₪ David Pescod's Late Edition September 26, 2007
NEWMONT MINING CORP. (US:NEM) $44.68 -3.01
Newmont Mining used to be considered one of the bestrun and most significant gold miners in the world, but over the last few years its image has been tarnished just a bit.
Today they’ve got big news out and that news probably isn’t all that “new” to gold bugs who have been following the gold scene for years, but it certainly had an effect on the market today. It was a very brief, three paragraph announcement that said Newmont’s costs have risen from about $375 an ounce to $400 an ounce. No big surprise there as in the mining business, costs for anything from steel to labor to you-name-it is going up.
Also, the second part to the little announcement wasn’t a surprise either in that “the gold company said it may have trouble finding new reserves to make up for levels it is mining since its mines are getting older with the bests quality ores already tapped.”
Which again, is no surprise and just tells you what’s going on in the mining scene. The easy gold has been found and mined, and now the game is simply getting tougher and more expensive.
ARC ENERGY TRUST (T-AET.UN) $21.22 +0.07
BONAVISTA ENERGY TRUST (T-BNP.UN) $29.38 +0.05
CRESCENT POINT ENERGY TR. (T-CPG.UN) $20.12 +0.10
He used to be an oil and gas analysts and now he isn’t ... but he prefers we not use his name and he’s suggesting we may be missing the point behind all the news about the takeover of Primewest Energy the other day by TAQA, the Abu Dhabi-based oil and gas company three quarters owned by the National Government there.
He suggests that if you read the news release, the suggestion is that TAQA just may have a lot more to invest in Canada and the guessing game he suggests, is who is next on their hit list?
First of all, he has an interesting comment about TAQA. A Government-created agency that only a few years ago existed solely for the purpose of desalination and providing power in Abu Dhabi. Since then, it’s grown leaps and bounds as you would expect for a company based in that area of the world that suddenly has lots of money to invest. And one would suspect looking to invest safely. Where better than in Canada where politics is relatively sedate and you have that enormous market just down the pipeline.
His big point is that in some of the news releases announced the other day, if they hope to have assets in Canada worth up to a value of $20 billion, so there is potentially $13 billion left to be spent if his understanding is correct.
So far, with the $5 billion purchase of Primewest, the $2 billion purchase of the assets of Pogo/Northrock and the $540 million purchase of Pioneer Canada, they already put together a fairly significant company. And quickly.
He also suggests we take a look at their website, www.taqa.ae and you’ll notice that this is a company that now in quick order operates all around the world from Morocco to India to the Netherlands to having just purchased Talisman’s interests in the North Sea. What is it they’re looking for? Because they are upstream, midstream and downstream and they are everything from gas to oil. With the purchase of Primewest he suggests, they now have lots of gas that they figure they’ve purchased at a pretty good price. So what is it that they are looking for now, he asks? Is it more gas, assuming it’s currently a good price that those with long horizons have hopes for? Or is it some oil for diversity?
He also suggests that the market cap on many oil and gas companies in Canada has suffered along with price of natural gas so some companies could be had relatively cheaply these days.
So we turn the tables and ask him, “well if you were TAQA and looking to diversify around the world and decided you like Canada, what three companies would you be looking at?”
He’s never stuck for words and comes up with the suggestions of three more sizeable companies that would help spend the money quickly. Arc Energy Trust, Bonavista Energy Trust and Crescent Point Energy Trust would be his picks with the suggestion of Crescent Point probably topping the list. Why? Their Bakken play in Saskatchewan is coming up with a lot of the light/sweet crude that comes up with top prices these days and they have huge land holdings yet to be developed on the trend. It’s his number one pick.
For those looking to know a little bit more about Crescent Point just in case he’s thrown a lucky dart, give Jennifer an e-mail at jennifer_lagdamen@canaccord.com for an analyst report on the company by Canaccord’s Bruce McDonald.
BLUE NOTE MINING (V-BN) $0.58 +0.04
BARRICK GOLD (T-ABX) $38.80 -0.41
Just because you find a mine, build a mill and stick it into operation, doesn’t mean that you’re going to have overnight success...there is a key ingredient here that sometimes can create hellish problems. That’s called metallurgy and basically, it’s how much of the zinc, the gold or the sweet stuff in the ore that you can actually recover. Needless to say if you can recover 80% to 90% of what you’re after—that’s good! If you only recover 30%, 40% or 50% - that’s not good!
Blue Note Mining owns the Caribou Mine currently being put into production and this mine did have problems when Breakwater was running it roughly a decade ago and was ultimately shut down. However it was shut down then mainly because of poor commodity prices in general.
Today we check with Mike Judson, CEO and President with Blue Note and he suggests that no, they have not had problems and no they have not hired some sort of metallurgical expert as is being talked about on the “bullboards” and suggests that they are now very close to their targeted rate of recovery.
He mentions that ten years ago, before production ended, Breakwater was hitting recovery rates of almost 80% before low commodity prices killed the operation. Back then they didn’t even have the Isa mills (Isa mills are what one finds in Mount Isa, Australia) and so sometime soon, we would expect notes from Judson about an update on operations and how good things really are going, because lead prices (this is a lead/zinc operation) continue to astonish on their upside.
Meanwhile, as an example of other mines or potential mines having trouble, mega-miner Barrick Gold, is finding big challenges at its Veladero gold mine in Argentina and has offered $10 million to anyone who can figure out the key to unlocking the silver from its ore at that time. Geologists, according to the news release have determined that there are 180 million ounces of silver contained in the gold, but because the silver particles are encapsulated in silica, current processing methods are recovering only 6.7% of the silver. So needless to say, if you can’t recover 180 million ounces of silver in your ongoing production, that’s a lot of money being left on the table. Just in case you figure out a technology, contact Barrick at www.f8films.com/client/unlockthevalue
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