drilling business article

Hi Guys

Did some researching and came across two very intresting articles. One of the articles is considerably older but the other is a new article dated back in March, no new information but it does help explain the companies drilling business better. I will post each article seperatly as they are quite large.

Cougar jumps on Uruguay opportunity
Michael Quinn, 21 April 2010

WHILE the clich? goes that it?s those providing the picks and shovels that mostly make all the money in the mining sector, Brazil gold explorer and drilling company Cougar Metals is sticking by its plan of being a self-funded explorer first and foremost ? despite winning a big drilling contract.

Executive chairman Randal Swick confirmed the self-funded exploration strategy remained in place (so that shareholders won?t be diluted), despite the company winning a drilling contract earlier this month that Cougar claimed will see revenue of $US7 million generated by the end of the year.

Cougar was capitalised this week at $A10 million, up about 50% on what it was prior to the deal that sees it drilling 75,000m in Uruguay for an unnamed magnetite hopeful. In essence, the deal will see Cougar end up with ownership of two diamond rigs and one RC rig, plus undisclosed cash, for carrying out the drilling. The program will also require hiring of an additional rig, and mobilisation of one of Cougar?s existing RC rigs.

The new rigs will be acquired via the advancement of a $US2 million, interest free loan from the magnetite client, with repayment considered completed by the drilling of 62,500m.

By mid-2010 Cougar?s drill fleet will include eight surface diamond rigs and four surface RC rigs, with eight of the 12 rigs owned and four on hire.
Swick indicated to HighGrade that the initial plan of establishing an RC drilling business in the diamond drilling-strong Brazil had been less than successful to date.

?RC (drilling) is still not very accepted at all in the Brazilian market,? Swick said. ?As much as we?d like to offer RC services, the demand just isn?t there. There is not enough demand to bring an RC rig on spec into that country. If we secure a long-term RC drilling contract, than great, we?ll bring a rig in. But to have a large RC rig in there to service the contract drilling sector is not that appealing to us at the moment.

?Hence we are focusing on diamond because that?s where the desire is. In Uruguay, it is a bit different. We?ll have about 3-4 RC rigs working down there and that will give us the opportunity to showcase RC for the Brazilian operators.
?What we?re also expecting is that from Uruguay we can start looking at other markets within South America and start tapping into some of those ... Chile, Colombia, Peru, Argentina.

?Brazil is a bit of an enigma in South America ? Portuguese speaking and that is not the only thing that is radically different. There is a very high barrier to entry. Brazil very much marches to the beat of its own drum. There is not as much cross pollination of ideas in Brazil compared to other countries.

?It?s perhaps not in the Brazilian geologist?s interest to introduce something new. It?s a risk for them, they could lose their job. I think there is a natural resistance to change no matter where you go. Even in Australia.
?But change does eventually come. Twenty years ago there was very little RC drilling in Africa.?

Swick said the setting up of the business in Montevideo would allow for creation of a Spanish-speaking drill crews able to travel easily elsewhere in South America.
Meanwhile, he remains bullish about the company?s gold exploration ground in Brazil, with the company holding ground that was contested by third parties. Four geologists are on the ground undertaking early stage exploration and planning geophysical surveys, with drilling not expected before August.

Cougar raised $A4.9 million (before costs) via a rights issue completed in February, with the vast majority of the shares on offer ending up with the underwriter Patersons and sub-underwriter Savvy Capital ? the latter being a Swick family member. Rosanne Thelma Swick is now Cougar?s biggest shareholder, with a 46.08% stake in the company.

GB