March 2016

LIKEMINDEDPEOPLEliberty markets prosperity

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In this issue:

• Two Sells for Wins

• Land, Food, and... WATER

• Fission Uranium’s Exploration Master Class

• The Gold Run Is Starting: Roxgold, Almaden, Almadex, Midas

• Income: Recent Declarations & Upcoming Payments

• Europe Looks Cheap

• Three New MLP Buys: Soda Ash, Nitrogen Fertilizer, Oil Logistics

• The Next Level: Stellar Update

We left off last month feeling pretty good about the positions we held.

Gold and related equities were — finally — moving higher, bringing much needed relief to the sorest portion of our portfolio. Anyone who’s a gold bull thought this move should’ve come long ago.

Fission Uranium had just struck pay dirt — its wildcat drill hit new uranium mineralization on its first hole of the winter campaign.

And we were just coming off a big income win from Newtek.

All of that momentum is still working for us. And in fact there have been even more positive gold and uranium announcements in the past month as they relate to our portfolio and beyond. I will cover all of it in this issue.

I also have some sells I want to recommend to make room for new positions in our portfolio. My rationale for the sells, along with new buys, are also in this issue. Let’s start with the sells.

Sell Coca-Cola FEMSA (NYSE: KOF)

We entered KOF last August looking for a bump from the opening up of Cuba. That largely didn’t materialize, but we’re still exiting with a very respectable gain.

Our entry price was $72.90 and we’ve received one biannual dividend of $0.9298. The stock currently trades at $77.50.

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My recommendation is to sell KOF above $77.50 for an ~8% gain. That may not sound like a lot... until you realize the S&P 500 is down 4% in the same time we’ve been in KOF.

There is nothing wrong with this holding per se. Part of my rationale for owning was the Cuban catalyst and that has now passed.

I simply see higher paying and more interesting income investments out there that don’t dabble in sugary drinks.

Sell Guggenheim S&P Global Water (NYSE: CGW)

This winner is a bit bigger at about 27%. But it’s only half a position. We sold the first half last August for a similar 30% win.

Here’s the thing: I absolutely love the water space. It was one of the first sectors I researched in the newsletter business.

This sell in no way means I’m walking away from the sector or that I don’t think water is a great investment.

It is. But there are better ways to play it than with this ETF.

We have two other water stocks in this section of the portfolio — Layne Christensen (NASDAQ: LAYN) and Lindsay Corp. (NYSE: LNN). I think each of those will provide substantially higher returns than an ETF ever could.

And it’s not even like we’re sacrificing yield.

CGW currently yields 1.73%. Lindsay yields 1.49%. Plus, Lindsay pays quarterly versus CGW’s annual payments, and Lindsay I think will be growing its dividend over the next few years.

So let’s take our 27% gains off the table by selling the Guggenheim S&P Global Water ETF (NYSE: CGW) above $27.00.

You can look to roll that into either Lindsay Corp. (NYSE: LNN) or Layne Christensen (NASDAQ: LAYN), or one of the other income investments I recommend below.

That’s it for the sells this month. Congrats on those wins.

Below is an overview of each of our portfolio sections. You’ll find several new Master Limited

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Partnership (MLP) recommendations in the “Income” section.

Land, Food, Water

Layne Christensen (NASDAQ: LAYN)

We bought in Layne Christensen last August at $6.60 and it promptly went to below $4.00 by the end of the year on an unexpected earnings miss.

I was convinced the stock was oversold and we held tight. And that was the right move.

A director of the company put up half a million dollars to buy shares in December, and they’ve been trending higher ever since. They now trade at $7.00 and we’re up about 6%.

I told you about an expanded supply agreement it signed last month to sell Sumitomos microfiltration membranes.

Then in late February coverage was initiated on the stock by Maxim Group with a ‘Buy’ rating and $8.00 target. And in early March investment bank DA Davidson also put an $8 target on the stock.

Layne is in the water management business, providing geoconstruction, drilling, heavy civil, and other related services. I think its involvement in the oil drilling space is what led to the stock being sold off last year.

It remains a buy under $7.00, and is trading right at that price as I type. So be patient and set

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limit orders.

Lindsay Corp. (NYSE: LNN)

Lindsay is in the irrigation business and has decreased revenues amid the soft commodity downturn. No doubt you’ve heard corn and soy and the like have been cheap for years. Corn sold for over $7 per bushel in 2012. Now it sells for below $4.

That means farmers spend less on things like irrigation.

Nonetheless, Lindsay is profitable and it has modestly grown its dividend.

And as the ag cycle returns, I expect both the stock and dividend to increase more.

Lindsay (NYSE: LNN) trades at $75 with a P/E of 33 and yields 1.5%. It is a buy under $80.

Energy

FISSION URANIUM IS PUTTTING ON A MASTERCLASS IN URANIUM DISCOVERY

Sorry for the caps, but this must be shouted.

Not only did Fission’s management team find the world’s best unmined deposit of uranium in a part of the Athabasca where no one was looking. It has brought in some of the most diligent investors — the Chinese — from one of the largest nuclear companies in the world as a strategic investor that’s not only supporting the project, but has agreed to offtake a portion of the uranium once the mine is built.

And now, since that deal has closed, Fission has found even more significant uranium mineralization on the property.

We learned a few weeks ago that Fission’s first wildcat drill hole of the winter season hit pay dirt, indicating a brand new, separate high-grade zone to the west of R600W. This new zone is being called R840W.

Then, in mid-February, we got the results from 11 more holes, all of which were mineralized: seven holes drilled on the R600W zone, three drilled on the R780E zone, and one on the R1620E.

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The most important of these holes is PLS16-460, which the press release notes:

...intersected 8.04m of total composite mineralization of >10,000 cps radioactivity in a continuous 50.0m wide mineralized zone that starts at the shallow depth of 65.5m depth. Not only is this by far the strongest mineralization drilled to date on the R1620E zone but additionally it is the strongest mineralization east of line 1125E (R780E zone) 375m further to the west. Hole PLS16-460 significantly upgrades the R1620E Zone.

And that led President and Chief Geologist Ross McElroy to comment:

“...drilling this winter at PLS has shown the upside blue-sky potential that exists. The shallow depth of mineralization in PLS16-460, starting at just 65.5m below surface, is a hallmark of the 2.47km long mineralized trend at PLS and is a continued reminder of just how much PLS and the Triple R differs from other discoveries and deposits in the Athabasca Basin.”

Here is your map, with hole PLS16-460 in the top-right and the new R840W zone in the bottom-left. This thing is growing from all sides, and is not being fairly valued for it:

(Click to Enlarge)

Despite this new discovery, the stock is only a dime off its 52-week low. That’s insane to me.

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If you can read between the lines of a recent video posted on the site, you’ll understand why. In the video, Fission COO Ross McElroy notes that:

Its validation of the Athabasca Basin and Fission’s Triple R Deposit that the Chinese have now made a major investment.

Fission has grown the PLS project significantly in just three years — growing the asset with discoveries in quick succession and completing a first level Preliminary Economic Assessment (PEA).

There are still a lot of exciting exploration targets on the property.

The R600W Zone (which is not part of the PEA) will be incorporated into the Triple R Deposit.

After more drilling this winter, the R1620E could be incorporated as well.

There are three drills on the property right now, with 30% – 45% of the winter campaign going toward exploration to find the next mineralized trend.

New airborne resistivity surveys are being done at half the cost of doing the same thing on the ground, and are being used to highlight new potential areas of high-grade uranium mineralization.

You can watch the video in full here, or by clicking it below.

(Click to Play)

Fission Uranium is also out with a four-minute video that shows how its Patterson Lake South

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project has developed, from initially discovering mineralization in 2012 through the recent preliminary economic assessment (PEA), addition of new mineralized zones, proposed open pit mining plan, and even an update on 2016 drilling progress. You can watch that video by clicking here or the image below.

(Click to Play)

The video mentions both a forthcoming resource update and pending assays. So we have more news to look forward to.

I purchased more Fission in early March.

Fission Uranium (TSX: FCU)(OTC: FCUUF) remains a buy at current prices.

Safety from Centralized Power

Roxgold (TSX-V: ROG)(OTC: ROGFF)

Roxgold is coming of age. With its mine construction almost finished at its high-grade Yaramoko project, it will soon complete the transition from gold explorer and developer to producer. That’s a transition that very few junior mining companies ever make. We’re now up about ~19% on Roxgold.

We aren’t buying new shares, but will continue to hold through the pouring of the first ounces.

I don’t see any negative impact at all from the company’s recent announcement of a C$20M

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bought deal financing. The 25M shares from the financing do represent an ~8% dilution, but that isn’t much to pay to top off the coffers as the company heads toward gold production, and will be used for additional exploration and to replace an equity financing facility provided by its underground contractor.

And the stock has only gone up since that financing was announced.

Almadex (TSX-V: AMZ)(OTC: AXDDF)

Almadex is a buy under C$0.20. It’s up as much as 70% in the past three months as some favor returns to the gold market.

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Many of you may have been issued these shares in the spinout from Almaden (NYSE: AAU)(TSX: AMM).

Almadex is a prospect generator with a suite of projects that it’s working on drilling out. And the market seems to like that recently with gold prices climbing.

The company was out with an exploration update and 2016 guidance last month. You can read that here.

And the company was also featured in a Stockhouse article that you can read here.

Almadex has also announced it has acquired three Mexican properties from Alianza Minerals in exchange for a 1% NSR royalty that’s capped at C$1M. But Almadex already held a 2% NSR on each of the three projects it acquired. We call this a “good deal.”

Almadex (TSX-V: AMZ)(OTC: AXDDF) has quietly amassed a nice portfolio of projects, royalties, and equities, and is a buy under C$0.20/US$0.14. And it’s a penny above that now.

Almaden Minerals (NYSE: AAU)(TSX: AMM)

Almaden is now back over C$1.00, a place it hasn’t been since July 2015.

And it isn’t rising just on increased gold prices.

Assays reported this month from its 100% Tuligtic project showed some nice mineralization over long stretches. It hit 43 meters of 2.26 gold grams per tonne (g/t) that included 12.75 meters of 12.75 g/t. Those same 43 meters showed 85.7 silver g/t including 12.75 meters of 158.5 g/t silver. One small 1.5 meter section returned 403 grams per tonne silver.

As Almaden’s press release about this correctly reminded investors: 

About the Ixtaca Deposit PFS Program

Development related activities are currently underway, including advanced engineering and environmental baseline studies to meet the requirements of a PFS and the submittal of an environmental permit application and risk assessment to the Mexican regulatory agency responsible for mine permitting. To date Almaden has completed or initiated the following studies:

• Hydrologic studies including the drilling of water test wells and installation

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of hydrologic equipment for baseline monitoring of existing subsurface water flow and quality on the project site (installation complete, monitoring ongoing);

• Baseline surface water quality and flow measurements (monitoring ongoing);

• Geochemical characterization of rock materials (complete);

• Condemnation drilling of areas where mine infrastructure is planned (complete);

• Geotechnical drilling to confirm foundation, footing and subsurface material quality (final holes based on updated mine plan are planned for March, 2016);

• Geomechanical drilling to confirm rock strength, hardness and pit slope parameters (complete);

• PFS level metallurgical test work (ongoing);

• Flora and fauna studies (complete);

• Installation of a weather station (complete);

I’ve said it before, and I’ll say it again: This project has a big ol’ “For Sale” sign on it. It’s move-in ready. Hold it for more gains to come.

Here’s a six-month chart of Almaden and the S&P 500:

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Favor — and dollars — are returning to the gold sector.

And it’s in the gold sector where we find our biggest news this month.

Midas Gold (TSX: MAX)(OTC: MDRPF)

The big gold news in our portfolio in February was the decision by John Paulson to invest up to C$55.2/US$40 million in Midas Gold (TSX: MAX)(OTC: MDRPF). I sent you a special update about this where I outlined why I think it’s such a great deal.

Midas closed at C$0.36 the day before this news was announced. It jumped 22% after the news was announced.

Macquarie Research is out with an update on the transaction, noting:

Paulson due diligence validation –  we expect it was exhaustive. Paulson had the advantage of knowing FNV conducted extensive permitting due diligence as well as being able to conduct their own. We also think that given Paulson’s deep insights into the +40mozAu Donlin Creek, Alaska development asset (JV: NovaGold – NG CN, not-rated / Barrick Gold – ABX CN, C$17.55, Neutral, TP: C$10.00) – a strong analogue to Stibnite Gold (Idaho) and a similar potential Tier 1 +20moz gold district was not lost – we have been making the point ever since initiating on MAX [LINK].

Cashed-up status incrementally “de-risks the permitting risk” via required financial certainty. The financing provides MAX with ~3.5 years of funds for permitting and the FS. This allows MAX to retain core team members, craft the PoO, drive the Joint Review Process (JRP) forward (once it is entered) and continue with its extensive collaboration with stakeholders – presumably culminating in successful permitting. We think the community that has been supporting Stibnite Gold will be highly encouraged by the Paulson investment size and pedigree.

Catalysts on the permitting front will be key. We are encouraged by the reinstatement of drill permits on Forestry Lands (Jan/16) and detect a level of support from the local First Nation Tribes and the Idaho Conservation League (a key NGO). Filing the PoO will be an important milestone. The other driver could be antimony being declared part of the Critical Materials Strategy by the US Dept of Energy – this could potentially accelerate the permitting process.

We are buyers of MAX for its optionality and eventual prime potential exposure to M&A.All of a sudden, Midas Gold has the capital to get through the permitting process.

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This is highly significant as there are very few +300mozpaAu development projects left in North America and the asset boasts a past-producing district consolidation play that we rank very highly. We reiterate our Outperform recommendation and C$0.90 target.

Macquarie’s upside potential on the stock is C$4.00. You can read its full update here.

Midas Gold has released two updates about this deal. You can see Midas’ two updates about it here and here. I am in favor of this deal and recommend you vote in favor of it.

Midas Gold (TSX: MAX)(OTC: MDRPF) remains a buy under C$0.65/US$0.50.

Income

IDT Corporation (NYSE: IDT)

This is another one we bought with a Cuban catalyst in mind.

But unlike Coca-Cola FEMSA, we’re going to stick with IDT a bit longer.

We’re down about 15% since we entered in May 2015. But shares have staged a meaningful comeback so far in 2016. They’re up ~18% year-to-date on the back of solid earnings.

It reported its fiscal Q2 in early March, posting a $4.1 million profit ($0.18/share) — 64% higher than the same quarter last year — on revenues of $382.5 million. Excluding one-time costs earnings were $0.39/share. The increased profitability can be attributed to reduced selling, general, and administrative (SG&A) costs, which is always a good thing to see.

When you give a company your money by buying shares, you want them to be good stewards of your capital.

A spin-out of IDT’s Zedge unit — which achieved record revenues and income in the most recent quarter — will be spun out as a new company to existing shareholders this year.

That, combined with the current 5.5% yield, are the reasons I still like this as a dividend stock.

IDT Corp. (NYSE: IDT) trades at $13.40 and is a buy at market price. It will pay a $0.19 quarterly dividend on March 25. You’ll need to own the stock on or before Thursday March 10th to get it.

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Newtek (NASDAQ: NEWT)

Newtek announced full-year 2015 results on March 7th.

Here are the highlights:

• Adjusted net investment income1 for the year ended December 31, 2015 was $22.2 million, or $2.06 per share.

• Net asset value (“NAV”) was $203.9 million, or $14.06 per share, at December 31, 2015; an increase from NAV of $13.10 per share at October 1, 2015.

• Net increase in net assets for the year ended December 31, 2015 was $35.7 million.

• Total investment income for the year ended December 31, 2015 was $26.1 million.

In 2015 the company paid the following dividends:

• The Company declared $20.9 million, or $1.76(3) per share, in cash dividends during 2015, which represented approximately 94.0% of the RIC’s 2015 estimated taxable income.

• On December 31, 2015, the Company paid a special dividend of approximately $34.0 million, or $2.69 per share, to shareholders of record on November 18, 2015, with 27% paid in cash and 73% paid in newly issued shares.

• The Company issued 1.8 million new shares on December 31, 2015 in connection with the special dividend bringing the total outstanding share count to approximately 14.5 million at December 31, 2015.

The stock traded sharply higher after the earnings release, jumping about 7% to $12.35, giving it a market cap of $179M.

I still view Newtek as cheap considering its current P/E of 6.5 and the dividends it expects to pay in 2016.

Total dividends paid this year should be $1.50 per share. The first quarterly payment of $0.35 will be made on March 31st to anyone who owns shares on or before March 17th.

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iShares International Select Dividend ETF (NYSE: IDV)

IDV remains a great way to diversify your income-generating portfolio into Europe and Australia.

It holds nearly 50% of its portfolio in Financials, Energy, and Utilities, primarily in companies based in the UK and Australia.

Softness in metals and oil have hurt the fund, since its larger holdings include Rio Tinto, Woodside Petroleum, and Royal Dutch Shell.

I like IDV as a play on a comeback in those sectors and Europe.

It also pays a current 5.4% yield, with the next quarterly distribution being paid on March 30th to anyone who owns shares on or before March 22nd.

IDV is a buy under $30.00 and trades at $28.50.

Now onto three new Master Limited Partnership (MLP) buys.

New Buy: Ciner Resources LP (NYSE: CINR)

Ciner Resources LP is in the trona mining business. It mines trona ore and then turns it into soda ash.

Some definitions are likely in order. From the Wyoming Mining Association:

Trona is a sodium carbonate compound that is processed into soda ash or bicarbonate of soda, or baking soda, as it is commonly known. Wyoming has the world’s largest deposit of trona, supplying about 90% of the nation’s soda ash.

We all know baking soda. It’s been used since Roman times for baking, glass making, and medicine. It’s timeless. And its demand is steady. BAKING SODA RIGHT ALIGNED

That’s why I like it as a steady dividend-paying investment. Here is a good primer on the soda ash market.

Ciner Resources operates in the Green River Basin of Wyoming, exactly

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where trona deposits were first formed. Again from the WMA:

Origin: The deposition of trona in Wyoming started about 50-60 million years ago during the Eocene Age in the Wilkins Peak Member of the Green River Formation. A large freshwater lake, Lake Gosiute, covered an estimated 15,000 square miles in a basin in southwestern Wyoming. The lake was fairly shallow and evaporated rapidly and repeatedly creating a climate that changed back and forth between humid and arid, trapping the once abundant life.

There are 42 trona beds spanning 1,300 square miles in the Green River Basin.

So we have a large, stable industry. And we have the heart of the source. These are two great boxes checked off the risk reduction list.

And Ciner is one of the only public ways to invest in it.

Ciner Resources LP (NYSE: CINR) is a subsidiary of Atlanta-based Ciner Chemical Corp. It (Ciner Resources) operates the trona ore mining and soda as production business operations of Ciner Wyoming LLC. Its facility in the Green River Basin of Wyoming has been in operation for more than 50 years and is one of the lowest-cost producers of natural soda in the world.

Ciner Resources Corporation, formerly OCI Chemical Corporation, was purchased by Park Holding A.S., a subsidiary of Ciner Group of Istanbul, Turkey on October 23, 2015. Ciner Group has operated in the world’s second-largest trona deposits in Turkey since the 1970s, and has now consolidated by purchasing OCI. See the difference in corporate structure here.

Ciner Resources LP, the investment I’m recommending, is a Master Limited Partnership (MLP). Here is what that means, as well as the tax implications, directly from Ciner’s website:

A major reason investors buy MLPs (versus bonds) is the potential to see their distributions grow at a faster rate than inflation.

Generally, a company chooses to be a master limited partnership to avoid double taxation of dividends. Instead of the partnership paying taxes on its profits (like a corporation), each limited partner is responsible as part of his or her individual income tax for a proportional share of the MLP’s income, allowing a higher cash flow payout to unitholders. The MLP format is more tax-efficient.

MLP Advantages

• Desirable to income-oriented investors

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• Offers investors an interest in a group of diversified assets controlled by the partnership

• When publicly traded, MLP units may be bought and sold like stock, providing investors investment liquidity

• Tax-advantaged income stream

• A portion of the distribution may be shielded from ordinary income taxes and treated as a reduction in a unitholder’s original cost basis in the investment

Other Factors

• MLPs grow mainly by making effective acquisitions

• Distributions (similar to dividends) are not guaranteed

• Unitholders could be subject to reporting in States in which the MLP has operations

• Investors may have to pay taxes on their proportional share of the MLP’s income, even if the MLP does not distribute cash

**Investors should consult with a tax advisor concerning their individual tax situations.**

I agree with this 100%. I am not a tax advisor. Having a good one can save you a bundle. I recommend you discuss all your investments with one, especially MLPs. And if you want to learn about MLPs themselves, here is a great crash course.

Back to Ciner and baking soda...

Remember, Wyoming produces about 90% of the world’s trona. About 17.3 million tons is produced in the state annually. Of that, Ciner produces about 3.87 million tons, 22%. So it has serious market share.

It takes approximately 1.55 tons of trona to make a ton of soda ash. So out of that 3.87 million tons of trona, Ciner produces about 2.55 tons of soda ash annually. The ratio does fluctuate a bit, these numbers are as of 2014’s annual report.

Soda ash is the main component of baking soda and is also used in glass making and in detergents.

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It can also be produced synthetically. In fact, about 75% of the world’s soda ash is produced synthetically through chemical processes. About 25% is produced using trona, even though it is cheaper to do it this way. This is because there is not sufficient supply of natural soda ash to satiate the global market. If there were more trona deposits, it would have a greater share of the market.

World soda ash production — both natural and synthetic — is about 53.2 metric tonnes annually. Ciner Resources LP produces just over 4% of that.

At current production rates, based on independent analysis, Ciner has enough trona to mine for another 68 years. And not only is it cheaper to use than producing soda ash synthetically, it also has advantages compared to other trona miners. Ciner’s trona beds are closer to the surface, 800-1100 feet on average, making them cheaper to mine. And they also have a high purity of trona at 85-89%.

Worldwide average demand for soda ash is expected to increase by 3.3% per year between 2014 and 2024, according to IHS Research.

Ciner Resources LP (NYSE: CINR) has 19.98 million shares outstanding that are currently trading ~$23.50 for a market cap of $470M. It has a 52-week range of $18.80-$26.10. It pays a quarterly distribution of $0.5575, giving it a very robust 9.8% yield.

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In the past 12 months, it has earned $3.20 per share in income, giving it a p/e around 7.

Ciner Resources (NASDAQ: CINR) is a buy under $23.00.

New Buy: PBF Logistics (NYSE: PBFX)

PBF Logistics is a New Jersey-based Master Limited Partnership formed by PBF Energy to own or lease, operate, develop, and acquire crude oil and refined products, terminals, pipelines, storage facilities, and other similar assets.

It has the following contracts in place:

It is growth-oriented, with a future plan that looks like this:

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Since its initial public offering in May 2014, PBF Logistics has:

• Invested ~$450 million to expand asset base

• Increased Distributable Cash Flow by over 100%

• Increased Distributions to unit holders by over 30%

• 23% Compound Annual Growth Rate (“CAGR”)

• Announced an unaffiliated, third-party transaction with the East Coast Terminals acquisition

That East Coast Terminals acquisition, which came in early 2016, is a big one, and will do much to foster PBF’s coming growth.

This is the company’s first ever third party transaction (outside its sponsor company PBF Energy). It came at an attractive 7X multiple (it is expected to ad ~$15M of pro forma EBITDA and they paid $105M), is accretive, and will generate fee-based cash flow.

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This acquisition doubles PBF’s storage capacity and expands its terminal footprint while bringing in new revenue streams.

Here’s a bit more color on that acquisition from a Seeking Alpha article:

Prior to the deal, PBFX had 3.9 million bbls of storage at the Toledo storage facility. Not only does the deal double the effective shell storage capacity, but it also does so in the eighth largest metropolitan area within 100 miles of ~1.3 million bpd of refining capacity on the East Coast. As if that wasn’t good enough, the terminals and storage assets are connected by a pipeline to every major pipeline system in the Philadelphia area. All this for $100 million.

Including an investment of $5 million in cash on hand to improve the infrastructure in order to increase the throughput capability and synergy opportunities at the new terminals, the acquisition is expected to generate ~$15 million of pro forma EBITDA, of which approximately two-thirds is expected to be from third-party customers. That equates to a price-to-EBITDA multiple of 7x, extremely attractive for a midstream acquisition which is typically in the range of 8-10x. In addition, the strategic nature of terminals and storage assets connected to major pipelines like Colonial and Buckeye cannot be understated for added supply optionality. After supply interruptions due to the Superstorm Sandy, New York City did a study of the metropolitan area’s “liquid fuels supply” infrastructure. The graphic below came from that study and shows the critical role both the Colonial and Buckeye pipelines, as well as regional refineries and marine deliveries, play in delivering refined products to end-use consumers:

The Colonial Pipeline is one of the largest refined products pipelines in the US and typically delivers an average of 100 million gallons per day to communities and businesses. The ability to connect to Colonial will enable PBF to effectively connect

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its Chalmette Refinery on the Gulf Coast, which it purchased from Exxon Mobil and Petroleos de Venezuela last November, to the partnership’s new assets and refineries on the East Coast.

Chalmette is an 189,000 bpd, dual-train coking refinery with a Nelson Complexity of 12.7. It is capable of processing both light and heavy crude oil. The facility is strategically positioned on the Gulf Coast with strong logistics connectivity — including both the Colonial and Plantation pipelines - two of the largest refined products pipelines in the US. Being just outside New Orleans on the Mississippi River, Chalmette also has the potential to export products.

And of course - as shown in the above graphic — the newly acquired East Coast assets in the Philadelphia area are in very close proximity to PBF Energy’s Paulsboro, NJ, and Delaware City, DE, refineries. So the new terminals and storage assets acquired in this deal — and their connection to the Colonial Pipeline - are strategic in that they will enable additional optionality across three of PBF Energy’s five refineries.

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In addition, the ability to make trade-offs between third-party deals and partnership utilization of the assets is also a positive catalyst. Note that two-thirds of the expected annual EBITDA from the newly acquired assets will be coming from third-party contracts. The increased revenue diversification reduces risks to the partnership.

The ~$450M PBF has spent on expanding its asset base since its IPO has resulted in its Distributable Cash Flow (DCF) doubling, allowing its distributions to grow at an impressive 23% compounded annual growth rate.

As of February 2016, the company was paying $0.41/share as a quarterly distribution. In 2015, it paid out $2.18/share in dividends, or a ~12% yield.

And I think recent and coming acquisitions will allow for continued distribution growth.

Because of the weakness in oil prices over 2014 and 2015, shares of PBFX have drifted lower ever since its IPO. It began trading at ~$27 and has been as low as $15.39 since.

I think getting in now will allow us to not only lock in a very attractive yield, but also benefit from share price appreciation as favor returns to the oil sector.

My recommendation is to buy PBF Logistics (NYSE: PBFX) below $20.00.

New Buy: CVR Partners (NYSE: UAN)

CVR Partners is a growth-oriented limited partnership formed by CVR Energy to own, operate, and grow its nitrogen fertilizer business.

Its flagship operation is Coffeyville Resources Nitrogen Fertilizers, which is the only urea ammonium nitrate (UAN) operation in North America that uses a petroleum coke gasification process to make hydrogen, which is used in its manufacturing process. Other manufacturers use a higher cost natural gas process.

That Coffeyville facility includes a 1,225 ton-per-day ammonia unit, a 3,000 ton-per-day urea ammonium nitrate unit, and a gasifier complex with a capacity of 84 million cubic feet per day.

Urea and ammonium nitrate (UAN) are used as nitrogen fertilizers on the country’s crops. CVR Partners produces about 7% of the UAN in the United States.

And like with oil, the nitrate business has been in the doghouse.

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In 2015 alone prices fell by about 9% for urea ammonium nitrate, from $247 to $221 per ton — and are now sitting at multi-year lows — and from $547 to $479 for ammonia.

Nonetheless, CVR has remained profitable. In Q4 2015 it earned a net income of $19 million ($0.26/share) on revenues of $66 million. That’s good enough for a 29% margin at a time when the price of its product is at multi-year lows.

This certainly piques my contrarian interests.

The nitrogen market is nearing saturation. The shale boom has made natural gas incredibly cheap. Natural gas prices, which are a major input cost for nitrogen production, have fallen ~90% since 2008 — from over of $13.00 per million BTU to below $2.00 where it stands today.

This allowed many nitrogen fertilizer producers to be profitable, and there were many new entrants into the market, especially in China. The lifting of Iranian sanctions will also allow a new source into the market. All this has created a nitrogen fertilizer oversupply, which has led to low prices.

Making it worse are low grain prices, which are limiting farmers’ spending on things like fertilizer.

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Higher-cost producers, mostly in China, are now being forced out of the market. U.S. producers, especially CVR, which uses petroleum coke, have always been the lowest-cost provider. They have remained profitable through recent low prices, and are certainly well positioned should either natural gas or nitrogen fertilizer prices rise.

All this, coupled with some isolated company-specific issues late last year, have sent shares of CVR Partners sharply lower, creating what I view as a good point of entry. An unexpected shutdown of an air separation unit that feeds nitrogen and oxygen to its facility led to three separate shutdowns in August and September 2015. That caused total downtime of 18 days and led to suspension of the third quarter dividend. This has been remedied and no further outages are expected. Distributions are already back on track for 2016, the first quarterly one of $0.27 being made on 3/07/2016.

At this writing (March 2016), shares are down ~50% over the past 12 months — though they’ve been down more than 60%.

Shares have a 52-week range of $4.77-$16.12, and currently trade at $8.00. Over the past 12 months, CVR has earned $1.08 per share in profit, giving it a price-to-earnings ratio below 9.

A pending merger with Rentech Nitrogen Partners (NYSE: RNF) is expected to close in the very near future, and will make CVR Partners the second largest urea ammonium nitrate producer in North America, while creating operational synergies and improving performance.

For example, CVR had operating cash flows of $133.5, $129M, and $181.8M in 2012, 2013, and 2014 respectively, without Rentech. With Rentech, those numbers would’ve been $266M, $173.5M, and $183.8M.

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In exchange for the operational improvements, CVR will take on about $500M of Rentech’s long-term debt, which shouldn’t be too big of a burden to bear considering its profitability.

Taken together, I think the above facts combine to present worthwhile upside in CVR Partners, both as it relates to unit price and distributions.

Shares are generally seasonally higher, with attention put on agricultural stocks around planting and harvest time.

I recommend buying before April below $8.15.

The Next Level

Stellar Biotechnologies (NASDAQ: SBOT)(TSX-V: KLH)

One of Stellar’s partners — OBI Pharma — has announced ‘successful’ breast cancer drug trial results.

The results are from OBI-822 — the world’s first carbohydrate-based vaccine for breast cancer. As Asia One reports:

Overseeing clinical trials for the vaccine, Huang Chiun-sheng said the team is excited that preliminary findings show OBI-822 could benefit patients substantially, and the team will redesign phase 3 based on the previous results.

Huang expressed he is optimistic that the drug would pass phase 3, and stressed that results show the drug has passed safety assessments.

OBI Pharma Chairman Chang Nien-tzu said to local media that the blind test was very successful, and that the actual results were better than predicted ones.

Patients who participated in the test saw an “evident improvement on overall survival,” said Chang. The firm will begin designing the global phase 3 experiment to be held in the US or Europe — expanding the numbers of recipients enrolled in the trial worldwide.

If you remember, Amaran, which will manufacture OBI-822 if approved, made a $5 million strategic investment in Stellar in 2013. It is confident it will need commercial quantities of Stellar’s KLH.

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Also remember, while this is one of Stellar’s highest quality shots on goal, it is only one of over 100 shots at a KLH-based drug gaining commercial approval.

Barron’s has put out an article about OBI-822 as it relates to Stellar.

And the Maxim Group reiterated its ‘Buy’ rating and $17 price target on the stock, noting:

Our takeaway is that the clinical benefit (and the impact of a KLH-based therapeutic) is significant enough to advance to a large global phase III study in breast cancer. OBI is now making plans for the next pivotal program.

Stellar will continue to supply KLH to OBI and that supply should increase for what we expect will be a larger phase III study. Our model has always assumed that the KLH-based breast cancer vaccine from OBI would require additional studies (setting up a launch in 2020). We see the OBI news as a positive for Stellar and validating for KLH-based approaches in immune oncology.

KLH-based therapeutic vaccines are emerging players in immune therapy (oncology and autoimmune). Biotech and pharma companies moving into the vaccine space are looking for a validated platform to deliver antigens, and KLH is often the answer. Stellar’s GMP-quality KLH may be the key that drives many companies’ therapeutic vaccines to commercialization. This gives Stellar a unique advantage, in our view, in that any company using Stellar KLH that drives a vaccine to commercialization by default needs Stellar as a KLH supplier. What if that therapeutic vaccine is a blockbuster? It could drive substantial revenues ($20M- $200M per indication) based on larger KLH supply agreements, as well as potential royalties. In addition, as KLH-vaccines emerge in the immune therapy space, they will need to be produced at GMP-quality. Stellar has entered into a joint venture with Neovacs SA (ALNEV-$1.23) to bring together Stellar’s GMP-quality KLH and Neovacs’ therapeutic vaccine technology (Kinoids) to become the first third-party manufacturer of KLH vaccines that can support production at both clinical and commercial scale.

Stellar Biotechnologies (NASDAQ: SBOT)(TSX-V: KLH) trades at US$6.30/C$8.31 and is a buy under US$8/C$10.70

Wrap-Up & RankingsThat’s a lot to chew on, including several recommended sells and new buys. So you have decisions to make.

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Spring is always transitional and this year is no different. Gold prices are on the rise and there are green shoots emerging for a mining recovery. It’s not a full-on bull yet, but it is certainly encouraging after the sentiment of the past few years.

Oil is also looking to firm up and it’s finally time to look at that sector once more.

We’ve done well so far this year to lock in wins and establish new long-term contrarian positions at low prices.

And I’m continually working on improving the products you receive, as well as developing new ones.

My private placement and extremely speculative service Nick’s Notebook is now fully launched and half of its 400 available membership slots have sold. You can check that out here.

And I just hired a new mining analyst who will launch a new letter to help guide us through what we see as an approaching resource bull market.

So much happening and much to look forward to.

Enjoy it.

Call it like you see it,

Nick Hodge Editor, Like Minded People

Like Minded People, Outsider Club LLC Copyright © 2016, 111 Market Place, Suite 720, Baltimore, MD 21202. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Like Minded People or Outsider Club LLC does

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