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August 2nd, 2015

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editorials

 
Torchlight Energy - A NewCo Turnaround Story That's Been Derisked
  Jul 22  

Opportune Time for Oil & Gas Exposure
Stephan Bogner  May 21  

Oil Market Update
Clive Maund  May 06  

Innovation and Efficiency Drive U.S. Oil Supply and Demand
Frank Holmes  Apr 01  

Oil Market Update
Clive Maund  Mar 29  

»» more editorials in the archives

market data


Ux U3O8 Price (Uranium)July 27th, 2015
$36.00 -$0.25 www.uxc.com

»View Commitment of Traders.

expert analysis & newsletter briefs

Hemisphere Energy Corp.

"Hemisphere Energy Corp. announced that upon annual review, its credit facility has been maintained at $15M, a positive sign in this timid market, and one that reflects the strength of the company's current asset and the potential for increased recoveries through optimization efforts. . .we maintain a Buy recommendation and a $1/share 12-month target price." (7/28/15) - David Ricciardi, Mackie Research Capital

Input Capital Corp.

"Input Capital Corp. is a public company in Canada that has taken the streaming model and adapted it to become the first-ever agricultural streaming company, using canola as the underlying crop initially. The business is off to a great start and is proving that farmers are demanding alternative forms of financing such as streaming. In FY/15, which ended in March, Input deployed ~$49M into new streaming deals, up ~100% year over year; generated $19.3M in revenue, up ~280% year over year, and $9M in cash flow (before changes in working capital), up from $1.5M in FY/14. The stock has been a little weak recently on concerns regarding the health of its farmer clients in western Canada; however, Input's exposure is predominantly in the eastern prairies where conditions are much better. This does bring a key issue to light—the benefit of diversification, both by geography and product. The company's recent announcement about exploring the addition of soybean streaming is an example of how Input can add further diversification to the model, by adding a different crop and gaining more exposure to eastern Canada." (7/28/15) - The Energy Report Interview with Spencer Churchill

Renewable Energy Group, Inc.

"The Senate Finance Committee markup of tax extenders included positive changes to the biodiesel blenders credit that could support a material uplift to Renewable Energy Group Inc.'s 2016 and late 2015 profitability. . .after the blenders credit is signed into law, the benefit will be recognized in GAAP earnings, instead of accumulating for retroactive recognition, and should materially benefit profits and sentiment." (7/22/15) - Craig Irwin, ROTH Capital Partners

Energy Fuels Inc.

"Following the previously granted approvals from the U.S. Nuclear Regulatory Commission and the Wyoming Department of Environmental Quality, the issuance of the final environmental assessment and the approval of the plan of operations represented the final major regulatory approval required for Energy Fuels Inc.'s Hank Unit. The approvals at the Hank Unit demonstrate the near term scalability of Energy Fuels' assets. We continue to forecast production out of Hank to begin in 2017." (7/21/15) - Rob Chang, Cantor Fitzgerald

Input Capital Corp.

"Input Capital Corp. has an excellent streaming model for its canola business. . .the company provides a farmer with an upfront cash payment in return for a share of the farmer's crop production. . .the farm then delivers Input's share of the crop and is paid a discounted contract price per tonne. If the crop yield has improved, Input can buy additional tonnes at the same contracted price, so both the farmer and the company benefit from an improved crop. Input then sells the crops at the market rate and can invest the proceeds into new streaming contracts. . .the company deployed $49.1M in capital during the 2015 financial year and now has 78 cash-producing streams in place, with 10 more being added in Q1 of the 2016 financial year. The company generated $11M in streaming revenue during 2015, which is a 258% increase over 2014. That's a beautiful business model. In terms of the profit margin, Input Capital's total costs per tonne of canola are around $310. It sells the stuff for around $500/tonne. Not bad for a hard day's work, is it? Input gets canola price upside, production upside, compounding cash returns and diversification without the need for heavy management. . .less than a month ago, the company was trading at around $3/share, now it's at about $2.50/share. These are the buying opportunities that investors should be taking advantage of." (7/21/15) - The Energy Report Interview with Tom Wallace


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from the publisher
  Robert J. Moriarty

Welcome to 321energy.



Peak Copper

Roland Watson
December 16th, 2005

If oil is the most important commodity, then copper cannot be far behind. Being used extensively in electrical power cables, electrical equipment, automobile radiators, cooling/refrigeration tubing, heat exchangers, artillery shell casings, optical fibre, water pipes, drain pipes, plumbing and even jewellery, this reddish-brown metal is a commodity that the world can ill afford to be in short supply of.

But the fact of the matter is that copper is yet another metal that is in a mining deficit that was predicted to be 700,000 tons in 2004 by the USGS 2005 summary. That would be about 5% of the estimated 14.5 million tons produced worldwide. As a result, stockpiles have reduced and prices have increased to over the $2 a pound mark recently.

Against this backdrop, I was nevertheless surprised to read recent comments by Ross Beaty, the chairman of Pan American Silver and Lumina Copper, that global copper production was approaching its own version of "Peak Oil" or shall we say "Peak Copper"?

His remarks can be found in this article. But his main points centred on such facts as:

Only 56 new copper discoveries have been made in the last 30 years. He predicts Chilean copper output to peak about 2008 (Chile is the world's main producer). A lack of smelter and refinery supply is creating another bottleneck. 21 of the 28 largest copper mines in the world are not amenable to expansion. Many large copper mines will be exhausted between 2010 and 2015.

Does not all this sound familiar to the arguments of the Peak Oil debate?

New oil discoveries of the last 30 years are dwarfed by those of previous decades. Saudi Arabia, the world's main oil producer may peak soon. A lack of refining capacity is causing bottlenecks in gasoline, etc. Many of the super giant oil fields in the world cannot have their production expanded or even maintained. Supergiants such as Ghawar, Cantarell, Burgan and others will be well on the decline path by 2015.

When we look at the comparative reserve numbers for oil and copper we also get a sense of an impending dual peak scenario. Worldwide economic reserves of copper are stated to be 470 million tonnes by the USGS 2005 summary for copper. If the 2004 mine production figure of 14.5 million tonnes is held steady into the future, copper would be exhausted within 33 years.

If we also assume about 1 trillion barrels of oil remains to be economically recovered worldwide with a current annual production of 30 billion barrels then we come out with a similar reserve lifetime of 33 years. Coincidence? Not if we realise that increased energy consumption means increased metal consumption. The two go hand in hand.

When might this peak come around? That is probably a little easier to calculate than oil since secrecy about copper reserves is much less prevalent. But the shocking news that Chile, which produces one third of the world's copper, may begin to decline irreversibly in 2008 suggests that as Chile goes, so goes the world.

When Chile peaks, the world peaks.

Sounds a bit like the peak oil mantra "When Saudi Arabia peaks, the world peaks".

However, if you believe that reserves are purely a function of price, you may take comfort in the recent USGS suggestion that the total reserve base of copper (economic and uneconomic) is not the 940 million tonnes of its 2005 summary but a whopping 1.6 billion tonnes! Sadly, some reading between the lines of that statement reveals a more sobering truth that half of that estimated tonnage does not appear to have been discovered yet!

Perhaps the USGS is indulging in the same over-optimistic numbers that we have seen it display in its estimates for crude oil. We think so and will continue to work on that assumption.

In conclusion, what are the ramifications of copper supply diminishing in the face of potential increased demand? The answer is far higher prices to begin with. The second answer is substitution of applications using aluminium, titanium and plastics - depending of course on how strained their resource base is.

There is one hope for those consumers who yearn for lower copper prices. When Peak Oil finally arrives, we'll probably enter a severe economic crisis that will kill demand for copper. Then they'll have their lower prices and unlike gold and silver that will see fevered demand as safe haven investments, nobody is going to fly to copper as a store of value.

Roland Watson

email: newerainvestor@yahoo.co.uk

Roland Watson writes the investment newsletter The New Era Investor that can be purchased for an annual subscription of $99. To view a sample copy of the newsletter, please go to www.newerainvestor.com and click on the "View Sample Issue Here" link to the right.

He invites comments and questions at: newerainvestor@yahoo.co.uk.



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August 2nd, 2015

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