₪ David Pescod's Late Edition April 10, 2006
ZINC $1.3320 +0.0390
Zinc stockpiles have plunged to 267,650 tons, which is roughly 10 days of global consumption.
COPPER $2.6944 +0.0877
Currently in the London Metal Exchange there is about 3 days of global consumption in inventory.
There is a little doubt what the story was today ... it was in the commodity markets and it’s about many commodities hitting multi-year highs. Copper rose to a record today, as did zinc, and nickel jumped to a level that hasn’t been seen since 1989.
There is a strike going on at Grupo Mexico’s La Caridad copper mine, which is the second largest copper mine in Mexico, but there is also on-going concerns about other situations around the world which reminds folks that it takes a long time to get new mines on-stream.
And, with all three major areas of the economic world, at a level of historic growth particularly India, China as well as Europe and North America, the demand remains strong.
Meanwhile, protestors remain in the central Sukhbaator square in Mongolia demanding the government grab 51% of Ivanhoe’s (IVN-T) Oyu Tolgoi copper mine.
Trouble continues in Indonesia, as police are still patrolling the Goro nickel mine site in New Caledonia, which has been the scene of violence protests and is stalling construction.
Also in Peru, where they are having Presidential elections and in the first round the Nationalist, Ollanta Humala, has won and that concerns more than a few people as Peru is the world’s fourth-largest producer of copper, the fifth of gold, and the third of zinc.
He has announced his attentions that the government will play a bigger role in the mining industry if elected. It is also a reminder that Bolivia, which had its elections just a month ago, elected a new President who has already nationalized all oil and gas assets.
Country risk remains something to be aware of, as prices head ever higher.
CANDAX ENERGY (V-CAX) $1.36 +0.10
OILEXCO INC. (T-OIL) $4.34 -0.02
STERLING RESOURCES (V-SLG) $1.78 +0.07
Late in the day today, we are glad to see Bloomberg carry this little tidbit of information, “White House Plays Down Report on Plans for Iran Nuclear Strike.” Phew! Anyway, oil prices were moving based on that information and there are a couple of junior oils that we follow, that had interesting days as well.
A company who wasn’t having much fun today was Oilexco, they announced a dry hole at Joy—that’s three in a row! That’s a reminder that through the North Sea you have between a 1 in 3 and 1 in 6 chance on many of those locations, but still ... considering Oilexco having a rig that everyone wants and getting to see everyone’s data one would have hoped for better results.
Now it is on to a joint venture with Sterling Resources at Disraeli. We talk with Ken Croft, who is currently doing the PR with Sterling and who is formerly National Bank’s oil and gas analyst. He tells us that on the new play, Oilexco pays 95% to earn 65% on the shallower Eocene zone and 95% to own 85% on the deeper, bigger and riskier Jurassic play.
It now starts getting interesting for Sterling, Croft says, as they hope to drill 3 wells in the North Sea this year, mainly dependent upon availability of oil rigs, but within days they hope to kick off their Romanian drilling program and do three to five wells there.Croft hopes to see drilling start at Disraeli PDQ!
Another company that is having more interesting times is Candax Energy, which today is in an interesting fiscal situation. They wouldn’t mind having some extra money in the bank and with 41 million warrants outstanding, that just had their life expectancy extended at bit to April 17, whether they find out what they got a Chaal in time or not maybe doubtful.
Today, they halt the stock and give an update. They announce that their Chaal well, “which was spudded on February 5, 2006, penetrated a hydrocarbon bearing section in the target reservoir, the Middle/Lower Nara, at a depth of 4, 036 meters. To date, a gross reservoir interval of 304 meters has been drilled, with the well depth currently at 4, 340 meters. There have been excellent gas shows throughout this 304 meter interval, including condensate at numerous intervals ... at a depth of 4, 340 meters another significant gas kick was experienced, and the well began flowing. At this point, it was decided to stop drilling and run an intermediate log suite ...”
This sounds interesting! For those with warrants or thinking of warrants, what to do?
Disclosure: Candax Energy: Canaccord Capital covers this stock and has a Speculative Buy rating on it. (Speculative buy: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the stock may result in material loss.)
Oilexco Inc: Canaccord Capital covers this stock and has a Buy rating on it. (Buy: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.)
Canaccord has recently led a financing for Candax Energy, Oilexco and Sterling Resources.
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