By The Gold Report, on November 22nd, 2011
Volatility in the markets overall, and particularly in the silver price, continues to deter investors, even the major producers, from stepping in on silver juniors. However, Chris Thompson, equity research analyst with Haywood Securities, names some attractive opportunities in South and Central America in this exclusive Gold Report interview.
The Gold Report: Chris, you recently called silver “the most volatile of all the precious metals.” Why do you believe that?
Chris Thompson: Silver is often called gold’s ugly sister because historically it presents itself as a very volatile metal, price-wise. Silver demand is typically determined by two main influences. First, silver as a store of value, much like gold. Second, silver is valued as an industrial metal. Right now, there’s a lot of concern about demand for silver as an industrial metal, about the lack of demand for silver for industrial fabrication. The interplay between these two demand uses contribute to its price volatility.
TGR: And you expect that volatility to continue for a while yet?
CT: I think so. We’ve seen a lot of volatility in gold. Earlier this year, many argued that gold could easily move up to $2,000/ounce (oz), over the long term. When gold ran up rapidly a couple of months ago, it did more damage than good to the precious metal sector because it caused a lot of people to wonder whether those high prices were sustainable. It discouraged them from playing the precious metal game in anticipation of a correction of sky-high gold prices.
The same is true for silver. Earlier this year silver approached $50/oz, and then fell back severely. My sense is the move forward will be volatile for a lot of metals, copper included.
TGR: You suggest the near-term price for silver will be around $38/oz. But, your long-term price drops to $20/oz. Is the lack of industrial demand behind that or are you just taking a very conservative approach?
CT: We are taking a conservative approach. We are looking for a weakening in the silver price into the medium to longer term. Anyone who suggested a long-term silver price of $20/oz a couple of years ago would have been called very, very aggressive. Now, a lot of commentators are predicting $20/oz in the long term. My sense is that $38/oz is a healthy price for silver in the near term, as is $20/oz as a long-term price. These prices will, in time, contribute to new mine production, which will contribute to new mined supply. Increased supply will depress the price of the metal.
Also, we have to recognize that 80% of the mined silver supply comes as a byproduct credit. In that sense silver production is linked to the economics of gold, lead and zinc. All things being equal, we are looking at good prices for gold and reasonable prices for base metals, all supportive of additional silver mined supply and a lower silver price in the long term.
TGR: For most of 2011, share prices of most major precious metals producers lagged the price appreciation of gold and silver. Lately that gap has started to close. Will this trend continue?
CT: I believe so, yes. I think the lag relates to the volatility of gold and silver prices, and arguably copper as well. That price uncertainty has caused a lot of companies to stay on the sidelines, to wait and see whether metals prices in the broader context are sustainable before engaging in merger and acquisition (M&A) activity. Now, I think there is a growing appetite for M&A in the precious metals space, being driven by the need to sustain production growth.
TGR: So, in effect, investors need precious metals prices to stabilize before they will invest in the companies that produce them?
CT: I think so, yes. This is the case for many individual investors, particularly those looking at takeout candidates. For certain producers, equity prices have caught up to metal prices.
A couple of the companies we have under coverage in the silver space, companies that have cash flow, are trading at relatively high multiples to cash flow for next year. That suggests that there is a lot of appetite for cash-flowing companies focused on silver, especially companies that have demonstrated their ability to grow their business.
But that’s not the case with companies oriented more toward longer term growth or development. If an investor is looking at a development opportunity, he has to be fairly confident about where the underlying price of the metal is going before making an investment decision. There has been a lot of doubt in the marketplace about whether metal prices are sustainable at current levels.
TGR: In addition to some of the silver majors trading at healthy multiples, some of the gold majors are putting their free cash flow into higher yields. Yet, prices for juniors, even juniors with significant resources, continue to languish. Do you expect any of the majors—gold or silver—to wade into the takeover game?
CT: I do anticipate that. But you have to understand that a potential acquirer of a mining or exploration company is just as much an investor as Joe Blow on the street. Potential buyers have to be confident in the sustainability of metal prices before making any significant merger and acquisition decisions. A lot of companies or potential buyers remember that a couple of years ago the marketplace was very different from where it is now. We all are acutely aware that things can change.
TGR: Another factor in the mix right now is increasing risk. Some Latin American countries, including Peru and Argentina, are enacting policies that will increase royalties or taxes on mining profits. Could that be a deterrent for foreign direct investment and ultimately, for the average precious metals investor?
CT: There is a broad-based acceptance, especially regarding Peru, that taxes and royalty rates will increase in line with other South American jurisdictions. My sense is that as long as that is handled in a predictable and transparent way, it should not be an impediment for foreign direct investment.
What upsets the marketplace and upsets investors is the knee-jerk reaction we’ve seen from many jurisdictions with regard to adopting or even suggesting radical changes in the taxation and royalty regimes. That type of reaction causes a lot of concern with regards to the investment of significant funds in those countries and jurisdictions.
TGR: You have a Sector Outperform rating on Kimber Resources Inc. (KBR:TSX; KBX:NYSE.A), which is developing the Monterde silver mine in Mexico. Your target is $3/share and Kimber is now trading around $1.40/share. Why will the share price effectively double in the next 12 months?
CT: Kimber is a good example of a potential acquisition target. The Monterde deposit is primarily a gold-rich deposit that carries a substantial silver credit. This project would be attractive for a mid-tier silver or even gold producer looking to expand its production profile.
Kimber is a turnaround story. Recently the company has refocused its attention on repositioning itself by developing an open-pit underground opportunity at Monterde. Kimber is releasing some very interesting results from deep drilling at Monterde that suggest good grades at depth. Monterde offers exploration potential, underpinned by prefeasibility-stage economic analysis that calls for an open-pit underground mine that can deliver gold production at a low cash cost. It is an opportunity that also offers a lot of resource growth potential and, in that sense, is an attractive acquisition target.
TGR: Kimber is expected to put out a new resource estimate incorporating recent drilling results by the end of April 2012. Do you think takeover offers will wait until that happens?
CT: Yes, I think anything that plays into derisking the asset is worth waiting for. That could be the confirmation of a larger resource, a revised and improved resource estimate or the delivery of a prefeasibility study. Any of these developments would add a level of comfort and make the project more attractive for a potential acquirer. The timing of the resource estimate may be early 2012.
TGR: Let’s move on to Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BLV), which you also give a Sector Outperform rating, with a target price of $7.25/share. When you made that call, Fortuna was trading around $5.50/share. Now it is around $6.80/share. What is responsible for that price spike?
CT: We initiated coverage on Fortuna about six months ago when it was trading at $4.60/share. At that point, the company was commissioning a new mine, the San Jose mine, in Mexico. It was also generating cash flow from its Caylloma mine in Peru. We felt comfortable that the company offers an attractive and a growing production growth profile with Caylloma and San Jose. Everything is running according to plan.
I visited the San Jose site about two weeks ago. The company is on budget and on time. The mill is operating very well; it’s at nameplate capacity right now. The development of the mine is proceeding according to plan. Basically, the market has recognized that success, which has caused the share price to react positively, on the back, I might add, of an increase in the silver price.
TGR: Fortuna recently published production numbers for Q311; silver production at Caylloma was up 42%. Is that in line with what your expectations?
CT: Yes, pretty much. We see both projects presenting potential for growing production profiles. Caylloma is not just a silver producer. It’s a silver producer that offers byproduct credits by way of lead and zinc and a little bit of gold. I think there is a lot of untapped exploration potential at Caylloma. The company is really looking at how it can deliver value by expanding the mine’s reserve base, as well as potential for increased production.
TGR: In Metals & Mining Weekly, you estimate total cash costs for Fortuna in 2011 at negative $0.62/oz produced. That jumps to positive $0.42/oz in 2012. Obviously the byproduct credits you mentioned are responsible for the negative cash costs this year. Why would they jump almost a dollar per ounce by 2012?
CT: It’s a complicated picture. Effectively, Fortuna is integrating a new operation into its corporate structure. It also has more silver ounces than byproduct credit, including lead and zinc credits from Caylloma. With all that in the mix, we see Fortuna delivering very attractive cash costs into the near term.
TGR: Let’s move on to Mirasol Resources Ltd. (MRZ:TSX.V), which also garners a Sector Outperform rating. Mirasol owns the Joaquin silver project in Argentina. Silver miner Coeur d’Alene Mines Corp. (CDM:TSX; CDE:NYSE) is earning a 51% stake in Joaquin by funding current exploration. Joaquin is located about 80 kilometers north of Coeur d’Alene’s Martha silver mine. Do you see Coeur eventually just buying Joaquin outright?
CT: Coeur d’Alene is probably the most logical acquirer for Mirasol. Coeur d’Alene already has an operation, the Martha mine, in relatively close proximity to the Joaquin Project. It is also Mirasol’s joint-venture partner at Joaquin.
TGR: What measures do you see the Argentine government enacting in terms of royalties?
CT: Argentina is an important provider of precious metals in the global context. Mining is important for the economy in Argentina. As a consequence, I would like to think that any adjustments by way of taxation or royalties will not penalize the investment or the mining industry.
TGR: Would you like to share other silver or gold stories in Latin America with our readers?
CT: Bear Creek Mining Corp. (BCM:TSX.V) is relatively well known in the sector. About six months ago, the company garnered a fair bit of negative press in the run-up to the Peruvian presidential election. Bear Creek was in the final stages of permitting one of its projects, the Santa Ana project, which accounted for about 15% of my valuation of the company.
Santa Ana became a lightning rod for many who were opposed to anything and everything to do with mining in Peru. As a consequence, investors panicked and we saw a significant selloff in Bear Creek shares, all for an asset that delivered relatively little value in our valuation of Bear Creek.
The reality is that much of the company’s current valuation is underpinned by another project called the Corani project. That asset can arguably deliver more than 10 million ounces in annual silver production, accompanied by significant lead and zinc credits. With a target price of $7.30/share, the stock is trading above $4/share right now, a very attractive valuation.
Bear Creek is definitely undervalued based on its development-stage Corani project in Peru, which is attractive from an acquisition/takeover perspective.
TGR: What should investors playing the precious metals market—be it in actual metals or equities—be aware of now that wasn’t in play a few months ago?
CT: That’s a good question. As far as precious metals or the mining sector as a whole is concerned, investors have to be aware that we are approaching the tax loss selling season. This might be an impediment for some mining and exploration stories through to early 2012.
Moving into Q112, I think a lot of attention will again be focused on the mining sector on the back of mining shows like the Mineral Exploration Roundup in Vancouver and the PDAC show in Toronto. Over the next six months, I expect we will see the mining sector as being a volatile space, but one that will garner a lot of attention.
TGR: Chris, thank you for your time and your insights.
Chris Thompson was trained in South Africa and has over 20 years of industry experience working as a geologist for major through to junior mining/exploration companies, in addition to a stint working as a mineral economist for the South African State. He has a bachelor’s degree from the University of the Witwatersrand, a graduate degree in Engineering, a master s in mineral economics, and a PGeo designation. Thompson has been with Haywood for over seven years and specializes in junior exploration and the silver and PGM sectors. Thompson was recently awarded the 2011 Starmine No. 1 Stock Picker award for the Canadian Metals and Mining Sector.
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By Doug Gentry, on November 22nd, 2011
 Jeff Stahler – Columbus Dispatch In Macro class today we talked about what is really a dual decision. First, should our national policy encourage spending or saving? Second, should government actions favor consumption or investment?
First, some definitions and a smidgen of theory. There is a simple dichotomy over how a family or a nation uses their income. They can spend it (i.e. consume) – which means purchasing goods and services that provide benefits right now. Or they can save it – by putting it in the bank or paying off debts, or even purchasing stock with it. Presumably the savings will improve things in the future (more on that later in this post.) Personal savings (excluding business and government action) have declined as a percent of income since 1980 and probably longer. The personal savings rate was 3.6 percent as of September 2011 (source: FRED). That meant we spent or consumed 96.4 percent.
Savings fuel investment. When households save, businesses save, and the government runs a surplus, this provides funds which can then be borrowed for investment purposes. Done correctly those investment activities will reap economic benefits in the future. If the government operates with a deficit, this adversely offsets personal and business savings. Government borrowing removes funds from the investment pool – a term called “crowding out.”
So, should we encourage people to spend or save right now? Saving brings up good images of a frugal nation, putting aside current desires for a better future. On the other hand, saving does nothing to stimulate demand right now as we struggle to return to full employment. For an extreme example consider Japan in the 1990s, which suffered what is sometimes called “the lost decade.” A real estate bubble popped, causing a typical recession, but then even with low interest rates businesses and families saved rather than spent. They entered what Paul Krugman calls a liquidity trap. Robust economic growth didn’t return for 10 years.
Were someone to ask me this first, spend or save, question, I would recommend incentives to spend – in the short and medium run. Restoring economic activity to its full potential is our most important priority right now – more important than the national debt and more important than future investment. A program to encourage more personal savings would be counter productive. As the economy starts growing on its own steam, we could then switch to more emphasis on savings.
Consume or Invest?
Now to our second, related question. As government considers fiscal policy (government spending and taxation) it would be wise to target those efforts strategically. Some government spending and some tax cuts will encourage consumption. This can be an appropriate goal during recessionary times, because the added consumption will add directly to GDP. In econ-jargon we call this shifting aggregate demand higher (to the right). If we were considering tax cuts, then targeting low and middle income families will yield the most effective bang for the buck. Lower income families spend more of new income on consumption. Higher income families, having met many of their day-to-day requirements put proportionately more of that new income to saving (including stock purchases.)
Let’s consider what to do once the economy is starting to grow on its own. Do we continue to encourage consumption, or should we shift to investment? I prefer the latter. Investment means putting off the benefits or happiness of current consumption, and directing resources to a better future. Using our tax cut scenario from above, we could argue that cuts should go to higher income families, since they are more likely to save, which in turn should encourage investment. Unfortunately for the advocates of this position there is theory but not much in the way of verifiable results to support this approach.
So, if the economy is growing or starting to regain its momentum, our other choice is to use government spending on thoughtful investments. Pushing aside some of the political wordsmithing, President Obama’s preference for spending on infrastructure fits with this goal. It asks a lot of Congress and the White House to choose investment projects wisely – the lobbying wolves are seldom at bay. There’s an old saw in the grant funding world, that if money is going to support more pigs, successful applicants learn to become pigs. This makes it difficult to thoughtfully target that spending.
My take on this is to be skeptical of general tax cuts – particularly those that funnel most of the money towards higher income families. Tax cuts will fuel consumption at all levels of income, though more consumption among lower income families. And there is scant evidence that money kept by higher income families truly generate savings that lead to thoughtful investment in our future.
By Christopher Briem, on November 22nd, 2011
Trib covers the Governor’s new panel charged with doing something to improve on manufacturing trends in Pennsylvania.
One of those things that needs a little historical perspective to even begin thinking about. Here is Pennsylvania’s manufacturing employment since 1969. Not exactly much change in trend which is remarkable in itself. Through significant booms and busts, not much deviation from trend.
For Pittsburgh it is not such a smooth glidepath. First there was the crash landing, and later in the 1990’s I suspect the trend would look more like the state’s if you took out the growth and decline of employment at the former Sony Plant in Westmoreland County which expanded a lot in late 1990’s only to go away completely.
By B.P.T., on November 22nd, 2011
At 7:45 AM Eastern time, the weekly ICSC-Goldman Store Sales report will be released, giving an update on the health of the consumer through this analysis of retail sales.
At 8:30 AM Eastern time, the preliminary GDP report for the third quarter of 2011 will be announced. The consensus is an increase of 2.4% in real GDP and an increase of 2.5% in the GDP price index. The real GDP estimate is 0.1% lower than the advance value for the third quarter of 2011, and the GDP price index is the same.
Also at 8:30 AM Eastern time, the monthly Corporate Profits report from the Bureau of Economic Analysis will be released.
At 8:55 AM Eastern time, the weekly Redbook report will be released, giving us more information about consumer spending.
At 2:00 PM Eastern time, the FOMC Meeting Minutes will be released, which will provide insight into how the Federal Reserve board governors and bank presidents view the economy.
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By Simon Grey, on November 21st, 2011
The other side of all this, which I’m surprised the article doesn’t mention, is that lower costs mean that addicts find it easier to pay for their habit. They’re less likely to resort to theft and mugging, and so on. It’s also noteworthy that crack probably only emerged as a way to get more “bang for the buck” out of cocaine while trafficking was harder.
Here’s an interesting question for proponents of the drug war: assuming that demand for drugs remains stable, what do you suppose will happen if you reduce the supply of drugs? Answer: the price will rise.Here’s another interesting question: if violence increases directly with rising drug prices, what will happen when the prolonged war on drugs succeeds in reducing supply without reducing demand? Answer: violence will increase.
It’s easy to say that drug use is immoral, and it’s easy to say that drugs have negative effects on society. However, knowing that the drug war is going to ratchet up the violence, and impose significant negative externalities on society, is it really so rational to say that the drug war is worth it?
By Christopher Briem, on November 21st, 2011
Just what I am pondering. From more recent work out of the Cleveland Fed: Manufacturing and Pollution: Trends in Old and New Industrial Centers is this graphic:
By The Gold Report, on November 21st, 2011
 Every investor knows that it’s hard to time the market. But Ron Struthers, editor of Struthers’ Resource Stock Report and a 25-year investment veteran, has been able to weave his way in and out of the market with aplomb this year. In this exclusive interview with The Gold Report, Struthers tells what he’s seeing in his technical analysis that is signaling it’s time to buy back in after selling off many gold equities in April.
The Gold Report: Ron, you said in your report that you’re buying back most of the equities you sold in April. Why is it time to get back into the market?
Ron Struthers: Most of these stocks have been valued at $1,100/ounce (oz) of gold. They’re not pricing the rise in the price of gold at all yet. There’s a disconnect or disbelief in the market.
Precious metal stocks have corrected way too far, to valuations we have not seen since the 2008 credit crisis. Following that crisis our average yearly return on my precious metal picks was 155% in 2009 and 99% in 2010. I see this opportunity again.
TGR: Is that because the market is expecting the price for gold to come down?
RS: That is the expectation, of course not among a lot of the goldbugs, myself included. Some see higher prices, but the general view of the mainstream investment community is the gold price is expected to come down. It is seen by them as rising too far, they do not understand what influences the gold market, and they mostly hear that it is another bubble.
TGR: Canaccord Research uses a sentiment indicator based on insider trading tracking by INK Research. The sentiment indicator uses a ratio of companies with buy-only transactions from insiders divided by companies with sell-only transactions from insiders over 30-day and 60-day periods. Some recent results from the sentiment indicator look quite positive.
RS: Insiders typically know best because they’re running the companies, so it’s always positive when there is more insider buying. I like the sentiment indicator ratio. A lot of companies have insiders buying and selling, which produces a clouded picture. By using the ratio of buy-only to sell-only, it gives a clearer picture of what insiders are doing. I don’t necessarily say they time the market that great, but it’s another positive sign that the insiders think the stocks are too cheap.
TGR: Are there more insiders buying than selling across the board?
RS: That’s what that ratio is saying in regard to precious metal stocks: Insiders are buying more aggressively into the market; they see the best place to put their cash is in these companies.
TGR: You rely heavily on market charts to time your investment decisions. What charts do you rely on most?
RS: I always look at the broad-based market by using the S&P 500. Then look at the PHLX Gold/Silver Sector index (XAU:NASDAQ) and the AMEX Gold Bugs Index (HUI:NYSE). I also track the TSX Venture Exchange, which is a good benchmark for the junior resource market.
TGR: What key things are those charts telling you right now?
RS: They’ve all come down a fair bit. The S&P had a nice run from a bounce off support around 1,100 points in early October, but it has pulled back. That market is in a sideways pattern, which is just fine for gold equities. Steep sell offs in the general equity market have often in the past been negative for gold equities, so I watch this and for signs that gold stocks are breaking free from the influence of the general market.
The AMEX Gold Bugs Index had a breakout to a new high over 600 points about two months ago. What I’ve noticed on the AMEX Gold Bugs Index is that the gold stocks have not been going down with the market every time. They’ve been holding or rising. They’re bucking the trend, which is a really positive indicator. For example, at the end of October, the S&P sold off big two days in a row while the AMEX Gold Bugs Index bounced back the second day, completely recovered by the third day and went on to much higher levels from the selloff while the S&P has yet to recover to its previous October high.
The Venture Exchange had quite a correction from about 2,400 to 1,350 points. The juniors corrected much further than the senior and midtier golds. In September, the Venture Index was at its high from last year, about 1,750 points, a support level, and then there was a big sell-off in gold at the end of September as the gold price was knocked down about $300/oz with central bank Intervention. The index also took a quick, sharp drop on that sell-off in gold. That really hammered a bottom into that market, down to 1350. Since then, it’s rallied up a fair bit, but I’m still looking for about another 200 points. I’d like to see it get over 1,800 to be sure that it’s in a new bull move for the juniors. That would be a higher high, above the level where it fell from in September.
TGR: Is that what you’re anticipating?
RS: Yes, but I want to see proof or confirmation that it happens. I want to see a move in that index. That will seal the case that it’s going much higher. But if it gets to that 1,800 level and isn’t able to go through that, I might take a more conservative stance on the junior market, lighten up a bit, and go more to cash.
TGR: What did you notice in April that caused you to start liquidating your portfolio?
RS: The biggest influence on my decision to time the selling then was the price of silver. It was having a very strong move. I figured silver wanted to get to that $50/oz mark, which was the old historic high, but would then see a good correction. It moved up so strongly and so fast, so a good correction would be normal. Gold and silver equities had both been strong up to that point, the TSX Venture Index had a 1,000-point rally, the Amex Gold Bugs Index 200 points, so my feeling was silver was going to have a peak in the intermediate term when it reached that $50/oz mark and its correction could be a catalyst for a good correction in both silver and gold stocks.
TGR: You noted over the summer that some strength was coming back into the gold price. Why didn’t you jump back in then?
RS: Actually, we were starting to buy back in during July and August, just not that aggressively. I was looking for a bottom around then, but in hindsight the bottom came later. We’ve started buying more aggressively these last couple of months. It’s always difficult to time the market exactly.
TGR: There are a lot of concerns about sovereign debt problems in Greece and Italy. In a Nov. 2 research report you said, “Greece deserves to go bankrupt and will go bankrupt in time along with all of Europe followed by Great Britain and the U.S.” That’s a bit extreme. Some well-known economists believe that there may not be any bankruptcies necessarily, but there could be 20 years of static growth.
RS: Europe is prolonging this in the hopes that the economies will pick up, tax revenues will grow again and things can continue as they always have. The real problem is simply too much debt and the debt problem can’t be fixed by adding more debt. The only way to fix that problem is to settle the debt, liquidating to pay down and/or restructure defaulting on some or all of the debt as what happens in a bankruptcy.
In the case of Greece, it’s not called a bankruptcy, but when debt holders accept pennies on the dollar or, in the Greece case thus far, 50% on your bonds, it is basically a default or like a bankruptcy agreement. At 50%, this is still not enough and will not work; even with rosy projections the Greece debt will be back up to 120% of GDP in a few years. Assuming this agreement goes through, it will default again and more debt will be defaulted on; in the end it will probably work out that bond/debt holders receive closer to $0.20 on the dollar. Call it what you like, I say bankruptcy.
This excessive debt problem, either way too much sovereign debt like Greece or too much private debt like we have seen in the U.S.—and a combination of the two—is a problem around the world, including most of Europe, Ireland, Britain, Japan and the U.S. All this debt will be defaulted on within the next several years.
The U.S has not resolved the debt problem that came to light in 2008. It has basically moved the bulk to the Fed balance sheet. The U.S. has 50 states and many of them have a larger GDP than Greece and just as bad of a debt problem. Perhaps the U.S. has 25 Greece-like problems yet to deal with, on top of the private sector debt problem and eventually a sovereign debt problem because it will keep piling on $1+ trillion Federal debt a year, as long as the bond market allows it. In other words, it is just like a ticking clock with a too short fuse.
TGR: What are some of your favorite companies?
RS: With the seniors, I more or less have kept them on my list a long time. I don’t trade them much. I like Goldcorp Inc. (G:TSX; GG:NYSE) and Barrick Gold Corp. (ABX:TSX; ABX:NYSE). Goldcorp is one I haven’t had on my list for quite a while, but I added Barrick back on last year. Barrick took the hit writing off its hedge book and has some big new mines coming onstream, so I expected cash flows and earnings would rise. Barrick’s latest quarter showed that, and the stock now pays over a 1% dividend yield, but like most gold stocks, it has yet to show much of this in the share price.
I also like Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE). In silver, there’s Pan American Silver Corp. (PAA:TSX; PAAS: NASDAQ). I Iike First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:Fkft) as more of a senior producer as well.
TGR: Earlier this year, Pan American had production guidance of 23–24 million ounces (Moz) of silver. It revised that around the middle of the year to about 22.5 Moz. Nonetheless, its third-quarter profit was $0.49/share or $52.5 million (M). It’s getting unprecedented revenue. Is that sustainable?
RS: I think so because the silver price has come down and has been in a sideways pattern, so it has really built a base now at higher levels. I think it will be moving higher with just the strong growing demand from the solar industry, and then there is the growing demand as a currency or investment, the poor man’s gold. That is obviously going to help all of these producers. What I find with Pan American, and some other more senior stocks, is that they are under-owned. From various analysis I have seen, total investment funds have less than a 1% allocation in precious metals. Once buyers come back into the market, these are among first things the funds are going to buy in the underweight sector. Meaning Pan American is a go-to silver stock that a lot of those funds would buy.
TGR: Would you purchase Pan American over Silver Standard Resources Inc. (SSO:TSX; SSRI:NASDAQ)?
RS: I would have to compare the two charts, but they’re both major silver producers that funds would consider in the silver market. Both have been way oversold compared to action in the silver price.
TGR: Some of the senior companies are having record quarters in terms of free cash flow. What do you like about these companies on a long-term basis?
RS: With the seniors, I’m always looking for a good pipeline of new projects coming on so there will be growth in gold production. That way there is not only the valuation rise on the price of gold, but increasing production. That’s one thing I liked about adding Barrick back on. It has some new mines coming on, like Donlin Creek and Cerro Casale. Kinross Gold Corp. (K:TSX; KGC:NYSE) is another one I have on my list for that reason. It has a few new mines coming onstream, the Tasiast project, Fruta del Norte, Lobo-Marte and Dvoinoye.
TGR: Do you think some of the intermediates and the senior producers will merge or suggest takeovers?
RS: Yes. I’m expecting to see more activity there. It’s getting harder to build and find producing mines. Especially with these valuations, it’s much easier just to buy them on the stock market. I think there will be increased merger activity in the next several months.
TGR: It’s interesting, too, when you look at a company like Agnico-Eagle—its executives Sean Boyd and Ebe Scherkus are not young men anymore. You have to wonder about their long-term appetite for this game at this point.
RS: That’s a widespread problem in the industry. Not a lot of young people are coming up. There’s definitely a shortage of those skill sets, another reason that mergers might make more sense.
TGR: What about some intermediate producers on your list, Ron?
RS: I have a number there that I like: Richmont Mines Inc. (RIC:TSX; RIC:NYSE.A), B2Gold Corp. (BTO:TSX; BGLPF:OTCQX), and Claude Resources Inc. (CRJ:TSX; CGR:NYSE.A), which is another one that we recently bought back. These are more small-to-intermediate producers, because I think there’s better value in the smaller producers.
Claude Resources is actually a junior producer in Saskatchewan, where its Seabee mine is located. Its production is pretty good and will be expanding with the Santoy mine within trucking distance. Claude is acquiring the remaining percentage of the Amisk project from its partner, so will have 100% of about 1.5 Moz defined there. In Red Lake, another mine advancing is its Madsen project, which it has been exploring and ramping up, currently up to about 1.2 Moz gold. Madsen was a past-producing mine, which makes it quicker to permit to production; the company should experience a significant bump in production when that comes onstream. That is a ways out yet, but Claude is not even being fully valued on its current mining operation. Its total gold resources in the ground are just being valued at about $70/oz. Investors are really getting one of the other projects, Amisk or Madsen, for nothing.
TGR: What about Avino Silver & Gold Mines Ltd. (ASM:TSX.V; ASM: NYSE.A; Gv6: Fkft)?
RS: That’s one of my favorite silver juniors. It is just starting production. There is typically a boost in stock price when production starts because the company is moving into a phase of cash flow from a long period of no cash flow. I like it for that reason, but it’s also undervalued as well.
TGR: It’s mining the Avino Mine in Durango, Mexico. There is further potential to expand the resource through the Guadalupe deposit, which is part of Avino. Tell us about that.
RS: In addition to starting production, I like a company that can increase that production and reserves. Avino Silver & Gold can easily do that at the Avino Mine. The zones at both Guadalupe and San Gonzalo are still open, so they can be expanded along strike and depth. A lot of the other zones on the property have not been drilled that much, so there’s room for expansion on practically all the zones there, including the original Avino vein still open at depth.
TGR: In some areas, it’s getting about 300 grams per ton (g/t) of silver and the recoveries have been around 80%. That’s certainly well above average.
RS: Both are certainly very good numbers. It’s typical of what can be found in Mexico—very rich veins as long as there is good-enough width and Avino has that so we can expect a very profitable mine operation.
TGR: What about some junior names that are offering a strong value?
RS: One of the recent ones I’ve picked is Sandspring Resources Ltd. (SSP:TSX.V). Its Toroparu deposit in Guyana has been growing steadily. It’s up to 9–10 Moz Indicated and Inferred. That stock’s price is between one-half and one-third of its high.
TGR: Sandspring has millions of pounds of copper there, too, but the market’s not really giving it credit for that.
RS: It’s not even giving a good value for the gold. When I looked at the company, I said to myself, “Just ignore the copper because it’s not getting valued at all for that.” Why? It’s the same thing with all these stocks that are valued so low. They’re just out of favor and not getting the valuation they deserve. It’s just market sentiment, not anything specific with Sandspring.
TGR: In July, Agnico-Eagle made a foray into the Red Lake Camp by investing $70M in Rubicon Minerals Corp. (RBY:NYSE.A; RMX:TSX). In 2008, Agnico lost out on a bid for Gold Eagle Mines with Goldcorp. Now both senior producers have a presence in the Red Lake camp. Agnico’s corporate secretary Greg Laing holds a seat on the board of Hy Lake Gold Inc. (HYL:CNSX; HYK:Fkft), which is also in Red Lake. But Hy Lake has a joint venture with Goldcorp. What do you think about the prospects for Hy Lake given its relationship with both producers?
RS: I think that’s ideal. That is really what a junior needs to do. Down the road, when it has proven out the reserves, it wants to have competition to buy it out. Agnico-Eagle and Goldcorp are the two gorillas in that neck of the woods. They are the two you want to have fighting over your stock when you discover a mine. It’s an excellent move.
TGR: What do you make of the Rowan property?
RS: It’s excellent. There were three past-producing mines near Rowan and the adjacent properties, so we know there’s still gold there. And it is finding robust gold grades in the drill results all the time. It’s just a matter of time to do enough drilling there before it proves up a mineable deposit.
TGR: Paramount Gold and Silver Corp. (PZG:NYSE.A; PZG:TSX) has a new resource on its Sleeper gold deposit and it’s had some good results from the San Miguel project in Mexico. What do you make of it?
RS: Those are two excellent projects and I like them both. The Sleeper project still has a lot of room to expand its resource numbers. So does San Miguel. The company has been actively drilling both projects. There should be an updated resource number on San Miguel within a few months.
TGR: Sleeper has about 3 Moz outlined. How does that compare to other projects in the area?
RS: It compares very well. Although the grade is a bit lower than many, the recoveries are good, up to 89% and with just $1,100/oz gold used in most studies currently, it can be very profitable. It needs to get up to the 3–5 Moz mark, where it is headed to really interest the major producers. The seniors need fairly large mines to have any impact on replacing their reserves. The 3–5 Moz mark is a minimum, but 10 Moz would be ideal.
TGR: What do you expect the new results on San Miguel to clock in at?
RS: The last time it was calculated around 1.7 Moz; it only updated some of the zones. I understand this next calculation is going to include all of the zones on the property and new discoveries. I’m looking for the number to get up to 4–5 Moz. These new resource calculations that still have plenty of room to grow will soon get the company up in the league of 10 Moz with the two projects.
TGR: What’s one last investment idea that you could leave our readers with?
RS: I like Levon Resources Ltd. (LVN:TSX.V; L09:Fkft; LVNVF:OTC). It’s proving up a Penasquito-type target that Goldcorp is mining in Mexico. It’s growing very quickly with a current phase 4, 130,000-meter drill program underway; that is a huge drill program. It has about five drills running and it already has over 300 Moz silver Indicated, almost 1 Moz gold and billions of pounds of zinc and lead. Its stock got sold off steeply in this correction, so it’s an excellent buying opportunity now. Levon has no need to finance as it has about $66M in the bank and only $20M budgeted in the current program.
TGR: With so many unvalued names, how are you choosing among them?
RS: I look at management, of course. You want good mining management that is experienced, has put mines into production, or has brought them up to a point of being producing. The jurisdiction is important. Right now, you can find good values in a lot of the primary areas, like Nevada, Canada, Mexico, and other mining-friendly jurisdictions. I look in those jurisdictions first when there’s great value in the market. I look farther out as the market gets pricier. I look for companies with ample cash on hand because it is difficult to raise money without a fair bit of dilution.
TGR: That’s one thing about Levon that investors might question. It has about 200M shares outstanding.
RS: The stock was up over $2/share even with 200M shares outstanding. It all speaks to the size and quality of the asset. I’m not too concerned when a company has a solid asset the size of its Cordero project; it is a monster already, around 11 Moz gold equivalent Indicated and will probably end up over 20 Moz equivalent. The larger share float also attracts institutional investors since it’s a more liquid stock.
TGR: Thanks for your time.
Ron Struthers, editor of Struthers’ Resource Stock Report, retired at an early age from IBM, where he spent many years as a system, business and inventory analyst. He began investing over 25 years ago. He began the Struthers’ Resource/Tech Stock Report almost 20 years ago. With his background as an analyst for a multinational computer giant, he is able to research and analyze vast amounts of investment data with the aid of the most technically advanced computer hardware and software. He also has numerous inside contacts.
By B.P.T., on November 21st, 2011
At 8:30 AM Eastern time, the Chicago Fed National Activity Index for October will be released, providing an update on economic activity and inflationary pressure in the United States.
At 10:00 AM Eastern time, the Existing Home Sales report for October will be released. The consensus is that existing homes were sold at an annual rate of 4.8 million last month, which would be an decrease of 110,000 from the previous month.
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By Simon Grey, on November 18th, 2011
He is known, of course, for his work on money and inflation. But he did not propose, as Hayek did, competition in currency production. He thought the reality of our times is that governments are in control of the money supply, so the question is simply how to sustain them. He thought a gold standard impractical – inevitably, rather than using the metal itself as money, people would use paper (or electronic) receipts for it, so you have the same problem of potential over-printing of that paper as you do today. So he thought the best thing was to have a monetary rule, preventing politicians from over-producing the paper money we have today.
While having a consistent ideology is important, it is always tempered by pragmatism. This is due to the very simple fact that humans are finite beings and cannot possibly fight every possible ideological battle that could possibly be fought. There are limits to what one person can do. Therefore, every person usually compromises his ideals at some point in life. Sometimes this leads to regret, sometimes this leads to relief.
Milton Friedman is no exception to this. Though he was very much a libertarian, he thought monetary policy to be a point of pragmatism. I’m not sure it’s wise to fault him for this, given the setting in which he made his decision. Government interference in all aspects of the economy was pretty rampant, and the general trend towards statism was ramping up when he hit it big. He had respect and was listened to by many people. But even Friedman had to pick his battles. It’s easy to criticize his decisions ex post, but it’s helpful to remember that he could not foresee most of the consequences.
Now, one can credibly argue that it’s foolish to trust the government to arbitrary rules about money policy. This assertion is true. One could also argue that “sound” money forces the government to be honest. This is also true, assuming you can keep the money sound. See, the United States used to be on a gold standard, then it left it. Going back to a gold standard, though desirable, was no guarantee against this happening again. As such, from a practical standpoint, it didn’t really matter what rules the government constrained the government; the government was going to look for ways to get around them and inflate the currency, one way or another.
It is certainly legitimate to criticize Friedman for his failure to harp on sound money, given the scope of his influence. Perhaps then much of the mess the United States face today would have been headed off earlier. Perhaps not; we can’t be sure. However, it is unfair to paint Friedman as a statist when his record is clearly libertarian. He may have been unnecessarily pragmatic on monetary policy, which is a matter with plenty of room for reasonable disagreement, but he certainly worked to advance the cause of freedom, and for that he should be thanked.
By The Energy Report, on November 18th, 2011
 With energy prices flat to down in a murky global economy, MKM Partners Managing Director Curtis Trimble says investor agility is essential. In this exclusive interview with The Energy Report, Trimble talks about his favorite names and some of the fuel-rich plays that make them interesting.
The Energy Report: Curtis, what is your overall theme right now?
Curtis Trimble: Agility is probably the best theme I could come up with for the current environment. The debt overhang and political gridlock in the U.S. combined with similar events coming out of the European Union around the viability of Greece, Italy, Ireland, Spain, Portugal, et cetera have been unnerving. In the energy market, and crude oil in particular, China remains the 800-pound gorilla with somewhere between 40–50% of world crude oil demand stemming from its growth expectations.
TER: Clearly the global economic outlook is not optimistic for the near- or even the mid-term. What does that mean for energy prices?
CT: While we have seen some substantial discoveries off the coasts of West Africa, Brazil and even the U.S.—off the Gulf of Mexico along with crude oil coming out of the Bakken and Canadian Oil Sands.—there is nothing in the next three-year landscape even close to the level of discovery successes we’ve seen over the past three years. I will use Will Rogers’ adage to buy land because they are not making any more of it, and for all intents and purposes that is going to apply to crude oil as well.
I think you are going to have a much wider trading range than what we have seen in the last year with West Texas Intermediate (WTI) lows in the mid- to high-$70s per barrel (/bbl) and highs in the $120/bbl range. A lot of that is going to center on expectations not only for current economic conditions, but probably more importantly over an 18-month out view for future economic growth. Again, China will remain amongst the most important drivers for those crude oil price expectations.
TER: Do you have a timeframe for reentry into economic growth?
CT: I think it is probably going to take 12–18 months to get some solid insight into U.S. policy and the other developed markets I just mentioned. Most likely we won’t gain any clarity until we work our way through the election season, and that is still a year off. We will continue to see gridlock as a policy response here. Without U.S. leadership, it is going to be very difficult for the balance of the world to step up and make adequate policy decisions to rectify their economic shortcomings.
TER: Will energy prices lead or lag economic growth?
CT: I think one of the more interesting phenomena we have seen over the last 12 months is crude oil as a store of value. My guess is that we are seeing some trickle-over from gold prices, which have historically been an inflation hedge. Gold prices have become quite heavy over the past few years, and some of that is expectation for hard assets, which is propping up crude oil prices. I would expect more of that based, again, on the scarcity argument. Over this next 12–18-month period we will likely see crude oil prices lead and prepare for reinvigoration of economic growth.
TER: Do you have a near- and mid-term forecast for oil and gas?
CT: Sure. For 2012, our estimate for WTI is at $90/bbl, and our estimate for natural gas is $4.16 per million British thermal units (MMBtu). Certainly if we continue to see what I deem a store of value phenomenon for crude oil, that $90/bbl level likely will prove conservative. But, in terms of generating valuation estimates for equities, I would rather be conservative than not, especially given the backdrop of volatility that will likely continue into the foreseeable future. As we look further out, we’ve got a 2013 estimate of $100/bbl. We see recovery in natural gas prices to $4.75/MMBtu as we move toward that 2013 timeframe.
TER: How does an MMBtu correlate to an Mcf (thousand cubic feet) for natural gas?
CT: It’s basically a 9% differential in the conversion. It’s going to end up being a rounding error in terms of generating valuation estimates for equities.
TER: Do you use them interchangeably?
CT: Yes, I generally use them interchangeably.
TER: Are energy equities a value now?
CT: I generally break up the various cohorts into micro-, small-, mid- and large-caps. I think the mid- and large-caps are reflecting fair value right now. The smaller guys, where we generally anticipate outsize growth and merger and acquisition premiums occurring, are probably a little ahead of their value, given near- to medium-term crude oil and natural gas price expectations.
TER: Do you expect to see value created before we emerge from these flat to downward trending energy prices?
CT: Given the overall backdrop of questionable economic conditions, flat to rising service costs and transportation issues concerning some of the quickly emerging shale basins, such as the Eagle Ford and the Marcellus, I think value creation in equities is likely going to be a function of takeout premiums and/or the actual realization of those takeouts. I think it is going to be difficult for the small-caps through micro-caps to post the outsize growth and value realization over the next 12–18 months. That’s not to say that reserve values in 2013, ‘14, ‘15 and beyond aren’t significant for these guys; I just think they are probably ahead of themselves.
TER: You speak about rising costs and transportation constraints that are a negative for small-cap companies, but I’m noting that at least two of your three top picks are small-cap energy companies.
CT: Generally, you see a pretty significant disconnect between small- and micro-cap companies’ ability to develop and bring their reserves on and realize that significant growth. The factors that discount future cash flows include constrained credit, access to capital markets and the headwinds of a higher-cost environment. It takes these guys a little bit longer to put the pieces of the puzzle together and bring those reserves to production. Nevertheless there are a couple of guys out there such as Gastar Exploration Ltd. (GST:NYSE) and Energy XXI (EXXI:NASDAQ) that we think are on the cusp of being able to realize significant production ramps. But truthfully for many small companies, it’s going to end up being a function of near-term oil performance.
TER: Do you expect smaller-caps to outperform in 2012?
CT: I think it’s going to be difficult for them next year. I would expect credit conditions to remain tight and natural gas prices to remain low compared to the 10-year historical price average. And even though many of the micro-cap and small-cap companies have a fairly substantial legacy base of natural gas reserves and production, I think it will be difficult for the average company to see significant reserve value expansion, and therefore their access to credit facilities is going to be difficult. I think it’s going to be difficult for the average company to do much better than it may have done in 2010 and 2011.
TER: Curtis, what are Q3 earnings telling you? Did you note any trends from earnings calls?
CT: One overarching trend you will see time and again is that investors will continue to latch on to outside positive news, and certain stocks will continue to benefit from incrementally beneficial news flow. For example, we have seen stocks like Rex Energy Corp. (REXX:NASDAQ) with significant exposure to the Utica Shale and upside from a Utica well bid up substantially in the context of a down-trending market. The counterpoint is GMX Resources Inc. (GMXR:NYSE), which produced a marginal initial well at its Bakken program and traded down significantly. So we see many illogical moves in the market in response to news flow.
Another overarching trend is the market’s ability to extrapolate companies’ positive results, such as the Wolfcamp results from EOG Resources, Inc. (EOG:NYSE) and Pioneer Natural Resources Co. (PXD:NYSE) across a wider base of companies, such as Concho Resources Inc. (CXO:NYSE), Approach Resources Inc. (AREX:NASDAQ) and Clayton Williams Energy Inc. (CWEI:NASDAQ). We are seeing some return to logic and the desire to extrapolate reserve value across equities out of third quarter earnings, which is interesting in the backdrop of a flat overall market.
TER: I believe you have about 18 companies in your coverage universe. What are your top picks?
CT: Chesapeake Energy Corp. (CHK:NYSE) has been one of our top picks for the mid- and large-cap space. It recently announced a substantial joint venture for its Utica Shale position, which is on the magnitude of 1.5 million acres. Shares actually traded down on the heels of that announcement, and I think that has more to do with investors’ distrust of management’s ability to constrain capital expenditures for incremental acreage acquisitions than it does for anything operationally with the company. That’s unfortunate, in my opinion, because I think its convergence to substantial liquids production from an extremely large base in natural gas production has gone extremely well. Management has basically grown its liquids production to the size of a Continental Resources Inc. (CLR:NYSE) in a matter of 18 months. Yet we don’t see that reflected in the share price.
As we look to some of the smaller companies, Gastar Exploration is a micro-cap company that I expect good-to-very good things out of in terms of reserve and production growth. I think the Marcellus program has been extremely aggressive for a company its size and is going to be the primary catalyst for that growth. Gastar should have upwards of 14 wells drilled and completed with potential for production over the next two quarters. For a company that is basically at 20 million barrels per day (bbl/d) of production ending Q3, that prolific basin should be a distinct and substantial equity value driver in a fairly compressed period of time.
TER: Do you expect to hear market-moving information on Gastar’s Marcellus play by the end of the year?
CT: I do. It has a handful of wells that are in various stages of completion that should turn to production between now and year end.
TER: You recently raised your target price on Energy XXI from $32 to $36. It’s a mid-cap at $2.3B. Why do you like it?
CT: Energy XXI has a number of tailwinds at its back right now. A significant premium is being paid for Louisiana Light Sweet crude oil, which is likely going to add somewhere between 10–15% to its cash-flow. Also, it has an extremely deep bench of potential drilling projects, including what appears to be an absolute homerun acquisition of some legacy Exxon Mobil Corporation (XOM:NYSE) properties contiguous to its shallow-water Gulf of Mexico core operations. Then there is its ultra-deep exploration portfolio in which it is participating with McMoRan Exploration Co. (MMR:NYSE) and several other partners. The Davy Jones, Blackbeard East and Blackbeard West wells are going down 36,000 feet deep or deeper. Initially, at least, the company is finding absolutely monstrous structures that appear to be a continuation of the extremely large structure found onshore in the transition zones of Louisiana that define some of the most prolific crude oil and natural gas fields in the history of that state.
TER: Energy XXI shares have performed quite well over the past 12 weeks, even with some weather-related issues during Q3. It was the best-performing stock in your coverage during that period. Why has it performed so well?
CT: First, most of that weather issue was related to tropical storm Lee, and that was fairly well known. It is really more of a production deferral than a production loss. Second, the upside performance is related to higher crude oil price realizations than what a lot of folks, including me, expected. And, again, that’s the tie-in to Louisiana Light Sweet crude. And, third, I think its building expectations for a Davy Jones production test sometime mid-December followed by first production shortly thereafter.
TER: Were there some small caps that you could talk about?
CT: A number of small caps looked comparably attractive in the long-term. One name worth some attention is Goodrich Petroleum Corp. (GDP:NYSE), which has become quite active in the Eagle Ford Shale and was among the first to investigate the Buda Lime Shale. This is another company transitioning out of lower value legacy natural gas assets to more liquid-rich crude oil driven areas like the Eagle Ford. The company has to work its way through some liquidity issues, and questions still remain to some degree about funding the 2012 capital budget. But, I think if it continues to post Eagle Ford results like it has the past few quarters, those liquidity concerns will give way to enthusiasm for growth in the crude oil volume.
TER: Are you implying that the Eagle Ford play has not been discounted into the stock price?
CT: Not anywhere close by my estimates. And, in a number of instances we see capital flowing disproportionately into larger players like Petrohawk Energy prior to its acquisition by BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK). EOG Resources continues to be on a very nice run in the Eagle Ford. Pioneer Natural Resources is also realizing some benefits there. But, I think the smaller-cap players have been disproportionately affected by transportation issues and have yet to fully realize the same degree of value as have the larger players such as Swift Energy Company (SFY:NYSE).
TER: Was there one more small cap?
CT: A large one that I would point to is SandRidge Energy Inc. (SD:NYSE). I’ll call it a Chesapeake junior, if you will. I say that because Chairman and CEO Tom Ward was one of the co-founders, president and CEO of Chesapeake before leaving that company and striking out on his own to build SandRidge. In terms of investor sentiment, SandRidge is quite striking in similarity to Chesapeake as well. The thesis of asset quality has been working for me over the past 5-7 years and ultimately it wins out. I believe SandRidge will continue to put points on the board with its oily growth out of the horizontal Mississippian and, certainly, as it continues to bring growth to the forefront of its Central Basin Platform property.
TER: Will SandRidge be able to fund its greater capex requirements associated with other projects?
CT: It will, and 2012 should not be at all problematic for SandRidge.
TER: A while back you said that small-cap GMX Resources Inc. was your top pick. How do you feel about it now?
CT: We maintain a Buy rating on it, and I think the shares are worth $5 as our estimates stand now. But, largely that is going to be predicated on the balance of the near-term well results. If we see further evidence of marginal performance out of the Bakken program it’s going to be very difficult to remain bullish on GMX without some substantial step-up in well performance.
TER: You have ATP Oil and Gas Corp. (ATPG:NASDAQ) rated as a Buy. It has had good relative strength over the past 12 weeks. You have a $16 price target on the stock, and that implies a substantial return of more than 100%. What is your thesis here?
CT: Our thesis remains intact. By my estimates, ATP was probably the most negatively affected by the federal government drilling moratorium after the Macondo oil spill tragedy, largely because it carries a substantial amount of leverage with about $2 billion of debt outstanding. Its largest development program, Telemark, was on the cusp of first production when that drilling moratorium was handed down. That put the company’s ability to pay down its debt load in a significant lurch. The forecast for Telemark was to have peak production of 30 thousand bbl/d, which would have more than doubled the company’s existing base of production. In a very recent conference call, the company noted that the production rate on one of the three wells in production has been lowered, which should act as a production deferral rather than a production loss. But investors have reacted negatively.
TER: Thank you very much for the time.
CT: I appreciate your time as well.
Curtis Trimble joined MKM Partners in August 2010 as an analyst covering the oil and gas exploration and production (E&P) sector. Mr. Trimble previously covered the U.S. E&P sector for Natixis Bleichroeder, ranking second in the 2010 Wall Street Journal analyst survey for that sector. He also followed the oilfield services sector for Canaccord Adams and Sterne Agee, ranking fourth in that space in 2006. Mr. Trimble holds a Bachelor of Arts in economics from Swarthmore College and a Master of Business Administration with a focus in finance from Rice University.
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