Don’t buy this just yet
As I write, the US financial bailout is up to $8.5 trillion. No doubt it will be higher by the time you read this. Was it only two months ago that citizens of the United States actually participated in debating the issue of a 3-page $700 billion dollar bailout? The vast majority was dead set against it. It passed anyway. As a 250-page $850 billion dollar bailout.
Financial bailouts are like wife beating. Once you start, you never stop. If someone had asked me what the chance was of an $850 billion dollar bailout ballooning up 10-fold to $8.5 trillion in less than two months, I’d have said none at all. But there you have it.
All my readers are now in the position of a lifetime. A financial hurricane has hit, it’s destroyed the MacMansion, the Ferrari and the spanking new yacht parked next to the house. You are financially destitute when suddenly a nice man in a freshly pressed suit pops up to talk to you about insurance.
He pulls out his pad and begins to scribble numbers as he asks, “How were you fixed for insurance?” You sadly mumble that you were fully covered but forgot to mail the check and when the hurricane hit you weren’t actually insured.
“Not a problem,” says as he smiles, “Just this time I can give you full insurance for everything you lost. Actually you can take out a policy for more than you lost. Guaranteed payout.”
“What’s the trick?” you ask.
“Gold,” he says, “You have to own gold. If you do, you are guaranteed to be covered.”
I’ve written hundreds of articles. I saw the bottom of gold in the summer of 2001. I saw the bottom of silver in early December of 2001. I’ve called half a dozen tops and bottoms of gold, silver, the dollar and oil, many to the day. I forecast even the month the crash would take place.
This may be the most important piece I’ve done. If you want to ignore it, it will cost you. Go buy some gold. Buy some gold you can hold in your hand. The financial hurricane I have been forecasting for years is here and no matter how much you think you have lost, if you can’t put your hands on some physical gold, you are going to lose everything.
The helicopter loaded with bales of $100 bills is overhead and the Gang of Fools are dumping money on the bonfire like there is no tomorrow. If you don’t get into some real assets, there will be no tomorrow.
AIG is at the trough for the 3rd time, they are up to $150 billion and after a couple of more feedings, even the densest of politicians is going to realize they are history. Citigroup is history, Bank of America is history, the entire system is toast. We are going to have riots in the streets when GM, Ford and Chrysler go belly up and they will. There is no alternative; they can’t be competitive with their current cost structure. Millions of Americans are going to lose everything they have, their jobs, their homes, their pensions. You don’t have to be one of them. You are smart enough to come to 321gold.
You still have a chance to get into real goods. The most valuable will be gold in your hands followed by silver. But energy is going to be just as good as gold, only you can’t store it under the bed. You are going to have to buy it in some paper form.
A recent report by the IEA studied 800 of the world’s oil fields. The study concluded production is going to decline 6.7% per year. That’s a lot. Peak oil was in May of 2005. Without the discovery of six Saudi Arabias over the next 20 years, we are in trouble. We may well be in a depression here and now, I think we are but the cost of energy is going up in both real and nominal terms.
I returned recently from Indonesia where I saw a wonderful opportunity in a brand new company specializing in Coal Bed Methane. (CBM)
Indonesia dropped out of OPEC in May of this year. They haven’t been an oil exporter since 2004. Oil and natural gas are an important contribution to the tax base of Indonesia. With declining revenues, the government realized they need to make major changes in how they develop their resources.
A few years ago, Indonesia overtook Australia as the world’s largest thermal coal exporter. If anything their coal production is more developed than their oil and gas industry even though they have been oil producers since 1903.
Studies have shown that the country has over 453 trillion cubic feet of CBM, twice the resource of natural gas. But due to a quirk in Indonesian law, the CBM potential has yet to be tapped. Indonesia differentiates between subsurface rights for coal and those of gas/oil. So if someone wanted to come in and do a CBM deal they had to deal with both the owner of the coal rights and the owner of the gas/oil rights. In the confusion, nothing was accomplished.
Jakarta understood the problem and made it clear to foreign companies that both their cash and their expertise were welcome. Many of the hurdles of weak legal and land title issues were swept aside. The central government insists that the rampant corruption in the country wouldn’t be allowed to stop the development of natural resources.
A new junior out of Vancouver formed by a team of highly experienced CBM experts came into being two years ago with a mandate to exploit the looming potential of CBM in Indonesia. Now called CBM Asia (TCF-V), the company is run by Al Charuk as President and CEO.
I was invited to Jakarta a couple of weeks ago to be present at a ceremony where the Minister of Energy for Indonesia signed 33 contracts calling for $912 million dollars to be spent on oil and gas exploration in the next year. I was with senior executives from CBM Asia as they watched their Indonesian partner sign the documents giving them approval for a joint venture in the Kutai block located in eastern Kalimantan on the island of Borneo.
After the Minister of Energy completed his marathon-signing event, he spoke to the large assembled group for a few minutes. One of the first things he announced was that he had signed a document the prior night taking the coal people out of the equation. In the future, the gas and oil people have preference and anyone wanting to drill for CBM will have to deal with them but will not have to deal with both them and the coal people. For a company in the position of CBM Asia, it’s a giant step forward because it cuts the number of people involved in the deal in half.
The deal that CBM Asia did involves the Kutai Basin with an estimated 81 TCF of CBM. They joint ventured with a local company PT Ephindo headed by two Indonesian senior executives with dozens of year’s experience in energy companies within Indonesia. PT Ephindo will be the operator of the project. Within the block CBM Asia and PT Ephindo have a concession, they believe there may be as much as 8 TCF of CBM in place.
The 100,000 square km Kutai Basin has a number of gas charged coal seams as thick as 150 feet at depths of between 500 and 4000 feet so drill costs will be low. There is an existing CBM gathering system only 3 km away so wells can be brought on line both quickly and cheaply. CBM Asia anticipates drilling as soon as March of 2009.
The government takes up to 55% of every CBM project. CBM Asia’s deal with PT Ephindo calls for them to pay 66% for a 40% working interest which is further reduced by the 55% government participation. At the end of the day, CBM Asia will have 18% of the project net.
That doesn’t sound like much but in this company you are buying a lot of blue sky at a very low price. I bought in to the first private placement and I wish I had bought more. A TCF of CBM is worth $1 billion in market cap. CBM Asia has the POTENTIAL for 18% of 8 TCF and they are the 2nd mouse to the mousetrap. They are the company that gets the cheese because they have already invested two years of their time.
CBM also signed an option on the Sangatta Block in another JV. Terms have not been disclosed and CBM may or may not take up their option. They have a number of other deals in progress.
I cannot stress enough the value of the time they have already invested. The Minister of Energy signing the document taking the coal people off the table is a really big deal. It makes deals half the work and cost to put together. But it takes time and lots of money to make the contacts CBM already has in place.
I love these guys. This is my #1 energy pick. Ignore the numbers for now; there are too many zeros to do the math. They will be drilling in the next few months and when they do, the quality of knowledge they have is going to go up 10-fold. But take my word; this is the best energy deal I know of. They are fully funded, they hit the ground running. I met their Indonesian partners and they are absolutely first class. Now they need to drill.
But don’t buy just yet. There are 8 million shares coming free trading on the 13th of December. Some of those people will have to sell and couldn’t until the 13th. Let them give the shares away cheap. After the 13th is going to be the best opportunity to buy CBM cheap that you are going to get.
Management is great, the website is OK, I’m going to insist on some changes to make it more user friendly but there is a lot of information. This is a true team and it’s a good team. This stock is going to be a winner.
We own shares. We were in the PP. I am biased. You owe it to yourself to do your own due diligence.
CBM Asia Development
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November 26th, 2020
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