LWS Financial Research is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

2025 in retrospective

Last year we highlighted how smooth the path had been in terms of volatility for both the indices and our investment ideas. The contrast with 2025 could not be greater. Despite the high returns achieved, macro conditions and political decisions have offered no respite at any point: tariffs, armed conflicts, trade tensions, electoral processes, and constant pressure on the Federal Reserve. It has undoubtedly been an intense year, in which closely following the day-to-day of the market and, above all, separating signal from noise has been more important than ever. At LWS Financial Research, we have sought to be that daily companion to help navigate an especially turbulent environment.

One of the most representative examples—and one I am personally most proud of—was our annual in-person event in Málaga, held to coincide with the weekend of Liberation Day. With portfolios under significant strain and uncertainty dominating all the headlines, one might reasonably have expected a gloomy atmosphere. The opposite occurred: the tone was extraordinarily positive, with a shared sense of being part of something larger, of breaking the investor’s isolation, and of being able to share doubts, learnings, and convictions in an environment of trust. It is probably the best expression of one of the project’s core pillars: the community, of which all of you are an essential part.

In this highly demanding context, the return achieved to date (YTD) by our model portfolio—whose objective is strictly educational and aimed at illustrating our analytical methodology and investment philosophy—stands at 46.28%, accumulating a total return of 145.1% since its inception in September 2022. As always, all movements have been shared in real time with subscribers. Below, we review the positions closed during the year (marked in green, with the current price corresponding to the exit price of the transaction), along with those from previous years.

Of course, not everything has been a success—far from it. We have also made significant mistakes, such as in Braskem or InMode, where we overestimated these companies’ ability to navigate a downturn in their respective industries. In the specific case of Braskem, moreover, I was not flexible enough to remove the position from the model portfolio when the initial takeover thesis failed, instead rationalizing a shift in focus toward a supposed cyclical opportunity at the bottom of the cycle. These are mistakes that should be acknowledged plainly. What truly matters in such cases is to extract lessons, improve the process, and, above all, manage risk in such a way that these drawdowns do not tarnish the overall result or interrupt the portfolio’s long-term compounding process.

Although, based on the profile of companies included in the model portfolio, it might appear that we focus exclusively on cyclical or commodity-linked industries, the reality is different. Our approach is consistently rooted in value investing. What varies is the tactical adaptation to those themes and sectors where we believe the risk–return trade-off is most attractive at each point in the cycle. In addition to the positions in the model portfolio, we regularly share many other ideas through the publication and on Discord—always in real time and with full transparency—which have also delivered very strong performance. Some relevant examples have been the following:

• DMX: Thanks to Mr. Timbits, one of the standout members of the community, we identified the investment opportunity in DMX, a Swedish uranium explorer that was operating under a moratorium which, until recently, prevented the extraction of this mineral in the country. The potential lifting of this ban represented a clear, binary, and highly asymmetric catalyst for the share price, which is why we shared the idea when it was trading around C$0.40 per share. Once the event materialized, it was tempting to maintain the position in anticipation of further upside supported by an exploration program or a potential sale of the asset. However, that scenario already corresponded to a different thesis, both in terms of probability of occurrence and return profile. In line with the original investment rationale, the decision was made to exit the position following the vote approving the lifting of the moratorium.

  

• EVO: On the other side of the coin, we shared the idea of Evolution Gaming at levels close to SEK 1,000 per share (currently around SEK 650). This is a very high-quality company, with a clearly dominant position in the online gaming segment, extraordinary margins, strong historical growth, and customer retention close to 100%. The market, however, has heavily penalized regulatory risks, which have ultimately fed through to the fundamentals, bringing the company to a reasonable valuation in both historical and absolute terms (around 10x FCF versus more than 30x just three years ago). Despite the high quality of the business and its structural position within the industry, the company has chosen to focus its growth exclusively on regulated markets, abandoning geographies and opportunities in greyer areas that, over the long term, could have entailed reputational, legal, and financial risks. This decision—strategic and understandable from the standpoint of business sustainability—has had a very negative short-term impact, triggering a sharp slowdown in growth and profitability and, as a result, a severe derating of the stock. I continue to believe the thesis retains meaningful long-term potential, but to date it has entailed a significant opportunity cost in terms of returns.

• IGIC: In an environment of elevated and persistent interest rates—the now classic “higher for longer”—both banks and insurers have gone through a period of extraordinary profitability. Beyond the large sector leaders, we decided to look for more niche opportunities within the insurance universe, where the market tends to be less efficient. In that context, toward the end of last year we began building a position in IGIC, a Jordanian insurer specialized in commercial insurance and reinsurance, with an especially prudent management profile, high profitability ratios, and clear capital allocation discipline, reflected in recurring share buybacks.

  

  The thesis worked very well from the outset and also offered additional opportunities to increase the position following the climate-related disasters associated with Hurricane Melissa. During that episode, the market indiscriminately punished the insurance sector as a whole, despite IGIC’s actual exposure to those events being minimal. We took advantage of that dislocation to adjust the position. Ultimately, we decided to exit after a revaluation of close to 40% in just a few months, achieving the targeted return and closing out a trade that clearly exemplifies our approach: identifying high-quality businesses in underfollowed niches, taking advantage of volatility episodes mispriced by the market, and maintaining active management of timing and risk.

  

The returns of the investment ideas shared and discussed in LWS Financial Research have, in aggregate, been higher than those of the model portfolio. It is worth remembering, however, that the latter is not designed to maximize returns nor to constitute an investment recommendation, but rather to serve as an educational tool to illustrate how, with a more moderate risk profile and a philosophy based on value investing and macro analysis, a retail investor can aspire to consistently outperform the indices over time. Last year we published an article—which we link again below—in which we outlined our main ideas for 2025. These were as follows:

• Precious metals: Silver entered 2025 from an especially favorable position, with a structural primary deficit accumulated over many years and clear tailwinds in the form of rising industrial demand, depreciation of fiat currencies, and an increasingly multipolar geopolitical environment. It is therefore unsurprising that it has been one of the best-performing assets of the year, breaking through previous highs with no clear signs of exhaustion. Primary supply is also highly inelastic—the bulk of production comes as a by-product of gold or copper mines—even despite the extraordinary margins currently enjoyed by producers.

  

  Despite the strong rallies in both gold and silver in 2025, central bank demand has remained firm, and Western investors—until now largely on the sidelines—have begun to increase their exposure through physical gold ETFs. Mining companies, however, continue to trade well below what would be expected at these metal prices, suggesting that the market still doubts the sustainability of the underlying commodities bull cycle. In the model portfolio, we chose to express this thesis through $DNG.TO, $DPM.TO, and $ADT.AX. Both Dundee and Adriatic—the latter ultimately acquired by DPM, as we had anticipated in Discord—have delivered excellent performance. Dynacor, for its part, has clearly lagged the evolution of the gold price, although we continue to see significant value upside in the company.

• Argentina: The country’s political and economic transformation since 2022 has been one of the most interesting processes of recent years. The expectation was that the reforms driven by the Milei administration would translate into another year of strong performance for the Merval, with particular focus on banks, real estate, and the energy sector. From a macroeconomic standpoint, the adjustment has progressed at great speed; however, the market began to heavily price in political risk amid doubts over a potential victory for La Libertad Avanza in the October elections, especially following the results in the province of Buenos Aires. This fear translated into extreme weakness in the Merval, with declines of over 60% in many banks in less than two months, driven by the possibility of a return to power of far-left socialist political options. In the end, the outcome was very different. Milei’s party delivered an extraordinary performance in the congressional and senate elections, leaving the executive in an even stronger political position than before the vote and clearing much of the uncertainty. This paves the way for deeper structural reforms, some of which have already begun to be implemented, such as permanent cuts to agricultural export taxes. The thesis did not work in the short term due to the severe sell-off driven by electoral risk, but once this factor was resolved, the forward-looking scenario became markedly more constructive. We have primarily expressed this view through (and, to a lesser extent, $GLNG) in the model portfolio, and although the results so far have not met expectations, we maintain our conviction in both positions.

• Oil: Probably our biggest mistake of the year. The thesis was based on a clear acceleration in global demand, even in a context of persistent economic weakness in Europe and the United States—something that has indeed materialized. Where we were wrong was on the supply side. We expected a much more limited response, constrained by geological restrictions and a lack of investment, but the geopolitical risks that unfolded throughout the year—most notably the conflict between Iran and Israel—triggered sporadic spikes in crude prices that allowed many companies to lock in attractive hedges. This kept production levels elevated for longer than anticipated. The result is a market that has now experienced three consecutive years of a clear downward trend in prices ($99/b, $82/b, $80/b, and $64/b between 2022 and 2025) and will likely continue to show weakness at the start of 2026. That said, the gradual return of barrels to the market by OPEC, together with the reduction in system spare capacity, should lay the groundwork for a healthier recovery in a later phase of the cycle.

  

  This idea was represented in the portfolio through Petrobras, Vermilion—which has executed an almost complete pivot toward gas—and Valaris, as a second-derivative exposure. With the exception of Vermilion, precisely the least exposed to oil, performance has not been particularly negative, suggesting that the market views this weakness as transitory and is already pricing in part of the expected recovery toward late 2026.

• Uranium: The nuclear narrative has taken hold, and there are now very few geographies left (not even Europe) that resist the new nuclear spring. With an increasing number of announcements of new reactors accumulating, supply–demand models are becoming ever more constructive, even though share prices do not yet fully reflect this. Short-term volatility and the sector’s loss of momentum are weighing on investor sentiment.

  

  However, the long-term value is clear, although I do believe that with new tailings-enrichment technologies, mining is now experiencing its last major cycle—and for many of these ideas, it is now or never.

As we can see, not all of them have performed as we expected, but active management and ongoing monitoring have allowed us to take advanta ge of them to a large extent.

⚠️Past performance does not guarantee future results. The historical performance of the model portfolio is shown for informational and educational purposes only and does not constitute investment advice or an offer to buy or sell securities. The returns shown may not include fees, taxes, or other associated costs.

Evolution of the publication

This third year of the premium subscription has been the year of true consolidation of the service, finally bringing us closer to the vision we had when we launched it in September 2022. From a product perspective, we have achieved the main milestones we set at the start of the year: the migration to our own website, leaving Substack behind and gaining full control over the publication, the archive of live sessions, and the company- and sector-based search engine; the strengthening of the team with the addition of two new analysts, Mr. Kamikaze and Arkad, which has allowed us to go deeper into sectors and companies that had previously been outside our coverage universe, such as restaurants or payment services; and the improvement and standardization of our publications, systematically incorporating video and Q&A sections into our reports.

On this foundation, we will continue to evolve the service with a clear roadmap and by actively gathering your feedback, with the aim of delivering value in a consistent and sustainable way over time. On the more bittersweet side, the strong growth of the service (more than 1,100 subscribers) and a retention rate above 90% have led us to make the decision to close new subscriptions—not as an exercise in artificial scarcity, but as a necessary measure to preserve the quality of the service and the sense of closeness that, according to your own feedback, you value most: the ability to ask questions, debate, and go deeper during the monthly live sessions and on Discord, in a trusted environment, with focus and well-developed answers.

Thank you for the trust and loyalty you show day after day. Our commitment is to continue repaying that loyalty with independent analysis, depth, and judgment, building on the foundation we have established so far and with new ideas that will set the course for 2026.

Main investment ideas for 2026

This year, as we have just seen, has once again been spectacular, but the level of challenge does not diminish looking ahead. On the contrary, ambition is even higher for the new year that is beginning, where the initial objectives remain the same, as could not be otherwise. The investment themes we plan to pursue have changed significantly compared to those of 2025, and we have even closed almost all of our positions in precious metals, which was my highest-conviction idea just 12 months ago. The macroeconomic environment is constantly evolving, and internal sector dynamics are equally volatile, so our task is to accurately read the current situation and adapt to changes. Below, we will review the main investment ideas that I find interesting for this year:

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q325 Earnings review, part III

This delivery is the third and final installment of the third-quarter earnings commentary for 2025 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• Dynacor Group

• Israel Chemicals

• AST Spacemobile

Let’s get at it.

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Dynacor Group

Finally. It seems Dynacor is starting to leave its operational problems behind and is once again executing like clockwork, just as it did a year ago. Looking purely at the financials, we see a strong increase in revenue but margin dilution, which drags down profitability:

• Revenues of $100.5M vs. $76.2M in 2024.

• Margin of 11.7% (vs. 13.6%), resulting in $11.7M in gross profit (vs. $10.3M).

• EBITDA of $9M (vs. $8.9M), weighed down by $0.6M in non-recurring expenses.

Cash flows were heavily hit by a deterioration in working capital (as gold prices rise, the company must pay miners upfront, creating a larger initial cash outflow). Another line item that surprised negatively was the increase in general expenses, which jumped from $2M in Q3 2024 to $3.5M this year. The reason and trend are very similar to what was seen at IPCO and HCC, where expansion-asset costs and salaries begin to be paid before those assets produce anything or offset the cash outflows. But since this is a temporary effect, it does not worry me too much.

As highlighted at the beginning, there has been a major operational improvement. In both Q1 and Q2, volumes and recovery per tonne processed fell sharply, with the company attributing this to lower grades delivered by miners and government-imposed curfews in Peru. In Q3, although they processed fewer tonnes due to July road blockades, the yield of those tonnes was higher than last year. Adding to that a better margin per ounce sold ($440/oz), we now have growth in both legs — volumes and price — showing the improvement path we wanted to see.

They continue advancing their international expansion plan, with the first ore from Senegal expected by Q1-26, which should be a transformational year for Dynacor’s volumes and fundamentals, laying the first cornerstone of its broader transformation. On shareholder returns, in addition to their monthly dividend (yielding ~4%), they have begun buying back shares, retiring 1% this year (not counting, of course, all the dilution from the Svetlana acquisition). If they manage to achieve even half of their stated objectives, the company is trading at multiples of just 2–3x EBITDA.

Israel Chemicals

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q325 Earnings review, part II

This delivery is the second installment of the third-quarter earnings commentary for 2025 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• International Petroleum

• Vermilion Energy

• Petroleo Brasileiro

• Golar LNG

Let’s get at it.

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International Petroleum

IPCO is one of the few companies in the sector that, despite weak oil prices, is trading at all-time highs. During the quarter, production came in at the upper end of guidance (45,900 b/d), even though CapEx remains at minimum levels, since the focus continues to be Blackrod. On that front, the company (like HCC), true to its style, has executed flawlessly, keeping costs within budget and bringing first oil forward by one quarter—now expected for Q3 2026—with a gradual ramp-up until 2028, when production is expected to reach the 30,000 b/d plateau. As a result, CapEx has been slightly front-loaded, which affects this year’s results, but should normalize next year, which will suffer from the opposite effect.

Even so, the decline in oil prices is an unavoidable reality, and cash generation is currently minimal. FCF was –USD 23M, but would have been +USD 36M (nothing spectacular, but better) without the investment in Blackrod (which is discretionary and growth-related). For the full year, with only one quarter left, they adjusted their expected range to –USD 160M to –USD 170M (assuming Brent between USD 55/b and USD 65/b).

They have been able to undertake this investment confidently thanks to the strong balance sheet in 2023, allowing them to combine growth with shareholder returns. They currently hold USD 435M of net debt (significant but not dangerous), which will peak next year—right before production begins at Blackrod—and should be paid down quickly once production ramps up. In addition to this CapEx, they completed another buyback program (which they will renew in December, as they do every year), leaving the company with fewer shares outstanding than when it went public in 2017, while production has grown 4.5×, reserves 17×, and more than 23 years of inventory have been added. Being aligned with the Lundins is always a guarantee.

Vermilion Energy

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q325 Earnings review, part I

This delivery is the first installment of the third-quarter earnings commentary for 2025 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• Amerigo Resources

• CVR Partners

• Metals X

• Sylvania Platinum

Let’s get at it.

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Amerigo Resources

During Amerigo’s conference call, a shareholder “complained” about how boring perfect execution and capital allocation can be, given the company’s consistency in delivering excellence and shareholder respect that are hard to find elsewhere. It’s worth noting that El Teniente mine —from which Amerigo processes fresh tailings— experienced operational issues in July, dragging down quarterly volumes, though this impact should already be resolved in Q4. In Q3, the average realized copper price was $4.54/lb, much lower than current levels but nearly 10% higher quarter-over-quarter, which helped offset part of the lower volumes. Likewise, molybdenum prices rose sharply, helping to reduce unit production costs. During the quarter, Amerigo generated $11.1M in FCFe (a 3.2% yield), which should be much higher going forward due to higher copper prices and volumes, perfectly in line with our expectations and model. For the rest of the year (and the coming ones), they expect large and growing copper market deficits, which should provide a tailwind for the company’s operations. In that regard, management indicated that a 10% increase in copper prices (already around the current average) would add roughly $7M in extra quarterly revenue.

On the capital allocation front —the company’s trademark— they have fully extinguished their bank debt, as previously announced, saving $9M per year. Half of that amount ($4.5M) has been used to increase the quarterly dividend by 33%, to C$0.04/share, while the rest is expected to be returned through special dividends or additional share buybacks.

CVR Partners

Another quarter, another generous dividend from $UAN —and that’s despite the company setting aside a significant amount of cash for plant upgrades planned for 2026. It seems clear that the cycle’s trough (2023–2024) is behind us, and fundamentals across the fertilizer sector are improving (also evident in $ICL). Adding revenue growth to the operating leverage inherent in a business with high fixed costs has produced spectacular results. With $70M in EBITDA, the company declared a dividend of $4.02/share (>4% quarterly yield).

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q225 Earnings review, part I

This delivery is the second installment of the second-quarter earnings commentary for 2025 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• Vermilion Energy

• Israel Chemicals

• Braskem

• Petrobras

Let’s get at it.

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Vermilion Energy

In yet another Groundhog Day episode, $VET.TO continues to execute well (perhaps lacking a bit more drive on the buyback side), but that’s not what matters right now to a market obsessed with flashy headlines and the next shiny object. Everything is cyclical, and free cash flow—which is currently overlooked—will have its moment to shine again.

Q2 production was 136k boe/d, up +32% QoQ, as it now includes a full quarter of Westbrick’s production (this will drop slightly after the sale, at the end of June, of the Saskatchewan assets and the northern U.S. assets). In the first six months of 2025, they have generated $218M in FCF, with only the buyback program falling a bit short; the company pays a 5% dividend while repaying debt, optimizing operations, and repurchasing shares.

In addition to acquisitions (which they are also considering, especially in the Netherlands), as seen late last year with Westbrick, they continue with organic developments, notably:

• Expansion in Mica, where they will begin the third (and final) phase, costing around ~$100M, enabling production of 28k boe/d by 2028. With eight wells per year (costing around ~$70M), they expect to maintain this production for over 15 years, generating between $125M and $150M in FCF (based on $3 AECO and $70 WTI).

• Continuing the campaign in Germany, which looks promising in terms of volume and achieves premium prices compared to Canada.

• Identifying $100M in additional synergy savings with the Westbrick assets—already totaling $200M—which will remain a focus, along with reducing well development costs.

Including the $535M obtained this month, they expect to close 2025 with $1.3B in net debt (-$750M vs. Q1), which would leave them trading at 4x FCF and 8x EV/FCF. Once debt is reduced to $1B, they will increase shareholder returns again, and they have made it clear that buybacks will be their preferred method. Personally, I’d rather see them continue paying down debt and cancel the dividend, as it creates a virtuous cycle of lower costs and greater flexibility, but in markets one often has to strike a balance in the face of shareholder pressure.

For Q3, production guidance is slightly lower (117k–120k boe/d) due to a voluntary summer reduction, when Canadian gas prices are seasonally weaker; the financial impact won’t be too damaging, as they have 60% of Q3 Canadian production hedged at $2.65/McF and will continue achieving premium prices in Europe. To clearly see the capital efficiency they tout so much: last year they produced 84,500 boe/d and spent $623M in CAPEX; this year, with 50% more production, investment will be around $600M. As they continue to further optimize operations and synergies (with an additional $200M in identified NPV to be realized), this trend should strengthen.

There is also optionality, now that LNG exports from Canada have begun, for AECO prices to improve as the country’s infrastructure develops and it ceases to be a captive market.

Israel Chemicals

Israel Chemicals has run ahead of its fundamentals, as we had already warned, but this shouldn’t overshadow the significant fundamental improvement the company is experiencing. Looking only at the financial data, revenue is up 5%, but a drop in operating margin has caused both profit and cash generation to remain flat or even decline slightly. If we stop here, there isn’t much to celebrate…

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q225 Earnings review, part I

This delivery is the first installment of the second-quarter earnings commentary for 2025 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• CVR Partners

• Valaris

• International Petroleum Corp.

• Georgia Capital

Let’s get at it.

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CVR Partners

Solid quarter for nitrogen fertilizer producer UAN. Sales reached $169 M, with $39 M in net income and $67 M in EBITDA. Despite a 91% utilization rate at ammonia plants —affected by planned maintenance and unplanned outages— sales volumes grew year-over-year, driven by strong demand and a favorable base effect (last year part of Q2 was shifted to Q1 due to weather-related issues).

In pricing, UAN rose 18% year-over-year and ammonia 14%, reflecting tight inventories and a positive agricultural season (more corn planting in the U.S. and better margins for farmers). The market environment remains favorable, with an ongoing bullish bias in fertilizers during the summer, which is typically a seasonally weak period. After deducting CAPEX and the cash reserve needed for next year’s improvement projects from results, the company approved a quarterly distribution of $3.89/share.

Looking more closely at CAPEX, $11 M was invested during the quarter (all maintenance). Full-year guidance stands between $55 M and $65 M, of which $40–45 M will be pure maintenance. Total liquidity is $162 M ($114 M in cash and $47 M available under the ABL), with no significant reliance on prepayments (less than $1 M in advance order backlog), and they plan to fund all plant expansion and alternative feedstock (gas) projects through balance sheet resources.

For Q3, they expect utilization between 93% and 98%, with new planned shutdowns (East Dubuque) for control system upgrades. Demand remains strong at the close of the planting season, and no significant changes are observed in consumption patterns. Overall, it was a reasonably good quarter, with strong pricing, operational discipline, and a moderate CAPEX roadmap. The tariff threat on Russian fertilizers adds a potential additional price catalyst for the second half of the year, while competitors in Europe continue to face structural problems due to higher costs with no solution in sight.

Valaris

The second quarter has brought clear signs of recovery in the offshore sector, especially for operators with modern fleets. Since the release of Q1 results, Valaris has added more than $1 billion in new contracts, bringing its total backlog to around $4.7 billion. The key point is not just the size, but the composition: 3 out of the 4 drillships with near-term availability have been contracted, and the DS-16 contract has been extended through 2028, reinforcing future revenue visibility. Of the total contracted, $860 million corresponds to new drillship contracts, with average day rates above $400,000. In parallel, the company highlights a pipeline of more than 30 additional opportunities in the floater market, with planned start dates in 2026–2027 and a minimum one-year duration. The message is clear: demand is there, and it is materializing.

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q125 Earnings review, part III

This delivery is the third (and final) installment of the first-quarter earnings commentary for 2025 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• Coinbase

• Warner Bros Discovery

• Cresud S.A

• Braskem

Let’s get at it.

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Coinbase

Coinbase has started 2025 with strong financial results, although this is not the core pillar of our investment thesis. Revenues reached $2 billion and adjusted EBITDA came in at $930 million in the first quarter (continuing a consistent positive trend), confirming that the business not only withstands the macro environment but is also expanding while others are retreating. Market share continues to grow in both spot and derivatives trading, with over $800 billion in global derivatives volume during the quarter—driven primarily by its international exchange, where its share in perpetual contracts surged by more than 60%. Overall, the company tends to provide accurate and honest guidance, which it has delivered on consistently.

But the truly significant development has been the announcement of the acquisition of Deribit, the world’s leading crypto options platform, with over $30 billion in open interest and $1 trillion traded outside the U.S. in the past year. With this move, Coinbase steps directly into the front line of the global crypto derivatives market, becoming a genuine one-stop shop for clients seeking to trade crypto assets, greatly easing adoption and use.

Coinbase is also advancing its offensive with USDC (stablecoins being the other pillar of adoption), which has reached a new all-time high market capitalization of $60 billion. Meanwhile, the average balance held in Coinbase products rose 49% quarter-over-quarter, reaching $12 billion. This growth is no accident: it's the result of a bold international licensing strategy. In recent months, Coinbase secured mass registration in Argentina and filed with India’s Financial Intelligence Unit. In Europe, for example, the approval of MiCA has cleared the path, effectively sidelining Tether from the playing field.

At the same time, especially since Trump’s return to the White House, the political landscape has become much more favorable. The U.S. has even taken a step that could mark a turning point: a recent executive order has established the creation of a strategic Bitcoin reserve and a national stockpile of digital assets. For the first time, the country formally recognizes Bitcoin as a strategic asset, opening the door for other governments to follow suit—though it remains to be seen how and to what extent this will be implemented.

Financially, as mentioned, the company reported $930 million in adjusted EBITDA, $66 million in net income, and a new metric designed to isolate the impact of crypto asset volatility: adjusted net income, which came in at $527 million. One chart I always find useful to share and analyze is the one that shows the growing weight and upward trend of service revenues, which reduces the cyclicality of the income statement and makes it less dependent on volatility.

Looking ahead to Q2, the company anticipates a more challenging environment due to the sharp drop in crypto prices (excluding Bitcoin), such as Ethereum (-36%) and Solana (-25%), which directly impact staking and rewards income, as well as transaction volumes. The May recovery may offset a weak April, especially if BTC breaks new highs—a scenario I see as likely, if not in Q2, then almost certainly in Q3. However, macro uncertainty and trade tensions are not helping. In April alone, spot volume fell by 12% month-over-month—mirroring the global decline of 13%—and transaction revenues reached $240 million. Subscription and service revenues are expected to ease to between $600 million and $680 million, dragged down by asset price corrections.

Coinbase has not only strengthened its balance sheet but is deploying capital with surgical precision to position itself for the coming years. The $1 billion share repurchase authorization with no expiration remains active, but capital allocation is being handled opportunistically: money goes where value is greatest. The $2.9 billion Deribit acquisition, partially financed with $700 million in cash from the balance sheet, follows this logic exactly. Not issuing new shares in this context is equivalent to an implicit buyback, as it avoids dilution and secures a dominant asset in a strategic segment.

From a structural perspective, the company does not hide its ambition: to become the world’s leading financial services app over the next decade. Trading and payments are just the starting point. Coinbase already operates across retail clients, SMEs, institutions, and developers, but the broader goal is to ride the wave of disruption crypto is bringing to the traditional financial system. With more and more banks preparing to integrate crypto, Coinbase holds a clear lead: it already dominates in product, has the infrastructure, regulation is starting to clear its path, and it has the liquidity to make bold bets. Holding onto cash is not a sign of caution but a lever for executing acquisitions and expanding its reach when opportunities are truly worth it. The current environment—with corrected valuations, inefficient structures, and increasing regulatory clarity—might be one of those moments when smart capital makes all the difference. And Coinbase knows it.

Warner Bros Discovery

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q125 Earnings review, part II

This delivery is the second installment of the first-quarter earnings commentary for 2025 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• International Petroleum

• Amerigo Resources

• Georgia Capital

• Vermilion Energy

Let’s get at it.

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International Petroleum

In the first quarter of 2025, IPCO managed to maintain its average net production at 44,400 boepd, despite the many planned maintenance activities, within the guidance range provided during the CMD. This figure consists of 52% heavy crude, 15% light and medium crude, and 33% natural gas. In terms of development, Phase 1 activities continued at the Blackrod asset, while at Onion Lake Thermal, all planned infill wells, including those for the last pair on Platform L, were successfully drilled.

Regarding finances, operating costs per boe remained unchanged at $17.3, which helped offset, to some extent, the weakness in crude prices ($76/bbl in Q1, much higher than current levels). With these volumes and prices, operating cash flow (OCF) amounted to $75 million (also in line with guidance), CAPEX was $99 million, and therefore, free cash flow (FCF) was -$43 million.

At the end of Q1, they had gross cash of $140 million and net debt of $314 million. For the full year of 2025, the company has maintained its forecast for average production between 43,000 and 45,000 boepd. It is also expected that operating cash flow (OCF) for the year will range between $240 million and $270 million, considering a Brent price between $60 and $75 per barrel. On the other hand, free cash flow (FCF) is expected to range between -$135 million and -$110 million, after accounting for $230 million in capital expenditures related to the Blackrod project.

The following table is very useful for showing the operational leverage at higher oil prices and the increase in debt clearly, as they have disbursed the Blackrod investment.

During the first quarter of 2025, the physical oil market remained in deficit (as shown by inventories, despite what the EIA reports), which led OPEC+ to increase supply beyond expectations. IPCO, prudently, entered hedging contracts for nearly 40% of its projected 2025 oil production. These agreements have been set at prices around $76 per barrel for Brent and $71 for WTI for the remainder of 2025.

The first oil from Phase 1 of the Blackrod development is expected by the end of 2026, with net production anticipated to reach 30,000 boepd by 2028. In 2025, capital expenditures for the Blackrod asset are expected to be $230 million, of which $77 million has already been disbursed in the first quarter. Since the organic growth project was approved in early 2023, approximately $669 million has been incurred, representing about 80% of the total multi-year project capital budget.

Regarding the share repurchase program under the 2024/2025 NCIB, IPC has repurchased and canceled approximately 0.8 million shares in December 2024, 3.7 million more during the first quarter of 2025, and 0.2 million additional shares under other exemptions in Canada. The average purchase price of common shares in the first quarter of 2025 was 146 SEK / 20 CAD per share. It is likely that we will see the arrival of Blackrod at the best possible time: with a significantly reduced number of shares, a much higher oil price, and a much less negative sentiment.

Amerigo Resources

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q125 Earnings review, part I

This delivery is the first installment of the first-quarter earnings commentary for 2025 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• InMode

• CVR Partners

• Sylvania Platinum

• Valaris

Let’s get at it.

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InMode

InMode started 2025 with a 3% drop in revenue, which came in at $77.9 million for the first quarter—just as the company had previewed a few weeks ago. GAAP gross margin was 78% (vs. 80% in Q1’24), and the adjusted margin stood at 79%. Earnings also declined: EPS came in at $0.26, and non-GAAP EPS at $0.31, both below last year’s figures.

Minimally invasive platforms accounted for 87% of revenue, confirming the company’s strategic focus, but this hasn’t been enough to offset the profitability deterioration. InMode generated $14 million in operating cash flow during the quarter and maintains a strong balance sheet, with $512.9 million in cash, allowing it to weather this downturn in the cycle. Still, outlook concerns remain.

The company has lowered its 2025 guidance across all key metrics. Revenue is now expected to range between $395 million and $405 million, while the non-GAAP gross margin is projected to fall to 78%–80% (vs. 80%–82% previously). Non-GAAP operating income was revised down to $101–$106 million (from $130–$135 million), and adjusted EPS to $1.64–$1.68 (from $1.95–$1.99). The business slowdown began in mid-2023, with the full impact of rising interest rates becoming clear, and the company is now facing its seventh consecutive soft quarter. Higher interest rates—affecting equipment leasing terms—and inflation, which has dampened U.S. discretionary spending, are directly impacting the demand for minimally invasive aesthetic treatments, many of which exceed $4,000 per session. InMode acknowledges that if Q2 results don’t clearly outperform Q1 (which is usually weaker due to seasonality), it will be forced to revise guidance again. The medical aesthetics market is expected to face these headwinds for several more quarters, and the company still doesn't see a clear path to recovery. Macroeconomic weakness and declining consumer confidence are directly affecting elective procedures, especially in the surgical segment—the first to be cut when budgets tighten. That said, demand for minimally invasive treatments remains more resilient, and the company is confident in a rebound once macro conditions improve.

InMode has made a deliberate decision not to lay off staff or scale back its ambitions. Management believes that tough times are when leadership is cemented, positioning itself to gain market share once demand returns. To this complex picture, tariff impact must be added. Products imported from Israel face a 17% tariff, but due to the relative weight of U.S. sales (50%) and the transfer price (also 50%), the effective impact is about 4%. With the temporary reduction of the tariff to 10%, the effect drops to 2.5 percentage points on gross and net margins—but it remains significant.

The worst part of the results, and what investors disliked most, was related to shareholder returns. Although the company has continued returning capital (in April alone it repurchased nearly 7 million shares for $127 million), and has returned more than $412 million over the past 12 months—about 27% of its total market cap—it admitted that its share buyback program has failed. It spent $508 million at an average price of $19.95 per share, while the stock currently trades at $14/share, meaning the capital deployed hasn’t generated value. I strongly disagree, and believe that once the sector recovers, this will prove to be a game-changer—but management has been weak on this front.

CVR Partners

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q424 Earnings review, part III

This delivery is the third and final installment of the fourth-quarter earnings commentary for 2024 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• ICL Group

• Braskem

• Golar LNG

• Vermilion Energy

Let’s get at it.

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ICL Group

The market is not fully recognizing the value (despite the 40% rally from the lows) of the company and its transformation process. In 2024, the company delivered financial results comparable to 2023 while gaining market share in its specialty-focused business. Annual revenues reached $6.841 billion, with adjusted EBITDA of $1.469 billion and a 21% margin (vs. 23% in 2023). So far, nothing particularly exciting...

What stands out is that they achieved these results despite ongoing pressure from the falling price of potash, their main product—which dropped 24% compared to the previous year. The strategy of focusing on specialty lines helped cushion this impact. Thanks to this approach, annual EBITDA grew by 8%, driven by the Industrial Products, Phosphate Solutions, and Growing Solutions segments. Together, these specialty divisions contributed 70% of the total EBITDA for the year and 73% of the fourth-quarter EBITDA, confirming the success of the strategic shift toward higher value-added businesses with less dependence on the most volatile raw materials.

In this regard, we’ve seen them enter markets such as semi-solid-state batteries during the year, while continuing to grow in phosphates, where they are also the global leader (by volume, quality, and cost).

They closed 2024 near the upper end of their revised guidance and, on the strategic side, strengthened key partnerships across their three main divisions (Industrial Products, Phosphate Solutions, and Growing Solutions). Looking at the markets, potash and phosphates are on diverging paths: potash prices remained under pressure in the fourth quarter (though they stabilized in January and have recovered since), while phosphate prices rebounded, rising 4% since the end of the year. The sector outlook for 2025 looks favorable, with an improving trend in potash and sustained strength in phosphates. Financially, leverage remained under control with a net debt/EBITDA ratio of 1.2x. Additionally, the shareholder remuneration policy was reaffirmed, with 50% of adjusted net income allocated to dividends, amounting to $52 million for the quarter and a 3.8% annual yield.

Looking ahead to 2025, the expectation is to continue capitalizing on the momentum of the specialties, with an expected EBITDA range between $950 million and $1.150 billion (for these segments) and total potash sales of between 4.5 and 4.7 million tonnes, while anticipating an effective tax rate of 30%, adjusted for a potential further improvement in potash prices. For context, ICL is trading at a $7.6B market cap (<5x EBITDA).

Beyond the guidance, this year could mark a very positive turning point. ICL faces a favorable environment after years of pressure from unfair competition from China. Thanks to anti-dumping measures already in place in Europe and progressing in the U.S., their product has gained ground by gradually replacing Chinese imports, not only due to regulations but also because of rising sustainability requirements that will sideline many competitors in the coming years. Furthermore, the company has a new product line that meets the highest environmental standards, strengthening its competitive position in both markets.

On another note, farmer sentiment improved significantly in the fourth quarter (+50% versus the third quarter) and continued rising in January, driven by the post-election climate in the U.S. Demand remains strong, but the commercial strategy has become more selective: despite having the capacity to lock in long-term orders, they prefer to pace sales to optimize prices. Although they haven't sold out production through May yet, it's not due to a lack of customers but rather a focus on prioritizing margins. With the worst of the cycle behind them, the company is returning to normal activity levels, but now within a much more favorable commercial environment thanks to tariff protections and its commitment to sustainable products. Potash prices are already up +28% YTD.

Braskem

The company's financial results are not particularly exciting, but the recovery of the petrochemical cycle and the competitive position of the Brazilian giant in the sector certainly are. The decline in international spreads during Q4 2024, especially in polyethylene (PE) and basic chemicals, negatively impacted the company’s results, closing the period with recurring consolidated EBITDA of $102 million. For the full year, recurring EBITDA reached $1.1 billion, a 46% increase over 2023, supported by volume recovery and some operational normalization. Nevertheless, the company posted a net cash consumption of $91 million for the year, reflecting the ongoing challenges of a squeezed margin environment despite improved activity, as well as the lingering Alagoas event, which has yet to be fully resolved.

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q424 Earnings review, part II

This delivery is the second installment of the fourth-quarter earnings commentary for 2024 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• CVR Partners

• Valaris

• Whitehaven Coal

• Amerigo Resources

Let’s get at it.

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CVR Partners

The results were very much in line with those of the previous quarter, and we won’t see a substantial change until 2026. The company closed Q4 2024 with net sales of $140M, a net profit of $18M, and an EBITDA of $50M (depreciation is a significant component of its financial statements). Plant utilization, following last year’s turnaround, has remained very high, above 96%, and, as we will see later, it should improve even further in the coming years. Compared to Q4 2023, ammonia sales volumes remained stable, while UAN volumes decreased by 3%, impacted by adverse weather conditions during the fall application season. They have decided to approve a $1.75/s distribution, bringing the total for the year to $6.76/s (8.45% yield), while reserving cash for the high CAPEX planned for 2025.

Regarding market conditions, ammonia prices increased by approximately 3%, while UAN prices fell by 5% compared to the same period last year. However, it seems we have clearly moved past the cycle’s low point. Despite adverse weather conditions, demand for nitrogen fertilizers remains strong, pushing prices higher compared to Q3.

2025 will be a year of significant investment, with maintenance CapEx of $35M-$45M and growth CapEx of $20M-$25M, which will be financed with the cash reserves accumulated over the last two years (at the end of the quarter, liquidity stood at $130M, of which $91M was pure cash). At the Coffeyville plant, engineering studies on the feasibility of using natural gas as an alternative to third-party petroleum coke as a raw material have already been completed. They are now developing construction plans and awaiting Board approval to begin execution.

Although the imbalances caused by the start of the Ukraine war and the associated disruption fears are now long forgotten, rising grain prices support increased demand for nitrogen fertilizers for spring application.

And customers are looking for more than what is available, which has driven the market higher over the past six weeks. Customers want to buy more. What I heard on the call is that it is very difficult to find available cargo for March. At this point, the market is more focused on April across all producers. This indicates that the market is tight and firm, and we will work hard to meet customer needs in April and May.

— Mark Pytosh

Not a bad starting point for the new year.

Valaris

Looking solely at the numbers, which have been solid and known for the past three months, it’s hard to understand the price trajectory Valaris has followed. Adjusted EBITDA for the fourth quarter came in at $142 million, a slight decrease from $150 million in the third quarter. Revenue was at the upper end of guidance, but EBITDA was slightly below expectations due to higher drilling contract expenses, mainly driven by a non-cash provision related to a legal matter.

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q424 Earnings review, part I

This delivery is the first installment of the fourth-quarter earnings commentary for 2024 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• Cresud S.A

• Dundee Precious Metals

• British American Tobacco

• Coinbase

Let’s get at it.

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Cresud S.A

Cresud's results, as we previously discussed in the investment idea article, are not easy to interpret since purely financial data does not tell the whole story. Let’s start with the operational side.

Planted area has increased by 9% compared to last year, reaching a historic record when combining owned and leased land across the four countries where the company operates. In the last quarter, agricultural commodity prices have shown a slight recovery, while costs have decreased, particularly in Brazil, due to the depreciation of the real.

The temporary adjustment in export taxes announced by the Argentine government to support the sector amid drought conditions has led to an approximate 5% increase in prices received by farmers, although part of this margin is absorbed by exporters. Milei has reiterated his intention to reduce or eliminate these taxes, but always under the premise of maintaining a fiscal surplus. For now, the announced reductions will remain in effect until June 30, creating market uncertainty as expectations fluctuate between their extension or a potential reversion to the previous 33% level starting July 1. Meanwhile, other products such as rice, cotton, and various dairy goods have seen their export taxes permanently reduced to zero, a move welcomed by the sector. The industry perceives a clear intention from the administration to continue easing the tax burden, particularly export taxes, which have historically been the main obstacle to producer profitability.

IRSA, Cresud’s largest holding, reported a loss of ARS 40.9 billion in the quarter, primarily attributed to a non-cash accounting adjustment related to the valuation of its investment properties. Despite this, activity in shopping malls showed a recovery, with rental sales increasing by 21.4% compared to the previous quarter. However, when compared to the same period last year, there is still an 8.5% decline, although positive year-over-year figures are expected in the coming quarters. In the office segment, occupancy reached 100%, representing a key stability factor for the company.

In the hotel sector, results were weaker, with declining revenues and occupancy rates due to Argentina’s new macroeconomic environment and currency devaluation, which has reduced the flow of tourists compared to the previous year (Aleix already mentioned this in our Discord).

Debt remained relatively stable, and the amortization schedule is entirely manageable for the company, which is balancing deleveraging with a strong shareholder return policy: a 7% dividend (yield) paid in November and a 0.75% share buyback that same month.

At a consolidated level, both IRSA and Cresud’s losses are directly related to the devaluation of investment properties. Last year, the sharp depreciation of the peso led to an accounting revaluation in pesos, generating positive figures. This year, with asset prices stable in dollar terms, a reduction in the blue-chip swap rate, and the appreciation of the peso, accounting losses have been recorded. In dollar terms, valuations for office properties and land banks—key long-term value drivers—have remained stable, while shopping malls reflect an improvement of approximately $120 million. If agricultural tax cuts are maintained or extended in July, we should see an immediate rerating.

Dundee Precious Metals

We are in a gold bull market, and Dundee Precious Metals is taking all the right steps to capitalize on it. The financial results are very strong, reflecting solid operational performance, with revenues of $607 million, net profit of $232 million ($1.29 per share), operating cash flow of $297 million, and free cash flow of $305 million.

The favorable metal price environment and a low-cost structure, which limits operating leverage, provide significant safety margins to sustain this trend. In fact, the all-in sustaining cost (AISC) stood at $872 per ounce of gold, a 3% YoY increase due to lower gold sales volumes, higher labor costs, and maintenance expenses, partially offset by lower treatment costs at Chelopech and higher by-product credits thanks to copper appreciation.

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LWS Financial Research is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

2024 in retrospective

What a year! Unlike 2023, aside from a brief scare in August and September due to market drops caused by the currency panic in Japan, everything has been smooth sailing. This is particularly remarkable and validates our portfolio approach and investment philosophy. Despite commodities, as an asset class, performing very poorly—and given their significant weight in our model portfolio—our strong performance is even more commendable. Year-to-date (YTD) returns stand at 26.62%, adding to last year’s 33.29%.

The initial objectives, which I maintain year after year, were to achieve positive, double-digit returns (check) and to outperform any benchmark index. On this last point, we fell short, with the Nasdaq delivering a spectacular performance that was 3.15% higher than ours. The closed operations in the model portfolio during the year (current price being the closing price of the transaction) are as follows:

Of course, not everything has been a success—not by a long shot. I've made many mistakes, like Seplat, where the final terms of the acquisition were far from what I expected, and surely many more will come in the future, as this is part of the process, especially with cyclical companies. What’s important in these cases is to always learn, improve, and manage risk so that these significant drops don’t overshadow the overall results or disrupt the portfolio’s compounding process.

While the companies on this list might suggest we only deal with cyclical or commodity-related industries, nothing could be further from the truth. Our approach is value investing, and we simply aim to adapt at any given moment to the themes we expect to yield the greatest returns. In addition to the positions in the model portfolio, we share many other ideas through our publication on Discord (as you’ll see below, EVERYTHING is shared in real-time and with full transparency), which have performed exceptionally well, such as:

• HFG: Shared on 05/27 at €5.86/share and strongly increased in June at €4.5/share. On 09/01, we published the investment analysis on this same blog, and today it trades at €12.28/share, yielding a 110% return since we shared the purchase on Discord.

• K2A.PREF: A very low-risk idea on preferred shares of a REIT, whose asset sales eliminated any solvency risk. We initiated a position on 07/24 at 147 SEK and sold on 10/02 at 196.5 SEK, yielding a 33% return in 3 months with very low risk.

  

• GMS: An auxiliary company in the offshore drilling industry that we have been buying and trading since 2023. We bought it at 4.7p/share, sold half when it doubled four months later, and today it trades at 16p/share—a 4x in 1.5 years.

  

  

• BTCC.B: As we’ll see below, one of our ideas for 2024 was to capitalize on the influx of capital into the crypto ecosystem this year, viewing it as a classic exercise in supply and demand. In the model portfolio, we decided to play it conservatively with Coinbase (a 2x return since purchase), but Mr. Timbits, one of the most prominent members of our community, shared the idea of buying calls on one of the existing BTC ETFs. We bought them a year ago, and they’ve yielded a 6x return since then.

  

• CORZ: Another crypto-related idea we decided to play was a mining company with significant potential in the AI space. Initially, we approached it as an implicit volatility play with options (yielding >10% monthly with a very compelling underlying), but many community members invested traditionally. We first bought it at $3.94/share in February, and today it trades at $14.04/share.

  

The returns on investment ideas shared in LWS Financial Research have far exceeded those of the model portfolio, which is not designed to maximize returns or serve as any form of recommendation. Instead, it aims to illustrate how, with a more moderate risk profile and a philosophy rooted in value investing and macro analysis, a retail investor can outperform the indices consistently. Last year, we published an article (which I’ll link here for free) outlining our main ideas for 2024, which were as follows:

• Metallurgical Coal: This was our biggest bet heading into 2024, but the global economic weakness (particularly in China) surprised negatively, reducing the underlying commodity's price by over 40%. In light of this shift, we decided to reduce exposure, selling with a +1% return for the year (+68% since last year) and with a -2% return. We still hold exposure to one company in the sector, but this idea has not performed well in 2024.

• Rate Cuts and QE: The idea materialized perfectly, but we ultimately decided not to include any company to play it.

• Oil Tankers: Our original thesis was that OPEC+ would increase oil export volumes in H2 2024, with a limited fleet, which would particularly benefit the VLCC segment. We played this with and $OET, achieving solid returns on both (+19% and +37%). However, when it became clear that oil market balances left no room for increased Saudi production, we closed our positions.

• American Natural Gas: The theory of stagnating growth in American shale and normalized winter temperatures is playing out, though more slowly than expected, as the new LNG export capacity has not yet come online. We ultimately decided not to play this idea.

• Crypto: In the model portfolio, we played this with $COIN, but we also tracked ideas like BTCC.B, ETHH.B, and BTC miners like $CORZ or $IREN. It performed as we expected, and we have been gradually reducing risk and exposure.

As we can see, not all ideas have worked as expected, but active management and diligent monitoring have allowed us to capitalize on them to a significant extent.

Evolution of this publication

This second year of premium subscription has been one of significant growth, both in the quality and variety of content as well as in the publication's reach. It concludes with a 78% retention rate (notable considering two price increases), very positive feedback, and a 5% monthly growth rate, far exceeding my best expectations at the outset. The newsletter has reached the 44th position globally in the finance category. Thank you!

While I’m thrilled with these milestones, my goal is not growth for growth’s sake but the development of a greater project: we have built the go-to community in the Spanish-speaking world through the LWS Financial Research Discord. It features an extremely high level of expertise and the top specialists in the topics we cover (commodities, maritime transport, options…), creating a default hub for keeping up to date on all developments, news, and new market ideas—all within an unbeatable atmosphere.

With these solid foundations in place, the plan is to continue improving the quality and variety of our informational offering. At your request, we now host a monthly live session to delve deeper into new investment ideas, portfolio movements, and answer all questions that arise. We’ve also streamlined the number of positions and ideas in the portfolio. In 2025, we’ll update all previously published investment ideas and continue to deliver top-quality insights and value.

I aim to combine this ambitious goal of being the leading investment community with offering the most attractive pricing, ensuring the value-to-price ratio is unmatched. Remember, tomorrow is the last dayto take advantage of our holiday discount:

• 20% lifetime discount on our premium membership, locking the price forever at just €400/year or €40/month.

CHRISTMAS 20% OFF

Main investment themes for 2025

This year, as we have just seen, has been, once again, spectacular, but the demands are not reduced for the future. On the contrary, the ambition is greater for the new year, where the initial objectives remain the same, as could not be otherwise:

• Positive, double-digit returns.

• To outperform all the benchmark indices.

The investment themes we are going to play have changed significantly with respect to those of 2023, and we have even closed almost all our positions in oil, which was my most important idea just 12 months ago. The macroeconomic environment is always changing, and internal sector dynamics are equally dynamic, so our job is to read the current situation well and adapt to the changes. We will now review the main investment ideas that I see as interesting for this year:

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q324 Earnings review, part II

This report is the third (and final) installment of the Q3 2024 earnings commentary for companies under our watchlist or model portfolio. These presentations are typically very positive events for our portfolio, as they showcase to the market the strong cash generation capacity of our holdings and are often accompanied by generous returns to shareholders. Specifically, in this publication, we’ll discuss the results of the following companies:

• Dundee Precious Metals

• Braskem

• Petrobras

• Warner Bros Discovery

Let’s get at it.

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Dundee Precious Metals

DPM has seen its (strong) results overshadowed following the U.S. elections due to the strength of the dollar, which has put significant pressure on gold and mining stocks.

Financially, as expected with current gold prices, the results were outstanding. Operating cash flow was $52 million for the quarter, lower than the previous year due to the timing of two material shipments, partially offset by higher mineral prices. Free cash flow, which the company reports before changes in working capital, was $71 million, an increase of $25 million compared to 2023. Costs rose slightly to $1,005/oz (we'll delve into the operational issues at Ada Tepe later).

Starting with the positives, operations at Chelopech were very strong in Q3, meeting volume guidance with costs slightly below expectations. The grade of processed ore (and recovery) improved compared to the previous quarter, positioning the operation well to meet 2024 targets.

At Ada Tepe, temporary operational challenges impacted performance during the quarter, including lower-than-expected ore grades and recoveries, as well as fleet availability issues. This resulted in production of approximately 16,000 ounces of gold and an all-in sustaining cost (AISC) of $1,171/oz (significantly higher than $767/oz in the previous quarter, weighed down by lower volumes). These issues have since been resolved, and higher production is anticipated in Q4, enabling Ada Tepe to meet its annual guidance.

The pre-feasibility study (PFS) for the Coka Rakita project is progressing, with completion expected in Q1 2025. Once published and updated to reflect current price sensitivities, it should yield an NPV significantly higher than the company’s current EV, with the potential to create substantial value. My view is that, beyond the organic development of this asset, we could also see M&A activity. The company has also identified significant exploration potential across its four licenses, as evidenced by recent drilling results. In September, two new discoveries were announced at the Dimitri Proto and Frasen prospects, located just one kilometer north of Coka Rakita. While still at an early stage, the expansion potential for this asset is highly significant.

Regarding capital investments, maintenance CapEx was $11 million for the quarter, comparable to 2023. Investment in Loma Larga has been virtually discontinued, as the development of the asset now seems remote and unlikely. During the first nine months of 2024, the company repurchased 3.4 million shares for a total of $28.3 million as part of its share buyback program and distributed $21.7 million in dividends, representing a combined return of 23% of its free cash flow to shareholders. Once the final investment decision on Coka Rakita is made, we are likely to see a significant increase in this distribution.

Braskem

Braskem is perhaps the thesis that is most testing our patience as a community, as the price continues to fall without finding any support. My view is clear and backed by the data and signals provided by the sector’s capital cycle, but it is natural to have doubts during the trough of that cycle.

In the third quarter of 2024, the petrochemical landscape maintained a trend of increasing spreads in the international market. This trend is mainly due to a better balance between global supply and demand, along with the effects of the conflict in the Red Sea, which continue to impact global logistics, increasing maritime freight rates and, consequently, international prices. In this context, and thanks to the company’s ongoing implementation of financial preservation initiatives, recurring EBITDA reached $432 million, 35% higher than the second quarter and 130% above the same quarter of the previous year. Cash generation (OCF) was $75 million for the period, while the net cash outflow reflected a consumption of $199 million, mainly due to a higher concentration of interest payments on debt securities issued in the international market.

They are not yet at a cash breakeven point, but this moment is approaching quickly.

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q324 Earnings review, part II

This report is the second installment of the Q3 2024 earnings commentary for companies under our watchlist or model portfolio. These presentations are typically very positive events for our portfolio, as they showcase to the market the strong cash generation capacity of our holdings and are often accompanied by generous returns to shareholders. Specifically, in this publication, we’ll discuss the results of the following companies:

• Amerigo Resources

• Warrior Met Coal

• Valaris

• Coinbase

Let’s get at it.

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Amerigo Resources

Amerigo Resources reported a significant year-over-year operational and financial improvement, although 2023 was notably impacted by an operational halt due to heavy rains. With an average price of $4.22/lb in the quarter, $ARG.TO achieved revenues of $45.4M, resulting in a net profit of $2.8M, although FCFe (Free Cash Flow to Equity, or the cash flow available for distribution to shareholders) was much higher at $5.9M.

Production costs, consistent with the previous quarter, remained below $2/lb ($1.93/lb), leaving a substantial margin at these prices and providing considerable optionality if, as in Q1 and Q2, prices approach $5/lb, when they even paid an extraordinary dividend of C$0.04/share.

They’ve consistently stated that their cash threshold, from which they will distribute all generated FCF, is $25M, a level they reached in Q3; in addition to last quarter's extraordinary dividend of C$0.04/share, they have reactivated their share buyback program. While they don’t plan to be highly active with buybacks (due to its cyclicality — more likely to activate during high copper prices, which is when the stock is most expensive), they aim to ensure that shares outstanding decrease each year.

The board has declared its thirteenth quarterly dividend of C$0.03/share, bringing total annual shareholder returns to $15.8M, already close to 2023’s total with one quarter remaining. Ideally, the company should continue repurchasing shares, as they announced they started doing in October, complementing the dividend with a strategy that has a greater impact on the stock price.

Warrior Met Coal

In the third quarter of 2024, Warrior generated a net profit of $42 million ($0.8/share), compared to $85 million ($1.64/share) in the same quarter of 2023. This decline was primarily due to a 17.5% decrease in sales volume and a 7% lower average selling price, meaning that the comparison shows worse results in both volumes and prices (the volume part, as we will see later, is partly intentional). Combined with an increase in production costs, the margin per ton dropped from $70/st to $48/st year-over-year.

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q324 Earnings review, part I

This delivery is the first installment of the third-quarter earnings commentary for 2024 for the companies under our watch or model portfolio. These presentations tend to be highly positive events for our portfolio, as they showcase to the market the strong cash-generating capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies::

• British American Tobacco

• Georgia Capital

• CVR Partners

• Inmode

Let’s get at it.

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British American Tobacco

British American Tobacco, in its Investor's Day, confirmed its 2024 and mid-term guidance, expecting organic revenue and adjusted profit growth in the low single-digit range for the year, and 3%-5% organic revenue and 4%-6% adjusted operating profit growth by 2026. However, the company anticipates a greater negative impact from currency fluctuations on its operating profit, due to a less favorable pound/dollar exchange rate than previously forecasted.

In the new categories, BATS has achieved an annual consumer growth of 14.7% since 2018, with its smoke-free products like vaporizers, heated tobacco, and nicotine pouches reaching millions of users and showing significant growth. The transition to smoke-free products could also increase margins: in Europe, heated tobacco and nicotine pouches offer a per-unit margin up to four times higher than combustible products. They have achieved global leadership with Vuse in the vapor market and with Velo in nicotine pouches outside the U.S. BAT maintains its vision of becoming a predominantly smoke-free business by 2035, with 18% of its revenue coming from smoke-free categories in the first half of 2024, or 27% if the traditional tobacco market in the U.S. is excluded.

The company has identified five strategic priorities: driving profitability in new categories, creating value growth in combustibles in the U.S., strengthening the heated tobacco category, leading the responsible development of new categories, and improving financial flexibility.

The U.S. market, which has shown significant weakness recently, remains essential, generating a third of BAT's global revenues. Despite a decline in combustible volume in this market, BAT remains the leader in legal vaporizers, although it faces competition from illicit disposable vaporizers. Additionally, the company plans to launch a synthetic version of Velo, called Velo Plus, in December 2024, expanding its reach in the U.S. and offering a more varied experience in flavors and nicotine concentration.

Heated tobacco, the largest revenue segment within smoke-free products, represents an area where BAT aims to expand its market share in the premium segment, a market dominated by PMI’s IQOS. With the launch of glo Hilo, BAT hopes to compete in this sector in 2024, expanding its presence in key markets.

Financially, BAT expects sustained revenue growth of 3%-5%, with strong contributions from new categories, and adjusted operating profit growth of 4%-6% in the mid-term, supported by efficiencies and strict administrative cost management. The company expects to generate more than £50 billion in free cash flow by 2030, allocating part of these resources to increasing dividends, selective mergers and acquisitions, and sustainable share buybacks, partially funded by the recent sale of its stake in ITC.

A real cash-generating machine, well-positioned to return to being a growth company in the near future.

Coinciding with the Capital Market Days, they received negative regulatory news: the three main tobacco companies, Philip Morris International (PMI), British American Tobacco (BAT), and Japan Tobacco, have agreed to a joint payment of C$32.5B to settle lawsuits in Canada. This agreement comes after losing appeals in two class action lawsuits in Quebec in 2019, following five years of negotiations under creditor protection.

The settlement involves initial and annual payments, using 85% of the after-tax net earnings from traditional tobacco operations in Canada until the full amount is covered.

BAT, with approximately 50% of the market in Canada, would bear the largest burden with C$17B. Although clearly negative, it removes extra uncertainty and only affects revenue and earnings generated in Canada, thus limiting the overall impact.

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Georgia Capital

Georgia Capital once again delivered spectacular operational results amid a whirlwind of negativity surrounding political uncertainty in the country, where recent elections saw Georgian Dream secure victory again, though some of the opposition deemed the results illegitimate.

From a financial standpoint, the numbers are very positive:

• NAV per share grew by 6.2% QoQ (3.3% in GBP).

• Revenues increased by 15.9% QoQ (9.9% YoY), and EBITDA rose by 34.1% QoQ (4.4% YoY), but the most notable aspect is the 101% QoQ (107.3% YoY) increase in cash flow, which, as we will see later, enables them to carry out very significant value-generating initiatives.

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q224 Earnings review, part III

With this dispatch, we continue with the commentary on the second quarter results for the year 2024 of the companies under our monitoring or model portfolio. These presentations are usually very positive events for our portfolio, as they demonstrate to the market the great cash generation capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies:

• Dundee Precious Metals

• InMode

• Warner Bros Discovery

• Braskem

Let’s get at it.

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Dundee Precious Metals

Dundee Precious Metals is making the most of the bullish market and positive environment for gold, reporting a record-breaking quarter. Production at its two assets (Ada Tepe and Chelopech) was in line with expectations, and thanks to by-product production, the cost per ounce has decreased by 3% YoY, down to $710/oz. The following chart shows record revenues, profits, FCF, and cash on the balance sheet, with improvements in all metrics.

The net reduction of shares during the quarter was 2.3M, representing 1.3% of total capital, complementing the quarterly dividend they distribute. They have renewed the NCIB, which allows them to repurchase 9.8% of the float over the next 12 months, creating significant shareholder value without compromising their ambitious organic development goals with Coka Rakita. Regarding this project, they published the PEA in May, which offers very interesting economic prospects, and as a result, they initiated the preparation of a formal PFS, which should be completed in Q1 2025. It's worth noting that this project, which at current prices has an NPV greater than its EV, comprises only one of the four licenses they hold in the area, and it's not even fully explored yet, so the potential is still enormous.

In the following table, they share their outlook for the next three years, highlighting the decline in volumes at their two production assets, although I believe they can reverse the trend at Ada Tepe and significantly extend its mine life with a brownfield exploration program that they are already starting to develop.

At these gold price levels, the company generates an enormous amount of cash, and they have very clear capital allocation priorities to generate shareholder value, even if the price doesn't fully reflect the progress they are making. With a balance sheet that is a fortress and such low production costs, the downside seems quite protected, and the upside and bullish case remain intact if gold maintains (or, as I believe, increases) these price levels.

InMode

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q224 Earnings review, part II

With this dispatch, we continue with the commentary on the second quarter results for the year 2024 of the companies under our monitoring or model portfolio. These presentations are usually very positive events for our portfolio, as they demonstrate to the market the great cash generation capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies:

• Vermilion Energy

• Peabody Energy

• Warrior Met Coal

• Valaris

Let’s get at it.

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Vermilion Energy

Vermilion Energy closed another operationally excellent quarter, with production at the high end of guidance (85k boe/d), representing a +2% YoY increase (+6% YoY per share due to buybacks). Following these strong numbers, the company has decided to raise its full-year forecast to 83k boe/d - 86k boe/d (+1,000 boe/d at the lower end of the range compared to previous communications).

Cash generation for the quarter was $126M in FCF ($0.78/share), impacted, compared to the previous quarter, by lower gains relative to the hedges they have in place. Leverage continues to decrease, with net debt reduced by 4% during the quarter, while returning $66M to shareholders ($19M in dividends and $47M in buybacks). It’s important to note that, according to their current shareholder remuneration framework, they distribute 50% of their FCF in the form of buybacks and dividends, and this percentage will increase as leverage continues to decrease.

With the recent rebound in natural gas prices in Europe, now around $17/mmbtu, Vermilion has hedged 42% of their 2025 production at this level, ensuring a very attractive cash generation profile. The market is overly pessimistic about this company, which has not been the best in terms of execution in the past, but has managed to transform its balance sheet and finally start a substantial shareholder return program that can move the needle (they are buying back 1M shares per month).

Their assumptions regarding oil and gas prices are very much in line with the current strip, giving them significant optionality if these perform better (as I expect) and a realistic anchor if they do not.

Peabody Energy

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q124 Earnings review, part III

With this dispatch, we begin the commentary on the second quarter results for the year 2024 of the companies under our monitoring or model portfolio. These presentations are usually very positive events for our portfolio, as they demonstrate to the market the great cash generation capacity of our holdings and are often accompanied by generous shareholder returns. Specifically, in this publication, we will discuss the results of the following companies:

• British American Tobacco

• Seplat Energy

• CVR Partners

• Amerigo Resources

Let’s get at it.

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British American Tobacco

BAT reported mixed results in the first half of 2024, showing some green shoots and opportunities but also some challenges and setbacks. Revenues fell by 0.8% to £12.34B, and growth in new categories disappointed with an increase of only 7.4%, although earnings per share (significantly influenced by a smaller denominator in the calculation) did increase by 1.3%. As a major financial milestone, they repaid 5% of their debt, and in terms of net leverage, the decrease for the year was 12.4%. The interest rate environment is improving, with most major central banks cutting rates, which should help reduce financial costs. BAT has monetized part of its stake in ITC during this semester, and the proceeds from the sale have been used to reduce debt and accelerate the buyback program, which will be £700M in 2024 and £900M in 2025 (totaling 2.5% of the outstanding shares).

They have added 1.4 million consumers of smoke-free products, reaching a total of 26.4 million, and this category now represents 18% of the group's revenue, which is an increase of 1.4% compared to the full year 2023. The results reflect the impact of their exit from Russia and Belarus in September of last year, higher amortizations, and impairment charges following the decision to begin amortizing the combustible brands acquired in the U.S. They achieved a 4.3% increase in the fuel price mix, with a 7.2% rise in prices, offset by a negative geographic mix, primarily driven by the U.S. In fact, excluding the U.S., we achieved 4% revenue growth and 4.6% operating profit growth in the rest of the world, in line with their mid-term guidance.

If we analyze the growth in the new categories, which are the key to the thesis and have disappointed on the downside, we see that only modern oral has shown truly positive results, while heated tobacco and vapor products have shown very poor figures. In the case of heated tobacco, they clearly need to improve their products (the most recent launches already show much better acceptance and market share), but for vapor products, the cause is external and is expected to reverse in the coming quarters.

The proliferation of cheaper, illegal vaping devices has affected the sales of Vuse and other legal competitors' products, eroding their market share and margins. The tobacco lobby has pushed to introduce legislation to combat these devices and has already succeeded in 10 states, after which their volumes have grown by 23% in those areas, showing the path of what will happen when the law extends to the entire territory. The key point to understand is that the tobacco industry is a de facto regulated oligopoly, and they will leverage this condition to push for favorable legislation.

The margin of the new categories, despite the large expenditures on marketing and innovation and the lack of scale, continues to improve, and they are now clearly net contributors to the results. When this fact, combined with greater growth and penetration (among young people and the previously non-smoking population, the growth is similar to that of combustible tobacco in the last century), becomes evident to the market, we will see a significant re-rating of the entire sector.

They maintained their guidance for the full year, where they expect an acceleration in H2 that will allow them to achieve revenue and adjusted profit growth of around 5%. Despite declines in revenue and operating profit, the performance in some categories (such as modern oral) and strategic initiatives, supported by regulation, provide a positive outlook, which has driven the shares up by more than 10% since the announcement. The valuation, at only 7.5x with a shareholder return yield of over 15%, remains very attractive, and the right steps are being taken to crystallize even more value.

Seplat Energy

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LWS Financial Reserach is NOT a financial advisory service, nor is its author qualified to offer such services.

All content on this website and publications, as well as all communications from the author, are for educational and entertainment purposes only and under no circumstances, express or implied, should be considered financial, legal, or any other type of advice. Each individual should carry out their own analysis and make their own investment decisions.

Q124 Earnings review, part III

With this dispatch, we conclude the first quarter results commentary for the year 2024 for the companies under monitoring or model portfolio. These presentations typically serve as very positive events for our portfolio, as they showcase to the market the great cash generation capacity of our holdings, and moreover, they usually come with generous returns to the shareholders. Specifically, in this publication, we will discuss the results of the following companies:

• Amerigo Resources

• Dundee Precious Metals

• Ecopetrol

• Braskem

Let’s get at it.

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Amerigo Resources

Amerigo Resources had a stellar first quarter, positioning itself favorably for the rest of 2024, riding the wave of the great rally in copper prices over the past three months.

Q1 was very strong from a financial and operational perspective, with production and costs 9% better than the guidance. Amerigo generated a net income of $4.3M ($0.03/share), EBITDA of $13.6M, and most importantly, $7.3M of FCFe (free cash flow available for distribution to shareholders). Looking at the following table, it is surprising to see that the realized prices were “only” $3.95/lb, but it must be taken into account that the company operates with a two-month lag, so Q2 is when we should start to benefit from the bullish momentum and operational leverage. Production costs (cash cost) stood at $1.96/lb, including an extraordinary expense of $0.07/lb in the form of a triennial bonus to mine supervisors, so the normalized figure is $1.89/lb. As a demonstration of operational leverage, the price increase of $0.8/lb since the end of Q1 would mean an extra $40M in quarterly revenue.

They repaid $1.7M of debt and distributed $3.7M in ordinary dividends (which is one of the pillars of their corporate strategy), while continuing to increase their cash reserves, aiming to reach the $25M target, which should be very quick in the current price environment. In the conference call, they made it clear that they will distribute all excess cash, beyond the capital needs of the business, in the form of special dividends and buybacks. They have decided to launch two plant improvement projects (approximately $2.3M cost), which will be operational next year and will increase production by 760klb/year, a significant improvement for the low required outlay.

Global PMIs continue to show improvement, especially in China, and some countries, like India (copper demand +16% in 2023), are becoming real tailwinds for the sector. However, as always, the key is supply: obtaining new permits is a complex political and financial process, coupled with the technical difficulty of locating viable deposits, often in unattractive jurisdictions, and the inherent operational risk of mining. Optimism is likely high right now, but several analysts are already pointing to $5/lb as the new incentive price.

The perfect environment for Amerigo: high copper prices, stable operations, controlled costs, deleveraging, and a good shareholder return policy.

Dundee Precious Metals

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