₪ David Pescod's Late Edition 6/09-6/13/08
To receive the Late Edition and be on our daily circulation simply e-mail Debbie at Debbie_lewis@canaccord.com and give your address, phone number and e-mail and we’ll have you on the list tonight.
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David Pescod's Late Edition June 9, 2008
CRYSTALLEX INTL. (T-KRY) $0.78 -0.01
TRANSGLOBE ENERGY (T-TGL) $5.16 -0.10
It’s called “country risk” and it’s something everyone
should be aware of these days where people are investing
all over the world. We mentioned Crystallex from time to
time as a stock we were avoiding, not because we didn’t
like the Company and not because we didn’t like management
and not because we didn’t like their project which is
probably one of the world’s biggest undeveloped gold
mines. It had everything to do with the country it was in
and that is Venezuela, run by Hugo Chavez, who currently
runs one of the more corrupt countries on the face of the
earth with one of the highest inflation rates out there.
Last week according to Bloomberg’s, there was a report
that Venezuela may make all gold mining “State-
Owned”. The suggestion was that Venezuela wanted to
eliminate privately owned gold mining and have all extraction
of the metals contribute to the Country’s reserves,
according to the national newspaper, El Nacional.
Another country we totally avoided investing in was
Russia and we notice in the May 10th issue of “The
Economist” why it might well be a good country to avoid,
despite the fact that Russia has lots of oil and with oil at
$130 these days, it should be a good business to be making
money in. Instead, the Economist reports, “The government
levies an export duty of 65% at prices over $25 a
barrel. Add to that various corporate, payroll and production
taxes, oilmen complain, and the state creams off as
much as 92% of profits. Executives at TNK-BP have argued
that rising costs across the oil industry will make
many investments in Russia unprofitable unless the tax
regime is changed. As it is, TNK-BP accounts for a fifth of
BP's production, but only a tenth of its profits.”
The concern is, is there another country to be listed on
the avoid list. We used to follow TransGlobe Energy because
of Bill Powers, the former editor of an interesting
newsletter and currently a hedge fund manager who had
big hopes for TransGlobe that have never actually developed.
What may be the problem with TransGlobe Energy is
the country its involved in, which is Yemen. Once again in
the Economist of May 10th, they take a look at Yemen and
report in an article titled “Anxious Times….Violence in a
notoriously rugged country has worsened.”
They suggest, “Yemen seems in danger of falling into
Somalia's lap. Not physically, by toppling across the Gulf
of Aden that separates the countries...but because of
100,000-plus destitute Somali refugees may shift its centre
of gravity…In the past few years, Yemen has dropped to
153rd among the 177 countries listed in the UN's humandevelopment
index...More than a fifth of its 22m people are
malnourished...Yemen imports 75% of its food, but even
so it is using up scarce water supplies so fast that the
aquifers most people rely on may dry up...Yet other security
problems are worse...Unrest is rising in the far south,
too, where resentment simmers over alleged discrimination
since formerly separate South Yemen (once the British
colony of Aden plus an outlying British protectorate of
emirates) united with the more populous north in 1990. Big
riots hit the city of Aden last month.”
An interesting article in another country that goes on
our “Avoid Investing In” list.
TROON VENTURES (V-TVN) $1.20 n/c
BEAR CREEK MINING (V-BCM) $6.32 -0.07
PETROLIFERA PETROLEUM (T-PDP) $9.39 -0.04
We don’t know anything about Troon Ventures, but it’s
hard to avoid reading the press release that went out a
couple of days ago. First of all, worth noting is that most
of the junior mining stocks these days are in the tank.
Their ability to raise money is feeble and the interest is
waning.
No one know what’s going to happen to gold next, but
it certainly doesn’t have the lustre of what it was at $1000
an ounce and now with base metals weakening as well,
one worries about the entire sector going from bad to
worse. And of course there is always the big problem
that there are so many thousands of junior mining companies
out there and the brokers are delivering a handful
more every day.
But something that can make a person take note is
just who is joining a company on their board of directors.
Back to Troon Ventures, where Mike Kenyon has joined
the board. He just happened to have been one of the
founders of Cumberland; which was bought out by Agnico
Eagle, the President and founder of Canico; which
was bought out by CVRD and Sutton Resources which
was bought out many years later by Barrick. Sounds like
a pretty impressive resume, doesn’t it? So why would he
be joining Troon Ventures? Also joining Troon Ventures
was Jonathan Rubenstein who was Vice President of
Canico and he was also with Sutton Resources.
And then there is Catherine McLeod-Seltzer who has
also joined the board.
She just happens to be Chairman of Bear Creek Mining
one of the successful mining stories of the day. She was
however, best-known for her success at Arequipa, which
became one of the huge success stories of the day.
While Troon Ventures, if you are simply looking at
names, happens to be run by Bruce McLeod, the brother
of Catherine McLeod-Seltzer and as we’ve talked about
frequently, at the McLeod supper table with mining magnate
Don McLeod, rocks and mining was the story to be
discussed every supper time. Interesting to see these
new names added to the team at Troon Ventures.
Meanwhile, there is another name we see added to the
board of a company and that’s Petrolifera Petroleum. Petrolifera
has come up with some very interesting results in
Argentina, which is the good news. The bad news is that
it’s in Argentina, which at the start of the 20th Century
was one of the richest countries in Latin America.
Through mismanagement ever since, it’s stumbled and
stumbled further and one wonders if current management
of the country is just going from bad to worse.
Currently oil prices are regulated at roughly $42 a barrel.
In a country that should be booming because of their
farming industry, but isn’t, because they’ve tacked on absolutely
enormous export taxes and crippling the farming
industry. It doesn’t make any sense, but there you go.
In the meantime, Andy Gustajtis, a person who we
highly respect has been added to the board of Petrolifera,
a company that has had some success in Argentina and
would have had a lot more if they had international oil
prices. What gets very interesting though is that Petrolifera
will soon start drilling some high profile/high risk/high
reward plays in Colombia followed in the first quarter of
next year by some absolutely enormous high risk/high
reward plays in Peru.
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David Pescod's Late Edition June 10, 2008
STERLING RESOURCES (V-SLG) $2.98 -0.22
BRIDGE RESOURCES (V-BUK) $1.39 -0.06
OILEXCO INC. (T-OIL) $17.23 -0.47
ITHACA ENERGY (V-IAE) $2.32 +0.02
We had been mentioning that some of the hot stories in
oil and gas after the huge market correction we’ve experienced
the last few months have given us new areas of
Canada to get excited about and other areas of the world
that have lost their lustre. Suddenly, it’s shale in Quebec
and Bakken in Saskatchewan and shale gas in northeaster
B.C. that are attracting the attention.
One of the areas of the world that definitely seems to
be losing interest is the North Sea for the simple reason
that many of the junior Canadians operating there, other
than Oilexco, didn’t have access to rigs and equipment to
keep their stories lively. It seems they would drill a well
and then it was another year or so before they had anything
else to report. And that puts people to sleep as well
as markets.
Oh well, things can definitely change on that front
though, and we’ve noticed some very aggressive statements
by Josef Schachter has rekindled interest in Sterling
Resources. Over the next six to eight months, they have a
series of four significant wells, any one of which could
make a huge difference to the stock. And for any player in
the North Sea, his comments on Sterling are simply mustreading!
(If you haven’t seen his latest issue, make sure
you e-mail Debbie at debbie_lewis@canaccord.com).
Meanwhile, Oilexco continues to have access to those
important rigs and material and Fred Kozak has been one
of its biggest fans.
But also today has been some decent news on Bridge
Resources reporting that their Durango development well
has come up with 42 million cubic feet a day of production.
While it was a development well and results were
expected to be positive, that was on the high side for production
and they also had 1300 barrels a day in condensate.
Too bad this company has almost 160 million shares
outstanding, because they have a very big exploration
well, the Piper, to be drilled in the next few months.
Meanwhile, Fred Kozak likes Oilexco a bunch and is
still keen on Ithaca Energy, although its stock has been one
of the North Sea disappointments over the last while.
Kozak has a target on Ithaca of $4.75 and today he
writes, “Our target price of C$4.75 is based on a sum-ofthe-
parts valuation for Ithaca. We use our estimate of
NAV for the company of C$3.99/fully diluted share (3P
reserves), plus a portion of the value attributable to the
potential exploration upside.”
Regarding the Next Catalyst he writes, “The next catalyst
should be the announcement of the closing of the
Beatrice acquisition which has been expected to occur in
July, but may be delayed further in Q3/08. On closing,
Ithaca will have its first UK North Sea production of approximately
1,800 bbl/d. This puts Ithaca into the status
of operator and provides the infrastructure for the company
to tie-in the Jacky and possibly the Polly discoveries
into the nearby the Beatrice production platforms. In
addition, the drilling results from the latest appraisal well
at Athena could also be a short-term catalyst for the
stock. Results of the well should be available in early
Q3/08,”
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David Pescod's Late Edition June 11, 2008
RAYTEC METALS (V-RAY) $1.82 +0.40
ANGLO POTASH (V-AGP) $8.10 +0.01
The junior mining market these days is an absolute mess.
First of all, the gold and precious metals sector hasn’t recovered
since when gold hit $1000 an ounce and many juniors these days
in the sector aren’t having any joy at all. To make matters worse,
the base metal sector is also weakening rather significantly with
concerns about the global economy potentially weakening because
of high crude oil prices.
The whole sector is in a mess because their ability to finance
and keep going is getting tougher and tougher. One of the other
big problems of course is that there are probably a couple of
thousand too many junior mining stories to start off with and
every day it seems the brokers give us a few more. Oh well,
there always seems to be one little sector or niche of the mining
market that is still able to make a person a dollar if he’s smart
enough and Eric and Dave Coffin of the Hard Rock Analyst have
found that niche...It’s called potash and they’ve had some beautiful
scores with their Hard Rock Analyst in the last couple of
months.
Yesterday, we saw a huge move in Raytec Metals and it was
probably their issue from Monday night that gave it the market
attention. They write, “The reason for today’s note on Raytec is
a 43-101 report the company released the results of last night.
The report’s authors estimated an Inferred tonnage figure based
on extrapolation from two potash holes drilled in the 1960’s.
These holes intersected the Patience Lake and Belle Plain potash
members. Potash is an evaporate which is found interspersed
with other salts in beds that formed when a great inland
sea evaporated. The two holes on Raytec’s project have grades
and thicknesses comparable to operating mines in the region.”
“The report authors estimate that KP441 contained total Indicate
resource of 148 million tonnes grading 23.44% K2O and 229
million tonnes of Inferred resources grading 20.4% K2O. Using
industry standard cut backs to account for solubility etc yields a
net recoverable Indicated and Inferred total of roughly 29 million
tonnes of K2O. Impurities and grades of Carnalite, a magnesium
salt that hampers in situ mining came in at 0.25%, one quarter of
the level that could make the project a non starter.”
“Obviously, based on current selling prices of $600 a tonne
an inferred resource of 29 million tonnes has great in situ value.
While impressive, it is still probably a bit on the small side for a
mine development but the potash beds remain open in two directions
and there are likely to be other areas on the Application.
RAY plans to undertake 2D and 3D seismic to better define the
beds then follow that up with further drilling.”
ZINC
BREAKWATER RESOURCES (T-BWR) $0.48 -0.03
BLUE NOTE MINING (T-BN) $0.165 n/c
COPPER
Don Coxe is building a huge following through his Basic
Points and other writings that he does that has shown
that his crystal ball is better than most.
His Belief in the commodity bull run has been well
documented and while there are many now riding this
train, he was the engineer that first postulated the views of
bullish commodity, energy and agricultural prices.
His latest issue might however cause a bit of concern…
He writes, “Food and fuel inflation rates continue to
climb...at a time of negative real yields across the yield
curve from t-bills to 10 years...the last time that happened
was during the 1970's. As Ben Bernanke keeps riding off
to rescue failing banks he must continue to reassure investors
and politicians that the stagflationary 1970's aren't
coming back.
Coxe continues, "Today, the big inflation stories come
from commodities, while the big deflation stories are
about falling asset prices, homes, commercial real estate,
structured debt products, and bank stock prices.
When such mighty macro moves collide, the result
might be stagflationary recession...This month we look at
the economic future by looking at the contrast between
the booming commodity futures and curves and the bumbling
bank and housing sector...particularly in the U.S."
Then Coxe gets to the meat of the matter "We are fine
tuning our recommended weightings....we believe that
soaring food and fuel prices threaten economic
growth"...and is reducing his exposure to base metals and
steel, and using the balance to increase allotments to energy
and agricultural commodities...precious metal allocation
remains the same.
Of interest to us is that Coxe has become so popular
and highly visible over the past five years that when he
announced that he was going to run a fund, the Coxe
Commodity Strategy Fund, that the brokers were inundated
with Canucks throwing money at him...almost
300 million dollars in no time flat.
Which is the good news. It's quite different being a
great deep thinker, and a good money manager, so it
will be interesting to see where he sticks his money,
which he says should take about four months.
Concerns about his idea about reducing base metal
exposure...well take a look at the charts on two base
metal stories and it becomes obvious they should have
been sold a long time ago...and if Coxe’s concern
about a recession become a reality, it will get worse.
The blue chippier base metal stocks don't look quite
this bad, but there appears to be a trend.
And about high profile money managers...take a
look at the Sprott Gold and Precious Minerals Fund run
by high profile John Embry, or Sentry Select Primary
Metals Fund run by Kevin MacLean...It's not that easy.
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David Pescod's Late Edition June 12, 2008
BNP RESOURCES (V-BNX.A) $1.50 -0.01
One thing that is definitely starting to affect commodity
prices in North America is the weather. Of course weather is
very important to many commodities, but so far this early summer,
it’s been more dramatic than often over the last few years.
The extreme heat over much of the American Eastern Seaboard
has had a lot of people turning on their air-conditioners a lot
earlier than expected, which of course has helped natural gas
prices stay near recent highs.
At the same time is the American mid-west (which is the
bread basket) it’s a different story...it’s rain, and lots of it. This
is a time of year you usually expect to see corn 12 inches high
and growing. Instead, there are many fields that haven’t even
been planted yet and the same goes for many other crops as
well. Many of the cereals that had huge runs over the last year
and then big corrections, are suddenly starting to perk up
again.
Meanwhile, all these rains are also affecting much of western
Canada and it is affecting the oil and gas patch as well. If
you’ve got an awful lot of rain and much of western Canada has
had that as well, moving the heavy equipment to drill sites has
been next to impossible, so a lot of the drilling is way behind
schedule.
One of the juniors that the high risk players should be following
these days (although so few have hit, it’s probably safer
to watch than be involved) is BNP Resources and that’s because
of their Jensen play. Run by some former CNQ executives, BNP
doesn’t have much in the way of production—it’s at a mere 300
barrels a day and considering they’ve got about 24 million
shares outstanding, that’s pricy. But Jensen is the key to this
company because if it misses, you expect the stock to be half
current prices and if it hits, you would expect multiples of current
prices.
Jensen is a play just on the Alberta side of the Montana border
and on the southern side of the border, they have look-alike
plays that have been producing oil for almost 40 years.
And there are some pretty sizeable pools. It’s expected that six
wells will either prove or disprove the Jensen play over the next
four to six months. So it definitely bears watching.
This is the kind of pool that is not the biggest in the line of
productivity, but it’s one of those just produces, produces and
produces. As we’ve said, on the southern side, they have been
pumping for as much as 40 years. The latest we hear is that
because of the delays due to weather, they expect to be licensed
and drilling their first of the six-well program in early
July.
OILEXCO INC. (T-OIL) $17.97 +0.41
ANTRIM ENERGY (T-AEN) $3.55 +0.13
We’ve mentioned a couple of times in the last few issues
that there’s been a change in the oil and gas patch about what
is hot and what is not. Definitely what’s not is many of the
junior Canadians in the North Sea area because people have
learned just how tough it is to get equipment for drilling and
getting work done in the area, but for the handful of companies
that have access to the equipment such as Oilexco, it may be a
bonanza.
For the little guys that drill something and then seem to
have to wait six or eight months before anything else gets
done, people are starting to lose their patience.
Take one look at the chart of Antrim Energy and you are wondering
if they are having a two-for-one sale, or whether oil has
dropped from $100 down to $60, or hey—what gives?
The Company has just given an update on some of their
other assets which happen to be in Argentina, which isn’t the
greatest place to have oil and gas assets. That country has
been seriously poorly run over much of the last 100 years,
continues to use economic policies that just makes you
scratch your head. One of the current ones is that they have
decided to limit their oil producers to $42 a barrel, which doesn’t
give you the incentive that many other oil companies in
different countries receive.
Today, Canaccord’s Fred Kozak gives an update on the
Company and he writes, “Our target price of C$8.00 is based
on our risked sum-of-the-parts Net Asset Value (NAV) estimate
of the company’s exploration and development assets in the
UK North Sea and Argentina, as well as the company’s proven
and probable reserves base.” Then he writes for the “Next
Catalyst,” “The company continues to move its UK North Sea
activities forward with its Field Development Plan for Causeway
being the next milestone in that project. In addition, the
company’s contracted drilling rig will arrive towards the end of
June to commence a four-well program. Further drilling will be
conducted at Causeway as well as a second delineation well to
be drilled on the Fyne structure to prove commerciality.”
As far as his comments on Argentina he writes,
“Commodity price changes in natural gas in South America
could also impact Antrim owing to the gas-weighted nature of
its production in Argentina.”
There are those that hope that natural gas and oil prices in
Argentina just might be raised.
For those who would like a copy of Kozak’s report, just email
Debbie at debbie_lewis@canaccord.com., but if you are
following Antrim the more important point is that it looks like
later this month they will finally be back at work in the North
Sea.
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David Pescod's Late Edition June 13, 2008
SHANGHAI COMPOSITE INDEX:
HO CHI MINH STOCK INDEX:
Bangkok: We are just finishing a three and a half week
trip to South East Asia, a trip we had promised ourselves to
take a long time ago, to see first hand what everyone from
Don Coxe to Jeff Rubin to who-ever talks about ... the booming
economies in this area of the world. And it has been an
eye-opener. I guess coming from North America one is
used to thinking we come from the centre of the universe,
and that we have the best of everything, and are so far
ahead of everyone else....dead wrong.
Our first stop was Bangkok, and what an eye-opener. If
you judge the level of societies by their airports, this was
first world...huge, ultra-modern. efficient, and all the officials
so polite and helpful....and did I mention huge? The
city of Bangkok has 8 million people, so you might have
expected an impressive structure, but this was beyond
that...judging by airports, this was first world, Toronto’s
Pearson would be decidedly second world , and the mess
in London they call Heathrow, decidedly fifth world ...
The next surprise…if this is Asia, what are all the Caucasians
doing here? This airport is half full of them. Ask
enough people and you find out much of Europe is over
here, and enough Scandinavians to make one wonder who
is manning all those Volvo plants. A generation ago, young
folks after college wanted to travel and see Europe … Now
Europe is way too expensive, plus old news, and they head
here.
There are tons of young Canadians here taking advantage
of some of the world’s best beaches, and cheapest
living arrangements, and parties on some beaches for the
full moon parties that can see 10,000 kids partying on the
beach all night long.
As for Bangkok, it is booming. Heavy traffic, new subways,
rivers full of barges and commerce and tourists from
everywhere. The markets are lively and packed, the hotels
busy, the well known tailors packing in those looking for a
deal, and those looking for a night life, there is none better,
with a rather large offering of activities on hand. We couldn't
or shouldn’t sample them all, but an evening supper on
the 62nd floor of a building in an open air restaurant with
one of the best views in the world is something I'll never
forget...and how many building violations it probably would
have posed if in North America. After a few days here one
wondered why there weren’t more North Americans here.
Vietnam was very different, and a sight for any poor Alberta
oilman worried about oil prices plummeting ..... millions
upon millions of motor scooters, as the country is economically
behind Thailand, but more productive than China in
one big area.......children. Vietnam never had the one child
policy like a very crowded China, so they make kids like
nobody’s business. Their population is now hitting 85 million,
meaning every year another 1.5 million people hit the
job market, and that has kept
wages low.
Just outside Hanoi we see an absolutely enormous shoe
factory at shift change, with thousands of ladies on their
scooters off to work. They make about $150 to $200 a
month.....and the factory is owned by Chinese interests, that
locate there because of the low wage rates....interesting
world isn't it?
Outside daNang is an enormous boot factory, owned by
a German firm and early every morning thousands of
women are off to the boot factory, the men off to go fishing
but along the waterfront you can see the future starting to
appear. This is the old area referred to as China Beach and
the beautiful beach just goes and goes.
In a few places some 4 and 5 star resorts are going up,
but so far most of the tourist are from Korea, Europe (the
old French influence) and Japan. That is now changing
quickly as a Chinese middle and upper income class now
has the money and desire and are starting to head to this
area in huge numbers, numbers that are expected
To only get much, much, bigger.
Yes Vietnam is still a communist country, but folks for
many natives to survive it has become, in small ways, one
of the most capitalist countries I've ever experienced ... more
peddlers and market folk know English than you would
have thought possible, and to do a deal Canadian currency
is accepted here by the folks in the market who on any
given day, probably know where any one of 20 currencies
are trading. And that rather poor looking lady at the bread
stall, looking like she hasn't much in the world, still probably
has a cell phone.
Meanwhile our guide discovers that we are a stockbroker,
and is immediately upset. We discover that the Vietnamese
market is down almost 60% this year, the worst in
the world (and as always - it's our fault.) After a great year
last year, the Vietnamese market and the currency - the
dong - are being battered big time, a problem being caused
by being a big importer of both oil, gas and fertilizer and
being in a credit position that's not that good.
Interestingly, while North Vietnam might have won the
war, it's the south that is booming. Whether you call it Ho
Chi Minh City or Saigon, it is thriving. Lots of work, tons of
tourists with lots to do. Communist Vietnam decided in the
mid 80's they had to open the country to foreign investment
and open their control system as well. Our guide tells us the
common fear of most of his countrymen is what happens if
someone in the family needs a doctor ... how do we pay the
bills? Sounds like a problem felt around the world.
? David Pescod's Late Edition 6/09-6/13/08
To receive the Late Edition and be on our daily circulation simply e-mail Debbie at Debbie_lewis@canaccord.com and give your address, phone number and e-mail and we’ll have you on the list tonight.
_____________________________________________________________________________________________________________________________________
David Pescod's Late Edition June 9, 2008
CRYSTALLEX INTL. (T-KRY) $0.78 -0.01
TRANSGLOBE ENERGY (T-TGL) $5.16 -0.10
It’s called “country risk” and it’s something everyone
should be aware of these days where people are investing
all over the world. We mentioned Crystallex from time to
time as a stock we were avoiding, not because we didn’t
like the Company and not because we didn’t like management
and not because we didn’t like their project which is
probably one of the world’s biggest undeveloped gold
mines. It had everything to do with the country it was in
and that is Venezuela, run by Hugo Chavez, who currently
runs one of the more corrupt countries on the face of the
earth with one of the highest inflation rates out there.
Last week according to Bloomberg’s, there was a report
that Venezuela may make all gold mining “State-
Owned”. The suggestion was that Venezuela wanted to
eliminate privately owned gold mining and have all extraction
of the metals contribute to the Country’s reserves,
according to the national newspaper, El Nacional.
Another country we totally avoided investing in was
Russia and we notice in the May 10th issue of “The
Economist” why it might well be a good country to avoid,
despite the fact that Russia has lots of oil and with oil at
$130 these days, it should be a good business to be making
money in. Instead, the Economist reports, “The government
levies an export duty of 65% at prices over $25 a
barrel. Add to that various corporate, payroll and production
taxes, oilmen complain, and the state creams off as
much as 92% of profits. Executives at TNK-BP have argued
that rising costs across the oil industry will make
many investments in Russia unprofitable unless the tax
regime is changed. As it is, TNK-BP accounts for a fifth of
BP's production, but only a tenth of its profits.”
The concern is, is there another country to be listed on
the avoid list. We used to follow TransGlobe Energy because
of Bill Powers, the former editor of an interesting
newsletter and currently a hedge fund manager who had
big hopes for TransGlobe that have never actually developed.
What may be the problem with TransGlobe Energy is
the country its involved in, which is Yemen. Once again in
the Economist of May 10th, they take a look at Yemen and
report in an article titled “Anxious Times….Violence in a
notoriously rugged country has worsened.”
They suggest, “Yemen seems in danger of falling into
Somalia's lap. Not physically, by toppling across the Gulf
of Aden that separates the countries...but because of
100,000-plus destitute Somali refugees may shift its centre
of gravity…In the past few years, Yemen has dropped to
153rd among the 177 countries listed in the UN's humandevelopment
index...More than a fifth of its 22m people are
malnourished...Yemen imports 75% of its food, but even
so it is using up scarce water supplies so fast that the
aquifers most people rely on may dry up...Yet other security
problems are worse...Unrest is rising in the far south,
too, where resentment simmers over alleged discrimination
since formerly separate South Yemen (once the British
colony of Aden plus an outlying British protectorate of
emirates) united with the more populous north in 1990. Big
riots hit the city of Aden last month.”
An interesting article in another country that goes on
our “Avoid Investing In” list.
TROON VENTURES (V-TVN) $1.20 n/c
BEAR CREEK MINING (V-BCM) $6.32 -0.07
PETROLIFERA PETROLEUM (T-PDP) $9.39 -0.04
We don’t know anything about Troon Ventures, but it’s
hard to avoid reading the press release that went out a
couple of days ago. First of all, worth noting is that most
of the junior mining stocks these days are in the tank.
Their ability to raise money is feeble and the interest is
waning.
No one know what’s going to happen to gold next, but
it certainly doesn’t have the lustre of what it was at $1000
an ounce and now with base metals weakening as well,
one worries about the entire sector going from bad to
worse. And of course there is always the big problem
that there are so many thousands of junior mining companies
out there and the brokers are delivering a handful
more every day.
But something that can make a person take note is
just who is joining a company on their board of directors.
Back to Troon Ventures, where Mike Kenyon has joined
the board. He just happened to have been one of the
founders of Cumberland; which was bought out by Agnico
Eagle, the President and founder of Canico; which
was bought out by CVRD and Sutton Resources which
was bought out many years later by Barrick. Sounds like
a pretty impressive resume, doesn’t it? So why would he
be joining Troon Ventures? Also joining Troon Ventures
was Jonathan Rubenstein who was Vice President of
Canico and he was also with Sutton Resources.
And then there is Catherine McLeod-Seltzer who has
also joined the board.
She just happens to be Chairman of Bear Creek Mining
one of the successful mining stories of the day. She was
however, best-known for her success at Arequipa, which
became one of the huge success stories of the day.
While Troon Ventures, if you are simply looking at
names, happens to be run by Bruce McLeod, the brother
of Catherine McLeod-Seltzer and as we’ve talked about
frequently, at the McLeod supper table with mining magnate
Don McLeod, rocks and mining was the story to be
discussed every supper time. Interesting to see these
new names added to the team at Troon Ventures.
Meanwhile, there is another name we see added to the
board of a company and that’s Petrolifera Petroleum. Petrolifera
has come up with some very interesting results in
Argentina, which is the good news. The bad news is that
it’s in Argentina, which at the start of the 20th Century
was one of the richest countries in Latin America.
Through mismanagement ever since, it’s stumbled and
stumbled further and one wonders if current management
of the country is just going from bad to worse.
Currently oil prices are regulated at roughly $42 a barrel.
In a country that should be booming because of their
farming industry, but isn’t, because they’ve tacked on absolutely
enormous export taxes and crippling the farming
industry. It doesn’t make any sense, but there you go.
In the meantime, Andy Gustajtis, a person who we
highly respect has been added to the board of Petrolifera,
a company that has had some success in Argentina and
would have had a lot more if they had international oil
prices. What gets very interesting though is that Petrolifera
will soon start drilling some high profile/high risk/high
reward plays in Colombia followed in the first quarter of
next year by some absolutely enormous high risk/high
reward plays in Peru.
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David Pescod's Late Edition June 10, 2008
STERLING RESOURCES (V-SLG) $2.98 -0.22
BRIDGE RESOURCES (V-BUK) $1.39 -0.06
OILEXCO INC. (T-OIL) $17.23 -0.47
ITHACA ENERGY (V-IAE) $2.32 +0.02
We had been mentioning that some of the hot stories in
oil and gas after the huge market correction we’ve experienced
the last few months have given us new areas of
Canada to get excited about and other areas of the world
that have lost their lustre. Suddenly, it’s shale in Quebec
and Bakken in Saskatchewan and shale gas in northeaster
B.C. that are attracting the attention.
One of the areas of the world that definitely seems to
be losing interest is the North Sea for the simple reason
that many of the junior Canadians operating there, other
than Oilexco, didn’t have access to rigs and equipment to
keep their stories lively. It seems they would drill a well
and then it was another year or so before they had anything
else to report. And that puts people to sleep as well
as markets.
Oh well, things can definitely change on that front
though, and we’ve noticed some very aggressive statements
by Josef Schachter has rekindled interest in Sterling
Resources. Over the next six to eight months, they have a
series of four significant wells, any one of which could
make a huge difference to the stock. And for any player in
the North Sea, his comments on Sterling are simply mustreading!
(If you haven’t seen his latest issue, make sure
you e-mail Debbie at debbie_lewis@canaccord.com).
Meanwhile, Oilexco continues to have access to those
important rigs and material and Fred Kozak has been one
of its biggest fans.
But also today has been some decent news on Bridge
Resources reporting that their Durango development well
has come up with 42 million cubic feet a day of production.
While it was a development well and results were
expected to be positive, that was on the high side for production
and they also had 1300 barrels a day in condensate.
Too bad this company has almost 160 million shares
outstanding, because they have a very big exploration
well, the Piper, to be drilled in the next few months.
Meanwhile, Fred Kozak likes Oilexco a bunch and is
still keen on Ithaca Energy, although its stock has been one
of the North Sea disappointments over the last while.
Kozak has a target on Ithaca of $4.75 and today he
writes, “Our target price of C$4.75 is based on a sum-ofthe-
parts valuation for Ithaca. We use our estimate of
NAV for the company of C$3.99/fully diluted share (3P
reserves), plus a portion of the value attributable to the
potential exploration upside.”
Regarding the Next Catalyst he writes, “The next catalyst
should be the announcement of the closing of the
Beatrice acquisition which has been expected to occur in
July, but may be delayed further in Q3/08. On closing,
Ithaca will have its first UK North Sea production of approximately
1,800 bbl/d. This puts Ithaca into the status
of operator and provides the infrastructure for the company
to tie-in the Jacky and possibly the Polly discoveries
into the nearby the Beatrice production platforms. In
addition, the drilling results from the latest appraisal well
at Athena could also be a short-term catalyst for the
stock. Results of the well should be available in early
Q3/08,”
_____________________________________________________________________________________________________________________________________
David Pescod's Late Edition June 11, 2008
RAYTEC METALS (V-RAY) $1.82 +0.40
ANGLO POTASH (V-AGP) $8.10 +0.01
The junior mining market these days is an absolute mess.
First of all, the gold and precious metals sector hasn’t recovered
since when gold hit $1000 an ounce and many juniors these days
in the sector aren’t having any joy at all. To make matters worse,
the base metal sector is also weakening rather significantly with
concerns about the global economy potentially weakening because
of high crude oil prices.
The whole sector is in a mess because their ability to finance
and keep going is getting tougher and tougher. One of the other
big problems of course is that there are probably a couple of
thousand too many junior mining stories to start off with and
every day it seems the brokers give us a few more. Oh well,
there always seems to be one little sector or niche of the mining
market that is still able to make a person a dollar if he’s smart
enough and Eric and Dave Coffin of the Hard Rock Analyst have
found that niche...It’s called potash and they’ve had some beautiful
scores with their Hard Rock Analyst in the last couple of
months.
Yesterday, we saw a huge move in Raytec Metals and it was
probably their issue from Monday night that gave it the market
attention. They write, “The reason for today’s note on Raytec is
a 43-101 report the company released the results of last night.
The report’s authors estimated an Inferred tonnage figure based
on extrapolation from two potash holes drilled in the 1960’s.
These holes intersected the Patience Lake and Belle Plain potash
members. Potash is an evaporate which is found interspersed
with other salts in beds that formed when a great inland
sea evaporated. The two holes on Raytec’s project have grades
and thicknesses comparable to operating mines in the region.”
“The report authors estimate that KP441 contained total Indicate
resource of 148 million tonnes grading 23.44% K2O and 229
million tonnes of Inferred resources grading 20.4% K2O. Using
industry standard cut backs to account for solubility etc yields a
net recoverable Indicated and Inferred total of roughly 29 million
tonnes of K2O. Impurities and grades of Carnalite, a magnesium
salt that hampers in situ mining came in at 0.25%, one quarter of
the level that could make the project a non starter.”
“Obviously, based on current selling prices of $600 a tonne
an inferred resource of 29 million tonnes has great in situ value.
While impressive, it is still probably a bit on the small side for a
mine development but the potash beds remain open in two directions
and there are likely to be other areas on the Application.
RAY plans to undertake 2D and 3D seismic to better define the
beds then follow that up with further drilling.”
ZINC
BREAKWATER RESOURCES (T-BWR) $0.48 -0.03
BLUE NOTE MINING (T-BN) $0.165 n/c
COPPER
Don Coxe is building a huge following through his Basic
Points and other writings that he does that has shown
that his crystal ball is better than most.
His Belief in the commodity bull run has been well
documented and while there are many now riding this
train, he was the engineer that first postulated the views of
bullish commodity, energy and agricultural prices.
His latest issue might however cause a bit of concern…
He writes, “Food and fuel inflation rates continue to
climb...at a time of negative real yields across the yield
curve from t-bills to 10 years...the last time that happened
was during the 1970's. As Ben Bernanke keeps riding off
to rescue failing banks he must continue to reassure investors
and politicians that the stagflationary 1970's aren't
coming back.
Coxe continues, "Today, the big inflation stories come
from commodities, while the big deflation stories are
about falling asset prices, homes, commercial real estate,
structured debt products, and bank stock prices.
When such mighty macro moves collide, the result
might be stagflationary recession...This month we look at
the economic future by looking at the contrast between
the booming commodity futures and curves and the bumbling
bank and housing sector...particularly in the U.S."
Then Coxe gets to the meat of the matter "We are fine
tuning our recommended weightings....we believe that
soaring food and fuel prices threaten economic
growth"...and is reducing his exposure to base metals and
steel, and using the balance to increase allotments to energy
and agricultural commodities...precious metal allocation
remains the same.
Of interest to us is that Coxe has become so popular
and highly visible over the past five years that when he
announced that he was going to run a fund, the Coxe
Commodity Strategy Fund, that the brokers were inundated
with Canucks throwing money at him...almost
300 million dollars in no time flat.
Which is the good news. It's quite different being a
great deep thinker, and a good money manager, so it
will be interesting to see where he sticks his money,
which he says should take about four months.
Concerns about his idea about reducing base metal
exposure...well take a look at the charts on two base
metal stories and it becomes obvious they should have
been sold a long time ago...and if Coxe’s concern
about a recession become a reality, it will get worse.
The blue chippier base metal stocks don't look quite
this bad, but there appears to be a trend.
And about high profile money managers...take a
look at the Sprott Gold and Precious Minerals Fund run
by high profile John Embry, or Sentry Select Primary
Metals Fund run by Kevin MacLean...It's not that easy.
_____________________________________________________________________________________________________________________________________
David Pescod's Late Edition June 12, 2008
BNP RESOURCES (V-BNX.A) $1.50 -0.01
One thing that is definitely starting to affect commodity
prices in North America is the weather. Of course weather is
very important to many commodities, but so far this early summer,
it’s been more dramatic than often over the last few years.
The extreme heat over much of the American Eastern Seaboard
has had a lot of people turning on their air-conditioners a lot
earlier than expected, which of course has helped natural gas
prices stay near recent highs.
At the same time is the American mid-west (which is the
bread basket) it’s a different story...it’s rain, and lots of it. This
is a time of year you usually expect to see corn 12 inches high
and growing. Instead, there are many fields that haven’t even
been planted yet and the same goes for many other crops as
well. Many of the cereals that had huge runs over the last year
and then big corrections, are suddenly starting to perk up
again.
Meanwhile, all these rains are also affecting much of western
Canada and it is affecting the oil and gas patch as well. If
you’ve got an awful lot of rain and much of western Canada has
had that as well, moving the heavy equipment to drill sites has
been next to impossible, so a lot of the drilling is way behind
schedule.
One of the juniors that the high risk players should be following
these days (although so few have hit, it’s probably safer
to watch than be involved) is BNP Resources and that’s because
of their Jensen play. Run by some former CNQ executives, BNP
doesn’t have much in the way of production—it’s at a mere 300
barrels a day and considering they’ve got about 24 million
shares outstanding, that’s pricy. But Jensen is the key to this
company because if it misses, you expect the stock to be half
current prices and if it hits, you would expect multiples of current
prices.
Jensen is a play just on the Alberta side of the Montana border
and on the southern side of the border, they have look-alike
plays that have been producing oil for almost 40 years.
And there are some pretty sizeable pools. It’s expected that six
wells will either prove or disprove the Jensen play over the next
four to six months. So it definitely bears watching.
This is the kind of pool that is not the biggest in the line of
productivity, but it’s one of those just produces, produces and
produces. As we’ve said, on the southern side, they have been
pumping for as much as 40 years. The latest we hear is that
because of the delays due to weather, they expect to be licensed
and drilling their first of the six-well program in early
July.
OILEXCO INC. (T-OIL) $17.97 +0.41
ANTRIM ENERGY (T-AEN) $3.55 +0.13
We’ve mentioned a couple of times in the last few issues
that there’s been a change in the oil and gas patch about what
is hot and what is not. Definitely what’s not is many of the
junior Canadians in the North Sea area because people have
learned just how tough it is to get equipment for drilling and
getting work done in the area, but for the handful of companies
that have access to the equipment such as Oilexco, it may be a
bonanza.
For the little guys that drill something and then seem to
have to wait six or eight months before anything else gets
done, people are starting to lose their patience.
Take one look at the chart of Antrim Energy and you are wondering
if they are having a two-for-one sale, or whether oil has
dropped from $100 down to $60, or hey—what gives?
The Company has just given an update on some of their
other assets which happen to be in Argentina, which isn’t the
greatest place to have oil and gas assets. That country has
been seriously poorly run over much of the last 100 years,
continues to use economic policies that just makes you
scratch your head. One of the current ones is that they have
decided to limit their oil producers to $42 a barrel, which doesn’t
give you the incentive that many other oil companies in
different countries receive.
Today, Canaccord’s Fred Kozak gives an update on the
Company and he writes, “Our target price of C$8.00 is based
on our risked sum-of-the-parts Net Asset Value (NAV) estimate
of the company’s exploration and development assets in the
UK North Sea and Argentina, as well as the company’s proven
and probable reserves base.” Then he writes for the “Next
Catalyst,” “The company continues to move its UK North Sea
activities forward with its Field Development Plan for Causeway
being the next milestone in that project. In addition, the
company’s contracted drilling rig will arrive towards the end of
June to commence a four-well program. Further drilling will be
conducted at Causeway as well as a second delineation well to
be drilled on the Fyne structure to prove commerciality.”
As far as his comments on Argentina he writes,
“Commodity price changes in natural gas in South America
could also impact Antrim owing to the gas-weighted nature of
its production in Argentina.”
There are those that hope that natural gas and oil prices in
Argentina just might be raised.
For those who would like a copy of Kozak’s report, just email
Debbie at debbie_lewis@canaccord.com., but if you are
following Antrim the more important point is that it looks like
later this month they will finally be back at work in the North
Sea.
_____________________________________________________________________________________________________________________________________
David Pescod's Late Edition June 13, 2008
SHANGHAI COMPOSITE INDEX:
HO CHI MINH STOCK INDEX:
Bangkok: We are just finishing a three and a half week
trip to South East Asia, a trip we had promised ourselves to
take a long time ago, to see first hand what everyone from
Don Coxe to Jeff Rubin to who-ever talks about ... the booming
economies in this area of the world. And it has been an
eye-opener. I guess coming from North America one is
used to thinking we come from the centre of the universe,
and that we have the best of everything, and are so far
ahead of everyone else....dead wrong.
Our first stop was Bangkok, and what an eye-opener. If
you judge the level of societies by their airports, this was
first world...huge, ultra-modern. efficient, and all the officials
so polite and helpful....and did I mention huge? The
city of Bangkok has 8 million people, so you might have
expected an impressive structure, but this was beyond
that...judging by airports, this was first world, Toronto’s
Pearson would be decidedly second world , and the mess
in London they call Heathrow, decidedly fifth world ...
The next surprise…if this is Asia, what are all the Caucasians
doing here? This airport is half full of them. Ask
enough people and you find out much of Europe is over
here, and enough Scandinavians to make one wonder who
is manning all those Volvo plants. A generation ago, young
folks after college wanted to travel and see Europe … Now
Europe is way too expensive, plus old news, and they head
here.
There are tons of young Canadians here taking advantage
of some of the world’s best beaches, and cheapest
living arrangements, and parties on some beaches for the
full moon parties that can see 10,000 kids partying on the
beach all night long.
As for Bangkok, it is booming. Heavy traffic, new subways,
rivers full of barges and commerce and tourists from
everywhere. The markets are lively and packed, the hotels
busy, the well known tailors packing in those looking for a
deal, and those looking for a night life, there is none better,
with a rather large offering of activities on hand. We couldn't
or shouldn’t sample them all, but an evening supper on
the 62nd floor of a building in an open air restaurant with
one of the best views in the world is something I'll never
forget...and how many building violations it probably would
have posed if in North America. After a few days here one
wondered why there weren’t more North Americans here.
Vietnam was very different, and a sight for any poor Alberta
oilman worried about oil prices plummeting ..... millions
upon millions of motor scooters, as the country is economically
behind Thailand, but more productive than China in
one big area.......children. Vietnam never had the one child
policy like a very crowded China, so they make kids like
nobody’s business. Their population is now hitting 85 million,
meaning every year another 1.5 million people hit the
job market, and that has kept
wages low.
Just outside Hanoi we see an absolutely enormous shoe
factory at shift change, with thousands of ladies on their
scooters off to work. They make about $150 to $200 a
month.....and the factory is owned by Chinese interests, that
locate there because of the low wage rates....interesting
world isn't it?
Outside daNang is an enormous boot factory, owned by
a German firm and early every morning thousands of
women are off to the boot factory, the men off to go fishing
but along the waterfront you can see the future starting to
appear. This is the old area referred to as China Beach and
the beautiful beach just goes and goes.
In a few places some 4 and 5 star resorts are going up,
but so far most of the tourist are from Korea, Europe (the
old French influence) and Japan. That is now changing
quickly as a Chinese middle and upper income class now
has the money and desire and are starting to head to this
area in huge numbers, numbers that are expected
To only get much, much, bigger.
Yes Vietnam is still a communist country, but folks for
many natives to survive it has become, in small ways, one
of the most capitalist countries I've ever experienced ... more
peddlers and market folk know English than you would
have thought possible, and to do a deal Canadian currency
is accepted here by the folks in the market who on any
given day, probably know where any one of 20 currencies
are trading. And that rather poor looking lady at the bread
stall, looking like she hasn't much in the world, still probably
has a cell phone.
Meanwhile our guide discovers that we are a stockbroker,
and is immediately upset. We discover that the Vietnamese
market is down almost 60% this year, the worst in
the world (and as always - it's our fault.) After a great year
last year, the Vietnamese market and the currency - the
dong - are being battered big time, a problem being caused
by being a big importer of both oil, gas and fertilizer and
being in a credit position that's not that good.
Interestingly, while North Vietnam might have won the
war, it's the south that is booming. Whether you call it Ho
Chi Minh City or Saigon, it is thriving. Lots of work, tons of
tourists with lots to do. Communist Vietnam decided in the
mid 80's they had to open the country to foreign investment
and open their control system as well. Our guide tells us the
common fear of most of his countrymen is what happens if
someone in the family needs a doctor ... how do we pay the
bills? Sounds like a problem felt around the world. |
