I met this guy at the PDAC and he mentioned he was looking for money in Toronto. I thought I could get him some money for his idea, but passed on it as he seemed to have good sources himself. On the other hand I am sure people who could have afforded a deal with him (to whom I spoke), would have turned him down.
Indonesian Thermal Coal. Guys are British, natch.. Idea makes sense.. althought the resource is largely known.
EC<:-}
This is Moriarity's take on the deal.
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Better than Uranium
Bob Moriarty
Archives
April 17, 2007
Uranium is getting hot. The price is now $113 a pound, up from $6 and change five years ago. It's getting too popular and I hate popular investment ideas. A year ago housing was the most popular idea on the block. I hate popular, it goes against my contrarian philosophy.
But believe it or not, there is an energy investment way overlooked by the crowd. It would be accurate to call it even unpopular. Right now it's the best energy investment on the block. The magic energy: coal. And I'll bet you were tempted to think, COAL=UGH. If you did, you just made my point. For most of the past 200 years, coal was THE energy source, it's only been the last 90 years or so that petroleum has been so popular. Coal mines made many fortunes but coal has been pretty much ignored by investors for the last 50 years. The sound you hear is opportunity screaming, "Buy me, Buy me."
Let me give you some numbers; it costs about $6-$8 to produce 1 million BTU from natural gas, relative to oil natural gas is way undervalued. And it costs $8-$12 to produce the same million BTU from oil. Coal costs a mere $1-$2 per million BTU. For coal, the future is bright indeed. Peak oil is not only real, peak oil is here, and actually it appears we have passed peak oil. Americans are casually assuming that as Canadian production of natural gas increases, it will flow to them. Actually more and more Canadian natural gas is being diverted to the shale oil projects and Canadian exports of natural gas to the US are decreasing.
The world has an energy issue even before you consider increased demand from China and India. I made my first trip to China in September of 2004. I happened to pick up a Chinese newspaper to read that between January 1st of 2004 and August 1st of 2004, Chinese imports of oil increased some 49%. That's enormous. So even if peak oil didn't exist (and it does) the increase in demand for energy from China and now India is enough to guarantee higher prices for all energy.
World wide, about 52% of all electricity is generated from coal. Coal used for electricity is called thermal coal. In recent years, Indonesia overtook Australia as the world's largest thermal coal exporter. I just came back from a trip to the island of Borneo in Indonesia where I visited a wonderful energy company, KAL Energy, trading on the OTC exchange. (Trading symbol KALG)
In late December of last year, I got a call from a good friend of mine in Vancouver. He and some partners had just done a deal to buy the Thatcher Mining Pte Ltd; a Singapore privately held company with significant coal holdings on Borneo. KAL Energy paid Thatcher shareholders 32 million shares for their coal properties and was in the midst of doing a $3.5 million dollar placement. My friend wanted to know what I thought about the deal.
Well, I thought; indeed, still think, it's brilliant. Indonesia is coal country and the two properties they picked up have about 192,000 million tons based on an estimate by Consulting Geologist Jonathan O'Dell. That number is not 43-101 or JORC compliant, it's an estimate of the potential based on a 4-5 meter thick single seam of coal.
I was interested enough to take part in their Private Placement and this was a couple of months before I even saw the property. This isn't like finding some moose pasture in Outer Mongolia because some geologist deep in his cups in a bar in Rio says there may be gold there. This is a deal with a known coal deposit surrounded by thermal coal producers, located on a deep river with full coal barges passing by hourly. It's not a theory, it's a fact.
Basically, KAL picked up two known coal properties and gave about 33% of the company away to get them. But their next actions were what really impressed me. They closed the placement in February and 24 hours later wired money to Indonesia to get their $2 million drill program started. The same day, a barge left carrying 5 drill rigs and all the equipment they need to get started. Plans called for starting drilling about March 8th.
I wanted to see the project first hand and I flew to Borneo to see it for myself. It took a grueling 30 hours of flying, a 6 hour drive down old logging roads and a 2 hour speed boat ride to get to the camp. In all I used five days to get there but it was worth it.
I arrived on March 12th; they had drills turning and were still building the camp. It was an adventure.
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