Demand for This Critical Resource Will Surge 500%... and China’S Monopoly Is Triggering Another Boom by Matthew Carr, Emerging Trends Strategist, the Oxford Club

OFORD RESOURCE

DRILLING DEEPER TO DISCOVER PROFITS | ISSUE 47, DECEMBER 2017

Demand for This Critical Resource Will Surge 500%... And China’s Monopoly Is Triggering Another Boom by Matthew Carr, Emerging Trends Strategist, The Oxford Club

Dear Member, The Oxford Club “What is it that you think you know about the geopolitics of this Matthew Carr situation?” Emerging Trends Strategist Eric Fry Dr. Miha Zakotnik’s first words to me are combative. His Eastern Macro Strategist European accent, intense gaze and unkempt ponytail give him the air of David Fessler a James Bond character. Energy and Infrastructure MATTHEW CARR Strategist I can instantly tell we’re going to get along. Alexander Green Chief Investment Strategist Miha and his colleagues want to see if I know the truth... Matthew Benjamin Editorial Director They want to see if I understand the realities about rare earth metals, permanent magnets and a critical supply chain situation the whole world is facing. Patrick Little Managing Editor Miha makes it perfectly clear to me: Despite the name, rare earth elements aren’t that Anne Mathews rare... They are in nearly every modern device – from medical devices to electric vehicles to Managing Copy Editor computer hard drives. He and his partners founded a company with this fundamental truth Alison Kassimir Art Director in mind. Chelsea Centineo But right now, the world is at the mercy of a monopoly when it comes to these materials... Graphic Designer And the country controlling the monopoly has proven it’s unafraid to use this as leverage to James Boxley Cooke Honorary Chairman bring those who need these materials to their knees. Julia Guth The (Not So) Rare Materials Critical to Modern Life As We Know It CEO & Executive Director Nathan Hurd Let’s back up for a minute and get some basics about rare earth metals out of the way... Director of VIP Trading Services From the time they were discovered in 1788 all the way until the 1960s, rare earths were considered rare. Annual production and consumption amounted to less than 5,000 metric tons. And they had little impact on our lives.

There are 17 elements on the periodic table that are considered “rare earths.” Examples include neodymium, dysprosium, praseodymium and scandium.

They are part of the chemical class known as lanthanides, and most of us were told to ignore them in chemistry class.

Please read on... the metals issue 2

The arrival of color TV, computers and smartphones has That’s all it took... sent demand soaring more than 2,420% since the 1960s. On September 24, Japan released Captain Zhan and Today, $2 trillion worth of products sold globally contain made what the international community referred to as a rare earths. They are absolutely necessary for these “humiliating retreat.” devices as well as for many of the things produced by the The episode awakened the world to a frightening reality: companies in our Trailblazers Portfolio. China had cornered the global market for producing rare Despite the fact that rare earths are in our homes and all earth metals... and it wasn’t afraid to flex its muscles. around us, it wasn’t until a morning almost a decade ago Basically, the whole world had been standing by while that we learned how uncertain the world’s supply of them China developed a monopoly on a globally critical resource could be. – one that’s essential to a virtually limitless number of The Minjinyu 5179 Incident commercial, industrial and military applications. In September 2010, rare earths were thrust into the This is a monopoly that not even OPEC can boast... global spotlight... Most unsettling, China showed that it has no qualms For decades, China and Japan have disputed ownership of about using its monopoly to bring another country to the Senkaku Islands, an uninhabited archipelago sitting its knees. on incalculable untapped wealth. Over the year that followed the Senkaku Islands incident, No one knows how much oil and natural gas reserves prices for rare earths surged by multiples, as fear ignited the islands might have. No one knows if those reserves stockpiling of them. It was a commodity boom... and are even economically recoverable. But whatever is there, probably the only reason many investors even know what rare earths are. China and Japan each want exclusive control of it. As Miha and his now-partners at Urban Mining The U.S. transferred control of the islands to Japan in Company watched this unfold, a lightbulb went off. 1971. And since then, China and Taiwan have both There was a solution to the rare earth supply problem disputed Japan’s ownership. – one that’s deceptively simple on the surface, but On the morning of September 7, 2010, a Chinese fishing complicated to accomplish... trawler, the Minjinyu 5179, collided with two Japan Coast Guard (JCG) vessels, the Yonakuni and the Mizuki. A Monopoly OPEC Can Only Envy China is the undisputed king of rare earths. The JCG boarded the Minjinyu 5179 and arrested its captain, Zhan Qixiong, and 14 crew members. In 2016, the country produced 105,000 metric tons of rare earths. That alone is 2,000% more than the world In the two weeks that followed, tensions escalated. China produced prior to the 1960s. demanded that the captain and his crew be handed over. Japan refused. China demanded six times that Japanese The next largest miner of rare earths is Australia, at a ambassador Uichiro Niwa come to Beijing. Japan refused. distant second of 14,000 metric tons produced annually.

On September 20, in retaliation, China arrested four It’s a steep step down from there. The world’s third-largest Japanese employees of Fujita Corp. for allegedly filming rare earth producer is Russia at 3,000 metric tons per military targets. year. India is fourth at 1,700 metric tons.

Two days later, China Premier Wen Jiabao demanded the The U.S. mines zero. release of Minjinyu 5179’s captain. He threatened “dire consequences” if Japan continued to resist. The only U.S. rare earth mine – Molycorp’s Mountain Pass open pit mine in California – was closed in 2015 China then promptly halted all rare earth exports to after the company declared bankruptcy. An ongoing Japan, which depends on rare earths for the cars and dispute between the company and debt investors indicates devices it produces. the mine will stay closed for the foreseeable future. the metals issue 3

China represents 85% of global rare earth production, metric tons today to 12,000 metric tons by 2024. but it could easily be considered to have an even bigger piece of the pie than that. Between now and then, rare earth magnet demand from wind turbines alone will double. In 2016, 72% of U.S. rare earth imports came directly from China. But the remaining 28% of imported metals Other major drivers for demand of rare earths include or compounds from other countries were derived from the precision motion industry. Robots, drones and mineral concentrates from China. autonomous vehicles, as well as all those necessities of the Fourth Industrial Revolution, require an ever-increasing In other words, all of the U.S.’s rare earth metals imports supply of rare earths. last year originated in China. That means our TrailblazersABB (NYSE: ABB), Raven Rare earth demand is already up more than 2,400% over Industries (Nasdaq: RAVN) and Komatsu (OTC: the past few decades. But it’s going to move even higher KMTUY) rely on them. thanks to permanent magnets, especially those made from neodymium, dysprosium and praseodymium. A New Type of Mining Currently, the world consumes 120,000 tons of rare “One man’s trash is another man’s treasure.” earth magnets every year. They’re in your smartphone, your smartwatch, your computer, your refrigerator, It’s a famous adage, and it couldn’t be truer for Urban your car (in larger quantities if you drive a hybrid or Mining Company. electric vehicle), dentures, door catches, generators, the The opportunity in this case is bigger than you can HVAC system in your home, point-of-sale displays, MRI imagine... The amount of electronic waste (e-waste) – scanners and wind turbines... smartphones, computers, televisions and other gadgets That’s just a partial list. – is projected to increase 8% per year. By 2018, global e-waste will reach nearly 50 million tons. Every moment of every day, we’re surrounded by rare earth magnets. And their ubiquity is growing exponentially. The U.S. is responsible for more than its fair share, accounting for 28% of all e-waste. Much of that can be attributed to the rise of green technologies. Last year, sales of EVs increased 55% Remarkably, less than 20% of all e-waste is recycled. worldwide to 695,000 units. By 2040, EVs are expected to The Environmental Protection Agency points out that account for a third of all cars on the road. by recycling just 1 million smartphones, the U.S. could Over the next seven years, demand for magnetic rare recover 20 pounds of palladium, 50 pounds of gold, 550 earths for EVs is expected to increase 500%, from 2,000 pounds of silver and 20,000 pounds of copper.

Rare Earth Producers and End Users

India 1% Brazil 1% Phosphors and Pigments 5% Russia 2% Other 1% Ceramics 6% Australia 11% Glass 7% Catalysts 24% China 84% Batteries 8%

Metallurgy 8%

Other Applications 9% Magnets 2%

Polishing 12% the metals issue 4

That alone is $1.5 million in recoverable metals. With This triggered a quick move higher in rare earth prices – new smartphones, tablets and laptops introduced each in particular, “light” rare earths such as the all-important year, we’ve been conditioned to see these devices as neodymium and praseodymium. disposable. But beyond all the precious and base metals we toss away when we discard an electronic gadget, there are also rare earth magnets going to waste. Praseodymium-Neodymium Oxide Market Price YTD Currently, less than 1% of rare earths in e-waste are recycled. In other words, there is a virtual gold mine $100 being chucked into the bin or incinerator every day. $80 Businesses like Urban Mining Company have woken up $60 to this reality. $40 The company collects hard disk drives, appliances, wind turbines and all those first-gen EVs and hybrids from the $20 early 2000s that are at the end of their useful lives. Rare $0 earth magnets are extracted from these and many more Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov apparatuses, and then are recycled and remanufactured. Now, these have cooled off in recent months, but that’s Urban Mining Company is effectively “mining” from okay. the 600,000 metric tons of magnets consumers have thrown away. It gives us an opportunity to take advantage of the pullback. Even better, the magnets it’s producing from recycled materials are even stronger than the originals. The long-term case for rare earths is bullish. And the In November, I visited Urban Mining Company’s market is expected to top $9 billion by 2019. laboratory in Austin, Texas, and learned about its For this reason, I want to add the VanEck Vectors Rare processes and business model from Miha and several Earth/Strategic Metals ETF (NYSE: REMX) to our other key people in the company, including the CEO, portfolio. This gives us exposure to a wide variety of the head of business development, the lead computer rare earth and strategic miners across the globe, many of scientist and two other chemists. which we can’t invest in on U.S. exchanges.

Be sure to check out the exclusive video we put together Miha and his colleagues at Urban Mining Company are from my interviews with Urban Mining Company. The the leaders of what could be a new wave of U.S. rare earth explanations are more complex and detailed than I could “miners.” Their factory, which should come online in the ever fit here... and fascinating. You don’t want to miss it. next year, will be the only rare earth permanent magnet Here’s the link to the video: factory in North America. It will be capable of producing https://oxfordclub.com/ore-at-umc-atx/. 1,000 metric tons of rare earth magnets every year.

China Triggers Another Boom This will be a major boon to all kinds of businesses and In just the past couple of months, China has sparked manufacturers within the U.S., as well as the Department another rare earth boom. The price of neodymium gained of Defense. 33% in the month of August alone. For now, China produces 100% of the rare earths that Rare earths are now entering a new boom cycle, following matter... and our best opportunity to gain access to them the devastating bust that led to bankruptcy of the only is with the VanEck Rare Earth Fund. rare earth miner the U.S. ever had, Molycorp. Action to Take: Buy VanEck Vectors Rare Earth/ The story of rare earths is similar to what we’ve seen in Strategic Metals ETF (NYSE: REMX), and add it to our other metals markets in 2017 – China is clamping down Trailblazers Portfolio. Use a 25% trailing stop to protect on illegal wildcat miners and producers. your principal and your profits. n the metals issue 5 Three-Dimensional Battery Sponges The Latest Innovation That Will Keep Zinc Booming by Eric Fry, Macro Strategist, The Oxford Club

Editor’s Note: The 21st century is ripe with opportunities for pick-and-shovel plays pertaining to battery technology. It’s one of the main reasons we’re seeing such a strong performance across the asset class we often refer to as “base metals.” In this issue of Oxford Resource Explorer, Macro Strategist Eric Fry and Energy and Infrastructure Strategist David Fessler offer different takes on where battery technology is headed... and they tell their stories through different base metals with booming demand. Through the lens of a small firm trying to bring a new innovation to market, Eric looks at where battery technology may be headed. And Dave writes about an opportunity investors can capitalize on right now. Their articles share an important message: Now is the time to get in on the massive base metal surge that is set to continue for the foreseeable future. Enjoy both of these articles... and you’ll see why these booming metals – especially zinc, nickel and cobalt – will inevitably climb higher. – Patrick Little, Managing Editor

Stick this thought in your back Zinc-based batteries are the industry standard for single- pocket: Nickel-3D zinc batteries may use household applications, but they don’t tend to recharge well... be the newest reason that booming global demand for zinc will boom Recharging zinc-based batteries often causes sharp-edged some more. conductive “whiskers” (dendrites) to form inside the battery. The whiskers can pierce the separation between These next-generation batteries anode and cathode and cause the battery to short-circuit. ERIC FRY threaten to replace lithium-ion batteries in numerous industry For this reason, a rechargeable zinc-based battery technology has been as elusive as Sasquatch... until now, applications, including electric vehicles. If they manage that is. to steal market share from their lithium-ion counterparts, zinc demand could soar well above what it is today... and The zinc market is already in deficit. So if a new major the zinc price could skyrocket. source of demand emerges, the zinc price could easily skyrocket. According to the U.S. Naval Research Laboratory (NRL) team that invented it, the nickel-3D zinc battery “[is] a The NRL research team came up with a nifty solution to the problem of dendrites. It found a way to avoid their safer alternative to fire-prone lithium-ion batteries, which buildup by making the anodes out of a three-dimensional were recently banned for some applications on Navy zinc “sponge” instead of the traditional powdered zinc. ships and other military platforms.” “The key to realizing rechargeable zinc-based batteries lies But these new batteries are not simply about fire in controlling the behavior of the zinc during cycling,” prevention; they are about providing superior explains a member of the NRL team. “Electric currents rechargeable battery technology. are more uniformly distributed within the sponge, the metals issue 6 making it physically difficult to form dendrites.” year... which would be nearly 1 million metric tons shy of the demand forecast for the year. And Teck Resources According to the NRL team, its novel batteries are now (NYSE: TECK), a major zinc miner, expects “supply ready for the marketplace because they can provide “an deficits” like these to persist for several more years. energy-relevant alternative, from drop-in replacements for lithium-ion to new opportunities in portable and wearable power, and manned and unmanned The Missing Zinc electric vehicles, while reducing safety hazards, easing According to data from the World Bureau of Metal transportation restrictions, and using earth-abundant Statistics, the zinc supply deficit has reached a materials.” two-decade low (based on rolling 12-month totals)

The NRL team announced its breakthrough battery Metric Tons six months ago. Less than two months later, it struck a 750,000 licensing agreement with EnZinc, a private Northern 500,000 California company. Under the agreement, EnZinc 250,000 obtained the exclusive right to commercialize the 3-D 0 -250,000 zinc sponge anode technology in a nickel-zinc battery -500,000 for use in “all electric road vehicles (from two wheel to 1999 2003 2007 2011 2015 multiwheel), hybrid vehicles, start-stop vehicles, and microgrids/distributed grids up to 60 MW.” The robust global zinc demand is making its presence But EnZinc has not yet begun to manufacture and felt at the London Metal Exchange (LME). As the chart market these new batteries. That’s why I suggest putting below shows, zinc inventories on the LME have dropped this story in your back pocket and keeping an eye out for to their lowest level since 2009. And as this chart also new developments. shows, periods of falling inventories tend to coincide with periods of rising zinc prices. However, even without a major new source of zinc demand, the price of this base metal is likely to continue climbing higher. In fact, the prospects for the zinc Zinc on the Move market may be more attractive than they are for any The zinc price is inching higher as zinc inventories at other commodity. the London Metal Exchange slide lower

Most of us pay little attention to zinc, but this metal is an ■ = Zinc Inventory at London Metal Exchange (Left scale) essential part of our day-to-day lives. It is the world’s fourth ■ = Zinc Price (Right scale) most used metal behind iron, aluminum and copper. Million Metric Tons Per Pound 1.6 $2.48 Zinc combines with certain metals to make a wide 1.2 $1.86 variety of alloys. But its primary industrial use is to galvanize steel. Because of this relationship, zinc demand 0.8 $1.24 closely tracks global economic growth, especially the 0.4 $0.62 construction-intensive economic growth occurring in China (which requires a lot of steel). 0.0 $0.00 1997 2001 2005 2009 2013 2017 Most indicators are pointing to a growing global economy. Perhaps that’s why the zinc price just hit a new That’s not surprising. It’s common for a commodity’s 10-year high. price to rise when supplies of that commodity become The market is already in deficit, and most industry relatively scarce. For example, when LME zinc inventories insiders believe that mined supplies of zinc will continue dropped sharply between 2004 and 2006, the zinc price to fall short of demand for several years to come. quadrupled, from $0.50 a pound to $2 a pound!

The International Lead and Zinc Study Group projects Keep your eyes on zinc. This dull industrial metal may zinc mine production will hit 13 million metric tons this soon begin shining more brightly than gold or silver. n the metals issue 7 Another Pick-and-Shovel Play for the EV Boom Debt Restructuring and Soaring Demand Will Launch This Company’s Shares Into Orbit by David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Back in the September issue of Oxford And lithium isn’t the only material that’s in great Resource Explorer, I showed how electric demand (and short supply) when it comes to vehicles are going to completely manufacturing EV batteries. disrupt transportation as we know it. I The chart below shows what would happen to the discussed the effects of that disruption demand for the most strategic EV battery materials in a on the lithium market. world where all cars were EVs. DAVID FESSLER In that issue, I recommended Sociedad Química y Minera de Chile (NYSE: SQM), the big Chilean Estimated Increase in Demand for specialty chemical manufacturer. In just a few months’ Metals in an All-EV World time, we’ve racked up gains of 23% on this lithium play. Lithium It’s because lithium is an important material for Cobalt manufacturing batteries for EVs... and car manufacturers Rare Earths are pouring billions into EV development. Graphite Nickel Tesla is just the beginning of the EV wave that’s coming. Copper Manganese Volvo announced that every new car it makes starting in Aluminum 2019 will be electric or hybrid... Silicon Ford is ponying up $4.5 billion to launch its EV Steel program. In the next five years, Ford expects to launch 13 0% 200% 400% 600% 800% 1,000% new EVs... Source: UBS estimates I could go on and on about this (and I have before)... As you can see, lithium, cobalt, graphite, nickel and This month, I found another excellent company that’s a copper would see soaring demand if internal combustion superb play on two other raw materials essential to the engines were to go the way of the dinosaurs. EV battery. Today I’m going to focus on two of these metals: nickel And, much like we’re seeing in Sociedad Química y and cobalt. Minera, we could see spectacular gains on it in the months ahead... As of 2016, the dominant lithium-ion battery design contained nickel, manganese and cobalt in equal But first, let’s talk a bit more about the EV battery. proportions.

Essential for All Commodities But this year, the industry has gravitated to a design that Investors: What’s Inside an EV Battery? is 8 parts nickel for every 1 part manganese and 1 part cobalt. Every EV, regardless of the manufacturer, has a battery. Every EV battery needs several special materials to work In other words, the design requires eight times as much properly. nickel as before. the metals issue 8

The rapid transition can be attributed to the high cost in demand from EV production is going to throw cobalt of cobalt. Nickel-heavy batteries are cheaper to produce markets into a deficit as early as next year. because of their lower relative cobalt content.

Even better, nickel-based batteries have higher energy Global Supply Balance of Cobalt density and a longer cycle life than earlier designs. The only downside is that they operate at a slightly lower Million Metric Tons 10 voltage than cobalt-based batteries. 5 If manufacturers continued to favor this new battery 0 design, here’s a closer look at what would happen to the demand for nickel in an EV-only world... -5 -10 EVs Will Cause the Demand -15 2010 2012 2014 2016 2018 2020 for Nickel to Soar Source: CRU = EV Penetration ■ = Nickel Demand 2,200,000 Metric Tons We’re already seeing early signs of a cobalt supply deficit. 100% Cobalt prices have increased more than 83% this year 80% and could easily double or triple from today’s levels 60% before long.

400,000 Metric Tons 40% Not many companies are in a position to ramp up production supplies and profit from the coming nickel 167,000 Metric Tons 20% 70,000 Metric Tons and cobalt deficits... 0% Source: Visual Capitalist But the company I’m about to describe is one of them.

Today, EV battery demand for nickel is 70,000 metric A Nickel and Cobalt Producer... tons, good for 3% of total global demand for nickel. Safe From the Strife of Civil War And that’s with EVs accounting for just 1% of the total Sherritt International Corporation (TSX: S; OTC: automobile market. SHERF) is a nickel and cobalt miner and refiner. It has operations in Cuba and Madagascar, as well as Canada, If EV penetration accounts for 6% of the auto market by where it is headquartered. 2025, nickel demand will grow by 97,000 tons. A major challenge in supplying cobalt to the EV battery But the story gets even more compelling... market is geopolitical risk. If EVs reach a 10% penetration level, nickel demand Sixty-five percent of the world’s cobalt supply comes from could soar to 400,000 metric tons, according to the CEO the Democratic Republic of Congo, or DRC, a country of Glencore. plagued by a seemingly endless civil war.

The result would be a global nickel supply deficit. Sherritt’s cobalt business does not have any exposure But I don’t think we’re far from 10% EV penetration. We to the DRC. Instead, its cobalt comes from mines in could easily hit that level by 2025. Madagascar and Cuba, both of which are far less risky than the DRC. More importantly, we’re much closer to a supply deficit... The company’s Ambatovy mine in Madagascar is a By next year, global demand could completely deplete joint venture with Sumitomo Corporation, a Japanese existing nickel stocks. conglomerate, and Korea Resources Corporation.

Just as it’s doing for nickel markets, the massive increase Ambatovy is the world’s largest operational nickel laterite the metals issue 9 project. It produces first-class nickel and cobalt, and has But it’s about as close to a nickel and cobalt pure mining more than 25 years of mine life remaining. play as we can get. Its shares are extremely cheap and very liquid (1.13 million shares per day) on the Toronto Stock Sherritt has restructured its Ambatovy agreement with Exchange, where it trades under the symbol “S.” Sumitomo. Under the new structure, Sherritt will own 12% of the mine and continue to run the project It also trades on the U.S. OTC pink sheets under the through 2024. symbol “SHERF.” Shares are far less liquid on the OTC than they are in Toronto... Try to buy shares through the More importantly, the restructure allows Sherritt to retire Toronto Stock Exchange if you can. $1.4 billion in debt from its balance sheet. With a market cap of CA$425.04 million, Sherritt is Sherritt’s mining operation in Moa, Cuba, is a 50-50 smaller than most companies I recommend in Oxford joint venture with the Cuban government. It produces Resource Explorer... high-quality nickel and cobalt. But Sherritt’s value proposition is simply too good to Sherritt completes the refining of Moa ore at its Fort pass up. Saskatchewan facility, which it owns in entirety. However, I suggest in the strongest terms that you only But Sherritt’s business doesn’t stop there. The company purchase shares using a limit order... has developed a high-pressure acid leach (HPAL) process to recover cobalt and nickel from nickel laterite deposits. If you don’t, you will likely overpay for your shares. The company has licensed its HPAL process to more than 35 plants worldwide. In summary, I like this Canadian cobalt and nickel producer. With the elimination of most of its debt thanks Since Sherritt uses its own HPAL process, its production to a restructuring of its Ambatovy partnership, it’s well- costs are some of the lowest in the industry. That’s good positioned to thrive from the coming EV storm. for the bottom line. Action to Take: Buy Sherritt International Corporation At about 75,000 metric tons of nickel and 7,700 metric (TSX: S; OTC: SHERF), using a limit order only, at up to tons of cobalt annually, Sherritt is not the world’s largest $1.75. Use a 50% trailing stop to protect your position and producer of nickel and cobalt. your profits. n

The Oxford Club’s 20th Annual Investment U Conference March 15-18, 2018 | Four Seasons | Las Vegas

Are you free March 15-18? If so, please join us at the Four Seasons in Las Vegas for our 20th Annual Investment U Conference! Here’s your chance to connect with like-minded individuals, get inspired by our brilliant guest speakers and learn new investment ideas from our entire team of renowned experts.

Our speakers include Emerging Trends Strategist Matthew Carr, Energy and Infrastructure Strategist David Fessler and Macro Strategist Eric Fry... as well as crowd favorites such as Sprott U.S. Holdings CEO Rick Rule and TradeStops CEO Richard Smith... and our exciting keynote speakers, the senior advisor to MIT’s Digital Currency Initiative, Michael Casey, and former Merrill Lynch stockbroker Mark Jeffries. Together, our speakers will teach you how to master the “art of intelligent speculation” – and they won’t leave any topic un- covered. You’ll learn everything you need to know about cryptocurrency, today’s hottest technology plays, the art of independent investing and so much more. As always, it wouldn’t be an Oxford Club event without a jam-packed schedule of exciting new moneymaking strategies and spectacular receptions, all of which will make this the most rewarding trip you’ll take all year.

Spots are filling up fast, but you still have time. For all the details, simply goclick here. portfolio review 10 Oxford Resource Explorer: PORTFOLIO REVIEW by Matthew Carr and David Fessler

This year, we started a journey together. This was a more than 95% year-over-year increase – not to mention a sequential increase of nearly 6% from My colleague David Fessler and I rebuilt, restructured and the second quarter. All of this means rising revenue for refocused the Oxford Resource Explorer portfolio to tap into RPC, which makes the equipment that makes hydraulic the profit potential of a new Commodity Super Cycle... fracking possible.

And it will be an epic journey as we aim to capitalize on In the first quarter, RPC’s total revenue increased 57.7%... new trends in a rapidly changing world. In the second quarter, it jumped 178%. Dave and I believe in the power of technology. We look at Canopy and Aphria Soar as Canada the effects it’s having on the energy and resources spaces... and we see opportunities. Greenlights Edibles

This is why we’ve made technologies of the Fourth It’s been only three months, but we already have a gain of Industrial Revolution (4IR) a point of focus. more than 100% on our Canopy Growth Corp. position.

Robots, drones and autonomous vehicles are the future On an almost daily basis, the company proves why it’s been of mining, agriculture, and oil and gas exploration. So we my No. 1 marijuana stock to own. added ABB (NYSE: ABB), Raven Industries (Nasdaq: Two recent moves show that it always has its eyes on the RAVN) and Komatsu (OTC: KMTUY) to the portfolio. future...

We recognized new commodity markets, including legal This past month, Corona and Svedka vodka seller marijuana, with Canopy Growth Corp. (OTC: TWMJF; Constellation Brands (NYSE: STZ) announced it was TSX: WEED) and Aphria (OTC: APHQF; TSX: APH). shelling out $191 million for a 9.9% stake in Canopy. And we noted the importance of the U.S. finally exporting liquefied natural gas (LNG) withCheniere (NYSE: LNG). The two companies are teaming up to make cannabis- infused adult beverages. We’re also targeting the miners that produce the raw materials – like lithium and cobalt – that 4IR technologies But the partnership will adhere to one of Canopy’s core rely on. principles: The beverages will be sold only in countries where marijuana is legalized at the federal level. But no matter how flashy the latest technology or how radical the impact an innovation might have on an That means they’re not coming to the U.S. – at least not industry, it’s hard to beat a well-run company... anytime soon.

And we’ve got plenty of those in the portfolio, too. Canada’s Parliament amended Bill C-45, its cannabis legalization bill, to include “edibles containing cannabis” More Rigs, More Money for RPC and “cannabis concentrates.” The government is trying to stamp out an already thriving black market for the It’s hard not to like RPC Inc. (NYSE: RES). The pressure products. pumper company takes care of its equipment – even when it’s cold stacked. But it also makes sure to reactivate idle In turn, our Canadian cannabis positions are surging as equipment to avoid flooding the market or needlessly these Trailblazers already anticipated the change. driving up its own operating costs. Aphria, like Canopy, is positioned to be a first mover in the U.S. production of crude – thanks to shale and hydraulic edibles market. It owns a stake in CannaRoyalty, which has fracking – is at all-time highs. And during the third licensing agreements for edibles in Canada as well as several quarter, the U.S. rig count averaged 942. U.S. states: Arizona, California, Oregon and Washington. portfolio review 11 Pioneer Rises as Crude Bubbles raised its full-year guidance as its business is exceeding expectations. The company also provided 2018 guidance of Political tension in Saudi Arabia caused a bump in our approximately $2 billion consolidated adjusted EBITDA. oil positions. In early November, a rocket was fired from Yemen toward Riyadh, the second such occurrence since Pretium Hits Pay Dirt July. The Saudis declared it an act of aggression at the hands of Iran and blocked all of Yemen’s land, sea and Pretium Resources (NYSE: PVG) reported third quarter air borders. production from its Brucejack Mine.

Days later, Saudi Arabia began its biggest political purge in For the three-month period, it unearthed 82,203 ounces of decades. Crown Prince Mohammed bin Salman arrested gold and 83,233 ounces of silver. Gold recovery averaged several high-level officials in an effort to consolidate power. 96.5%. Pretium reported $70.9 million in revenue while In turn, the price of oil spiked to $56, the highest it’s been all-in sustaining costs were $788 per ounce. This should in two years. come down as gold sales pick up speed. As crude marched higher in the wake of uncertainty in the Kadant and Komatsu Shine Middle East, our shares of Pioneer Natural Resources (NYSE: PXD) marched right along with it. They hit their Our shares of Kadant (NYSE: KAI) and Komatsu are both highest level since August. up more than 30%. In the third quarter, Kadant’s revenue rose 45% to a record $153 million. And it reported record Cheniere Raises Guidance on Rising bookings of $135 million. Asian Demand Kadant is seeing exceptionally strong growth from By the end of the third quarter, Cheniere had delivered China and raised full-year guidance to a range of $509 more than 200 LNG cargoes to 25 of the 40 LNG million to $512 million. That’s a 4% increase from its importing countries in 2017. Revenue for the quarter previous guidance. increased more than 200% to $1.4 billion. Meanwhile, our shares of Komatsu surged to a new Cheniere is benefiting from the fact that the industry 52-week high in November. The heavy equipment underestimated Asian LNG demand. In turn, the company manufacturer’s revenue rose 35% in the quarter. n

From the Desk of David Fessler, Energy and Infrastructure Strategist

At the beginning of November, TransMontaigne On a share basis, net income was $0.56, equal to Partners L.P. (NYSE: TLP) announced its acquisition analyst estimates. of the Martinez and Richmond terminals in California for $275 million. TransCanada now believes the northern leg of the Keystone pipeline, the Keystone XL, has adequate The company will assume ownership from Plains support from crude oil shippers. This will allow Products Terminals LLC at the start of 2018. The TransCanada to proceed with construction. facilities have a combined crude and refined product storage capacity of 5.4 million barrels spread across 64 When completed, the pipeline will transport 830,000 storage tanks. barrels of crude per day, linking Canadian producers to U.S. refiners. Both facilities have extensive connections to both international and domestic crude oil and refined The Trump administration has lifted regulatory product markets. Multiple pipelines supplement truck, roadblocks put in place by the Obama administration. marine and rail takeaway facilities. Presently, TransCanada has its minimum required TransCanada Corporation (NYSE: TRP) announced commitment level of 500,000 barrels per day from $2.59 billion in revenues for the third quarter. shippers, a level it wanted before committing to proceed. portfolios 12

TransCanada will make the final decision on whether to Química y Minera de Chile (NYSE: SQM). proceed sometime in December. The stake is currently owned by Potash Corporation With several new gas pipeline systems under its belt and (NYSE: POT). the prospect of a fully operational Keystone pipeline Last year, Sociedad Química y Minera produced about in its future, TransCanada remains a great cross-border 44 million metric tons of lithium carbonate. It’s going infrastructure play. to continue to be a major producer of lithium for the foreseeable future as lithium demand continues to climb. Several weeks ago, mining giant Rio Tinto (NYSE: RIO) said it was close to a deal to purchase up to 32% If you don’t already own it, now’s a great time to add of our lithium pick-and-shovel play, Sociedad some shares. n

OXFORD RESOURCE EXPLORER PORTFOLIOS

Prices as of 11/21/2017 CURRENT TRAILING TOTAL ISSUE OF REC. REC. PRICE RATING EDITOR PRICE STOP GAINS FOUNDATION PORTFOLIO High-yielding and stable blue chips and MLPs that get resources to consumers and refiners Tutor Perini (NYSE: TPC) Oct-17 $28.65 $24.35 Buy $22.24 -15.0% Matthew Carr Kadant (NYSE: KAI) Jun-17 $76.85 $103.50 Buy $85.20 35.2% Matthew Carr Komatsu (OTC: KMTUY) Jun-17 $24.59 $32.36 Buy $25.52 32.6% Matthew Carr Martin Marietta Materials Inc. (NYSE: MLM) Jan-17 $224.15 $207.44 Buy $180.45 -6.9% David Fessler TransMontaigne Partners L.P. (NYSE: TLP) Aug-16 $41.04 $38.50 Buy $32.13 2.7% David Fessler TransCanada Corporation (NYSE: TRP) May-16 $40.60 $50.26 Buy $35.52 37.2% David Fessler FORTUNE HUNTERS PORTFOLIO Midcap to large cap companies that use new technologies to get resources out of the ground Sherritt International Corporation (TSX: S) Dec-17 New New Buy 50% TS New David Fessler RPC Inc. (NYSE: RES) Aug-17 $21.43 $23.24 Buy $19.59 9.4% Matthew Carr Pioneer Natural Resources (NYSE: PXD) Aug-17 $163.90 $152.23 Hold $122.89 -7.1% Matthew Carr Pretium Resources (NYSE: PVG) May-17 $9.29 $10.98 Buy $9.13 18.2% Matthew Carr TRAILBLAZERS PORTFOLIO Small, innovative companies with high revenue growth rates VanEck Vectors Rare Earth/Strategic Dec-17 New New Buy 25% TS New Matthew Carr Metals ETF (NYSE: REMX) Aphria (OTC: APHQF) Nov-17 $5.97 $6.94 Buy $5.39 16.3% Matthew Carr Cheniere Energy (NYSE: LNG) Sep-17 $42.79 $47.90 Buy $37.82 11.9% Matthew Carr Canopy Growth Corp. (OTC: TWMJF) Sep-17 $7.18 $14.37 Buy $12.00 100.1% Matthew Carr Sociedad Química y Minera de Chile Sep-17 $46.93 $57.33 Buy $46.46 23.0% David Fessler (NYSE: SQM) ABB Ltd. (NYSE: ABB) Jul-17 $25.18 $25.55 Buy $19.71 1.5% Matthew Carr Raven Industries (Nasdaq: RAVN) Jul-17 $33.10 $36.75 Buy $27.56 11.8% Matthew Carr

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