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To: ms.smartest.person who wrote (2276)	3/26/2007 7:46:50 PM
From: ms.smartest.person	Read Replies (2) \| Respond to of 3198

&#8362 David Pescod's Late Edition March 26, 2007 LIONORE MINING (T-LIM) $19.28 +1.79 The theory has been bouncing around for a while. As commodity prices remain high, you just hear the theory more frequently. It’s that all the big old mines around the world are having to go deeper and with ore grades becoming less and less, so it only means that some of the big miners are going to have to buy some other miners to maintain reserve levels. Today LionOre Mining makes the news as it is bought out by Xstrata in a $4 billion deal. LionOre with operations in Botswana, South Africa, and Australia has a little bit of synergy with Xstrata in that the ore from the Tati mine in Botswana and also the Nkomati mine in South Africa, is refined at Xstrata facilities so the deal does makes sense. You see the huge volume today and it’s trading at a higher price than the offer is made suggesting that the assumption out there is that with high nickel prices, there might be another suitor. Which gets us to the next question of the day...who’s next as a take-over candidate because I’m sure this is not the end of it all. OILEXCO INC. (T-OIL) $8.30 +0.14 QUESTERRE ENERGY (T-QEC) $1.35 +0.05 One thing we look forward to in the oil and gas sector is Josef Schachter’s coverage which comes out monthly for Maison Placements plus other institutional clients. Today, it’s out and Josef remains bullish on natural gas, a sector that has many gassy charts looking like a car going off a cliff. At this point, his comments are natural gas; “With the strong, cold finish to winter in the Eastern U.S. and Canada, natural gas storage levels dropped from all-time high levels down to the current level of 1,516Bcd which is well within the ‘normal’ 5-year band.” He also writes, “Going forward we are anticipating lower than normal injections in the summer months because North American deliverability has declined as a result of slower drilling activity in Canada and some areas of the U.S. If the summer build is materially lower than the 5-year average, we expect to see some very healthy natural gas prices in the late summer months. Price could move over US$9/mcf for NYMEX if there is any material hurricane event.” “This in conjunction with any wild cards such as an above average air conditioning season, or an early winter could result in spiky natural gas price action to double digits and the resurrection of the ‘zombie’ natural gas weighted stocks.” His comment about the zombie natural gas stocks is well taken as every time we thought we were nibbling at what might be low prices on gassy stocks, we found out that those were just steps into cow patties. While natural gas may have bottomed and we say may, the natural gas stocks just seem to keep getting weaker and weaker. So needless to say, Joe is one of the aggressive ones as far as expectations for natural gas prices. We always look forward to his favorite stories because there are usually a couple of good reasons for those. For this issue, his picks on the International level are Oilexco (which he has a price target of $13.00). His key purchase reasons for the stock is that “The Brenda development work is on the cusp of being completed. It is estimated that they need 4 days of decent weather required to finish final work before first oil. Initial production levels of 35,000 b/d is expected by the company for early April 2007. Once Brenda is completed, the running 12-month average production could be around 30,000 b/d resulting in a cash flow of around $3.00.” He also points to “Encouraging appraisal results from Shelley. The formation was appraised with an 8-leg cluster with the final leg testing at 3082 b/d of light oil” and he mentions that “Oilexco is hoping to fast track this development.” “ Additional development projects that will add near term production (with a 1 to 2 year time frame) he suggest, “include Ptarmigan, Blackhorse & Bugle and the Sheryl discovery with Oilexco potentially exceeding 50,000 b/d in the coming years.” He also points to the recent success of Kildare in the deeper unexplored Upper Jurassic sands. His top domestic pick is certainly a different type of story and for those who are adventurous, Questerre Energy is currently trading at around $1.30 and while he gives it a potential target price of $1.75, if this play works out you can imagine that number could be a lot higher. For those who haven’t heard of this story, it’s in of all places - Quebec. He writes, “A successful test of the Gentilly–1 well (4.5 mmcf/d rate) has confirmed the presence of hydrocarbons in the Trenton Black-River (TBR) formation in Quebec.” He suggests, “Full test results will be known in May. QEC has an average 25% working interest with operator Talisman in 1 million acres all of which are prospective with the TBR. This play has multi-Tcf potential across the land spread and over time could see multiple exploration and development wells. Quebec is a net energy importer and natural gas projects has superior economics when compared to the WCSB.” He also suggests that the company has competed drilling a very highly prospective well in NE British Columbia at Beaver River that could be quite significant for the company as well. So between the high impact plays in Quebec and British Columbia, they also have conventional Alberta properties at Vulcan doing about 1,000 boe/d and Westlock doing 300 boe/d and also he suggests that they have a strong debt free balance sheet. Obviously, this is a story for those who are seeking a little bit of adventure. One thing that Schachter is key on is his expectations of the energy sector before this commodity bull run is over - it could be as much as three times current levels and suggests (at this time) to be fully invested to enjoy this new up-leg. We certainly hope he’s right on natural gas stocks, for those of us who have stuck our toe in possibly a little too early… If you would like to receive the Late Edition, email Debbie at debbie_lewis@canaccord.com