₪ David Pescod's Late Edition March 14, 2006
IVANHOE MINES (T-IVN) $ 8.70 +0.10
FREEPORT MCMORAN (NYSE: FCX) $51.96 +2.19
The fun part of putting out this letter everyday, is some of
the people that you meet and one of the most intriguing we’ve
met is Harry Dobson, the Scottish Billionaire who has had interests
in enterprises from Brokerage Houses to race horses to
Manchester United (the big soccer enterprise) to huge real estate
holdings.
He was by the other day to talk about his latest gold venture,
Kirkland Lake (KGI). He had some interesting comments to
make and while he is a big gold bug, he is suggesting that people
better be aware of “country” risks involved. He is suggesting,
that you have to watch the politics of the country you
maybe investing in, because he figures that there is a lot of
unpleasant surprises around the corner.
For all the mining companies that have decided to explore in
countries like Mongolia, Zimbabwe and in the future...a reminder
that things can have unpleasant surprises. The Globe
and Mail headlined an article on Monday, March 13th and notes
that a senior Mongolian cabinet minister is suggesting that the
Government wants a 51% stake in Ivanhoe’s massive copper/
gold mine in that country.
There are lots of Canadian companies currently working in
Mongolia such as Western Prospector (WNP) and I suspect this
is not the kind of thing you’d want to be hearing. Recent elections
in Mongolia have brought in a former socialist group.
Meanwhile, in Zimbabwe, management for platinum miners
Implats will sit down with government officials to look at new
proposals for mining. The government of Zimbabwe wants to
take 51% of all energy, minerals and precious metal mines and
plans to give nothing in return.
Obviously, platinum miner Implats, which has put a lot a
time, money and effort into that country is a little ticked. Meanwhile,
yesterday the Peruvian market got clobbered—down
almost 250 points the bond market got rocked and the Peruvian
currency got battered as well, because the Peruvian presidential
candidate Ollanta Humala who is campaigning for higher
taxes and tighter limits on foreign investments, according to
Bloomberg, closed the gap with front-runner Lourdes Flores in
a national pole. She is the free market gal we hope wins.
Humala is a little bit scary because he sounds like another
Hugo Chavez and is also talking about maintaining Coca production
and if you owned a mine in Peru, maybe one should be
very worried………
The scary presidential candidates Humala, has a brother currently
in jail for taking over a police station, killing four people,
starting to formant a little revolution, looking to take over former
state owned operations and basically, not a friend of foreign investment.
Today, Merrill Lynch, the world’s biggest securities firm downgrades
the bonds issued by Peru.
Meanwhile in Indonesia, one of the world’s biggest and richest
gold/copper mines—the Grasberg owned by Freeport, was shut
down earlier this year by locals that didn’t want it operating. The
gossip we hear from people on the scene is that the locals have
given the company a date that they may be re-visiting the operation
to try and shut it down yet again. March 21 is the date we
hear.
Meanwhile, we are absolutely shocked at the number of people
that are buying shares of Crystallex (KRY), which undoubtedly
has a big gold situation, but it’s in the country of Venezuela and
we all know what Hugo Chavez has done to the oil and gas companies
down there. The question is, just when does the other foot
drop for the mining companies.
OILEXCO INC. (T-OIL) $4.60 +0.19
Today Oilexco hits new highs and volume appears to be picking up.
When we go to Josef Schachter (recently on ROB-TV and making
Oilexco his second pick) he tells us results could be out shortly on
their Joy well. “It’s important that one of these additional plays
work out”, he says, “because while Oilexco will have some very
high cash flow come on stream later this year from Brenda, its production
that could tail off quickly.” Some additional discoveries
that would make up for that drop would be very welcome. If the Joy
well comes in, he suggests “it’s probably worth another $0.50 to
the stock and then they immediately start drilling their Disraeli
play.” This one has two zones and he figures the upper zone has
about a three out of four chance, but the lower, merely a one out of
ten chance. Meanwhile, Oilexco’s CFO Brian Ward tells us that
they expect their annual year end financials and new reserve numbers
to be announced within the next two weeks. As far as the
market perking up, he says he is glad that it’s finally catching up to
expectations of what their after-tax net income could be for the
company next year, which he forecasts on 30,000 barrels a day,
could be $400 to $500 million US. He’s glad people are paying
attention and paying more than a blow-down valuation on the
stock. He hopes to put out news within the next month on additional
banking relationships. As to the Joy well, he suggests they
will get to the pay zone in a very quick eight days from spud date.
Disclosure: Canaccord has recently led a financing for Oilexco Inc.
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