THURSDAY EDITION

September 3rd, 2015

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editorials

 
Torchlight Discovers New Giant Oil District
Bob Moriarty  Aug 19  

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  

»» more editorials in the archives

market data


Ux U3O8 Price (Uranium)August 24th, 2015
$36.75 +$0.50 www.uxc.com

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expert analysis & newsletter briefs

Royal Dutch Shell Plc

"Liquified natural gas (LNG) prices around the world are quite low right now. Costs are lower, and there's lots of supply coming onstream, but big companies like Royal Dutch Shell Plc and Exxon Mobil have invested heavily in LNG projects in British Columbia because they know when oil prices come back, another huge disconnect from gas will occur. Right now, oil and gas are actually quite close in price per British thermal unit. But when oil was at $100/bbl, gas was $3/bbl, and that spurred a lot of demand for gas. Companies like Shell look at 20-, 30-, even 40-year cycles. And they like what they see. . .when oil is once again much more expensive than gas, you'll see demand for gas rocket right back up. I think that's what these big guys are seeing, and why they are still moving forward in a big way on gas projects. They understand that you have to work the cycle two or three times over the life of your asset, and you're going to make most of your money at the top and not very much at the bottom. They see today as the bottom that sets them up for success at the top of the next cycle. . .LNG in Canada is a bit of a binary trade right now with the Canadian election coming up Oct. 19. . .if the right-wing Conservatives get back in, then I think Shell. . .will probably move forward." (9/1/15) - The Energy Report Interview with Keith Schaefer

Nemaska Lithium Inc.

"Nemaska Lithium Inc. represents the new wave of lithium production; Nemaska's Whabouchi Project will use a well-trodden technology, membrane electrolysis, to convert hard-rock lithium ore to lithium hydroxide. This technology has already been proven in pilot-scale work in Canada, but the company plans to reduce time-to-market even further by building a Phase I commercial demonstration plant that will reduce commissioning time for the full commercial plant while providing qualification samples for customers. . .for the price, our analysis suggests this strategy is undeniably the right one. . .we are initiating coverage on Nemaska with a Positive recommendation." (9/1/15) - Jon Hykawy, Stormcrow Capital

Royal Dutch Shell Plc

"Liquified natural gas (LNG) prices around the world are quite low right now. Costs are lower, and there's lots of supply coming onstream, but big companies like Royal Dutch Shell Plc and Exxon Mobil have invested heavily in LNG projects in British Columbia because they know when oil prices come back, another huge disconnect from gas will occur. Right now, oil and gas are actually quite close in price per British thermal unit. But when oil was at $100/bbl, gas was $3/bbl, and that spurred a lot of demand for gas. Companies like Shell look at 20-, 30-, even 40-year cycles. And they like what they see. . .when oil is once again much more expensive than gas, you'll see demand for gas rocket right back up. I think that's what these big guys are seeing, and why they are still moving forward in a big way on gas projects. They understand that you have to work the cycle two or three times over the life of your asset, and you're going to make most of your money at the top and not very much at the bottom. They see today as the bottom that sets them up for success at the top of the next cycle. . .LNG in Canada is a bit of a binary trade right now with the Canadian election coming up Oct. 19. . .if the right-wing Conservatives get back in, then I think Shell. . .will probably move forward." (9/1/15) - The Energy Report Interview with Keith Schaefer

Nemaska Lithium Inc.

"Nemaska Lithium Inc. represents the new wave of lithium production; Nemaska's Whabouchi Project will use a well-trodden technology, membrane electrolysis, to convert hard-rock lithium ore to lithium hydroxide. This technology has already been proven in pilot-scale work in Canada, but the company plans to reduce time-to-market even further by building a Phase I commercial demonstration plant that will reduce commissioning time for the full commercial plant while providing qualification samples for customers. . .for the price, our analysis suggests this strategy is undeniably the right one. . .we are initiating coverage on Nemaska with a Positive recommendation." (9/1/15) - Jon Hykawy, Stormcrow Capital

Royal Dutch Shell Plc

"I believe the probability of a Royal Dutch Shell Plc dividend cut is highly unlikely. In any event, the payout is air tight through 2016E. . .the company has arguably one of the two best balance sheets in the energy industry." (8/28/15) - Ray Merola, Seeking Alpha


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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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September 3rd, 2015

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