Coal

[sumisu]

Johnlw,

I woke up this morning with the worse summer cold, fever, sore throat, cough, and an aching body. Ironically the only thing I can do right now is type, so I’m somewhat responding to your question posed to me last week.

Much of the following is probably elementary to you, but my knowledge of the coal sector is still very limited.

The WHD website contains the following statement:

“On July 26th, 2006 at 8:00 am (pacific), a request was made to Market Regulation Services to halt the trading of the shares of West Hawk Development Corp. on the TSX Venture Exchange pending an announcement. The request was made immediately upon receiving word that the Company had signed an agreement concerning a significant acquisition. As it was anticipated that several days would be required to compose and seek all necessary approvals of the contents of the news release, it was felt that in order to maintain the integrity and fairness of trading in the shares of West Hawk, that a halt in trading was the appropriate action.”

The rumor on StockHouse is that West Hawk will resume trading on Tuesday, August 8 (Monday is a holiday in Canada). I eagerly await the announcement of this “significant acquisition.” This news will come after six plus months of my investment in West Hawk, but the story of how and why I arrived here began long ago.

The following describes my odyssey into the coal sector and particularly West Hawk. I will present the links that encouraged me to buy and believe in West Hawk.

Before I even began my DD on West Hawk, I already had a predisposition to coal for two reasons.

Firstly, my grandparents heated with coal and when I was around four, they found me in the coal bin playing in the anthracite coal (I learned an early lesson in obedience).

Secondly, I was a chauffeur in 1966 – 1967 for a multimillionaire coal owner of The Hartwell Coal Company. Mr. Swan Hartwell, then at age 94, told me “coal will always be important!” To my dismay, I did not heed his advice earlier.

A year ago I had five stocks with a little worth and I just dabbled to keep occupied in retirement. One Saturday last July I listened to Jim Puplava at the following website:

http://www.netcastdaily.com/fsnewshour.htm

I mention this site, as it launched me into reading twelve books about Peak Oil and additional books on China and its outstanding growth, and natural resource investing. I also listened to two years of archived broadcasts of Puplava’s shows because I wanted to assure myself that I was getting a complete perspective of the energy sector.

After all of this reading and listening, I concluded that with the advent of Peak Oil, mankind must turn to coal, which as you know, is getting cleaner and thus more acceptable. Further, after learning that about 60% of U.S. electric energy needs are supplied by coal powered plants, I was sold on coal’s large potential and expanding need in a transition from oil to coal and other alternatives.

Since I wanted to limit my exposure of money transferred from my 401K to an IRA, I decided to invest in the largest coal producer in the United States, Peabody Energy (BTU). I thoroughly researched BTU before I purchased it. I knew I was in a good sector, but I bought last October and then the energy market weakened in November, BTU’s price dipped, and doubts developed in my mind. When BTU and the entire energy sector rebounded with cold weather and good earnings, I was completely hooked.

An investor on I-Hub named futrcash recommended West Hawk to me. Since I knew him well for about 5 years and highly respect his recommendations, I immediately bought 10,000 shares of West Hawk on 1/11/06 @ A $.385.

I then began looking at West Hawk’s website to begin my DD. Here is the site for your review again:

http://www.westhawkdevelopment.com/

A few Internet articles influenced me to buy more shares of West Hawk.

The first was a post on this thread supplied by Arctec on 1/22/06.

http://www.investorshub.com/boards/read_msg.asp?message_id=9362171

This link was a wealth of information beginning with a company overview, discussion of coal supply and demand world wide, PCI (Pulverized Coal Injection) for injecting coal directly into blast furnaces, company preview (projects), and discussion of management. (Unfortunately the charts that accompanied this presentation did not appear in I-Hub).

At this point I was getting pretty enthused about West Hawk and BTU was also increasing in value. So, I bought more shares of West Hawk on 1/22/06 and the price was already up to A$.48.

As I continued my DD, I located another link:

http://www.321energy.com/editorials/moriarty/moriarty093005.html

A key paragraph is quoted:

“But the real eye opening news came on September 28th when West Hawk announced receiving licenses for their Groundhog Coal Project from the Coal Licensing Bureau. At the same time they released a 43-101 report showing 48 million tons of coal in the inferred category and a mind blowing 980 million tons in the speculative category.”

Not knowing what was a 43-101, I did a Google and found the following:

http://www.apgo.net/cpd/NI43101/

Had West Hawk not had a 43-101, I would have been leery of this investment and what I had invested to date. In my mind, at least, this was a good indicator.

My convictions of West Hawk grew stronger when I heard a SMARTSTOX interview by Stanlie Hunt of Michael Townsend, President & CEO, and Chris Verrico, VP (this was 1/18/06).

http://www.smartstox.com/interviews/whd.php

I liked what these gentlemen said and they seemed to have the contacts to fold significant coal properties into a company.

On December 5, 2005 Dr. Wm. Mark Hart joined West Hawk; he is mentioned in some of the above links. I have concluded that Dr. Hart’s 30 years experience, worldwide connections, education, membership in various professional organizations, and his keynote speeches, particularly centered on gasification of coal, will enable West Hawk to grow and possibly be sought as a junior venture partner in future.

This is all conjecture, but follow my logic. The world is on the cusp of Peak Oil. It will need alternative sources of energy. Gasification of coal is one such alternative. An expert in gasification must head this process.

Dr. Hart is seemingly the right person, at the right time, with the right company with huge coal reserves to make this succeed. In my opinion, his vast experience of 30 years will culminate in the success of West Hawk and be the crowning achievement of his career. Witness some of his attributes and how they fit into West Hawk’s objectives, as stated in a West Hawk news release.

“Dr. Hart's credentials and experience in high volume underground longwall and open cut coal mining are the perfect fit for exploiting the flat lying stratigraphy of the anthracite coal seams that constitute the 980,000,000 ton speculative resource at the company's flagship Groundhog Coal Fields Project, 240 km north of Smithers B.C. “

“Dr. Hart is considered an expert in Coal Mining and has considerable knowledge in Gasification Technologies having worked as a senior executive for NRG Energy, the second largest independent power producing company in the world at the time. He has since, overseen the feasibility study, mine plan, Front End Engineering and Design (FEED) for a 500 Mw IGCC Power Plant in Sardegna, Italy. Dr Hart has also been consulting on Clean Coal Technologies to some of the largest power utilities in the United States and Europe. Dr. Hart worked for American Electric Power Fuel Supply at 22 coal mining operations for AEP coal fired power plants across the U.S.”

OTHER DEVELOPMENTS

MORE COAL RESERVES

On April 4, 2006 West Hawk reported acquisition of “an additional 3.3 billion tons of thermal coal resources contained within 245,519 acres of contiguous coal holdings known as the Fosheim Peninsula property on the east banks and the May Point property on the west banks of Eureka Sound in the West Central region of Ellesmere Island Nunavut Territories.”

The complete link of this acquisition is included:

http://biz.yahoo.com/iw/060404/0121192.html

To my knowledge, this land is not yet 43-101 compliant, but there is adequate evidence of huge coal reserves. Once this is determined and put into the measured and indicated categories, West Hawk, I believe, will have the reserve potential to become a major player in the Canadian coal industry (and elsewhere).

RELATIONSHIPS

The coal to gas will be extremely important, as oil production increases in the face of vast world population increases, particularly in China and India. West Hawk's "Non-Disclosure and coal testing Agreement (NDA) with LURGI of South Africa, in order to advance negotiations on developing this historically identified coal resource" is a giant step forward. LURGI has a working relationship with Sasol (SSL), a South African organization, which is the largest in the world for gasification and I think that this NDA bodes well for West Hawk.

West Hawk’s anthracite coal is the type of coal that is vital to blast furnaces for making steel. The steel demand is enormous in China and so is the need for anthracite coal. I own BHP and they supply a great deal of coal to China. I'm hoping that West Hawk further develops its current relationship with the Lu An' Mining Group.

LOCATION

West Hawk is relatively close to the Canadian Tar Sands of Alberta. When I owned ECA, I researched natural gas and learned that the availability of natural gas needed to process the tar from the sand could eventually become limited, both by supply and government restrictions. So I believe that gasification of coal to be used in this tar sand process will someday offer great opportunities for West Hawk. Of course, this possible objective will take vast amounts of money, but I'm betting that West Hawk's proximity and coal holdings will grow in importance and will attract major companies to it. (RTK recently partnered with BTU for their gasification process, so these relationships do develop).

West Hawk’s close proximity to ports of British Columbia will contribute to accessing the Pacific Basin, where there is a great need for its coal.

AN ANALOGY

Whenever I think of two bookends, one large and one small, I think of BTU and West Hawk, differing in size, but progressive in approaches. I believe that management in both companies is visionary. This analogy might seem farfetched at this time, but West Hawk, as a startup, has exhibited to me, at least, that it has the “best athletes available” to achieve success.

FINAL THOUGHTS

When West Hawk was halted, its price was C$.80 with 24,284,921 outstanding shares. Although the company should still be considered speculative, its prospects could be considered very good (or better) based merely on its vast coal reserves. However, it is still two to four years away from mining.

No doubt West Hawk will need additional funding to achieve income-producing products. This will mean that the stock will be diluted most likely by private placements. This is what I call the “growing pain period,” but all startups must make a funding commitment sooner or later. Again, I believe that the intrinsic value of the coal and its eventual production will justify required funding and yield a higher stock price.

Next week’s acquisition news must be fully digested. It seems that many times when a small company receives what I consider to be good news, the price then drops. This pattern probably exists as there are two primary groups owning a stock, one group is the traders and the other group is the investors. If there is a pop in the stock, the traders will unload to make the fast buck, in my opinion, and drive the price down. As an investor, I will be tempted to buy more should there be a price decline.

Finally, I’m relieved that I made this coal investment. Every week I keep my on Peak Oil developments. A news article in last Wednesday’s Wall Street Journal provided an example of declining oil supply. It stated that Mexico’s largest oil field, Cantarell, which produces about 60% of its oil, fell to 1.74 million barrels a day in June from 1.92 barrels in January. This decline was earlier than expected and might portend accelerated declines over the next few years. Sort of going down the slope of the right side of a bell shape curve. If you can find this article, it will depict what might be occurring to a lot of oil fields worldwide.

I’m not happy about the prospect of Peak Oil, but I do want some financial protection in the form of energy stocks. I guess that all people on this thread share the same attitude.

Good luck and thanks for the question,

sumisu