The Energy Report: German Chancellor Angela Merkel recently decided to shut down the country’s nuclear reactors that began operating prior to 1980. Germany will ultimately disband its nuclear energy program in favor of gas and wind power following the fallout from Japan’s nuclear disaster in March. Meanwhile, Japan is also attempting to lessen its dependency on nuclear power. How has that disaster permanently changed the uranium market?

Rick Mills: It’s a short-term hiccup and it’s probably presenting us with one of the greatest buying opportunities for carefully selected uranium stocks that a retail investor can get. The global nuclear renaissance that was underway in early 2010 was happening for specific reasons: concerns about climate change, reducing carbon footprints, energy security and the rising cost of fossil fuels. And then the disaster hit. It gave pause to the renaissance, but none of these reasons have gone away.

Germany’s kneejerk reaction shut seven of its nuclear reactors. They won’t be opened again. Its other reactors will also be completely mothballed by 2022. But the thing is that in 2002 Germany’s center-left coalition enacted a law to phase-out nuclear power. Last autumn, Merkel’s center-right coalition government decided to extend the lifetimes of the country’s 17 reactors by an average of 12 years. That decision was based on a judgment that Germany could not meet its power demand using only natural energy sources, such as wind and solar. The country doesn’t have abundant natural gas reserves. So, I find it pretty ironic what’s happening over there. I think Germany may suffer when it finds it can’t maintain its manufacturing competitiveness. Germany is now burning more coal, and already buying more nuclear power-generated electricity from France and the Czechs, who use the old Soviet-style reactors.

TER: There’s a lot of talk right now about thorium replacing uranium as the fuel in nuclear reactors. These reactors could use thorium, which is much more stable than uranium, and roughly performs the same function. Do you think that thorium will ultimately replace uranium?

RM: Ultimately, but we’re 35 to 40 years away from incorporating that technology. Uranium’s got a long way to run. I believe thorium will be the answer one day, but not for several decades at least.

TER: What about the U.S.? It has some reactors slated to come onstream over the next 5 to 10 years. Do you think that the U.S. is going to follow suit with Germany?

RM: The U.S. is going to ramp up its nuclear power. On April 21, the U.S. Nuclear Regulatory Commission renewed the operating license for the U.S.’s largest atomic plant, the Palo Verde nuclear generating station in Arizona, for 20 years. The U.S. Department of Energy just dedicated a new research facility on May 3. The U.S. is accelerating the advancement of nuclear reactor technology. It’s studying the performance of light water reactors and developing highly sophisticated modeling that will help accelerate upgrades at existing nuclear plants.

That doesn’t sound like the U.S. is in any way, shape or form going to cut back. As a matter of fact, U.S. Secretary of Energy Steven Chu just said nuclear energy is the nation’s largest source of carbon-free power and it is an important part of the U.S. energy mix moving forward.

Uranium supplies are going to get very tight. There’s going to be fierce competition for available material in both the spot and long-term markets. Investors should be looking at uranium-focused juniors with money in the treasury. We’re being set up for the perfect storm in uranium.

TER: Since the disaster at the Fukushima plant in Japan, the spot price for uranium has fallen to about $50/lb. from around $73/lb. in early March. Many junior uranium miners and explorers have seen their share prices fall dramatically since then, too. What are some companies that you think offer a lot of value as a result?

RM: Uranerz Energy Corp. (TSX:URZ; NYSE.A:URZ) is one of the best uranium companies out there. The management is top-notch. These guys wrote the book on in-situ leach mining.

Uranerz is going to be included in the Russell 3000 Index again. If you want to see something interesting, pull up a chart from June 2009 when it was included on the Russell the last time. Funds that track that index have to include these new additions. We’re talking about an awful lot of money. It’s going to be interesting to see what happens to Uranerz’ share price as this becomes common knowledge.

Uranerz is waiting for its final permit to start well field construction and build its production facility. Currently, the company has $45M in the treasury; that’s $0.60 a share. Costs to get into production are estimated to be $35M, so the company has some money for contingencies. I expect Uranerz to be in production in 12 to 15 months. Currently, two drill rigs are performing exploration drilling. Uranerz has identified over 483 kilometers (km.) of alteration-reduction trends on its project areas which cover 38,000 hectares. Uranerz has explored only 15% of the identified trends. One drill is doing delineation drilling for the construction of the well fields.

TER: We’re talking about the Powder River Basin Project in Wyoming?

RM: That’s right. The Nichols Ranch project is expected to produce a maximum of 2 Mlb. of yellowcake annually. Initially, the project is targeting 600,000 to 800,000 lb. per year. The company has long-term offtake agreements signed for a portion of production with two major U.S.-based nuclear operators, including Exelon Corp. (NYSE:EXC). The U.S. produces 27% of the world’s nuclear power from 104 nuclear reactors—these reactors use 50–55 Mlb. of uranium a year but the U.S. only produces 4 Mlb.

Uranerz is a company that has its act together and is definitely sitting at a sweet spot for investors. While there’s a little bit of blood in the streets right now concerning uranium, people should be looking at this sector.

TER: That production could be coming on-stream right about the time when uranium prices could be rebounding.

RM: The spot market is definitely going to tighten up before then and people are going to be looking for long-term contracts. This setback, if anything, makes the market stronger. Prices will eventually move higher.

TER: Potash has somewhat of an inverse relationship to uranium prices. Earlier this month, corn futures reached an all-time high, which ultimately means higher food prices for all of us. It also means there’s a greater need for fertilizer and that bodes well for junior mining companies looking for potash. Do you believe that potash prices will remain as high as they are now?

RM: Yes I do and going higher. Food and how we grow it are going to be dominant investment themes for decades to come. Our population increases geometrically. Our food supply can only increase arithmetically. We’ve got major problems in addition to our growing population. One of the biggest threats we are facing is the loss of arable land that was used for food production. Land is being used for biofuels, topsoil is being eroded away and the agricultural land base is being paved over. We’re destroying our freshwater aquifers. But world population growth and three billion people climbing the protein ladder are the elephants in the dining room. Tonight, 220,000 new mouths will need to be fed at the dinner table.

TER: How does potash mining differ from gold or copper mining?

RM: Unlike other resource plays, potash does not have a cycle. Demand is always going to be there, which makes potash an excellent play in a long-term agricultural commodities bull market. Potash markets are never disrupted by political interference. Food shortages will always trigger social and political instability, such as the riots in the Middle East and Africa. All governments fear a hungry populous.

Companies like Agrium Inc. (NYSE:AGU) and PotashCorp (TSX:POT; NYSE:POT) have very solid bottom lines, but they are mature companies. Investors should start moving down the value chain to junior companies with big potash resources that are going to create value for their shareholders.

TER: What companies fit that bill right now?

RM: We’ve been following three companies on Ahead of the Herd for quite some time now.

Verde Potash (TSX.V:NPK), formerly Amazon Potash, is putting together a fairly large project in Brazil. By the time it finishes, I wouldn’t be surprised if it had enough potash to supply the Brazilian market, the largest potash market in the world, for 30 years.

The company also has phosphate at the Apatita Project and should have a resource calculation out by the end of the third quarter. It is also planning drilling on five other targets bordering their thermal potash product, the Cerro Verde. Recent news suggests they will have a limestone resource as well. This is a company that is definitely in the right area at the right time with the right resources.

The thing about this company that most people don’t realize is that if the potash price is $430/t in Saskatchewan, Canada, it would take $100/t to reach a port in Brazil. Then it would take another $100/t to get it to a blending facility near farmers. The price that Verde’s competing against is not $430—it’s $630—they are already close to that blending facility. According to the last test the company did on its product, thermal potash is about 17% to 19% more effective than KCI, or typical potash.

TER: Verde’s chairman, Peter Gundy, was an executive with PotashCorp. He certainly has some significant background in the potash mining business. He also has the right connections to get the money necessary to bring this company forward.

RM: Absolutely true, and let’s not forget to mention the tremendous efforts of President and CEO Cristiano Veloso, who has done an amazing job pulling it all together, and VP of Corporate Development Jed Richardson, who has been there from day one. Also the government of the Brazilian state of Minas Gerais has signed a memorandum of understanding regarding support for potential financing.

TER: What’s the next name you’re following on Ahead of the Herd?

RM: Western PotashCorp (TSX.V:WPX) has done really well for its shareholders and we were early into this one as well. It’s adjacent to BHP Billiton Ltd. (NYSE:BHP; OTCPK:BHPLF) and Agrium’s exploration permits, and within 13 km. of PotashCorp’s Rocanville facility. The company has 34 Mts. of indicated potash with 245 Mts. of inferred.

Pat Varas and his team have done an exceptional job advancing this project so quickly. The company is doing a prefeasibility study to be completed in the fall, and is planning to start on its feasibility study in August. That’s an amazing amount of engineering going into the project right now. WPX has a memorandum of understanding signed with the city of Regina for water. It’s doing environmental studies and community visits.

Western’s land acquisition program has now successfully secured over 2,550 acres at the company’s preferred plant site location. Securing the plant site location is an important aspect of the ongoing feasibility process as the environmental and regulatory approval processes and project schedules are dependent on it.

TER: Is it a takeover target given its proximity to PotashCorp?

RM: It could be. One of the majors might want to take it and put it on the shelf; the Chinese or Indians have to be interested. I think that’s very possible.

TER: Is there a point where juniors get on the radar screen of larger companies and wake up the sleeping giants like BHP Billiton?

RM: Definitely. I think the major players, the BHPs of the world, are probably looking for at least a prefeasibility study. They want to see solid numbers—capital expenditures and costs of production, net present values and internal rates of return that actually have solid studies behind them. None of these majors have a history of moving too quickly. They’re trudging behemoths that do things at their own pace and need surety in a deal.

TER: There was one more potash company you wanted to talk about. What was that one?

RM: Encanto PotashCorp (TSX.V: EPO) in Saskatchewan, Canada. What makes this one interesting is that they are collaborating with several First Nations groups to develop projects on their lands.

TER: In fact, Encanto was developed with that in mind, right? It was developed with the idea that it would work with First Nations to develop these resources.

RM: Absolutely. The first project Encanto started was developing an 80-to-100-year resource on the Muskowekwan’s land. The goal is to develop a producing mine as quickly as possible. EPO’s upcoming preliminary economic assessment (PEA) remains on schedule to be released in the first half of August. The PEA is designed to determine the most economical method for potash extraction and will make a recommendation on a solution or conventional mining operation.

It hasn’t had the success in the market that Verde and Western have seen because the necessary reserve vote on continuing with development of the project hasn’t happened yet and that creates uncertainty. The vote will happen in the fall; it’s scheduled for late September.

TER: The whole operation hinges on that vote?

RM: Yes. Newly elected Chief Bellerose ran on a pro-potash forum. The majority of candidates also ran on a pro-potash forum, as did all eight successful councilors. I firmly believe it’s going to be passed. But there seems to be some hesitation in the market over it.

TER: If the vote does go through as expected, we could we see a bump in the share price. It’s at $0.23 right now.

RM: The band has approximately 1,050 eligible voters, many of whom don’t live on the home reserve. For the vote to be considered a legal vote, at least 51% of eligible voters must cast a vote. For the vote to be successful, at least 51% of those voting must cast in favor. If a sufficient number of voters don’t participate in the first vote then the vote is considered a failure; a second vote will be held on the home reserve 35 days after the first vote. For the second vote to be successful, a simple majority is required from those who vote. In an effort to ensure that all band members are fully aware of the benefits offered through the partnership with Encanto, Bellerose is holding open sessions in Regina, Calgary, Winnipeg, Saskatoon and Edmonton.

There are really two drivers for the stock: the vote and getting the Home Reserve Lands, which will double the land acreage (and potentially the resource). It’s been a long haul, but I believe that this is going to be a successful company and we’re going to see it move forward.

TER: What are some things that investors should keep in mind when investing in potash companies?

RM: It’s a long-term investable trend and with surging prices for agricultural commodities, farmers are looking to boost crop yields, opening the door for fertilizer makers to raise prices. There might be temporary weaknesses, but everybody has to eat and there are 220,000 more of us at the dinner table every night. So there are compelling reasons to be looking at these companies. Also, these are not cheap mines to build. The companies need management teams capable of going out there attracting the interest from the institutions and raising the money necessary (all three companies I mentioned do). Their neighborhood is also important. Who’s in the neighborhood? Could a company be a takeover target?

TER: Thanks, Rick.

Richard is host of www.Aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 300 websites, including: The Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Uranium Miner, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and Financial Sense.

The Energy Report: You spoke to The Energy Report approximately three months ago. We’ve been experiencing some weakness in natural resources since then. How has your portfolio performed since that time?
Chen Lin: It’s doing relatively OK. It’s down slightly, but not much. In the past few months, I’ve been telling my subscribers to be careful, to raise some cash and to be prepared and to buy on a dip. In the past couple of weeks, I have started to deploy some capital into buying those cheap, undervalued stocks. So far I’ve been doing OK, down slightly, I would say a few percent.

TER: Have these buys on dips been additions to existing positions? Or are these new stocks?

CL: Some of these stocks were already in my portfolio and some are new positions. I also want to say that I have sold some at a profit, including some of the stocks mentioned in my last interview with The Energy Report.

TER: You’ve told me that you focus on resources because the entire sector is under-researched, and you can find undiscovered jewels. How do you find an orphan stock? Do you discover these companies at conferences, seminars? What is the process?

CL: I find some companies at conferences. Some are already known and they come here to have private meetings, at which time I’m able to talk to the management. Also, I receive recommendations from people I know and trust who have already done some screening. So I can take a look see if a company’s really good.

TER: Typically, people won’t be talking to you about companies that they might buy next week or the week after. They’re talking to you about companies they already own. You have to make a judgment at that point on whether or not you’re throwing good money after bad, or whether it’s truly a great growth or value opportunity. Don’t you?

CL: Yes, absolutely. I should also add that some companies actually have business relationships with some of my friends who may already own the stock. So, they have some personal incentive to promote the company. But that’s fine. I only look at the valuation. When they bring companies to my attention, I do the research, and elect not to buy most of them. Many stocks have been thrown to me, but I only pick a few that I believe are the best.

TER: There is so much risk involved in a company that is not under the microscope. So much can fly under the radar. How much diligence do you do? How long does it take before you enter a position in a company that you’ve never known before?

CL: Usually it takes some time. Sometimes it takes days. Sometimes it takes weeks. Sometimes it takes months and then years. If I find a company of interest, I’m going to look at the back history. When did it do a private placement? When does a share become a free trade (expiration of lockup period)? Is it a flow-through share, or is it a regular share? Who are the shareholders? I want to see when it might be most likely that people will be selling the stock.

So even if I like a particular stock now, I might put it on my calendar to look at it six months from now. Perhaps at that time those private placements will be finished selling shares, and it could be a better time to enter the stock. So to answer your question, it really depends.

TER: So you want to see how much selling there is after a lockup expires.

CL: Exactly. As I told my subscribers, one stock I was recently buying is a flow through, and it will expire. You buy a little bit, and then when it drops, you buy more. When the stock dropped 30% in a couple of weeks, we bought more. Now it’s up 30%. If you followed those steps, you could have 30% gains in a week or two.

TER: You probably find it to be a good sign if insider ownership is increased from quarter to quarter.

CL: Absolutely. We’re in a period in which some energy stocks were hit really hard. And when an insider buys from the open market, that’s a very good sign.

TER: Out of the entire resource sector, in which industries are you currently overweight, and in which are you underweight?

CL: I’m currently overweighting energy because usually summer is a very good season for energy stocks. There are going to be heat waves and rolling blackouts, and oil demand is very high.

TER: Do you currently prefer oil to gas?

CL: Oh yes, I’m heavily in favor of oil. I would not want to look at a company producing gas in North America unless it’s an extremely compelling situation. Gas is very, very cheap here in the United States. If you calculate the gas-to-oil equivalent, the gas price is $25–$30/bbl right now, while WTI oil is $100/bbl. So, basically, if you use gas to run your car, it’s about $1 per gallon gasoline equivalent.

The United States is the world’s largest oil consumer, and it should be a no-brainer to switch to natural gas. In fact, most of the natural gas here is produced in North America, while oil is produced around the world, and by a lot of countries that are enemies of the United States. Even in China, where the price of imported natural gas is very high, people are still switching from gasoline to natural gas.

It’s very easy to switch. You just need to convert your engine, and it’s a very simple conversion. But it takes government will to do that because you need to build natural gas fueling stations nationwide. Once those are built, people will enjoy $1 per gallon natural gas that is sourced in North America. I do not understand why the government is not going for that. Government is run by a lot of supposedly intelligent people. One day they will wake up and say we should use natural gas, and so I’m very bullish on natural gas for the long run.

TER: During the month of May, Brent crude tested $110/bbl on the downside three times. It looks like a perfect triple bottom, and now oil has bounced. Was that what we needed for oil to continue its bull market?

CL: Goldman said before that it was bearish on oil, and that pushed oil down. Now Goldman is bullish on oil, and it goes up. I think maybe we’re in a trading range for the near future. But my energy companies are making extremely good cash flows at the current price. I’d like the price to go lower.

Although I invest in energy companies, I wish oil would go down to $80–$90/bbl. My oil companies are low-cost producers, and they can still make a lot of money at $80–$90/bbl. They don’t really need $110/bbl to make extra profits. So I actually hope energy prices will come down further, but I’m not counting on that. As for the technical side, $110/bbl seems to be the support level.

TER: What companies are you favoring right now?

CL: My current biggest position is Mart Resources Inc. (TSX.V:MMT). It’s a light sweet oil producer in Nigeria. The company has been ramping up production very nicely; current production is probably three times last year’s rate, and going higher. Well drilling continues, and production just keeps growing. The stock is trading at 1X pretax cash flow right now, and if production continues to progress, it will be trading below 1X cash flow. We know that most of the energy companies are trading at least 3–5X cash flow. Because it’s a Nigerian company, you have to give it a little discount, but it’s still extremely undervalued.

TER: You say it’s undervalued, but its share price performance has been stronger than most of its peers over the last year.

CL: Yes. I think that’s partly because it has such a strong cash flow supporting its stock. This company is generating $15–$20 million per month in pretax cash flow right now, and the market cap is only $200M; that’s a really compelling valuation, and I believe the stock will go much higher. [Editor's note: After the interview, Mart Resources published a new presentation stating that they were generating $13.5 million in monthly after-tax cash flow and around $20 million pretax.]

TER: I’m noting that Mart’s share of the Umusadege oil field play during Q410 produced 104,000 bbl of oil, compared to 317,000 bbl of oil in Q409. What happened there?

CL: There was a problem with a pipeline. What I heard was that the pipeline owner fired the security staff, and then there was some trouble and a significant pipeline disruption in Q410. But right now, everything has quieted down, and there has been almost no disruption since the beginning of the year.

TER: I also noted that the company announced that the total gross proved reserves in that field increased 56% year over year, to 9.6 MMbbl of oil on December 31, 2010, compared to 6.1 MMbbl at the previous year-end. Is that where you’re hanging your theory?

CL: Yes, but I think that’s just part of the picture. As the company continues to drill and develop, I believe that the net present value will continue to increase. So far, every well drilled has been a success. So the number will be much higher by the end of this year.

TER: You’re still very high on Mart Resources even though it’s up 153% over the past year, right?

CL: Yes, that’s correct.

TER: OK.

CL: Another company is Porto Energy Corp. (TSX.V:PEC). It’s a new addition to my newsletter. It owns almost 100% of a big land package in Portugal, but the area has not had any modern exploration yet, and so it’s a virgin play. There are top-notch people on board from Devon Energy Corp. (NYSE:DVN), including Joe Ash, who ran the Devon International division, and that was a $10 billion business. He left to run the Porto Energy startup, and it already has a natural gas discovery.

I want to add that the natural gas price in Europe is much higher than in the United States. Porto has a natural gas discovery with a much higher value than the current stock price; also, there are going to be some very exciting oil wells drilled. You can look at Porto’s recent presentation to see how big it’s aiming. This is an elephant, and so the upside is very big.

TER: Chen, I noted that Porto raised $70 million with its IPO back on March 28th. Did you buy in at the IPO, or after the IPO?

CL: Oh, I didn’t participate in the IPO. I already participated in the placement earlier, about two years ago. But I bought from the open market recently, when the price dropped below the IPO.

TER: You said it was a virgin play. Will that $70 million take it to production?

CL: It will take the gas into production. My understanding is that Porto will start producing the gas already discovered in the first half of next year. The good thing about these small companies is that if they drill a well, and it’s successful, they can start pumping oil and then truck it out. There are two refineries in Portugal, and both are importing oil. So I think they’ll probably be more than happy to replace that with domestic oil, and as soon as the oil flow starts, cash flow will start.

TER: Will the gas production fund operations for oil?

CL: The $70 million will fund the drilling campaign this year and next; next year, the plan is to start selling gas. Joe Ash told me that if oil is found, it’s very unlikely that Porto will be an independent company a year from now.

TER: You have been watching insider ownership.

CL: Yes. There are three insider purchase companies I’ve been watching. One is Groundstar Resources Ltd. (TSX.V:GSA); I mentioned it last time I spoke with you. There has been insider buying, and recently the stock started to rebound. There’s one play in Kurdistan, one in South America and one in Egypt. The good thing is that Groundstar is not paying for the drilling, except in Kurdistan. All the others are currently in production.

There are two other companies. One is Harvest Natural Resources Inc. (NYSE:HNR). It’s pretty significant that one company vice-president spent a half million dollars to buy on the open market. This company has properties in Indonesia, in Africa (offshore) and in Venezuela. There’s an African well being drilled right now, in Gabon. I didn’t mention the company last time because it had a little too much debt on its balance sheet. But since then, it has sold its U.S. property for $4–$5/share cash, and the company today has a very clean balance sheet.

After paying down debt and all the other improvements, HNR probably has $3 or $4/share in cash, and this is a $12 stock. The Venezuela property is fully funded and paying dividends, and there is no need for funding. So it’s a very good value proposition, and the company is for sale. Management wants to maximize shareholder value. Then you can see the VP put a lot of money into this.

TER: OK, you said there was another insider play?

CL: Yes, another one with a pretty large insider purchase is actually a coal company called Prophecy Resource Corp. (TSX.V:PCY). The CEO has been buying the stock with significant amounts of money recently. Also, other members of management have been buying over the longer term. This company is starting two coal mines in Mongolia. One is already started, and one is in the process of getting the final permit. As we’ve seen, the price of coal has been rising dramatically. This summer, China is going to be experiencing the worst rolling blackouts in history. So I think there will be a lot of demand from China for its major power source: coal. The future looks very bright for coal. The insider purchases make Prophecy Resource look really good.

TER: Your three insider plays, Groundstar, Harvest Natural Resource and Prophecy, are very interesting stories. What else did you want to mention?

CL: Last time, I mentioned a few stocks I’m still holding: Vaalco Energy Inc. (NYSE:EGY), Pan Orient Energy Corp. (TSX.V:POE) and Vast Exploration Inc. (TSX.V:VST). VAALCO and Pan Orient both have some very significant drilling results coming in the next 6 to 12 months.

TER: You’ve sold your Leader Energy Services Ltd. (TSX.V:LEA), correct?

CL: That’s correct, yes. Leader Energy went up a lot, and I had a pretty good profit so I decided to take the profit on that. I was pretty lucky because I sold it when it was quite high—much higher than the current price.

TER: Leader is up 300% over the past 52 weeks.

CL: I just wanted to say QE2 (Quantitative Easing 2) is finishing at the end of June. The market could be volatile this summer, so it’s always nice to have some dry powder. That’s pretty much my message right now.

TER: Thank you, Chen.

CL: Thank you—likewise.

Chen Lin writes the popular stock newsletter What Is Chen Buying? What Is Chen Selling?, published and distributed by Taylor Hard Money Advisors, Inc., publisher of J. Taylor’s Gold, Energy & Technology Stocks newsletter and Roger Wiegand’s Trader Tracks. Using his wife’s Roth IRA account, Lin invested $5,411 in December 2002, and by December 31, 2010 it was worth $1,188,993—with no cash added. You can see his portfolio chart here.

Another big issue in inflation measurement in India is the problems of food and fuel. In both cases, there’s an element of administered prices, so a jump in the point-on-point seasonally adjusted price level might just be a month in which the government raised a price. This is not a statement about the deeper inflation in the economy. In any case, fuel prices are greatly influenced by the global oil price. Food prices often jump around reflecting a good harvest or a bad harvest. In order to understand the deeper `core’ inflation in the domestic economy – the stuff that domestic monetary policy should care about – it’s useful to look at the WPI excluding food and fuel. Starting with yesterday’s release, we do this also.