Month: April 2013

By www.CentralBankNews.info     Poland’s central bank held its policy rate steady at 3.25 percent, as expected by most economists, and said it would explain its decision at a press conference later today.
    The National Bank of Poland (NBP), which has cut rates by 100 basis points this year following a reduction of 50 basis points in 2012, signaled last month that it was getting close to ending its rate easing cycle as moderate economic growth would help contain inflation.
    In February, Poland’s inflation rate tumbled to 1.3 percent in February from 1.7 percent in January, the lowest rate since early 2006. The NBP targets inflation of 2.5 percent target, plus/minus one percentage point.
    Financial markets are expecting the NBP to cut rates further in the next few months as economic data continue to weaken.
    Retail sales rose in February from January but on an annual basis they were down 0.8 percent while the February unemployment rate rose to six-year high of 14.4 percent.
    Poland’s Gross Domestic Product grew by 0.2 percent in the fourth quarter from the third quarter for annual growth of 1.1 percent 

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 10 April 2013, 07:30 EST

AFTER touching a one-week high yesterday, gold drifted lower Wednesday, ending London’s
morning trading around $1580 an ounce, more-or-less where it started the week, while stocks
gained and government bond prices fell.

Gold in Sterling was also trading in line with last week’s close at around £1032 an ounce, while
gold in Euros fell to €1206 an ounce, just under 1% down on the week so far, as the Euro touched a
one-month high against the Dollar following news that Ireland and Portugal may get more time to
repay bailout funds.

Dealers in India meantime reported slow buying Wednesday, while the world’s biggest gold
exchange traded fund, SPDR Gold Trust (ticker: GLD), continued to see outflows Tuesday. The
volume of gold bullion backing GLD shares ended yesterday at a new 21-month low of just over
1200 tonnes.

“Sentiment amongst some investors has become less bullish for gold,” says this month’s Metal
Matters from bullion bank Scotia Mocatta.

“Rising equity prices to new record highs have increased the opportunity cost of holding gold as an
investment and that has caused some rotation out of bullion and into other asset classes. With some
financial institutions also seeing the gold price as in a bubble and marking down their forecasts, it is
not surprising that sentiment amongst some investors has turned less bullish.”

Analysts at US investment bank Goldman Sachs today cut their 12-month gold price forecast from
$1550 to $1390 per ounce, and advised clients to sell gold short using futures contracts.

Deutsche Bank and UBS both cut their average gold price forecasts yesterday, to $1637 and
$1740 respectively. So far this year gold has averaged just over $1626 per ounce, based on
afternoon London Fix prices.

President Obama is due to unveil his 2014 budget later today, with the White House saying he has
come “more than halfway towards the Republicans” in an effort to secure a deal.

Obama’s budget is expected to ask for $580 billion of new tax revenues over the coming decade,
including a minimum tax on those earning more than $1 million a year – the so-called Buffett Rule
– which is opposed by Republicans.

Obama is also expected to announce a change in the way inflation is measured when calculating
payments under programs such as Social Security, adopting the so-called chain-weighted consumer
price index, which has tended to be slightly lower than the standard CPI.

Whereas the standard CPI measures the changes in prices of a predetermined basket of goods and
services, the chain-weighted measure allows the basket to change to reflect changes in consumer
buying habits, in particular substitution out of goods and services that have risen in price.

The Federal Open Market Committee meantime is due to publish the minutes of its latest policy
meeting later today.

Over in Europe, Ireland and Portugal could get an extra seven years to repay their bailout loans,
according to draft proposals drawn up by the so-called troika of the European Commission,
European Central Bank and International Monetary Fund, Reuters reports.

Support for granting Portugal more time however is likely to depend on its government plugging a
€1.3 billion budget gap that arose after earlier proposed savings were deemed illegal, the newswire
adds.

China, the world’s second-biggest gold buying nation last year, recorded an $884 million trade
deficit in March, official figures published Wednesday show. Year-on-year export growth fell to
10%, down from nearly 22% a month earlier, while imports rose by 14% from a year earlier.

“A depreciating Yen has weakened the competitiveness of Chinese products in Japan,” says Zheng
Yuesheng, spokesman for China’s customs administration.

The Yen traded close to four-year highs against the Dollar Wednesday, just below the ¥100 mark,
while gold in Yen was also near its highest level in over 30 years.

The Bank of Japan last week promised to aggressively boost its monetary stimulus program as part
of an effort to raise the rate of inflation in Japan.

Elsewhere in Asia, South Korea has raised its alert level to “vital threat” following signs that North
Korea is preparing for a missile test.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership
service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-
running investment letter. A Cambridge economics graduate, he is a professional writer and editor
with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best
place for your money, and any decision you make will put your money at risk. Information or
data included here may have already been overtaken by events – and must be verified elsewhere –
should you choose to act on it.

Forex Daily review brought to you by REAL FOREX | www.Real-forex.com

 

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By www.CentralBankNews.info Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

By MoneyMorning.com.au

On the 11th of March 2011, Japan experienced a nuclear disaster at the Fukushima power plant.

Then just over two years later, on the 4th of April 2013, Japan experienced its second ‘nuclear disaster’.

But this time, the nuclear disaster was in its financial system. And rather than an act of god, it was an act of madness by a central bank: the Bank of Japan nuked its own currency.

This will have massive implications for the Japanese…but just what does it mean for you?

In case you missed it, the Bank of Japan’s (BoJ) Governor, Haruhiko Kuroda, announced last week plans to DOUBLE the size of the BoJ’s balance sheet by the end of next year…

To do this it will buy the equivalent of $75 billion of securities each month.

That may not sound so shocking, given the US Fed is buying $85 billion a month. It seems we’ve become desensitised to these big numbers anyway: a hundred billion here, a few trillion there.

But please let me put Japan’s $75 billion in context.

Their economy may be the third largest globally, but its GDP is currently just $5.8 trillion. Compare that to the US economy with a GDP of $15.1 trillion.

So Japan is almost matching the US’s asset purchases, but has an economy almost three times smaller.

In other words — Japan’s purchases would be the equivalent to the Fed buying $195 billion of assets a month.

Give it a few years before the Fed does that…for now, that kind of number would still stun the market.

So what’s happening over in Japan so far? Well the main index, the Nikkei 225, has taken off like a rocket, jumping 8.6% in the last few days.

This is where things could get interesting for Aussie investors. You may not think of the Japanese stock market being that important to us, but the two are linked in a tango.

Aussie Investors Take Note

After all, Japan is the second biggest economy in the region, after China. Japan is also one of the biggest importers of Australian resources. And Japan’s currency has been a favourite of the ‘carry trade’, where low interest Yen is used to invest in higher yielding assets, like Aussie stocks.

Through these links, and others, Japan has a major influence on our market. You can see just how tight the All Ords (red) and the Nikkei (black) are in the chart below.

Japanese and Australian Markets Dance the Tango

Click to enlarge
Source: StockCharts

Now take another look at the chart. See how the Aussie market has tracked Japan’s every move for years — but is yet to follow Japan’s recent massive spike?

If the long term relationship continues, either Japan’s market pulls back, which is very unlikely given the immense scale of the BoJ’s new plan…or alternatively, the Aussie market follows Japan’s lead up.

This has the makings of a turning point for our market, after it spent most of March falling. Even the smoking crater called the Australian resource sector has bounced 4.4% since the surprise announcement from Japan.

And that’s the key in this. It has been a genuine surprise. Of course, everyone knew an announcement was coming, and that it was supposed to be a big one.

Even so, after many years of piecemeal Japanese policy, no-one anticipated that the BoJ would come out with the biggest ‘bazooka’ the world of Quantitative Easing has ever seen.

In Money Morning yesterday, I explained how Japan’s decision could contribute to a 40% move in gold. But what of other assets? How about silver? It’s already seen a 5.5% jump since the announcement.

A Bullish Signal

Is it a coincidence that leading into the BoJ decision, the set up on the silver futures market has been just about as bullish as it gets? Take a look at this chart below. The managed money (ie: traders, not the big banks) have recently taken a short position between them.

Traders Shorting Silver — Time for You to Buy

Source: gotgoldreport

Like in the chart for gold I showed you yesterday, when these guys get bearish they are usually wrong — and it precedes a rally in silver.

But it’s been 5.5 years since they were so short that the net position was actually negative. Last time this happened, silver jumped 65% in six months. This is a clear warning to expect the well overdue move in silver. And Japan’s red-hot printing presses will be the perfect catalyst.

This could well mark the moment that the devastated gold and silver juniors turn around. Where else will helicopter Haruhiko’s money show up in global markets?

It’s hard to anticipate how bubbles will express themselves. The biggest question is how this affects the Japanese bond market.

The jury is still out, but trading has been wild so far. Nearly all of Japans grossly inflated bond market is held domestically by banks, pension funds and the like. They have been ridiculously loyal in recent years, but will they be able to hang on in the face of a doubling in the balance sheet?

We just don’t know. So while it is easy to imagine the price of precious metals, and stocks rising in over the next few years in response to the BoJ’s big
bazooka , be warned there are more important questions over the longer term.

What will be the unintended consequences of this grand experiment?

How will this affect the Japanese bond market, only slightly smaller than that of the US?

And how will this play out in Japan and Australia’s economies?

It’s just far too early to say, but it’s very hard to imagine this will go without a hitch!

Dr Alex Cowie
Editor, Diggers & Drillers
Join me on Google+

From the Port Phillip Publishing Library

Special Report: TORRENT SIGNAL 3

Daily Reckoning: Will Japan Provoke the Chinese Dragon?

Money Morning: Gold Bulls About to Win the War

Pursuit of Happiness: Why the NBN is Dead Before it’s Begun

Australian Small-Cap Investigator:
How to Make Money From Small-Cap Stocks

By MoneyMorning.com.au

Of all the alternative energies in the world, nuclear power is both the most promising and the most reviled.

Many environmental activists now see nuclear as the ‘least-worst’ option for dealing with climate change. Compared to coal and even natural gas, nuclear is clean energy.

On the other hand, the 2011 Fukushima disaster in Japan illustrated all anyone needs to know about why nuclear power is held with such suspicion by the voting public. And where the voters go, politicians follow.

As a result, the price of uranium — the fuel for nuclear reactors — is hovering very near to its post-financial crisis lows.

And that’s why now could be the perfect time to add some nuclear industry exposure to your portfolio…

Supply of Uranium Looks Set to Tighten

In 2007, the price of uranium spiked above US$130 per pound. The financial crisis saw it crash to around $40 per pound. It then clawed its way back above $100 as recently as early 2011. The Fukushima disaster drove it back below $50, and it has been in a slow decline since.

Right now, the price is sitting at just over $42 per pound. What’s to stop it from going even lower?

There are tentative signs that the price might be bottoming out. Uranium industry group Ux Consulting notes that the uranium price has remained stable at $42.25 per pound for five weeks in a row. That’s the longest period of unchanged prices since the summer of 2008, according to Platts.

As Melissa Pistilli notes on uraniuminvestingnews.com, the stable price may ‘lure utilities back into the market this month despite the fact that April is seasonally slow.’

They might be wise to do so. We all know what happens when prices of commodities fall. Production tends to fall too. Various plans for new mines and production expansions have been shelved.

Meanwhile, global uranium consumption looks set to outstrip production this year. The shortfall is met by stockpiles from Russia, from decommissioned nuclear weapons. This has provided around 25 million pounds of uranium a year since 1993, according to Halkin Services.

However, the deal between the US and Russia on the stockpiles expires this year. While it might be renegotiated, the Russians may well look for better terms. 

What About the Demand Side?

Worldwide, there are around 435 nuclear reactors in operation, with more than 60 being built. Nearly half of the new reactors are in China. One of China’s biggest problems right now is pollution. Between the smog and the dead animal-clogged rivers, the state of the environment and living conditions are a serious social issue.

This is where nuclear power has a real benefit. China only gets around 2% of its electricity from nuclear just now. The majority comes from coal, which is dirty and accounts for a lot of the pollution problem.

So if China wants to be more ‘green’, then nuclear makes a lot of sense — there are plenty of problems associated with nuclear, but greenhouse gas emissions are not one of them.

The other area to keep an eye on is Japan itself. Before the disaster in 2011, nearly a third of Japan’s electricity came from nuclear power. Yet now almost all of its reactors have been shut down.

That means the country is relying on expensive imported natural gas. Japan’s Ministry of Economy, Trade and Industry thinks the nuclear shutdown is costing the utility companies around $13bn a year.

Unsurprisingly, Japanese voters don’t like the idea of nuclear power. But given the huge costs involved, you can see that politicians might be tempted to push through the reopening of as many reactors as possible.

Prime Minister Shinzo Abe is certainly keen — the last thing he wants after making such an effort to reflate the economy is for his hard work to be undone by an energy crisis.

New safety standards are being revealed in July, notes Pistilli, and some reactors look set to be restarted in the autumn. If Japan switches on more reactors than expected, that could give a surprise boost to demand.

The reality is that despite Fukushima, nuclear power isn’t going to go away. Yes, it’s likely to remain a marginal source of energy because it will never be politically popular. But given how far the uranium price has fallen, now looks a promising time to add a bit of exposure to the sector to your energy portfolio.

Don’t expect the price to come rocketing back — there are plenty of potential disappointments and tripwires on the road to a nuclear renaissance.

But given the current lack of interest in the sector, and the low price of uranium, it wouldn’t take much positive news to start turning things around.

John Stepek
Contributing Editor, Money Morning

Join Money Morning on Google+

From the Archives…

Only Lunatics Need Apply for This Stock Market Rally
5-04-2013 – Kris Sayce

The Run-on Effect of Aussie Housing on the Australian Stock Market
4-04-2013 – Murray Dawes

Good News in China’s Economy? Put This Date in Your Diary…
3-04-2013 – Dr Alex Cowie

‘Gold Only Rises During the Bad Times’ and other Fairy Tales
2-04-2013 – Dr Alex Cowie 

On Gold — Billionaire Investor Eric Sprott Says : ‘I’m in Alex Cowie’s Camp’
1-04-2013 – Dr. Alex Cowie

AUDUSD breaks above 1.0496 resistance and reaches as high as 1.0508, suggesting that the uptrend from 1.0115 has resumed. Further rise is still possible, and next target would be at 1.0600 area. Support is at 1.0435, only break below this level will indicate that lengthier consolidation of the uptrend is underway, then another fall towards 1.0300 could be seen.

Forex Signals

By The Sizemore Letter

Listen to Charles Sizemore and Mike Robertson discuss ”sell in May, go away,” dividend investing and investing in emerging markets on Straight Talk Money.

SUBSCRIBE to Sizemore Insights via e-mail today.

The post Charles Sizemore on Straight Talk Money: Part 2 appeared first on Sizemore Insights.

By OilPrice.com

Until recently Tunisia was considered to be a minor league and relatively underexplored venue in Africa’s rapidly expanding oil & gas scene. This situation has quickly changed with new bid rounds and forced relinquishments creating an opportunity for new companies to come in.

Major American E & P companies like Shell have jumped at the opportunity to acquire ground that had been dominated for decades with little to no work conducted, mostly by European State oil & gas companies in this former French protectorate. For the first time major spending has been committed to test Tunisian basins which are arguably equally prolific as those in neighbouring environments with more work performed, such as Libya.

Tunisia is now in focus for investors because exploration is increasing within the producing Pelagian Basin, which leads us to ask the following questions:

Should Tunisia now be on energy investors watch list?

Is Shell just the start of “big oil” making inroads into the country? And which are the plays that people should be watching?

To help us look at the developing situation in the region we managed to speak with oil industry veteran John Nelson.

John Nelson is CEO of Canadian-listed Africa Hydrocarbons Inc. (NFK). A veteran geologist, Nelson spent much of his career in East and Central Africa—much of it for Mobil Oil–studying regional and mapping rift basins at a time when no one else was shopping around in Africa’s interior. Over his 27 years in the industry, Nelson has also had junior E & P experience, recently serving as CEO for Lion Energy Corp., which was bought out by Africa Oil Corp ‘AOI’ in 2011 as a way for AOI to gain access to their impressive Kenyan land package that John had put together.

Africa Hydrocarbons Inc has a 47.5% interest in the Bouhajla Block, located onshore Tun isia and surrounded by major Shell Oil.

In an exclusive interview with Oilprice.com, Nelson discusses:

• What makes Tunisia a great game for the juniors
• How Tunisia’s geology compares to the East African Rift
• What’s hot in Tunisia: conventional or unconventional plays?
• Why security isn’t as grave a concern as one would think
• What some of the next great exploration areas will be for juniors
• Why it’s a lack of capital, not venues that is holding new entrants back
• How to mitigate risk in Somalia
• Why Ethiopia may be about t o see its first major discovery
• Why things are moving—but slowly—in Eritrea
• How close we are to commercial viability in Kenya

Interview by. James Stafford of Oilprice.com

James Stafford: Is Tunisia right now a venue for the juniors or majors, and what makes Tunisia a good venue for small companies?

John Nelson: There is a good cross-section of different sized oil companies exploring and operating in Tunisia. Some of the majors are present such as ENI, Total, CNOOC and Shell; however, most of the activity is with the smaller companies.
Junior companies can be very successful on projects that may not meet the economic threshold of the majors, but can propel juniors quickly to mid-tier producers. This makes Tunisia a good place for smaller compan ies to explore.

The basins in Tunisia are well established and understood. Services for seismic and drilling are available. There is a capable work force and French rule of law. Infrastructure in the way of roads and pipelines can be found across the country. Fiscal terms are good and the government is stable and reasonable to deal with. There are a number of smaller Canadian companies already there.

James Stafford: Can you tell us a bit about Tunisia’s potential. What is the biggest field and what are the best exploration prospects?

John Nelson: There is a lot of geological diversity in Tunisia which creates a number of different play types to explore for. The biggest onshore oil field is the Sidi el Kilani field in north central Tunisia. This field has produced over 50 Million barrels of light sweet crude from a small number of wells. In fact it is the similarities in Africa Hydrocarbon’s targets to Sidi el Kilani that got me interested enough in the “home run” size of the first drillable target, to decide to come and run this company.

James Stafford: How does the geology compare to the East Africa and the East Africa Rift System?

John Nelson: The geology of Tunisia is not exactly like that of the great Tertiary rift system of east Africa. There are of course some geological similarities on a smaller scale where extension has caused the formation of horst and graben structures in some areas of Tunisia. In general what we are looking for is actually arguably more straight forward.

James Stafford: What’s the business atmosphere right now in Tunisia?

John Nelson: Business as usual. We have not seen any significant risks or changes in business practices since we have been involved there. In terms of North Africa, Tunisia is probably at the top as a jurisdiction in which to do business, and stability of the politics, etc. The economy seems to be doing well. There is construction going on in many of the cities. The country has not suffered at the same level from debt and poor fiscal mgmt like some of the Eurozone countries on the northern Mediterranean side. The country, like many countries these days, has unemployment issues especially with the younger generation.

James Stafford: So if Big Oil is not looking in Tunisia, how does that help NFK?

John Nelson: It is hard to compete against majors when it comes to acquiring sizeable acreage and making commitments. It allows smaller companies to cost effectively get positioned and undertake exploration initiatives. However, if a significant discovery is made then Big Oil may appear back on the scene to partner with or acquire small companies like NFK. Sh ell Oil surrounds our Block now but we were there first and were able to position ourselves with over 130,000 acres.

James Stafford: Africa Hydrocarbons has a nice piece of contiguous acreage in Tunisia. Can you tell us a bit about the two blocks in question and where you are right now in the exploration process?

John Nelson: We have a 47.5% interest in two adjoining concessions, the Bouhajla and Ktititir blocks, located in north central Tunisia and only 25 kms west of the Sidi el Kilani oil field. The blocks were acquired approximately 3 years ago when the govt made them available for bidding after being off the market for over 25 years. Our local partners were there first, and that is the opportunity.

James Stafford: What are you chasing here? Conventional or unconventional plays? What do you think you’ll hit with drilling?

John Nelson: We have several conventional type prospects and leads on our blocks and that is what we will be targeting initially. Our first well will be testing a fractured carbonate chalk reservoir, which is very similar to what is found producing at Sidi el Kilani. Last year, Shell acquired a large land position around us and have committed to spending over $150MM on their blocks. We have heard that Shell and others have an interest in testing shale (also called “unconventional”) plays within the region. The possibility for an unconventional play type also exists on our acreage but we have chosen what we believe is the “low hanging fruit” to target first.

James Stafford: You’ve mentioned before the ability to “de-risk” exploration and development in Tunisia. Can you take us through the math here and demonstrate the economic feasibility of operating in Tunisia?

Jo hn Nelson: Our situation is somewhat unique compared to many others in Tunisia or exploring in other remote parts of Africa. Only 25 kms from our block is the facility and pipeline for the Sidi el Kilani oil field. The facility was built to handle up to 25,000 bbls/d but now is only handling 1000 bbls/d. So there is much excess capacity in this nearby facility. There is also a pipeline in place from the field all the way to the port facility on the coast that is also under-utilized.

That means it won’t take much time or money to get any future production on stream. As a result, we can still be profitable in the event of a smaller discovery size due to the infrastructure already being in place. It also allows the option to truck oil to the facility to obtain some cash flow while onsite facilities and a short pipeline are built to Sidi el Kilani if we make a discovery.

In other words if we are successful on our first well next month, we should be able to start cash flowing very very quickly.

James Stafford: Do you need a major operator in there like Tullow with Africa Oil in Kenya? What happens if you make a discovery? Can you develop it cost-effectively?

John Nelson: In our situation we do not need the expertise or deep pockets of a large partner. In the event of a discovery we would be able to adequately finance a development project. We anticipate that fewer than five wells would be needed to optimize drainage of our first target area, which is substantially larger than the area of production of 50 million barrels at Sidi el Kilani

James Stafford: How does the cost of drilling wells compare in Tunisia, Kenya, Somalia …?

John Nelson: Our costs to drill a 2500m well is in the area of $7 million. The cost seems excessive compared to drilling costs in North America, but on an interna tional scale it is reasonable. This actually isn’t very deep, and given the size of the target, not very expensive. We also have easy terrain and a network of roads in our area of Tunisia. Access is pretty easy and services are relatively close if needed.

In more remote projects such as in Puntland, Kenya, Ethiopia or other areas far from infrastructure, the drilling cost of a similar well may be well over $50MM.

James Stafford: Outside of Tunisia, where should smaller companies be looking? Can you rank the prospects for us here in terms of junior capabilities and potential?

John Nelson: Juniors provide a valuable service to the industry by often being the first entrants into a new area or applying new technology to older areas. There are niches in most parts of the world. Myanmar is opening up. New opportunities may now come up in Venezuela. The rift basins of Niger, Chad and Sudan are attracting n ew investment. The new discoveries off of Israel are opening up a lot of new exploration initiatives there that look quite attractive. There is not so much a shortage of ideas and opportunities as there is a shortage of capital to pursue them.

James Stafford: We understand that you have experience in Somalia—specifically in Puntland. Can you debunk any myths about working in Somalia and take us through the challenges?

John Nelson: There were a lot of concerns about security issues both onshore Puntland as well as piracy in the offshore. It took a lot of careful planning to mitigate much of the risk. Local communities were engaged, informed and employed. Our security people worked with the govt and contractors to remove any possible threats along transportation routes. The airstrip and drilling camp were well protected. In the end, all the people and equipment were mobilized and the drilling took place wi thout incident.

James Stafford: What about Ethiopia and Eritrea? Eritrea seems open for business now after preferring to focus on its mineral resources for so long–and thanks to the new technology on the scene–and it’s got Red Sea territory that is virtually unexplored.

John Nelson: Eritrea has been slow to open up to oil and gas exploration despite a fairly high level of interest. New laws and policy changes move slowly in many parts of Africa. Eritrea has been explored in the past and there are known oil seeps there. No major discoveries have been made yet.

James Stafford: How do you view prospects in Ethiopia, as a possible extension of finds in Kenya?

John Nelson: Ethiopia has a variety of play types throughout the country that are soon to be drilled. Africa Oil is currently drilling in SW Ethiopia along the Tertiary rift trend that extends north of Kenya. They may make the first significant oil discovery for Ethiopia in that area.

James Stafford: How close are we to commercial viability in Kenya, and what do you think the next year to year and a half will show?

John Nelson: Tullow and Africa Oil are close to determining commerciality. The recent testing suggests the rates and accumulations may be sufficient. Some additional drilling success in some of the other sub-basins on their acreage in blocks 10BA and 10BB as well as in Ethiopia will help initiate further development decisions. There is a lot of drilling and testing to be done over the next couple years. I am pretty sure the results will lead to major infrastructure plans for the area. It will take time–years–due to the remoteness and current lack of infrastructure in the area as well as political involvement of neighbouring countries.

James Stafford: So what can we expect by the end of the year from Africa Hydrocarbons? What do potential investors need to know?

John Nelson: We anticipate drilling our first well in April and should know the results in May. In over 27 years, I haven’t seen many wells with this kind of risk-reward—a $7 million well that is geologically so similar to a proven field only 25 km away where one well produced more than 20 million barrels.

We have worked up the target with 2-D and 3-D seismic that are remarkably clear, and that give us what we call in the business a “play chance” that is much much higher than your typical International exploration well. Usually with a target this size you are looking at a 10%-15% chance of success – we have heard our chances rated by third parties between 28% and into the low 30% chance of success. This is actually a geometric difference in probabilities – really an order of magnitude.

With success on our first well, w e would look to start production from Bouhajla North, and follow in that area by preparing to penetrate the reservoir again with new wells. We would also establish a reserve and resource calculation to highlight the size of the produceable reservoir in that area.

Concurrently we would develop an inventory of prospects all over our acreage which we would develop with additional seismic programs.

Real success just on our first well would turn us from an explorer into an intermediate producer immediately.

James Stafford: What happens if you hit—what kind of NPV do we get compared to current market cap.

John Nelson: Well James, if we don’t hit we are backstopped by cash in the treasury as well as our land position and additional targets which we would then set our sights on.

But with a discovery similar to a Sidi el Kilani well, our NPV10 based on our 47.5% working interest would be close to $100MM, which is about 10 times the current market capitalization of the company of $9 million – we will know within 8 weeks. .

James Stafford: Thanks for taking the time to speak with us John.

Source: http://oilprice.com/Interviews/Is-Tunisia-the-New-Hot-Spot-for-Energy-Investors-Interview-with-John-Nelson.html

By The Sizemore Letter

Listen to Charles Sizemore and Mike Robertson discuss Margaret Thatcher, the Bitcoin phenomenon, gold, the InvestorPlace 2013 Best Stocks contest, and the state of the American job market on Straight Talk Money.

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