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Phil,
Does the Vine Borer attack cucumbers? My cukes were doing great and now they seem to be splitting near their base.
Thanks,
sumisu
RonnieD,
Thanks for the post; it's good to have divergent opinions on the Peak Oil topic.
I tried listening to the Alex Jones interview and it kept cutting off, but I did get bits. I was hoping that his guest, Dr. Nick Begich, would be a geologist, but he was not. That doesn't mean that he does not a knowledgeable man; quite the contrary, after looking at his background.
However, I bring up geologists, as they are most likely to know what is in the ground, based on education and experience. I regularly speak to a geologist who spent 50 years in the oil fields. He has provided me much insight into the Peak Oil topic. He has indicated that the oil that remains is the most expensive and that the current oil problem is related to an overwhelming demand from China and India, which are both siphoning off oil from the world markets. AND their populations are dramatically increasing.
Alex Jones mentioned that 45% of the crude oil increase was due to the declining value of the dollar. I agree with Alex on this point. If we take $75 (approximate price of a barrel of crude) times 55% to adjust out inflation, the price of crude is a somewhat respectable $41.25. Take out a war premium, let's make it a conservative 10% and crude would be just over $37. Now oil does not look that expensive, in view of what is transpiring in China and India.
Before I reach any conclusion about any topic, I like to quantify things, if possible. I will provide some links, as I explain. Below I compared the profit margins for Exxon-Mobil, Coke, and Microsoft, three totally different industries.
I found the following in Yahoo under Key Statistics, Profitability,:
Exxon-Mobil: 11.32%
http://finance.yahoo.com/q/ks?s=XOM
Coca Cola: 21.85%
http://finance.yahoo.com/q/ks?s=KO
Microsoft: 28.45%
http://finance.yahoo.com/q/ks?s=MSFT
Admittedly, this is only one statistic, and one statistic does not make a complete analysis.
But from all of the clamoring about Big Oil in the media, I did not expect this relationship to exist in this order for these three companies. In fact, I thought the results would be inverted to what I found.
I’m trying to keep an open mind on Peak Oil from two viewpoints. First, if it does occur, it would be good to have energy stocks ranging from oil, natural gas, coal, uranium and alternative energy in a representative portfolio. Secondly, I hope that the United States becomes energy independent from parts of the world that do not particularly like us.
Planning for the future, both as individuals and as a nation, would be the best thing in an unpredictable world.
sumisu
Kuwait Oil Reserves
Kuwait Oil Reserves: Things Just Got Worse
by Byron W. King
Whiskey & Gunpowder
Pittsburgh, PA
January 25, 2006
Byron King looks at Kuwait's Oil Reserves . . . and how the country doesn't have as much as they've been claiming for years.
Greg's Note: After coming up for air from his recent and well-received book review of Red Star Rogue, our intrepid correspondent Byron King goes back to the oil patch. Or maybe we should say the Big Oil patch. This time around, and far removed from the stripper wells of Titusville, Byron comments on a recent, disturbing report concerning the oil reserves of Kuwait. The title of Byron's article says it all.
And if you have something to say and want to lay it all upon the shoulders of your bleary-eyed, unseasonally-tanned and world-traveling editor (who has just returned from hard labor in the surf and sand of Nicaragua), please address your comments to greg@whiskeyandgunpowder.com
Things Just Got Worse
NO, MAKE IT A LOT WORSE. Word just came out that Kuwait, long regarded as home to some of the world's largest reserves of petroleum, may possess only half the amount of oil reserves that it officially has been stating for many years.
According to a restricted report issued by the authoritative industry newsletter Petroleum Intelligence Weekly (PIW), internal Kuwaiti records reveal that the nation's oil reserves are far below the officially stated amount of about 99 billion barrels. Kuwait's reported 99 billion barrels, if they were really there in the ground, would make up about 10% of world's reported oil reserves.
The PIW report is based upon data circulating within the top echelons of the Kuwait Oil Co. (KOC). KOC is the upstream arm of state-owned Kuwait Petroleum Corp. KOC has primary responsibility for conducting exploration, drilling and production from Kuwait's oil fields. The PIW report claims that Kuwait's remaining proven and nonproven oil reserves total about 48 billion barrels, or 51 billion fewer barrels than previously advertised.
By way of comparison, the estimated remaining proven oil reserves for the United States total about 22 billion barrels. Estimates for the North Sea are about 17 billion barrels. So a downward adjustment of 51 billion barrels by the Kuwaitis leaves a good deal more than twice what remains in the United States, and three times what is in the North Sea.
Yet another way of stating the matter, and in a macro sense, the amount of estimated world oil reserves just fell by 5%. This 5% drop in reserves is the equivalent of almost 20 months worth of total cumulative worldwide oil production and consumption, based on the current world oil use of about 84 million barrels per day. From the standpoint of the world reaching the absolute Peak Oil point, we now live in August 2007, not January 2006. And as the Mogambo Guru would say, "Thanks a hell of a lot, guys."
According to the PIW report, the official public Kuwaiti figures do not distinguish between what are known as "proven," "probable" and "possible" reserves. The PIW report stated that the Kuwaiti data indicate that, of the current remaining 48 billion barrels of proven and nonproven reserves, only about 24 billion barrels are so far fully proven (That is, slightly more reserves than in the States).
The rest of the Kuwaiti reserves are probably out there, but we will know only after someone drills and completes a series of wells. And if the wells are dry, whoops, there goes another 2.5% of the world's oil reserves. And in that case, it may as well be 2008, from the standpoint of achieving the milestone for mankind known as Peak Oil. The future is here.
Kuwait Oil Reserves: Follow the Oil
Most of the proven Kuwaiti reserves, about 15 billion barrels, are the well-known volumes in Kuwait's largest oil field, at Burgan, in the southeast of the country and just north of the border with Saudi Arabia. Burgan is an extension of a geologic trend that includes the massive Ghawar oil field to the south, in Saudi Arabia.
Burgan is known in the trade as a "super giant" oil field and has been pumping oil for almost 60 years. Burgan accounts for most of Kuwait's oil production and exports. You may remember the images of burning oil wells that came out of the Gulf War of 1991. Almost all of these were wells in Burgan, blown up and set afire by retreating Iraqi troops. (Under international law, oh, by the way, this type of intentional destruction of Kuwait's national patrimony and natural resource base was a war crime of the first magnitude.) The oil was just roaring straight up out of the holes in the ground, propelled by its own underground reservoirs, and feeding the conflagrations. It took many months of truly heroic effort to control the fires. And many of the Burgan wells, and portions of the producing rock formations, were irreparably damaged.
For a number of years, KOC has been adding upward of 500 million barrels of oil reserves per year at Burgan, by means of offset drilling into adjacent geological strata. Statistically, the remaining nonproven reserves of some 5.3 billion barrels will likely be upgraded to proven, according to PIW.
In the fall of 2005, KOC chairman Farouk Al-Zanki admitted that, in the future, the sustained output of the Burgan oil field will be around 1.7 million barrels of oil per day. This amount is significantly less than the 2 million barrels per day of production for the rest of the field's estimated 30-40 remaining years of life that were forecast as recently as mid-2005. In a recent experiment, Kuwaiti oil engineers tried to obtain 1.9 million barrels of oil production per day from Burgan, but the level was not sustainable. The engineers determined that the higher rate of production was causing pressure drops, water intrusion, and other formation damage to the underground reservoirs. Thus, according to KOC, 1.7 million barrels per day is considered to be the optimum rate.
Kuwait has announced plans to spend upward of $3 billion per year into the future to boost output and exports from other fields. There are three consortia, led by BP, Chevron and ExxonMobil, presently pursuing a contract to win something called Project Kuwait. Project Kuwait is intended to be a 20-year operating service agreement with the government of Kuwait to raise crude capacity at four relatively unexplored oil fields in the north of the country, near the border with Iraq. (That is another problem, but we will not go there just now.)
The competition for Project Kuwait is still open. However, I should note that one of the competitors, Chevron, has a long history in that relatively small nation. Gulf Oil Corp., which became part of Chevron in 1984, discovered the super giant Burgan oil field in Kuwait in 1938. In what was perhaps an omen of things to come, the first oil well drilled into Burgan hit pressures that were so high as to blow out the wellhead valves and turn the first Kuwaiti oil well into an uncontrolled gusher. Additional drilling and large-scale development, however, was interrupted by World War II.
The long-term impact of the Burgan discovery went beyond simply drilling wells into high-pressure zones and helped to change the geopolitics of the Middle East. In 1946, Kuwait began exporting oil, and has remained a net oil exporter ever since, except during the time of its military occupation by Iraq, in 1990-1991. After the first tankers started sailing from its ports, Kuwait rapidly became a wealthy nation. To its credit, and through its comparatively prudent stewardship of its oil revenues over the years, Kuwait has become a world-class financial power.
Kuwait Oil Reserves: Not News
Burgan gusher or not, however, for many oil analysts, the reports that Kuwaiti reserves are significantly less than claimed are not news. For many years, there have been analyses along the lines that the Kuwaitis, and many other oil-producing countries whose reserves are state controlled, have been misstating the size of their reserves. In essence, the officially stated oil reserves of Kuwait have for many years been little more than an illusion, based on nothing more than wishful thinking and economic fiddling. The attitude seemed to be, "Oh, yes. Burgan is a big field. Lots of oil there. No problem."
No problem? Using a method called "Hubbert linearization," some analysts have previously estimated that Kuwait's ultimate recoverable reserves would be far less than what the government statistics forecast. One authoritative estimate has placed Kuwaiti reserves ultimately at 76 billion barrels, of which about 36 billion have already been produced. This would leave remaining Kuwaiti reserves at about 40 billion barrels, and that is assuming that there is massive effort at additional drilling, new discovery, and production in the years to come. This linearized estimate is in general agreement with the range of oil reserves, 48 billion barrels, based on the internal KOC information that PIW recently reported.
The numbers suggest that Kuwait is at about 47% of its ultimate oil recovery, or, for all intent and purpose, at the halfway point of ultimate oil recovery. Future depletion rates are cheerfully, if not hopefully, estimated to be in the magnitude of about 4% per year. However, the Kuwaitis have in recent years adopted the latest approaches to using new technology to maximize short-term oil production and recovery. That is, they are drilling horizontal wells and using what are called multiple lateral completion techniques. This does not really find "new" oil; it just drains the existing oil faster.
Thus, in this case, it is not possible to rule out the possibility that Kuwaiti oil production will suddenly go into steep decline. This would be similar to what we have seen in other oil provinces that have benefited from application of "new technology," like in the North Sea or Mexico's Cantarell. Instead of the estimated annual 4% depletion rate, we might see a North Sea-like depletion rate of 10% or more per year. Thus, until the decline rate becomes apparent, and given the age of and production history of Burgan, it will not be possible to make a refined estimate of future production trends.
Kuwait Oil Reserves: Are the Other Books Being Cooked?
The news out of Kuwait highlights the point that most, if not all, of the estimates published by member nations of the Organization of Petroleum Exporting Countries (OPEC) are similarly without merit. In all likelihood, all of the OPEC member nations have chronically overstated their reserves. The ominous implication is that we are confronting the reality that the world has a lot less oil than we thought and that a peak in global oil output must occur sooner than even some of the most pessimistic predictions.
The news about the Burgan oil field lends credence to the opinions of investment banker Matthew Simmons, who has made a career working with the companies that form the industrial backbone of the oil industry. For the specific arguments of Simmons, you should read his exceptionally well-written book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, published in June 2005. In preparing and writing his book, Simmons reviewed hundreds of technical papers written about the Saudi oil fields, interviewed many people with firsthand knowledge of Saudi oil production, and visited a number of important oil sites in Saudi Arabia. Based on this, Simmons makes a solid case that Saudi Arabia faces an imminent downturn in oil production. And because Saudi Arabia has always been considered the "swing producer" to the world, and thus the price-setting supplier to the world's oil-based economy, any production shortfalls would have severe and immediate economic, political, and military impacts.
Using the "Hubbert linearization" method on publicly available reserve data and production figures for Saudi Arabia, it appears that the Saudis have produced 105 billion barrels of oil out of an ultimately recoverable reserve base of about 180 billion barrels. Much of this production came out of the ground in the past 25 years. Thus, the Saudis are now at about 55-60% of their ultimate recovery and a state of irreversible decline cannot be very far behind.
Kuwait Oil Reserves: The Results of Less Kuwaiti Oil
The implications for the global economy of a decline in Kuwaiti oil exports, let alone Saudi production, are indeed serious. If the world oil supply fails to expand proportionally to the increasing demands of China and India, as well as to growing demand from the West and Japan, then the upward pressure on oil prices will be inexorable. As we have said so many times before in Whiskey & Gunpowder, and in other Agora Financial publications, we can expect to see the price of oil climb.
For the oil producers, an upward price trend will be good news in some respects and come as compensation, for at least a few years, for declining output. Swelling coffers of revenue from oil sales may even cushion some nations against economic collapse, which will be likely when oil prices begin their long-term increase to stratospheric levels.
Oil-consuming nations and societies will face major energy and financial crises. Governments and central banks will try to "inflate" their way out of it, as has been the case in America over the past few years. Eventually, however, the combination of high prices, depreciating currency, and absolute shortages of oil will lead to profound dislocations in society. Things may approach a state of what author James Kunstler calls The Long Emergency, the title of his book published last year.
And what are the political, economic, and cultural leaders of most nations doing about this profound and precarious situation? Very little, sad to say. At the recent Detroit Auto Show, the biggest press coverage was reserved for new versions of 1960s muscle cars, recreations of such famous old names as the Chevy Camaro and the Dodge Challenger. The U.S. economy is still utterly dependent, and growing more and more so, on over-the-road trucking for most freight hauling, at an average fuel burn of about 4 miles per gallon. And every U.S. politician of any significance has a well-honed "position" on the virtues, or not, of Roe v. Wade. But ask that politician about Peak Oil and, with a few notable exceptions, you will get a blank stare, or at best a silly answer, that betrays little understanding.
So let's review. Kuwait's oil reserves are being downgraded by 51 billion barrels. Detroit is building muscle cars. Few U.S. politicians even have a clue about the problem, and apparently Peak Oil simply does not fit into any of their standard political paradigms. It is just crazy.
Which reminds me of a comment about Peak Oil from the above-noted Kunstler, who has written a sentence that, for a lot of people at least, truly sums it all up:
"Peak is making us insane and passing Peak will make us more insane. There may be no moment of clarity, only new kinds of delusion and disorder. We'll keep behaving the way we do until we can't, and then we won't."
And what are you doing about all of this, dear readers? Do you really believe that, as the notion goes, "technology will save us"? (OK, technology will help, but you had better get out in front of it.) Or do you believe that "the politicians will do something"? (Wow. Call your doctor. Get that closed-head injury examined.) Or do you subscribe to the "abiotic theory" of oil formation? (I call it "abiotic snake oil." It offers nothing but utterly false hope.)
Are your kids studying something in school that will prepare them to compete with 6 billion other people in an energy-short world? ("Marxist Themes in Feminist Literature"? Oh, really? How interesting.) Are you at least investing in the "right kinds" of things, so that you can secure your financial future? (At Agora Financial, we have some ideas about that. See below.)
Well, dear readers, if you have gotten this far, you are making a start. We thank you corporately. I thank you personally.
Until we meet again...
Byron W. King
MEXICO
Mexico oil output to decline, analysts sayOil production in Mexico may have peaked in 2004, according to Raymond James & Associates.
BY AMY STRAHAN
Bloomberg News
Oil output has peaked; major field in decline.
Mexico's oil output will probably decline in the next two years if the country doesn't allow foreign investment to boost drilling, according to Raymond James & Associates.
Production in Mexico may have peaked in 2004, analysts J. Marshall Adkins and Pavel Molchanov wrote in a July 10 report, because the 30-year-old Cantarell field, the world's second-largest, has reached maximum output, they said. Petróleos Mexicanos, the state oil company, said Aug. 2 that Cantarell production will decline 8 percent this year.
''The country's oil production looks like it already might have peaked -- quite possibly for good,'' they said in the report. ``At the very least, production appears stagnant. Following a decline in 2005, we project that Mexican production will again show modest year-over-year declines in 2006 and 2007.''
Foreign investment to boost production in Mexico is unlikely because of prohibitions in place since Petróleos Mexicanos, the government oil company, was formed in 1938. Felipe Calderón, who won a narrow victory as president of Mexico last month, said he does not favor privatization, although he supports allowing Pemex to form joint ventures with foreign operators, Molchanov said.
Pemex is so heavily taxed it has no capital for re-investment in exploration and production, Molchanov said in an interview. ``After paying its operating and labor costs, Pemex may have to borrow to fund its capital spending, despite record oil prices.''
Crude oil output at Cantarell fell faster than expected in June to a four-year low, according to data from Mexico's energy ministry. The decline signals the government will miss production targets.
The field, which accounts for about half of Mexico's crude production, yielded 1.74 million barrels a day in June, the most recent month for which information is available. That's 13 percent less than a year ago and the least since November 2001, according the ministry.
The drop worsens the outlook for Mexico's crude exports, about 80 percent of which go to the United States. The decline comes as BP Plc announced Sunday it is temporarily closing its Prudhoe Bay oil field because of pipeline corrosion. Prudhoe Bay is the largest field in the United States. About 400,000 barrels a day of production is being shut, possibly for months.
Crude oil prices have increased 23 percent this year on concern that supplies won't be able to meet increases in global demand. Violence in Nigeria cut output by 20 percent this year, and efforts to curtail Iran's nuclear program have increased the risk of a reduction in shipments from the Islamic republic.
Oil futures in New York rose to a record $78.40 a barrel on July 14.
Mexico, the third-largest oil producer outside of the 11-member Organization of Petroleum Exporting Countries, pumps 4 percent of the world's oil. Estimates from the Mexican government have suggested that the Cantarell field won't begin declining until 2008, Molchanov, Adkins and Wayne Andrews wrote in the note to investors.
In 2004, Mexico's production rose less than 0.4 percent, and by 2005 it fell 1.4 percent, according to the analysts. Mexico currently produces 3.78 million barrels a day, Molchanov said.
The current stagnant production figures suggest oil prices could continue to rise, according to the report.
Mick,
Agree that "world affairs" puts a premium on oil pps and metals. But as time progresses and the world's population increases dramatically, this will be the main impetus to high prices.
Basically demand will overwhelm supply and in the absence of more oil discoveries (and gold, copper, silver, etc.), price will have to rise to restrict demand.
But you do make an excellent point about world affairs. I just received a book in the mail this past week titled RESOURCE WARS - THE NEW LANDSCAPE OF GLOBAL CONFLICT, by Michael T. Klare. No doubt about it, societies will be fighting each other for limited resources, and oil will be the main one, in my opinion.
We'd better head for the hills.
sumisu
Mick,
I listen to all of Puplava's shows, at least twice and sometimes more.
He will be taking a three-week vacation and then on September 9, he will will return and have three one hour segments, although some of these segments go beyond that time limit.
I was a very limited investor and not very informed, until I listened to Puplava.
He has done wonders for my portfolio, as I concentrate on energy and precious metals. I believe that these two segments could provide a more secure future with Peak Oil and the dollar decline.
Hope you enjoy the shows.
sumisu
Mick,
Thanks; I'm hoping that this develops.
I'm not sure if you listent to Jim Puplava of Financial Sense.
Here is the link:
http://www.financialsense.com/index.html
You will want to go to today's broadcast, "2nd Hour The BIG Picture with Jim Puplava & John Loeffler"
Once you open this 2nd hour link, you can skip to the 28th minute and listen to "Zapata" George Blake and Dan Gainor.
Zapata George is very funny and even more informative than funny. Gainor gave a good interview too.
Let me know what you think of these interviews.
sumisu
Published on 6 Jul 2006 by Energy Bulletin. Archived on 6 Jul 2006.
An Open Letter to Greg Palast
by Richard Heinberg
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Peak Oil - Aug 2...
Dear Greg,
Congratulations on your new book, Armed Madhouse. As with your previous work, I admire your dedication in exposing the machinations of government and corporate miscreants.
However, this time around you’ve also taken a potshot at a target that I happen to know a good deal about and have been closely involved with for a few years—the efforts by a growing number of analysts to forecast the arrival, and prepare the world for the consequences, of Peak Oil. In this instance I think your negative comments about Peak Oil and those of us who study it are not well informed. Ordinarily I wouldn’t respond to an ill-considered statement by an otherwise admirable author; but unfortunately you go on for several pages on this theme, and I’ve started receiving e-mails from folks who are troubled by what you said. In my many years of fighting to protect our planet from environmental destruction, I have learned how important it is to make sure that our supporters have the most accurate information possible. Time and again, I have seen our opponents seize on internal disagreements as wedges in their drive to weaken and damage the credibility of the environmental movement. I feel the responsibility to help sort out the factual issues in this instance particularly strongly because you have worked so hard to earn your reputation as a truth-teller in these perilous times.
First let me make clear where I’m coming from with my critical analysis. Before you assume that, just because I disagree with you, I must therefore be secretly in the employ of the Heritage Foundation or some nefarious corporation, I should point out that in my own recent book, Powerdown, I take the Bush administration to task as vehemently (if not at so great a length) as you have done. And I teach in a program on “Culture, Ecology and Sustainable Community” at a small, far-left liberal arts college where you have lectured. So we are in other respects natural allies.
In your book, you place your critique of Peak Oil in the context of scathing attacks on the Bush energy plan and the oil companies’ enormous ongoing political influence. These are serious problems and you deal with them skillfully and entertainingly. But, in contrast to these subjects, the Peak Oil discussion is more about science than politics, and when it comes to science, catchy phrases don’t count; only a careful weighing of evidence does. I’m sorry to say that you don’t appear to be fully informed about the terms and history of this debate.
Let’s start with your description of the work of the late geologist M. King Hubbert and the study of oil depletion.
On page 108 you pretend to summarize Hubbert’s 1956 world forecast for global oil production as follows:
Sometime during 2006, we will have used up every last drop of crude oil on the planet. We’re not talking “decline” in oil from a production “peak,” we’re talking “culmination,” completely gone, kaput, dead out of crude—and not enough natural gas left to roast a weenie.
But “Decline” and “peak” are precisely what Hubbert was forecasting—and not in 2006, but around the year 2000, as shown in the graph you reproduce on page 111. How could you possibly get the essential terms of the debate so plainly wrong? Frankly, I’m amazed. Maybe you got hung up on the word culmination (which, among other things, means “the highest point achieved by a celestial object in the night sky before it begins its descent”—a good metaphorical usage of the term in this instance). But even so, how could you have completely missed the context in which Hubbert used that word—a discussion that was entirely about “decline” and “peak”?
This is a core misunderstanding that crops up repeatedly in your treatment of the subject. In your caption to Hubbert’s graph on page 111, you say, “Note: the total sum of oil is 1,250 billion barrels—which runs out in 2006.” The graph clearly shows production peaking around the year 2000—which it probably would have done if not for the oil shocks of the 1970s, which Hubbert could not have foreseen—and still shows oil being produced in the year 2200. The oil industry is fond of citing historical claims from the 1890s that “oil will run out in 10 years” as a way of discrediting current concerns about Peak Oil, and your accidental misinterpretation of this graph unfortunately echoes this oil industry line.
Hubbert just flat-out never predicted that oil would “run out,” nor has any oil depletion analyst that I’m aware of predicted oil “running out.” There will always be more oil in the ground, just not enough at a cheap enough price to sustain the current world oil demand. Debaters would call putting the phrase “running out” into the mouths of oil depletion analysts a “straw-man” argument: you wrongly attribute an absurd statement to your adversary, you disprove the absurd statement, and the audience cheers—except for the frowning woman in row 12 who happens to be taking a course on critical thinking.
In fairness, you seem to be saying that the total amount of oil represented under the curve Hubbert drew is too small (which it was); thus, if we take that amount as fixed and subtract the oil actually used so far, what’s left won’t last us till the end of this year.1 Well, according to my calculations the world still has a few years to go even if we do pursue this useless thought exercise, but that’s mere quibbling. The point you wish to make is: Hubbert got it wrong!—he underestimated the global amount of ultimately recoverable oil. Therefore we should pay no attention to him.
But hang on—didn’t Hubbert get it amazingly right when in 1956 he predicted that US oil production would peak around 1970 (which it did)? You don’t mention that. Why was one prediction spot-on, the other less so? Well, in 1956 the US was much more thoroughly explored—and depleted—than the rest of the world. The method Hubbert had developed for predicting peaks worked well in the US in 1956. And it seems to be working well for other large provinces (such as the North Sea) where extraction has proceeded sufficiently far so as to establish a linear trend.2 If you want to understand the method better, I recommend a careful reading of Chapter 3 of Kenneth Deffeyes’s excellent book Beyond Oil. In the decades since Hubbert made his initial forecasts, world depletion has more than caught up with where US depletion stood back then. Thus a Hubbert-type forecast for world peak is much more likely to be correct today than it was in 1956, given the data available.
These are only a couple of examples; you go on from there. Sentence after sentence betrays ignorance of the scientific matters at issue.
There’s just no hope of setting the record straight on everything. Therefore the best I can do is to address what I take to be your three core assertions.
1. King Hubbert was a shill for Shell
Just because someone works for a company or agency, that does not mean that everything the person writes or does is in the service of the institution. But you assume the worst of Hubbert in this regard, and your line of reasoning goes like this:
King Hubbert worked for Shell Oil research labs during the years when he made his predictions about the US and world peaks in oil production. That means he was being paid by Shell. That means that the work he was doing must have been suggested by Shell, approved by Shell, and in Shell’s interest. Therefore the entire Peak Oil notion is one created, bought, and paid for by Big Oil.
This might be characterized as argument by innuendo. The first two sentences in the preceding paragraph are demonstrably true; the second two are pure conjecture. What does the evidence say? I challenge you to produce any account of the events that differs substantively from the one Ken Deffeyes (who knew Hubbert well) offers in his book Hubbert’s Peak. Not only did Shell not suggest the line of inquiry that led to Hubbert’s famous depletion curve, but when he came up with it his bosses tried to prevent him from talking about it. The general reaction in the industry was anything but supportive. Deffeyes puts it this way: “It was as if a physician had diagnosed virulent, metastasized cancer; denial was one of the responses.” Hubbert was repeatedly attacked from within the industry.
Well, you might say, maybe this was all a clever plot. I suppose there’s no way to prove whether it was or wasn’t. But we might profitably inquire: Just what kind of man was Hubbert? Was he the sort to participate in an industry conspiracy?
Not according to the people who knew him.
I cannot tell if you talked to people who knew Hubbert and worked with him—before slandering him by innuendo. I have spoken to a few such people, including several of his former students, a co-worker, and a close relative. The picture they paint is of a somewhat imperious, pig-headed genius who had gradually come to the conclusion that the world was headed in the wrong direction fast because of its dependence on fossil fuels. He was a respected geologist responsible for other important contributions in his field. In addition to working for Shell, he also worked for the USGS and taught at several universities. He did not suffer fools lightly, nor did he show much interest in climbing corporate or academic ladders. This would not appear to be the sort of person who would stake his career on a bogus hypothesis just because a temporary employer told him to.
As a current and apt analogy, consider the case of James Hansen of NASA, who has spoken out strongly about the dangers of global greenhouse gas emissions. The man works (indirectly) for the Bush administration; therefore should we assume that he is secretly doing Dick Cheney’s bidding by needlessly scaring the nation about climate change? Of course that’s absurd: the Bush administration has tried to muzzle Hansen—just as Shell tried to muzzle Hubbert.
Innuendo is just not a proper form of argument.
You point out that King Hubbert supported nuclear power. I happen to disagree with him on that issue—as I also do with biologist James Lovelock, who likewise supports nukes.
But you make it sound as though Hubbert came up with his oil depletion forecasts as a justification for Shell’s nuclear program. There is no evidence for that assertion, as far as I’m aware. Hubbert’s colleagues tell the story differently: Once he had calculated that global oil production would peak in a mere half-century, Hubbert realized that the world would need a new non-fossil source of energy. At the time (remember, we’re talking about events in the 1950s), nuclear power seemed the only realistic alternative. Later he threw his support behind solar power, when that technology began to show promise.
In retrospect, it seems to me that King Hubbert was one of the most visionary scientists of the twentieth century. You may disagree. But ultimately there is only one question about Hubbert that really matters in the current discussion: Did he make an important contribution to our understanding of oil depletion? On that point, there is widespread positive agreement. Not only has Hubbert’s method produced results that have been confirmed by events, it also yields forecasts that mirror ones generated through entirely different methods.
Chris Skrebowski, the editor of Petroleum Review, has been tracking decline rates from producing oilfields and comparing those numbers with new production capacity expected from the various new projects in which the industry is investing. He calls this a “bottom-up” method (because it requires patiently assembling and crunching data from many sources), in contrast to Hubbert’s “top-down” graphs. I doubt if Chris has ever drawn a standard Hubbert curve, but he has come to essentially the same conclusion as those who do: he expects global oil production to peak around 2010.3
Was Hubbert right about everything? Obviously not. We’ve already seen that he underestimated the global amount of ultimately recoverable oil, and why he did so—because he was working with early data. However, some of your own statements seem to be inaccurate in ways that are harder to account for.
2. The oil companies are behind today’s Peak Oil warnings
You point out that Chevron has recently taken out ads declaring that world oil discoveries are down. Chevron is pushing Peak Oil! Therefore the latter must be a corporate plot whose purpose is to drive up oil prices and line the pockets of greedy executives. Here’s the relevant passage from your book:
So who’s selling us Peak Oil today? The operator of the supertanker Condoleezza has been running an extravagant advertising blitzkrieg to tell us: We’ve peaked! “The world consumes two barrels of oil for every barrel discovered!” That’s just the billboard. Their double-page spread in Harper’s is even more hysterical: “The fact is, the world has been finding less oil than it’s been using for twenty years now.” Unfortunately, that “fact” isn’t a fact at all—reserves rise year after year—and those facts don’t change because Chevron paid my magazine to print it.
Actually, Chevron—rather than being at the forefront of the Peak Oil discussion—is late on the scene: independent and retired geologists have been talking about this problem for years; the companies have generally been discouraging the discussion in every way possible. I know because when I lecture about the subject, the people I find myself debating are usually industry PR reps (including, just recently, one from Shell), while the folks who offer the most informed encouragement are nearly always retired or independent geoscientists. Chevron still hasn’t used the “P” word, and is just saying that oil will get more expensive from now on.
Of all the oil companies, Exxon is leading the charge in opposing Peak Oil. You may remember that Exxon also spearheaded the industry’s effort to deny the link between climate change and carbon emissions—and in fact is still doing so. Here are passages from an Exxon ad, titled “Peak Oil: Contrary to the Theory, Oil Production Shows No Sign of Peak”:
Will we soon reach a point when the world’s oil supply begins to decline? … So goes the theory. The theory does not match reality, however. Oil is a finite resource, but because it is so incredibly large, a peak will not occur this year, next year, or for decades to come.4
The case made in the Exxon ad is essentially the same one you outline in your book. So which company is telling the truth and which is engaged in a disinformation campaign? One of the problems with argument by innuendo is that it often requires us to speculate about other people’s motives. The only question that really matters here is, which line of argument is correct? And the only way to make an informed judgment in that regard is to examine and weigh the evidence and the quality of reasoning on each side.
Well, what about Chevron’s statement that “the world has been finding less oil than it’s been using for twenty years now”? You say that “isn’t a fact at all.” Not if one conflates actual discoveries with reported reserve additions—but these are two very different animals. Reserve additions occur for a number of reasons—some political, some simply having to do with SEC reporting rules. Sometimes they reflect recent discoveries, but this is less the case as time goes on. The Royal Swedish Academy of Sciences, in a recent publication titled “Statements on Energy,” describes the situation this way:
In the last 10–15 years, two-thirds of the increases in reserves of conventional oil have been based on increased estimates of recovery from existing fields and only one-third on discovery of new fields. In this way, a balance has been achieved between growth in reserves and production. This can’t continue. Fifty percent of the present oil production comes from giant fields and very few such fields have been found in recent years.5
In fact, recent oil discovery figures are much worse than Chevron makes them out to be: the Chevron ad you quote says that two barrels of oil are being extracted for every one discovered; for the past few years the ratio has actually been more like four, five, or even six to one.
But why does it matter if discoveries are down, when reserves are still growing? Doesn’t the fact that global oil reserves are at record highs preclude a near-term peak in production? Not necessarily. There are many examples we could explore—after all, over half of the world’s producing nations are in decline, most of them irreversibly so. Did reserves drop substantially in these nations before they hit their production peaks? Certainly not in the most important and well-documented case—that of the US. Here, while discoveries of new fields peaked in 1930, reserves as of 1970 were at record levels, as was production. Therefore it came as a surprise to nearly everyone (except King Hubbert) when production levels began to drop the following year, despite every effort on the part of the industry to keep them soaring. US production in the onshore lower 48 is now back down to about where it was in 1940.
Is Chevron right, or is Exxon right? I’d say that what Chevron is telling the American public is closer to the truth. But only time and careful analysis will tell. Speculating on the companies’ motives may be easy and entertaining, but it is probably the least helpful way of getting at the truth in this instance.
3. The world has oodles of oil—and most of it’s in Venezuela
As I read and re-read the pages in which you claim to show that “the Peak Oil crowd is crackers,” I am disturbed to see how much your case relies on guesses about what’s going on in the minds of oil company executives, and how little discussion you provide of the sea of facts and analysis that are publicly available. It’s in your Appendix, “Return to Hubbert’s Peak: Why Palast Is Wrong,” that you finally do present a brief analytic case. The factual core of your argument (still confined to only a few sentences) seems to be that the world simply has enormous amounts of oil, and thus a near-term peak is unthinkable.
Price, you say, makes all the difference:
World oil reserves, officially measured at 1.189 trillion barrels, are probably, as one of Mr. Hubbert’s protégés stated a few years back, grossly overstated—if you assume oil selling at $10 a barrel. But kick the price up to a post-invasion $50 a barrel, and the world reserves are wildly understated.
Yes, the world has more oil available at, say, $50 or $70 a barrel than at $10 or $20. Everyone agrees; that’s a truism in the industry. But there’s no simple mathematical relation between increasing the price of oil and increasing the size of estimated reserves. Doubling the price doesn’t double the reserves; it merely makes a few out-of-the-way known reserves more attractive.
The all-important question is, how much oil can the industry pump every day (that is, at what rate can that oil be produced)? That’s what the debate over Peak Oil is all about—not reserves or amounts ultimately recoverable, but flow rates. When will the flow rate that the industry can possibly attain reach its maximum?
With prices high, you say, hundreds of billions of barrels of oil from the tar sands of Canada and from the heavy-oil fields of Venezuela become economical to produce. Right again, though this is not conventional oil we’re talking about, but materials that have to be transformed into synthetic petroleum using energy-intensive processes. Again, the real question is, at what rates? Canada is currently extracting a million barrels a day from the tar sands; Venezuela is pulling a little over half that amount from the Orinoco belt. These numbers are expected to climb—and then level off. Why? Because the process of producing synthetic oil from these low-quality hydrocarbon sources is constrained by physical factors that just do not respond much to economic stimuli. Canada needs lots of fresh water and natural gas to make oil from the tar sands, and both are in short supply. The best published forecasts say that, regardless of the price of oil, flow rates there will max out at about three to five million barrels per day by 2025—a generous amount in terms of the benefit to Canada’s economy. But this is not nearly enough fuel to satisfy the US habit of over 20 million barrels per day—and crucially, it’s not enough to make up for expected declines from the world’s giant and supergiant conventional oilfields once the latter begin their inevitable declines—as they are doing now. There are only about a hundred of those big fields that, collectively, yield roughly half the oil extracted today. Nearly all are old (found in the 1940s through the 1970s), and we’re seeing that, with the newer water-flooding recovery methods, when decline comes it can hit unexpectedly and with catastrophic swiftness—as it did in the Yibal field in Oman, which peaked at 250,000 barrels per day in 1997 and is already down to less than 80,000 b/d.
The situation in Venezuela is similar to that in Canada.
All of these questions have been discussed, dissected, analyzed, and graphed endlessly. Yes, it’s theoretically possible to build nuclear reactors to cook the tar sands—but the practical challenges in that case are prohibitive, as the tar sands are geographically extensive and each nuclear plant would be able to heat only a limited area; that means lots of expensive nuke plants with useful lifetimes limited by the amount of bitumen within easy reach. It’s already costly to make oil from bitumen; add hundreds of billions of dollars in nuke plants and the exercise quickly becomes an investor’s worst nightmare.
I could provide more details, but what’s the point? We are breaking no new ground here. Every serious analyst I know who is predicting a global oil production peak between now and, say, 2012 is thoroughly familiar with the standard free-market argument about higher prices stimulating more production, and with the published reserves figures for tar sands, heavy oil, shale oil, and so on. All of this has long ago been taken into account.
After writing the previous paragraph, I went back to your book to see if I had missed something. But no—the rest is all guesswork: Why did the US really invade Iraq—was it to close down the oil spigot and raise prices? Is Shell Oil Company using its ads to try to scare us into supporting further invasions of the Middle East? Did Hubbert time the release of his famous paper to coincide with the overthrow of Iran’s Mossadegh and the closure of the Suez Canal? I honestly don’t know whether you’re right on any of these points. I just don’t have enough information to go on—even though I’ve spent the past few years devoting considerable time each day to studying the oil industry and following the same press reports you must have read.
What I do know is that the arguments you have brought up in order to “debunk” the Peak Oil thesis are not up to your usual journalistic standards.
* * *
In an apparent nod to folks like me, you write, near the very end of your book, “Some environmentalists have echoed the ‘peak oil’ theorem in the false hope that oil companies’ raising prices will lead to conservation. Fat chance.” As you might imagine, Greg, it gives me no pleasure to see the efforts of five years (and the motives for those efforts) misrepresented and flushed away in a couple of snide sentences. The truth is, I write and speak about Peak Oil because I believe that the evidence for it is overwhelming, that it will have a devastating impact on everything we hold dear, that there are actions we can take to mitigate that impact, and that those efforts won’t be undertaken unless the public is alerted.
The problem of Peak Oil has been acknowledged by environmentalists like Bill McKibben and Lester Brown, by public figures like Bill Clinton, by international affairs experts like Michael Klare, and by both oil industry insiders and severe critics of the industry. The world is deeply dependent on cheap, abundant oil, and we are seeing the end of cheap oil unfolding before our eyes. The process of economic adaptation is not going to be quick or easy. We’re all going to have to work together on this—whether we think of ourselves as liberals or conservatives, whether we live in rich or poor countries, and regardless of our area or level of expertise. Naturally, there will be disagreements along the way, some folks will try to take advantage of the situation, and we’ll need investigative reporters like you to help keep everyone informed and honest. But if we don’t commit ourselves to trying to work together, things could get ugly—much uglier than they already are.
I’d be happy to discuss the evidence with you at greater length, and I’d be happy to point you toward some good source material, most of it untainted by association with any oil company.
I refuse to speculate about your motives. I assume they are the best. Therefore I also assume that, if shown to be incorrect, you will set the record straight. Everyone is wrong sometimes, and when one is publicly wrong, there is a strong incentive to retrench. Being wrong in print is the worst case. But sometimes it happens, and when it does the best thing is to admit it and move on.
On the other hand, you may wish to write a rebuttal. If so, might I suggest some sources for research on anti-Peak Oil arguments? Try these:
Exxon (as discussed above);
Daniel Yergin, chairman of Cambridge Energy Associates and author of The Prize and The Commanding Heights—the latter a book that’s on every neocon’s short list of favorites; and
Jerome Corsi, proponent of the “abiotic oil” hypothesis and primary architect of the Swift Boat disinformation campaign against John Kerry.
Now, these people’s assertions have already been countered by competent scientists, so if you want to make a real contribution to the discussion, you will need to take account of those counter-arguments and bring the debate up to a still higher level. That will require familiarizing yourself with an extensive literature.
But I would greatly prefer it if you would simply acknowledge that thousands of Peak Oil activists around the world are in fact devoting themselves to a worthy cause. Most of them are working hard to wean themselves and their local communities from oil dependency.
In my view, the best large-scale strategy for going forward would include the international ratification of an Oil Depletion Protocol mandating reductions in petroleum production and imports. Such an agreement would tend to stabilize prices, reduce international competition and conflict, and conserve the resource base. If nations observed such a Protocol, it would also help with the problem of greenhouse gas emissions, as long as it was accompanied by a strong Kyoto-like accord. A coalition of individuals and groups is forming in order to persuade the nations of the world to adopt such a Protocol.6
I’d really like to have your support on the Protocol and on grassroots Peak Oil efforts, Greg. A lot of people listen to what you have to say, and a lot is at stake.
Sincerely,
Richard
Notes
1. Hubbert estimated that the Earth would eventually yield about 1,250 billion barrels of regular oil (excluding tar sands, oil shale, and so on); many current estimates of global recoverable regular oil are in the range of 2,000 billion barrels, or about 800 billion barrels (65%) higher. The world has consumed just about 1,000 billion barrels so far.
2. Jeffrey J. Brown and “Khebab,” “Texas and US Lower 48 Oil Production as a Model for Saudi Arabia and the World,” May 25, 2006, http://graphoilogy.blogspot.com/2006/05/texas-and-us-lower-48-oil-production_25.html. See also Roger Blanchard, “North Sea Oil Production and its Relationship to Global Oil Production,” June 19, 2006, www.energybulletin.net/17262.html.
3. Chris Skrebowski, “Megaprojects Analysis Explained,” June 21, 2006, www.energybulletin.net/17422.html.
4. www2.exxonmobil.com/Corporate/Files/Corporate/OpEd_peakoil.pdf.
5. “Statements on Oil” Royal Swedish Academy of Sciences Energy Committee. (17 Oct. 2005) www.energybulletin.net/9824.html.
6. More information will soon be available at www.oildepletionprotocol.org.
Richard Heinberg is one of the world’s foremost Peak Oil educators. He is the author of seven books including The Party’s Over: Oil, War and the Fate of Industrial Societies; Powerdown: Options and Actions for a Post-Carbon World; and the forthcoming The Oil Depletion Protocol: A Plan to Avert Oil Wars, Terrorism and Economic Collapse.
~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~
A taste of Greg Palast's disappointing efforts at countering the imminent peak oil hypothesis can be found here:
No Peaking: The Hubbert Humbug
Why Palast Is Wrong by Greg Palast
http://www.energybulletin.net/17914.html
Oil Doomsday is Nigh, Tar Sands Not a Substitute
By Tim Wood
11 May 2005 at 09:01 PM EDT
NEW YORK (ResourceInvestor.com) -- Matthew R. Simmons says the world is blindly and blithely racing toward an energy crisis rooted in false assumptions about plentiful Saudi Arabian oil reserves. Simmons says that provided “disbelief is suspended”, the problem can be dealt with, but not before prices surge to crimp demand.
How soon could the crisis manifest? It already has to an extent, but Simmons believes the fourth quarter of this year will see the first real crunch as global demand reaches 86 - 87 million barrels per day, which is 2 - 4 million barrels short of projected supply. He believes that rebalancing the market would require tapping stocks for 180 - 360 million barrels, which simply does not exist.
Simmons disagrees with recent analyst reports of oil prices spiking to record highs, because it implies a quick retracement off a high. Rather, he sees prices surging to progressively higher plateaus.
Conventional wisdom
Simmons is the principal of the eponymous Simmons & Company International, based in Houston, which consults to a who’s-who of the energy industry. His book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy will be available in bookstores from May 27.
Speaking with us by telephone, Simmons, who has analysed energy for 34 years, boiled the energy problem down very simply to a failure of conventional wisdom about oil.
For example, great store has been placed in new technology that was supposed to find more oil and deliver it cheaper such as 3-D seismic surveys and horizontal drilling. There was also an industry consensus that a supply glut was always impending, whilst there was unrelenting pessimism about a quasi-permanent deflation in natural resource prices. There was also widespread belief that non-OPEC oil producers would emerge to challenge the status quo.
Nearly everything has been wrong. Demand has grown massively at 12.5 million barrels a day from 1995 to 2004. The cost of finding new and replacement reserves has increased dramatically, whilst fields recently found have been smaller with lower quantities of poorer quality resource. Technology advances were misleading because they resulted in a form of “high grading” – production was boosted in the short term, but with negative effects in the long term.
The primary problem is a lack of information.
The most reliable oil producer for 70 years, Saudia Arabia, has been especially secretive about the status of its reserves and output. With energy analysts unable to glean hard information, they relied on reflexively optimistic economists.
It has all been wrong, says Simmons.
Accidental trip
“I took an accidental trip to Saudi Arabia in February 2003,” Simmons told us, adding, “and what I saw didn’t pass the smell test.”
He observed technology applications and water handling infrastructure that should have been superfluous to a country reportedly awash with cheap reserves. “We’ve always been told they had 260 million barrels of reserves in 80 fields… they weren’t behaving that way,” he said.
He was particularly struck by Saudi efforts to rehabilitate old oil fields. “Why were they doing that if they had 80 [untapped] fields?,” Simmons asked rhetorically.
On his return to the States, Simmons scoured the digitised archive of the Society for Petroleum Engineers. Therein he found 235 technical papers spanning many years which when pieced together presented the actual truth about Saudi oil.
Simmons’s truth is that Saudi oil diversity and abundance is a myth.
For the last four decades, 90% of Saudi Arabia’s 8-9 million barrels of oil per day has come from just five giant fields. 85% of the remaining 10% comes from just 3 other fields. By contrast, America produces 5.5 million barrels per day from 800,000 wells. Also, the Simmons found that Saudi fields are highly compartmentalised rather than homogenous, which makes extraction more complex and costly.
Those “miracle” fields are now mature and in need of husbanding.
In order to keep production rates up, the Saudi fields were pressurized by injecting massive amounts of water. This is not uncommon, but in the Saudi case many injector wells are horizontal rather than vertical according to experts. When the water pressurized oil rises above the level of the injector well, “brine” gushes out, referred to as water cut. It’s environmentally messy and usually spells an early end to the primary well. Similarly, there’s a point at which the loss of pressure makes a field inert, leaving behind a good deal of oil.
Water cut has increased exponentially at Saudi Aramaco’s monster Ghawar field.
Most worryingly, Simmons says there is plentiful evidence that the state oil company Aramco spent $17-18 billion exploring for new reserves only to come up dry. “They have had no exploration success,” Simmons declared, noting also that once publicly available field-by-field data suddenly disappeared in 1982.
So why hasn’t Saudi Arabia come clean? Simmons says it can be put down to pride and protecting its dominant position within OPEC. OPEC’s pecking order is determined by the reserves of its members.
Not just the Saudis
It’s not just a Saudi problem although that is where the focus is because it was assumed the Middle East provided a perpetual reservoir of cheap oil. However, worldwide there are just 14 fields that provide one fifth of all oil output.
The conclusion is that Saudi Arabia has been over producing its most important fields, and has probably been masking capacity constraints by meeting demand from tank farms.
With “Peak Oil” rapidly gaining attention outside the industry, Simmons cautions against too simple an interpretation.
“It’s not a matter of the highest output or running out of oil, but sustainable production,” Simmons said. He noted that if his research is correct, and sustainable Saudi production has already passed, then global oil supply has also peaked.
The peak oil discovery year was 1965. 2005 is now being marked as peak sustainable production.
When asked about Canadian tar sands and South American shales, Simmons said it was critical not to confuse the two types of oil. “They’re real and the economics work, but these are high energy intensity projects that can never reach high volumes. They are not a substitute for high flow rate oil. They are not a real offset.”
It’s a gloomy picture and Simmons acknowledges that there are others who argue that reserves are just a function of price. He’s adamant and confident that the optimists are wrong, saying, “there’s a better chance we’ll be living on the moon [than find enough oil to sustain current and projected demand]. Oil will peak and it is not renewable.”
He is just as bearish on Middle Eastern alternatives such as Russia, the Arctic and Antarctic frontiers, residual North American fields, and Alaska’s north shore. They’re all speculative projects that he says can only delay peak oil rather than avoid it.
Global oil collaboration
Simmons is urging collaboration between the UN, IMF and national energy agencies to create a global inventory report. The intention is to compel companies and governments to give up their production and reserve information field-by-field so that every well bore’s productivity can be assessed.
“It would take 30 analysts 30 days to sort out what the real proven reserves are,” said Simmons.
With that data Simmons says we can put the right value on scarce oil, and then start developing ways to balance supply and demand, and recycle petrodollars productively into new forms of energy. The urgent need is to avoid a shock to the global transportation system which consumes 70% of all oil produced.
So if you’re an investor looking at this wreck, you’ll be examining the whole hydrocarbon complex, but you may also want to think about thinks like:
Rail transport. Greenies will try to block new corridor development in the US, but political response to constituents in an oil crisis will prevail:
[1]Investments in easements could be worth a fortune, even if those easements are now dormant or alternate use such as rails to trails.
[2]Miners could find themselves earning a handy fortune on sidelines like tunnels for expanded networks and shorter routing.
The platinum group metal value chain. An oil crisis will accelerate the onset of the hydrogen economy which is seen as reaching critical mass in 2060. That’s about ten years after oil supply will decline dramatically according to Simmons’s numbers.
Hydrogen energy as a mass product is going to consume a lot of PGMs. There will be a huge fortune to be made in PGM recycling.
Nuclear supply chain. Nukes are the shortest route to a viable energy alternative for electricity grids. Efficient technologies like pebble bed reactors will be in high demand, but they will also have compete for the uranium feedstock that is in short supply. That’s why the price keeps rising and uranium exploration and development plays are such good bets right now.
Energy efficiency punts. Investment in structure insulation should soar; think thermal windows etc. There should be rising demand for high efficiency air conditioners, furnaces and water boilers, especially tankless boilers that use lasers to flash heat water. Those consume more metal, especially copper.
Coal is enjoying a renaissance, but it’s not much good for the transportation network unless steam comes back into vogue.
Migration plays. All that snowbird and lifestyle migration may stop short of Arizona and Texas.
LPG conversions as a short-term bridge for retail car fleets. LPG-petrol vehicles are in widespread use in places like Australia and that technology could be taken up quickly in the US as an interim measure. Go short gas barbecue grills!
Indeed, don’t ignore the obvious shorts for which little imagination is needed.
http://www.resourceinvestor.com/pebble.asp?relid=9692
What happens when oil does peak?
by Joel Bainerman
Peak oil is often referred to as "Hubberts Peak", a geophysicist who observed that oil well production followed a bell curve. According to the mainstream, convention view, peak oil is set to occur around 2006-2008. When peak oil occurs, production will decline approximately 3% per year at a time where global demand is increasing at 3% per year.
What will all this mean for you and me- the average folk? Which industries will suffer the most- and which will strengthen as the new situation takes hold?
If and when oil prices start to rise substantially, it will undoubtedly translate into strong commodity based inflation. Ultimately, as the price of oil rises it will cause a severe contraction in the world economy. Most observers of this occurrence agree that this will translate into higher prices all the way down the food chain- literally- right down to bread and fruit- as not only road and air transportation will be affected directly but the price of nearly ever commodity and product consumed in the world economy will be impacted indirectly.
When world petroleum production peaks, energy prices will go up dramatically. There will be a recession similar to the recessions that followed the energy price increases of 1974 and 1979, but with one difference: the US Federal Reserve Bank is much more active in setting economic policy than it was then, and its main focus is fighting inflation, so we can expect much lower inflation and much higher unemployment than in the 1970s. As interest rates soar, housing prices will fall and the stock market will suffer.
Eventually, the rest of the decline in oil production would have to be absorbed by a prolonged economic depression. Whenever energy prices soar, the Fed will raise interest rates until they have slowed the economy enough to stop inflation. To keep the demand for energy from exceeding the physical supply, they might have to reduce the GDP by 10 or 15 percent over 15 or 20 years. That could mean unemployment over 20 percent - about as high as it was during the worst years of the Great Depression.
Says David Petch of the Market Letters Digest newsletter:
"High oil prices around $160/barrel would eventually collapse to around $30/barrel. In 2012, should that occur, it would have a positive effect on agriculture, since food would be able to be produced cheaper. However, a decline in oil prices would signal a collapse in exploration, which would only add to energy crises in the future. A decline in oil to such a level would not be a permanent thing. It would likely return to the former level of $160/barrel and remain there, rising in price as it becomes more scarce. The wild fluctuations will hurt most, since it translates into oscillating inflation/deflation cycles"
Which industries will be affected most by the rising price of petroleum?
Food and agriculture industries
According to Matt Savinar, proprietor of lifeaftertheoilcrash:
Petrochemicals are key components to much more than just the gas in your car.
Geologist Dale Allen Pfeiffer points out that approximately 10 calories of fossil fuels are required to produce every 1 calorie of food eaten in the US. In the US, the average piece of food is transported 1,500 miles before it gets to your plate.
The size of this ratio stems from the fact that every step of modern food production is fossil fuel and petrochemical powered.
Vast amounts of oil and gas are used as raw materials and energy in the manufacture of fertilizers and pesticides, and as cheap and readily available energy at all stages of food production: from planting, irrigation, feeding and harvesting, through to processing, distribution and packaging. In addition, fossil fuels are essential in the construction and the repair of equipment and infrastructure needed to facilitate this industry, including farm machinery, processing facilities, storage, ships, trucks and roads. If the price of oil rises substantially- all of these sectors of the food industry will have to pass on the extra costs to the consumer.
Commercial food production is oil powered. Most pesticides are petroleum- (oil) based, and all commercial fertilizers are ammonia-based. Ammonia is produced from natural gas. Oil based agriculture is primarily responsible for the world's population exploding from 1 billion at the middle of the 19th century to 6.3 billion at the turn of the 21st Oil allowed for farming implements such as tractors, food storage systems such as refrigerators, and food transport systems such as trucks
According to Matt Savinar, proprietor of lifeaftertheoilcrash:
As oil production went up, so did food production. As food production went up, so did the population. As the population went up, the demand for food went up, which increased the demand for oil. Oil is also largely responsible for the advances in medicine that have been made in the last 150 years. Oil allowed for the mass production of pharmaceutical drugs, and the development of health care infrastructure such as hospitals, ambulances, roads, etc.
Colin J. Campbell, one of the world's leading oil industry analysts, claims:
“The world's economy has been driven by an abundant supply of cheap oil-based energy for the best part of this century. The coming oil crisis will accordingly be an economic and political discontinuity of historic proportions, as the world adjusts to a new energy environment."
We are now at a point where the demand for food/oil continues to rise, while our ability to produce it in an affordable fashion is about to drop. Within a few years of Peak Oil occurring, the price of food will skyrocket because the cost of fertilizer will soar. The cost of storing (electricity) and transporting (gasoline) the food that is produced will also rise starkly.
A sharp increase in the price of oil or a reduction of oil supplies could present a far more serious threat to food security and is likely to as oil enters its depletion phase. Food production and distribution, as they are organized today, would not be able to function. The alternatives, in the form of sustainable agriculture and local food supplies which minimize the use of crude oil, are currently unable to respond to increased demand due to low investment and capacity. Localising the food system will require significant diversification, research, and public investment.
According to financial analyst Norman Church, as a result, the contemporary food system may be inherently unsustainable.
According to Matt Savinar, proprietor of lifeaftertheoilcrash:
"Oil is required for a lot more than just food, medicine, and transportation, " he says. "It is also required for nearly every consumer item, water supply pumping, sewage disposal, garbage disposal, street/park maintenance, hospitals and health systems, police, fire services and national defence.
Church states part of the solution will be to localize the food system. Production needs to be located as near to the consumer as possible. When applied to food supply, local food systems in the form of home-delivery box schemes, farmers’ markets and shops selling local produce would replace imported and centrally distributed foodstuffs.
Some analysts predict that by 2030, the cost to transport fresh fruits and vegetables from foreign producers will become so burdensome that there will be a major resurgence in local agricultural production: e.g. truck gardening, community supported agriculture, and commercial greenhouses.
One sector of agriculture likely to benefit from the rise in the price of oil is organic farming. Organic gardeners, less reliant on expensive pesticide inputs, will become increasingly competitive at the local and regional level. A return to interest in canning and consumption of winter root crops can also be expected
Other industries to be affected by "Peak Oil"
According to Matt Savinar, proprietor of lifeaftertheoilcrash:
It's not just transportation and agriculture that are entirely dependent on abundant, cheap oil. Modern medicine, water distribution, and national defense are each entirely powered by oil and petroleum derived chemicals.
Most of the consumer goods we buy are made with plastic, which is derived from oil.
All manufacturing processes consume huge amounts of oil. For instance, the average car - including hybrids - consumes the energy contained in 25-50 barrels (or about 1,200-2,400 gallons) of oil during its construction, while the average computer consumes 10 times its weight in fossil fuels during its construction.
All electrical devices - including solar panels and windmills - make use of silver, copper, and/or platinum, all of which are discovered, extracted, transported, and fashioned using oil-powered machinery.
One industry likely to benefit from "Peak Oil" is the recycling markets for certain commodities. For instance, used materials that were energy intensive to produce, like ceramic sinks, aluminum canoes, stainless steel grilles, will become very cost effective to recycle.
New economy and technology companies
Although it sounds strange- an industry likely to feel the effects of the rise in the price of oil is the dot-com sector.
The oil shock could have adverse effects for new-economy companies. One immediate concern is that delivery services FedEx and UPS will raise their rates to cover higher fuel costs. Online retailers have built their reputations on cheap prices and fast delivery. Higher transportation costs could hurt their operations.
Some dot-com companies, however, may find good news in all this. Companies that sell oil through online marketplaces such as Petroleum Electronic Pricing Exchange (Pepex) and American Petroleum Exchange say business is up because high prices mean buyers are looking for ways to cut costs.
"Larger buyers are seeking all kinds of alternatives to traditional buying methods because they are faced with the higher cost of fuel, says Stephen Gloyd, senior VP for American Petroleum Exchange, a new b-to-b fuel exchange that counts FedEx, UPS and Wal-Mart as its customers. "They are doing everything they can to create some stabilization of prices and make sure they get enough product,"
Macro economic effects of "Peak Oil"
According to Matt Savinar, proprietor of lifeaftertheoilcrash:
Most people new to the idea of Peak Oil tend focus on finding alternatives to oil, while wholly ignoring the more fundamental issue: the ramifications of Peak Oil on our monetary system.
If the Federal Reserve raises interest rates, it could not only slow the whole economy but could also hamper investment in high technology.
"People often underestimate how cyclical tech spending and stocks are," says Martin Brookes, senior global economist at Goldman Sachs in London. "To the extent that high oil prices slow the U.S. economy, that will ripple through the technology sector as well."
Brookes expects the rise in oil prices during the past 18 months will shave one-quarter to three-quarters of a percentage point off the growth of the world's major industrialized countries next year.
It's not enough to push the world into a recession. But it's enough to take the edge off quite robust growth.
Another less tangible consequence of higher oil prices is that they could depress consumer confidence. If people lose confidence, they start scaling back on purchases, and that is one way to get into a recession. Oil-price increases certainly have brought on recessions in the past and still have the potential to do so."
Binit Patel, an economist at Goldman Sachs, estimates that $50 oil would only add 1% to most western countries' consumer price index . However, it would have a bigger effect in the US, where CPI will rise 1.7%. This will undoubtedly mean the world will become a higher interest-rate place than it is today.
Patel estimates that after one year of oil prices at $50, G7 GDP would be 3% weaker than it otherwise might have been. Goldman Sachs equity strategists believe that each sustained 10% rise in oil prices knocks 8% off the value of European equities. US equities, meanwhile, are already falling in response to rising oil.
Although the initial effect of higher oil prices is inflationary, ultimately the result is deflation. Deflation in growth forecasts, deflation in stock prices and deflation in jobs. That means overall tax-take will be lower than he expected, which in turn means his budget deficit will remain high.
According to Matt Savinar, proprietor of lifeaftertheoilcrash:
Consequently, a declining supply of oil must be accompanied by either a declining supply of money or by hyperinflation. In either case, the result for the global banking system is the same: total collapse. This may be what led Stephen Roach, the chief economist for investment bank Morgan Stanley, to recently state,
"I fear modern day central banking is on the brink of systemic failure."
Within a few months of global oil production hitting its peak, it will become impossible to dismiss the decline in supply as a merely transitory event. Once this occurs, you can expect traders on Wall Street to quickly bid the price up to the $200 per barrel range as they realize the world is now in a state of permanent oil scarcity.
With oil at $200 per barrel, gas prices will hit about $10 per gallon virtually overnight. This will cause a rapid breakdown of trucking industries and transportation networks. Importation and distribution of food, medicine, and consumer goods will grind to a halt.
The collapse will be hastened by the fact that the US national debt will become completely unsustainable once the price of oil gets into the $100 range.
Once this mark is passed, the nations of the world will have no choice but to pull their investments out of the US while simultaneously switching from the dollar to the euro as the reserve currency for oil transactions. Along with the breakdown of domestic transportation networks, the global financial shift away from the dollar will wholly shatter the US economy.
Every dollar increase in the price of a barrel of imported oil increases the size of the U.S. trade deficit, which puts more pressure on the value of the U.S. dollar, which leads to a weaker dollar, which makes OPEC countries want to raise the dollar-denominated price of a barrel of oil to make up for the dollar’s fall, and so on.
Joel Bainerman
Joel Bainerman has been a writer on economic and Middle East issues since 1983. His published archive can be viewed on his website at www.joelbainerman.com
His new online, multi-lingual alternative newsmagazine for Europeans can be viewed at www.theotherside.org.uk
http://321energy.com/editorials/bainerman/bainerman081005.html
Seven Questions: The Future of Oil
High gasoline prices have returned oil to the forefront of the national debate. Matthew Simmons, an energy industry investment banker, is a leading voice warning of “peak oil”—the theory that world oil output will soon decline. Saudi officials and many economists say oil production will increase to meet growing demand, but Simmons doesn’t buy it.
(Continued on following link)
http://www.foreignpolicy.com/story/cms.php?story_id=3233&page=0
Commentary on the Flux of Events
by Jim Kunstler
November 14, 2005
Years ago, President Nixon nominated a legal nonentity named G. Harold Carswell for a seat on the supreme court. Derided by the newspaper columnists as "mediocre," Carswell was defended by a conservative Nebraska senator, Roman Hruska, who said, memorably: "There are a lot of mediocre people in America who ought to be represented."
Now Hruska has been reincarnated in Senator Charles ("Chuck") Grassley of Iowa, who said the following a few days ago:
"You know what? What makes our economy grow is energy. And Americans are used to going to the gas tank (sic), and when they put that hose in their, uh, tank, and when I do it, I wanna get gas out of it. And when I turn the light switch on, I want the lights to go on, and I don't want somebody to tell me I gotta change my way of living to satisfy them. Because this is America, and this is something we've worked our way into, and the American people are entitled to it, and if we're going improve (sic) our standard of living, you have to consume more energy."
Like the true-blue mediocre Americans of the Nixon era, American consumers (as we like to call ourselves) have the representative they deserve today in Senator Grassley. He expresses perfectly the dominant thought out there, which is as close to being not-a-thought as any thought can be. And this kind of proto-crypto-demi-thought is exactly what is going to lead this country into a world of hardship.
Instead of preparing the public for changing circumstances that will inexorably require different behavior on our part, our leaders are setting the public up to defend a way of living that can't continue for practical reasons. The question remains: are our leaders doing this out of cynicism or stupidity, or some other reason that is hard to determine?
Cynicism would mean that they know exactly what the score is with the global energy situation and our predicament in relation to it, and don't trust the public to deal with the truth. Two weeks ago, I was on a speaking program in Dallas with investment banker Matthew Simmons, author of Twilight in the Desert, an alarming book about the state of the Saudi Arabian oil industry. I asked Matt what he has encountered the time or two that he has had an audience with George W. Bush. Apparently, the president's reaction to Simmons' message (which is that we are in big trouble) is a kind of curious incomprehension, as in the old expression, is that so?
Personally, I don't believe that Mr. Bush or the people around him do not understand that oil production worldwide has about topped out, and that whatever oil is left belongs mostly to other people who don't like us very much. But public acceptance of this reality would mean the end of many illusions supposedly crucial to our national life, most particularly that we can continue to be an easy motoring society, and continue running an economy based on its usufructs.
But the psychology of previous investment is a curious thing. It compounds itself insidiously, and now we not only suffer from our misinvestments in an infrastructure for daily life that has no future, but we also suffer from the political investment in continuing to pretend that everything is okay. That is, if Mr. Bush went on TV tomorrow and told the public we have a problem, the public would want to know why they weren't told sooner, and why they were not directed to some purposeful adaptive behavior, and Mr. Bush's team, the Republican party, would be discredited for failing to do so.
While I doubt that the President and his posse are too dim to comprehend the energy trap we're in, there certainly is plenty of plain stupidity in the rest of our elected leadership, of which Senator Grassley's remarks are Exhibit A. To be more precise, actually, Grassley's statement displays something closer to childishness than sheer stupidity. It comprises a set of beliefs or expectations that are unfortunately widespread in our culture, namely, that we should demand a particular outcome because we want it to be so. This is exactly how children below the age of reason think, in their wild egocentricity, and it is the hallmark of mental development to grow beyond that kind of thinking. But the force of advertising and other inducements to fantasy are so overwhelming in everyday American life that they may be obstructing the development of a huge chunk of the population, something that becomes worse each year, as proportionately more adults fail to grow up mentally. This state-of-mind is made visible in Las Vegas, our national monument to the creed that people should get whatever they want.
What I wonder is: when will my fellow citizens discover that their thinking and their behavior are unworthy of their history? That we are entering a time when these things simply aren't good enough, aren't enough to meet the challenges that reality now presents. Or are we too far gone? It's possible that we are. After all, life is tragic, meaning that happy outcomes are not guaranteed and that people who forget that usually come to grief.
Russia Shifts Part of Its Forex Reserves from Dollars to Euros
June 9, 2006 - MosNews
http://www.mosnews.com/money/2006/06/09/dollarshift.shtml
On Thursday, June 8, Russia became the latest in the list of countries that shifted a part of its Central Bank reserves from the dollar. Sergei Ignatyev, chairman of the Central Bank, said that only 50 percent of its reserves are now held in dollars, with 40 percent in euros and the rest in pounds sterling. Earlier it was believed that just 25-30 percent of Russia’s reserves were held in euros, with virtually all the rest held in dollars.
Russia’s gold and foreign currency reserves have grown rapidly over the last few years in tandem with high oil and gas prices. As MosNews has reported earlier, Russia currently has the world’s fourth-largest reserves, after China, Japan and Taiwan, and it looks to overcome Taiwan by the end of the year, with reserves growing by $5-6 billion monthly.
The Russian Central Bank’s move ties in with increasing signs that Middle Eastern oil exporters are also looking to diversify their reserves out of the dollar. “This is a bearish development for the dollar,” Chris Turner, head of currency research at ING Financial Markets, told the British Financial Times. “It reminds us that global surpluses are accumulating to the oil exporters,and Russia is telling us that an increasingly lower proportion of these reserves will be held in dollars. This suggests there is a trend shift away from the dollar.”
Clyde Wardle, senior Emerging Market Currency strategist at HSBC, told the paper: “We have heard talk that Middle Eastern countries are doing a similar thing and even some Asian countries have indicated their desire to do so.”
Moscow’s move was unsurprising. Russia’s $71.5billion Stabilization fund, which accumulates windfall oil revenues, is due to be converted from rubles to 45 percent dollars, 45 percent euros and 10 percent sterling. The day-to-day movements of the ruble are monitored against a basket of 0.6 dollars and 0.4 euros. About 39 percent of Russia’s goods imports came from the eurozone in 2005, against just 4 percent from the US.
The statement plays into a perception that central banks, which together hold $4.25 trillion of reserves, are increasingly channeling fresh reserves away from the dollar to reduce potential losses if the dollar was to fall sharply.
Chapman: Train Wreck Of The Week
Robert Chapman
July 8, 2006
We have been looking for something positive from the elitists and we may have found it. The US, Singapore and Switzerland have proposed to the WTO that countries eliminate taxes on medicines. Presently India charges 100% and Morocco 12%. India taxes to protect its generic drug industry.
Globalization moves in a dialectical manner. Two steps forward, one step back. Three steps forward, two steps back.
The Doha round of talks are finished and were a complete failure we are happy to report. The development round pitted the third world against the first world. Well, the rich had no intention of exposing their farmers to the chill winds of foreign competition. Kamal Nath, India’s Commerce & Industry Minister, voiced incredulity that he was being asked for bigger percentage cuts in his country’s tariffs than rich countries were willing to make in their own. They said to him we’ll cut 20%, you cut 70%.
Those countries chief antagonist was the US, and when asked why their contentious position the US representative, Susan Schwab said, “Isn’t that what leadership is about.” What a stupid answer. The US and Europe refuse to budge on agriculture. The US subsidy program alone with Europe’s, especially France’s, is widely blamed for leading to over production of crops that depress prices on world markets, destroying farming in the developing world. Just look at what it has done in Mexico; free trade and globalization has been in decent since Cancun in 2003 and continues to deteriorate. Hopefully WTO is staring over the precipice and falls in.
Sales for the big 3 automakers in June were not good. GM fell 26%, Ford fell 7% and Daimler Chrysler 13%. Toyota gained 14% and sold more cars than Ford and Chrysler combined. In June, Toyota had 15% of the US market, up from 12% y-o-y. Detroit-based companies’ market share sagged to 56% from 62%. Sales of SUV’s and light trucks fell 11%. In the first half of 2006 Toyota’s sales rose 10%.
Toyota had only a 9-day inventory of the Yaris, and a 4-day inventory of its hybrid Prius, making both sellout hits. The Ford Explorer’s sales fell 36% in June and the expedition was off 46%.
Kirk Kerkorian, a major buyer of GM shares at $32, is looking to broker a GM-Nissan-Renault alliance. Nissan has been under pressure this year with sales off 19%.
Yes, the economy is slowing. The question in America and across the world is how much, and how bad will it be? America is again collectively in denial. It should be disturbing to anyone of sound mind that the Fed is raising interest rates as the economy slows. Wall Street and government say they do not know where the end is, which is more denial and lies. Each interest increase is supposed to slow the economy, but no one writes about money and credit creation’s massive increase each and every day. This is what is known as a Ponzi scheme. The Fed can’t allow deflation because if it does, once it starts it is unstoppable and they are well aware of it. The economy is slowing on its own because people are buried in debt. Yes, interest rates hurt, but copious credit is still available.
The bogus CPI for the second quarter was up 5.7% versus 4.2% y-o-y. You readers know CPI is double that. The Fed sees raising wages as the problem, which is absurd. It’s debt, inflation, energy costs that are not going to go away and a sinking dollar. These idiots can’t call a spade a spade. They’ll give the game away and goodness forbid the public will get the truth and they won’t like it.
Rising wages are not the cause of inflation – fiat money creation is. Inflation can only be caused by monetary debauchery. That’s why the dollar is falling. To show you how absurd the rising wage argument is wages, adjusted for inflation, are less than they were four years ago. This is how the fed has screwed the workers of America. Worse yet, the Joe six-pack release, the home piggy bank, is about to stop supplying cash to stave off bankruptcy. The housing bubble has burst and prices can only go lower. You are about to see $8 trillion lost in housing values over the next few years. This is what was lost when the dotcom Fed engineered bubble burst. Americans will be lucky if they only have a deep recession. Americans have a minus 1.6% savings rate and the average family is three paychecks away from bankruptcy and they have no one to blame but themselves for not listening and seeking out the truth. A 5-1/2% to 6% Fed funds rate will put the 30-year fixed rate mortgage at 7-1/2%. That puts the real estate market dead-on-arrival. Even if housing prices didn’t go down we’d still have a recession. Falling house prices just exacerbates the situation.
A 5-1/2% to 6% Fed rate is plenty, but people don’t realize that foreigners are demanding higher interest rates and yields for the Treasury paper they are buying from the Fed to keep the US economy from collapsing. Look at the jobs picture. The BLS figures are all lies. The unemployment rate is over 13% not 4-3/4%. The BLS added 176,000 jobs in June for phantom companies they believe via pipe dreams had just come into business and started hiring. They also added 206,000 in May and 191,000 in April and Wall Street and Washington go right on with the fabrications. Wait until July 7 numbers are released. They should be downright nasty. The capper will be July’s numbers to be released on Friday August 4th. They should be terrible. Thus we have ongoing stagflation. Lower employment, wages, real estate, stock and bond prices and higher interest rates, the antithesis of what is needed and continued massive money and credit creation. The worst of all worlds. We are not negative, we are just reporting the truthful facts and you know how right we have been for 16 years.
Scandal ridden insurance giant AIG, American International Group, says it has lost personal identifying information on about 970,000 consumers through a burglary. Now get this, the burglary was on March 31st, the police have been told, but not one of the consumers have been informed of their possible vulnerability to identify thieves. This is a 2-½-month delay, which is preposterous. There have been 40 data breaches just since March 31st when AIG had their robbery.
We have had a number of people ask what happens when the Fed stops raising interest rates. First of all they can’t return to lowering rates because they’ll be a run on the dollar and no one will want to buy Treasury securities. That could bankrupt the country.
That said, erosion in bond, stocks and real estate will take place and they’ll be a major gold and silver rally.
http://www.theinternationalforecaster.com/trainwreck.php?Id=130
Peak in gas output predicted
By Gargi Chakrabarty, Rocky Mountain News
August 1, 2006
Natural gas production in the United States will peak later this year or in early 2007, an industry observer says.
Unless energy companies find new gas fields or new drilling techniques to improve extraction, natural gas supplies will peak at more than 52 billion cubic feet per day and then begin to decline, said David Reimers, senior U.S. data specialist with IHS Energy.
And that will push up prices even higher.
"It is a concern," Reimers said Monday at the IHS Energy Regional Roundup in downtown Denver. "We need energy for the industries, for our economic base.
"Gas production will peak and start declining next year, and unless we find new plays, or new technologies, we are going to be in a bind."
IHS Energy bought Cambridge Energy Research Associates - a consulting firm founded by Pulitzer Prize-winning author Daniel Yergin - in 2004. The firm is owned by Arapahoe County-based IHS Inc.
Reimers said the Rocky Mountains, which contain huge natural gas reserves, could be the answer to America's hunger for gas. The gas here is trapped between layers of either shale, tight sands or coal beds, and it requires unconventional drilling techniques to pry it out.
Unconventional gas wells were 14,386, or one-third, of the gas wells completed last year. According to Reimers, the share of unconventional gas - especially from the Rocky Mountains - in the future will account for more than the current 28 percent of total U.S. production.
Unlike other areas in the U.S. where production has declined, the Rocky Mountains have produced a steady supply of gas. But there's a need for more wells to maintain that supply, Reimers said.
UPDATE
AP
Friday August 11, 12:25 pm ET
CVRD Plans $15.16 Billion Offer for Inco; Competes With Other Offers
NEW YORK (AP) -- Brazilian mining firm Companhia Vale do Rio Doce said Friday it plans to make a tender offer of 17 billion Canadian dollars ($15.16 billion), cash for Canadian miner Inco Ltd., competing with similarly valued offers from two other mining companies.
Inco shares rose almost 4 percent after the news.
The deal amounts to 86 Canadian dollars ($76.69) per share.
Rio de Janeiro-based CVRD said the deal would create one of the three largest diversified mining companies in the world, with positions in iron ore, pellets, nickel, bauxite, alumina, manganese and ferroaloys.
Inco, with 2005 earnings of $836 million on $4.52 billion in revenue, is the world's second-largest producer of nickel.
CVRD, the world's largest producer of iron ore, said it would finance the acquisition with money borrowed through a loan facility from Credit Suisse, UBS, ABN AMRO and Santander. Those banks are also acting as financial advisers to CVRD.
The company said it will make a formal offer on Monday. CVRD will complete the deal if Inco shareholders tender at least two-thirds of the company's outstanding shares. CVRD has not spoken to Inco about the deal.
The offer competes with cash-and-stock offers from Phoenix-based copper miner Phelps Dodge Corp. and Teck Cominco. On Monday, Inco said that a bid of 82.50 Canadian dollars ($72.30) in cash and stock by Vancouver-based Teck Cominco was not superior to a prior offer by Phelps Dodge. It advised shareholders to reject Teck Cominco's bid.
Shares of Inco Ltd. rose $2.80, or 3.7 percent, to $79.38 in early trading on the New York Stock. CVRD shares slipped 18 cents, to $22.71.
CVRD Announces Proposed All-Cash Offer to Acquire Inco
Friday August 11, 7:39 am ET
RIO DE JANEIRO, Brazil, Aug. 11 /PRNewswire-FirstCall/ -- Companhia Vale do Rio Doce (CVRD) announces that it intends to make an all-cash offer to acquire all of the outstanding common shares of Inco Limited. (Toronto Stock Exchange- TSX and New York Stock Exchange - NYSE ticker symbol: N) (Inco), at a price of Cdn$ 86.00 in cash per Inco common share.
The combination of CVRD and Inco will create one of the three largest diversified mining companies in the world, with leading global market positions in iron ore, pellets, nickel, bauxite, alumina, manganese and ferroalloys, and an exciting world-class pipeline of projects, supported by a large-scale, long-life and low-cost asset portfolio.
About Inco
Inco is a leading Canadian-based nickel company, and the world's second largest nickel producer possessing the world's largest nickel reserve base. Inco is one of the world's lowest cost producers of nickel and due to a very attractive pipeline of projects it has the highest growth potential amongst the main global nickel producers. Inco is also a leader in nickel technology, with a very traditional brand name and premium products for plating, special nickel alloys and superalloys.
In 2005, Inco had revenues of US$ 4.518 billion and net earnings of US$ 836 million. Inco's total debt as of June 30, 2006 was US$ 1.921 billion.
About the offer
CVRD's all-cash offer of Cdn$ 86.00 per share will allow Inco shareholders to realize upfront in cash Inco's profitable growth potential without incurring the risk of that such potential will not be realized.
The acquisition will be financed through a two-year committed bridge loan facility provided by four large first-tier banks: Credit Suisse, UBS, ABN AMRO and Santander. CVRD expects to take out the bridge facility with a long-term capital package within 18 months after the closing of the proposed transaction.
CVRD remains firmly committed to maintaining its investment-grade rating. We will retain financial flexibility after the transaction and will seek to obtain future upgrades in our current ratings, continuing to pursue the minimization of the cost of capital.
Full details of the offer will be included in the formal offer and take- over bid circular documents to be publicly filed and subsequently mailed to Inco's security holders. CVRD is formally requesting a list of Inco's shareholders and expects to mail the take-over bid and circular documents to Inco's shareholders as soon as possible following receipt of the shareholder list.
CVRD expects to formally commence its offer by newspaper advertisement on Monday, August 14, 2006. The offer will be open for acceptance for 45 days following its formal commencement and no Inco common shares will be taken up and paid for pursuant to the offer unless, at such date, each of the conditions of the offer is satisfied or waived.
Completion of the offer will be subject to a sufficient number of shares being tendered to the offer such that CVRD would own at least 66 2/3% of Inco's common shares, on a fully-diluted basis, following completion of the offer. The offer will be also conditional upon the receipt of all necessary regulatory approvals, the absence of litigation, no material adverse change at Inco and other customary conditions.
CVRD has not yet held any discussions with Inco's management with respect to this transaction but would welcome the opportunity to work with Inco to achieve a successful outcome to this transaction.
CVRD Chief Executive Officer, Roger Agnelli said: "This is an exciting opportunity for CVRD. The operations of the two companies are complementary and the combination will enhance our capabilities to benefit from the fast changing global landscape in the metals and mining industry. For Inco shareholders, our all-cash offer provides a very attractive opportunity to realize substantial gains with no exposure to market risks."
Strategic alignment and expected benefits
The offer is consistent with our long-term corporate strategy and with our non-ferrous metals business strategy. It is a new step in our strategy of developing, operating and maximizing the performance of large-scale, long-life and low-cost assets.
The proposed transaction enhances our options to further generate the increase in production capacity needed to meet the demand for minerals and metals of high growth markets over time.
The combination of Inco's specific knowledge, long-term experience in nickel mining and technological leadership in nickel metallurgy with CVRD's global mining leadership and strong cash generation makes for a unique opportunity to create shareholder value in an environment of sustained demand for minerals and metals in the long-term.
The proposed transaction will bring a better diversification to CVRD's activities by products, markets and geographic asset base contributing to reducing our business and financial risks.
We expect the acquisition to add significant value to our shareholders over the medium to long term. Built into the offer price is the recognition of the synergies available to CVRD through our nickel projects as well as our marketing functions.
Benefits to Canada
CVRD is confident that its acquisition of Inco will deliver significant benefits to Canada as a whole including the operations, employees, suppliers and stakeholders of Inco and the Canadian communities in which it operates.
We have a long and strong track record of investing in our operations to sustain their long-term future. CVRD recognizes the significant and unique capabilities of Inco's business and its employees. It is firmly committed to ensuring that Inco's business continues to play a leading role in the global nickel industry. Upon completion of the acquisition, CVRD intends to establish a global nickel business, based in Toronto, Ontario.
CVRD is committed to continuing to invest in R&D as well as capital projects to maintain the strength of Inco's current operations in Canada as well as Inco's continuing mineral exploration effort in Canada with a view to creating shareholder value and supporting the communities where Inco operates.
CVRD intends to work with key stakeholders to optimize the Sudbury operations in order to support its long-term competitiveness and to create real benefits to the local communities.
We are fully committed to the highest standards of corporate social responsibility, as we understand that it is fundamental to preserve our long- term competitiveness in the global arena. CVRD consistently invests significant resources in environmental protection and conservation and in the creation of channels of social and economic mobility in low-income communities. At the same time, one of our most important priorities is to maintain a high level of work and environmental safety in our operations and to fully comply with all related laws.
Therefore, we will be working to explain the clear benefits of the transaction to Canada, including for Inco's employees and the communities in which Inco operates, to the Minister of Industry and other stakeholders. CVRD expects to move through the Investment Canada Act process on a timely basis, and looks forward to participating as a member of the Canadian community.
About CVRD
CVRD is a Brazilian company, headquartered in the city of Rio de Janeiro, Brazil. It is the largest metals and mining company in the Americas and one of the largest in the global metals and mining industry, with a market capitalization of approximately US$ 55 billion. It is rated BBB+ by Standard & Poor's, BBBhigh by Dominion Bond Rating Service, Baa3 by Moody's and BBB- by Fitch Ratings.
It is the largest global producer of iron ore and pellets, the world's second largest producer of manganese and ferroalloys, one of the world's lowest cost producers of aluminum products (bauxite, alumina and primary aluminum) and a producer of copper, potash and kaolin. CVRD is the largest logistics player in Brazil, owning and operating three railroads and eight maritime terminals along the Brazilian seacoast.
CVRD has been investing in a large growth pipeline, involving greenfield and brownfield projects in iron ore, pellets, bauxite, alumina, potash, copper, nickel and coal. Simultaneously, we are investing in a global multi- commodity mineral exploration program in South America, Africa, Asia and Australia.
Our shares are traded on the New York Stock Exchange - NYSE (RIO and RIOPR), on the Sao Paulo Stock Exchange - BOVESPA (Vale3 and Vale5) and on Latibex (XVALP and XVALO).
CVRD's financial advisors in this transaction are Credit Suisse, UBS, ABN AMRO and Santander. Its legal advisors are Stikeman Elliott LLP in Canada and Cleary, Gottlieb, Steen & Hamilton LLP in the United States.
Conference call and webcast
CVRD will hold a conference call and webcast today at 12:00 p.m. Rio de Janeiro time, 11:00 am Canadian/US Eastern Standard time, and 4:00 pm UK time. Instructions for participation are on our website, www.cvrd.com.br, under Investor Relations. A recording will be available on CVRD's site for 90 (ninety) days following August 11, 2006.
IMPORTANT INFORMATION
This press release may be deemed to be solicitation material in respect of CVRD's proposed tender offer for the shares of Inco. CVRD will prepare and file a tender offer statement on Schedule TO (containing an offer to purchase and a takeover bid circular) with the United States Securities and Exchange Commission (SEC). CVRD, if required, will file other documents regarding the proposed tender offer with the SEC.
INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE TAKEOVER BID CIRCULAR, THE SCHEDULE TO AND ANY OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFER FOR INCO SHARES. These documents will be available without charge on the SEC's website at www.sec.gov. Free copies of the documents can also be obtained by directing a request to Kingsdale Shareholder Services Inc., The Exchange Tower, 130 King Street West, Suite 2950, P.O.Box 361, Toronto, Ontario, M5X 1E2, by telephone to 1-866-381-4105 (North American Toll Free) or 416-867-2272 (Overseas), or by email to: contactus@kingsdaleshareholder.com.
--------------------------------------------------------------------------------
Source: Companhia Vale do Rio Doce
CVRD Announces Proposed All-Cash Offer to Acquire Inco
Friday August 11, 7:39 am ET
RIO DE JANEIRO, Brazil, Aug. 11 /PRNewswire-FirstCall/ -- Companhia Vale do Rio Doce (CVRD) announces that it intends to make an all-cash offer to acquire all of the outstanding common shares of Inco Limited. (Toronto Stock Exchange- TSX and New York Stock Exchange - NYSE ticker symbol: N) (Inco), at a price of Cdn$ 86.00 in cash per Inco common share.
The combination of CVRD and Inco will create one of the three largest diversified mining companies in the world, with leading global market positions in iron ore, pellets, nickel, bauxite, alumina, manganese and ferroalloys, and an exciting world-class pipeline of projects, supported by a large-scale, long-life and low-cost asset portfolio.
About Inco
Inco is a leading Canadian-based nickel company, and the world's second largest nickel producer possessing the world's largest nickel reserve base. Inco is one of the world's lowest cost producers of nickel and due to a very attractive pipeline of projects it has the highest growth potential amongst the main global nickel producers. Inco is also a leader in nickel technology, with a very traditional brand name and premium products for plating, special nickel alloys and superalloys.
In 2005, Inco had revenues of US$ 4.518 billion and net earnings of US$ 836 million. Inco's total debt as of June 30, 2006 was US$ 1.921 billion.
About the offer
CVRD's all-cash offer of Cdn$ 86.00 per share will allow Inco shareholders to realize upfront in cash Inco's profitable growth potential without incurring the risk of that such potential will not be realized.
The acquisition will be financed through a two-year committed bridge loan facility provided by four large first-tier banks: Credit Suisse, UBS, ABN AMRO and Santander. CVRD expects to take out the bridge facility with a long-term capital package within 18 months after the closing of the proposed transaction.
CVRD remains firmly committed to maintaining its investment-grade rating. We will retain financial flexibility after the transaction and will seek to obtain future upgrades in our current ratings, continuing to pursue the minimization of the cost of capital.
Full details of the offer will be included in the formal offer and take- over bid circular documents to be publicly filed and subsequently mailed to Inco's security holders. CVRD is formally requesting a list of Inco's shareholders and expects to mail the take-over bid and circular documents to Inco's shareholders as soon as possible following receipt of the shareholder list.
CVRD expects to formally commence its offer by newspaper advertisement on Monday, August 14, 2006. The offer will be open for acceptance for 45 days following its formal commencement and no Inco common shares will be taken up and paid for pursuant to the offer unless, at such date, each of the conditions of the offer is satisfied or waived.
Completion of the offer will be subject to a sufficient number of shares being tendered to the offer such that CVRD would own at least 66 2/3% of Inco's common shares, on a fully-diluted basis, following completion of the offer. The offer will be also conditional upon the receipt of all necessary regulatory approvals, the absence of litigation, no material adverse change at Inco and other customary conditions.
CVRD has not yet held any discussions with Inco's management with respect to this transaction but would welcome the opportunity to work with Inco to achieve a successful outcome to this transaction.
CVRD Chief Executive Officer, Roger Agnelli said: "This is an exciting opportunity for CVRD. The operations of the two companies are complementary and the combination will enhance our capabilities to benefit from the fast changing global landscape in the metals and mining industry. For Inco shareholders, our all-cash offer provides a very attractive opportunity to realize substantial gains with no exposure to market risks."
Strategic alignment and expected benefits
The offer is consistent with our long-term corporate strategy and with our non-ferrous metals business strategy. It is a new step in our strategy of developing, operating and maximizing the performance of large-scale, long-life and low-cost assets.
The proposed transaction enhances our options to further generate the increase in production capacity needed to meet the demand for minerals and metals of high growth markets over time.
The combination of Inco's specific knowledge, long-term experience in nickel mining and technological leadership in nickel metallurgy with CVRD's global mining leadership and strong cash generation makes for a unique opportunity to create shareholder value in an environment of sustained demand for minerals and metals in the long-term.
The proposed transaction will bring a better diversification to CVRD's activities by products, markets and geographic asset base contributing to reducing our business and financial risks.
We expect the acquisition to add significant value to our shareholders over the medium to long term. Built into the offer price is the recognition of the synergies available to CVRD through our nickel projects as well as our marketing functions.
Benefits to Canada
CVRD is confident that its acquisition of Inco will deliver significant benefits to Canada as a whole including the operations, employees, suppliers and stakeholders of Inco and the Canadian communities in which it operates.
We have a long and strong track record of investing in our operations to sustain their long-term future. CVRD recognizes the significant and unique capabilities of Inco's business and its employees. It is firmly committed to ensuring that Inco's business continues to play a leading role in the global nickel industry. Upon completion of the acquisition, CVRD intends to establish a global nickel business, based in Toronto, Ontario.
CVRD is committed to continuing to invest in R&D as well as capital projects to maintain the strength of Inco's current operations in Canada as well as Inco's continuing mineral exploration effort in Canada with a view to creating shareholder value and supporting the communities where Inco operates.
CVRD intends to work with key stakeholders to optimize the Sudbury operations in order to support its long-term competitiveness and to create real benefits to the local communities.
We are fully committed to the highest standards of corporate social responsibility, as we understand that it is fundamental to preserve our long- term competitiveness in the global arena. CVRD consistently invests significant resources in environmental protection and conservation and in the creation of channels of social and economic mobility in low-income communities. At the same time, one of our most important priorities is to maintain a high level of work and environmental safety in our operations and to fully comply with all related laws.
Therefore, we will be working to explain the clear benefits of the transaction to Canada, including for Inco's employees and the communities in which Inco operates, to the Minister of Industry and other stakeholders. CVRD expects to move through the Investment Canada Act process on a timely basis, and looks forward to participating as a member of the Canadian community.
About CVRD
CVRD is a Brazilian company, headquartered in the city of Rio de Janeiro, Brazil. It is the largest metals and mining company in the Americas and one of the largest in the global metals and mining industry, with a market capitalization of approximately US$ 55 billion. It is rated BBB+ by Standard & Poor's, BBBhigh by Dominion Bond Rating Service, Baa3 by Moody's and BBB- by Fitch Ratings.
It is the largest global producer of iron ore and pellets, the world's second largest producer of manganese and ferroalloys, one of the world's lowest cost producers of aluminum products (bauxite, alumina and primary aluminum) and a producer of copper, potash and kaolin. CVRD is the largest logistics player in Brazil, owning and operating three railroads and eight maritime terminals along the Brazilian seacoast.
CVRD has been investing in a large growth pipeline, involving greenfield and brownfield projects in iron ore, pellets, bauxite, alumina, potash, copper, nickel and coal. Simultaneously, we are investing in a global multi- commodity mineral exploration program in South America, Africa, Asia and Australia.
Our shares are traded on the New York Stock Exchange - NYSE (RIO and RIOPR), on the Sao Paulo Stock Exchange - BOVESPA (Vale3 and Vale5) and on Latibex (XVALP and XVALO).
CVRD's financial advisors in this transaction are Credit Suisse, UBS, ABN AMRO and Santander. Its legal advisors are Stikeman Elliott LLP in Canada and Cleary, Gottlieb, Steen & Hamilton LLP in the United States.
Conference call and webcast
CVRD will hold a conference call and webcast today at 12:00 p.m. Rio de Janeiro time, 11:00 am Canadian/US Eastern Standard time, and 4:00 pm UK time. Instructions for participation are on our website, www.cvrd.com.br, under Investor Relations. A recording will be available on CVRD's site for 90 (ninety) days following August 11, 2006.
IMPORTANT INFORMATION
This press release may be deemed to be solicitation material in respect of CVRD's proposed tender offer for the shares of Inco. CVRD will prepare and file a tender offer statement on Schedule TO (containing an offer to purchase and a takeover bid circular) with the United States Securities and Exchange Commission (SEC). CVRD, if required, will file other documents regarding the proposed tender offer with the SEC.
INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE TAKEOVER BID CIRCULAR, THE SCHEDULE TO AND ANY OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFER FOR INCO SHARES. These documents will be available without charge on the SEC's website at www.sec.gov. Free copies of the documents can also be obtained by directing a request to Kingsdale Shareholder Services Inc., The Exchange Tower, 130 King Street West, Suite 2950, P.O.Box 361, Toronto, Ontario, M5X 1E2, by telephone to 1-866-381-4105 (North American Toll Free) or 416-867-2272 (Overseas), or by email to: contactus@kingsdaleshareholder.com.
--------------------------------------------------------------------------------
Source: Companhia Vale do Rio Doce
Yamana Gold Posts Wider 2Q Loss
Wednesday August 9, 3:14 pm ET
Yamana Gold Posts Wider 2nd-Quarter Loss, Declares First Dividend
TORONTO (AP) -- Yamana Gold Inc. authorized payment of its first dividend Wednesday as the gold and copper miner's sales jumped more than threefold in the second quarter, but it posted a sharply wider loss.
Due to strong cash flows and a strong cash balance, Yamana Gold's board approved a 1-cent per share dividend payable Oct. 13 to shareholders of record on Sept. 30.
Yamana's loss for the quarter ended June 30 totaled $55.3 million US, or 20 cents per share, compared with a year-ago loss of $7 million, or 6 cents per share. Excluding non-cash and non-recurring expenses, the company earned $13.1 million, or 5 cents per share.
Sales jumped to $41.9 million, up from $10.8 million a year ago. At the end of the quarter, the company had $142.3 million in cash and cash equivalents, partly due to a $200 million financing earlier in the quarter.
Total production for the quarter was 83,089 ounces of gold, up more than threefold from a year ago.
The gold company's cash flow generated from operations was $15.1 million in the quarter.
"Yamana is now at a stage of financial and operational maturity consistent with our intermediate gold producer peers," Peter Marrone, Yamana's president and chief executive, said in a release.
"We now have five mines in full production with our largest mine still to come," he said.
Yamana Gold has gold production, gold and copper-gold development stage properties in Brazil and Central America.
Yamana Gold shares fell 30 cents, or 2.7 percent, to $10.86 in afternoon trading on the American Stock Exchange.
Canadian Zinc Reports Second Quarter 2006 Results
8/10/2006
UNDERGROUND DEVELOPMENT AND NEW EXPLORATION UNDERWAY AT PRAIRIE CREEK MINE
VANCOUVER, BRITISH COLUMBIA, Aug 10, 2006 (MARKET WIRE via COMTEX News Network) --
Canadian Zinc Corporation (TSX: CZN) reports filing of its unaudited financial statements for the period ended June 30, 2006. The Company reported a net loss for the second quarter of $326,146 compared to a loss of $159,896 in the second quarter of 2005. For the first half of 2006 the Company reported a loss of $481,292 compared to a loss of $1,746,226 in the first half of 2005. The loss in the first half of 2005 included an expense of $1,241,000 in respect of stock based compensation on the issue of options under the Company's Stock Option Plan.
During the first half of 2006 the Company raised $9,693,107 from the issue of Units, exercise of broker warrants and through the exercise of stock options. As at June 30, 2006 Canadian Zinc had cash and term deposits of $24.6 million placing the Company in a very strong financial position.
This press release should be read in conjunction with the unaudited financial statements and notes thereto, and Management's Discussion and Analysis for the quarter ended June 30, 2006 available on SEDAR at www.sedar.com.
Progress at Prairie Creek:
During the first half of 2006 the Company was mainly engaged in permitting activities and planning the proposed 2006 exploration and development programs at the Prairie Creek mine. A budget of $5.7 million has been approved for the 2006 exploration and development program.
Very significant and important progress was made in securing permits for the Prairie Creek project.
In February 2006 the Mackenzie Valley Land and Water Board issued Water Licence MV2001L2-0003 in respect of underground development and the operation of a metallurgical pilot plant in the mill at the Company's Prairie Creek mine.
In May 2006 the Mackenzie Valley Land and Water Board issued a Land Use Permit for the Phase 3 Exploration Program at Prairie Creek covering all of the Company's mining leases and mineral claims outside the immediate mine area.
In June 2006 the Mackenzie Valley Land and Water Board granted a two year extension to Land Use Permit MV2001C0022, which covers diamond drilling within the vicinity of the mine facilities.
The mine site at the Prairie Creek mine was reopened in April for the 2006 season. Camp and equipment upgrades are underway to support future activities.
Procon Mining and Tunneling Limited of Burnaby B.C. was mobilized to site to undertake the 2006 underground development program at Prairie Creek. The underground exploration program involves the driving of approximately 400 meters of new decline tunnel and up to 10,000 meters of underground exploration diamond drilling. Preparation and rehabilitation of the existing 870m underground workings, including timber stripping, rock bolting, pipe hanging, installation of electrical facilities, completion of refuge station, ancillary ventilation fans, removal of old rock material and new track laying, is well underway. A scoop tram and single boom jumbo drill have been transported by air into the site onto the company's 1000 meter gravel airstrip.
A bulk sample of vein material from underground was collected and shipped to SGS Lakefield for detailed metallurgical optimization studies. The sample was collected from multiple cross-cuts of the vein within the existing underground workings.
The surface exploration program outside the immediate mine area commenced in late June with drilling targeted on Zone 8, about five kilometers south of the mine site.
Outlook:
Plans for 2006 include continuing the Company's exploration program on the Prairie Creek property outside the immediate currently known resource area, and continuing the decline and underground drilling program. At the same time ongoing technical and metallurgical studies will be carried out to advance the project towards commercial production. The Company will also continue with its permitting activities and during the year expects to file applications for the Land Use Permits and Water Licence for the commercial operation of the Prairie Creek mine.
During the period the Company reviewed a number of other new mining investment opportunities and this activity will continue during 2006.
About Canadian Zinc:
Canadian Zinc's 100% owned Prairie Creek (zinc/silver/lead) Project, located in the Northwest Territories, includes a partially developed underground mine with an existing 1,000 ton per day mill and related infrastructure and equipment. The Prairie Creek Property hosts a major mineral deposit containing a historically estimated resource of 3.6 million tonnes (measured and indicated) grading 11.8% zinc; 9.7% lead; 0.3% copper and 141.5 grams silver per tonne and 8.3 million tonnes (inferred) grading 12.8% zinc; 10.5% lead and 0.5% copper and 169.2 grams silver per tonne, with significant exploration potential. The deposit contains an estimated, in situ 3 billion pounds of zinc, 2.2 billion pounds of lead and approximately 70 million ounces of silver.
Cautionary Statement - Forward Looking Information:
This press release contains certain forward-looking information, This forward looking information includes, or may be based upon, estimates, forecasts, and statements as to management's expectations with respect to, among other things, the issue of permits, the size and quality of the company's mineral resources, future trends for the company, progress in development of mineral properties, future production and sales volumes, capital and mine production costs, demand and market outlook for metals, future metal prices and treatment and refining charges, the outcome of legal proceedings and the financial results of the company. The Company does not currently hold a permit for the operation of the Prairie Creek Mine. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that mineral resources will be converted into mineral reserves.
Contacts: Canadian Zinc Corporation John F. Kearney Chairman (416) 362- 6686 (416) 368-5344 (FAX) Canadian Zinc Corporation Alan Taylor VP Exploration & Chief Operating Officer (604) 688- 2001 or Tollfree:1-866-688-2001 (604) 688-2043 (FAX) invest@canadianzinc.com www.canadianzinc.com
SOURCE: Canadian Zinc Corporation
mailto:invest@canadianzinc.com http://www.canadianzinc.com
Copyright 2006 Market Wire, All rights reserved.
Press Release Source: Goldcorp Inc.
Goldcorp Inc.: Second Quarter Earnings Nearly Doubled to $190 Million from Q2 2005
Thursday August 10, 4:22 pm ET
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Aug 10, 2006 -- (All figures are in US dollars unless stated otherwise) -
GOLDCORP INC. (TSX:G.TO - News)(NYSE:GG - News) is pleased to announce its second quarter results, highlights of which are:
- Net earnings nearly doubled to $190.4 million ($0.50 per share), compared with $98.0 million ($0.30 per share) in 2005. Adjusted for certain non-cash items(1)(2), net earnings amounted to $136.9 million ($0.36 per share) for the quarter.
- Operating cash flows increased 46% to $240.1 million ($0.63 per share), compared with $163.9 million ($0.50 per share) in 2005(2).
- On May 12, 2006, Goldcorp closed on the agreement with Barrick Gold Corporation to acquire Placer Dome Inc's ("Placer Dome") Canadian operations and other assets for cash of approximately $1.6 billion. These operations are included in Goldcorp's operating results for the period from May 12, 2006 to June 30, 2006.
- Gold production increased 35% to 378,500 ounces, compared with 281,000 ounces in 2005.
- Gold sales were 398,700 ounces, compared with 267,400 ounces in 2005, excluding second quarter 2005 gold sales of 275,700 ounces in gold bullion inventory.
- Total cash costs were minus $123 per ounce (net of by-product copper and silver credits) (2005, $52 per ounce)(2).
- On June 9, 2006, Goldcorp closed on the early warrant exercise transaction. Proceeds received during the quarter were approximately $455 million, which were subsequently used to repay credit facilities drawn down to fund the acquisition of Placer Dome assets.
(1) Non-cash items include $61 million related to the dilution gain realized on the Silver Wheaton C$200 million public offering to non-controlling interests and $7.6 million, net of tax, non-hedge derivative losses.
(2) The Company has included certain non-GAAP performance measures throughout this document.
For the six months to June 30, 2006, net earnings increased to $282.8 million ($0.78 per share), adjusted for certain non-cash items, net earnings amounted to $229.3 million ($0.63 per share), compared with $127.5 million ($0.44 per share) in 2005. Operating cash flows increased to $314.5 million ($0.87 per share), compared with $244.1 million ($0.84 per share) in 2005. Gold production totaled 673,600 ounces in 2006 compared with 556,400 ounces in 2005. Gold sales increased to 687,100 ounces at a total cash cost of minus $108 per ounce, compared with 484,900 ounces, excluding gold sales of 275,700 ounces in gold bullion inventory, at a total cash cost of $64 per ounce in 2005.
Ian Telfer, President and Chief Executive Officer of Goldcorp, said, "Goldcorp's strong quarterly results are indicative of the Company's ability to increase gold production, deliver solid earnings and cash flows and remain as one of the lowest cash cost producers in the industry. The integration of the recently acquired operations is proceeding smoothly and synergy optimization plans are in progress. We will continue our aggressive plans to create value for shareholders through strategic acquisitions and capital investments that enhance our long-term production profile."
A conference call will be held Thursday, August 10th at 5:00 p.m. (ET) to discuss these results. You may join the call by dialing toll free 1-877-888-3855, or for calls from outside Canada and the U.S. dial (416) 695-6622.
You can listen to a recorded playback of the call after the event until September 10th by dialing 1-888-509-0081 or (416) 695-5275. A live and archived audio webcast will also be available at www.goldcorp.com.
Goldcorp is one of the world's lowest cost and fastest growing multi-million ounce gold producers with operations throughout the Americas and Australia. Gold production in 2006 is expected to approximate 1.8 million ounces on an annualized basis, at a total cash cost of less than $100 per ounce. In the second half of 2006, production is expected to be 950,000 ounces. The Company does not hedge its gold production.
INFORMATION CONTINUED IN FOLLOWING LINK:
http://biz.yahoo.com/iw/060810/0152995.html
Goldmarca geological interpretation indicates gold prospective zones 300 metres west of Aurelian discovery
Thursday August 10, 12:47 pm ET
TSX-V: GML
PANAMA, Aug. 10 /CNW/ - Further to Goldmarca Limited's (TSX-V:GML - News) news release of July 12, 2006 announcing the acquisition of the Eccolmetals Property, Ecuador, the initial geological interpretation has been completed and the results indicate a highly prospective zone for gold mineralization. The Eccolmetals Property is 300 metres west of Aurelian's high-grade gold properties Fruta del Norte ("FDN") in the Condor Gold Belt, Ecuador. See Figures 1 and 2 http://files.newswire.ca/499/GoldMarca_MAPS_Aug10.doc 2006.
Preliminary geological interpretation by Goldmarca indicates the gold mineralization in the FDN discovery zone and adjacent properties is controlled by major faults and shear zones and preserved in graben structures where the sandstone cover the gold system from erosion. Notably, Goldmarca, in the Eccolmetals Property, has identified prospective zones that have some 10 kms (6 miles) of strike of favorable structural controls for gold mineralization and are immediate drill test targets. In the east border (limit) of the Eccolmetals Property there is a concentration of the majority of the Aurelian high-grade targets (FDN and Bonza-Pena zones) controlled by a convergence zone of two regional faults, north-south plane and northeast alignments (Rio Branco and Las Penas Fault) with two local faults planes northwest, connected directly with the intrusive batholith 2 kms to the west. All of these faults are inside the Eccolmetals Property (Machinaza fault northwest trend). This provides evidence that the eastern side of the Eccolmetals Property is a highly prospective gold target.
Utilizing exploration knowledge of the region several targets have been identified inside the Condor Gold Belt, both previously and currently evaluated, the gold mineralization settings are favored by the open traps in volcanic and volcanica-clastic piles in the proximity to the contact with the Zamora Intrusive Batholith. The structural framework generated during the intrusion and the contact zone in this geological situation is the control and provided avenues for the channeling fluids and strong alteration - interaction, leaching, transport and deposition traps of the gold mineralization.
Work Program
Surveying of 40km grid lines has commenced on the Eccolmetals Property in preparation for geological mapping and geophysical induced polarization survey to better define drill targets.
Dr Howard Lahti, Ph.D. Geology is acting as the Qualified Person in compliance with National Instrument 43-101 with respect to this release. He has reviewed the contents for accuracy.
Condor Drill Results
Goldmarca is waiting for receipt of assay results from six drill holes from the Condor gold Project. Drill results will be released on receipt of the assays and independent verification thereof.
On behalf of the Board of Directors,
Robin Slaughter
President and Chief Executive Officer
ABOUT GOLDMARCA: Goldmarca Limited (TSX-V: GML - News) is an international mining company that is engaged in adding value to gold and base metal projects with a primary focus on assets in South America and Australia. By applying unique technology and expertise, Goldmarca is focused on delivering a low-cost option to develop resource projects that can provide a one-year payback of all capital costs. Goldmarca is also listed on the Frankfurt and Berlin exchanges under the symbol "GDQ." For more information, please visit www.goldmarca.com.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this news release.
Safe Harbor Statement:
Statements contained in this release that are not historical facts are forward-looking statements which involve risk and uncertainties, which could cause actual results to differ materially from those, expressed in forward-looking statements including the following: changes in economic or environmental conditions and the Company's ability to execute its business model and strategic plans. The Company relies on litigation protection for forward-looking statements.
For further information
Robin Slaughter, President & CEO, at 507-66714370 or Nick DeMare, Director & CFO, at 1-604-685-9316 or send email to info@goldmarca.com
--------------------------------------------------------------------------------
Source: Goldmarca Limited
Goldmarca geological interpretation indicates gold prospective zones 300 metres west of Aurelian discovery
Thursday August 10, 12:47 pm ET
TSX-V: GML
PANAMA, Aug. 10 /CNW/ - Further to Goldmarca Limited's (TSX-V:GML - News) news release of July 12, 2006 announcing the acquisition of the Eccolmetals Property, Ecuador, the initial geological interpretation has been completed and the results indicate a highly prospective zone for gold mineralization. The Eccolmetals Property is 300 metres west of Aurelian's high-grade gold properties Fruta del Norte ("FDN") in the Condor Gold Belt, Ecuador. See Figures 1 and 2 http://files.newswire.ca/499/GoldMarca_MAPS_Aug10.doc 2006.
Preliminary geological interpretation by Goldmarca indicates the gold mineralization in the FDN discovery zone and adjacent properties is controlled by major faults and shear zones and preserved in graben structures where the sandstone cover the gold system from erosion. Notably, Goldmarca, in the Eccolmetals Property, has identified prospective zones that have some 10 kms (6 miles) of strike of favorable structural controls for gold mineralization and are immediate drill test targets. In the east border (limit) of the Eccolmetals Property there is a concentration of the majority of the Aurelian high-grade targets (FDN and Bonza-Pena zones) controlled by a convergence zone of two regional faults, north-south plane and northeast alignments (Rio Branco and Las Penas Fault) with two local faults planes northwest, connected directly with the intrusive batholith 2 kms to the west. All of these faults are inside the Eccolmetals Property (Machinaza fault northwest trend). This provides evidence that the eastern side of the Eccolmetals Property is a highly prospective gold target.
Utilizing exploration knowledge of the region several targets have been identified inside the Condor Gold Belt, both previously and currently evaluated, the gold mineralization settings are favored by the open traps in volcanic and volcanica-clastic piles in the proximity to the contact with the Zamora Intrusive Batholith. The structural framework generated during the intrusion and the contact zone in this geological situation is the control and provided avenues for the channeling fluids and strong alteration - interaction, leaching, transport and deposition traps of the gold mineralization.
Work Program
Surveying of 40km grid lines has commenced on the Eccolmetals Property in preparation for geological mapping and geophysical induced polarization survey to better define drill targets.
Dr Howard Lahti, Ph.D. Geology is acting as the Qualified Person in compliance with National Instrument 43-101 with respect to this release. He has reviewed the contents for accuracy.
Condor Drill Results
Goldmarca is waiting for receipt of assay results from six drill holes from the Condor gold Project. Drill results will be released on receipt of the assays and independent verification thereof.
On behalf of the Board of Directors,
Robin Slaughter
President and Chief Executive Officer
ABOUT GOLDMARCA: Goldmarca Limited (TSX-V: GML - News) is an international mining company that is engaged in adding value to gold and base metal projects with a primary focus on assets in South America and Australia. By applying unique technology and expertise, Goldmarca is focused on delivering a low-cost option to develop resource projects that can provide a one-year payback of all capital costs. Goldmarca is also listed on the Frankfurt and Berlin exchanges under the symbol "GDQ." For more information, please visit www.goldmarca.com.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this news release.
Safe Harbor Statement:
Statements contained in this release that are not historical facts are forward-looking statements which involve risk and uncertainties, which could cause actual results to differ materially from those, expressed in forward-looking statements including the following: changes in economic or environmental conditions and the Company's ability to execute its business model and strategic plans. The Company relies on litigation protection for forward-looking statements.
For further information
Robin Slaughter, President & CEO, at 507-66714370 or Nick DeMare, Director & CFO, at 1-604-685-9316 or send email to info@goldmarca.com
--------------------------------------------------------------------------------
Source: Goldmarca Limited
Goldmarca geological interpretation indicates gold prospective zones 300 metres west of Aurelian discovery
Thursday August 10, 12:47 pm ET
TSX-V: GML
PANAMA, Aug. 10 /CNW/ - Further to Goldmarca Limited's (TSX-V:GML - News) news release of July 12, 2006 announcing the acquisition of the Eccolmetals Property, Ecuador, the initial geological interpretation has been completed and the results indicate a highly prospective zone for gold mineralization. The Eccolmetals Property is 300 metres west of Aurelian's high-grade gold properties Fruta del Norte ("FDN") in the Condor Gold Belt, Ecuador. See Figures 1 and 2 http://files.newswire.ca/499/GoldMarca_MAPS_Aug10.doc 2006.
Preliminary geological interpretation by Goldmarca indicates the gold mineralization in the FDN discovery zone and adjacent properties is controlled by major faults and shear zones and preserved in graben structures where the sandstone cover the gold system from erosion. Notably, Goldmarca, in the Eccolmetals Property, has identified prospective zones that have some 10 kms (6 miles) of strike of favorable structural controls for gold mineralization and are immediate drill test targets. In the east border (limit) of the Eccolmetals Property there is a concentration of the majority of the Aurelian high-grade targets (FDN and Bonza-Pena zones) controlled by a convergence zone of two regional faults, north-south plane and northeast alignments (Rio Branco and Las Penas Fault) with two local faults planes northwest, connected directly with the intrusive batholith 2 kms to the west. All of these faults are inside the Eccolmetals Property (Machinaza fault northwest trend). This provides evidence that the eastern side of the Eccolmetals Property is a highly prospective gold target.
Utilizing exploration knowledge of the region several targets have been identified inside the Condor Gold Belt, both previously and currently evaluated, the gold mineralization settings are favored by the open traps in volcanic and volcanica-clastic piles in the proximity to the contact with the Zamora Intrusive Batholith. The structural framework generated during the intrusion and the contact zone in this geological situation is the control and provided avenues for the channeling fluids and strong alteration - interaction, leaching, transport and deposition traps of the gold mineralization.
Work Program
Surveying of 40km grid lines has commenced on the Eccolmetals Property in preparation for geological mapping and geophysical induced polarization survey to better define drill targets.
Dr Howard Lahti, Ph.D. Geology is acting as the Qualified Person in compliance with National Instrument 43-101 with respect to this release. He has reviewed the contents for accuracy.
Condor Drill Results
Goldmarca is waiting for receipt of assay results from six drill holes from the Condor gold Project. Drill results will be released on receipt of the assays and independent verification thereof.
On behalf of the Board of Directors,
Robin Slaughter
President and Chief Executive Officer
ABOUT GOLDMARCA: Goldmarca Limited (TSX-V: GML - News) is an international mining company that is engaged in adding value to gold and base metal projects with a primary focus on assets in South America and Australia. By applying unique technology and expertise, Goldmarca is focused on delivering a low-cost option to develop resource projects that can provide a one-year payback of all capital costs. Goldmarca is also listed on the Frankfurt and Berlin exchanges under the symbol "GDQ." For more information, please visit www.goldmarca.com.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this news release.
Safe Harbor Statement:
Statements contained in this release that are not historical facts are forward-looking statements which involve risk and uncertainties, which could cause actual results to differ materially from those, expressed in forward-looking statements including the following: changes in economic or environmental conditions and the Company's ability to execute its business model and strategic plans. The Company relies on litigation protection for forward-looking statements.
For further information
Robin Slaughter, President & CEO, at 507-66714370 or Nick DeMare, Director & CFO, at 1-604-685-9316 or send email to info@goldmarca.com
--------------------------------------------------------------------------------
Source: Goldmarca Limited
http://www.investorshub.com/boards/read_msg.asp?message_id=12584252
Goldmarca geological interpretation indicates gold prospective zones 300 metres west of Aurelian discovery
Thursday August 10, 12:47 pm ET
TSX-V: GML
PANAMA, Aug. 10 /CNW/ - Further to Goldmarca Limited's (TSX-V:GML - News) news release of July 12, 2006 announcing the acquisition of the Eccolmetals Property, Ecuador, the initial geological interpretation has been completed and the results indicate a highly prospective zone for gold mineralization. The Eccolmetals Property is 300 metres west of Aurelian's high-grade gold properties Fruta del Norte ("FDN") in the Condor Gold Belt, Ecuador. See Figures 1 and 2 http://files.newswire.ca/499/GoldMarca_MAPS_Aug10.doc 2006.
Preliminary geological interpretation by Goldmarca indicates the gold mineralization in the FDN discovery zone and adjacent properties is controlled by major faults and shear zones and preserved in graben structures where the sandstone cover the gold system from erosion. Notably, Goldmarca, in the Eccolmetals Property, has identified prospective zones that have some 10 kms (6 miles) of strike of favorable structural controls for gold mineralization and are immediate drill test targets. In the east border (limit) of the Eccolmetals Property there is a concentration of the majority of the Aurelian high-grade targets (FDN and Bonza-Pena zones) controlled by a convergence zone of two regional faults, north-south plane and northeast alignments (Rio Branco and Las Penas Fault) with two local faults planes northwest, connected directly with the intrusive batholith 2 kms to the west. All of these faults are inside the Eccolmetals Property (Machinaza fault northwest trend). This provides evidence that the eastern side of the Eccolmetals Property is a highly prospective gold target.
Utilizing exploration knowledge of the region several targets have been identified inside the Condor Gold Belt, both previously and currently evaluated, the gold mineralization settings are favored by the open traps in volcanic and volcanica-clastic piles in the proximity to the contact with the Zamora Intrusive Batholith. The structural framework generated during the intrusion and the contact zone in this geological situation is the control and provided avenues for the channeling fluids and strong alteration - interaction, leaching, transport and deposition traps of the gold mineralization.
Work Program
Surveying of 40km grid lines has commenced on the Eccolmetals Property in preparation for geological mapping and geophysical induced polarization survey to better define drill targets.
Dr Howard Lahti, Ph.D. Geology is acting as the Qualified Person in compliance with National Instrument 43-101 with respect to this release. He has reviewed the contents for accuracy.
Condor Drill Results
Goldmarca is waiting for receipt of assay results from six drill holes from the Condor gold Project. Drill results will be released on receipt of the assays and independent verification thereof.
On behalf of the Board of Directors,
Robin Slaughter
President and Chief Executive Officer
ABOUT GOLDMARCA: Goldmarca Limited (TSX-V: GML - News) is an international mining company that is engaged in adding value to gold and base metal projects with a primary focus on assets in South America and Australia. By applying unique technology and expertise, Goldmarca is focused on delivering a low-cost option to develop resource projects that can provide a one-year payback of all capital costs. Goldmarca is also listed on the Frankfurt and Berlin exchanges under the symbol "GDQ." For more information, please visit www.goldmarca.com.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this news release.
Safe Harbor Statement:
Statements contained in this release that are not historical facts are forward-looking statements which involve risk and uncertainties, which could cause actual results to differ materially from those, expressed in forward-looking statements including the following: changes in economic or environmental conditions and the Company's ability to execute its business model and strategic plans. The Company relies on litigation protection for forward-looking statements.
For further information
Robin Slaughter, President & CEO, at 507-66714370 or Nick DeMare, Director & CFO, at 1-604-685-9316 or send email to info@goldmarca.com
Falconbridge Expands Raglan Nickel Mine in Northern Quebec
By Jocelyne Richer
09 Aug 2006 at 04:54 PM EDT
KATINNIQ, Que. (CP) -- Nickel producer Falconbridge Ltd. [TSX:FAL; NYSE:FAL] plans to expand its Raglan mine in northern Quebec with an investment of nearly $540 million over the next several years to boost production of copper and nickel, the company announced Wednesday.
The expansion will create about 50 new jobs as the miner launches two key studies to develop new reserves to replace ore mined since the mine opened in 1997 and boost metal output.
Falconbridge said the global nickel market is strong enough - with prices tripling to C$6 per pound from C$2 in 1997 - to justify such a large investment in a mine 1,800 kilometres north of Montreal, not far from the Arctic Circle.
Falconbridge said the first study will focus on new reserves and will cost about C$240 million over six years.
The second study will look at a 30% expansion in nickel ore production to 1.3 million tonnes a year from one million as early as 2009. That study will cost about C$250 million while raising the annual royalties Falconbridge pays to local Inuit communities.
The mine employs 500, including 14% of Inuit origin.
In a related development, Falconbridge also announced the start of major renovations to its Deception Bay loading dock at a cost of C$50 million to handle the planned increase in nickel production.
''These studies will enable the Raglan Mine to expand production while maintaining the flow of benefits to local Inuit communities, and also respecting the environment,'' Ian Pearce, the Toronto company's chief operating officer, told a news conference at Raglan.
Quebec Premier Jean Charest and Natural Resources Minister Pierre Corbeil also attended the expansion announcement.
''Falconbridge has strong roots in the immense Abitibi-Temiscamingue region of Quebec, through its predecessor company Noranda,'' Pearce said. ''In recent years, Quebec has demonstrated its unequivocal support for the mining sector and is today one of the world's most attractive jurisdictions for our industry.''
The Falconbridge nickel mining camp at Raglan is made up of three underground mines, one open-pit mine, as well as a processing mill, all connected by road to a landing strip at Donaldson and to harbour terminals at Deception Bay. Ore from the mine is crushed, ground and processed into nickel-copper concentrate at the Raglan plant.
Charest descended 300 metres below ground to tour the facility and its mineral extraction process.
Despite his attendance at the announcement, the Quebec government isn't kicking in any funding for the project. Rather, the premier's presence was intended to reinforce how much Quebec's economy relies on the health of the mining sector.
''I am pleased that our government could contribute because our policies establish the context that encourages investment,'' Charest said in a speech.
The Fraser Institute has ranked Quebec the best place in Canada and among the best locations in the world for mining investments, he said.
Falconbridge is one of the world's biggest nickel and copper producers, with 14,500 workers around the world.
Late Tuesday, Falconbridge's board of directors recommended that shareholders tender to a takeover bid by Swiss mining giant Xstrata [LSE:XTA], signalling an end to a months-long takeover battle among Canada's mining giants.
Xstrata, which already owns 24.5% of Falconbridge, is offering C$63.25 a share in cash, including a special dividend, for the rest. That offer expires Aug. 14.
Falconbridge had initially spurned Xstrata's offer, forming an alliance with fellow Canadian mining company Inco [TSX:N; NYSE:N] and U.S. copper miner Phelps Dodge Corp. [NYSE:PD] with plans to create the country's biggest nickel company. However, those plans dissolved after shareholders failed to support the merger.
On Tuesday, Falconbridge's board said that after examining alternatives for the company, it was satisfied that a more attractive offer is unlikely to emerge.
''Xstrata currently owns 24.5% of Falconbridge and since its offer is for any or all shares of Falconbridge, it appears likely that it will attract sufficient shares to gain effective control of Falconbridge on Aug. 14,'' Falconbridge CEO Derek Pannell said in a release.
The board of directors for Inco, which was also the subject of a hostile bid by Vancouver-based Teck Cominco [TSX:TCK.B; NYSE:TCK], said Monday it's open to negotiations with Teck that might boost its offer above that of Phelps Dodge.
Teck Cominco, which received an olive branch after months of being snubbed by Inco, said emphatically Tuesday that it is not in talks with Inco and has no plans to enter discussions or negotiations on a new and higher bid to its C$17.5-billion offer.
Teck's bid was conditional upon Inco dropping the Falconbridge tie-up.
Phelps Dodge has a separate friendly deal to merge with Inco - with or without Falconbridge - but many analysts say it has a poor chance of success because of shareholder opposition from shareholders of both companies.
© The Canadian Press 2006
Downstream presenting exciting global coal-mining opportunities, says Anglo CEO Trahar
Source: Mining Weekly, 10 August 2006
Author: Martin Creamer
New downstream energy-coal activities were presenting exciting coal-mining opportunities globally, Anglo American plc CEO Tony Trahar has told Mining Weekly Online.
{b}Trahar said that Anglo American plc had aligned itself in a very powerful partnership strategy in which it had the coal-mining expertise and multinational petroleum company Shell the coal-to-liquids technology.{/b}
He said that Anglo's first step in coal-to-liquids was to study the large $4-billion-to-R5-billion Monash Energy Project in Australia, which required the moving of large volumes of coal and the very-attractive environmental storage of carbon dioxide in empty oil wells offshore in the Bass Strait.
“This is new fringe project for both us and for Shell and we are going to take time developing it,” he said, emphasising that it was still early days.
Trahar said new sources of energy were in growing demand the world over.
China had indicated its intention to add value to its own vast coal resources and Anglo was itself investigating a large coal-to-chemicals complex in the Xiwan province of China.
These downstream energy-coal activities, though still a fledgling part of Anglo's coal business, were presenting “very exciting” coal-mining opportunities around the world,though they would take time to build up.
Anglo had entered the coal-to-liquids business with energy major Shell Gas & Power and had formed an alliance in the field of conversion of coal to clean liquid energy, currently dominated by South Africa's petrochemicals group, Sasol, listed on the New York Stock Exchange.
Trahar said that the alliance would explore technologies that produced liquid fuels from nonconventional sources, such as coal and was incorporating Anglo American's Monash Energy Project into the alliance.
The burning of synthesis gas generated by the gasification of coal emitted significantly lower quantities of greenhouse gases and pollutants than traditional coal burning and was seen by many as the cleanest way to harness the energy potential of coal, which was still the world's dominant fuel source.
They aimed to take selective equity positions in coal-conversion projects in order to maximise the benefits from the emerging field of clean-coal energy.
These projects would use Anglo's coal reserves and combine its mining capabilities with Shell's technologies. The objective was to extract, gasify and convert coal into chemicals, hydrogen, power and liquid hydrocarbons.
Shell Gas & Power executive director Linda Cook said the alliance further advanced the progress that Shell has made in developing clean coal energy. She described clean coal energy and the potential opportunities that it would unlock as exciting.
http://www.miningweekly.co.za/min/news/breaking/?show=91420
MEXICO
Mexico oil output to decline, analysts sayOil production in Mexico may have peaked in 2004, according to Raymond James & Associates.
BY AMY STRAHAN
Bloomberg News
Oil output has peaked; major field in decline.
Mexico's oil output will probably decline in the next two years if the country doesn't allow foreign investment to boost drilling, according to Raymond James & Associates.
Production in Mexico may have peaked in 2004, analysts J. Marshall Adkins and Pavel Molchanov wrote in a July 10 report, because the 30-year-old Cantarell field, the world's second-largest, has reached maximum output, they said. Petróleos Mexicanos, the state oil company, said Aug. 2 that Cantarell production will decline 8 percent this year.
''The country's oil production looks like it already might have peaked -- quite possibly for good,'' they said in the report. ``At the very least, production appears stagnant. Following a decline in 2005, we project that Mexican production will again show modest year-over-year declines in 2006 and 2007.''
Foreign investment to boost production in Mexico is unlikely because of prohibitions in place since Petróleos Mexicanos, the government oil company, was formed in 1938. Felipe Calderón, who won a narrow victory as president of Mexico last month, said he does not favor privatization, although he supports allowing Pemex to form joint ventures with foreign operators, Molchanov said.
Pemex is so heavily taxed it has no capital for re-investment in exploration and production, Molchanov said in an interview. ``After paying its operating and labor costs, Pemex may have to borrow to fund its capital spending, despite record oil prices.''
Crude oil output at Cantarell fell faster than expected in June to a four-year low, according to data from Mexico's energy ministry. The decline signals the government will miss production targets.
The field, which accounts for about half of Mexico's crude production, yielded 1.74 million barrels a day in June, the most recent month for which information is available. That's 13 percent less than a year ago and the least since November 2001, according the ministry.
The drop worsens the outlook for Mexico's crude exports, about 80 percent of which go to the United States. The decline comes as BP Plc announced Sunday it is temporarily closing its Prudhoe Bay oil field because of pipeline corrosion. Prudhoe Bay is the largest field in the United States. About 400,000 barrels a day of production is being shut, possibly for months.
Crude oil prices have increased 23 percent this year on concern that supplies won't be able to meet increases in global demand. Violence in Nigeria cut output by 20 percent this year, and efforts to curtail Iran's nuclear program have increased the risk of a reduction in shipments from the Islamic republic.
Oil futures in New York rose to a record $78.40 a barrel on July 14.
Mexico, the third-largest oil producer outside of the 11-member Organization of Petroleum Exporting Countries, pumps 4 percent of the world's oil. Estimates from the Mexican government have suggested that the Cantarell field won't begin declining until 2008, Molchanov, Adkins and Wayne Andrews wrote in the note to investors.
In 2004, Mexico's production rose less than 0.4 percent, and by 2005 it fell 1.4 percent, according to the analysts. Mexico currently produces 3.78 million barrels a day, Molchanov said.
The current stagnant production figures suggest oil prices could continue to rise, according to the report.
MEXICO
Mexico oil output to decline, analysts sayOil production in Mexico may have peaked in 2004, according to Raymond James & Associates.
BY AMY STRAHAN
Bloomberg News
Oil output has peaked; major field in decline.
Mexico's oil output will probably decline in the next two years if the country doesn't allow foreign investment to boost drilling, according to Raymond James & Associates.
Production in Mexico may have peaked in 2004, analysts J. Marshall Adkins and Pavel Molchanov wrote in a July 10 report, because the 30-year-old Cantarell field, the world's second-largest, has reached maximum output, they said. Petróleos Mexicanos, the state oil company, said Aug. 2 that Cantarell production will decline 8 percent this year.
'The country's oil production looks like it already might have peaked -- quite possibly for good,' they said in the report. ``At the very least, production appears stagnant. Following a decline in 2005, we project that Mexican production will again show modest year-over-year declines in 2006 and 2007.'
Foreign investment to boost production in Mexico is unlikely because of prohibitions in place since Petróleos Mexicanos, the government oil company, was formed in 1938. Felipe Calderón, who won a narrow victory as president of Mexico last month, said he does not favor privatization, although he supports allowing Pemex to form joint ventures with foreign operators, Molchanov said.
Pemex is so heavily taxed it has no capital for re-investment in exploration and production, Molchanov said in an interview. ``After paying its operating and labor costs, Pemex may have to borrow to fund its capital spending, despite record oil prices.'
Crude oil output at Cantarell fell faster than expected in June to a four-year low, according to data from Mexico's energy ministry. The decline signals the government will miss production targets.
The field, which accounts for about half of Mexico's crude production, yielded 1.74 million barrels a day in June, the most recent month for which information is available. That's 13 percent less than a year ago and the least since November 2001, according the ministry.
The drop worsens the outlook for Mexico's crude exports, about 80 percent of which go to the United States. The decline comes as BP Plc announced Sunday it is temporarily closing its Prudhoe Bay oil field because of pipeline corrosion. Prudhoe Bay is the largest field in the United States. About 400,000 barrels a day of production is being shut, possibly for months.
Crude oil prices have increased 23 percent this year on concern that supplies won't be able to meet increases in global demand. Violence in Nigeria cut output by 20 percent this year, and efforts to curtail Iran's nuclear program have increased the risk of a reduction in shipments from the Islamic republic.
Oil futures in New York rose to a record $78.40 a barrel on July 14.
Mexico, the third-largest oil producer outside of the 11-member Organization of Petroleum Exporting Countries, pumps 4 percent of the world's oil. Estimates from the Mexican government have suggested that the Cantarell field won't begin declining until 2008, Molchanov, Adkins and Wayne Andrews wrote in the note to investors.
In 2004, Mexico's production rose less than 0.4 percent, and by 2005 it fell 1.4 percent, according to the analysts. Mexico currently produces 3.78 million barrels a day, Molchanov said.
The current stagnant production figures suggest oil prices could continue to rise, according to the report.
MEXICO
Mexico oil output to decline, analysts say Oil production in Mexico may have peaked in 2004, according to Raymond James & Associates.
BY AMY STRAHAN
Bloomberg News
Oil output has peaked; major field in decline.
Mexico's oil output will probably decline in the next two years if the country doesn't allow foreign investment to boost drilling, according to Raymond James & Associates.
Production in Mexico may have peaked in 2004, analysts J. Marshall Adkins and Pavel Molchanov wrote in a July 10 report, because the 30-year-old Cantarell field, the world's second-largest, has reached maximum output, they said. Petróleos Mexicanos, the state oil company, said Aug. 2 that Cantarell production will decline 8 percent this year.
'The country's oil production looks like it already might have peaked -- quite possibly for good,' they said in the report. ``At the very least, production appears stagnant. Following a decline in 2005, we project that Mexican production will again show modest year-over-year declines in 2006 and 2007.'
Foreign investment to boost production in Mexico is unlikely because of prohibitions in place since Petróleos Mexicanos, the government oil company, was formed in 1938. Felipe Calderón, who won a narrow victory as president of Mexico last month, said he does not favor privatization, although he supports allowing Pemex to form joint ventures with foreign operators, Molchanov said.
Pemex is so heavily taxed it has no capital for re-investment in exploration and production, Molchanov said in an interview. ``After paying its operating and labor costs, Pemex may have to borrow to fund its capital spending, despite record oil prices.'
Crude oil output at Cantarell fell faster than expected in June to a four-year low, according to data from Mexico's energy ministry. The decline signals the government will miss production targets.
The field, which accounts for about half of Mexico's crude production, yielded 1.74 million barrels a day in June, the most recent month for which information is available. That's 13 percent less than a year ago and the least since November 2001, according the ministry.
The drop worsens the outlook for Mexico's crude exports, about 80 percent of which go to the United States. The decline comes as BP Plc announced Sunday it is temporarily closing its Prudhoe Bay oil field because of pipeline corrosion. Prudhoe Bay is the largest field in the United States. About 400,000 barrels a day of production is being shut, possibly for months.
Crude oil prices have increased 23 percent this year on concern that supplies won't be able to meet increases in global demand. Violence in Nigeria cut output by 20 percent this year, and efforts to curtail Iran's nuclear program have increased the risk of a reduction in shipments from the Islamic republic.
Oil futures in New York rose to a record $78.40 a barrel on July 14.
Mexico, the third-largest oil producer outside of the 11-member Organization of Petroleum Exporting Countries, pumps 4 percent of the world's oil. Estimates from the Mexican government have suggested that the Cantarell field won't begin declining until 2008, Molchanov, Adkins and Wayne Andrews wrote in the note to investors.
In 2004, Mexico's production rose less than 0.4 percent, and by 2005 it fell 1.4 percent, according to the analysts. Mexico currently produces 3.78 million barrels a day, Molchanov said.
The current stagnant production figures suggest oil prices could continue to rise, according to the report.
Sector Wrap: Gold Leads, Equities Follow
Wednesday August 9, 4:12 pm ET
Gold Price Climbs, Pulling Shares of Gold Mining Stocks Higher
NEW YORK (AP) -- Investors pushed gold prices to close modestly higher Wednesday, the first trading day after the Federal Reserve held its benchmark interest rate steady after a two-year-long spate of increases.
Shares of gold mining equities marched higher as well. Barrick Gold Corp., the world's largest gold producer, saw its shares advance 68 cents, or 2.1 percent, to close at $32.79 on the New York Stock Exchange. Newmont Mining Corp. shares added $1.50, or 2.9 percent, to close at $53.42, while Goldcorp shares rose 52 cents to end at $31.44.
AngloGold Ashanti Ltd. shares gained $1.21, or 2.5 percent, to close at $50.64 on the Big Board, and Gold Fields shares rose 36 cents to end at $21.46.
The most active December contract for gold climbed $4.70 to finish at $662 an ounce on the New York Mercantile Exchange.
After the gold market closed Tuesday, the Federal Reserve announced it would hold the nation's benchmark rate steady -- the first pause after 17 consecutive increases since 2004.
Lone Clone's post on GOLDBUGS board:
http://www.investorshub.com/boards/read_msg.asp?message_id=12545648
sumisu
Northern Orion Reports Record Second Quarter 2006 Results and Indicative Guidance for Agua Rica
Wednesday August 9, 8:00 am ET
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Aug 9, 2006 -- Northern Orion (TSX:NNO.TO - News)(AMEX:NTO - News) is pleased to report record quarterly net earnings of $32,828,000 ($0.22 per share) for the second quarter of 2006 ("Q2 2006") compared with net earnings of $3,624,000 ($0.02 per share) for the second quarter of 2005 ("Q2 2005").
Second quarter 2006 highlights
- The Company's share of operating cash flow before interest, depletion, depreciation, amortization and tax ("EBITDA", see Section 3.3) from Alumbrera was $56,327,000 ($0.37 per share) in Q2 2006, compared to $12,063,000 ($0.08 per share) in Q2 2005.
- Equity earnings from Alumbrera was $37,876,000 ($0.25 per share) in Q2 2006, compared to $6,935,000 ($0.05 per share) for Q2 2005.
- Average realized copper price was $4.44 per pound and average realized gold price was $608 per ounce in Q2 2006 ($1.59 and $422 in Q2 2005 respectively). The Company's share of Alumbrera sales in Q2 2006 was 15,576,000 pounds of copper and 24,653 ounces of gold (11,312,000 pounds and 15,897 ounces in Q2 2005 respectively).
- An ongoing ore delineation drilling programme at Alumbrera has confirmed an additional 40 million tonnes of mineral reserves, extending the mine life of Alumbrera by one year until at least mid-2016.
- As a result of strong earnings in the last few quarters, Alumbrera paid its first earned royalty payment under the original royalty agreement to YMAD in Argentina. Net of previous advances of $16.4 million, a payment of $33.4 million (on a 100% basis) was made to YMAD in August 2006.
- During the quarter, the Company continued to make significant progress on the update to the feasibility study for the development of its Agua Rica project. This is nearing completion and its results are expected to be released upon completion of the current metallurgical and mining optimization activities, final reviews and approvals. Discussions for the financing of the project are also well under way.
- Indicative guidance suggests that Agua Rica will be a very low cost producer, based on work completed to date, and based on constructing all required components for the project with no allowance for existing infrastructure and current costing data. Subject to confirmation on completion of the updated study and assuming no shared or available infrastructure, Agua Rica has:
- 23-year life of mine
- Capital costs of $1.9 billion
- Cash cost of $0.09 per pound of copper net of by-products (based on $435/oz gold and $7.00/lb molybdenum)
- Cash cost of negative $1.05 per pound of copper net of by-products (based on current prices of $635/oz gold and $26/lb molybdenum)
- At June 30, 2006, the Company had a cash position (including temporary investments) of $172,425,000.
David Cohen, President and CEO of Northern Orion said: "We are very pleased with our second quarter results and with our progress at Agua Rica which is demonstrating that it will be a very low cost producer. We would also like to congratulate the Alumbrera management team and its staff for their commitment and dedication to continually add value to the project, as demonstrated by Alumbrera's operating efficiencies and safety performance standards and by the latest extension of the mine life at Alumbrera."
Teleconference call and webcast details
Northern Orion will host a telephone conference call and webcast on Thursday 10 August at 10:00 a.m. Pacific (1:00 p.m. Eastern) to discuss these results. The conference call may be accessed by dialing 1-800-319-4610 in Canada and the United States, or 1-604-638-5340 internationally.
The conference call will be archived for later playback until August 17, 2006 and can be accessed by dialing 1-800-319-6413 or 1-412-317-0095 and using the passcode 7218#. A live and archived webcast presentation will also be available at www.northernorion.com.
Please go to www.northernorion.com to review our Management's Discussion and Analysis of Financial Conditions and Results of Operations.
Results of Operations for the three and six months ended June 30, 2006
The following table sets forth selected consolidated financial information for the three and six months ended June 30, 2006 and 2005 (in thousands of U.S. dollars, except per share amounts):
Table 1
Consolidated statements of operations
Second quarter First half
------------------- ------------------
2006 2005 2006 2005
--------- -------- --------- -------
Equity earnings of Minera
Alumbrera Ltd. $ 37,876 $ 6,935 $ 59,285 $ 15,191
Expenses
Financing costs -- (285) -- (569)
Foreign exchange gains
(losses) 27 (1,183) 17 512
Office and administration (665) (740) (1,321) (1,247)
Professional and consulting (548) (425) (1,054) (881)
Property maintenance
and exploration (421) (44) (464) (89)
Settlement of lawsuit (500) 0 (500)
Stock-based compensation (5,165) (1,418) (5,165) (1,418)
Interest and other income 2,224 923 3,499 1,418
Interest expense -- (139) -- (355)
--------- -------- --------- -------
Net earnings for the period $ 32,828 $ 3,624 $ 54,297 $ 12,562
--------- -------- --------- -------
--------- -------- --------- -------
Earnings per share -
basic $ 0.22 $ 0.02 $ 0.36 $ 0.09
Earnings per share -
fully diluted $ 0.18 $ 0.02 $ 0.30 $ 0.08
Weighted average shares
outstanding ('000s)
Basic 151,599 148,476 150,494 138,914
Diluted 181,062 165,683 179,081 158,972
Alumbrera operations
During the three months ended June 30, 2006, the Company recorded equity earnings of $37,876,000, a record for any quarter since the acquisition of its 12.5% interest in the Alumbrera Mine in June 2003. This represented an increase of 446% over the same period in 2005. During the six months ended June 30, 2006, the Company's equity earnings of $59,285,000 was a 290% increase over the same period in 2005.
The following is a summary of Northern Orion's 12.5 % proportional share of Alumbrera's operations for the three and six months ended June 30, 2006 and 2005:
Table 2
Company's 12.5% proportional share of Alumbrera operations
Second quarter First half
--------------------- ---------------------
2006 2005 2006 2005
--------------------- ---------------------
Key financial statistics
(amounts stated in thousands
of U.S. dollars)
(per share amounts stated in
U.S. dollars)
EBITDA (1) $ 56,327 $ 12,063 $ 88,982 $ 25,888
Equity earnings $ 37,876 $ 6,935 $ 59,285 $ 15,191
EBITDA, per share (1) $ 0.37 $ 0.08 $ 0.59 $ 0.19
Equity earnings,
per share $ 0.25 $ 0.05 $ 0.39 $ 0.11
Sales -
Copper (pounds) 15,576,000 11,312,000 26,736,000 21,313,000
Gold (ounces) 24,653 15,897 41,823 32,638
Average realized price
Copper ($ per pound) $ 4.44 $ 1.59 $ 3.94 $ 1.60
Gold ($ per ounce) $ 608 $ 422 $ 595 $ 419
Copper cash costs
per pound, net of
gold credits (1) $ 0.32 $ 0.27 $ 0.17 $ 0.13
Key production statistics
Ore mined (tonnes) 850,000 1,148,000 1,639,000 2,226,000
Ore milled (tonnes) 1,158,000 1,150,000 2,261,000 2,293,000
Grades -
Copper (%) 0.61 0.57 0.62 0.53
Gold (grams/tonne) 0.77 0.58 0.77 0.57
Recoveries -
Copper (%) 89 91 89 90
Gold (%) 79 77 78 77
Production -
Copper (pounds) 13,945,000 12,994,000 27,531,000 23,918,000
Gold (ounces) 22,823 16,308 43,579 32,166
(1) These are non-GAAP measures as described below.
Average realized copper and gold prices in Q2 2006 were 179% and 44% higher, respectively, than for the same period in 2005. Average realized prices for the first six months of 2006 were 146% and 42% higher, respectively, than for the same period in 2005. Average realized prices can differ from average spot prices as metals sales prices are subject to adjustment on final settlement. In a sharply rising copper price environment which was experienced throughout the first six months of 2006, these adjustments on certain sales recognized during late 2005 and in Q1 2006 resulted in a realized price of $4.44 per pound of copper for Q2 2006, substantially higher than the average spot price of $3.29 per pound.
The average grades of copper and gold mined in Q2 2006 were 7% and 33% higher, respectively, than for the same period in 2005. Grades for the first half of 2006 were 17% and 35% higher, respectively, than for the first half of 2005. Copper and gold recoveries have remained relatively unchanged in the past 12 months. There was a 26% drop in the tonnes of ore mined in Q2 2006 compared to Q2 2005 and in the first half of 2006 compared to the first half of 2005. However, tonnes of ore milled year-to-date were approximately the same levels as in 2005, and coupled with the increase in the copper and gold grades, production of copper and gold in Q2 2006 was 24% and 28% higher than in Q2 2005, respectively. Production was 15% and 35% higher, respectively, in the first half of 2006 compared to the first half of 2005.
The higher gold production and prices have a positive effect on cash costs per pound of copper net of gold credits, but increased royalties in Q2 2006 resulted in cash costs per pound of copper (net of gold credits) increasing from $0.27 in Q2 2005 to $0.32 in Q2 2006, as discussed in Section 3.3. During Q2 2006, Alumbrera started to accrue for royalties payable to Yacimientos Mineros de Agua de Dionisio ("YMAD Royalty"), a quasi-government mining company which owns and administers all mining prospects in the Farallon Negro district, the region which includes the Alumbrera Mine. Under a royalty agreement put in place prior to project construction, the YMAD Royalty is equal to 20% of net proceeds after capital recovery and certain other adjustments, and is payable in the fiscal year following the one in which positive net proceeds are realized. The YMAD Royalty is in addition to a royalty which the Alumbrera Mine already pays to the Province of Catamarca. In Q2 2006, total royalties increased by $7,284,000 compared to the same period in 2005.
Recent Developments at Alumbrera
In August 2006, Alumbrera paid its first earned royalty payment of $33.4 million to YMAD, net of previous advances of $16.4 million (on a 100% basis).
Alumbrera expects to complete the expansion of its concentrator by the end of 2006 for a cost of about $15.5 million (Northern Orion share - US$1.9 million). This is projected to increase mill throughput by 8% to 40 million tonnes per annum.
In August 2006, Alumbrera announced an upgrade in its Mineral Reserves and Resources, extending the mine life at Alumbrera by one year to mid-2016. This was based on an ongoing delineation drilling programme in the Alumbrera pit undertaken both within the existing ore envelope and for extensions at depth. The Mineral Reserves and Resources currently stand as follows (on a 100% basis, of which Northern Orion owns 12.5%):
Mineral Reserves(i) Mineral Resources(i) (inclusive of Reserves)
-------------------------- -------------------------------------------
Proved 380 Mt @0.45%Cu & Measured 400 Mt @0.45%Cu & 0.48 gpt Au
0.49 gpt Au
-------------------------- -------------------------------------------
Probable 24 Mt @0.42%Cu & Indicated 24 Mt @0.42%Cu & 0.43 gpt Au
0.43 gpt Au
-------------------------- -------------------------------------------
Total 400 Mt @0.45%Cu & Total 420 Mt @0.45%Cu & 0.48 gpt Au
0.49 gpt Au
-------------------------- -------------------------------------------
(i) Information which relates to Mineral Resources and Reserves is
based on information verified by Alumbrera's internal lab facilities
and compiled by Mr. Luis Rivera who is a member of the Australasian
Institute of Mining and Metallurgy and who is a Qualified Person as
defined by National Instrument 43-101. Mr. Rivera is a full-time
employee of Minera Alumbrera Limited. Ore Reserves have been
calculated in accordance with the recommendations of the Australian
Institute of Mining and Metallurgy - Joint Ore Reserve Committee
(the "JORC" code), where the Measured and Indicated Mineral
Resources are inclusive of those Mineral Resources modified to
produce the Mineral Reserves.
Alumbrera Non-GAAP Measures
The Company believes that conventional measures of performance prepared in accordance with Canadian GAAP do not fully illustrate the ability of Alumbrera to generate cash flow. In this MD&A, the Company has reported its share of earnings before interest, depletion, depreciation, amortization and tax ("EBITDA") at Alumbrera. This is a liquidity non-GAAP measure which the Company believes is used by certain investors to determine the Company's ability to generate cash flows for investing and other activities. The Company also reports cash costs per pound of copper (net of gold credits), another non-GAAP measure which is a common performance measure used in the base metals industry. These non-GAAP measures do not have any standardized meaning prescribed under Canadian GAAP, and therefore they may not be comparable to similar measures employed by other companies.
Cash costs net of gold credits increased to $0.32 per pound of copper in Q2 2006 from $0.27 per pound in Q2 2005. For the year-to-date, cash costs increased to $0.17 per pound of copper from $0.13 per pound in 2005. The primary cause for the increase is the YMAD Royalty as described above, but costs of production have also increased in the last twelve months due to rising costs of fuel, electricity, tires and reagents, and higher rates for price participation, treatment and refining charges, and ocean freight.
The following table provides a reconciliation of EBITDA and cash costs per pound (net of gold credits) to the financial statements:
Table 3
(Stated in thousands, except ounce, pound,
per ounce and per pound amounts)
Second quarter First half
--------------------- ---------------------
2006 2005 2006 2005
---------- --------- ---------- ---------
EBITDA Calculation
Revenues from mining
activities $ 76,302 $ 21,871 $ 118,310 $ 42,281
Cash cost of sales (19,975) (9,808) (29,328) (16,393)
---------- --------- ---------- ---------
EBITDA $ 56,327 $ 12,063 $ 88,982 $ 25,888
Interest, taxes,
depreciation and
amortization (18,451) (5,128) (29,601) (10,697)
---------- --------- ---------- ---------
Equity earnings of
Alumbrera $ 37,876 $ 6,935 $ 59,381 $ 15,191
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Cash cost calculation
Gold sales in ounces 24,653 15,897 41,823 32,638
Average realized price
per ounce $ 608 $ 422 $ 595 $ 419
---------- --------- ---------- ---------
Total gold revenues $ 14,989 $ 6,709 $ 24,885 $ 13,675
Cash cost of sales 19,975 9,808 29,328 16,393
---------- --------- ---------- ---------
Net costs after gold
credits 4,986 3,099 4,443 2,718
---------- --------- ---------- ---------
Copper sales in pounds 15,577,000 11,312,000 26,736,000 21,313,000
---------- --------- ---------- ---------
Cash cost per pound
of copper $ 0.32 $ 0.27 $ 0.17 $ 0.13
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Agua Rica
In late 2004, the Company commissioned Hatch Ltd. to prepare a detailed update to the initial 1997 feasibility study to support financing. This update, which is nearing completion, has focused on the development of an independent mine and processing facility at Agua Rica, with production planned to commence approximately three years after the Company obtains all necessary permits.
The Company has completed all field work necessary to support the update to the feasibility study. The work included drilling in the mine area for pit slope stability and hydrogeological data, water supply drilling, updating the block model and resource estimate, and performing additional baseline work to support the environmental impact assessment. The Company is currently undertaking optimization of the mine plan and the metallurgical flowsheet. A detailed environmental and social impact assessment is currently being prepared and is scheduled for presentation in the fourth quarter of 2006. The Company has also mandated a financial advisor to arrange project debt financing and is currently in discussions with international project finance banks that may potentially participate in the financing.
Indicative guidance suggests that Agua Rica will be a very low cost producer, based on work completed to date, and based on constructing all required components for the project with no allowance for existing local infrastructure and current costing data. Subject to confirmation on completion of the updated study, Agua Rica has a 23 year life of mine with capital costs of $1.9 billion. Cash cost per pound of copper net of by-products is estimated at $0.09 based on $435 per ounce of gold and $7.00 per pound of molybdenum, and negative $1.05 based on current prices of $635 per ounce of gold and $26 per pound of molybdenum.
In the second quarter of 2006, the Company incurred cash expenditures of $5,371,000 on advancing the update to the feasibility study. For the six months ended June 30, 2006, the Company spent $11,689,000 on advancing the update to the feasibility study.
Corporate
Corporate expenses in the three and six months ended June 30, 2006 were generally in line with the same periods in 2005, except the following items:
A foreign exchange loss was incurred in Q2 2005 and a foreign exchange gain was incurred in the first half of 2005 as a result of the Company holding significant amounts of Canadian dollars in a volatile U.S. dollar environment. The Company reduced its exposure to foreign exchange gains and losses during the third quarter of 2005 when it converted Cdn.$74 million in cash to U.S. dollars. No significant foreign exchange gains or losses were experienced in 2006.
Property maintenance and exploration of $421,000 in Q2 2006 included exploration expenditures of $375,000 on the Company's properties in the provinces of Mendoza and Neuquen in Argentina. Exploration costs in the first quarter of 2006 were not significant. The Company is planning to commence a drilling program in these areas in the third quarter of 2006.
In Q2 2006, the Company settled a labour claim against the Company for $500,000. The claimant had claimed damages of $714,000.
The Company recorded stock-based compensation of $5,165,000 in Q2 2006 as a result of stock options issued during the period. See Section 4.1 for details. In Q2 2005, stock-based compensation of $1,418,000 was recorded. No stock options were granted during the first three months of 2005 and 2006.
Interest and other income in Q2 2006 included a $401,000 gain on sale of marketable securities. Interest income increased from $923,000 in Q2 2005 to $1,823,000 in Q2 2006 (and from $1,418,000 in the first half of 2005 to $3,098,000 in the first half of 2006) due to the Company's increased cash balances from cash distributions from Alumbrera and from a short-form prospectus financing in February 2005, and due to rising interest rates over the past 12 months. At June 30, 2006, $169,000 in interest receivable was included in prepaid expenses and other receivables on the balance sheet.
Financing costs and interest expense were incurred in Q2 2005 and in the first half of 2005 in connection with an outstanding term loan facility which the Company repaid in full by the end of 2005. No such costs were incurred in Q2 2006.
Liquidity, Capital Resources and Outlook
At June 30, 2006, the Company had working capital of $171,387,000 (December 31, 2005 - $133,605,000) and cash and cash equivalents and temporary investments of $172,425,000 (December 31, 2005 - $135,911,000). The increase in the cash balances in 2006 was mostly due to cash distributions of $49,756,000 received from the Alumbrera mine, offset by cash expenditures of $11,689,000 at its Agua Rica Project.
The Company anticipates copper and gold prices to remain strong in 2006. For the remainder of 2006, the mine plan at Alumbrera calls for the mining of zones that are of lower copper grades than that achieved in the first half of 2006 (2H 2006 - 0.52%; 1H 2006 - 0.62%), and also lower gold grades as compared to the first half of 2006 (2H 2006 - 0.63 g/t; 1H 2006 - 0.77 g/t). Recovery rates for the rest of 2006 are expected to remain the same. The following graphs show the actual and estimated grades and recoveries for copper and gold for each of the quarters in 2006:
To view the attached graphs, please click on the following links:
http://www.ccnmatthews.com/docs/coppergrades.jpg
http://www.ccnmatthews.com/docs/goldgrades.jpg
http://www.ccnmatthews.com/docs/copperrecovery.jpg
http://www.ccnmatthews.com/docs/goldrecovery.jpg
The information above is subject to change and is subject to the risk factors described in the Company's Management Discussion and Analysis for the year ended December 31, 2005.
Based on current commodity prices, market conditions and planned production levels at Alumbrera, the Company expects to receive significant cash flows from Alumbrera for at least the next eight to ten years, which, along with the Company's current cash balances, will provide a significant part of the equity contribution necessary for the Company to bring Agua Rica into production. The Company will also require significant external financing or third party participation in order to bring Agua Rica into production. However, if volatile global and market conditions result in a significant decline in commodity prices, then the cash flows from Alumbrera may become insufficient to advance any of the Company's projects, including Agua Rica, to the production stage, and to fund other acquisition projects. This could also result in the Company having difficulty in obtaining external financing or third party participation.
If so, over the long-term, the Company may be required to obtain additional funding either through the public or private sales of equity or debt securities of the Company, or through the offering of joint venture or other third party participation in Agua Rica in order to bring Agua Rica into production. Insofar as factors beyond the Company's control may adversely affect its access to funding or its ability to conclude financing arrangements, there can be no assurance that any additional funding will be available to the Company or, if available, that it will be on acceptable terms. If adequate funds are not available, the Company may be required to delay or reduce the scope of its activities to bring Agua Rica into full production.
Northern Orion is a mid-tier copper and gold producer focused on the development of its Agua Rica project and engaged in the exploration for copper and associated by-product metals in Argentina. The Company will continue to build upon its progress to date with a strategy to advance Agua Rica so as to achieve maximum monetary returns in the shortest time frame. In addition, the Company will continue to review and evaluate accretive acquisitions that could provide the Company with additional cash flow in the short to medium term.
David Cohen, President and CEO
Except for the statements of historical fact contained herein, certain information presented constitutes "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements, including but not limited to, those with respect to the price of gold, silver and copper, the timing and amount of estimated future production, the potential and/or projected cash flow generated from production, costs of production, reserve determination and reserve conversion rates, and the potential for further equity dilution involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of Northern Orion to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks related to international operations, risks related to joint venture operations, the actual results of current exploration activities, actual results of current reclamation activities, conclusions of economic evaluations, uncertainty in the estimation of ore reserves and mineral resources, changes in project parameters as plans continue to be refined, future prices of gold, silver and copper, economic and political instability in Argentina, environmental risks and hazards, increased infrastructure and/or operating costs, labor and employment matters, and government regulation as well as those factors discussed in the section entitled "Risk Factors" in Northern Orion's Renewal Annual Information form attached to Northern Orion's latest Form 40-F on file with the United States Securities and Exchange Commission in Washington, D.C. Although Northern Orion has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Northern Orion disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, readers should not place undue reliance on forward-looking statements.
Contact:
Contacts:
Northern Orion Resources Inc.
Investor Relations
1-866-608-9970
info@northernorion.com
http://www.northernorion.com
--------------------------------------------------------------------------------
Source: Northern Orion Resources Inc.
Market Regulation Services - Trade Resumption - Central Alberta Well Services Corp. - CWC; West Hawk Development Corp. - WHD
Wednesday August 9, 9:28 am ET
VANCOUVER, Aug. 9 /CNW/ - Trading resumes in:
Issuer Name: Central Alberta Well Services Corp.
TSXV Ticker Symbol: CWC
Resumption Time: 9:02 EST
Issuer Name: West Hawk Development Corp.
TSXV Ticker Symbol: WHD
Resumption Time: 9:30 EST
For further information
Market Regulation Services Inc. (416) 646-7299
(Sorry for posting this late, as I was out in the garden.)
sumisu
oasdihf,
A lot of good signs for coal in that post.
There exist some infrastructure impediments in the United States in transporting coal. As an investor in Peabody Energy (BTU), I have been concerned about the ability of railroads to transport all of the coal out of the Powder River Basin in Wyoming.
With Peak Oil just around the corner, I would think that the U.S. government would do more for railroads than it does for its highways.
Here is an interesting post, which outline the transportation problems imposed on utility plants. It is from the GrandForksHerald.com and was posted on June 12, 2006.
Coal demand puts strain on nation's rail system
By Bob Moen
Associated Press
WHEATLAND, Wyo. - In the time it takes to microwave a frozen dinner, another 120 tons of coal is dumped from a railroad car at the Laramie River Station. It's a scene that can occur 200 times a day.
To keep electricity flowing to some 1.6 million homes, the power plant burns up to 24,000 tons of coal every day. Operating continuously, the plant's three generating units require a dependable, steady stream of coal.
This past year, however, the stream of coal was anything but steady, even though the plant is only about 100 miles from the largest-producing coal mines in the United States the Powder River Basin in northeast Wyoming, home to the nation's top 10 producing coal mines.
As the power plant's stockpile of coal, sapped by sporadic shipments, dwindled to less than a week's supply, Basin Electric Power Cooperative had to make plans for scaling back the plant's operations and power output. "The best I can characterize it is that we're operating on the ragged edge," Basin Electric spokesman Floyd Robb said.
Basin Electric is not alone. Power plants around the country have seen their coal stockpiles dwindle, mainly because of problems with shipping coal out of Wyoming and increased worldwide demand for energy.
David Wilks, president of energy supply for the Minneapolis-based Xcel Energy, testified before a Senate committee last month that power companies may be forced to buy up to $2 billion worth of natural gas to make up for a coal shortfall.
The result has been higher electric bills in some areas because power companies were forced to replace coal with more expensive natural gas to feed their plants.
"People call us the Saudi Arabia of coal. But if you don't get it to the power plants, it doesn't matter," said Mike Grisso, executive director of the Alliance for Rail Competition, a shippers' organization.
The two main shippers of U.S. coal BNSF Railway Co. and Union Pacific Railroad say they are investing hundreds of millions of dollars in order to ship more Wyoming coal and keep up with an ever growing demand for power.
Anthony Hatch, an independent transportation analyst in New York, said he believes railroads will meet future demands for shipping coal. But it will take time because of the enormous task of expanding an industry that until only a few years ago was abandoning track as its business dwindled.
But until the rail system can match rail capacity and demand for service, there will be periods where rail shipments can't keep up, he said.
With plentiful coal reserves and alternative fuels still too costly or years away from becoming reality, coal is seen by many as the most practical means to meet the nation's and world's growing power needs.
"The economy is still rolling along so everybody expects production and demand to keep increasing," Fred Freme, industry statistician with the U.S. Energy Department's Energy Information Administration. "It is the cheapest as far as electric generation goes."
Owned by six electric utilities, the Laramie River Station's three 605-foot-tall stacks tower above the landscape of east-central Wyoming and the nearby community of Wheatland. Each of its three generators produces enough electricity to power roughly 550,000 homes.
To generate the electricity, Laramie River will burn up to 1,125 tons of coal an hour at full throttle.
The coal arrives by rail from mines north of Wheatland. Each BNSF train tugs about 135 open-top rail cars loaded to the brim with chunks of gleaming black coal.
The coal cars are pulled through a long, narrow building where a layer of coal dust covers the floors, railings and steps up to a half-inch deep. Each 20-ton car is grabbed by four clamps and turned upside down. Its cargo of 120 tons of coal pours into a chute and is funneled to a conveyor belt, and then to holding bins.
It takes about 2 minutes to dump each rail car.
Richard Bower, engineering assistant at the plant, said ideally the plant would have 700,000 to 800,000 tons of coal on hand. But this winter, the plant's coal supply dwindled as low as 150,000 tons, less than a week's supply, prompting Basin Electric to consider curtailing power production.
"It's not increased generations causing the stockpile to go down," Basin Electric spokesman Robb said. "It's lack of coal deliveries."
Other power companies are having similar supply problems. Entergy Arkansas said its coal shipments declined up to 20 percent last year, forcing it to reduce operations at two power plants in Arkansas and to buy power on the open market. Wisconsin utilities incurred nearly $50 million in extra costs last year because of interruptions in coal shipments.
Entergy Arkansas has sued Union Pacific Railroad, claiming the railroad schemed to hold back deliveries of Wyoming coal in an effort to make more money. UP denied the claim, saying it actually turned down new contracts to ship coal in order to catch up with delayed shipments to existing customers.
Power generating companies are not expecting any improvement this year.
It used to be that people would set their clocks by the train coming into town. But the business of running the nation's train traffic is much more complicated these days.
Today's railroads use a rail system that has not added track and other infrastructure for decades. In fact, before 2003, railroads had been abandoning miles of unprofitable and underused lines.
Just in the area of coal, "the rails have to keep up with 20 (million) to 30 million tons of increased shipments each year," David Khani, an industry analyst with of Friedman Billings Ramsey in Arlington, Va., said.
At the same time, increasing imports of goods from China and elsewhere are competing for space and time on the nation's rail system, he said.
With little margin between coal supply and demand, any disruption in train traffic, especially in the movement of coal out of Wyoming, will influence coal prices around the country, he said. That's what happened a year ago when derailments in Wyoming stopped traffic briefly and slowed shipments for months.
BNSF and Union Pacific jointly share a rail line coming out of the southern end of the Powder River Basin. With an average of about 61 coal trains a day traveling on the joint line, some 325 million tons of coal about one-third of the nation's total coal production was carried over the line last year. The same line handled just 19 million tons of coal in 1985.
BNSF and UP are investing about $200 million in a project that will eventually expand what had been a two-track line into three tracks for the entire 75-mile length. A 15-mile stretch will get a fourth set of tracks, BNSF spokesman Pat Hiatte said.
As a result of the expansion, the two railroads expect to be able to ship more than 400 million tons of coal a year over the joint line.
In addition, a new staging yard is being built and conductors, mechanics and other rail workers are being hired, said Gus Melonas, spokesman for BNSF Railway Co.
Over the first four months of this year, BNSF hauled out about 6 percent more Wyoming coal than during the same period last year.
And the first major rail expansion in the United States in about a century is in the works. The South Dakota-based Dakota, Minnesota & Eastern Railroad is seeking $2.5 billion in federal loans to extend and rebuild rail lines so it can haul Wyoming coal to the Midwest and Great Lakes regions. Its loan application is pending before the Federal Railroad Administration.
"What we're seeing here is a rail renaissance," Hatch said.
Goldcorp Declares Eighth Monthly Dividend Payment for 2006
Tuesday August 8, 12:58 pm ET
VANCOUVER, BRITISH COLUMBIA--(MARKET WIRE)--Aug 8, 2006 -- (All dollar amounts in United States dollars (US$))
GOLDCORP INC. (TSX:G.TO - News)(NYSE:GG - News) is pleased to declare its eighth monthly dividend payment for 2006 of $0.015 per share. Shareholders of record at the close of business on Friday, August 18, 2006 will be entitled to receive payment of this dividend on Friday, August 25, 2006.
Goldcorp is the world's lowest-cost and fastest growing multi-million ounce gold producer with operations throughout the Americas and Australia. The Company does not hedge its gold production.
Cautionary Note Regarding Forward-Looking Statements
Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995: Except for the statements of historical fact contained herein, the information presented constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, including but not limited to those with respect to the price of gold, silver and copper, the timing and amount of estimated future production, costs of production, reserve determination and reserve conversion rates involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of Goldcorp to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks related to the integration of acquisitions, risks related to international operations, risks related to joint venture operations, the actual results of current exploration activities, actual results of current reclamation activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, future prices of gold, silver and copper, as well as those factors discussed in the section entitled "General Development of the Business - Risks of the Business" in Goldcorp's Form 40-F on file with the Securities and Exchange Commission in Washington, D.C. and Goldcorp's Annual Information Form on file with the securities regulatory authorities in Canada. Although Goldcorp has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
Contact:
Contacts:
Goldcorp Inc.
Melanie Pilon
Director, Investor Relations
(604) 696-3024
(604) 696-3001 (FAX)
info@goldcorp.com
http://www.goldcorp.com
--------------------------------------------------------------------------------
Source: Goldcorp Inc.
earthfarm,
I follow all of your posts.
While doing some Peak Oil research yesterday, I came upon some interesting reading about Cuba's having to adapt to a farm economy when the U.S. established a blockade.
It's my belief that the Cuba, Brazil, and the Amish have a jump on the world once Peak Oil sets in.
http://www.globalpublicmedia.com/articles/657
Even though I grew up outside New York City, I went to college in Kansas for two years. After seeing the large farms and silos, and listening to the large freight trains, I became a country boy at heart.
sumisu
West Hawk Development Corp. announces major natural gas acquisition
Symbols: (WHDCF - AMERICAN; WHD.V - CANADIAN)
http://www.investorshub.com/boards/read_msg.asp?message_id=12529782
sumisu
jw,
I'm interested to see your reaction on the West Hawk's future gas plans in Colorado.
I have to reactions:
Upon entering Peak Oil, West Hawk will be positioned in two alternative energy sectors, coal and gas.
As I stated before, financing will be needed to get off the ground with their coal and gas projects.
This is interesting for a penny stock.
sumisu
West Hawk Signs a Drilling and Development Agreement
August 8, 2006. West Hawk Development Corporation (WHD TSX.V) the “Company” or “West Hawk” through its wholly owned subsidiary, West Hawk Energy (USA) LLC (WHE), is pleased to announce that it has formally entered into a Drilling and Development Agreement for a 5120 acre property located in the center of the Piceance Basin, Colorado. Under the Drilling and Development Agreement, the Company has committed at a minimum to drill 4 wells in year 1, 8 wells in year 2, and 12 wells in year 3. The Resource Evaluation Report, in compliance with the Canadian securities commissions’ National Instrument 51-101 criteria for oil and gas properties, has been completed by Gustavson Associates, Independent Qualified Reserve Evaluators, and is being filed with the TSX Venture Exchange and is viewable on SEDAR and the Company website.
A Resource calculation from the report, prepared by a Registered Petroleum Engineer with the State of Colorado, is as follows: The basin-centered gas accumulation in the Piceance basin is expected to form a continuous pool with varying degrees of technically and economically recoverable gas. This play is best thought of in terms of resources and economically recoverable reserves on a per well basis. Based on all available data, Gustavson Associates has assigned the probabilistic estimation of technically recoverable resources from the property, measured in billion cubic feet (BCF), as follows: P90% estimate of 383 BCF, P50% estimate of 529 BCF, and P10% estimate of 700 BCF.
Under the terms of the agreement, West Hawk is responsible for 100% of drilling and completion costs of the first 32 wells (160-acre spacing). In accordance with the aforementioned NI51-101 report, the cost of each of those wells is estimated at $1,600,000 per well with roughly 50% attributable to drilling and the balance to completion costs. In return, the company will earn a working interest in the property (ranging from 50% to 75%) with a 75% net revenue interest (NRI) proportionally reduced to the working interest earned.
“The Piceance Basin, with an estimated 300 trillion cubic feet (TCF), is considered one of the largest gas plays in North America. Signing this agreement follows our focus to build West Hawk Development into a significant energy producer” says Dr. William Mark Hart, President, West Hawk Development Corp.
ON BEHALF OF THE BOARD OF DIRECTORS
“Michael Townsend”
Executive Chairman
51-101 REPORT
http://www.westhawkdevelopment.com/doc/report/pdf/51-101-piceance-basin.pdf
ENCANA RELATIONSHIP
A paragraph on the bottom of page 2-1 states:
"West Hawk Development has enterted into a farm out Agreement with Encana Corp. to earn a working interest (WI) in the project. The mineral owners are Exxon Mobil (50%), Puckett Land Company (40%), and Whiting Petroleum (10%), who together hold a landowner's royalty of 20%. The Reeves group holds a 5% overriding royalty interest. Thus, the combined royalty burden is 25%, and the net revenue interest (NRI) is 75%."
WEBSITE UPDATED
http://www.westhawkdevelopment.com/
TRADING
I expect trading to resume tomorrow.
sumisu