ONE of the constants of living under the shadow of Pure Speculation is what the Americans call Monday morning quarterbacking, and in our case this involves being told -- usually in no uncertain terms -- where we got the wrong end of the stick.
Don't misunderstand; we are thrilled to know that someone out there is reading this every week (and especially those who, rather than part with $1.50 for a copy of the paper, email in outrage that the column is late being posted on the website).
Three years ago, when this column had just begun -- yes, we know, it seems longer, much longer -- one of the earliest such Monday morning emails was to take Pure Speculation to task for publishing an item about a history of oil slicks being sighted off the NSW coast from Newcastle.
We said that Bounty Oil & Gas (BUY), which held the exploration licence for that offshore area, believed this was a big lead, that the slicks were caused by natural seepage from the seabed. The licence area had been dropped in the early 1990s by Santos (STO), which, although it had found some gas, was too heavily focused on the Cooper Basin at that time.
Nonsense, came the emails. Those slicks were more likely from ships discharging oil into the sea. And there the matter rested.
Bounty is now in joint venture with unlisted Advent Energy, which is controlled by listed pooled development fund MEC Resources (MMR). Now the quest for (mainly) gas but also some oil off this part of the NSW coastline is getting serious. And Queensland coal multi-millionaire Ken Talbot, through his private investment company, has taken a 10 per slice of Advent.
MEC believes there could be more than 16 trillion cubic feet of gas and has started on the road to raising serious money by mandating Pareto Securities of Norway as the lead broker for Advent's capital raising. Advent has the stake in the project as MEC's fund status (free of capital gains and dividend taxes) prevents it from operating a business.
Pareto has raised some very big money for clients in recent years, and big sums will be needed given that the MMR-BUY permit covers 8100sqkm. Good timing, too, with the cost of drill rig hires being about half what it was a few years ago.
Seems like there's more to this story than just a couple of bulk carriers discharging from their bunkers.
Gold investors, take heart
CASEY Research, based in Arizona, has been peddling financial advice for 30 years, and it's one of the more authoritative commentators found on precious metals websites.
We liked their latest take on gold, triggered by a newspaper business editor lecturing one of their analysts on what she saw as the foolishness of investing in the yellow metal. Gold is not a good investment, she argued. That misses the point, replied the Casey people, because it's not meant to be an investment; rather, it is a way to preserve your purchasing power.
A few examples. In 1979, gold averaged $US306/oz. That bought an average full-sized bed. Thirty years later, an ounce of gold (about $US950/oz) would still buy you such a bed.
Take a longer time frame: in 1000BC, King Solomon paid 150 shekels (or 55oz) of silver for each army horse he bought. Today, a riding horse can be bought for about $US800, or roughly Friday's value of 55oz of silver.
In addition, the argument continues, gold can't be counterfeited, it takes 1062C to melt, doesn't need to be fed, it's portable and it's beautiful (just ask an Indian bride).
So shareholders in gold producers should feel reassured. Joining those ranks are backers of Morning Star Gold (MCO), where mining is now under way. It's the first commercial production from the historic Morning Star mine, 120km northeast of Melbourne, since the former Western Mining shut down operations there in 1959.
Samples from the reefs far below the surface have assayed up to 1155 grams/tonne.
The company also has the old Wallaby mine. A recent sample returned 79g/tonne gold.
Wallaby has not been drilled to depth.
And gold producer Troy Resources (TRY) has just declared its 10th consecutive fully franked dividend. Quite rightly, the company claims this is an amazing record for a junior gold producer.
New attractions
INVESTORS are spoiled for choice these days. Where once it was pretty much gold and base metals, nowadays there are all the speciality metals (molybdenum, tungsten, rare earths), uranium and the newcomers, coal-seam gas and underground coal gasification.
In its latest weekly client note, BGF Equities makes the point that the market again has a mind of its own and doesn't want to listen to economists' warnings or pessimists. It notes that the coal-seam gas sector is now well on the way to being a supplier for several mooted liquefied natural gas projects.
In the past few days we have seen Westside Corp (WCL) announce the expansion of CSG exploration with 16 more holes to be drilled in its Bowen Basin properties, while WHL Energy (WHN) can earn up to 51 per cent of a coal-seam gas project in Kansas. This project is in the Cherokee Basin, which has more than 70 producing CSG and shallow oil wells. And Icon Energy (ICN) says it has discovered a new CSG reservoir north of Goondiwindi.
BGF says a less advanced, and therefore more speculative sector, is the underground coal gasification crowd. The report says Linc Energy (LNC) has performed well but that three other good entry points were Carbon Energy (CNX), Liberty Resources (LBY) and Regal Resources (RER). Regal has just lodged applications in Victoria to get approval for its coal-to-liquids project located between Melbourne and Ballarat.
Cudeco takes off
SHARES in Cloncurry copper play Cudeco (CDU) took off again during the week after some exciting-looking drill results, closing on Friday at $4.37. That's a little higher than Foster Stockbroking's "buy at $4.15" recommendation, although it does put a target of $7 on the stock.
Foster's people ask the question that we've all been wondering about: just how big is Cudeco's Rocklands copper project? The answer: like the rest of us, they don't know. But they do take a guess, and that figure is well beyond 100 million tonnes at 1.5 per cent copper, plus gold and cobalt. They think the project is shaping up as a producer of 70,000 tonnes of copper a year for 20 years.
The significance of last week's drilling results was that these confirmed the extension of the ore body at depth. Foster says it expects further announcements from the company that will act as major catalysts for the stock.
Contractors busy again
IN a Diggers & Dealers debriefing note to clients, ABN Amro Morgans said the message from the mining services companies was that the worst was behind them, but that it still remained one of the toughest businesses around with increased competition. It was capital intensive and had low profit margins. But two companies stood out to the ABN Amro boys. These were Sedgman (SDM), on which they have a "buy", and Swick Mining (SWK), which they don't cover.
During the week, Sedgman said it was opening an office in Johannesburg. The contractor has been working on two coal projects in Mozambique and expects to pick up more business in Southern Africa.
But Hartleys does cover Swick and they have a "buy" on the stock. Swick has just secured another drilling contract in Alaska and, with 43 rigs at work in Australia, the contractor is back to its 2008 peak here.
Tailenders
* A URANIUM float! Break out the flags. The drought is over. UCG gas player Carbon Energy, which we mentioned earlier, is spinning its uranium assets off into a new initial public offering before the end of the year. It holds uranium ground in three states and the Northern Territory.
* BIG news for Austin Exploration (AKK) with the successful completion of the first oil well at its Kentucky project. It is expecting its first oil sale before the end of the month.
* LAST week we made reference to the company formerly known as Victorian Antimony Mines (1952-1963), and then as Vam. David Archer at Hillgrove Resources (HGO) reminds us that Vam still lives, having become Hillgrove Gold in 1994 and then acquiring its present name in 2004.
* SO much news, so little space. Much of the overflow -- including an interesting base metals project -- will appear online later today on The Dirt.
The Australian implies no investment recommendation and this report contains material that is speculative in nature. Investors should seek professional investment advice.
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4.9¢ Sentiment: Hold Disclosure: Held
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