The world’s next blockbuster drug might be coming out of a company based in my hometown of Calgary, Alberta, Canada. The company is called Resverlogix (RVXCF.PK) (RVX.TO) and I had the opportunity to meet with the company’s president, Don McCaffrey, back in February of this year. The company has been in a trading range ever since, but recent news on the safety of their lead compound, RVX-208, has created a renewed interest in the company.

Resverlogix is engaged in the development and commercialization of novel small molecules for the treatment of cardiovascular diseases (CVDs), Alzheimer’s, and Inflammation. RVX-208 increases the production of plasma ApoA-I, the key cardioprotective protein in high-density lipoprotein (HDL) or “good” cholesterol. Increasing ApoA-I enhances the process of reverse cholesterol transport where cholesterol on artery walls is removed by ApoA-I lipid complexes.

In the world of price forecasting you can be reasonably sure that the consensus view will be incorrect. Everyone looks at the same data to derive their forecasts and they come to similar conclusions. In the forecasting business, it is the unknowns that matter most.

Another consideration in the forecasting business is that the closer your prediction is to the mean of other forecasters, the less media attention it will get. The people like their daily does of freaks, geeks and outliers.

Our friend Tom Jeffries completed a great comprehensive interview with Dr. Doom, Marc Faber, last Friday. While Dr. Faber is often interviewed on television, the YouTube format allows for a much longer 18 minutes - watch parts 1 and 2 below. On the close ups of Dr. Faber you’ll see Vancouver Harbor and a bright yellow sulfur pile in the background.

Part 1

Part 2

And it makes no sense
And it makes perfect sense
Alejandro Escovedo

Those of you who read my blog posts have seen several well-reasoned articles explaining why natural gas prices are expected to remain low for a long period of time (Gloomy Natural Gas Outlook and More Natural Gas Gloom). Why then would there be so much recent buying of the United States Natural Gas Fund LP (UNG)?

Nova Chemicals Corp. (NYSE:NCX), was recently flirting with bankruptcy. With share price highs of C$41.79 in 2007 and US$32.46 in 2008, the recent February 2009 low of US$1.05 was a blunt report card on management’s effectiveness.

According to the corporate website:

It looks like Chavez needs the first string team back on the (oil) field.

Hugo Chavez recently drove Western oil companies out of Venezuela and let national oil companies from Iran, China and Belarus take up the slack. The New York Times is now reporting that the Venezuelan President (not for life… not yet) has been quietly courting companies such as Chevron (CVX), Royal Dutch Shell (RDS.A), and Total (TOT) and promising them access to some of the world’s largest petroleum reserves.

Our friends in the airline industry made a big deal about oil speculation when oil prices were flirting with $150.

They even encouraged their customers to sign up for a website to stop oil speculation.

Pickens’ company, Mesa Power, is in for $2 billion towards building the world’s largest wind farm in Pampa, Texas. The total cost is estimated to exceed $10 billion.

Now he’s sharing his vision on energy with the rest of the USA. While a cynic might say he’s “talking his book,” it's his money paying for the mighty Pickens Plan PR push. His plan has merit, as we are nowhere near peak natural gas (nobody even mentions gas hydrates).

Hack: A modification of a program or device to give the user access to features that were otherwise unavailable to them.

While a cult of Peak Oil adherents fret about the end of the hydrocarbon age, we’ve been focusing on trends that will provide buffering to the upcoming declines in oil production. Don’t get me wrong, I’m not saying that Peak Oil won’t happen. However, the dreaded peak may turn into a downward sloping plateau supported by higher prices. This high price plateau should buy the planet enough time to start thinking about conservation and using alternate energy sources.

I first wrote about Wavefront (WEESF.PK) [before I started working for them] when the share price was around $1 and moving up quickly. After I started working with Wavefront I made the following statement:

In my capacity as a newsletter writer, I'm exposed to hundreds of companies a year. It is extremely rare to find one with as much groundbreaking potential as Wavefront. My experience and expertise as a petroleum hydrogeologist over the last 20 years gives me a great deal of comfort with the reliability of Wavefront's technology and the science behind it.

The graph below prepared by EOG Resources (using data provided by IHS Energy) illustrates the most important thing you need to know about the North American natural gas market. Decline rates of gas wells have almost doubled over the last 10 years!

Natural gas wells normally produce a their highest rates as soon as they are put into production. Over time the gas flow rates decrease until the revenue stream from the gas production is less than the cost required to maintain production. This is when the wells are shut in or abandoned.

A corporate presentation from Mines Management Inc. listed the world’s Top-20 undeveloped silver deposits. I thought it would be instructive to see which public companies own these deposits. Silver is in a bull market after all. They are roughly listed from largest to smallest. Often new drilling results will expand the estimated size of these deposits so the relative size of each deposit can be a moving target.

Peñasquito, Mexico – Glamis Gold [acquired by Goldcorp (GG) in early November]

Encana’s (ECA) decision to divest itself of non-core assets is starting to pay dividends. While one could argue that there are better geological opportunities outside of North America, many of those come with large, unquantifiable risks. Within North America, the remaining opportunities of "size" are predominantly in unconventional resource plays.

In a peaceful world where there was lots of cooperation between countries on energy matters, that strategy might put Encana into the vulnerable position of being the highest cost producer.

China made it very clear that it does not want to pay higher prices for iron ore after enduring price increases of over 70% last year. Bold statements about “huge and unreasonable profits” and “unacceptable prices” preceded the annual price negotiations. Recently, German and Japanese mills agreed to an increase of 19%, which set a de facto global benchmark price.

To understand the iron ore market you need to realize that the “Big 3” control approximately 70% of the world's iron ore production and they are unlikely to sell their product at a discount while demand is so high. Who are the Big 3?

One of the tangible items that I brought back from the PDAC Convention in Toronto was a little vial of iron filings from one of the booths. There are only a handful of public iron ore companies and it looks like its worth taking a close look at them. This article indicates prices are likely to rise:

Iron-ore contract price negotiations have heated up this week, with rumours that the Chinese government has issued an unofficial directive to cap the prices paid by domestic steel makers.

The New York Times article Below a Mountain of Wealth, a River of Waste hasn’t done much for the reputation of Freeport McMoRan (FCX).

The free version of Google Earth doesn’t allow one to zoom into the “deepening spiral” of the open pit as described by the authors, and the massive tailings plume (which is clearly visible) doesn’t appear “soot colored”, but large scale environmental issues related to Freeport’s mining activities are evident from satellite imagery. The Austin Chronicle’s Robert Bryce article “Written in Stone” drew attention to the environmental damages back in September:

• Tan Range Exploration Corp. (TRE)
• Eldorado Gold Corp. (EGO)
• Desert Sun Mining Corp. (DEZ)
• Great Basin Gold Ltd. (GBN)
• Yamana Gold Inc. (AUY)

Interestingly enough, all of them are gold stocks.

The Gold Information Network has a 600 year silver price chart which also shows the silver/gold ratio. Congratulations to everyone who sold silver in 1500.

Throughout long periods of history both silver and gold were used as money (bimetallism) and the silver/gold ratio was pegged at ~15.5 for long periods. The current ratio is ~60 although the global aboundance of silver is only 10 times that of gold.

Burlington and Encana share some history. Both companies got a head start in the oil and gas business through land grants and rights of way for railway construction. In 1864 Northern Pacific Railway Company (predecessor to Burlington Northern Railroad Company) received 40 million acres (an area the size of Washington State). The Canadian Pacific Railway (a predecessor to EnCana) received 25 million acres in 1864 (an area the size of England).