Tricky week overall with the Porch-folio down -0.25%, underperforming both the FTSE100 and the others on the investing platform.

Mining stocks overall are struggling to find their footing, as concerns around Chinese demand continue. Stimulus from the administration has been limited so far as it appears increasingly that the domestic economy needs some support

Could have been worse had it not been for Sylvania Platinum, which has been a steady underperformer these last few weeks. The company announced earnings for the year to June. The company exceeded production targets, with production up +13% as compared to the prior year, and revised up guidance for the next 12 months. As such revenues came in significantly ahead of market expectations with revenue only down -14% as compared to the previous 12 month period.

There was a little trading in the period for the Porch-folio:

Exited - Ecopetrol, Yellow Cake, NAV Kazamtomprom

Reduced Existing - Mercadolibre

Added to Existing - Eramet

New Positions - Bunge, Arcos Dorados

With the recent highs in uranium prices, I took the opportunity to exit the uranium stocks in the portfolio at significant profits. The Colombian state oil operator Ecopetrol we doubled the position when it was particular weak, and reaped the dividends when oil (inevitably in my opinion) rallied back up to USD 90 a barrel.

Reduced MercadoLibre to take some profits, bring the overall cost price of the position down and to hopefully reduce overall portfolio volatility in future. It has been a particularly volatile stock recently. The Gabonese coup has provided a nice entry point to add further to Eramet, and as such have increased the position.

The new positions have been ideas I have been following for some time. Adding Bunge will provide exposure to agricultural commodities which I have been looking to add to balance the portfolio. Arcos Dorados is the franchise holder for McDonalds across 20 countries in Latin America. A less volatile means to get exposure to Latin American consumer economy then MercadoLibre. The stock has sold off in the past few weeks as such provided an attractive entry point.

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Find more on the Porch-folio Capital website, including following the Porch-folio's overall performance.

The Porch-Folio has been outperforming since the I have begun these weekly updates in May.

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A strong week this week outperforming both the FTSE100 index and the others on the investment platform. With a storming performance from MercadoLibre up close to +15% for the week. The stock is now at the highest it has been since November 2021. No specific news on the stock beyond a few banks and analysts rating the stock higher.

There was some respite with some of the mining names, with many rebounding after a tough prior few weeks. Poor Chinese data has pummelled these stocks recently so it is certainly nice to see a rebound.

What I was most concerned about during the week was the impact of the Gabonese military coup on mining company Eramet. The company had suspended operations in the country on the news for 24 hours. Operations there are now back online though risks related to the instability there remain. I remain bullish on the company and its longer term prospects and feel this share price weakness offers an attractive entry point.

You can find more on Eramet here: https://commonstock.com/post/5aaf7b00-291a-439b-9b74-5e5857afc77b

Eramet's share price has tumbled on the back of the news that the company temporarily had to suspend operations in Gabon after the latest military coup. This coupled with the already weak outlook for metals key to the steel manufacturing process has meant the share price has fallen fairly dramatically over the past twelve months.

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When considering the current state of operations, future opportunities, and the depressed share price, Eramet shares look attractive to fairly priced and as such assign a BUY rating to the shares.

Eramet is a mining and metallurgical company with operations globally headquartered in France. The company operates in the extraction and processing principally of three groups of metals and minerals - Manganese, Nickel and Mineral Sands.

Eramet is the largest producer of high grade manganese ore and refined manganese alloys in the world. Manganese is a crucial metal in the production of iron and steel. It is used as an alloy in steel to remove excess oxygen, sulphur and phosphorus from the metal improving the malleability of the alloy. This makes up around 90% of global manganese demand. Other uses of manganese include in alloys for aluminium, batteries and resistors.

As such, when considering the overall manganese market, it is key to understand the dynamics of the steel market. As demand for steel rises, so will demand for manganese given how important an alloy it is in the steel making process. Manganese steel alloys are particularly used in the construction and car industries.

The company mines its manganese in the Moanda mine in Gabon. Eramet estimates that another 20 years of manganese reserves are available at the mine. There are plans to modernise the railway link that runs from the mines to the port of Owendo, so as to improve the company’s ability to export manganese ore out of Gabon. Further plans to improve production at the site include adding modular washing plants and a new conveyor for the mine.

When it comes to processing the manganese ore into refined manganese products, the company relies on six pyrometallurgical plants - three in Norway, one in France, one in the United States and one closer to the mine in Gabon.

Nickel is another metal important in the production of steel, however the nickel steel alloys create stainless steel which makes up around 70% of global nickel demand. The remaining demand can be attributed to batteries in particular in electric vehicles.

Eramet operates the largest nickel mine in the world at Weda Bay in Indonesia. This is via a joint venture with Chinese steel group Tsingshan. Additionally, the company has smaller nickel mines in New Caledonia. All the sites have hydrometallurgical plants to produce the final product once mined. The company estimates a further 22 years of production from the Weda Bay mine and 25 years at the New Caledonia mines.

Eramet extracts sands which contain various metals and minerals including titanium and zircon. The company is the largest producer of titanium containing raw materials and the fourth largest producer of zircon. Zircon is a mineral that is principally used in the ceramics industry, which makes up 54% of the global demand. It is used to improve the whiteness of tiles or enhance pigments.

The mineral sands are mined at a mine in Senegal, and then partly enriched in Senegal or Norway. The company expects a further 24 years of reserves from its mineral sands mines. Eramet hopes to see a 10% increase in mineral sands production thanks to initiatives it is implementing. These began in October 2022 and are expected to be on stream across the whole mineral sands operation by 2024. Additionally, renovation of the furnace in Norway should also help with the titanium oxide processing. This improvement is expected to also be online by 2024.

Eramet has added a new business segment in lithium. The company has acquired perpetual mining rights over a lithium mining concession in Argentina. Lithium has many uses however is key to the energy transition process given its role in the production of lithium-ion batteries. This makes up more than 75% of the global market for lithium.

The lithium plant is to begin production in early 2024, with an annual expected production target of 24,000 tonnes of lithium carbonate to be mined by 2026. Cash costs for the project are currently slated at USD 3,500 per tonne of lithium mined.

The big news to have affected Eramet recently was the military coup this week in Gabon. As a result of the coup, the company initially announced it was temporarily halting operations in the country on Wednesday. That included the manganese mine, the processing operations and the transport to the port. 24 hours after this announcement after considering the political situation, the company reopened operations in the country.

The price action on the stock was quite dramatic. The stock initially fell -16.5% from EUR 76.2 to EUR 63.6 a share on Wednesday before rebounding the next day to EUR 70.85.

This is not surprising when considering the prospect of a long term suspension of the company’s manganese operations which comprised 61.6% of the company’s revenue for the 12 months to June and 96% of EBITDA for the same period. Operations were halted for only a day, so there should not be a significant impact on the earnings for the upcoming quarter, however since the stock hasn’t rebound back to the pre-coup price, the market clearly expects the coup to materially affect operations going forward.

Taking the coup in Gabon out of the picture for now, the company was having some operational issues. On the 26th July, Eramet issued its results for the second quarter of this year which saw a sell-off in the price of the stock by -9.3% the following day.

Firstly, the report flagged falling market prices for all materials produced and sold by the company. This is consistent with the rest of the commodities and mining sector. Metals prices have fallen dramatically after spiking midway through last year as a result of the slowing global macroeconomic picture. Rising interest rates are hampering real estate markets globally and as such a fall in demand for steel for construction.

In particular it is worth considering the disappointing post-COVID rebound in China. With the Chinese real estate sector being near enough anaemic, this has led to an even more dramatic fall in demand for metals key in construction. China produces over 50% of manganese steel alloys globally. The average China manganese ore price was USD 5.2/dmtu for the first six months of the year, which is down -23% as compared to the same period in 2022.

Of the metals important to Eramet, since mid last year, manganese prices have seen a -12% drop (though manganese alloys have seen a near -50% fall) and both nickel and lithium prices have seen a close to -60% drop. The fall in metals prices certainly hit Eramet’s revenues.

Revenues for the first six months of 2023 were EUR 1,901m, or a -32% drop as compared to the same six month period last year.

There have also been issues from a cost perspective. Not only is the company dealing with continued high input costs (energy, freight, wages etc.) but logistical incidents at the Gabon mine significantly impacted manganese production, with volumes down -27% for the six month period to June 2023 as compared to the same period last year.

The Moanda mine in Gabon was halted for the whole of January and again in April, because of transportation logistics issues and difficulty delivering fuel and necessary parts to the mine.

EBITDA for the first six months of 2023 were EUR 339m, or a -71% drop as compared to the same six month period last year.

Freight costs have fallen as compared to the peaks seen during the COVID-19 pandemic and through last year, so this has helped to ease cost pressures somewhat. Stabilising energy prices will also help margins in the near term.

Although EBITDA has fallen so dramatically and the company is seeing both revenue and cost pressures, margins overall have remained fairly strong considering. Although a lot lower than the 35% EBITDA margins seen mid last year, EBITDA margin for the twelve months to June was 14.6%.

This is a testament to the company’s already impressively low cost operation, that it can see metal prices fall by half and have significant cost pressures and yet still remain operationally profitable. The picture is the same if you consider the company’s separate business segments.

The near term outlook provided by the company remains subdued, and revised downwards EBITDA expectations for 2023 down to EUR 900m. This is accounting for continued manganese price depression and upwards trends in nickel pricing.

Steel outlook continues to be negative with the Chinese real estate sector in particular still far from being reinvigorated. The company suggests that there will realistically be a -15% drop in China manganese ore prices for the remainder of this year.

Demand for manganese outside of China for the rest of the year also seems subdued, as manganese inventory stocks continue to remain high especially in Europe.

Although the steel market will also impact demand for nickel, there are other factors involved which suggest a more robust pricing environment. Global battery demand remains high and overall nickel inventories remain low, which should carry the nickel price for the short to medium term.

In the medium term, the addition of the lithium segment should help grow and diversify the company further. In the latest results, Eramet confirmed the lithium project in Argentina would begin in mid 2024, with the construction of the project 60% completed by June this year.

In the longer term, the picture looks encouraging. Construction is dependent on overall economic growth and population growth and as such the demand for steel will continue to grow. Chinese steel demand may temper with the country’s aging population likely weighing on economic growth and construction, so global growth from that sector will come from elsewhere. There are significant other developing markets with large growth needs such as in India, Indonesia, Latin America and Africa where much more infrastructure and real estate construction can be expected. For example you are seeing extensive road building across India and the building of Indonesia’s new capital city Nusantara. Both hugely steel dependent projects. Just a snapshot of the construction still required in developing economies.

The biggest driver of growth for Eramet however will be the energy transition and in particular the battery metals it mines. Both nickel and lithium play an important part in battery manufacturing and thus the electric vehicle market. According to Goldman Sachs, global electric vehicle sales will jump to 73 million units by 2040 which compares to around 2 million for 2020. Electric vehicles will make up close to 61% of vehicles globally.

Currently, China makes over 50% of electric vehicle battery components, with the rest predominantly made in Japan and South Korea. Under the US’s Inflation Reduction Act, American companies cannot use battery components that have been built in China. This is in an effort to promote battery production and assembly in the United States. A competitive environment between the United States and China for battery metals with potential supply chain disruptions such as the measures under the Inflation Reduction Act will drive battery metals demand and prices further.

When it comes to a valuation, the coup has certainly made things difficult. It is unclear how much of an impact the new military regime will have on Eramet’s Gabonese operations. With political disruption (and in particular some African countries) comes some level of corruption. The new military regime may want to distance themselves from French influence, which has been strong up until now and kept going by previous president Ali Bongo. Could Eramet’s assets be seized by the Gabonese state and brought under state control? The state does own a 9% stake in the Gabonese project and receives tax receipts as well, but a taking of control is not out of the question.

To arrive at a valuation, I will consider three outlooks:

For the mid case we will consider the company’s base guidance and outlook.

We will consider a scenario where manganese operations are considerably held up by the coup and metals prices remain depressed.

Limited impact on operations in Gabon, with metals prices quickly recovering to levels seen in early 2022 before the price spikes.

We will apply these three outlooks on earnings to a range of price/earnings ratios for the stock to create a realistic trading range.

Over the past three years, the Eramet stock has generally traded in a range between 3x and 8x price / forward earnings. As such it would be reasonable to expect the stock to trade within this range going forward. It currently trades at a 6.1x price to forward earnings ratio.

These levels are fairly low compared to other mining companies. Large mining companies trade at much higher ratios for example BHP Group at 11.7x, Rio Tinto at 9.8x, Glencore at 8.8x and Anglo American at 9.0x. The other large French-listed metals and mining conglomerate Constellium is currently trading at a ratio of 8.7x. The discount for Eramet is primarily because it mines in developing and potentially unstable regions such as Gabon, so the discount is somewhat understandable from that perspective.

Considering this price to forward earnings ratio history, we can classify various ratios as follows:

Strong Buy - trading below 3x

Buy - trading below 5x

Hold - trading below 7x

Sell - trading below 9x

Strong Sell - trading above 9x

Inputting the outputs from our previous three scenarios we get the below ranges.

Given potential earnings over the next 12 months, the stock seems overall fairly priced considering the risks, with potentially a BUY rating on further price weakness. Given potential volatility arising from the Gabonese coup, there could be an opportunity to rate the position as a BUY.

What is also worth considering is that we are only looking at earnings over the next 12 months. Taking a longer term view there is a significant potential earnings catalyst in the new lithium segment. Production will only begin in early 2024, and will take a few years to ramp up. As discussed previously, the environment in the longer term when it comes to lithium prices is certainly favourable thanks to the rapid rise in electric vehicle take up.

When assessing a longer term investment window, this seems like an attractive entry point. There could be a significant rise in earnings as a result of the lithium segment. With expected cash costs to the company of USD 3,500 per tonne of lithium and lithium already trading at around USD 20,000 a tonne, there is certainly opportunity for rapid earnings generation.

Considering this, I rate Eramet a BUY at current pricing levels with significant upside potential thanks to the strength of the battery metals market and its long term reserves. It is worth considering however the shorter term implications of the coup in Gabon escalating and impacting operations which is a risk.

On Thursday, it was announced that the BRICS bloc of developing countries would expand its membership from five to eleven countries. This newly expanded group will have significant economic weight and could be considered more influential than some existing developed economy groups such as the G7.

​The newly expanded BRICS group will account for 47% of the world’s population and 37% of the world’s Gross Domestic Product (GDP) when measured by purchasing power parity (PPP). If you compare this to the G7, that group represents 9.8% of the global population and 29.8% of GDP. The difference in size is stark.

But it’s not all about size. There are many frictions when it comes to the countries within the BRICS and up until now the group hasn’t been anywhere near as influential as it would like to be.

So what is the BRICS and why does this expansion matter?

### What is the BRICS group?

The original BRICs were a group of four emerging market countries: Brazil, Russia, India, and China. Goldman Sachs economist Jim O’Neill first used the term in 2001 in a research piece detailing which fast-growing economies he expected would begin to dominate by 2050.

Subsequently, from 2006 onwards, foreign ministers of the four countries would meet fairly regularly until 2009 when a full BRICs meeting occurred in Yekaterinburg in Russia. South Africa then joined the group in 2010 to give the BRICS acronym, with the capital S, that we are more familiar with today.

The group has until now been focused on financial cooperation such as setting up an emergency foreign currency fund and a World Bank style institution called the New Development Bank which lends for infrastructure projects within the group. Overall, it is certainly up for debate whether the BRICS group has produced anything concrete up until now.

Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates were the six new countries to be added this week. This new expansion has in particular been driven by China as it looks to challenge a United States-led West.

### ​Why expand the membership?

Why is the BRICS group looking to expand and why these countries in particular? To answer that question, it is important to consider the broader global macroeconomic and geopolitical backdrop.

The world has changed significantly as a result of the COVID-19 pandemic and the Ukraine conflict. Western energy policy is now focusing not only on new renewable sources but also on promoting domestic energy production for energy security reasons. The West is becoming increasingly less dependent on fossil fuels and as such oil and gas imports.

Industry is being brought back to the West and to its allies away from China and other manufacturing hubs in what is being termed re-shoring or near-shoring. Industry used to go where it was cheapest. The recent supply chain disruptions of the past few years highlighted new risks in being able to manufacture goods and ship them around the world. Supply chain security has become increasingly a consideration.

Geopolitical tensions are rising, firstly with the Russian conflict in Ukraine and secondly with China posturing when it comes to Taiwan. The Taiwan situation is fuelling discontent between the United States and China, to the point where we have seen the United States imposing export controls on advanced computing and semiconductor manufacturing items to China late last year and a ban on tech investment into China from American companies earlier this month. With recent sanctions on Russia as a result of the Ukraine conflict and these measures from the US pre-emptively hindering China ahead of a potential invasion of Taiwan, economic battles are becoming increasingly prominent.

It is well-publicised that the Chinese economy is becoming increasingly problematic. The real estate sector is on the edge of collapse, demographics in the country are delivering an increasingly aging population and the hugely anticipated post-COVID rebound has been near non-existent. There is a limited window for China to use its economic clout to move the global political needle in its direction.

Although the West is moving away from fossil fuels as a primary means of energy generation, countries like China and India remain hugely fossil-fuel dependent. With Saudi Arabia and the UAE now joining the BRICS, the group now has three of the top five oil exporters among its members. Over the past year, there has been a huge increase in Russian oil exports to China and India as sanctions have meant lower exports to the West from Russia. China and India have been able to pick up cheap oil that Russia has been keen to export to fund the war effort.

We already see how much of an influence OPEC has when it comes to dictating the crude oil price. A tie-up of the largest oil producers in the world with China will give the country more friendly nations willing to export oil to it at prices that it wants, whilst being able to dictate the future of the global oil economy via the BRICS for the increasingly short window that the West remains oil dependent.

The other area that China cares about is shipping. As the manufacturing giant that it is, it needs to know it can import the raw materials and commodities it needs and can export the finished goods around the world.

Egypt, Ethiopia, Saudi Arabia, the UAE, and Iran are all strategically placed when it comes to the maritime chokepoints around the Arabian Peninsula. The Suez Canal, Bab el-Mandeb, and the Strait of Hormuz now find themselves neighboured by countries that have joined the expanded BRICS that China can feel like they can influence.

Not only could the expanded BRICS put China in a position to dictate the global oil economy to upset the West, but also able to disrupt shipping lanes out to the Mediterranean and beyond. Whilst the United States has used its own economic weapons to try and stifle China, it seems China is looking to equip itself with its own.

### Problems, tensions & instabilities

There is a problem for the expanded group, and was already an issue before and why the BRICS group has achieved little since the countries first began associating. The countries and economies in the group differ hugely. They have entirely different ambitions and agendas, some are closer allies to the West than China would like and simply some sit at other ends of the Earth from each other. The initial grouping was coined by an economist at Goldman Sachs to cover a series of countries that he expected to have strong growth. Apart from this, they have little in common.

China will want to lead the group, however, if economic and demographic trends continue as they are, India will have a very fair claim to be the largest and most influential country in the group. This is already becoming evident in other spheres, with India for example beating Russia to the southern pole of the Moon with the Chandrayaan-3 mission. Russia's Luna-25 mission had crashed into the moon only days before.

Countries like Brazil and South Africa which continue to have ties to the West, likely now consider their standing in the group to have reduced with the expansion, and may not be as favourable as before when it comes to initiatives taken by the group.

Vladimir Putin didn’t even travel to the conference this year for fear that he would be arrested under the International Criminal Court arrest warrant issued for him in March this year. Demonstrates that not all the members necessarily have each other's backs.

Additionally, it is worth considering the stability of the newly added countries. The Argentinian and Egyptian economies are both in significant distress with sky-high inflation, hugely volatile currencies, and mounting piles of debt. Saudi Arabia and Iran only restored relations early this year after decades of tensions and conflict.

As a group in itself, it’s unlikely the newly expanded BRICS will be able to deliver much for its respective member countries and that it could impact those markets themselves. It hasn't done much until now, and given the country's differing targets and agendas, it is likely to achieve anything ground-breaking any time soon. However, it demonstrates increasingly China’s want to drive geopolitics more in its direction and to find new avenues to put pressure on the West.

If China continues to want to disrupt the political balance, this could add further stress on Chinese stocks, and potentially Taiwanese stocks if tensions go as far as an attempted invasion of Taiwan.

Additionally, if China looks to weaponise oil markets, this could push oil prices up in the West, as it looks to assert influence on the oil-producing countries to sell it cheap oil whilst pushing up the oil price for everyone else. OPEC already adjust the oil price in their favour and a few years ago were willing to temporarily sink the oil price to slow down the shale sector in the US. Why wouldn’t these countries look to do something similar if China made it worth their while?

Another decent week overall in the sense that the Porch-folio returned positive performance on what has been a choppy few weeks for what is a commodity heavy portfolio. Earnings season is also coming to an end with most companies now having reported their earnings for the second quarter.

Biggest winner on the week was Mexican precious metals miner Fresnillo. There was a rebound in the silver price during the week after the China worries driven sell-off in the price of the metal the week before.

Biggest loser by some margin was radiation detection company Kromek. No specific news about the company, but this is the kind of volatility you can expect from more illiquid stocks. Obviously when everything goes right with these smaller sized companies, you are going to make multiple times your initial investment, but until then, it can be hugely volatile. The nature of these smaller companies seeing much less active trading and being much less known to investors is that pricing can be very erratic.

Key here is to understand your investment horizon. Many of my positions in the Porch-folio have more medium term investment horizons. I expect to get a return within the next six to twelve months depending on how certain macroeconomic scenarios play out. Here, my thesis is much more longer term. Best is to ignore for now and wait for true catalysts to drive this investment forward, not price action based on erratic trading patterns.

The wheels came off a bit this week, with a pretty disappointing performance, though still ahead of the market index.

Negative market sentiment was driven by concerns around the Chinese economy, with disappointing economic data continuing to come out of the country. Additionally, Chinese real estate developer Country Garden missed bond payments, further suggesting that there are issues with the Chinese real estate industry.

The real estate sector in China drives more than a quarter of economic activity, and a significant slowdown there would have huge ramifications for the global economy, in particular commodity markets. Unsurprisingly the Chinese real estate sector is a huge consumer of heavy commodities and metals in particular. As such, many of the mining names in the Porch-folio significantly underperformed. Given these names make up about 35% of the Porch-folio it was going to be a tricky week.

There are suggestions that the Chinese administration will look to support the sector and the economy shortly, likely via cutting core lending rates. This is to reduce borrowing costs in the economy with a view to spur demand.

The biggest loser in the Porch-folio wasn’t in fact one of these commodity exposed names but instead Latin American e-commerce company MercadoLibre. The stock has been very volatile, but particularly so recently with the Argentinian presidential primary elections where Javier Milei took the largest share of the vote. Milei is pushing for a more radical and right leaning agenda, in particular “dollarising” the economy. This could put more pressure on inflation in Argentina and a more difficult environment for MercadoLibre to do business in.

The biggest winner in the week was Mexican based Coca-Cola FEMSA. It is a name that I have liked previously but felt the price was a little expensive. With a recent weakness in the price, it was added to the Porch-folio a few weeks ago, and has already rallied back to those levels. I feel the stock is now fairly priced and will continue to hold it for the meantime.

Been working on this project for a little while now. Introducing.... Porchester Capital!

To better aggregate my work, analysis, portfolio etc I have launched this website Porchester Capital!

This will be alongside my posting here on Commonstock, but you will also find further information and analysis there.

The site is split into three broad categories:

In-depth analysis of companies from both emerging and developed markets. Emerging markets across all sectors and geographies, whereas developed markets will be with a micro/small cap focus. Analysis includes overview of a company's operational and financial performance, valuation and risks.

Commentary on financial markets, macroeconomic trends and overall portfolio strategy. Articles that apply to individual investors, institutional investors and anyone with an interest in markets.

The Porch-folio is Porchester's own personal investment portfolio. As a UK based investor, the performance of the Porch-folio is measured in GBP terms. Performance is compared to the FTSE100 index and the average performance of the users across the same investment platform. Below are the regular Porch-folio updates on performance and trading.

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Will be using the website to broaden the Porchester reach, and potentially evolve Porchester further.

Should help me to focus my analysis and cement a style, because I often feel I can be a bit all over the place in my research.

The Commonstock community is the first to hear about this, and am very excited to show you all.

Would really appreciate you all going on the site to have a look and to hear your feedback.

Whether that is bugs, issues or ways to improve. Am open to constructive criticism!

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Many thanks,

Porchester

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Overall a comfortable week considering the performance of others and the market as a whole. Particularly encouraging given the portfolio's heavy lean towards mining and commodity names and that sector's particularly poor performance this week. The recent trading in the portfolio to diversify is seeming to pay-off.

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Perennial loser Sylvania Platinum has bounced back, which is very pleasing given how tough the stock has been finding it these last few weeks. The company announced in the week a new joint venture with the Limberg Mining Company to process platinum and other metals from the Limberg Chrome Mine in South Africa. This venture will increase Sylvania Platinum's output by +9% and further diversify its commodity portfolio by adding chrome to the mix.

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New addition Kromek Group performed poorly, but am not too fussed with this. The stock is hugely volatile and there will be big swings as we go forward, but am still comfortable that the company remains considerably under valued and I expect the return to be made over the long term. Volatility is to be expected when you start delving in these higher growth and smaller market capitalisation companies.

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Another really encouraging week, with strong outperformance again to both the FTSE100 and the others on the platform.

Part of it could either be incredible instinct or totally luck on my part, choosing to exit some fairly chunky positions at the start of the week and holding significant cash through the midweek sell off before reinvesting those proceeds.

With earnings season in full swing, we got some nice boosts in some parts of the portfolio.

Scorpio Tankers, the oil shipping company, was the biggest winner in the week. Falling oil inventories means more business for companies like Scorpio Tankers as those buying oil look to ship more than rely on inventories. Q2 earnings for the company were broadly resilient considering the global demand picture of the past quarter and falling freight rates. To me, thanks to these inventory dynamics, a young fleet and solid management, I continue to like Scorpio Tankers despite the rally.

Another strong performer in the week was MercadoLibre, the Latin American commerce platform. The company's chares surged +13% on Q2 earnings this week. Results continue to be impressive with continued strong growth. Revenue up +57.2% year on year and a +47.2% increase in volumes. I generally tend towards value investing over growth, and MercadoLibre may look expensive on the face of it, however given the scope for growth, I feel the shares are more than fairly values and remain bullish.

Over the week there was some trading in the portfolio, with three positions exited, two existing positions added to and three new positions.

Exits: Antofagasta (+17.1% return), Gaztransport et Technigaz (+11.9% return), Moncler (+2.0% return)

Additions to Existing Positions: Sylvania Platinum, Fresnillo

New Additions: Kromek Group, Coca-Cola FEMSA, Anglo American

Coca-Cola FEMSA is the Mexico based bottler of Coca Cola. I did a write up on the company in April and at the time I felt the company just about fairly valued to quite expensive. The stock price has fallen since and now feel there is a much better entry point. It is also a fairly defensive stock, and as such balances out nicely with some of the more aggressive additions to the portfolio recently.

Finally I wanted to mention Kromek Group, a new small cap added to the portfolio. Kromek is a radiation detection company based principally in the UK. Not only do their products have application for the nuclear sector but also in defense and in the medical sectors. All three of these sectors I see bullish headwinds for in the medium term. The company has recently seen strong margin expansion and a significant boost to revenues. Although there was a smallish rally this week, I still see plenty of room for the stock to rise further based on current and potential operations.

A really strong this week and we head into earnings season, significantly outperforming both other users on the platform and the FTSE 100. Biggest winner was Chilean copper miner Antofagasta. There was news that the Chinese Communist Party's Politburo met to discuss support for the Chinese property market. The Chinese property market is a huge importer of steel, copper and other metals and any support for the sector would be a boon for miners globally. This pushed the Antofagasta price up to the highest it has been since February.

Over the week there was some trading in the portfolio, with two positions exited and replaced with two new positions.

Exits: Petrobras (+37.1% return), Vale (+6.0% return)

New Additions: Fresnillo, Oxford Metrics

Petrobras has been a real winner in the portfolio (and one of the largest positions) but I have chosen to exit it at this time. Although it is a great income play for an income portfolio, I feel like from a capital appreciation perspective, most of the upside has now been captured and it was time to exit. May return to it in future on some price weakness because I remain very comfortable with the fundamentals. This also helps in reducing my USD exposure.

As a UK based investor, I obviously care about appreciation in GBP terms, and as such there is FX risk in holding international assets. If UK inflation continues to be stubborn and it begins to settle in the US, financial conditions will be tightening here whilst softening in the US. Higher interest rates here vs the US could lead to GBP strengthening and an FX loss on my USD positions. Hence why I am replacing some USD denominated stocks with some GBP ones.

Fresnillo I like, it is a silver miner based in Mexico and listed in London. The stock has sold off significantly, despite a strong gold and silver pricing environment. In particular there has been a silver rally this past few weeks that the stock has not followed. There are obviously issues at the company which is why it has performed so poorly, notably operational challenges and cost issues. The company could also benefit from reshoring trends as industry moves away from China and the South Pacific back closer to the US and its neighbours. Additionally silver could play a huge part in the future battery market and as such at current pricing levels, Fresnillo looks like a strong longer term play.

Oxford Metrics is one of my first dips into microcaps and a move into a new sector for the portfolio which is currently very commodity and luxury dominated. The company is based in the UK and is a leader in 3D imaging and sensing for a whole host of uses from entertainment to medical purposes. The company anticipates growing revenue by 2.5x over the next five years. Despite being an early stage company with heavy research and development costs, the company is already profitable and primed for growth. Gross margins at close to 70%. EBITDA margins of over 20%. Return on equity of 91%. Very little debt. Currently also trading at a low P/E ratio as compared to recent history.