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Greek debt worries may derail market

On Monday Greece's sovereign credit rating was downgraded again by Moody’s. 2-year bonds now yield over 15 per cent and the national debt now stands at 150 per cent of GDP (gross domestic product).

So bond investors are betting that a Greek debt restructuring is inevitable. If the German and French goverments do not support this, a Greek sovereign debt default looks a certainty. Voters in these countries are unlikely to support a give away to the Greeks, so political will is not in Greece's favour. Ireland's new government is trying to renegotiate the terms of its €80 billion bail out, whether it succeeds is a matter of debate.

With €325bn of government debt outstanding at the end of 2010, Greek and other eurozone banks hold €120bn of this. Potentially a catastrophic exposure should a default ever occur.

Markets reverse after Libya worries finally unsettle investors

The FTSE 100 moved into negative territory late on in the day finishing down 16 at 5,974 as Wall Street reversed into the red. Worries that the unrest in Libya could spread to other oil producing states worried investors. If one of the Middle Eastern producers had an interruption in supply we could see oil at over $200 a barrel, with a huge negative impact on global economic growth similar to the oil shock of the 1970's following the Arab-Israeli war.

The Contrarian Investor Uk portfolio had a good day with some good timing of trades. I ditched some Rockhopper positions early on whilst still up (finished down 5%) to increase my holding in Weatherly and Solomon Gold. Both were down in the morning but SOLG finished up 7.5% and WTI finished flat. At 12p Weatherly was a great top up opportunity despite the drop in the copper price today. Good to see Xcite staying in the blue, though off its best for the day.

On another note, Sareum Holdings finished down 13% after the 30%+ rise first thing (see my post earlier in the day). MeDaVinci changed its name to Orogen gold today and fell 8% to 0.87p as the new shares were issued to complete the purchase of its Serbian gold prospect.

Markets strong despite Libya

The FTSE 100 is having a good day, up 42 to 6,033. The Dow Jones industrials are up 57 to 12,223.

Citigroup today increased its 2011 forecast for US light crude to $105 per barrel from $90 and their 2012 forecast is for at least $100 a barrel. Libya has lost about 1 million barrels of production since the civil war broke out. Tanker rates have surged 18 fold since the beginning of March as oil refiners try to stock up on crude supplies in anticipation of further issues in North Africa and the Middle East.

Unfortunately we are as addicted to oil as we ever were, particularly in the U.S. where fuel efficiency is still not on the agenda of many American motorists. $100 a barrel oil may make consumers think differently about the way they use oil, and in the case of the USA its about time. With petrol now at £6 a gallon in the UK, we are already paying the price of rising oil but also bloated taxes on the fuel.

Classic Pump and Dump on Sareum Holdings

Cancer drug development company, Sareum holdings (SAR) soared to 3.25p first thing this morning on hype about its new cancer development drug. The shares have risen almost three fold in the last few few days on a stampede into the shares. But unfortunately beyond the hype a few pieces of important information seem to have been.forgotten. The chk1 inhibitor for bowel cancer is in a preclinical phase and although at this very early stage, results have been.encouraging, ultimately 90% of new drugs don't make it to market because of safety or efficacy issues.

Also it will take 5 years at least for the drug to hit the market as they are years away from a regulatory submission. They have around a £1 million left in the bank, so a placing is likely as big drug companies will not pay a big upfront payment to Sareum until certain milestones have been met. Also the company will want to expoit its RNS to the full, and fill its coffers whilst it can. I can tell you that if a placing happens it won't be at 3p.

I see that sense has prevailed and the shares are now down 10%, after being up over 30% earlier. The smart money bolted when it hit 3p, and the poor private investors who believed the hype can now get 2.1p. A great "pump and dump" if i ever saw one! I hope too many new investors in AIM stocks haven't lost too much! Be careful out there, its a jungle!!

Plenty of action today for porfolio stocks

Xcite Energy is moving up nicely today to 350p to buy. What a bargain XEL was at 300p early last week. With reserves upgrade due in the next 2-3 weeks I think there will continue to be plenty of upside here.

Amazing that Weatherly Int. is down again today by 3%. Have topped up yet again and now holding a little too many for comfort. But when stock is drifting down like this its a good time to buy. Calling the bottom is an impossible task and 12p feels pretty comfortable.  Same goes for Solomon Gold which is down to 27P to buy. When everyone else loses interest, this is the time to buy, not on the spikes when the momentum investors are back.

Steve Eisman - is he the greatest Contrarian investor of all time?

I am currently reading a great book called the BIG SHORT by Michael Lewis, who also wrote the best seller, Liar's Poker. It tells the fascinating story of those who bet against the real estate bubble and made billions in 2009. Like the book by Andrew Ross Sorkin, "Too big to fail", it tells of the out and out greed of Wall Street which helped prime the world for a financial armageddon in 2008/2009.

A fascinating part of the book is the commentary about Steve Eisman, who went all in whilst working for Deutsche bank betting against the CDO's (collaterised debt obligations) which underpinned the sub-prime mortgage bond market. CDO's were in effect the insurance that brokerages used to protect themselves against default on bond debt and most of the Sub-prime bonds were protected by American Insurance giant AIG which had to bailed out by the American tax payer with $85 billion in September 2008 after the U.S. property market turned sour. At one point he was over $20 million in the red on his short positions in real estate companies and shorting CDO's, he ultimately made billions of dollars during the financial collapse of 2008 and 2009.

Highly recommended reading for those interested in the funs and games that went on behind the scenes during this last great episode in our financial history which very nearly led to the Great Depression Mark 2.

Pension annuity rates for men likely to fall with European Court of Justice ruling

The Euopean Court of Justice (ECJ) ruled earlier in the week that insurers cannot charge different premiums to men and women because of their gender from December 2012. The ECJ said "Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination."

This means that women can no longer be charged lower car insurance premiums than men, and pension annuity rates will fall for men. Men could see an 8% reduction in annuity rates, but women could see a 6% rise and the cost of life assurance could increase by 20% for women but fall by 10% for men.

It seems another barmy European legislative decision given that women live longer than men, meaning that they receive a higher income  per year from their annuity than women with the same sized pension fund.  This means mens retirement income will fall dramatically come December 2012. Until recently, annuity rates have fallen dramatically in the age of low interest rates, this is another hammer blow for pension returns. A £ 100,000 annuity for a man aged 65 and a female aged 60 (joint life, 2/3rds widow’s pension and level payments) pays a gross income of £6,700 per year. This is the highest annuities have been since August 2004 when the same annuity was paying £6,500. Annuity levels fell as low as £5,921 in February 2006. This still means to have an income of £20,000 in retirement requires a pension pot of close to £300,000 and most in the U.K. will not have anything even close to that in private or company pensions.

How the European court can call differences in prices for men and women for their insurance is a breach of human rights is plain crazy. It is a fact that men and women live on average to different ages and have different risk profiles when it comes to things like driving. What next, I ask myself!!

Portfolio review of the week - 5th March 2011

After being in positive territory for much of the day, the FTSE 100 fell back towards the close as the DOW Jones moved firmly into the red. The FTSE 100 closed down 15 at 5,990, down 0.2% on the week. The Dow Jones Industrials finished down 88 at 12,170, but still up 0.3% on the week.

Rising crude oil on continued turmoil in Libya worried investors. WTI (West Texas Intermediate) crude moved close to $105 a barrel (up 6.7% on the week) and Brent Crude moved above $116 a barrel as reports came in that that clashes between Gaddafi's forces and rebels were occurring at the Ras Lanuf, a major oil terminal, in Libya. On a positive note, the U.S. unemployment rate dropped to 8.9% in February, the lowest rate in almost two years, with the addition of 192,000 jobs. But investors are concerned that corporate earnings growth may be curtailed by the extraordinary rise in the oil price in recent weeks. It seems likely that the U.S. Federal Reserve will maintain low interest rates to maintain economic growth despite concerns about inflationary pressures. 

It has been a week of fairly heavy trading in the Contrarian Investor UK portfolio as I have tried to free up funds to take advantage of the plunge in the share price of Xcite Energy mid-week to around the £3 mark, which was a buying opportunity not to be missed. I sold some Sirius Minerals (fortunately at the week high) and my Encore Oil position to fund Xcite. Overall a much better week after an awful February, with the market seemingly wanting riskier stocks in AIM again after weeks of selling off.

Xcite Energy (XEL) - Xcite had a great finish to the week, closing at 339p, up 8.5p on the day. On Wednesday the shares flirted with the £3.00 level on false rumours that the forthcoming reserves report was being "fixed" and that the flow test completed in December was flawed. It was a classic "bear raid" with the shares being pushed down by the market makers. On Thursday we saw the inevitable bounce and after buying heavily on the dip, I took some profit yesterday. I have tucked a good chunk away in my SIPP (Self Invested Personal Pension) at £3.01, since with production only 10 months away (at 15,000 barrels a day), this share will be going 2-3 times higher I am sure. In the medium term (i.e. less than a month) we are likely to see the Reserves Report and then the CPR (competent persons report). A great lesson for investors not to get spooked by nonsense rumours on the bulletin boards. Be sceptical of anyone, even if they appear "in the know".

Encore Oil (EO.) - Though the North Sea explorer announced it had spudded two wells this week, I have sold my position in Encore on Friday at a profit to increase my holding in other portfolio stocks, notably Weatherly International. I believe Encore is a great stock to own, but having analysed the current market capitalisation, exploration upside is needed to drive a further appreciation in the share price i.e. the oil finds to date support the current share price, but there does seem to be a big discount. I will buy back in on any weakness since its drilling prospects look enticing. 

Weatherly International (WTI) - A bit of a sell of in Namibian copper producer, Weatherly, late in the week meant it was time to increase the holding. With over 4000 tonnes of copper due to be produced by the company this year (with a selling price of over $9000 a tonne), revenues will begin to increase significantly in the second half of the year. In addition there is considerable upside from projects due to come on stream within the next 18-24 months. I am struggling to see why WTI is not significantly higher than 12.5p, especially when its operations are in a relatively benign part of the world (and the Namibian government own nearly 9% of Weatherly derisking further). I guess a watch and wait on this one for now!

Solomon Gold (SOLG) - A big sell off in Solomon Gold this week meant it hit 26p. I have been initiating a position this week on this decline and believe the company offers good value given its exploration prospects. (see previous post - http://contrarianinvestoruk.blogspot.com/2011/03/solomon-gold-solg-is-based-in-brisbane.html)

Rockhopper (RKH) - Good to see a nice 6% bounce to 246p as the big seller finally seems to be out of the way and the results from the 14/10-4 well loom ever closer. I bought a little more yesterday as the momentum on this stock finally seems to be turning positive after a drop of more than 40% after the 14/10-3 well in February. 

Bowleven (BLVN) - A very strong week for Cameroon oil explorer Bowleven, with the shares rising 7% on the week to 359p. A couple of weeks ago they had dropped below £3.00, and were completely oversold given the prospects. A Goldman Sachs conviction buy addition finally turned the corner and its been up ever since. I took the opportunity to sell some BLVN to invest in SOLG, RKH and WTI.

Sirius Minerals (SXX) - Nothing new to report on Sirius. A volatile week though with the shares closing at 14p, 7% rise on the week. They hit 15.5p on Wednesday, triggering a sell which was invested in Xcite Energy.  

Rupert Cole (CFO Xcite Energy) Interview March 4th 2011

Link below to Rupert Cole (CFO Xcite Energy) March 4th 2011:

Rupert Cole of Xcite Energy believes there’s still significant upside on asset value

Friday, March 04, 2011

http://www.proactiveinvestors.co.uk/companies/stocktube/686/rupert-cole-of-xcite-energy-believes-theres-still-significant-upside-on-asset-value-.html

Key highlights from Cole:
Well - outstanding success, beyond public conservative modelling assumptions
New reserves assessment report - model has to be rebuilt from scratch with increased in place volumes, and enhanced reservoir performance demonstrated from well test. Usually 6-9 months timeline, trying to complete in 3 months. Says categorically that reserves assessment has not bee done, nothing to hide. Targeting for end March Doing things as quickly as possibly can, but robust and efficient assessment for first stage production. Maximise value for shareholders. Don't get hung up on a particular date.
Value of Bentley - $1 billion company is reflection of asset value. Still significant upside in asset value and therefore share price. $4-5 per barrel asset price, target is $10-15.
Director sales at £3.84 - rebalance personal asset sheets, reasonable thing to do

Topped up on Weatherly International

With Weatherley (WTI) dropping today to 12.25p to buy, I have taken the opportunity to buy more. After buying Xcite around £3 a couple of days ago, I have taken a little off the table (plenty left there).

WTI is a favourite because :

• Copper production is already happening at the company's Matchless and Otjihase mines
• Forward sales already contracted to with Louis Dreyfus Commodities commencing in May 2011 at a fixed price of US$9,750/tonne. (total forward sales of 1,925 tonnes), 20% of anticipated production from May 2011 for 17 months.
• China Africa Resources flotation expected in April/May 2011 (WTI shareholders will receive shares in the new company)
• Blackrock now hold 16% of the company

Range Resources drops back a little after going into orbit this week

Range Resources (RRL) went to 24p intraday yesterday and even at todays price of 20.5p, they are up nearly a third on the week. RRL came off the boil by 7% today (and was a lot lower earlier) after the company issued an RNS with a letter they sent to the ASX exchange in response to the share price increase earlier in the week. It is amazing to think that the 52 week low was 3p and at the end of 2010 the shares were 6p. The market capitalisation is now £285 million. Any piece of news seems to send RRL up over 10%. Disapointed not to have been in on the ride back in early February, but even for me a little on the higher risk side. C'est la vie! See below:

4th March 2011 
 
 
The Manager 
Company Announcements 
Australian Securities Exchange Limited 
Level 6, 20 Bridge Street 
Sydney NSW 2000 
 
 
By e-lodgement 
 
RE: PRICE QUERY 
 
I refer to your letter dated 3 March 2011 in relation to the recent change in 
price of the Company's securities and respond as follows in line with the 
numbers of your letter. 
 
 1. The Company is not aware of any information concerning it, that has not 
    been announced and which, if known, could be an explanation for recent 
    trading in the securities of the Company; 
 
 2. Not applicable; 
 
 3. Range recently announced a number of key milestones for the Company across 
    its development and exploration assets, including; 
 
    - the securing of the drilling rig for its Georgian exploration program; 
 
    - anticipated mobilisation of the Georgian drilling rig expected March 
      2011, and planned spudding in April 2011; 
 
    - commencement of drilling at the East Texas Cotton Valley Project; and 
 
    - successful fracture stimulation of the lower two zones on the Russell 
      Bevly well, with the upper two zones to follow later in March 2011. 
 
It is anticipated that further updates on the Company's activities will be made 
with respect of its assets over the coming weeks as events occur, as indicated 
in the recent announcements from the Company. 
 
The Company also notes that its Executive Directors have been in London on a 
promotional visit, further increasing the awareness and activities of Range to 
a wide range of the London investment community, at a time of increased 
activity across the Company's portfolio of assets. 
 
Since the release of the announcements referred above, the share price has 
increased significantly (with volume) on its AIM traded shares (with ASX 
following). 
 
 4. The Company confirms that it is in compliance with the ASX Listing Rules. 
 
 
Yours faithfully 
 
Peter Landau 
Executive Director 
Contacts 

Sareum Holdings soars 170% on pre-clinical CHK 1 study

Sareum Holdings (SAR) is currently up 170% on news from its CHK-1 inhibitor in Colon Cancer. Potential investors should remember that this is a very early stage pre-clinical study and secondly I would bet that Sareum have a fund raising on this news. I wouldn't be surprised to see it lower by the end of the day. Exciting stuff for investors who bought at 1p though. See my previous review on Sareum : http://contrarianinvestoruk.blogspot.com/2011/02/sareum-holdings-pharmaceutical-cancer.html

Research Update: Positive Chk1 Programme Model Studies

 (AIM: SAR)   4 March 2011


                              SAREUM HOLDINGS PLC
                                   ("Sareum")

             Research Update: Positive Chk1 Programme Model Studies
Sareum,  the specialist cancer  drug discovery business,  is pleased to announce
positive  results from  pre-clinical in-vivo  efficacy studies  from their joint
research  collaboration with Cancer Research  Technology Limited ("CRT") and The
Institute of Cancer Research ("The ICR").

A  recent  colon  cancer  pre-clinical  model  study  carried  out  by  The  ICR
demonstrates  that the combination of a  collaboration Chk1 inhibitor, dosed via
the   oral   route,   in   combination  with  a  chemotherapeutic,  gemcitabine,
demonstrates a greater than two-fold reduction in cancer growth rate compared to
treatment with the same dose of gemcitabine without the Chk1 inhibitor.

Further   pre-clinical   in-vivo   studies  for  the  programme  show  that  the
collaboration Chk1 inhibitor, dosed alone, can reduce cancer growth in models of
AML  (acute myeloid leukaemia) and  neuroblastoma (a childhood cancer).  Certain
cancers, such as these, are believed to be dependent on Chk1 for survival.

The  joint research collaboration with the  ICR and CTR targets Chk1 (Checkpoint
Kinase  1). Chk1 is  important in  controlling a  cancer cell's  response to DNA
damage, which may be a consequence of the cancer itself, or intentionally caused
by chemotherapy or radiotherapy.

Sareum's CEO, Dr Tim Mitchell, commented:

"These  are exciting advances,  demonstrating efficacy of  our Chk1 compounds in
several cancer models. Studies on additional models are on-going. We believe the
results  from  the  recently  conducted  studies  will significantly enhance the
licencing  package and assist  the collaboration in  selecting the best compound
for development into a clinical trials candidate".

Solomon Gold seems to have solid potential with a bit of fortune

Solomon Gold (SOLG) is based in Brisbane, Australia but listed on AIM in the U.K.. Its shares first began trading in 2006. The Company acquired Acapulco Mining and Central Minerals in late 2009 and early 2010.

The company has a portfolio of projects in the Solomon Islands (Guadalcanal and Fauro), Queensland , Australia (Rannes and Mt Perry).

Projects
Mt Perry
At Mt Perry, located in South East Queensland, the company is investigating an area of approximately 1,500square kilometres hosting over 50 historic mines and workings near Newcrest's Mt Rawdon Gold Mine.  Mt Perry has yielded potentially economic drill intersections on nine of the ten prospects tested to date.

The area lies adjacent to Lihir Gold’s 100kozpa Mt Rawdon Gold Mine on the intersection of two major geological fault structures; the Mt Perry and Darling Lineaments. Several high grade vein style and lower grade high tonnage porphyry style gold targets have already been identified by mapping sampling, geophysics and exploration drilling.The mineralised target zones at Mt Perry extend over a 20km north-easterly corridor from Augustine West in the south west to the New Moonta mines in the north-east. Sulphide mineralised breccias with variable gold, silver and base metals, with occurrences of uranium characterise the Augustine to New Moonta trend. Copper-molybdenum porphyries with gold and zinc anomalous halos lie in the south of the project area and merge with the 7km long strongly mineralised Chinamans Creek – Reids Creek – Spring Creek – Regans target immediately to the north. In the northern part of the project area, gold mineralisation is characteristically low in sulphide minerals and similar in style to gold rich intrusives of north-west America.

Rannes Project
The Rannes project is 140km west of Gladstone, Queensland, Australia with a 22km long prospective zone in a 200km long trend on the eastern edge of Queensland's Bowen Basin in the same geological setting as Newcrest's 100,000 ounce per year Cracow Gold Mine.  This extensive exploration licence position hosts three mineralised projects at Cooper, Rannes Central and Police Camp.  The exploration area is believed to host mineral systems which are geologically similar to the Carlin trend in Nevada USA.  At Rannes Central, the Company has encountered potentially economic mineralisation in five different prospects targeted to yield at least 1 Moz.  A maiden 200,000 ounces has been defined to date at the Crunchie Prospect.

Guadancanal
The Guadancanal project is 30km south of the Capital Honiara, Solomon Islands
Over the period from 2005 to 2008 the Company set about an intensive program of fieldwork involving detailed mapping and sampling of known prospects. At Valehailali, Sutakiki, 32m at 9.45g/t gold was encountered in a peripheral skarn system. In 2009, the Company entered into the Venture Agreement with Newmont, the Guadalcanal Joint Venture (“GJV”). The aim of this initiative was to refocus the exploration program from the diversionary high grade vein search to porphyry exploration. Newmont can earn 51% of the Guadalcanal project area by expending US$6million by 4 March 2012, and may elect to spend a further US$6million within a further two year period to earn an additional 19% interest (a maximum potential interest of 70%).

Newmont has proposed an extensive 2011 work program budgeted at US$6million on Mbetilonga, Sutakiki, Kuma and Central during 2011, including a planned 5,600m (3,500m at Mbetilonga and 2,100m at Sutakiki) drilling program.

Fauro Island Project
The Fauro Island project is 380km northwest of the Capital Honiara, Solomon Islands. SOLG own a 100% owned Prospecting Licence on Fauro Island Project which was granted on 20 November 2009 for a period of three years and covers 70km2 (granted) of mineralised volcanic rim on the western side and a further 67km2 (licence extension application) on the eastern side, over Piru and Masamasa Islands. The Fauro Project area covers the remnant rims of a volcano which gave off silica and gold rich mineral fluids as the volcano waned. These fluids soaked into porous and absorbent volcanic rubble known as breccias and agglomerates and precipitated gold and sulphide minerals. Copper and molybdenum sulphide mineralisation are evident in porphyry bodies in the core of the volcanic complex. Alluvial gold is known to be common in the streams draining the Fauro prospects on the western side of the volcanic rim.

Management
The management team hold 17% of SOLG shares.  
Nicholas Mather (Chief Executive Officer)Cameron Wenck (Non-Executive Chairman)Brian Moller (Non-Executive Director)John Bovard (Non-Executive Director) Dr Robert Weinberg (Non-Executive Director)

Nicholas Mather graduated in 1979 from the University of Queensland with a B.Sc. (Hons, Geology). He has 25 years' experience in exploration and resource company management in a variety of countries. He was managing director of BeMaX Resources NL (an ASX-listed company) from 1997 until 2000 and instrumental in the discovery of the world class Ginkgo mineral sand deposit in the Murray Basin in 1998. As an executive director of Arrow Energy NL (also ASX-listed) until his resignation in 2004, he drove the acquisition and business development of Arrow's large Surat Basin Coal Bed Methane project in south-east Queensland. He was managing director of Auralia Resources NL, a junior gold explorer, before its USD23 million merger with Ross Mining NL in 1995. He was a non-executive director of Ballarat Goldfields NL until 2004, having assisted that company in its recapitalisation and requotation on the ASX in 2003. He was also founder and Chairman of TSX-V listed Waratah Coal Inc until its $130m takeover by Minerology Pty Ltd in December 2008. He is also Chief Executive of ASX-listed D'Aguilar Gold Limited and is a non-executive director of ASX-listed Bow Energy Limited.
Cameron Wenck is a financial adviser and company director with over 18 years' experience in the financial services industry. Earlier in his career Cameron worked for the London stockbrokers Scrimgeour Vickers and chartered accountants PricewaterhouseCoopers.

Future news flow
February 2011 – Drilling and assay results from Perry, Rannes and Fauro. Resource upgrade at Rannes and maiden resource at Mt Perry
March 2011 – Fauro dilling results. Perry and Rannes drilling

Project updates
Kauffmans-Homestead Prospect - Rannes
On the 28 February 2011, SOLG announced a Maiden Resource Estimate at its Kauffmans-Homestead Prospect at Rannes of 203koz of gold and silver, bringing a total Inferred Resource for Rannes to 404koz.  The Kauffmans-Homestead Prospect lies within the Rannes Project, in Central Queensland, Australia and a major asset of its 100% owned subsidiary, Central Minerals Pty Ltd.  The estimates were compiled by Hellman & Schofield Pty Ltd, an independent geological consultancy, and have been classified as Inferred for reporting under the JORC Code for Reporting of Mineral Resources and Ore Reserves widely accepted as a standard for professional reporting purposes.

Solomon is targeting a resource in excess of 2Moz of gold at the Rannes Project. The Company expects additional regular updates in regard to the drilling programs and further resource upgrades due to improving weather conditions going into winter and the availability of additional drill rigs. The Kauffmans prospect should be mineable by open cast making the mining simpler and it is possible that a strike length of some 1.5km may emerge if mineralisation joins with Homestead and Shilo gold prospects near by

Fauro
On 18 February 2011, announced the completion of the first diamond drill hole on the Meriguna Prospect, with encouraging mineralisation and initial assay results from the first 83m of the hole.  The IP survey on the Fauro Island Project has commenced over the identified Prospects. The survey will cover a total area of 11km² over the identified Prospects: Ballyorlo, Kiovakase, Meriguna, Bataha, Ballteara and Northern Fauro The Meriguna Prospect is part of the Fauro Island Project which is in the Northern Solomon Islands, just south east of Bougainville and is 100% owned by Solomon Gold.

Guadancanal
On 14 February 2011, the company announced that rock chip samples taken from the Mbetilonga Project have returned high grade copper and gold results.  NVL Solomon Islands Limited, a subsidiary of Newmont Mining Corporation, Solomon Gold's partner in Guadalcanal, has advised of the 2011 work program for the Guadalcanal Joint Venture, spending US$6.03million on a program including 5,600m of drilling on Mbetilonga, Sutakiki, Kuma and Central during 2011, including a planned 5,600m (3,500m at Mbetilonga and 2,100m at Sutakiki) drilling program.

Financial
In July 2010, Solomon Gold undertook a placement of 33.1 Million Shares at £0.05 to Raise £1,654,455.  In October 2010,  it placed 54.02 million shares at £0.28 to raise £15.1 million. The funds raised were be used to continue the progression of the Company's exploration program at Fauro in the Solomon Islands in 2011, including extensive mapping, sampling, trenching, geophysics and a 9,900 metre drilling program.  In addition funding would be available for  drilling Rannes and Mt Perry Projects in Queensland.  Nick Mather, Chief Executive of Solomon Gold, subscribed for 1,116,071 Placing Shares in the Placing. Following completion of the Placing and Admission, Nick Mather holds 37,706,233 ordinary shares in the company representing 13.45% of the enlarged issued share capital of the Company following the Placing.

The Company now has 281,772,521 fully paid ordinary shares and 2,600,000 options on issue. Current market capitalization is £80 million at 28p per share (52 week range 5p-53p).
SOLG intend to spend $A 21 million in 2011 on exploration activities (Newmont will spend approximately $6 million).

SWOT
Strengths

• Diverse portfolio of assets in Solomon Islands and Australia
• Well funded following £15 million placing in October 2010
• Active drilling programmes in Guadancanal, Fauro, Rannes and Mt. Perry
• Management team has 17% of shares so vested interest in company success
• Institutional support – Baker Steel and Regent Pacific
• Joint venture with Newmont mining in Guadancanal
• Management are targeting a 2moz resource within the Rannes prospect area which if economically mineable could be transformational

Weaknesses

• AIM share volatility
• Exploration risk

Opportunities

• Preparing for ASX Australia listing in second half 2011 (documentation being drafted)
• Strong gold price ($1,418 an ounce)
• Potential for Newmont Mining to increase cooperation on other projects

Threats

• Potential does not translate into economically recoverable reserves

Share outlook
Solomon Gold’s shares are currently trading at 27p, giving a market capitalization of £76 million (52 week range 5p-53p). At the current price they are trading below October 2010’s placing of 28p which raised £15 million for the company’s current exploration and appraisal programme. Though the shares once hit over 80p intra-day after the initial Fauro Islands discovery they have drifted down in recent months and have traded in a 25-35p range.

The Fauro project remains the most risky, but Guadancanal and Rannes (Australia) offer the most certain upside to the current share price. The fact that Newmont mining are working in a joint venture with Solomon on Guadancanal gives reassurance and less funding risk. Solomon are targeting 2 million ounces at Rannes alone, which could mean a 3 times upside to the share price. Initial exploration results have been encouraging on both these projects.

Solomon Gold feels a little like Range Resources (RRL). In other words, plenty of upside from a diversifIed range of exploration assets but with a good dose of risk on some of them. Arguably the fact that Solomon Gold has assets in stable parts of the world versus Range’s key asset in Somalia, makes SOLG feel slightly more comfortable and therefore investable (RRL's recent share price rise has been incredible by the way! When I wrote my review on Range in early February the share price was 16p, yesterday it hit 24p. SEE http://contrarianinvestoruk.blogspot.com/2011/02/range-resources-look-to-have-good.html

Private Investors in SOLG seemed to have lost interest despite the news flow due over the next 2 months. This is not surprising with all the excitement over in the oil sector e.g. Caza, Range, Chariot etc. But lets not forget, gold is still hot and hitting all time highs at the moment ($1,418). If SOLG can deliver on their promises, this company looks very interesting. I bought some for my Contrarian Investor UK portfolio on Tuesday and topped up at the close yesterday on continued weakness in the share price.

Sense finally returns to Xcite Energy

After briefly hitting close to £3 again this morning, Xcite Energy (XEL)
has finally rallied from its lows to rise as much as 19p to 323p (6%).

The shorters have been out in force over the last few days. They hunt in
packs using the bulletin boards to feed false rumours into the market. Supposed expert posters were questioning the work that Schlumberger had done on the flow test in December and whether the CPR would be delayed again because it hadn’t been done properly and the classic yesterday that
the oil actually wouldn’t flow because it was too viscous at ambient North
Sea temperatures. In other words, the drilling experts, Schlumberger had
been complete monkeys and made a hash of it.

Then there was the conspiracy theories that the board were keeping market
sensitive information to themselves and that the reserves upgrade would be
below expectations and that they had change supplier (to TRACS) to massage
the figures. Oh, I almost forgot the rumour that they were planning a
massively discounted rights issue at £2.50. All complete XXXX of course!

So the inexperienced investors think “oh, maybe the rumours are true, I’ll
sell at £3.00 and put my money into something else which is going up (e.g.
Range)”. Those posters on iii.co,uk and LSE boards must be “in the
know”. A classic Bear raid! Of course, by the time they’ve sold and moved
into something else, that's goes down as well. Get the weak to sell and the
shorters feed off the frenzy. When they’ve got their man, they switch and
start buying. Whilst the sheep were selling the last few days, I’ve been
topping up. Not putting up with any market maker or shorter nonsense! Hope
they’ve closed their shorts now!!?