Dear Partners,

For the month of October, Caravel returned +2.51% compared to +1.65% for the benchmark (+2.34% for the S&P 500 & +0.97% for the SPTSX)¹. This brings year-to-date total net return to +26.78% for the fund and +21.32% for the benchmark, respectively.

When you lose, say little. When you win, say less.

This is a phrase I heard countless times growing up. I’ve always found it hard to walk this line in our letters, because their purpose is to communicate our strategies, connect with partners, and to promote our fund. Not an ideal place to be short on words. We want to give insights into how we think and act when managing our partners’ capital alongside our own. Given that 2025 has been a good year for our fund, I have tried to explain our performance objectively and without embellishment. I will attempt to do so again for October, before discussing some of the challenges we have encountered so far in November.

October was another balanced month, with our commodity-linked (+3.7% gross), equity long-short (+1.8% gross), & credit strategies (+0.9% gross) driving gains, while merger arbitrage (-2.6% gross) & shorts/hedges (-0.6% gross) were drags.

One positive standout was Probe Gold (TSX: PRB), a Canadian precious metals developer we have written about in past letters. We first established a position in PRB in May 2024 at $1.32 per share. On October 31^st, PRB announced it had entered into a definitive agreement to be acquired by Fresnillo PLC (LSE: FRES), a £18 Billion international producer, for CAD $ 3.65 per share in cash, or a 39% premium. Here is what we wrote in our August 2024 Letter when another portfolio company, Osisko Mining, was acquired for a healthy premium:

While we don’t buy things on the premise that they will get taken out in the future, we can’t say we were surprised by this outcome. There is a scarcity of large-scale mining assets that are 1) in top tier jurisdictions, 2) are advanced to the point of permitting/development, and 3) exhibit robust project economics in a wide range of possible future commodity price environments. I dare say we own similar names and might be writing similar notes in the future.  

Ok, may have left something to be desired there in the humility department. My point is, our message remains unchanged. We are using the same criteria to identify opportunities in the commodity sector that have served our investors well throughout Caravel’s 9+ year operating history. We hope to bring similar tidings in future letters.

Humble Pie, with a side of Crow

Now for the hard part. Despite the month not being over, I wanted to share some challenges we have experienced so far in November. The calendar reads 11/20 as I write, and we will have more to share in next month’s letter. But, given what I have previously written in these pages, there is something I wanted to address without delay.

Abandoning our CVV Call

In our November 2024 Letter, we highlighted CanAlaska Uranium (TSXV: CVV) as a top pick in the Uranium exploration sector when shares were trading around CAD $0.70. Our thesis seemed to be playing out over 2025, with strong drill results from the company’s Winter 2025 program propelling the stock to +40% gains through the end of October. A strong uranium market undoubtedly helped.

My target for 2025 was $1.40 per share. The stock spent parts of September and early October between $1.10 and $1.25, despite not having released results from their Summer 2025 drill program, which we viewed as the key driver of the next leg of performance in the stock. We used this opportunity to reduce exposure given how close the shares were to our estimate of fair value, combined with the pending drill results which we viewed as a risk. This proved to be wise.

In October the company raised $15 million at $1.00 per share, when the drill results still had not been released. Despite our reservations, we used this as an opportunity to repurchase shares 15-20% below where we had recently sold them. This proved to be unwise.

CVV closed the deal on 10/30, after telling us that they had no drill results to disclose. On 11/06, they released drill results that were extremely underwhelming to market expectations. Shares are currently trading at $0.58, or 42% below the issue price from three weeks ago.

I hate staying at the table long enough to realize I was the mark all along. The only thing worse, is sticking around when your only strategy to make your money back is to clasp your hands and pray. When the deck is stacked against you, take your chips and leave. We have exited this position with realized gains and losses roughly canceling each other out over our 18-month hold period. In this instance, I let greed win the tug of war against fear, an error compounded by my poor judgment of character. Our exit of the position at a loss cost the fund approximately 1.5% in November. We have learned our lesson here and adjusted our new-issue underwriting policies going forward to prevent failures of this nature from reoccurring.

In the interest of brevity, I will leave it there for now. Of the many great thinkers and investors I have read in my career, almost all say that they learned more from their losses than from their wins. We are humbled, but not the least bit discouraged by this experience – if anything it has lit a fire under us to come back better than before.

If you have any questions about our fund, strategies, or just want to catch up, we are available via phone or email to our partners at any time.

We thank you for your continued support,

Jack and Glen

Managing Partners, Caravel Capital

 _{1 Benchmark = 50/50 weighting of S&P 500 & SPTSX Composite Indices}