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May 7/08
A ) Sprott Resource Corp.
SCP $3.75 up .52 ( 16%)
Apparently a news release a day does attract investor attention:
Money Management
I followed the trading strategy of The AMP book and began buying this stock at
$ 2.08 March 28th , 2008
$ 2.14 March 31
$2.22 April 1
$ 2.50 April 3
$ 2.70 April 4
and bought right up until today.
Today I sold one - third of the position to lock in some profits.
This is a great run for five weeks and I sold enough to sleep nights without the worry of a reversal.
here is the latest news release :
TORONTO, May 6 - (TSX:SCP) - Sprott Resource Corp. ("SRC") announced today that it has entered into an agreement with Altius to explore for potash in the St. George's Basin in Southwestern Newfoundland. "SRC is excited to be working with Altius, a company with great exploration expertise and proven success in Eastern Canada. We feel that there are excellent opportunities for potash exploration in Eastern Canada, which has a lower cost profile than the Saskatchewan Potash Basin," states Kevin Bambrough, President and CEO of SRC.
The St. George's Basin is geologically analogous to the Moncton sub-basin in New Brunswick, which is Canada's second major potash mining district. Under the agreement SRC may earn an interest in a large land package that has been assembled by Altius to cover several known potash occurrences within the basin. SRC may earn up to a 60% interest in the St. George's Project by spending C$2,500,000 over 4 years subject to an underlying 2% gross sales royalty retained by Altius.
The St. Georges project consists of 1,400 claims (35,000 hectares) to cover four primary target areas for potash deposits. These targets feature historical potash drill intercepts, low gravity anomalies and salt springs that are underlain by a relatively unexplored evaporite-bearing sequence. An exploration program to evaluate the area and to identify drill targets has commenced.
In addition to the St. George's Basin joint venture, Altius and SRC have also signed a strategic alliance regarding the assessment of potash exploration opportunities in Canada. Under this agreement, the two parties have agreed to collaborate in the acquisition and exploration of potash projects in Canada.
B ) Oil Blasts Higher
CIBC World Markets Advice on the Oil Sector "Overweight "
( Goldman Sachs Forecast is in a seperate story in this edition of The AMP )
Oil futures blasted to a new record near US$123 a barrel Tuesday, gaining momentum as investors bought on a forecast of much higher prices and on any news hinting at supply shortages. Retail gas prices edged lower, but appear poised to rise to new records of their own in coming weeks.
Goldman Sachs Forecast rallies the commodity price :
A new Goldman Sachs prediction that oil prices could rise to $150 to $200 within two years seemed to motivate much of the buying Tuesday, although a falling U.S. dollar and increasing concerns about declining crude production in Mexico and Russia contributed, analysts say.
Rubin ( CIBC Strategist ) remains overweighted in the energy sector, which makes up 37% of the portfolio's equity position, seven percentage points higher than the benchmark. The addition of 1% to the energy exposure comes at the expense of the utility sector, which Rubin cuts from 3.5% to 2.5% of the equity portfolio. "We remain wary of near-term market volatility. But the strength of the resource market, particularly energy, and a gradual recovery in the U.S. economy, should see the TSX justify our equity weighting," says Rubin.
He also predicts that the profits for companies producing agricultural chemicals will triple this year, which justifies a 0.5% increase in the allocation to the chemical sub-sector within materials.
Rubin predicts that the S&P/TSX Composite index will reach 16,200 by the end of 2009, a gain of about 13% from today. Meanwhile, the S&P 500 will struggle to reach 1475 over the same period, which would mark a gain of about 5%.
If there is a dark spot on the Canadian stock markets, Rubin says it is the financial sector, where profits are expected to "fall modestly for the first time since 2002." The model portfolio remains 2.5% underweighted in financials, with a 25.7% allocation
Demand Is Not going to Drop Much
``We shouldn't expect too much from the price, in terms of bringing demand down,'' he said. ``China and India are transforming the energy markets by the sheer size of their populations.''
Crude prices have soared in the past year, with futures touching a record $122.73 a barrel today on the New York Mercantile Exchange, amid rising demand from emerging-market economies.
China alone will import 13 million barrels of oil by 2030, nearing the level of U.S. imports, as the number of drivers rises from 20 out of 1,000 people to 140 out of 1,000, Birol said. That compares to 860 out of every thousand residents in the U.S. ``We have no right whatsoever to blame China and India,'' he said. ``They are only doing what the rich countries, the OECD countries, did.''
C ) Three for The Oil Money from Pescod
OILEXCO INC. (T-OIL) $15.74 +0.34 ( 2.20 %)
TUSK ENERGY (T-TSK) $2.42 -0.03
ITERATION ENERGY (T-ITX) $7.03 +0.05
Alex Squires, is the affable oil and gas guy with Brant Securities, that you have probably seen from time to time on BNN. Way back when, he might have been one of the first guys who started you following the Oilexco story, as Alex has been following it longer than most analysts, and when we get an update on Monday, he still has Oilexco as one of his top stories of the day.
Don't Sell in May
One thing that has got him going though is all the commentary he is reading in the press these days, about the usual spring correction you see in oil and gas stocks. He suggests some people might be doing the wrong thing, as he worries about taking some small profits now to try and be cute, might exit you from some bigger profits down the road.
Right now he figures the oil and gas market is just getting started, that it is in the early days. Things are still trading he suggests, at relatively low multiples, and well below numbers that we saw at the high of the last cycle.
Nat Gas Forecast
Down the road, his crystal ball is looking for gas prices somewhere between $13.00 and $14.00 next Christmas, and oil at current levels to a $130.00 dollars a barrel. He is bullish on the sector and again reiterates its just early days.
As far as his favorite picks you’ll notice that there hasn’t been too much of a change. Oilexco is his number one pick, and he is looking for $25.00 by Christmas, and inside that price target is not included the possibility of a discovery at Moth. He suggests that play has a one in ten chance, so one shouldn’t be counting on it...he’s just expecting production from Shelley and advances at Huntington and others to bring production up significantly and the market will appreciate it.
Tusk Energy
One stock that has been a long time favorite of his as well, is Tusk Energy and he never predicted the dramatic drop we saw in natural gas prices because of two warm winters in a row, so if you owned a gas stock when prices were stumbling like that, you didn’t have any joy. Now we are back to near normal times and Tusk is on the way up. He has a $4.00 target by Christmas, which is one of the more aggressive targets out there.
Not quite as aggressive is his look of Iteration Energy as two companies combine and he suggests that if the results of the amalgamation go well, he would not be surprised to see $10.00 to $12.00 by Christmas.
D ) China Copper Demand to Rise by 20 %
China, the world's biggest copper consumer, may increase imports of ore used to make the metal by 20 percent to a record this year, said Trafigura Beheer BV, the country's top supplier.
Purchases of so-called concentrate, or processed ore containing copper, may rise to 5.4 million metric tons from 4.5 million tons in 2007 as China expands in smelting, said Simon Collins, director of Trafigura Trading Shanghai Co., a unit of Trafigura. China would become the world's top buyer, surpassing Japan which bought 5.05 million tons last year.
China's 11.4 percent economic growth in 2007, the fastest in 13 years, fueled demand for copper and pushed prices to a record $8,820 a ton on the London Metal Exchange on March 6. Investment in cities and highways has spread to the center and west of the world's most populous country, increasing consumption of metals for power, homes, factories and cars.
``If you travel outside of Shanghai and Beijing to provincial capitals and second-tier cities, you'll see an enormous amount of development going on,'' Collins said by telephone from Shanghai April 4. ``I'm very bullish on China.''
Trafigura, a closely held commodities trader based in Amsterdam, is the largest seller of copper concentrate to China, supplying about 1 million tons a year, said Collins, who is responsible for metals and minerals operations in the country. The company sells more than 600,000 tons of lead and zinc ore, and about 1 million tons of alumina a year, ranking in the top five suppliers of these materials to China.
Copper Update from Tuesday May 6th
Copper rose on improved demand prospects, higher oil prices, and worries over supply as the dollar steadied after rallying last week.
Meanwhile, bargain hunters took advantage of the lower prices seen last week after copper hit its lowest level since late March.
"The base and precious metals are rebounding strongly this morning, buoyed by a combination of a down turn in the value of the dollar and a sharp move higher in crude which is now trading towards $120/bbl," said JP Morgan analyst Michael Jansen. " This has pushed copper up towards the $8,520/mt area, which is a little surprising in light of the end of the Codelco subcontractors strike, and might indeed reflect some of the price action on Monday in New York when Comex was sharply higher, up around 11 percent at one stage."
Yesterday, while the London Metal Exchange was closed for a public holiday, U.S. copper futures surged on short covering.
Chile Strike Update
In industry news, Codelco, the world's largest copper producer, will restart output at its second-biggest mine in Chile today after contract workers ended an almost three-week strike and protest that pushed the price of the metal to a record.
While that may calm some supply fears, demand prospects have picked up after a week of better than expected U.S. data last week and some signs the world's biggest economy might avoid a recession. Meanwhile, copper stocks across the globe remain at their lowest levels since August, according to LME data.
Teck Cominco ( TCK.B) $ 48.18 up $1.48 ( 3.17%)
Hudbay ( HBM) $20.13 dowm .05
More on Oil Forecast from Goldman Sachs
E ) Goldman Sachs Raises Oil Price Forecast
Crude oil may rise to between $150 and $200 a barrel within two years as growth in supply fails to keep pace with increased demand from developing nations, Goldman Sachs Group Inc analysts led by Arjun N. Murti said in a report.
New York-based Murti first wrote of a ``super spike'' in March 2005, when he said oil prices could range between $50 and $105 a barrel through 2009. The price of crude traded in New York averaged $56.71 in 2005, $66.23 in 2006 and $72.36 in 2007. Oil rose to an intraday record $120.93 today on speculation demand will rise during the peak U.S. summer driving season.
``The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty,'' the Goldman analysts wrote in the report dated May 5.
Higher Energy Use Forecast
A report yesterday showed U.S. service industries expanded in April, signaling higher energy use. The Institute for Supply Management said its index of non-manufacturing businesses, which make up almost 90 percent of the economy, grew for the first time since December. China is increasing refining capacity and boosting imports to meet rising demand for the Olympic Games.
U.S. gasoline demand typically climbs going into the summer season when Americans take to the highways for vacations. The peak-consumption period lasts from the Memorial Day weekend in late May to Labor Day in early September. Monthly fuel sales were the highest during August in five of the last six years, according to data from the Department of Energy.
China Consumption
China, the world's fastest-growing major economy, has more than doubled oil use since New York crude oil dropped to this decade's low of $16.70 a barrel on Nov. 19, 2001. Record prices have failed to stem rising consumption in developing nations, with demand led by China, India and the Middle East.
Price forecasts for spot U.S. benchmark West Texas Intermediate crude oil for 2008 to 2011 were revised higher by Goldman. The 2008 price estimate was raised to $108 a barrel from $96, the 2009 forecast to $110 from $105, and 2010 to 2011 estimates are projected at $120 from $110, the analysts said, citing slowing supply growth in Mexico and Russia, and low spare production capacity in OPEC.
F ) The ( Vancouver / May ) AMP Seminar
Planning Not Wishing for Success
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G ) The New U.S. Energy Policy
from Thomas Friedman ( N.Y. Times )
Our president’s latest energy initiative was to go to Saudi Arabia and beg King Abdullah to give us a little relief on gasoline prices. I guess there was some justice in that. When you, the president, after 9/11, tell the country to go shopping instead of buckling down to break our addiction to oil, it ends with you, the president, shopping the world for discount gasoline.
Final Notes
The behaviour of the market is unpredictable, but the behaviour of the market's participants is about as predictable as you can get. For long-term success, investors need the discipline to do two things:
1. Invest during points of pessimism
2. Exercise patience.
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