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Fox-Davies Capital Tuesday Energy and Mining News Wrap

11th Nov 2008, 9:16 am Fox-Davies Capital Tuesday Energy and Mining News Wrap

ONGC confirms that both of the Pre-Conditions to the Offer ((i) approval from the Governmental Commission of the Russian Federation in respect of the restrictions on the ownership of Russian entities by entities controlled by a foreign government; and (ii) approval from the Federal Anti-Monopoly Service ("FAS") of the Russian Federation in respect of anti-monopoly regulations) to acquire Imperial have been satisfied.
 
Comments: this supports our view that NOCs are better positioned to manage business risks in Russia than foreign large independents or IOCs. NOCs may therefore be better positioned to benefit from Moscow’s need to be more conciliant with foreign investors to attract capital. We also believe that NOCs are credible potential buyers of oil and gas juniors in Russia.
 
Irvine Energy  (IVE)  announced the company is facing cost overruns associated to seismic operations. The company indicated it is looking at divesting assets to meet these liabilities. As a result of these cost over runs, the below expectation drilling results in the previous Kansas drilling programme and the Company's low current production levels, GasRock has exercised its discretion not to make any further advances under the debt facility until these matters are resolved to their satisfaction. As a consequence of these circumstances, the Company may need to raise additional finance and the directors are considering all options including and not limited to, equity or debt finance, further asset sales or a strategic investment.
 
Gas Matters reports that a shortfall in revenue is expected to hit Russian gas producers in 2009, with gas prices likely to fall to $360/Mcm in Western Europe. However, Gazprom expects to compensate for falling revenue by the sale of 22 Bcm of gas to Belarus at $200/Mcm and 55 Bcm to Ukraine at between $250 and $400/mcm.
 
Comments: this supports our view the gas convergence story in E. Europe is intact. Players expected to benefit from the situation are Cadogan, Regal Petroleum and JKX Oil & Gas.
 
Upstream online reports that Nigerian President Umaru Yar'Adua wants former Opec secretary-general Rilwanu Lukman to take over as minister of energy as part of a cabinet reshuffle, a presidential aide said today.
 
Comments: this would be a very positive news for Afren (Lukman is a key stakeholder).
 
Upstream online reports that directors from Brazil’s hydrocarbons regulator ANP have estimated a reserve volume between 50 and 70 billion barrels of oil equivalent in the pre-salt blocks under concession.
 

Kalimantan Gold Corporation  (KLG)  announced the initial resource statement for only one of five main veins identified at the Company's 100%-owned Jelai gold project in East Kalimantan, Indonesia. The Mewet Vein resource block is based on 23 drill holes and is contained within a 250 metre section within a known vein structure of more than 2,000 metres in strike length with mineralisation beginning on surface down to 225 metres below surface. The Indicated Resource, at a cutoff grade of 1.0 g/t gold is 256,000 tonnes @ 3.44 g/t gold and 3.2 g/t silver, contains an estimated 28,000 ounces of gold and 26,000 ounces of silver. The Inferred Resource, at the same cutoff grade is 690,000 tonnes @ 2.81 g/t gold and 3.7 g/t silver, contains an estimated 62,000 ounces gold and 82,000 ounces silver.
 
Comment: Whilst the grades look good, there will need to be a significant increase in tonnage for this to be economic.
 
African Eagle Resources  (AFE)  announced another set of  excellent results from  the last  29 holes  from the  reverse circulation  (RC) drilling programme at the Company's recently discovered Dutwa  nickel laterite project  in  Tanzania. The most significant results are 48m at 1.30% nickel from 3m depth, including 42m at 1.42% 42m at 0.98% nickel from surface 42m at 0.83% nickel from surface, including 18m at 1.05% 24m at 1.45% nickel from 15m depth, including 9m at 2.22% 24m at 1.44% nickel, from 3m depth, including 6m at 2.27%.
 
Toledo Mining Corporation  (TMC)  announced an update to shareholders on the activities of the Berong nickel mine and Ipilan nickel project which have been carried out during the quarter ended 30th September 2008. This quarter the Berong mine set a record with 345,005 tonnes of ore mined and hauled to the coast, largely due to improved contractor performance and reduced rainfall. Rainfall at the mine site was over 64cm compared to 154cm for the same quarter in 2007.


A total  of 144,289  wet metric  tonnes of  nickel laterite  ore  was shipped to BHP  Billiton in Australia  at an average  grade of  1.54% nickel (approximately 2,222 tonnes contained  nickel on a dry  basis) and 31.08% iron. Approximately 323,115 tonnes of ore was stockpiled at the coast at the end of September awaiting shipment, of which 47,995 tonnes was shipped to BHP Billiton in October.  A further approximate 150,000 tonnes is targeted for shipment to BHP Billiton in early 2009.
 
Connemara Mining  (CON)  announced significant zinc & lead mineralisation in two additional holes at Stonepark in Limerick. The mineralised zone now extends for at least 300 metres and drilling continues.

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