Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
The Opportunity: There are good reasons why the stockmarket might not like Tomco (LSE:TOM). It was once a (failed) internet company. Then it tried exploring for oil on the Gaza strip which posed certain logistical issues. It was booted off AIM but has not returned. It is loss making. Oh, and it is now pursuing a technology that is as yet commercially unproven. Do we need to go on? However, forget the past. The company has enough cash to get to where it needs to be, a credible management ( it is no longer run by Bing Crosby’s nephew) who we have met and quizzed in detail and that commerciality issue is also about to be solved. A see-though valuation based on its next door neighbour would See Tomco’s current £25 million ($40 million) valuation jump by eight times. We are not predicting that but over the next three months we do see the shares heading well past 2p to sell Operations & Fundamentals: Tomco has net cash of c$1 million which is enough to last it until late summer. It also has shares bought for $5 million in Red Leaf, a company that owns a shale oil resource roughly the same size as Tomco’s in the US Mountain states. French giant Total is to spend $320 million (80% of the cost) of commercialising Red Leaf’s resource for a 50% stake in Red Leaf. Tomco has a license to use the Red Leaf technology. So in a see through basis Tomco should be valued at c$320 million not $40 million. Tomco is likely to sell its stake in a pre-IPO (of Red Leaf) auction of Red Leaf stock in the summer. Its other source of funding is a sort of non death spiral facility from its broker Fox Davies. For this to kick in the shares have to trade above 2p consistently. You can bet your bottom dollar that this is going to be made to happen. The short Term Newsflow: During the next three months we expect Tomco to apply for full drilling and mining permits for its acreage. Using the same documentation and applying to the same regulators as Red Leaf which already has permission there should be no issue. But notice that it has filed permits is a serious statement of intent from its well-regarded new board. 2. Red Leaf showed a couple of years ago that a pilot planted using its technology could extract oil and gas cleanly and cheaply from shale. Now it is set to scale up. We expect news and regular updates on the construction of its commercial plant starting within weeks. That will show this is a real asset that Tomco sits upon. 3. We are aware that a very major IR blitz to PCBs and indeed journalists starts this afternoon. This stock can move fast on relatively modest volumes. One helpful share tip or a bit of PCB buying and we will see our 2p target very soon indeed. There are risks: In order to build its plant Tomco will need c$260 million – half debt and half equity. But if the Red Leaf plant is delivering that will not be an issue. Of course Red Leaf may itself suffer scale up issues. We accept that risk. But o
Mike, Many thanks for taking the time to write such an excellent post. I can´t disagree with a single point or statement you've made and it´s obvious that you have a clear understanding of both the risk and the real potential for TOM to achieve a huge return on our initial investments!
Halifax007, My feeling is that this year could be the game changer for Tom. When I first invested in 2011 I was very optimistic that the sp might of taken off the following year. In reality, that´s not been the case as we've been following in the footsteps of Red Leaf´s progress towards the development and testing of their commercially sized Ecoshale Capsule. Delays in permitting certainly hasn't helped but the recent approval of the Water Permit was the final obstacle for RL to start work once the winter snow disappears. There could be further hold ups from Environmentalist appeals but they are really clutching at straws when they state that their process could damage the water table which is near impossible! I think it´s very unlikely that this will hold up the construction. Once RL begins the construction process we can expect regular updates throughout the year for what will be the world´s first environmentally friendly way of extracting oil from shale rock. If everything works out and Tom obtains the same mining and water permits for their Holliday Block leases this year then we could see Tom being bought out at some point in 2015? Targets for the sp during 2014 could be modest but reach somewhere between 3 to 6p but the directors need to raise their game with marketing TOM.
halifax, You need to look at the Tomco Energy Website to understand the differences between Oil Shale mining and Fracking. Fracking requires deep drilling operations to fracture rocks to release the GAS. Oil shale in Utah is a complete;y different process where surface rock is mined, placed in the Ecoshale capsule and it is then baked slowly for 200 days to release Kerogen a High Quality Oil product. .Do a bit of research and you'll soon work out the difference!
TOM has been waiting for over a year to receive copies of the Red Leaf costing calculations. Now that the Water Permit has been issued RL will release the figures to TOM soon so that they can upgrade their own JORC calculations to the highest level of RESERVE Status. TOM will then submit their own applications for large Mining and Water Permits. It's possible that this whole process could be completed in 2/3 months leaving TOM with a fully approved Mining operation in place that should attract either Corporate funding for their own Mining Project or more likely an agreed buyout from an Oil Major?? Very Exciting prospects for 2014 for TOM investors!!
Now the Water Permit has been finally issued, it will be full steam ahead for Red Leaf to begin construction of the Worlds First Ecoshale Capsule that may just produce sufficient oil by the end of 2014? In any case we should start receive regular updates about the construction progress by early Spring. There could of course be an appeal lodged by Living Rivers in January but the tone of press releases just after the permit news leads me to believe that they may have been outflanked by Red Leaf. Their updated water permit application answered all of Living Rivers objections relating to the near impossible likelihood water table contamination located deep below the solid rock formations.
At last Red leaf receives full approval of its long awaited Water Discharge Permit! http://finance.yahoo.com/news/red-leaf-secures-major-permit-173400951.html lets see how the sp reacts on Monday?
I received a reply from Mark Novak at DQW 2 days ago. My email to Mark was: Dear Mark, Just following up on any progress with approving Red Leafs Water Permit. Are you still corresponding With Western Resources/Living Rivers and are there any important obstacles to approving the permit. Many thanks Mike Mark Novak DVQ Reply: "We are struggling to get it out this month. The permit should be issued shortly after the comment response" Close: You can clearly see that his department is taking great care and time with their reply to the Western Resources/Living Rivers 10 pages of comments. So the timetable now appears to have slipped into the New Year but the real question is, How long can LR drag out the appeals process? You have to accept that the fully cleared Water Permit will open up this region to many companies wanting to exploit the vast oil shale reserves and TOM are right behind Red Leaf with their own mining applications.
Capital Funding and Cash Flow has always been the stumbling block for CFU. It's great to hear that their development of this World Class technology has at last resulted in what could be a game changing order for this excellent business. I hope they can now deliver these units on time?
Well Mike, If Red Leaf is in dialogue directly with Living Rivers then thats very positive news? LR in principle are against all mining projects in this region but they have to be realistic. Their arguments against the water permit construction are now very limited after all of the extra work that Red Leaf has completed in the past year and they are not in a position to provide evidence that any seepage from the Ecoshale Capsule could penetrate into any deep water table. They can of course delay the project by taking limited legal action but at what cost and do they have any chance of winning their action? The experts say no, they can't so in reality they are just an hindrance. I expect that the water permit will be approve but with additional caveats that hopefully will satisfy the environmentalists? I fully understand your frustration Mike. It's 2 years since I invested in Tom and I now have millions of their share in my CFD account. I still remain relaxed but I'm also frustrated that the final piece of the jigsaw still needs to be put in place!!
Hi Mike, If the permit is approved and then LR appeals and I'm sure they shall then no work can go ahead until the appeal has been resolved. I've been corresponding with Mark Novak at Utah.Gov the Geologist who has been dealing with responses to comments submitted. I doubt LR or WRA would respond to your emails?
Hi Halifax, I have no info about any new purchase of leases. I would expect that we would be informed of any new acquisitions through an official RNS.
There has been no deadline set for when Utah Gov will issue the Water Permit. I have been informed by Mark Novak at Utah Gov that they are preparing a weighty response to the main protagonist Living Rivers the Environmental Group! The Key point here is that Utah Gov want to issue the full permit and they believe that Living Rivers objections cannot be substantiated but they have to follow due process to satisfy all concerned that they have considered and responded to all of their objections and arguments? You have to recognise that once Red Leaf has been issued with the full Water Permit that is fully backed by Utah State Government, work will quick commence on the Ecoshale Capsule construction. Tomco directors must be confident by setting the base level for their liquidation funding at 2p A bit of patience is required here but it should be well rewarded!
DWQ has had possession of all comments submitted for 2 weeks as of today. My guess is that they will have written a response to Living Rivers 10 pages of "Objective" Comments prior to issuing Red Leaf with the Water Permit. Should Living Rivers appeal the Water Permit approval then that will delay matters further. Realistically, it's possible this process could take a month or two? A lot depends on whether LR has deep enough pockets to take legal action against the Utah State Authority that is Right behind the development of Oil Shale in the Region.
Continued: After that, it’s a go for construction of the surface retort capsule. The capsule produces oil in about 90, but the technology uses a 200-day process as the lower prolonged heating produces a slightly better the product. Matt Greene, Red Leaf financial manager, said the capsule produces liquid oil with “35 to 36 API gravity, or a light crude oil.” Greene said the oil is not like the dense, heavy oil ladened with wax that most basin residents have come to know. About 80 percent of the recoverable oil within encapsulated shale rock is siphoned off. At this juncture, Red Leaf will construct one 1,000-foot capsule on the mine. Hartley said that once that capsule is in production, they will build an additional 6 capsules. “For 20 years, you are building capsules to cook the oil. So, it’s a constant construction site,” he said. Red Leaf anticipates hiring in local job fair and has established a downtown Vernal office to open shortly. hxxp://www.ubmedia.biz/ubstandard/news/article_755a45b8-24a1-11e3-84d4-001a4bcf887a.html
I had seen this excellent report before but it's well worth reading it again, particularly as it comes directly from Red Leaf who don't often provide us with any updates. Red Leaf has developed the most environmentally correct process to extract oil from shale on the Planet. I just cannot see how any appeal could possibly succeed! Red Leaf oil shale mine at the outset Posted: Monday, September 23, 2013 4:42 pm - By Mary Bernard mbernard@ubmedia.biz VERNAL–Red Leaf Resources, Inc. says it’s on the brink of commercial oil shale mining. They have the cash, the land, the contractors and – they almost have all the permits. “Hopefully, by snowfall, we’ll be starting the mining process,” said Jeff Hartley, spokesperson for the Sandy-based company. With Red Leaf’s pilot test complete, the first phase of early production project is ready to up-scale into a large mine operation. Hartley told the Vernal Area Chamber on Tuesday, Sept. 17, that the Southwest #1 Project Area of roughly 1,600 acres is “ready to turn dirt as soon as we get those permits in place.” Red Leaf’s mine is about 55 miles southwest of Vernal located within a parcel of 17,000 contiguous acres of state School and Institutional Trust Land Administration properties. “One of the knocks on oil shale is that it’s too risky, too costly,” Hartley said He recalled the early days some ten years ago when the price of oil shale technology was too high and the price of the oil was pretty low. The economy of the technology and oil has flipped since then, and the reverse situation has hastened the efforts to extract commercial oil shale. Hartley said the patented Red Leaf technology has low emissions, no water use in processing, uses on-going surface recovery and produces a high-grade of crude. After completing a two-year pilot study honing the technology further, Red Leaf entered into a joint venture with Total, a French company, which is one of the largest energy companies in the world. “It’s a $400 million joint venture, to build an extraction capsule about three-quarters in size,” to extract roughly 350,000 barrels of oil. That’s nearly full-capacity for commercialization, or something critics of oil shale have long claimed, said Hartley. The joint venture has Total paying 80 percent of the $400 million in cash against Red Leaf’s land, money and leasing permits. The final submission on the company’s ground water discharge permit was completed in August and the public comment period will close on Sept. 27. Red Leaf’s process does not have surface or groundwater discharge, but representatives say the permit is needed in case an accident occurs. “The Division of Water Quality should make a decision in a couple of weeks,” Hartley said, adding receipt of their the large-scale mine permit depends on this. After that, it’
Andy, My last email exchange with M Novak Dear Mark, As Red Leaf has been issued with a draft permit, what limitations are there in relation to carrying out any work at all at their planned site for constructing their Ecoshale Capsule? I'm presuming that any successful appeal could stall the whole operation for an indefinite period? Reply: M Novak Realistically I don't think they can do anything. Their mine permit is contingent on them getting a ground water permit. I don't think the case against them, if there is an appeal, is particularly strong. An appeal could delay the permit for an indefinite time, though. Close: Nothing conclusive about Mark's comments but a fair reflection of where we stand today. It looks very much like that DWQ will want to issue the Water permit but it's quite likely that Living Rivers will appeal the decision?
Andyhey, Just to be clear the only comment from Mark Novak was: "No estimate whatsoever. The permit could get appealed" I have had another reply to another Question I asked about where this leaves Red Leaf's possibilities for now but I need further clarification on this point!
Mark Novak comments about the time it may take to deal with any objections. "No estimate whatsoever. The permit could get appealed" Living Rivers won't lie down so will probably appeal the approval of a full permit to Red Leaf Mark Novak has already commented that their 10 pages comments didn't amount to much so you can take that how you want to
There isn't very much to write about at the moment Mike. Stubbsy was the main promoter of Tom and he appears to have jumped ship since you questioned his motives!