| 08/23/2008
www.insidemetals.com |
Vol
3, Issue 15 |
|
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In
This Edition...
Precious
Metals Market Update Geopolitical View
Gold
Producer News
Website Updates
|
|
| |
| Dear
Subscriber, |
| The
newsletter will be published next on September
13, 2008 |
IN
THIS EDITION OF INSIDEMETALS
|
|
In this edition of the
InsideMetals Newsletter, we'll take a look at
black gold, production,
pricing and news, as well as precious metals
trends, gold producer news and recent website
updates.
|
|
 |
| In
This Issue |
| Precious
Metals Markets Update |
| 2007
Silver Nevada Miner Bar |
| Geopolitical
View |
| Whitney
& Whitney Inc. |
| NYSE
Gold Producer News |
| AMEX
Gold Producer News |
| NASD
Gold Producer News |
| InsideMetals.com
Website Updates |
|
| |
| PRECIOUS
METALS MARKET UPDATE |
 Gold
closed at $833.50/oz (London Fix) on August 21,
2008. This is 9.2% lower than the $918.00/oz
(London Fix) closing price on July 31, 2008,
when data for the previous newsletter was
gathered.
Silver
closed at $13.59/oz (London Fix) on August 21,
2008. This is a 22.3% drop from the $17.48/oz
(London Fix) closing price on July 31, 2008.
Platinum
closed at $1412.00/oz (London Fix) on August 21,
2008. This is a 19.7% drop from the $1758.00/oz
(London Fix) opening price on July 31, 2008.
Palladium
closed at $290.00/oz (London Fix) on August 21,
2008. This price is 24.1% lower than the
$382.00/oz (London Fix) closing price on July
31, 2008.
Since the last newsletter gold has declined from
$918 per ounce to a low of $786.50 per ounce.
Gold has since regained $47.50 as the US dollar
has weaken and oil prices have returned to the
$120 barrel price.
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Silver Nevada Miner Bar - 99.9% Pure 5
Troy Ounces of American History
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| GEO
POLITICAL VIEW
|
 BLACK
GOLD WILL FLOW & PRICES WILL DROP IF WE
DRILL
It drives me mad that every time the question
comes up about the energy crisis on Hannity
& Colmes, Alan always challenges the
program's conservative guest that George Bush's
own Department of Energy states that the U.S.
only has 3% of the world's oil reserves and
annually consumes 25% of the world's annual
production. Consequently, the U.S. can't resolve
the shortage by drilling.
Alan then follows with a comment,
"shouldn't the oil companies be required to
drill the leases they hold before they are given
rights to drill offshore?"
Sean, tell Alan Colmes to get his facts
straight. First of all, regarding the 3%
reserve, you can't determine an oil reserve
without drilling. Since we haven't drilled in a
systematic matter prospective offshore
continental slopes targets or deep water
targets, let alone prospective, but restricted
continental targets, we shouldn't be forming
national energy policies and solutions based on
a number that is misleading. The 3% only refers
to known oil reserves. Areas that haven't been
drilled can't be accurately categorized as to
whether or not they the potential to contain
hydrocarbons unless they have been drilled.
In an August 14, 2008, Washington Post
editorial, a point was made regarding the 3%
reserve. According to the Department of the
Interior's Mineral Management Service (MMS)
there was an estimated 18 billion barrels of oil
in the off-limits portion of the Outer
Continental Shelf (OCS) prior to 2006. The
estimate was made using old data from
now-outdated seismic equipment. In the case of
the east coast, the data was collected before
Congress imposed a moratorium on offshore
drilling in 1981. In 1987, the MMS estimated
that there were 9 billion barrels of oil in the
Gulf of Mexico. After major advances in seismic
technology and deepwater drilling techniques,
the MMS resource estimate for the Gulf of Mexico
had ballooned to 45 billion barrels in 2006.
Advances in technology, followed by drilling,
has increased known reserves. New drilling in
currently restricted areas both onshore and
offshore will result in the discovery of new oil
fields. A recent example of successful expansion
of U.S. oil reserves in conjunction with
advances in technology is the
Devonian-Mississippian Bakken Formation in the
Williston Basin (Montana and North Dakota).
In the 1980's and 1990's the upper Bakken was
the focus of considerable drilling activity, but
the wells were marginally economic and difficult
to produce. Consequently the upper Bakken was
looked at as a drill hole termination point
rather than a target.
A 1995, U.S. Geological Survey (USGS) assessment
of the Bakken Formation estimated a reserve of
151 million barrels of oil. The assessment was
made using a "tried and true" geology
based assessment methodology. The USGS is
required by the Energy Policy Conservation Act
of 2000 to provide assessment of the identified
priority basins in the U.S. Thirty-two basins
have been identified. as priority basins, and
they contain 96% - 98% of the known oil and gas
resources for the U.S. These basins are
prioritized according to resource potential and
the percentage of federal land.
This view of the Bakken changed dramatically in
1995 when oil prospector, Dick Findley of
Prospector Oil Inc., recognized that the
fractured middle dolomitic section of the Bakken
had good porosity and could be a host for
oil.This observation and successive drilling led
to the discovery of the Elm Coulee, Montana oil
field which contains an estimated 43 million
barrels of oil.
Successful Bakken production wells require
vertical drill holes to a depth of 10,000', and
then horizontal hole deflection into the
dolomitic middle Bakken. The horizontal
deflections may extend for another 10,000' or so
in order to tap the oil from the porous and
fractured dolomite. Bakken wells typically cost
$5 - $6 million each depending on required
completion work.
Horizontal drilling alone is not the key to
successful production. The determinative factor
is the multiple zones of fracing (induced
fracturing) that allows oil flow from separate
zones by utilizing drill hole swell packers that
can be used to isolate zones so flow can be
enhanced by managed stimulation (water and/or
gas injections).
Interestingly, the Energy Policy Act of 2005
states that the same methodology must be used in
assessing the Bakken formation as what was done
to assess the other priority basins. This
insistence on using the same methodology
suggests that the latest technological advances
in resource modeling have not been used in this
recently completed assessment.
Using a geology-based assessment methodology,
the USGS reported in April 2008, that the Bakken
now contains an estimated mean undiscovered
volume of 3.65 billion barrels of oil, 1.85
trillion cubic feet of associated/dissolved
natural gas, and 148 million barrels of natural
gas liquids.
The oil in the Bakken is considered to be a
continuous oil accumulation which is spread
throughout the formation as opposed to a
conventional oil accumulation which occurs as
discreet pools. The spread out nature of the
Bakken oil makes it expensive to recover, and
may limit the amount that can be produced.
According to the MMS there were 7,457 active oil
and gas leases as of June 8, 2008. Of those only
1,877 leases were classified as producing. In
FY2007 the MMS collected and distributed $11.45
billion in revenue from energy production on
Federal and American Indian lands, and from the
OCS. Annually revenue from leases is distributed
to American Indians and states on a regular
basis. This lease revenue is generated from
royalties, rents, bonuses (revenue generated
from oil and gas lease sales), and other money
collected by the MMS. The distribution of
revenues associated with onshore Federal lands
is split 50-40-10, with 50% of the money going
to the state where the lease occurs ($2 billion
to the states in 2007). FY2007 revenues are also
distributed to various Federal special-use
accounts, such as the Land and Water
Conservation Fund ($900 million), the Historic
Preservation Fund ($150 million) and the
Reclamation Fund ($1.5 billion), and to the
General Fund of the U.S. Treasury ($6.8 billion)
The breakdown of the FY 2007 revenue collected
by the MMS included a record $4.4 billion in oil
royalty revenue which surpassed the $3.9 billion
in FY2006. Additional FY2007 revenue included
$4.6 billion from natural gas royalties; $900
million in bonus revenues; and annual rental
revenues of $267 million.
Regarding leases on government land, oil and gas
companies pay billions of dollars for the rights
to explore on federal lands. If a company does
not produce within the term of the lease, it
must give the lease back to the government, and
the company does not get its investment back.
There are considerable risks and challenges
involved in finding and exploring for oil and
gas. There are no guarantees that a particular
lease will contain hydrocarbons. It is not
unusual for a company to spend in excess of $100
million only to drill a dry hole. A company may
only have limited geologic knowledge about the
leased acreage unless previous work has been
done in the area by the company, or information
has been acquired from another operator.
Companies are not in the habit of spending money
evaluating government land until a lease has
been acquired. Companies can take several years
to determine whether or not a lease warrants
drilling. In some cases they may attempt to
joint venture their lease and get a partner to
put up the funds to drill.
In the lower 48 states about 85% of the OCS and
67% of onshore federal lands are off-limits or
impose significant restrictions toward
development.
In July 2008, the Bureau of Land Management
(BLM) provided written Notice of a Competitive
Oil and Gas Lease Sale that will be held on
September 9, 2008 in the Reno, Nevada at the BLM
Nevada State Office. The leases will be issued
for a term of 10 years, and they will be allowed
to continue beyond the 10 year term if oil and
gas is produced in paying quantities on or for
the benefit of the lease. Lease rates are $1.50
per acre for the first 5 years ($2 per acre
after that) until production begins. If your
bonus bid was more than $2 per acre, the full
amount plus the first year's $1.50 acre advance
rental is due immediately following the sale.
The bid amount above $2 must be paid within 10
days of the sale.
Once a lease is producing a 12.5% royalty is
charged on the removed or sold production.
In the past two years the BLM has experienced a
sharp increase in demand for natural gas
drilling permits, and expects that demand to
continue
The American Petroleum Institute contracted with
Ernst & Young LLP to prepare an analysis of
the oil industry's historical investment trends
and other uses of cash flow. Over the 11 year
period 1996 through 2007, the 5 major companies
(BP, Chevron, ConocoPhillips, Exxon Mobil and
Royal Dutch Shell) had $712 billion in new
investment. Over the same period these companies
had a net income of $705 billion, and cash flow
from operations of $1.18 trillion.
New investment exceeded net income every year
between 1996 and 2007. The increased demand for
energy occurs at a time that the U.S. oil
companies are facing significant constraints as
to where they can explore in the world and must
comply with ever increasing constraints imposed
by the host country, and face increasing
geopolitical risks.
The U.S. oil and gas industry is also facing
environmental expenditures. Since 1990 the
industry has invested more than $160 billion
toward improving the environmental performance
of its products, facilities, and operations. In
2006 the industry spent $11.3 billion
implementing new technologies, creating cleaner
fuels and funding environmental initiatives.
America's oil and natural gas industry is one of
the world's most capital-intensive. Companies
that participate routinely invest billions of
dollars each quarter into exploration, research,
development and technology. A single offshore
platform in the Gulf of Mexico, designed to
operate in thousands of feet of water can cost
more than a $1 billion to develop. In recent
years companies like Exxon Mobil are reporting
record quarterly earnings. For the second
quarter of 2008, Exxon Mobil reported record
quarterly earnings of $11.97 billion on total
revenues of $138 billion. Exxon Mobil returned
to their shareholders in the second quarter
$10.1 billion through $2.1 billion in dividends
and share re-purchases.
The earnings are immense but not out of line
based on what other industries earn. A review of
first quarter earnings by industry, according to
the U.S. Census Bureau and Oil Daily indicates
that the oil and natural gas industry earnings
were 7.4% of sales. Pharmaceutical and medicines
reported earning of 25.9% compared to sales. All
manufactures, not including autos, reported
earnings of 8.6% compared to sales.
A strong oil industry is good for the U.S.
Imagine what the consequence would be if our oil
companies were encumbered with a weak financial
structure like our auto industry which once
dominated world production and sales.
Big oil is good for America.
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Management Consulting Firm
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| NYSE
GOLD PRODUCER NEWS
|
 July
31, 2008: Agnico Eagle Mines Ltd (AEM)
purchased 12,222,222 common shares of Stornoway
Diamond Corporation at a price of CDN$0.90 per
common share. AEM received an additional 527,947
common shares of Stornoway in satisfaction of
accrued but unpaid interest on the convertible
debentures (CND$10 million) obtained by AEM in a
private placement prior to their redemption. As
a result of the transaction, AEM increased their
stake in Stornoway from 27,520,809 (13.6%)
common shares to 40,270,978 (17.7%). AEM
acquired the Stornoway shares for investment
purposes only.
August 1, 2008:
AngloGold Ashanti Ltd (AU) announced that in
terms of JSE Listings Requirement 3.63, AU,
director Mr. S Venkatakrishnan has exercised
share options, after having received clearance
to do so in terms of Listings Requirement 3.66.
The options were granted in terms of the AU
Share Incentive Scheme. Venkatakrishnan has
elected to exercise the options granted to him
and to use the proceeds to purchase AU shares in
his own name.
August 6, 2008:
Barrick Gold Corp (ABX) has entered into an
agreement to purchase oil and gas assets
representing approximately 900 barrels of oil
equivalent (BOE) per day at Sturgeon Lake,
Alberta, from Daylight Resources Trust for $87.5
million in cash. This transaction follows ABX's
$410 million offer for Cadence Energy Inc. and
will bring ABX's total oil and gas production up
to around 4,500 BOE per day, which represents
about 30% of ABX's annual fuel consumption.
August 8, 2008:
Harmony Gold Mining Ltd (HMY) announced Newcrest
Mining Ltd has acquired its initial 30.01%
interest in the exploration and mining joint
venture in the Morobe province of Papua New
Guinea (PNG). The announcement follows
Newcrest's payment of $230 million to HMY and
the completion of all necessary steps to achieve
the Stage 1 requirement of the joint venture.
Newcrest will increase its interest in the joint
venture to 50% by solely funding all project
expenditures up to $306 million, until the date
of first production from the Hidden Valley mine.
Hidden Valley production is scheduled to start
in mid-2009. The joint venture assets, which
will be operated under the name Morobe Mining
Joint Ventures, include the Hidden Valley gold
mine, the Wafi Golpu copper/gold deposit and
other exploration properties in the Morobe
province of PNG.
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| AMEX
GOLD PRODUCER NEWS
|
 August
8, 2008: Eldorado Gold Corp (EGO) has
purchased an additional 2,000,000 shares of
Brazauro Resources Corporation for $0.42 per
share. This represents approximately 2.3% of
Brazauro's issued and outstanding common shares
at July 31, 2008. EGO will own 12,304,000 common
shares representing 14.4% of Brazauro's issued
and outstanding common shares. EGO also owns
4,400,000 Warrants and if EGO decides to
exercise all of the Warrants, it will own
16,704,000 common shares of Brazauro,
representing approximately 18.6% of Brazauro's
issued and outstanding common shares.
August 21,
2008: Apollo Gold Corp (AGT) completed
its private placement in Canada of Flow-Through
Shares by selling 17,000,000 Flow-Through Shares
at CDN$0.50 per share for a total of
CDN$8,500,000. AGT intends to use the gross
proceeds for the pre-strip of the Black Fox open
pit mine and for exploration at Black Fox.
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| NASDAQ
GOLD PRODUCER NEWS |
 August
21, 2008: DrdGold Ltd (DROOY) announced a
25% increase in attributable ore reserves from
6.3 million ounces (Moz.) in 2007 to 7.9 Moz. in
2008, as well as a slight increase in mineral
resources, up from 54.2 Moz. in 2007 to 54.7
Moz. in 2008. Total attributable ore reserves
from Ergo Mining increased by 271% to 2.6 Moz.
The attributable underground reserves rose from
0.5 Moz. to 1.2 Moz. due to the conversion of
the Ergo Mining resources into reserves, and the
attributable surface reserves from 0.2 Moz. to
1.5 Moz. owing to the inclusion of the Elsburg
tailings complex, which will be mined by Ergo
Mining.
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| INSIDEMETALS.COM
WEBSITE UPDATES
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 WEBSITE
UPDATES
PAID SUBSCRIBER RESOURCES: The Business
Summary for Richmont Mining Inc. (RIC). has been
updated on the website, and now reflects its
reported operating and financial results for the
2nd quarter of 2008.
Paid subscribers can view this update by
clicking the "All Gold Stocks" button
bar under the "Subscribers Resource"
area on the left margin of the website. This
will take the user to the Index of listed gold
companies where the subscriber can then use the
"Quick Nav Bar" on the Index Page and
then click on "B" to view the Business
Summary for the requested company.
New Ranking
Numbers & Financials: Year-end 2007
annual report and/or SEC 10-K' financial data
has been added to the InsideMetals.com website
and new Ranking Numbers have been compiled. The
updated financial data can be viewed by paid
subscribers by using the button bars on the left
margin of the Home Page and clicking under Gold
Subscriber Resources by Performance Table year
that the investor wants to view. Performance
tables can also be viewed by selecting the All
Gold Stocks button which will take you to an
Index Page that allows for Quick Navigation of
the site.
InsideMetals.com has compiled annually the
performance of the Gold Producer Stocks it
reports on since 2005. Since 2005 several Gold
Producer Stocks have had stock price gains over
300%. The best performing InsideMetals.com stock
since 2005 is Agnico-Eagle Mines Ltd. (AEM),
which has had a gain of 325%. Eldorado Gold Corp
(EGO) is the best performing Gold Producer
Stocks year-to-date with a stock price gain of
25%.
For each company new Ranking Numbers have been
computed that reflect their financial
performance in 2007. A positive ranking number
indicates that the company generated a profit.
Companies with more positive ranking numbers
will tend to perform better as investments than
companies with less positive ranking numbers.
Companies with negative ranking numbers should
be carefully studied using the InsideMetals.com
Business Summaries. There may be factors that
have resulted in positive stock performance in
anticipation of future results.
The Ranking Numbers and financials can be viewed
by going to the Index Page and navigating as
explained below:
To view an individual company's 2007 financial
data, go to the large table listing "All
Gold Companies" and click on "F."
To view the 2007 financial data, compiled by
Stock Exchange, go to that table and click on
the link to the appropriate exchange or click on
the link to "All Gold Companies."
For those newsletter subscribers who are not yet
subscribers to InsideMetals.com, the publication
of these ranking numbers in the website will
assist investors in identifying mining stocks
that are undervalued, especially as a result of
the recent decline in gold prices.
Junior Gold
& Minerals Stocks Shopping Mall: On
August 21, 2008, InsideMetals.com announced the
addition of four Junior Gold Companies to its
Gold and Mineral Stocks Shopping Mall which is
available to all viewers of the website and can
be accessed by clicking on its icon located on
the right side of the website's Home Page. The
Gold & Mineral Stocks Shopping Mall contains
the names of 133 exploration companies and links
to each company's website. The companies are
categorized as to whether they are exploring for
"Gold" (precious metals) or
"Minerals" (copper, lead, zinc,
molybdenum, and/or industrial minerals), and are
classified as Prospector, Explorer, or Developer
to reflect the stage of their project's progress
toward becoming a producing company. The
exchanges where the companies trade at are also
listed and linked for easy access.
The
companies added include:
Explorers
Osiko
Mining Corp.: is listed on the
Toronto Stock Exchange. On August 11, 2008,
Osiko announced positive drill results from its
definition drilling program at South Barnat, a
separate gold mineralized zone located
approximately 1200 meters northeast of the
center of its Canadian Malartic deposit in
Quebec which contains an inferred resource of
8.4 million ounces of gold. The press release
includes results from 8 new drill holes,
including 2.03 g/t gold over 93.6 meters, and
1.87 g/t gold over 140.5 meters.
Virginia
Mines Inc.: is listed on the Toronto
Stock Exchange, and the Frankfurt Exchange. On
July 14, 2008, Virginia announced that it has
granted 46,000 stock options to its directors,
officers, and 104,250 stock options to
employees, and service providers. Each stock
option entitles the holder to subscribe to one
common share of the company's stock at a price
of $5.41 per share. These stock options are
valid for a period of 10 years.
Prospectors
Azimut
Exploration Inc.: is listed on the TSX
Venture Exchange and the Frankfurt Exchange. On
July 30, 2008 Azimut reported the discovery of a
2.4 km-long mineralized zone on its North Rae
uranium property in the eastern part of the
Ungava Bay region of Nunavik, Quebec. This
discovery confirms the district-scale uranium
potential of the region. Azimut is an active
Gold and Uranium Prospector with over 50
projects in Quebec.
Everton
Resources Inc.: is listed on the
TSX Venture Exchange. On July 3, 2008 Everton
announced the start of a 6,000 meter diamond
drilling program in the Dominican Republic. This
40 to 50 drill hole program will test multiple
gold and polymetallic targets on the El Llano,
La Yautia, Fresso and Ampliacion Pueblo Viejo
properties.
The above companies are all actively exploring
in Quebec, Canada. Three of these companies,
Azimut, Everton, and Virginia all have projects
in the James Bay area adjacent to Goldcorp
Inc.'s Elenore gold deposit which hosts an
estimated 3.7 million ounces of gold.
The grouping of companies by classification on
the website allows the user to easily compare
companies at comparable stages of development.
Some companies are listed more than once as they
trade on multiple exchanges or they have
projects other than precious metals.
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We
hope you have enjoyed our newsletter.
The newsletter will be published next on
September 13, 2008
Until next time!!!,
InsideMetals
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