Friday, October 29, 2010
Rare Earth Shorts See A Bubble Ready To Burst
U.S. research report tells investors in rare earth element stocks to be wary. It says the world could be awash in rare earth elements if and when the Mountain Pass mine gets into production.
A U.S. research report is raising red flags in the direction of rare earth stocks, including Canadian junior Rare Element Resources Ltd. (TSX: V.RES, Stock Forum) (AMEX: REE, Stock Forum), and telling investors to be wary.
The report by “Shareholder Watchdog’’ follows a surge in the value of Rare Element Resources shares, which traded at $13.91 on Thursday. That’s up from $2 in July.
Although the Vancouver junior has zero revenue, and posted a loss of $1.7 million or 6 cents a share in the year ended June 30, 2010, (compared to a year earlier loss of $1.2 million or 5 cents), it has a market value of $447 million, based on the 32million shares outstanding.
Rare earth elements are a collection of seventeen chemical elements with tongue twisting names such as scandium, yttrium. Found in the earth’s crust, they are applied in a wide range of devices, including superconductors, and magnets.
Stocks in the sector have skyrocketed amid concerns about export restrictions in China, currently the source of 95% of the world’s production.
The recent Molycorp Inc. (NYSE: MCP, Stock Forum) IPO has also helped to put the spotlight on rare elements, highlighting the Colorado company’s plan to reopen a California mine that was shut down eight years ago
But “Shareholder Watchdog’’ says rare earth elements are much more abundant then their name implies.
It says elevated prices may be a temporary phenomenon, explaining that there are two main reasons why this will be the case:
- China will begin exporting rare earth elements again as political pressures mount.
- When Molycorp’s Mountain Pass mine is up and running it will produce 20,000 tonnes of rare elements, an amount that is equal to three times the amount of rare earths that were imported into the U.S. in 2009.
The report concludes that the world will be awash in rare earth supply if and when Rare Element’s Bear Lodge rare-earth elements project in Wyoming is in production in 2015.
This makes the junior a potential short opportunity, according to “Shareholder Watchdog.”
However, aside from worries about lofty commodity prices, the report sees other reasons to be wary of Rare Element Resources.
They include the commingled nature of a Vancouver office address that Rare Element shares with at least six other businesses, some of which are also managed by the junior’s senior executives.
“We believe it is a significant red flag that critical members of Rare Element’s management team are engaged with more than five companies currently,’’ the report says.
Reached in Toronto, Rare Elements chief financial officer Mark Brown dismissed the report, saying it is the price of having a stock that goes up really fast.
He said it is an insult to Rare Element Chairman and chief executive officer Donald Ranta. “This is a senior guy, now retired, who was vice-president of Echo Bay Mines,’’ Brown said. “He was also vice-president, exploration for North America with Phelps Dodge.’’
(Phelps Dodge was acquired by Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX, Stock Forum) in 2007, while Echo Bay was swallowed by Kinross Gold Corp. (TSX: T.K, Stock Forum) in 2002).
“I think there is quite a large group of people out there who are short our stock and are trying to cover because it has just gone up so fast. We had short reports of over 700,000 shares last week.”
Meanwhile, Brown took issue with the suggestion that he is spreading himself too thinly.
“We do have a bunch of companies that are all run out of the same floor as our office and they lease space from us,’’ he said.
At the top of the list is Pacific Opportunity Capital, a financial consulting and merchant banking firm that is active in venture capital markets in North America.
“Pacific Opportunity Capital is my holding company and owns 900,000 shares of Rare Element.”
Brown owns 1.5 million shares of Rare Element Resources and has a role in managing Animas Resources Ltd. (TSX: V.ANI, Stock Forum), Fox Resources Ltd. (TSX: V.FAX, Stock Forum) Avrupa Minerals Ltd. (TSX: V.AVU, Stock Forum), and Tarsis Resources Ltd. (TSX: V.TCC, Stock Forum).
“They don’t all need full time CFOs,’’ said Brown.
“It is disappointing to me that they are trashing my reputation. [The authors of the report] fail to point out all the successful companies that I have been involved with and continue to be involved with.”
In addition to being CFO at Rare Element, Brown is a director of Animas and Avrupa, President and ceo of Fox Resources, chief financial officer of Tarsis, and President of Pacific Opportunity Capital.
Still, viable rare earth element mines are a rarity in North America.
Rare Element is preparing to look at the feasibility of mining 17.5 million tonnes of 3.46% rare earths oxide, a project that Brown described as “very robust.’’
However, “Shareholder Watchdog” says the grade may ultimately prove too low to be viable under a “normalized pricing scenario.’’
“Shareholder Watchdog” is a pseudonym for unnamed writers who are interested in protecting shareholder and retail investors from potential accounting problems and business and regulatory risks.
According to a published report, “Shareholder Watchdog” has a short position in Rare Element stock, meaning that it has a vested interest in seeing the stock go down.
Thursday, October 28, 2010
Gold miners better buy than bullion: Sprott
Goldcorp doubles monthly dividend
Wednesday, October 27, 2010
Vancouver — Goldcorp Inc. doubled its monthly dividend on Wednesday as it reported a sharp increase in quarterly profits, boosted by the rising price of gold .
The Vancouver-based gold miner said earnings attributable to shareholders amounted to $466.5-million (U.S.), or 63 cents per diluted share, for the quarter ended Sept. 30, compared with a profit of $114.2-million, or 16 cents per diluted share, a year ago.
Revenue for what was the company's third quarter totalled $885.8-million, up from $691.9-million.
The company also doubled its monthly dividend to 3 cents per share.
“Goldcorp's current financial strength and growing cash flows enable us to significantly increase our dividend while also executing on our plan to deliver 50 per cent production growth over the next five years,” Goldcorp president and chief executive Chuck Jeannes said in a statement.
Excluding non-cash foreign exchange losses and other one-time items, the company said it earned $231.5-million, or 31 cents per share, in the quarter, compared with $140.6-million, or 19 cents per share, in the third quarter of 2009.
Analysts on average were expecting earnings of 29 cents per share on revenue of $893-million, according to analysts polled by Thomson Reuters.
During the quarter, Goldcorp sold 568,100 ounces of gold, down from 601,500 ounces a year ago, while the average realized gold price increased to $1,239 per ounce, up from $968 per ounce a year ago.
Goldcorp has mines and exploration and development projects in Canada, the United States, Mexico and Guatemala and Argentina. The company employs more than 14,000 people.
Over the past year it has been involved in acquisitions that have irked a number of other players, including Barrick Gold Corp. the world's largest gold producer. Goldcorp stepped in and bought a controlling interest in the El Morro gold-copper project in Chile in a deal with junior miner New Gold Inc. shutting Barrick out of the sales process.
Barrick had already announced an agreement for the property with Anglo-Swiss mining giant Xstrata PLC. Barrick has since launched a lawsuit that alleges the Goldcorp-New Gold deal is illegal.
Last week, Goldcorp closed the sale of its stake in Terrane Metals Corp. to Thompson Creek Metals Inc. for 13.9 million shares of Thompson Creek and $240.5-million in cash.
Goldcorp signed a deal in September to buy U.S. gold miner Andean Resources Ltd. for $3.6-billion (Canadian).
The agreement beat out Eldorado Gold Corp. which had just hours before announced its own $3.4-billion bid for the company which owns a promising mine in Argentina.
Goldcorp's bid has the unanimous support of Andean's board and a lock-up agreement from a shareholder that owns 21 per cent of Andean's shares.
The deal is expected to close later this year or in early 2011.
©2010 CTVglobemedia Publishing Inc. All rights reserved.
Tuesday, October 26, 2010
Time To Buy BNK? Bankers Pet...
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Bankers produces 9,826 bopd from Patos-Marinza in Q3
2010-10-07 08:13 ET - News Release
Mr. Abby Badwi reports
BANKERS PETROLEUM PROVIDES OPERATIONAL AND CORPORATE UPDATE
Bankers Petroleum Ltd. has provided the following operational and corporate updates.
Production
Third quarter production averaged 9,826 barrels of oil per day (bopd) from the Patos-Marinza oil field in Albania compared with second quarter production of 9,830 bopd. Current production is 10,500 bopd with 700 bopd shut in awaiting maintenance and repairs. The average Patos-Marinza oil price was $46.61 (U.S.) per barrel representing 61 per cent of the Brent oil price compared with the second quarter's average oil price of $47.12 (U.S.) per barrel (60 per cent of the Brent oil price).
Three main factors affected lower than anticipated daily production volumes to this date:
- Several new wells drilled in the second and third quarter were targeting reserves expansion, thermal assessments and one well was drilled for water disposal. This reduced the number of wells drilled for production growth.
- The company experienced delays in takeover of existing wells for reactivation from the national oil company, Albpetrol Sh.a. The company was expecting to receive 100 well candidates from January through to the end of the third quarter, but unfortunately only 10 suitable wells have been handed over for reactivation, resulting in lower production volumes. This situation has now been resolved with 55 reactivation candidates handed over to the company by Albpetrol on Oct. 5.
- Several horizontal wells experienced drilling problems resulting in completing less than optimum short lateral sections. Other horizontal wells were challenged by previously explained fresh water intrusion and cross-flow from shallower zones due to corrosion in adjacent old vertical wells. Comprehensive review and remedial isolation of old wellbores with corrosion issues has been progressing with positive results in increasing oil cut in affected horizontal and old vertical wells. The company anticipates minimizing these concerns in future new drilling.
With these operational and mechanical issues, the company is adjusting its exit production target to 12,000 bopd for 2010 and to 20,000 bopd for 2011.
Drilling update
The company continued execution of its horizontal drilling program targeting different productive zones and areas of the field to fully evaluate the reserves potential of the Patos-Marinza oil field. Eleven horizontal wells drilled during the quarter resulted in four oil wells on production for over a month at an average rate of 165 bopd and seven wells recently placed on production and currently cleaning up and stabilizing with good initial productivity indication. The majority of the new producing wells are in the northern part of the field with one well drilled in the Driza 1 formation, which due to drilling mechanical issues has a short lateral of only 130 metres and with this limited inflow current production from the well is 30 bopd. The Driza 1 formation is present in large areas of the field and horizontal drilling development of this zone should contribute to new reserves additions.
At Sept. 30, 2010, there were 43 horizontal wells drilled in the oil field with seven wells recently on production for under a month and stabilizing, 27 horizontal oil wells producing for longer than a month with an average production of 133 bopd, and nine wells that have a lower production average of 20 bopd due to previously described mechanical issues, specifically short laterals within the producing section and water intrusion in others.
The company is pleased with the overall success of the horizontal drilling program, specifically the potential for program expansion in 2011 beyond the 2009 proved plus probable reserve case. The current reserve-based development program only incorporates horizontal drilling into three of the 17 discreet sands that exist in the field. Successful delineation of an additional four sands through the 2010 drilling program has led to an expansion of the company's planned program in 2011 and beyond, and will likely result in incremental reserve additions at the end of the current year as new zones are targeted as recoverable oil in place.
Fourth drilling rig
Bankers horizontal drilling program will continue to expand in 2011 with the addition of a fourth drilling rig which has now been contracted and is scheduled to commence operations in April, 2011.
Well reactivations and workovers
During the quarter, no wells were reactivated due to handover delays by Albpetrol. This situation has now been resolved and on Oct. 5, 55 existing wells have been handed over to the company by Albpetrol and several of these wells will be reconfigured and placed on production before year-end. All of these wells are located in the northern part of the field north of the Seman River and in anticipation of receiving these wells the company had started construction of facilities and infrastructure to handle production from this sector.
Ten existing shut-in wells were successfully brought on stream through recompletions in new producing formations to add 300 bopd of production.
Thermal pilot and western extension area
In addition to drilling of two vertical core recovery wells last quarter, two step-out vertical wells were drilled in the third quarter on the western flank of the field. Both wells indicated the presence of good porous oil saturated sandstones from the Lower Gorani through the Marinza formations. To date three separate formations have been tested for primary production with others to be evaluated in this quarter. Initial indication are that the oil is heavy and viscous (3.8-degree American Petroleum Institute (API)) indicating that thermal recovery techniques will be necessary to produce this type of oil in this area. Two additional step-out wells will be drilled in the fourth quarter to further confirm the areal extent of these zones.
Planning and work for the first thermal pilot and initial cyclic steam injection into a horizontal well in the first quarter of 2011 are progressing on schedule. Surface facilities have been designed and various components have been procured. The 25,000-British-thermal-unit (BTU) steam generator will be ready in late October for start-up testing by the manufacturer in preparation for transport to Albania before year-end. Wellbore and production equipment design is nearing completion with major equipment orders placed with suppliers.
Infrastructure development
Tank construction at the Vlore terminal is nearly complete and will enable storage of 160,000 barrels of oil once operational in the next few months. Planning for phase 1 of the crude sales pipeline, from the Patos-Marinza oil field to the rail tie-in at Fier, is progressing on schedule. Pipe has started to arrive in country, drawings are currently being finalized for the hub facility at Fier and construction is expected to begin in the fourth quarter.
Kucova
The company has now received formal approval from Albpetrol and AKBN (the state regulatory agency) for amendments to the Kucova licence and petroleum agreements. Fieldwork will commence this quarter and a formal plan of development will be submitted to the Albanian authorities in November.
Block F
The company commenced reprocessing existing seismic on the block. Initial evaluation of select lines illustrates considerable structural anomalies than was first contemplated. An expanded reprocessing program is under way in order to select the best exploratory drilling location now scheduled for the first quarter of 2011.
Crude marketing initiatives/working capital
The company has received several new proposals to purchase Patos-Marinza crude at a price range between 66 per cent and 68 per cent of Brent price. The company is currently finalizing new and current marketing agreements for 2011 volume deliveries and pricing.
At Sept. 30, 2010, Bankers held $134-million of cash, and working capital was approximately $136-million. No funds were drawn on the $110-million credit facility from the European Bank for Reconstruction and Development and the International Finance Corp. The company has drawn $24-million of the $28-million Raiffeisen credit facility.
For additional information, please see an updated version of the company's corporate presentation on its website.
Conference call
The management of Bankers will host a conference call on Oct. 7, 2010, at 7 a.m. MDT to discuss this operations update. Following management's presentation, there will be a question and answer session for analysts and investors.
To participate in the conference call, please contact the conference operator 10 minutes prior to the call at 1-888-231-8191 or 1-647-427-7450. A live audio webcast of the conference call will also be available on Bankers' website.
The webcast will be archived two hours after the presentation on the website, and posted on the website for 90 days. A replay of the call will be available until Oct. 21, 2010, by dialling 1-800-642-1687 or 1-416-849-0833 and entering access code 16045644.
We seek Safe Harbor.
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