very risky. It also has a major portion of its reserves in Puesto Guardian and this is still a work in progress.

However one views it, the company has displayed a degree of resilience in the face of external factors (Bad luck?) over which it has no control. I suspect that many of its competitors may not be so fortunate and there could be further acquisition opportunities. But more importantly, it continues to build a profitable energy business in a region crying out for its production.

According to the FT, the LF Ruffer Gold Fund has just topped its Morningstar category with a return of 30% since the start of the year. Obviously, it has a portfolio of Gold stocks (PAF is not one of its top 10 largest holdings) but it’s worth mentioning that Ruffers increased its holding in PAF to 5.84% on March 16th 2020. It may also be worth referring to what Ruffers wrote in its March 2020 quarterly report for the fund. This was in respect to COVID-19 and its implications.

"At the time of writing, it is no exaggeration to say that we are in the midst of a once in a hundred year event with a truly astounding global social and economic impact. "

Considering that Ruffers was recently revealed as the “50 Cent” behind the purchase of derivative products linked to the VIX, which helped it gain some US$2.6b in a month, its views may deserve to be taken seriously. If Ruffers is correct, then the outlook for Gold is probably very rosy. But the read across for the rest of the market is pretty dire.

Taking a broader view of the UK stock market and it’s increasingly difficult to find companies where the management is prepared to give guidance. That’s compounded by the problem of many companies abandoning their dividends. For sure, Caledonia comes with a jurisdiction that many would run away from but considering the company on its performance and considering the jurisdiction on how it has treated the company and the outcome may be quite different.

It recently deferred making a decision on its quarterly dividend in light of the lockdown in Zimbabwe. It has subsequently decided to go ahead with it. The cost will be some US$860,000. Bearing in mind that as at 24th April 2020 it had US$14.1m in cash (At the 25th March 2020 it had US$12.5m) and very low debt, it will not exactly break the bank. Should it choose to abandon its dividend at some point, I will probably divest but that does not seem to be a realistic prospect for the moment. The company will provide the market with its next quarterly update on 14th May.

Very importantly, it seems to have reached an accommodation with the Government of Zimbabwe. It continues to operate at around 93% of target production but provides considerable assistance to the community in which it’s based.

It may be ticking over for the time being but there is the probability of a substantial increase in Gold production (Increasing to around 80,000 oz per annum) by 2022 with the commissioning of the Central Shaft. This will have the added benefit of extending the mine’s life to 2034.

But Caledonia comes with inherent risk. Most obviously with the Gold price but also jurisdiction. This is a pure Zimbabwe Gold play. It’s looking for acquisitions (At the right price) but only in Zimbabwe. Added to that is its ability to get paid-in-full and on-time. There could also be issues with critical supplies coming from South Africa. Even the reliability of its electrical supply has been called into question in the past but that seems to have been mitigated through a Government scheme as well as the use of diesel generators. It's planning to construct a solar energy plant (Estimated cost some US$18m and debt-financed - it would be a phased project) eventually to provide energy for all its daytime electricity needs. But that is some way down the line.

The big issue seems to be jurisdiction. If it was based in Australia and paid a tiny annual dividend, its rating would probably be a lot higher. Having said that, unlike many companies in all sectors, it’s operating profitably and paying dividends. And it does seem to be able to provide shareholders with a degree of guidance.

Much depends on the Gold price but it’s a low-cost producer (All-in-Sustaining Costs of US$791 per oz) with a raft of producing assets in three remote clusters in Russia's far east. For sure, it’s carrying a significant amount of debt but it does have considerable financial firepower left and that includes a credit facility of US$340m. But the really big prize lies with the commissioning of Kekura planned for late 2023. This is projected to add another 170,000 oz of Gold to its output. Between then and now the company is upgrading and developing its current producing assets as well as expanding its Valunisty mine through underground development.

It certainly comes with risk both in terms of jurisdiction as well as the control that its major shareholders have over the company and, of course, the Gold price. But put into perspective, it pays healthy dividends and it shows no signs of being hit by a lockdown. Importantly, its producing assets lie in three separate clusters; it's not completely dependent on a single asset. In today’s investing climate, simply being able to operate normally and profitably is a standout feature.

As with CMCX, IGG is, in my opinion, a play on the volatility of the financial markets. This volatility could be with us for a long-time. There are growing geopolitical tensions. It’s unclear how the current dislocation caused by COVID-19 will work out - will there be major changes in consumer habits? Years of QE and ultra-low interest rates have created serious problems for monetary policy. Governments across the world are literally printing money to keep their economies ticking over. A large number of UK quoted companies will almost certainly have to issue equity to survive rather than expand. And the backdrop is a high level of global debt.

For sure, it has not raised its dividend but it’s actually paying a dividend and functioning as a normal business. My prime concern is that it effectively manages its risk. That is key.

As soon as "normality" returns, I will re-evaluate my holding of IGG. But I suspect that could be a long way off.

Putting a floor under the price of oil received by Argentine producers should be good news for President but it’s worth remembering that it aims to produce 4,000+ BOEPD by the year-end. That includes gas and gas does not appear to be covered by this proposed decree. It’s aimed at helping oil producers.

Today’s update from Sirius points to a German commercial property market in a healthier state than its UK counterpart.

“The collection of rent and service charge income for the month of April 2020 has remained relatively robust with over 75% of billing collected by working day 7 (9 April 2020), representing circa 90% of the normal working pattern”.

Taking a look at the UK commercial property sector. Intu received some 29% of the rent due for Q2 2020 (Q2 2019: 77%). Hammerson received 37% of UK rent billed for Q2 2020. Landsec received 65% for Q2 2020 (2019: 96%).

Yes, comparing apples with apples is ideal. But the above seems to indicate that, thus far, Germany appears to be weathering the COVID-19 storm better than the UK. The one concern I do have is that Germany has an export-led economy (Hugely benefiting from the Euro) and so will be hit by the problems besetting its trading partners.

I no longer hold the stock, however, I am certainly still interested. But I will only really be tempted when there is greater economic clarity.

The SA Government seems to have cut it some slack. For sure, the lockdown has been extended but Pan African is now allowed to operate limited overground operations at some 70% of normal capacity at Elikhulu and its Barberton Tailings Retreatment Plant. It has also been allowed to conduct limited underground operations at Barberton but does not indicate its capacity. This is far from ideal but it’s certainly better than no production and it can tap into the relatively high ZAR price of Gold. The SA Govt seems to be adopting a similar approach to Zimbabwe (CMCL is still operating but below its normal capacity). For the moment, simply being able to operate appears more important than the Gold price.

As has been discussed, the company will almost certainly be badly impacted by the restrictions placed on outdoor events as well as a major fall in rail passenger journeys. However, in its recent interims, it did state “We are in the final stages of negotiating several large multi-year software licencing contracts which we expect to close over the coming weeks”. This is in stark contrast to many UK listed companies where winning new business has simply stopped and where the focus has shifted to survival.

In its update of 30th March 2020, the company stated that it had applied for an exemption from the recent lockdown and was awaiting a response from the authorities. In the meantime, it was continuing production at some 70-80% of its normal target. The lockdown is due to end on April 18th. Whether or not it gets the exemption and when, who knows? Purely conjecture, but the lockdown is now entering its second week. I would not be surprised if it simply continued production, albeit at reduced levels for the remaining period. There may be no response from the authorities and, if there is one, it could be very late into the lockdown.

As BHP has discovered at the giant Escondida copper mine in Chile, Covid-19 may become a major issue for mining companies. Easy to forget but very important. CAML’s copper production in Kazakhstan is derived from tailings. It’s not an underground mine. Sure, its Zinc/Lead mine in Macedonia is an underground operation but not its copper production.

In my view, a tailings business is far less likely to suffer the impact of Covid-19. It does not involve large numbers of workers confined in small spaces. In general, it's a less dangerous working environment. The logistics are also very different and workers can be replaced or re-scheduled. Basically, it would take a lot to stop its copper production.

Normally I would not bother commenting when an institutional investor passes the notification of major holdings threshold. But this could be worth a little reflection. Ruffer LLP purchased a further 2,000,000 ordinary shares of PAF on 16th March. Taking its holding to 5%. This might be revealing a lot more than its faith in Pan African. As this piece from Business Insider and published in April 2018 illustrates, Ruffer’s are not afraid of putting their credibility and cash on the line.
https://www.businessinsider.com/financial-earthquake-is-coming-2018-4?r=US&IR=T

For sure, it has been a long time coming but the Government’s 2020 Budget plans for public transport development are quite expansive. The full details will be given in the Comprehensive Spending Review to be published in July together with The National Bus Strategy.

Importantly, the Government has earmarked £4.2 billion for eight combined Mayoral Authorities to develop local transport links. This dovetails with the powers given to elected Mayors via The Bus Services Act 2017. Rotala may get squeezed out by the big operators. But I suspect the authorities want a shake-up rather than business as usual. And this appears to be part of a broader Government strategy of reducing car travel and increasing social mobility. It’s also worth noting that Manchester is the most advanced in utilising these powers and Rotala has a strong base there with scope to expand without adding greatly to its fixed overheads.

Not suggesting buying but I am suggesting a little perspective. Firstly, according to its interims for the period ending 30th June 2019, it had cash of some US$17.8 million. While its production averaged 3,008 BOPD for the period. For Q4 2019, this increased to 3,196 BOPD. It has hedged some of its production to ensure that it can go ahead with its offshore development. And underpinning this is a break-even of less than US$30 per barrel and, of course, it’s debt-free. Assuming that it has accrued no cash for H2 2019 and Q1 2020, which seems unlikely, it’s trading at around 60% of its cash value - forget about its other assets. Sure, the market needs to discount prospective cash flows and oil prices have collapsed but it may be overreacting with Trinity.

Impossible to prove, but I suspect that Trinity is caught between a rock and a hard place. It certainly is not in the same cohort as much of the AIM resource rubbish. It’s profitable, debt-free, cash-rich and is working to a plan that could substantially lift production. At the same time, in terms of production, it’s still a minnow. And, of course, it has to grapple with the impact of SPT.

It enters 2020 with production at about 3,400 BOPD and probably has around US$20m in cash and no debt. And, of course, this is at a break-even of less than US$30 per barrel. But the real prize is offshore and that will require external funding and is several years from production. In the meantime, the company has to find a means of keeping shareholders happy. I would have thought the easiest way would be to provide a dividend but that does not appear to be forthcoming. In its interim report, it intimated at taking advantage of possible “Strategic opportunities”. So, maybe a consolidation of Trinidad’s oil producers could be on the cards.

At an operational level, the company appears to be doing very well. My prime concern is what the exit strategy will be for investors. The management’s rewards are ongoing and are geared to output. Bruce Dingwall’s base salary increased in 2019 to US$360,000 pa (That excludes all the add-ons, including expenses). For sure, he has skin in the game but his shareholding has fallen from some 6% of the stock to around 3.5% over the five years to 2019. While investor rewards are effectively back-ended. As the recent takeover of Amerisur Resources demonstrated, should Trinity be sold at some point, the sale price could be a lot less than most investors expect.

Having said all that, this seems like a very sound business. It’s not dependent on a tiny number of high impact wells. It’s working multiple reservoirs and is based in a stable jurisdiction. Sure, it's impacted by SPT but it looks as though it can work around that. The real issue is that it seems to be in something of a limbo. Neither fish nor fowl. To some degree, it comes down to Bruce Dingwall’s character and how we judge the man. The impression I get is that he wants to do right by the shareholders and also has a strong affinity with Trinidad. As a slight aside, I can very clearly recall at a recent investor presentation where Dingwall mooted at the long-term potential for offshore development. He mentioned the possibility of the oil majors scaling down their operations and leaving neighbouring fields, largely the result of natural decline. In which case, Trinity would be in an ideal position to pick up operating assets at very low prices. Should that happen, it could be extremely lucrative but it would be years away.

This does not strike me as a stock to trade - it’s not a pump and dump. Its assets are real and so are its plans. But there is an inherent risk with banking on a sale of the company at an unknown price at some unknown point in the future.

The acquisition of Valunisty in December 2018 has made Highland an even purer Gold play. In H1 2018, other metals (Silver, Lead, Copper and ZInc) made up some 16% of its revenue. By H1 2019, this had fallen to just 11%.

By the way, some investors may not have yet grasped that the far eastern part of Russia is being opened up through a policy of private and public development. The authorities are constructing an infrastructure that facilitates private development. It’s almost a chicken and egg situation. It’s pointless building roads to nowhere and it’s equally pointless investing in areas that lack basic infrastructure. Highland seems to be a key part of that strategy. Its development makes viable infrastructure investment, such as winter roads, and that facilitates further development. In essence, a multiplier effect. The Kekura project is largely possible because the authorities have built a 733 km high voltage power transmission line stretching across Bilibino-Kekura-Peschanka-Omsukchan. And this includes a cable running directly to the Kekura site. Sure, Highland has built a sub-station that fits into the system but it was the authorities who did the heavy lifting. There’s a parallel development. I would suggest that the upshot is that Highland has a great deal more development potential within its current licences.

Putting aside Peel Hunt’s upgrade and drawing upon what was said at the recent General Meeting and President is probably going to enter a step-change in H2 2020. My understanding is that the enlarged pipeline that will allow the company to transport its gas reserves out of Estancia Vieja is largely complete. The final gas compressor will be installed in April 2020. And, this compressor is locally built (There are no China supply chain issues). The company will then bring back into action its existing gas well stock. It appears set to increase its overall production by some 1,000 BOEPD. So, it should be entering H2 2020 with production of around 3,500 BOEPD. With almost 30% coming from gas sales. It’s also worth noting that gas was not impacted by last year’s Decree 566 fixing the price of oil and the exchange rate associated with those oil sales. In essence, it appears set to become a more balanced company with a lower-risk profile.

Incidentally, the Argentine economic crisis has had little impact on the company’s financial performance when Decree 566 is pulled out of the equation. I was told that it added 1% to its forex charge (On its revenue) on the business. As for Decree 566, this has gone. It has not been suspended, it has gone. In respect to getting paid in full and on time, there were no issues. There had been no increase in debtor days. It was dealing with the likes of Shell and Trafigura (Now a shareholder). The company also conveyed the very real value the new Argentine Government attaches to developing the conventional oil sector. It does not appear set to introduce any draconian new measures that will adversely impact the industry.

It may be useful to remember that Argentina has a chronic energy problem. Without increasing energy output, it’s impossible to see any way out of its current economic problems. And just as an afterthought, for those concerned with some type of Peronista nationalisation threat, it’s worth remembering that the IFC (The sister organisation of the IMF) is a major shareholder in President.

When looked at rationally, it’s strange that Russia is off the radars of so many resource investors because of “Jurisdictional issues”. For sure, Highland Gold operates in some of the most inhospitable climates on earth. But it has no problems with armed and organised artisanal miners. There are no issues with “Community groups”. And most of its operations are within an Advanced Special Economic Zone (ASEZ). So they get substantial benefits including a favourable tax regime. More specifically, Highland has four distinct producing assets - open pit and underground. These are augmented by waste dumps that can be used to even out production. In addition, it has three major development projects. The largest, Kekura, is now at phase 2 and is looking at going into production in 2023 with an estimated annual production of 172,000 oz of Gold per annum. Around this and the company has a raft of ongoing and near-mine exploration projects that seem set to increase the life of its existing and producing mines.

In essence, it may be risky but Highland could be a lot less risky than most other mid-tier Gold miners.

After immediately getting back into the stock on news of the company's imminent sale, this has been a very profitable exercise but not as profitable as I expected. A final takeover offer of at least 25p was the figure that I anticipated. Frankly, in my view, the business is being sold on the cheap. If there is one lesson to be learned, I would suggest that the model of back-ending shareholder rewards in the resource sector is deeply flawed. Typically, managers will take their rewards in cash and on an on-going basis. Plus, of course, money can also be extracted in other ways. As for their holdings, these are often the result of favourable option packages. However, shareholders are largely dependent on a payout (Unknown) at a point in the future (Unknown). It leaves a great deal to luck and trust in the management. And something that some private shareholders do not seem to take on board concerns liquidity. Institutional shareholders may take a low-ball offer because it's the only way they can exit the position. Their targets may be far lower than those of small shareholders.

At the moment, CAML is my preferred choice in the resource sector. More broadly, I am getting increasingly wary of resource stocks that cannot or will not pay a dividend.