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Buy in May and Go Away

Bob Moriarty
President: 321gold
Archives
May 7th, 2011

I was going to write a piece about silver for the 1st of May titled ďSell in May and Go AwayĒ but the market collapsed before I could get to it. Oh, well.

There is another company I have been following for almost 2.5 years. I was a buyer at higher prices and I kept buying all the way down to the bottom. They came out with what I thought might be significant results about 10 days ago. Iíve literally been beating on management since that time to explain in simple English what those results actually mean without success until today. Unfortunately, others have figured out the meaning and ran the stock up 78% yesterday.

Not to worry, itís still cheap. 30 months ago when I first visited the company in Indonesia, I thought they were a 10-bagger. Even after a 78% rise on Friday, I think they have ten bagger potential. Next week will be interesting for trading.

The company is CBM Asia (TCF-V) and has several CBM (Coal Bed Methane) projects in Indonesia. The past 30 months have been rough on the company and they have struggled to get traction. The stock is only now where it was 2.5 years ago but they had partner problems and then when they finally got around to drilling for coal, it never occurred to the operator that it would be nice to know if there was any gas in the coal and the core went unsealed until all the gas was gone.

But they have traction now and are drilling the Sekayu project in the South Sumatra Basin. It was the results from the first hole that lit the market on fire. They are drilling two more holes and the results should be released in about a month.

CBM Asia has a 12% working interest in the Sekayu project and has the right to increase it to 24%. Here are the numbers from their website quoting estimates from a report written in 2004.

The entire Sumatra basin has about 7350 square km. TCF and their partner control some 580 square km or 7.9% of the basin. The basin is estimated to contain 183 Tcf of gas. 7.9% of 183 Tcf of gas is about 14.45 Tcf. If they drill the entire 580 square km and find what the presentation estimates and TCF has 24% of the working interest, TCF would have about 3.46 Tcf of gas for their shareholders.

Prior deals in the area would show a SWAG (Stupid Wild Assed Guess) price for a Tcf in the ground of $.83 per Mcf. That would make a Tcf worth $830 million. If TCF had 1/10th of the gas estimated for their portion in the basin, it would give them an in the ground value of $287 million.

I loved the company 2.5 years ago when they were about $.45. I loved the company when they dropped to $.10 and I love them now. I bought shares at $.45, I bought shares at $.10 and I bought shares today. I have never sold a share. Iím thrilled that they actually got traction.

They arenít the best in the world at communication. I have been beating on them for days trying to get a translation of what the numbers meant. And I mean I beat on them. I wanted to get my piece out before the shares ran away. I was a little late on that but you can see with 4.5 million shares traded and a 78% climb in a day, itís not anything I did. Iím told they have been making presentations in Asia and finally everyone got it.

There will be a 51-101 resource on the Sekayu project in 60 days or so or there will be heads rolling in the aisle. TCF has two other projects in the Kutai Basin, Kalimantan. They are scheduled to drill the Kutai West project in 2Q11. Expect a 51-101 resource for Kutai West by 3Q11.

This is the kind of company that makes fortunes for people. I canít even say what I really think the stock could do. CBM has been ignored in Indonesia forever because it wasnít coal and it wasnít natural gas. It fell between the cracks. The pricing is different than the US and Canada and they are getting $5-$6 a Mcf now. CBM Asia was a pioneer in Indonesia and while they have been bloodied, they have come up trumps.

TCF has been a loyal advertiser for almost three years. I have visited Indonesia with TCF. I love the country. TCF has a franchise and if they can pull it all together, they have multi-billion dollar potential. It will be an interesting ride.

I own shares and have participated in several placements. I am as biased at they get. I like the people and the management. I hope everyone makes a lot of money out of it but since you donít share your profits with me, you must take some responsibility for your own actions and you must do your own due diligence.

CBM Asia
TCF-V $.445 (May 06, 2011)
CBMDF-OTCBB
60.9 million shares
CBM Asia website


Bob Moriarty
President: 321gold
Archives
May 7th, 2011



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