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NatGas
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Looks like NatGas prices continue downtrend until mid Oct, then should be time to buy NatGas stocks...
http://www.investorshub.com/boards/board.asp?board_id=5931
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Interesting posts Robry:
Back in April, as we exited winter with record storage, the forward futures were priced at a premium to cash in such a way that, theoretically, an industry insider (one that posessed pipeline capacity rights) could have purchased gas at spot and stored it, sold a futures contract against that stored gas (with the intent of making delivery), and pocketed the difference. Back then (on the last day of march), Henry-Hub futures were priced to premium (vs cash) as follows:
........................3/31............Contract-To
.......................Close.......Cash Premium
......Cash HH...6.980.................n/a
......06-May......7.210...............0.230
......06-Jun.......7.420...............0.440
......06-Jul........7.625...............0.645
......06-Aug......7.777...............0.797
......06-Sep......7.890...............0.910
......06-Oct.......8.060...............1.080
......06-Nov.......9.125...............2.145
......06-Dec.....10.065...............3.085
......07-Jan......10.715...............3.735
......07-Feb......10.710...............3.730
......07-Mar......10.525...............3.545
Theoretically, an industry insider could have purchased spot gas & injected, wrote a winter contract (06-Dec through 07-Mar), and pocketed better than $3 on the headge... IF storage capacity could be found. Trouble was, storage capacity was not to be had, as most storage is probably contracted (if not owned outright) to Distribution-utilities for the sole benefit of their customers. But storage capacity was to be had... for the interruptible-type storage you are looking at, on a short term basis prior to the fall shoulder, and I do remember one night (just for fun) sifting through transactional reports on one of the web sites (believe it was Egan) and found several deals were done.
One month later, the Henry-Hub futures were priced to premium (vs cash) like this...
........................4/30............Contract-To
.......................Close.......Cash Premium
......Cash HH...6.650.................n/a
......06-May........n/a...................n/a
......06-Jun.......6.555..............(0.100)
......06-Jul........6.810...............0.160
......06-Aug......7.055...............0.405
......06-Sep......7.298...............0.648
......06-Oct.......7.663...............1.013
......06-Nov.......9.133...............2.483
......06-Dec.....10.583...............3.933
......07-Jan......11.358...............4.708
......07-Feb......11.365...............4.715
......07-Mar......11.168...............4.518
Notice how the Contract-to-cash-premium decreased sharpley for the 06-Jun through 06-Sep contracts, but increased sharply for the 06-Dec through 07-Mar contracts. I wonder if the difference in performance might be due to a situation where speculators were buying contracts (on strengthening oil prices/fundamentals) while at the same time some industry insiders (with pipeline capacity rights) were selling contracts & buying spot with the intent to deliver.
That would be an explanation as to why at the time natgas held up well (in price) in spite of the record storage, why storage injections continued to be so robust last spring (well above what LDC's would require for maintaining their injections), and why natgas prices would then collapse deeply into demand-reasurrection in August (In essence, writing contracts with the intent to deliver (never cover) would create a "Hot Potato" contract to any speculator who purchased it- a contract that would loose value progressively until another speculator could be found to pass it off to- until finally the price got low enough that some fuel-switching entity would bite on it.)
Now I don't see anything in this that I would think of as "Manipulation". It is more the case of wise industry-insider management taking advantage of the foolishness of speculation, and it probably trims a few cents (per mcf) off of consumers energy bills. (As an asside... I remember as a kid my father repeatedly getting phone calls from boiler-room-style commoddities brokers. He would just laugh it off but a lot of folks had to have been hurt by them... enough to pay all the salaries of the boiler-room-boys at least).
One thing about futures... because for every contract there are two sides, for every profit there is a loss, and for every dollar a trader makes, there will be another dollar lost- probably by the industry (and ultimately passed on to the consumer). This is one big reason I don't trade the futures, because I know where my profits would ultimately come from. Ultimately, futures contracts only transfer wealth, while drilling (E&P's) create it (by creating something new of value- reserves). For reasons of faith and ethics, I find it better to trade the E&P's than the futures.
-Robry825
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Posted as a reply to: msg 6027 by robry825
The opposite effect has been happening lately and has lead to the withdrawals from storage we've seen in 2 of the last 4 weeks. I'm a very active participant in the trading of the these cash-futures spreads and moving storage around to profit for our customers. During the hot spell cash prices were trading well over futures, so we pulled from storage and sold at higher cash prices and bought future months to reinject the gas at lower prices. I believe this was happening a lot, which may lead to stronger than expected injections during Sep and Oct. We'll see.
Another good post Robry.
$4
26% gold stocks
8% physical gold and silver
Was over 70% in gold stocks until June/July when I took profits. Was down to under 20% gold stocks until a few days ago, now buying a bit.
Currently, have high cash balance and diversifying more to natgas stocks.
1st year since inception (Washington Agreement started 7 years ago).
Yes, we may see CB sales in late Sept before fiscal year expires. However, current thinking is 100 tonne shortfall caused soley by Germany not taking its 100 tonne quota. Thus, 400 tonnes would be the revised goal and CB sales should hit this revised goal.
central bank gold sales
about 109 tonnes short YTD to meet 500 tonne/yr "goal"
Slower Selloff By Central Banks Keeps Shine on Gold
By Charlotte Mathews
15 Aug 2006 at 11:21 AM EDT
JOHANNESBURG (Business Day) -- The failure of central banks to sell the full amount of gold they are entitled to in the current year of their sales agreement could be positive for the gold price in future, says the latest gold-hedging report by Virtual Metals Research and Consulting.
An important factor helping to stabilise the gold market in the past few years has been the voluntary signing of sales agreements - which limit how much gold signatories will sell each year - by a number of central banks.
In the year to this September, the signatories were permitted to sell 500 tons of gold but by the end of July they had sold only 331 tons. They cannot carry over the allocation from one year to the next.
Virtual Metals said it seemed unlikely the signatories would sell the full allocation this year - and if they did not, it would not only limit the amount of gold in the market at present but also affect future assumptions about sales by central banks. Previously, the banks had sold their full allocations every year.
Virtual Metals researcher Matthew Turner said reduced selling by central banks was not necessarily a general policy change, but largely reflected the dispute between the German government and the Bundesbank over using Germany’s gold reserves to cut the budget deficit. Once this was resolved, Germany could resume selling its allocation.
What was significant, though, was that other central banks had not taken up Germany’s sales allocation. In the past six months, the gold price has also been supported by big gold producers’ shrinking forward sales commitments.
Gold hedging in the second quarter of this year fell 5.1-million ounces, the largest quarterly decline in Virtual Metals’ records.
Turner said the rapid dehedging supported the gold market because it temporarily reduced supply into the spot market. However, gold producers could not continue dehedging at this pace.
Barrick Gold [NYSE:ABX; TSX:ABX], AngloGold Ashanti [NYSE:AU] and Newcrest [ASX:NCM] were responsible for 82% of the 10-million ounce decline in the global hedge book this year.
Apart from AngloGold, there were also small declines in the hedge positions of other South African producers - Harmony Gold [NYSE:HMY; JSE:HMY], Western Areas [JSE:WAR] and Metorex [OTC:MRXLF], the report said.
Forward selling of gold by producers, known as gold hedging, is a protection measure against a decline in the gold price. It is a controversial strategy, with those against saying shareholders buy gold companies’ stock to gain exposure to the gold price. Also, when the gold price rises, gold hedgers have to mark-to-market their hedge books, which has a substantial accounting effect, and the average gold price they receive will be below that received by nonhedgers.
The effect of producer hedging on the gold market as a whole was analysed by Anthony Neuberger of the London Business School in a May 2001 paper for the World Gold Council. He concluded that pro-ducer hedging probably depressed the gold price in the 1990s, but the effect was too small to explain all of the real decline in the gold price at that time
thanks, you saved me some time and trouble of reviewing Northgates earnings...
Have been buying PMI at these lower prices. No one has posted yet on the 7,595 MTU in fiscal 4Q whereby production exceeded sales. Likely some or most of this will turn around in fiscal 1Q and my calcs show 1Q should be most profitable in PMI history, we shall see. I am hopefully, conservatively estimating 3,200 MTU will turn around this quarter (i.e. sales will exceed production in 1Q). Am also assuming PMI will meet its regular 30,000 MTU production goal this quarter, this is more problematic, but certainly achievable, IMO.
http://amarks.homestead.com/files/pmi1.jpg
As for the Almonty/Black deal on Tungsten APT sales revenue, this has been averaging 11.55% of revenue these past 2 quarters. This is a good deal for Almonty, no doubt about it, but is somewhat/partially offset by lower G&A salaries/stock option compensation since Almonty getting paid via this "royalty" and not by salaries/options. I would prefer more transparency as well, but Almonty only getting 11.55% of APT Tungsten revenue at current Tungsten $260 price.
http://amarks.homestead.com/files/pmi2.jpg
Tungsten price is moving up a bit these past few weeks.
http://www.investorshub.com/boards/read_msg.asp?message_id=12565477
Believe PMI is a good speculation at these lower prices, given that fiscal 1Q should be PMI's best quarter ever from mining operations (i.e. before one time adjustments such as last quarters Income Tax Adjustment). We shall see.
COHA Report:
The Upcoming Nicaraguan Elections
The 2006 Nicaraguan presidential campaign leading up to the November 5 election has been book-ended by events wholly unprecedented in Nicaraguan history. In addition to the sudden death of presidential candidate Herty Lewites on July 2, the race has been witness to the division of the two political parties that traditionally have dominated the Nicaraguan political system. This is demonstrated by the addition of three new presidential contenders running on alternative platforms. Two of these candidates, Eduardo Montealegre and Edmundo Jarquín, have been extremely successful in courting the support of traditionally partisan conservatives and liberals – thus successfully presenting options to the electorate; while the third, Edén Pastora, has rarely gathered more than 1.5 percent support in the polls. Never before in the country’s modern electoral history has the transcendence of the two primary parties, the Sandinista Liberation Front (FSLN) and the conservative Constitutional Liberation Party (PLC), been so challenged. This splintering has been largely caused by the popular disillusionment with the endemic corruption that has plagued these parties since the early 1990s. Thus, as the country recuperates from Lewites’ death, and prepares to see the presidential race through to the end, the Nicaraguan people will be given the unique opportunity to break with a past filled with venality and political scandal and pursue a future of political plurality and accessibility.
Three’s Company
The formation of the bipartisan system that has dominated Nicaragua in recent years began in the late 1980s with the development of a conservative electoral opposition to the revolutionary Sandinista movement. However, the solidification of two-party dominance was not orchestrated until 1999, when a cynical political pact, called el Pacto, was brokered between the PLC’s Arnoldo Alemán and the FSLN’s Daniel Ortega. This undemocratic arrangement, which was negotiated by self-serving political elites to the detriment of the electorate, has been continually characterized by corruption and represents a telling blow to free electoral process and legitimate governance.
The 1999 political pact between Daniel Ortega and Arnoldo Alemán (president from 1996 – 2001 who is now facing 20 years in jail for fraud and embezzlement) is the culmination of years of political venality from which Nicaraguans are clearly trying to escape with the upcoming election. The agreement united their two parties in the National Assembly and gave Ortega and Alemán control over nearly 90 percent of the legislature – granting the unified duo near dictatorial powers over the nation. The leaders used their majority control for the cynical assertion of conclusive influence over many facets of Nicaraguan public life, including the Supreme Court and the Supreme Electoral Council (CSE). Their sway even gave them the political clout necessary to exert power over the executive, should it deviate from their political agenda. The pact also ensured both Ortega and Alemán seats in the national assembly for the next two terms, a position coveted by both men because of the parliamentary immunity that it afforded. Because of this privileged protection, Ortega and Alemán avoided prosecution for various crimes committed in previous years, Ortega for sexual abuse charges and Alemán for fraud and embezzlement.
The reaches of the pact have also, predictably, extended into Nicaraguan electoral politics – a fact that will surely have consequences for November’s election. In a recently released report by the Organization of American States (OAS) in preparation for their involvement in the observation and monitoring of the November 5 election, the body highlighted several deficiencies in the Nicaraguan Supreme Electoral Council (CSE) that can most likely effect the upcoming election. Most notably, the OAS reported power struggles within the CSE that bode poorly for the body’s legitimacy. Ortega and Alemán used the 1999 agreement to capture the CSE by overhauling the organization of the group, agreeing to increase the number of members, which provided each man the opportunity to select three allies to sit on the council. The seventh member, Roberto Rivas, generally regarded to be neutral between the two political parties, was selected by Ortega and Alemán as the swing vote – the proverbial Sandra Day O’Connor of the CSE. In the past year, however, Rivas has shown a preference toward Ortega’s FSLN party, thus tilting the scales of the CSE in favor of Ortega and creating both a dramatic rise in public mistrust of the body’s legitimacy and suspicions surrounding the Nicaraguan electoral system as a whole.
The Ortega and Alemán-controlled National Assembly passed legislation in January 2000 that increased the electoral threshold for political parties seeking to participate in the National Assembly, further establishing the dominance of the FSLN and the PLC. Lastly, Ortega saw to the passing of legislation through the National Assembly that lowered the percentage necessary to win the presidency in the first round to 35 percent of the popular vote (In the case that no one candidate reaches 35 percent of the vote, the two top candidates are subject to a runoff election). This is a key advancement for his position in November as his party has, in past elections, attracted between 35 and 40 percent of the vote, just falling just short of the previous presidential threshold. Thus, with the new requirement now in place, and with his predictable support base, Ortega’s chances for victory are greatly increased. The duopoly created by means ofel Pacto, effectively brought about the gutting of Nicaraguan democratic legitimacy. Ortega and Alemán’s negotiation of a closed political system and their resulting complete dominance represents a regression into the power politics of the Somoza era.
The Demise of the Open Political Process: The Case of the FSLN
In addition to the damage done to the Nicaraguan political system by way of el Pacto, Ortega and Alemán have further ensured their dominance in Nicaraguan politics by limiting political participation within their own parties. This has primarily been the case with the FSLN party which, once a leftist revolutionary movement representing the hope of political freedom for Nicaragua, has, through the internal supremacy of party leader Daniel Ortega, become the embodiment of the caudillo politics that have long plagued Nicaragua.
Many of the FSLN’s fundamental political failures are due to a lack of internal democratization, which has given rise to the authoritarianism of Daniel Ortega. For example, the Ortega-dominated Consejo Sandinista Nacional (the highest decision-making body of the FSLN) has maneuvered the expulsion from the party of any other potential presidential candidate who could pose an effective challenge to Ortega. Most notably, the late presidential candidate Herty Lewites, who was a key actor in the revolution and closely collaborated with Ortega during the 1980s, was expelled from the party in March 2005 after expressing his intentions to contend for the FSLN candidacy in the 2006 presidential election. In the midst of this process, Lewites told Washington D.C.-based social justice group the Nicaraguan Network that he would continue his demand for an FSLN primary election, proclaiming, “I will do everything I can to liberate the Sandinista party from the current internal dictatorship it has to put up with.” Lewites’ presidential bid was supported by many important ex-FSLN leaders such as Dora Maria Tellez, Sergio Ramirez, Ernesto Cardenal and Carlos Mejía Godoy, who were all once influential revolutionaries before similarly defecting from the FSLN because of Ortega’s dominance and his cult of personality politics. Lewites ultimately joined the presidential race, albeit under an independent ticket aligned with the Movement to Restore Sandino (MRS), the premier FSLN-dissident party of Tellez, Ramirez, Cardenal and Godoy.
The support that Lewites attracted, both in his demand that a primary election be held within the FSLN and in his subsequent independent candidacy for Nicaragua’s presidency, makes it clear that many within the party are dissatisfied with the current reign of Daniel Ortega and have sought ways to unseat him. In July, in opposition to Ortega’s traditional commemoration of the 1979 revolution in Managua, former Sandinistas held an alternative celebration in the city of Masaya. This strategic move was a symbolic protest of the ascendancy of Ortega over the revolutionary party. After the celebration, in an interview, former Sandinista and prominent MRS member Victor Hugo Tinoco said, “Daniel and his group don’t fulfill their promises …The majority of them have become millionaires. They are now just a powerful economic group whose only goal is to protect its interests by using anti-democratic means to control the party, and by using false leftist speech and inflammatory anti-American rhetoric to gain the support of Nicaraguan society.” Ortega’s chokehold over the party has frustrated attempts to reform from within, and has thus caused political diversity to be sought after in the rise of the MRS party and its current push for the presidency.
MRS: A Third Way?
The potency of the MRS’ presidential campaign was delivered a massive blow when its preferred candidate, Herty Lewites, died suddenly of a heart attack on July 2. However, while mourning Lewites with appropriate solemnity, party leaders did not hesitate to name his running mate, Edmundo Jarquín, as Lewites’ successor, and national folk singer and leftist political activist Carlos Mejía Godoy as its new vice-presidential candidate. Lewites was known for his charisma, humor, and honesty, three traits that made him a unique and lovable politician, and in this sense, he leaves Jarquín with large shoes to fill. However, MRS party leaders, as well as the candidate himself, have expressed their confidence that Jarquín is very capable in clinching the race that Lewites began.
The independent candidacy of Herty Lewites had gained momentum as a result of deepening divisions in the Sandinista party. Lewites, who participated actively in the revolution alongside Ortega and remained in the party until 2005, possessed strong leftist credentials which offered a potent challenge to Ortega on his own ideological turf. After expulsion from the FSLN thwarted Lewites’ bid for the FSLN candidacy, Lewites attracted the support of other prominent Sandinista dissidents, small businessmen and traditionally leftist voters. It is uncertain, however, whether that strength will transfer to his successor and translate into a victory for the MRS party.
The MRS platform is centered on ridding the Nicaraguan political system of the corruption that has been a legacy of el Pacto. It also seeks to empower Nicaraguan civil society by opening up the political system and reintroducing a democratic tendency in which the common citizen can influence the political process.
(For more on the life and death of Herty Lewites, and the prospects of the MRS party in the upcoming election, please read: “The Death of a Good Man” by the same author.)
Arnoldo Alemán and the Splintering of the Right
Like the FSLN, the conservative PLC party has seen a recent fallout as a result of Arnoldo Alemán’s iron-fist hold on the reins of the party, combined with the widespread disillusionment surrounding Alemán due to a series of corruption scandals leading up to the 1999 pact with Ortega.
In 2002, Alemán was sentenced to 20 years in prison for a myriad of crimes he committed during his presidency (1996-2001) – derelictions which then drove his all-consuming quest for impunity and which led him to the 1999 pact with Ortega. These offenses included embezzling millions of dollars from the Nicaraguan state, nepotism, money laundering, and using illicit funds to influence the 2001 presidential campaign of Enrique Bolaños. Ironically, Alemán’s trial and conviction were helped along by his protégé and successor, then-president Bolaños, who pursued an anti-corruption campaign after splitting from the PLC early in his presidency. The National Assembly, encouraged by Bolaños, voted to withdraw Alemán’s parliamentary immunity, thus forcing him to stand trial. The ex-President is now serving time under house arrest due to a medical condition. However, such disgrace did not dislodge him from a position of plenary power within the PLC, despite the fact that the taint of corruption was fast eroding his popular support outside the party.
With the public acknowledgement of Alemán’s crimes and his conviction in 2002, many prominent PLC members concluded that the popular disillusionment surrounding the party leader would stain their political careers as well. Therefore, in the aftermath of Alemán’s presidency, prominent party members defected from the PLC in order to escape the former leader’s disgrace, as well as to pursue their own political careers. Most notable of those who split from the party is the country’s current president, Enrique Bolaños, who broke with PLC leadership during his presidency to form his own party, Alliance for the Republic. Furthermore, Eduardo Montealegre, foreign minister in Alemán’s administration, broke from the party to run for the presidency in the coming election, on a conservative platform: the Nicaraguan Liberal Alliance – Conservative Party (ALN-PC).
Additionally, the PLC has not managed to effectively coalesce around the Alemán-designated candidacy of José Rizo and running mate José Alvarado, and the pair has consistently trailed in the polls. Furthermore, Rizo and Alvarado, have begun to challenge Alemán’s penchant for authoritarian leadership. Indeed, as the Nicaraguan Network reported on June 6, “The leader of the Liberal Constitutional Party (PLC), former president and convicted felon, Arnoldo Alemán, admitted that his party is going through a period of crisis as a result of disagreements over the list of National Assembly and Central American Parliament candidates for the upcoming election.” Also, in a June 12 presidential debate held in Miami, Rizo took the opportunity to further distance himself from the former president, alleging that the PLC party is moving toward independence from Alemán’s heavy-handed rule. Earlier indicators, however, point to the contrary. The heavy-handed control of Arnoldo Alemán contributed greatly to the splintering of the party for the 2006 elections, and has thus produced an additional challenge for current PLC candidate José Rizo in trying to best his conservative opponent Eduardo Montealegre.
The Rise of Montealegre
Eduardo Montealegre has built his support base largely with those PLC partisans who had become discontented due to Alemán’s unsavory reputation, which has tainted the party’s legitimacy. Running under the banner of the ALN-PC, Montealegre has been consistently second to Ortega in the polls. Furthermore, Montealegre is Washington’s preferred candidate in the race, which has earned him the specific support of U.S. Ambassador Paul Trivelli.
At a June 15 speech given at George Washington University, Montealegre promoted his platform focused on “growth with equity.” He proposes that the fastest and fairest way toward achieving this goal is to employ the neoliberal economic model outlined by the ‘Washington Consensus,’ but with a focus on broad economic growth through the logistical and financial support of small farmers. To combat the country’s legacy of corruption, in particular from within his former party, Montealegre plans to double the budget for the ministry of education. These increased funds will raise the level of primary education in the country and theoretically spread values of honesty and accountability to the youth. In the short term, Montealegre speculates that he will be able to break the hold that Ortega and Alemán have on government agencies by revising the laws and regulations that resulted from el Pacto and by negotiating the ouster of political actors selected by either Ortega or Alemán solely to service their ends. Lastly, he seeks to use ‘growth that permeates’ within all levels of society which would entail increasing the level of public health and national infrastructure by employing methods of grassroots development to support a growing economy.
If anything, Montealegre is an adroit politician – he certainly has Washington convinced of his usefulness, and he respectfully registers in the polls; he appears to be doing a passably good job of convincing the Nicaraguans of the viability of his platform. However, his neoliberal economic model has been employed by three successive conservative presidents – Violetta Chamorro, Arnoldo Alemán and Enrique Bolaños – with few equalizing effects. Nicaragua remains one of the poorest countries in the hemisphere, with awesomely high wealth disparity rates. Montealegre has struggled to distinguish his campaign promises from the failed ideas of his predecessors – but his pledge of ‘growth that permeates’ is mostly tepid and relatively unsupported. Less ambiguous is the fact that Montealegre is specifically campaigning against an Ortega victory, and it seems that he will go to any lengths to further discredit the former leader. It is also clear that, to some extent, the success of his campaign has been augmented by Washington’s support and the U.S. embassy’s tireless involvement.
The Constant Specter of U.S. Involvement
In keeping with the precedent that the 1980s Contra War set for modern U.S.-Nicaraguan relations, Washington has once again proven to be a force of intervention in Nicaragua’s internal affairs – most recently targeting the 2006 campaign. Spearheaded by Ambassador Trivelli, the U.S. has thrown aside all diplomatic niceties to aggressively support Montealegre, while displaying an unwavering determination to prevent leftist, Daniel Ortega from returning to power. Trivelli has attempted to unify the right against the threat of the former revolutionary’s election, by convening meetings between the divided right-wing factions of the presidential race, acting almost as if he were a paid political spin doctor charged with maintaining the conservative status quo. According to the Nicaraguan Network, in an effort to coerce them to unite against Ortega, Trivelli has offered the leaders and candidates of the right-wing factions U.S. financial and technical support. The PLC has been specifically targeted in these attempts to unify the conservative forces; as their candidate, José Rizo, poses the greatest threat to splitting the conservative vote that would otherwise rally behind Montealegre. However, the PLC’s leadership has made one thing very clear: Rizo’s candidacy will stand regardless of U.S. disapproval.
Trivelli has made no secret of the fact that U.S.-Nicaraguan relations would be strained by an Ortega victory in November. This threat is likely to significantly sway the voters’ opinions in favor of Montealegre, considering their memories of Washington’s hardball role in the aftermath of the Contra War, as well as the country’s economic reliance on close trade relations with the United States. Trivelli’s blatant intervention on behalf of the State Department raises questions about his own professionalism, which could come to haunt him in later phases of his career and which comes very close to violating Vienna Convention provisions that “expressly prohibit diplomats from interfering in internal matters of the country where they are assigned.”
(For more on the U.S.’s involvement in this election, please see “COHA Report on Nicaragua” published on June 22, 2006)
As November 5 Approaches…
Despite unyielding pressure from Ambassador Trivelli, at the present time it appears as though this campaign will come down to a competition between the left, divided between Ortega and Jarquín, and the right, divided between Montealegre and Rizo. Most likely, on November 5, no single candidate will reach the 35 percent threshold necessary to secure victory in the first round, though Ortega will probably come close. Thus, the two top candidates, most recently Ortega and Montealegre, will be forced to face each other in a runoff election. It is here that Montealegre will most likely be successful, as he, unlike Ortega, has demonstrated the ability to reach out beyond his traditional moderate support base to constituents from both the far left and the far right. Indeed, Manuel Orozco from the Washington-based Inter-American Dialogue has told the Miami Herald that, “For [MRS voters] to head back to the Sandinista Front would be a betrayal of everything Herty [Lewites] stood for. If anything, they are closer to Montealegre’s position than Ortega’s.” However, the November election remains far from predictable as the most recent polls have shown that over 33 percent of the electorate has yet to make up its mind. In any event, regardless of who is victorious, the ideological splintering within the left and the right has benefited the Nicaraguan people by giving the voting public an alternative to the iron grip of Ortega and Alemán.
- Former head of state Daniel Ortega remains the top contender in Nicaragua’s presidential race, according to a poll by Borge y Asociados. 31.4 per cent of respondents would vote for the Sandinista National Liberation Front (FSLN) member in this year’s election.
Eduardo Montealegre of the Nicaraguan Liberal Alliance - Conservative Party (ALN-PC) is second with 29.1 per cent, followed by José Rizo of the Constitutionalist Liberal Party (PLC) with 15.7 per cent, Edmundo Jarquín of the Sandinista Renewal Movement (MRS) with 15.2 per cent, and Edén Pastora of Christian Alternative (AC) with 1.1 per cent.
In 2001, the PLC’s Enrique Bolaños won the presidential election with 56.3 per cent of the vote. The PLC and the FSLN have traditionally been the dominant parties in the Central American country’s political scene. Montealegre once belonged to the PLC, and the MRS was assembled by former FSLN members.
In March 2005, the FSLN officially designated Ortega as its presidential nominee. Ortega governed from 1985 to 1990, but was a losing candidate in the 1990, 1996 and 2001 ballots.
Yesterday, Ortega claimed that Cuban president Fidel Castro "is active" and "holding telephone conversations with his friends." Castro has not been seen publicly since Jul. 31, when the Cuban government announced a "provisional transfer of duties" to vice-president Raúl Castro, Fidel’s brother, after the president suffered "an acute intestinal crisis, with sustained bleeding" which required immediate medical intervention.
The presidential election is scheduled for Nov. 5. In the event no contender receives 40 per cent of all cast ballots, the first place finisher can only avoid a run-off by holding a five-point advantage over the closest rival.
Polling Data
Who would you vote for in the presidential election if the candidates were these?
Jul. 2006
Jun. 2006
May 2006
Daniel Ortega (FSLN)
31.4%
30.1%
28.4%
Eduardo Montealegre (ALN-PC)
29.1%
24.4%
26.5%
José Rizo (PLC)
15.7%
21.6%
17.1%
Edmundo Jarquín (MRS)
15.2%
--
--
Edén Pastora (AC)
1.1%
1.0%
1.3%
weekly tugsten price
I update it every few weeks, usually after a move in price...
http://www.amarks.homestead.com/files/tungstenprice.jpg
As you know, vast majority of GBN reserves in S Africa. As you likely know, S Africa gold companies sell at a signficant discount to their N American peers. Investors worry about new S Africa royalty and BEE laws. Royalty laws appear to be working out better than anticipated but BEE ownership is more of a problem. Also, Burnstone deposit appears not to be amenable to mechanization and 500,000 oz/yr production which the majors prefer.
To offset the issues above:
1) Burnstone cash cost very low since shallow deposit, even if narrow veins preclude higher annual production ounces.
2) No problems with NGOs, infrastructure, and finding highly capable contractors to quickly permit and build a mine in S Africa. S Africa has expertise/highly qualified mine builders.
3) No problem with financing a mine in S Africa with S African bank debt. S Africa has lenders for new gold projects on attractive terms, IMO.
4) S Africa has better mining laws and political stability than most third world countries.
Central Bank Gold Sales Graph
http://www.investorshub.com/boards/read_msg.asp?message_id=8327291
BI makes a good point, most advanced exploration plays do NOT perform well during mine construction.
The one thing that could make BI incorrect is that GBN gets acquired. This is quite possible given the size of Burnstone PP plus resource ounces, this is a large enough deposit to attract a major...
bill powers interview
http://financetrends.blogspot.com/2006/08/interview-with-bill-powers.html
Nicaragua's Leading Loser
Can a candidate despised by most of his countrymen still win a presidential election? Ask Daniel Ortega.
Friday, August 4, 2006; A16
DANIEL ORTEGA, the failed former Marxist dictator of Nicaragua, ought to be facing a dim political future this summer. He's a candidate for president in elections in November, but he's already lost three previous votes, including the one that removed his Sandinista party from power in 1990. As he has acknowledged, no more than 40 percent of Nicaraguans would ever support him -- most are disgusted by his record of misrule or the charges of corruption and sexual abuse that trail him.
This time Mr. Ortega has the backing of Venezuelan President Hugo Chávez, who has supplied Sandinista-controlled firms with fertilizer to distribute to peasants and offered cut-rate oil. But Mr. Chávez's blessing has proved a liability in a couple of recent Latin American elections, and Nicaragua appears no different: 49 percent of Nicaraguans surveyed in a recent poll said they believed Venezuela was meddling in their country's affairs -- significantly more than felt that way about the United States.
Mr. Ortega, however, has an advantage over the other leftist populists who have tried and failed to take power in Peru and Mexico. Through a patient strategy of corrupt manipulation, he has gained control over much of Nicaragua's fledgling democratic political system and is steadily twisting it to his advantage. Knowing that a majority of voters would never choose him, Mr. Ortega has managed to alter the electoral rules so that he could win election as president with as little as 35 percent of the vote. He has managed to stack Nicaragua's supreme court with his cadres. He has stripped the current president, Enrique Bolaños, of much of his power. Consequently, Mr. Ortega is regarded by many as the favorite to become Nicaragua's next president.
The story of how Central America's poorest country reached this point provides a lesson in the vulnerability of new democracies to cynical and ruthless opportunists. Mr. Ortega's chief gambit has been an alliance with a former right-wing president, Arnoldo Alemán, who was convicted in 2003 of stealing tens of millions of dollars from government coffers. Not allowing his ideological differences with the disgraced president to get in the way, Mr. Ortega sealed a political pact with him. The two leaders' followers in Nicaragua's Congress then teamed up to rewrite the constitution and stack the courts. Until they were constrained by the Bush administration and the Organization of American States, they were preparing to remove Mr. Bolaños from office.
The "pact," as it is universally known in Nicaragua, has produced a healthy backlash: Both the Sandinista party and Mr. Alemán's Liberals have split. The reformers in each party have nominated their own presidential candidates; they include the Liberal party's Eduardo Montealegre, a former finance minister whose commitment to democracy and free markets is unquestioned. The Sandinista challenger to Mr. Ortega, however, died unexpectedly last month, increasing Mr. Ortega's chances of winning by his own rules.
At this point, the best chance of thwarting a ballot-box coup probably lies with the OAS and its member governments, which between now and November must insist on a free and fair election. If Nicaragua remains a genuine democracy, Mr. Ortega will lose.
also, did not include the HL Royalty payable to GBN
NG playing hardball..., nice presentation
http://www.secinfo.com/d1Ze2u.v26b.htm
the good old days of 30% discounts during the summer appear over with EDV... have played EDV purchases over the summer months the past 3 years... but nobody crushing the stock this year, what a shame...
central bank gold sales
my calcs have them 90 tonnes below plan...
Not that Ortega guy again ...
Published July 28, 2006
Sixteen years and three elections ago, war-weary Nicaraguans ousted Sandinistan strongman Daniel Ortega from the presidency. He's been working on a comeback ever since. Now, with the untimely death of a former lieutenant and the largess of (who else?) Venezuelan President Hugo Chavez, Ortega suddenly has a good shot at winning the Nov. 5 election.
Ortega, a former Marxist, came to power in 1979 after helping topple dictator Anastasio Somoza. He spent the 1980s battling the CIA-financed contra rebels in a civil war that left the country in ruin. Accused of corruption and sexual misconduct, he was knocked out of office in 1990. Still, Nicaragua has never been able to get on its feet.
It didn't help that voters in 1996 elected another scoundrel, conservative Arnoldo Aleman. He was convicted in 2003 of embezzling more than $100 million from the impoverished citizens of Nicaragua. Aleman, who is under house arrest, still controls the rightist Liberal Constitutional Party, which dominates the legislature; Ortega's leftist Sandinista Front controls the judiciary.
Under a bizarre left/right alliance dubbed "el pacto," the two former presidents operate as twin strongmen, having dismantled the checks and balances intended to protect the new democracy.
Hopeful signs emerged recently as both parties spawned splinter groups. Eduardo Montealegre, a Harvard-educated banker, left Aleman's camp and founded the center-right Nicaraguan Liberal Alliance Party. Herty Lewites, a former Sandinista guerrilla, Cabinet member and mayor of Managua, was expelled from the Sandinista Front and formed the center-left Sandinista Renovation Movement. Both launched campaigns for president, making the 2006 election an unprecedented four-way race. Even more encouraging, Lewites and Montealegre pledged that they would eliminate el pacto. Fresh air!
In late June, polls showed Ortega in first place, but far short of the 40 percent needed to avoid a runoff, which he likely would lose. Then on July 2, Lewites died of a heart attack. The question now is whether his followers, mostly disaffected Sandinistas, will return to Ortega's fold. If so, the divided conservatives could hand Ortega the election.
Meanwhile, Venezuela's Chavez has gifted Nicaraguan farmers with huge fertilizer subsidies billed as "foreign aid," but channeled through an agricultural cooperative with ties to Ortega. He also offered to send 10 million barrels of oil--on credit--to the energy-starved nation, where gas is $5 a gallon and power outages are a daily occurrence. That offer, too, was brokered through a Sandinista group, and so far the government has refused to let it materialize. Still, Ortega comes across as the good guy, trying to ease the burdens of ordinary Nicaraguans.
Grateful for cheap fertilizer and disgruntled about the stalled oil deal, Nicaraguans nonetheless think Chavez is meddling in their affairs. A poll last month in the political journal Confidencial found that 49 percent think Venezuela is interfering in the election.
U.S. officials, worried about Latin America's swing to the left, have openly criticized Ortega's "undemocratic tendencies" and suggested that his election could cause Nicaragua to lose aid and trade opportunities. Forty-six percent of Nicaraguans think the U.S. is meddling, too. They probably have a point. But it would be a lot easier to butt out if Nicaraguans had a track record of choosing good leaders.
Ortega's status as front-runner is a sign that the electorate has a short memory--and way too little experience with good government.
Great Basin ties up R1bn Burnstone loose ends, begins prep work
--------------------------------------------------------------------------------
Canadian miner Great Basin Gold had started preparatory work at its Burnstone project, a gold prospect on the South Rand portion of South Africa's giant Witwatersrand Basin, but was still awaiting the conversion of old-order rights before it could proceed to first blast.
The R1-billion project, to be built on farms near Balfour, in Mpumalanga, had been explored intensively since its acquisition by Great Basin Gold in late 2002. Since January 2003, a total of 125 090 m of core has been drilled from 261 holes into the resource area. This process unearthed a proved initial resource of 15,1-million tons, grading at 4,61 g/t.
On Thursday, the company, domiciled in Vancouver, but run out of Sandton, announced the completion of two previously-disclosed transactions, which were important to facilitating the development of the prospect.
The first was a settlement agreement for residual amounts owing to landowners and previous mineral-rights holders that dated back to 2002, while the second related to a private placement announced in April.
CEO Ferdi Dippenaar told Mining Weekly in a telephonic interview that four-million common shares worth $2,25 a share and two-million warrants, entitling the holder to purchase an additional common share of the company at a price of $1,80, had been issued to the landowners. The warrants were exercisable for a two-year period and subject to an accelerated expiry should the market price of Great Basin's common shares exceeds $3,60 for ten consecutive trading days. The private placement of some 3,3-million common shares for C$7,5-million was also confirmed as completed.
Dippenaar said the priority was now to move ahead with the development of the property, a process that required confirmation, from the Department of Minerals and Energy, of a conversion of old-order prospecting rights to the new order. Great Basin Gold applicatied for the conversion nearly a year ago.
Once approved, the company would move ahead with mine development and would also apply for full mining rights.
The former Harmony Gold marketing director admitted that he had hoped that the process would have been completed earlier, but indicated that confirmation of its rights was now imminent. For this reason, it had already started with the construction of a portal on site, with mine contractor Scribante advancing this work.
Dippenaar also reported that a new submission for a secondary listing on the JSE should be made this week, which, if accepted by the bourse, should lead to a listing by mid-August.
Initially, Great Basin Gold had hoped to list during July, but the JSE had requested some amendments to its first listing submission.
'Je ne regrette rien'
David McKay
Posted: Wed, 26 Jul 2006
[miningmx.com] -- FERDI Dippenaar has no regrets having left Harmony Gold last year, where he was marketing manager for around seven years. Sceptics would say that’s because he hasn’t started mining Burnstone yet, the gold mine owned by Great Basin Gold, of which Dippenaar is CEO.
The property, situated 80km south-east of Johannesburg, has been part of South African mining’s furniture since the Nineties. First discovered by Gencor, the project was ditched but picked up again by John Handley, a geologist and former stockbroker. Hunter Dickinson, the Canadian firm, took the project and folded it into Great Basin Gold, which also owns two properties in Nevada.
Dippenaar has great hopes. “About 193 holes have been drilled and the understanding of the orebody is probably the best in South Africa. Technically, there’s no real challenge mining Burnstone. You just have to stick to your mining parameters.”
Burnstone has had its problems under Great Basin Gold. Though initial production estimates put the mine at 300,000 oz/year the figure is closer to 214,000 oz/year at full tilt. The adjustment is a function of the full time attention Dippenaar is now giving the project.
Production will be in about two to three years’ time. The current status of Burnstone is that its first phase has been approved, which will involve sinking a 3km decline. Mining starts at 250m below surface but first bulk sampling of 27,000 t will have to be completed. Total expenditure is estimated at about R1bn, of which R800m is project related over five years.
“Burnstone has a 7.2 million oz resource, of which around 2.4 million oz is categorised as reserves. About R8m is being spent improving the knowledge of the orebody,” Dippenaar says.
There’s also the chance of a South African listing. “There’s been quite a lot of interest from the local guys in Burnstone, so we’re thinking of getting a secondary listing,” says Dippenaar. JP Morgan is assisting with the listing.
“Apart from opening up the European market it will also allow Tranter [Great Basin Gold’s South African empowerment partner] to participate in the equity if it wanted to,” says Dippenaar.
____________________
If Ferdi accurate, then production by 3Q 2009 (i.e. 3 years time)
Permitting process and NGO's in S Africa make it much easier and faster to Burnstone mine into production. Even financing with S African debt facility is easier/faster as well.
Believe GBN will be in production by 2010, with any luck, should allow for at least some internal financing via Hollister...
Central Bank Gold Sales
"The ECB’s weekly balance sheet revealed that two subordinate banks sold E25Mm of gold last week, a mere 1.65 tonnes (compared with 5.04 tonnes last week). On the face of it, this suggests the ECB group was not the seller clearly active on the fixes last week, and strongly implies that there is not an intention to meet the WAG2 quota – the year end of which is 10 weeks and some 150 tonnes away."
FWIW, my calcs show it is 160+ tonnes away (i.e. 160 tonnes must be sold by 9/30 to meet quota).
http://www.investorshub.com/boards/read_msg.asp?message_id=8327291
on another vacation basserdan..., will update Central Bank Gold Sales when I get back to Dallas next week...
Martin M, appears he is getting more cautious
In the most recent edition of “Gold Monitor” by M. Murenbeeld & Associates Inc., a Dundee Wealth Management Company, Dr. Martin Murenbeeld, Chief Economist of Dundee Group of Companies, noted that gold could ease back during any lull on the geopolitical front until such time as the Fed starts to ease and/or the dollar declines further.
“While gold is rising on the back of geopolitics, it should not be forgotten that monetary policy has been tightened around the world,” he wrote.
this may amuse you...
http://www.theoildrum.com/story/2006/7/10/145048/052
I am actually hoping form sub $5.00 natgas for 2 months to clear the storage glut. 2 months of pain at sub $5.00 would be fine with me if it would clear the glut (i.e. all the power generators would switch from coal to natgas, and 2 months of added use would clear it).
Most of my natgas investments are via working interests. Have no problem getting only $4.60 for a few months in return for much higher prices after the glut is cleared, and fears of a cold winter sink in around Nov/Dec.
nothing terribly bad about that news release, given the resources already identified... but do not follow CTQ.
personally, am shying away from all emerging market resource plays for now.
personally, I did buy a few MMGG shares today at the close, against my better judgement, at $3.03, filled the gap and Mexico seems stable enough for now..., give me a bounce and I will be out of most of it tomorrow...
Martin M - Gold
"Risk Ranges: Narrow $575-$680, Wide $535-$700. The risk ranges havenot been altered this week. Our longer-term bias remains very bullish, but we remain uncertain about the near term. I continue to think that gold will form a base in the $600-650 range. We’ll see."
June 2nd, but although dated looks plausible scenario...?
http://www.victoradair.com/pdf/GM20060602.pdf
FWIW, did a bunch of selling last few weeks of LT core gold positions. My precious metal stocks now down to 30.4% of my portfoliio, cash+T-Bills @ 50%, physical gold/silver @ 7.6%, oil/gas and commodity stocks make up the balance.
Am now officially worried about Japan/US decrease in liquidity and for the entire stock market over the next 3-4 months.
Ortega Reaches 30% in Nicaraguan Race
July 10, 2006
- Voter support for former head of state Daniel Ortega increased last month in Nicaragua, according to a poll by Borge y Asociados. 30.1 per cent of respondents would back the Sandinista National Liberation Front (FSLN) member in this year’s presidential election.
Eduardo Montealegre of the Nicaraguan Liberal Alliance - Conservative Party (ALN-PC) is second with 24.4 per cent, followed by José Rizo of the Constitutionalist Liberal Party (PLC) with 21.6 per cent, Herty Lewites of the Sandinista Renewal Movement (MRS) with 17.3 per cent, and Edén Pastora of Christian Alternative (AC) with one per cent.
The survey was completed before the death of Lewites on Jul. 2. The MRS has announced that economist Edmundo Jarquín would be its new presidential candidate, with singer-songwriter Carlos Mejía Godoy as his running mate.
In 2001, the PLC’s Enrique Bolaños won the presidential election with 56.3 per cent of the vote. The PLC and the FSLN have traditionally been the dominant parties in the Central American country’s political scene. Montealegre is a former member of the PLC, and Lewites was expelled from the FSLN.
In March 2005, the FSLN officially designated Ortega as its presidential nominee. Ortega governed from 1985 to 1990, but was a losing candidate in the 1990, 1996 and 2001 ballots.
On Jul. 8, Ortega criticized the American government’s immigration policies, saying, "They can raise as many walls as they want, but they will not be able to stop Latin Americans from getting there."
The presidential election is scheduled for Nov. 5. In the event no contender receives 40 per cent of all cast ballots, the first place finisher can only avoid a run-off by holding a five-point advantage over the closest rival.
Polling Data
Who would you vote for in the presidential election if the candidates were these?
Jun. 2006
May 2006
Feb. 2006
Daniel Ortega (FSLN)
30.1%
28.4%
18.3%
Eduardo Montealegre (ALN-PC)
24.4%
26.5%
21.7%
José Rizo (PLC)
21.6%
17.1%
--
Herty Lewites (MRS)
17.3%
14.8%
27.3%
Edén Pastora (AC)
1.0%
1.3%
--
Source: Borge y Asociados
Methodology: Interviews with 1,008 Nicaraguan adults, conducted from Jun. 20 to Jul. 2, 2006. Margin of error is 3.2 per cent.
Maybe it's time to call in sick...? Go write somebody a
message, and phone it in...
http://www.ospenterprises.com/phone/
Unexpected Death of Lewites Further Complicates Nicaragua’s November Elections
Written by Kristen B. Shelby
Tuesday, 04 July 2006
The outcome of the November 2006 presidential elections in Nicaragua has become even more uncertain in the wake of the unexpected death of Herty Lewites, the presidential candidate for the Movimiento de Renovación Sandinista (MRS).
Herty, who served as Minister of Tourism during the revolutionary decade of the 1980s and mayor of Managua from 2000-2005, died from a heart attack Sunday, July 2, in the Hospital Metropolitano Vivian Pellas in Managua. Herty was expelled from the Frente Sandinista de Liberación Nacional (FSLN) in February of 2005 over a dispute with the party’s president, Daniel Ortega, regarding the party’s selection of a presidential candidate. The FSLN led the 1979 Nicaraguan Revolution, which overthrew the decades-long US-backed Somoza dictatorship. The revolutionary government’s socialist-inspired reform programs and its adoption of a mixed economy brought it head to head with the Reagan administration in the United States. The US imposed an economic embargo on Nicaragua and funneled money and arms to the Contras, the ex-dictator’s National Guard, fueling a bloody civil war that resulted in 50,000 deaths. Daniel Ortega served as Nicaragua’s president from 1984-1990, when a coalition headed by Violeta Barrios de Chamorro defeated the FSLN in internationally observed elections. Since 1990 and the end of the Revolution, Nicaragua has seen a drastic cut in social spending and a push towards free-market reforms, culminating in the CAFTA agreement, which went into affect in April 2006.
The November elections, which will take place under close international scrutiny, mark a historic shift in the Nicaraguan political landscape. The four-way electoral split reflects the crisis that the two main political parties, the FSLN and the Partido Liberal Constitucional (PLC), have entered into since the last presidential elections in 2000. The FSLN has been the mainstay of the left since the Revolution, though it has lost credibility since 1990 due to corruption scandals and pacts with the right, most notably the pact formed in 1998 between Daniel and PLC leader and then-president, Arnoldo Alemán, to divide the major branches of the government between the two parties. The FSLN’s opportunism combined with Daniel’s iron grip on the party has angered many former Sandinistas, and many leaders prominent in the 1980s, such as former Vice-President Sergio Ramirez and former Minister of Health Dora Maria Tellez, broke with the FSLN to form the Movimiento de Renovación Sandinista (MRS) in 1994. However, the MRS remained on the margin of Nicaraguan politics and in a strategic alliance with the FSLN until recently, when it decided to end this alliance and fully support Herty’s presidential candidacy. This created a sharp split among voters of the Nicaraguan left, divided between supporting another presidential bid by Daniel Ortega on the FSLN ticket or Herty Lewites on the MRS ticket.
The right has undergone a similar crisis due to corruption. The PLC’s leader, Arnoldo Alemán, was sentenced to 20 years in prison in December of 2003 after being convicted of money laundering, embezzlement, and corruption. Through his connections in the judicial branch, he has been permitted to serve his sentence under house arrest at his private estate, and remains the strongest force in the PLC, despite his incarceration and supposed retirement from political life. The PLC’s presidential candidate for this year’s elections, José Rizo, has attempted to distance himself from Alemán, but frequent meetings between Alemán, Rizo, and other important PLC functionaries at the former president’s ranch severely undermine Rizo’s credibility in the eyes of many Nicaraguans. The PLC’s problems have been capitalized on by Eduardo Montealegre, a US-educated diplomat who is running as tbe Alianza Liberal Nicaraguense’s (ALN) candidate on an anti-corruption neoliberal platform. US Ambassador Paul Trivelli has made it clear that Montealegre is his government’s favored candidate, though he has also made it clear that anyone is more acceptable in the eyes of the US than Ortega. Trivelli even went so far as to write a letter on April 5th to the PLC and the ALN offering financial and technical support to help unite the right wing in order to prevent an Ortega victory. However, the official date to form alliances passed in May, leaving a last minute drop-out by the ALN or the PLC as the only possibility for a united right in November.
According to recent statistics, a Daniel victory is more likely than in any recent election (Ortega has been the FSLN candidate in every election since 1984). A June 29th CID-Gallup poll showed Daniel in a clear first-place lead with the support 23% of likely voters. Montealegre came in second, with 17% of the expected vote, and Herty polled close behind at 15%. Rizo polled at 11%, while 3% of voters said they supported "other candidates." However, 32% of those polled were undecided about which candidate they would vote for in November. Nicaraguan electoral law allows for a candidate to win with only 35% of the vote as long as the winner has a 5% margin over the runner-up, thus creating the possibility for a first-round victory despite the four-way split. If none of the candidates is able to garner this 35%, a runoff will occur between the top two candidates.
In this context of an extremely divided electorate, Herty’s death is likely to have a huge impact on the November elections. Perhaps all of the publicity surrounding his death will pull more voters to the MRS. Those close to Herty have vowed to continue fighting for the Nicaragua he sought to create, yet finding a replacement for the charismatic Herty, who in the recent CID-Gallup poll garnered a 45% approval rate, the highest of all of the presidential candidates and the current president, is a tricky task. The MRS’s vice-presidential candidate, Edmundo Jarquín, is not nearly as well-known as Herty, and many of the other important figures in the MRS might be too intimately linked to the controversial decade of the 1980s to attract undecided voters. Though Herty, who became involved in the anti-Somoza struggle in 1960 and spent the 1960s and 70s involved with arms smuggling and international relations for the FSLN, obviously had an intimate history with the Nicaraguan Revolution, his able performance as Minister of Tourism in the 1980s and as mayor of Managua 2000-2005 earned him a reputation for efficiency and transparency. Additionally, his rhetoric was not generally viewed as radically leftist. While Herty promised to increase spending on education, health, and housing, he is viewed as a moderate leftist who will not greatly hinder foreign investment. He pledged to help Nicaragua overcome its position as one of the poorest and most unequal countries in Latin America through investment in alternative energy and tourism, not by rejecting CAFTA and embracing the Venezuela, Cuba, and Bolivia-backed Alternativa Bolivariana para América (ALBA), as Daniel Ortega has avowed to do (though it is interesting to note that the FSLN’s sudden decision in October 2005 to no longer keep CAFTA off the agenda in the National Assembly was integral to its passage in Nicaragua).
If voters turn away from the MRS, it is unclear which candidate they would support. While some Herty supporters might support Daniel as the only other viable left-wing candidate, the recent CID-Gallup poll showed that 46% of voters would never vote for Daniel under any circumstances. In fact, Herty recently announced that if the elections came to a run-off and the MRS was not included, he would still not support Daniel. In a similar show of disaffection with the PLC, 21% of those polled said they would never vote for Rizo. Meanwhile, only 5% would never vote for Montealegre and 3% said they would never vote for Herty. It is therefore very likely that former Herty supporters fed up with corruption and caudillo politics could support Montealegre, despite obvious ideological differences. In the volatile political context of Nicaragua, nothing about the outcome of the November elections is certain.
Yet, despite the ambiguity surrounding the November elections, it remains clear that Herty Lewites has left an irreversible mark on Nicaraguan history by opening up a space for a left free from corruption, pact-making, and domination by Daniel Ortega.
Iran News
Under mullahs' management, Oil-rich Iran may run out of gasoline next month
Jul 5, 2006, 08:10
Islamic Infamy
Iran, the world's second-largest holder of oil reserves, may run out of gasoline by the end of August, one month earlier than expected, as surging world prices bankrupt the government's price-subsidy program.
Iran's $2.5 billion budget for gasoline imports this year will only suffice until the end of August if prices keep rising, Hojatollah Ghanimifard, executive director for international affairs at National Iranian Oil Co. said on Petroenergy Information Network, Iran's Oil Ministry news agency.
The ministry has said it will have to ration gasoline to 3 liters a day (0.8 gallons) from as early as September following a parliamentary decision in March to cut its annual budget for gasoline imports by 40 percent. Instead of spreading measures throughout the year, the government has opted to wait until the budget is exhausted to ration gasoline.
The Islamic Republic is in the process of distributing "smart cards" that will limit the amount of gasoline individuals can buy, Deputy Oil Minister Mohammad Reza Nematzadeh said last month. The program is running behind schedule, and Iran will take at least another six months to complete it, newspaper Sarmayeh reported on June 21, citing an unidentified energy official.
Without a rationing system in place, Iran's parliament will likely have to approve an emergency budget extension to bridge the gap.
The country's gasoline demand has grown at 15 percent a year as waste, a lack of refining capacity and smuggling have boosted fuel imports, the Paris-based International Energy Agency said in the April issue of its monthly report.
Iran, the second-biggest oil producer in the Organization of Petroleum Exporting Countries, imports more than a third of the gasoline it uses, about 188,000 barrels a day. Last year, the country spent about 10 percent of its $44.6 billion crude oil export revenue on gasoline imports.
Subsidies ensure Iranian drivers pay the equivalent of $4 for a 40-liter tank of gasoline. The same amount of gasoline would cost $31 in the U.S., using the July 3 average unleaded price from the American Automobile Association.
Iranian arab-parast president Mahmoud Ahmadinejad has opposed cutting subsidies for gasoline and basic commodities because that could create "instability." Ahmadinejad won last year's election after pledging to redistribute the country's oil wealth to the people.
central bank gold sales
http://www.investorshub.com/boards/read_msg.asp?message_id=8327291
EPM Annual General Meeting Notes
Attended the AGM in London on 6/23/06. EPM had enough coffee and pastries for 50 people, but my daughter and I were the only shareholders that attended the meeting… About 12 people showed up altogether, with most being EPM management, bankers, and Canaccord Investor Relations.
EPM appeared disappointed with the turnout. Besides having enough Danish for 50 people, EPM had a new presentation and was fully prepared to respond to shareholders questions. But I was the only one asking questions and making comments.
1) Debt Facility/SENET - EPM very confident that this debt facility will be finalized and this project debt furnished. With SENET taking over from MDM, all the paperwork and bank review had to be redone completely. Also, my impression is the S African Export Credit for this debt facility may also be slowing down the process (both SENET and MDM are S African firms, so EPM entitled to S Africa export credit on this contract). If you were to put a gun to my head, then I would predict debt facility to be finalized before 2Q06 financials are out (around Aug 15).
2) In the unlikely event the debt facility is not finalized, then EPM will issue $30M of more stock via a PP and finance the mine 100% equity. One way or the other, this mine will be brought into production in early 2007.
3) In hindsight, EPM somewhat regrets not going 100% equity finance in the first place. Not having the debt facility in place has delayed mine completion by 4 months or so, primarily by not timely ordering some certain capex needs like steel for the process plant. EPM is very happy with the Kazakh construction company (JSC Consolidated Development Corporation) performing the work.
4) EPM will be updating 43-101 with new gold and copper prices that will thus show a healthy increase in reserves.
5) Concurrent/after completion of new 43-101 EPM will consider mine expansion to increase annual production by deepening the pit operations or by other means. This would require only marginal capex increase relative to the new gold ounces produced. Thus, I was concerned about a new PP and voiced my opinion that internally financing mine expansion would be much preferable. EPM stated they currently had no plans for any new PP to finance mine expansion and would first have to get results of the 43-101, economics of revised mine plan for expansion, gold prices, EPM share price, etc. Mine expansion economics should be complete about Sept 06. The good news is EPM can likely increase annual production with only a modest capex increase and apparently EPM has no plans for mine expansion financing at current low share price.
6) When asked why Charlemagne Capital not present at AGM, was advised that Charlemagne calls them at least once per week to get an update, they had called this week, and apparently Charlemagne increased their shareholding very recently (not confirmed by London AIM news release as of today).
7) In regard to copper hedging, EPM is actively pursuing hedging its copper production which is quite significant in the early years. Was advised that copper hedges, unlike gold, cannot be rolled forward easily. If you have copper hedge for June 07 delivery, then you bloody well better have the copper delivered in June, since you cannot simply roll over the contract to the next month. My impression is EPM will likely hedge some of its copper if and when copper production delivery is 95+% assured. Personally, I hope EPM hedges some copper and buys $750 gold calls with the proceeds to reduce their gold hedges.
8) In regard to consumables and maintenance, a very key concern of mine given harsh cold winter climate, we discussed tires, consumables, and CAT maintenance contract. This is still a key concern of mine but EPM is aware of the problem and is actively managing this potential problem.
9) When modeling EPM copper concentrate revenue, one can use 80% of the copper price.
The EPM presentation that included many powerpoint slides, lasted about 40 minutes and was interrupted several times (about 15 minutes of the 40) by my questions and comments seeking clarification. Am disappointed that EPM has not put this AGM presentation on their website, as EPM obviously spent a great deal of time on preparing this presentation which included several new slides. Was hoping this AGM presentation would be on website by now to jar my recollection on certain of my other questions. In any event, was happy EPM went to all the trouble to prepare the AGM for my sole benefit and EPM was happy to answer all my questions.
EPM appears to be currently undervalued and I remain very confident that the drawdown of its US$75 million debt facility is a done deal. Just my opinion… Within the next 4 months, we should get news on 43-101 new resource estimate, debt facility being finalized, and the new mine expansion economics.
Natural Gas: Bulls, Bears, and Bankers
http://www.energypulse.net/centers/article/article_print.cfm?a_id=1291
Let’s start with the punch line: As of mid-June, natural gas in storage is roughly 450 Bcf (or 22%) above the year-ago level and roughly 650 Bcf (or 35%) above the five-year average. Without an extremely disruptive Gulf of Mexico hurricane season, Henry Hub natural gas prices will decline significantly by mid-summer and regional basis discounts will widen much further, especially in the Rocky Mountain regions. Hot weather, increased industrial demand, NGL liquids stripping, and fuel switching are nowhere near enough to work off the storage surplus without a major hurricane disruption or a major cut-back in production. Investors need to be very cautious about short-term natural gas prices.
By now the bulls’ case and the bears’ case are well known. The bankers’ case is much less well known but no less important. This article summarizes these three views of the natural gas markets and offers some ideas about where the market is headed.
The Bulls’ Case
First, at $70 per barrel, crude oil is trading at more than 10:1 versus the price of natural gas. The long-run average is closer to 6:1. More importantly, natural gas at $6.50/mmBtu (Henry Hub) is trading about 10% below 3% sulfur residual fuel on a Btu basis. This is unusual since residual fuel typically sets the floor price for natural gas. Fuel switching should add a couple of Bcf/d to load.
Second, with basis discounts already exceeding $1.00/mmBtu in the Rockies and parts of the mid-continent and approaching $1.50/mmBtu for late summer futures in several major producing regions, price-sensitive industrial load unrelated to fuel switching will return, adding another couple of Bcf/d to load. Liquids stripping in the NGL industry will absorb another couple of Bcf/d versus long-run averages at current and future relative oil / gas prices.
Third, as summer heat kicks in and peaking plants crank up for the ever larger housing stock, utilities will turn to gas in larger quantities. Additionally, the low price of natural gas will encourage utilities to use more gas and less coal to conserve below-average coal inventories. The combined effect of fuel switching, industrial load pick-up, NGL liquids stripping, and summer peaking demand will absorb at least 5 Bcf/d more than average through the summer, allowing storage to trend towards normal levels by the end of injection season even without a hurricane.
Fourth, the futures markets are saying that Henry Hub gas this winter (and at least the next three winters) will be closer to $10/mmBtu versus today’s $6-7 range. That means the futures markets do not believe we will enter the winter with a sufficiently large storage surplus to keep prices depressed.
Fifth, the natural gas strip is set by winter prices, which are set by heating loads, which are set in the residential sector. The U.S. is rapidly increasing its natural gas-heated housing stock, making five-year average storage levels unrepresentative of the levels required to meet winter heating loads. The storage surplus is nowhere near as large, relative to normal winter loads, as it appears. The excess storage today is a byproduct of last winter’s unseasonably warm weather. Don’t count on it happening again.
Sixth, North American natural gas producers have dramatically increased exploration and production spending in the past few years with little or no net impact on total production. Even a slight pull-back in capital expenditures, without any production shut-ins, will put the already severe depletion curves back into play. Any surplus will disappear in short-order.
Finally, Hurricanes Katrina and Rita combined to shut-in almost 800 Bcf offshore and probably another 100 Bcf onshore and are continuing to shut-in more than 1 Bcf/d, nearly a year later. Hurricane Ivan shut-in hundreds of Bcf the year before. The hurricane season currently forecast, even if only at the Ivan level and far below the Katrina-Rita level, is more than enough to eliminate the current storage surplus.
The bottom line for the bulls: natural gas prices are near a bottom relative to competing fuels, loads are going to pick-up from multiple industrial and power generation uses at current prices, and the storage surplus – which isn’t as big as it appears assuming only average weather – is going to be largely absorbed by the end of injection season without any further price declines. Even a moderately active hurricane season will send spot prices back into double-digits and create a serious problem this winter.
The Bears’ Case
First, total switchable load (industrial and power generation) is no more than about 2-3 Bcf/d and most of the load that can switch has switched because natural gas has been priced below residual fuel oil for months now. Similarly, NGL liquids stripping, which can vary by several Bcf/d depending on relative prices, should already be near a maximum for the same pricing reasons. While these two factors could maximally account for 20-30 Bcf per week of gas diverted from storage, the pricing relationships have been in place long enough that very little price-sensitive switching or stripping is left.
Second, price-sensitive industrial load that hasn’t returned to natural gas (previous paragraph) isn’t coming back until prices are much lower, stay that way for an extended period of time, and occur in an otherwise favorable long-term business environment. Industrial loads are not ramped up or down weekly or monthly as if linearly tied to gas prices. It will take a great deal of time and business confidence to restore the multiple Bcf/d of industrial load lost to last year’s very high prices and it won’t take place in the next month or two. Meanwhile, literal demand destruction from Katrina doesn’t reappear simply because gas is “only” $6/mmBtu. It’s gone. Finally, production of certain other gas-intensive commodities, like ammonia, has permanently moved to locations like the Middle East and the Caribbean to take advantage of much lower feedstock costs (e.g., $2/mmBtu).
Third, coal inventories at power plants were low in the winter because of rail problems. Those problems have mostly been resolved and coal inventories are acceptable. Nuclear and hydro are operating at higher capacity factors than last year and total electric power generation is down versus last year. There is some deterioration in the average heat rates of the natural gas plants but it’s worth no more than 1-2 Bcf/d. If early-August heat (the hottest part of the summer) were in place from early-July through early-September, the incremental gas absorption for power generation and air conditioning would be around 100 Bcf. This is only 20% of the current surplus. The next inflection point for meaningful incremental gas demand is substitution for coal. For this to take place, natural gas has to be in the range of $4/mmBtu, not $6/mmBtu.
Fourth, the futures markets are not going to sustain a $3-4 winter premium to spot if the current injection and storage patterns hold much longer. From the perspective of the hedge funds, the futures markets are in extreme contango, which costs the funds substantial amounts of money each month on negative roll yield. From the perspective of the producers, the incentive to sell the strip forward or at least hedge the winter months at a $3-4 premium is going to become irresistible as operational flow orders loom. As of mid-June, storage is almost 2.5Tcf. In the past eight years, the earliest date that storage approached 2.5Tcf was the third week of July in 2002. Not coincidentally, that was also the last time natural gas was below $3/mmBtu and the last time the oil/gas price ratio hit 10:1. If the current storage trends continue for even another few weeks, operational flow orders from the pipelines will force production shut-ins. Without shut-ins and hurricanes, average summer injections would take storage to the traditional maximum fill of about 3.3Tcf by the end of August. This would leave no place to put September and October injections – typically totaling almost 600 Bcf.
Fifth, winter prices may spike in February or March if it’s cold but this has little meaning over the next few months if storage is at 3.3Tcf in August or early September. While a very cold winter (e.g., mid-January temperatures from mid-December through mid-February) would absorb about 350-400 Bcf more than a normal winter, there is no evidence that the upcoming winter will be unusually cold. Moreover, the combination of a hot summer and a cold winter only represents about 450-500 Bcf more than average loads. Normally, this would be an enormous increment and raise important questions about storage adequacy and winter deliverability, but this year it’s no more than the year-over-year storage surplus.
Sixth, a significant pull-back in capital expenditures on exploration and production will absolutely put the North American depletion curves back in play. Gas production will decline. However, the issue is the supply / demand balance in the summer of 2006, not next year or the year after, assuming a near-term cut-back in exploration expenditures. Meanwhile, the big increase in expenditures in the past few years has at least temporarily reversed the production decline. Production in 2006 is up versus 2005. It’s not much in the context of the other supply / demand imbalances but it is adding to the storage and pricing pressure.
Finally, a hurricane having an impact between that of Ivan in 2004 and Katrina in 2005 would definitely absorb the storage surplus for at least a short period of time. However, Katrina and Rita eliminated close to 900 Bcf (offshore and onshore) and ten months later we’re 500 Bcf above average. Mild weather since the hurricanes cannot explain more than about 1/3 of that swing. Price-sensitive demand destruction and literal demand destruction were and are the larger reasons for the surplus.
The bottom line for the bears: without production shut-ins, natural gas prices will drop towards $5 at the Henry Hub and $4 or lower in regions with the biggest supply / demand imbalances, notably the Rockies. Major price-sensitive demand from utilities firing coal won’t kick-in until that point. The idea that oil-to-gas fuel switching, industrial load, NGL liquids stripping, and utility peaking load at $6/mmBtu can reliably absorb 5 Bcf/d above current levels is wishful thinking. It may be possible to add 1-2 Bcf/d after a period of time where prices remain stable and industrial demand remains strong but the cumulative effect between now and the end of injection season is potentially no more than 100 Bcf. Only a hurricane that can shut-in hundreds of Bcf of production - without further destroying demand via high prices or literal destruction - can prevent comparably large shut-ins this summer.
The Bankers' Case
The bankers are aware of the tug-of-war between the bulls and bears over the storage numbers, the factors that could generate incremental load growth, the recent and ongoing expansion of North American E&P capital spending, incremental LNG imports, the producers’ collective desire to “drill through” the current price weakness and, of course, the risk of hurricanes. The bankers are also aware of the producers’ budgeted 2006 oil & gas price decks (about $56/bbl. and $7/mmBtu) and the levels at which spending would be significantly cut back (about $42/bbl. and $5/mmBtu) assuming the lower prices were in place for at least three to six months. (Ref. 1)
The bankers are also aware that statistically (based on crude and products prices, gas storage levels, and seasonal factors) spot natural gas prices actually should be closer to the double-digit futures prices for the winter months than the current $6-7 level. These statistical inferences aren’t reliable in the current situation, however. Storage levels are far outside the historical range used to establish the pricing relationships and short-term gas demand is demonstrably less price-elastic than the models assume. These factors wreak havoc with models that require continuous substitutability between residual oil and gas; a relationship that has obviously broken down in the face of the current storage surplus and the current oil / gas price relationship. In other words, it’s more prudent to believe the physical surplus than the regression models for now.
According to a survey of 41 bankers reported in the June issue of Oil and Gas Investor magazine, the forecast mean Henry Hub natural gas price for the second through fourth quarters of 2006 is $6.66/mmBtu. For 2007, the figure is $6.32. For 2008 and later years, it’s below $6/mmBtu. The sensitivity case downside values are $5.37, $4.84, and mid $4s for those same periods, respectively. (Ref. 2)
The bankers’ price forecasts do not take aim at the bull-bear argument between $6 summer gas and $10 winter gas. They take aim at the argument between $6 gas and $70 oil. The same banker survey puts the crude oil forecast at roughly $48 (WTI) for the second through fourth quarters of 2006, $44 for 2007, and $40 or below thereafter. The downside mean values are roughly 20% lower.
With the important caveat that the market views of bankers and oil & gas producers reflect very different risk-reward dynamics, the implication of the bankers’ forecasts versus current strip prices is greater price risk in the crude strip than the gas strip. This has significant implications for the bull-bear gas argument. If relative oil prices slip like the bankers’ forecast then the case for gas-for-oil substitution and NGL liquids stripping becomes weaker and natural gas inventories expand, at least until the forecast trend towards backwardation in the futures market pressures the gas strip.
Additionally, the bankers’ oil price deck versus current world prices is consistent with either or both 1) a U.S. and probably worldwide macroeconomic slowdown and reduction in demand or at least demand growth, and 2) a large increase in oil supply arising from the large recent increase in capital expenditures on exploration and production. Through some combination of a shift in the demand curve downward or a shift in the supply curve upward, the equilibrium price for oil would decline.
With respect to natural gas (though not oil), the long-term validity of these relatively conservative forecasts is subject to dispute for one gigantic reason – the unstoppable acceleration of North American depletion rates over time. (This will be the subject of a future article.) For the short-term, however, the bankers’ current view of the world challenges one and possibly both of the major price-related demand underpinnings from the bulls’ case: 1) gas-for-oil substitution at the industrial level, NGL liquids stripping, and gas-for-oil and ultimately gas-for-coal at the utility level, and 2) absolute price-sensitive load increases at the industrial level. The position of the bankers with respect to supporting natural gas prices at current levels this summer without large production shut-ins can thus be summed up in one word: hurricanes.
Conclusion
Natural gas storage levels are so far ahead of historical averages that there is no longer any non-hurricane alternative to price declines and production cut-backs. For example, everything else equal and assuming average injection rates, natural gas storage would reach traditional maximum levels around 3.3 Tcf about two months ahead of schedule and absolute physical maximum storage around 3.5 Tcf more than one month ahead of schedule. There will simply be nowhere to put the gas normally injected in September and October. Second, a 450 Bcf storage surplus is approximately equal to incremental gas usage from a back-to-back hot summer and cold winter. This is approaching the definition of a short-term gas bubble. Apart from lower prices and production cut-backs within a month or two, the only force that can change this dynamic is a highly disruptive Gulf of Mexico hurricane season. In the long-run, the gas bubble collapses as North American depletion curves dominate all other variables. But not this summer. For this summer, it’s either much lower prices and voluntary production shut-ins in the regions with the most extreme supply / demand imbalances or hurricanes.
References:
1. Lehman Brothers, Oil Services & Drilling Original E&P Spending Survey, June 21, 2006.
2. Oil and Gas Investor magazine, Tristone Capital’s Energy Lender Price Survey, June, 2006, p. 11.
6.30.06 Harry Chernoff, Principal, Pathfinder Capital Advisors, LLC
natgas, great article...
http://www.energypulse.net/centers/article/article_print.cfm?a_id=1291