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Athabasca Basin and beyond

September 22nd, 2013

Uranium news from Saskatchewan and elsewhere for September 14 to 20, 2013

by Greg Klein

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Fission and Alpha sign acquisition agreement, Denison challenges Mega for Rockgate

Another burst of merger and acquisition activity hit the markets last week. Joint September 18 statements from Fission Uranium TSXV:FCU and Alpha Minerals TSXV:AMW announced a definitive agreement for the former’s acquisition of the latter. The proposed Mega Uranium TSX:MGA/Rockgate Capital TSX:RGT merger, however, took a surprising turn with Denison Mines’ TSX:DML unsolicited pitch for Rockgate. Denison’s September 17 announcement claimed a 38% premium over Mega’s offer, based on the previous day’s closing prices.

Uranium news from Saskatchewan and elsewhere for September 14 to 20, 2013

In addition to taking a run at Rockgate, Denison filed a revised
43-101 report for six deposits on its Mutanga property in Zambia.

The Fission/Alpha rationale is to put their 50/50 joint venture under a single owner, creating a company solely focused on Patterson Lake South and presumably a more attractive takeover target. Their other properties would go to two newly created spincos. Should Denison’s offer succeed, the company would spin out its African assets along with Rockgate’s advanced-stage Mali project. That would leave Denison focused on the Athabasca Basin.

Read more about these proposals and other uranium M&A news.

(Update: On September 24 Rockgate terminated its proposed merger with Mega. Read more.)

PLS assay backlog grows as Fission/Alpha release more scintillometer results

Step-out drilling confirmed strong mineralization in Patterson Lake South’s newest zone, Alpha and Fission stated on September 16. The JV partners released scintillometer readings for two new holes on zone R945E, the fourth of four zones along a 1.02-kilometre southwest-northeast trend.

The hand-held device measures drill core gamma rays in counts per second, up to an off-scale reading above 9,999 cps. The results are no substitute for assays, which are pending.

Hole PLS13-092 was collared roughly 10 metres north of existing holes. It reached a total downhole depth of 377 metres, striking the basement unconformity at 59 metres without encountering sandstone. Some highlights include:

  • <300 to 1,400 cps over 3 metres, starting at 157.5 metres in downhole depth

  • <300 to >9,999 cps over 16 metres, starting at 163 metres

  • <300 to 1,800 cps over 11 metres, starting at 192.5 metres

  • 460 to 2,500 cps over 2.5 metres, starting at 238 metres

PLS13-096 was collared about 15 metres grid west of PLS-084, replacing it as the zone’s most southwesterly hole. It found no sandstone, hit the basement unconformity at 56.5 metres and stopped at 365 metres. Highlights include:

  • <300 to >9,999 cps over 42.5 metres, starting at 135.5 metres in downhole depth

  • 310 to >9,999 cps over 11.5 metres, starting at 185.5 metres

  • <300 to >9,999 cps over 10.5 metres, starting at 235.5 metres

  • <300 to >9,999 cps over 14.5 metres, starting at 249 metres

True widths weren’t available. The two holes were drilled at -88 and -89 degree angles respectively, making downhole depths close to vertical.

The $6.95-million program calls for 44 holes totalling 11,000 metres, along with geophysics. These results bring the summer’s drilling to 27 holes totalling 8,488 metres. So far just one of the holes has had lab assays released. Scintillometer readings have been reported for 18 holes this summer.

Denison files combined resources for Mutanga property in Zambia

Denison has filed a new NI 43-101 report to replace two previous reports for its Mutanga property in Zambia, the company announced on September 16. The New Mutanga Report follows an Ontario Securities Commission review of a resource filed in March 2012 for the property’s Dibwe East deposit. The OSC declared that report non-compliant because it didn’t include all resource estimates and material information for the property as a whole. Denison’s new report incorporates information covered in a 2009 report on the Mutanga and Dibwe deposits, as well as the 2012 info for Dibwe East.

Of the project’s six deposits, only Mutanga shows measured, indicated and inferred categories. Mutanga Extension, Mutanga East, Mutanga West, Dibwe and Dibwe East have inferred pounds only. Combined, the estimate shows:

  • a measured resource of 1.88 million tonnes averaging 0.048% for 2 million pounds uranium oxide (U3O8)

  • an indicated resource of 8.4 million tonnes averaging 0.031% for 5.8 million pounds

  • inferred resources totalling 65.2 million tonnes averaging 0.029% for 41.4 million pounds

The 457.3-square-kilometre property is about 200 kilometres south of the capital city of Lusaka, near the Zimbabwean border.

The previous week, Denison updated two Athabasca Basin projects with a new resource for Waterbury Lake and more high-grade assays from Wheeler River.

Lakeland Resources options gold project to focus on Athabasca uranium

Now a pure play uranium explorer, Lakeland Resources TSXV:LK optioned a north-central Ontario gold property to New Dimension Resources TSXV:NDR, the companies announced September 16. New Dimension may earn a 70% interest in the Midas project by paying $100,000, spending $1.2 million and issuing 1.5 million shares. New Dimension must spend $300,000 on exploration by December 31.

We’re maintaining our focus on uranium, yet we’re not giving away what could turn out to be a valuable asset in the end. In our view there’s no downside to our shareholders, only a potential upside.—Roger Leschuk, corporate communications manager for Lakeland Resources

The 2,112-hectare road-accessible property has already seen ground magnetics, induced polarization and 16 drill holes that partially defined two gold-bearing zones, with 14 holes showing gold mineralization. Among the assays was 5.92 grams per tonne gold over 4.7 metres, starting at 45.7 metres in depth and including 8.88 g/t over 2.6 metres.

“We get to maintain an interest in a property that looks very encouraging to say the least,” Lakeland corporate communications manager Roger Leschuk tells ResourceClips.com. “The people who are picking it up are a very good group and they see this as potentially becoming their flagship property. The great part about it for Lakeland is we retain a 30% interest all the way potentially to a new discovery. We’re maintaining our focus on uranium, yet we’re not giving away what could turn out to be a valuable asset in the end. In our view there’s no downside to our shareholders, only a potential upside.”

A fall drill program is expected to begin shortly, the companies stated.

Read more about Lakeland Resources.

Forum announces fall/winter plans for its PLS-adjacent Clearwater project

In a September 17 report, Forum Uranium TSXV:FDC updated its Clearwater project, which underwent ground radiometric prospecting, lake sediment geochemical surveys and soil radon surveys in late August and early September. The radon survey found anomalous zones immediately southwest of the adjacent PLS property, the company stated. Forum now plans further prospecting of radiometric anomalies, as well as an expanded radon survey to cover areas with electromagnetic conductors on strike with the PLS conductive trend. Autumn is scheduled for ground EM surveys and early winter for ground gravity work to identify drill targets for the 9,910-hectare property in late January.

One week earlier Forum said its private placement raised $2.59 million.

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Rating the risks

February 28th, 2013

A Fraser Institute survey shows how miners and explorers see the world they work in

by Greg Klein

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“Great mineral assets, highly corrupt government….” That’s sometimes the conundrum under which exploration and mining companies operate. And that was just one comment published by the Fraser Institute as it evaluated a world of challenges and opportunities in its annual Survey of Mining Companies released on February 28.

Between October 2012 and January 2013, 742 companies rated 96 jurisdictions which included countries and, in the case of Canada, Australia, the U.S. and Argentina, provinces, states and territories. Respondents considered 15 policy factors affecting investment decisions in those jurisdictions, for a possible maximum score of 100. Some factors included regulations, corruption, taxation, aboriginal land claims, infrastructure, the local workforce, political stability and physical security.

While the full report provides breakdowns by category, here are the top 10 jurisdictions for overall scores. The 2011-to-2012 rankings are in parentheses.

A Fraser Institute survey shows how miners and explorers see the world they work in

The Fraser Institute’s annual survey rates jurisdictional risk
for a number of factors concerning mining and exploration.

1. Finland (New Brunswick)
2. Sweden (Finland)
3. Alberta (Alberta)
4. New Brunswick (Wyoming)
5. Wyoming (Quebec)
6. Ireland (Saskatchewan)
7. Nevada (Sweden)
8. Yukon (Nevada)
9. Utah (Ireland)
10. Norway (Yukon)

Last but least, here are the bottom 10:

87. Greece (Vietnam)
88. Philippines (Indonesia)
89. Guatemala (Ecuador)
90. Bolivia (Kyrgyzstan)
91. Zimbabwe (Philippines)
92. Kyrgyzstan (India)
93. Democratic Republic of the Congo (Venezuela)
94. Venezuela (Bolivia)
95. Vietnam (Guatemala)
96. Indonesia (Honduras)

Utah and Norway knocked Saskatchewan and Quebec out of the top 10. Greece was added to the survey for the first time, only to join Zimbabwe and the Democratic Republic of the Congo for their bottom 10 debut. Another first-timer, French Guiana placed 27th overall, a fairly impressive ranking for a newcomer and non-First-World country.

Crisis-torn South Africa dropped to 64th place overall compared to 54th last year, retaining its fourth-from-last spot for “labour regulations, employment agreements and labour militancy or work disruptions.”

Of Canadian jurisdictions, Nunavut ranked worst at number 37.

Some anonymous concerns listed under “horror stories” ranged from uncertainty about native rights in Ontario to potential corruption in Quebec. One response stated that “endless ‘community consultation’” in the Northwest Territories costs the company more than exploration. Others noted confiscation of mining rights in Indonesia and expropriation in Bolivia.

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Spotlight on the juniors

January 21st, 2013

Companies, investors and pundits converge on the 2013 Vancouver Resource Investment Conference

by Greg Klein

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A marketplace of ideas about the market itself—that partly describes the 2013 Vancouver Resource Investment Conference. This year the Cambridge House event brings several hundred companies together with prospective investors. But the conference also features about 50 speakers with maybe 50 divergent (although often overlapping) perspectives on the state of the juniors.

Cambridge House calls this Vancouver event the world's largest investor-focused resource exploration conference

Cambridge House calls this Vancouver event “the world’s
largest investor-focused resource exploration conference.”

Among those on hand January 20 were Michael Berry speaking on Obamanomics, Rick Rule on his love for bear markets and Chris Berry on specific critical and strategic commodities for 2013.

Canadian-born Michael Berry, co-founder of Discovery Investing, fell just short of doom and gloom in his cautionary tale about the transformation of United States economics, culture and governance. More than ever before, he said, taxation, deficit spending and redistribution of wealth are firmly entrenched as government polices. The purpose, he stated, was to remake America. The program has disturbing implications for Canada and the rest of the world, he added.

“We have now turned the corner with the second administration of Barack Obama. Politics, not economics, is now the driving force—period, end of story.”

When it comes to boosting its power, U.S. government methods are myriad: Executive orders, challenges to the constitution, the appointment of czars who aren’t checked by the constitution, redistribution of wealth, repression of investment and market manipulation of gold, silver and currency. Outright confiscation, Berry warned, has happened historically and could happen again.

Helping rationalize government policies is a government belief that “anyone in government is smarter than anyone else.” Society, meanwhile, becomes ever more polarized. “It’s not violent yet but it could be violent at some point in the future,” he warned. “It’s happened before.”

The market of course went off the cliff in 1997, so there was the ’97-to-2002 bear market, a truly dismal bear market—when my net worth skyrocketed.—Rick Rule, chairman of Sprott Global Resource Investments

But just from an economic viewpoint, the future looks bleak indeed. “Sometime around 2030, which is not all that far in the future, we will have amassed 200% federal debt relative to GDP…. That’s exactly what the Obama administration wants to do…. When that happens, the current structure will not be sustainable and the government will have to step in and reorganize the economy.”

Massive, growing government debt “is the tool the government is using to socialize the economy,” Berry stated. “It’s not a legacy we want to leave to our children. But it is a legacy with great implications for gold and silver.”

To protect themselves, Berry suggested investors “must eschew the dollar and every fiat currency you can think of,” own precious metals and consider other investments including water and infrastructure.

“I think you need to be looking at risk, thinking about risk, and those ten-baggers that will help you tread water as the U.S. moves towards an ultimate socialist state,” he concluded.

Following with good-natured overstatement was Rick Rule, chairman of Sprott Global Resource Investments. “There’s basically nothing I could say that would depress you more,” he quipped. But ever the contrarian, Rule added, “It defines me well that when everyone else seems to be depressed, I’m on my way to being elated.”

He predicted the junior bear market—the “nice, ugly bear market,” as he called it—has another 18 to 24 months to go. And for anyone who wants to make money, “it’s an extremely good thing.” It’s time to do some bargain-hunting, he maintained.

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Week in review

December 7th, 2012

A mining and exploration retrospect for December 1 to 7, 2012

by Greg Klein

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Lawyer wants to cross-examine Bre-X wives

A lawyer representing Alberta investors wants to know what happened to $95 million that two families received from the Bre-X fraud. The multi-billion-dollar mining scam hit the fan in 1997 and the company filed for bankruptcy in 2002. On Tuesday class-action lawyer Clint Docken told media he wants to cross-examine Ingrid Felderhof, ex-wife of Bre-X chief geologist John Felderhof, and Jeannette Walsh, widow of founder David Walsh, about affidavits the women made concerning their financial situation.

According to Tuesday’s Calgary Sun, Docken told court that the company founder received $25 million from investors while the chief geologist got $70 million. Ingrid Felderhof lives in the Cayman Islands. Jeannette Walsh lives in the Bahamas.

A mining and exploration retrospect

Docken told the Calgary Herald he also wants an appraisal of a Cayman Islands mansion the Felderhofs bought 15 years ago for $3 million.

“It’s important to know what it’s worth now,” the Herald quoted him. “That’s an asset that should be taken into consideration. If this claim is successful, she may have to sell it.”

Lawyers representing bankruptcy trustees Deloitte & Touche want the suit dismissed, saying there’s no money left. The Calgary Court of Queen’s Bench adjourned the case to May 30. The Herald also stated that Ontario has a parallel class-action suit underway.

Darryl Stretch’s downfall

Solid Gold Resources TSXV:SLD announced on Monday that it replaced outspoken CEO Darryl Stretch. According to a company statement, the BOD appointed director/chief financial officer Alan Myers interim CEO.

Stretch courted controversy several times after coming into conflict with the Wahgoshig native band and the Ontario government. He said the Wahgoshig wanted him to fund a $100,000 archeological study prior to drilling claims near Lake Abitibi in northeastern Ontario. Saying the company couldn’t afford it, he told the Globe and Mail last March, “It’s not my obligation to go find arrowheads for those people, period…. If they don’t like you, you don’t work.” That outburst followed a January court injunction ordering him to suspend drilling and consult with the Wahgoshig band. The company filed for leave to appeal, arguing that consultation wasn’t a legal obligation.

The Wahgoshig, in turn, filed a claim in February against the province and Solid Gold. According to a company statement, “the claim states that ‘the mining act does not establish any requirement on the Crown or the holder of a prospectors licence to consult or accommodate aboriginal communities’ therefore the act ‘is unconstitutional and of no force and effect.’”

According to an August Solid Gold statement, “While the company was restricted from operating in the area, the [Wahgoshig First Nation] used information obtained from Solid Gold during the consultation process to stake mineral claims over an area approximately six kilometres long and 500 metres wide, bordering the Solid Gold property.”

By September, a judge granted Solid Gold leave to appeal the court-imposed drilling suspension. The judge, according to a company statement, wrote that he saw “no basis in the facts of this case for an imposition of a duty to consult on Solid Gold. If the Crown wishes to delegate operational aspects of its duty it must establish a legislative or regulatory scheme. The mining act does not presently contain such a scheme.”

Such a scheme was already underway. Under new rules to take full effect April 1, the province will require companies to consult native bands prior to early-stage exploration drilling on Crown land. The bands will have 30 days to express concerns, which could then block a permit.

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CBM Asia signs Agreement to sell Indonesia Coalbed Methane Gas

November 29th, 2011

Resource Clips - essential news on junior gold mining and junior silver miningCBM Asia Development Corp TSXV:TCF announced that project operator, Medco Energi Internasional Tbk, has signed an agreement with Indonesia’s upstream oil and gas regulator, BPMigas, to conduct the sale and purchase of coalbed methane gas produced during dewatering at the Sekayu PSC (production sharing contract) in Indonesia. CBM Asia has a 12% interest in the Sekayu PSC with an option to acquire another 12%.

CBM Asia Chairman Scott Stevens tells ResourceClips.com, “The negotiation was between Medco, as the operator, and BPMigas—which is the government. We’re happy with the agreement. It shows that the government is really motivated to get early production and remove any possible roadblocks.

“The government has really been bending over backwards to try to accelerate commercial production from coalbed methane. It can be a slow process, but with coalbed methane the Indonesian government recognizes it’s different. You can get quick commercial production from a pilot. With coalbed methane you typically do the core holes—like we just did—and next you move into the pilot-production phase. Typically, that gas gets flared or vented. In this case, we have an option to work with GE which manufactures portable 3-megawatt [gensets]. They would provide that onsite, and then we would sell gas to the engine, and that would be linked into the grid. So there could be power development as early as 3Q 2012.

The [Indonesian] government has really been bending over backwards to try to accelerate commercial production from coalbed methane—Scott Stevens

“We’re designing the [pilot] wells right now with Medco,” Stevens continues. “In 1Q 2012 they drill them, and then they put them on production. Typically, there’s a few months of water production and low gas production. We’re hoping it’ll be pretty quick. That’s the main goal for that block. It’s the furthest along towards commercialization.

“The other block is in Kutai West. It is quite close to the Bontang LNG plant, and right next to BP—which is already commercial. We are supposed to be spudding the first core hole at Kutai West next month. That’ll give us the gas content, then we can get the NI 51-101 resource study sometime next year. We’re still in the early phases of working out a seismic- and core-hole drilling program at the two blocks that we have the 70% working interest and operatorship of. That’ll happen next year.”

View Company Profile

Read more about CBM Asia

Alan Charuk

Disclaimer: CBM Asia Development Corp is a client of OnPage Media.

by Ted Niles

Fracking The Future

November 9th, 2011

CBM Asia Develops Indonesia Coalbed Methane

By Ted Niles

Indonesia’s abundant coal deposits have long been exploited, but it was Scott Stevens—in a 2004 paper published by the Society of Petroleum Engineers—who identified their coalbed methane potential. The Chairman of CBM Asia Development Corp TSX:TCF explains, “Indonesia is already the biggest exporter of coal in the world. The coal is beautiful quality; it’s very low in ash and really good for power generation. The industry is just booming.”

Stevens continues, “When these coals become deeper they become very gas charged; they pick up a lot of natural gas. We mapped that out, and we found that south Sumatra, east Kalimantan and south Kalimantan have really huge deposits. We estimate about 453 trillion cubic feet (TcF). That’s the number I developed 10 years ago, and the government still uses it.”

CBM Asia Develops Indonesia Coalbed Methane

Previously known as the stuff that, when detected, sends coal miners running for their lives, coalbed methane (or CBM) is an unconventional form of natural gas that is stored at high pressure in coal beds. Unconventional because of the process required to extract it (safely, that is), called hydraulic fracture or “fracking.” Hydraulic fracture, in the case of coalbed methane extraction, consists of drilling into the water-saturated rock to release the water and the gas. The gas rate increases the more water is extracted until the well reaches peak-gas production when, needless to say, it begins to decline. Estimates for average CBM well life range anywhere from 10 to 40 years.

Stevens’ discovery of Indonesia’s coalbed-methane potential came as welcome news to the country, whose increasing energy demands drove it, in 2008, from net-exporter of petroleum to net-importer, precipitating its withdrawal from OPEC. That same year the government introduced the Coalbed Methane Regulations giving CBM producers a considerable enticement by offering them a much larger share in production sharing contracts (PSCs) than their counterparts in oil and natural gas. The first such license was granted to CBM Asia in May 2008 for a 12% interest in the Sekayu PSC—located in the South Sumatra Basin—with an option to acquire an additional 12%. Included among those in possession of the 30 PSCs granted since then are multinational petroleum giants BP, Exxon Mobil and Total.

“We’re in this very interesting food chain here where they’re probably going to buy us out if we get to a certain point,” Stevens remarks. “And that’s a very valid strategy. I consult for the majors a lot around the world, and they know they’re not very good at discovery. In fact, they never discovered any of these CBM or shale plays. They only bought in after.”

CBM Asia announced its first NI 51-101 resource estimate for Sekayu PSC November 2. Gross prospective gas resources at the project have a low estimate of 319,051 MMcf (million cubic feet), a best estimate of 1,061,983 MMcf and a high estimate of 2,056,266 MMcf. Stevens comments, “There are a lot of tonnes there—millions and millions of tonnes—so that adds up to a lot of gas. We found 500 millidarcies of permeability, which is really good. And Medco [i.e. PT Medco Energi Internasional Tbk], the operator, also found they had gas flowing to the surface right away. So the indications look really good at Sekayu, and Medco is really excited as well. They’ve decided to fast track and move up the production pilot to probably 1Q 2012.”

According to the company, Sekayu’s geology is similar to that of Wyoming’s Powder River Basin (PRB), which currently produces 1.5 Bcfd of CPM and could produce as much as 30 Tcf.

The pilot will consist of a cluster of wells, spaced about 1,000 to 1,500 feet apart. Once running, the most likely method of transport for sale of the gas would be for project operator, Medco, to build a short pipeline to connect with the Trans Sumatra Gas Pipeline—located 10 kilometres from Sekayu—which is currently functioning at 65% capacity. “That pipeline goes up to Singapore, where it gets $12 gas,” Stevens reports. “Of course, we don’t get that $12, but we would very likely get much better than four dollars. That’s the near-term commercial plan. That would allow us to get proved reserves on a small portion of the block; it would give us more confidence that this is real; and it will give us a little cash flow to help get things going.”

We’re in this very interesting food chain here where they’re probably going to buy us out if we get to a certain point —Scott Stevens

He continues, “We’ll hopefully have four or five wells in a cluster sometime in 2Q and then put it on production. So maybe by mid-year we could be flaring enough gas to give [Medco] the encouragement to build that pipeline connector. That might be in 3Q 2012, and then we’ve got cash flow for that quarter.”

Moving forward, the objective is for the company to build multiple pilots on the 58,349-hectare property, and Stevens is hoping to be started on the next in the second half of 2012. In the event that CBM Asia has two pilots by the end of next year, they would undertake a reserve update. “The numbers will be much bigger and promising at that point,” Stevens says. “Solid, tighter numbers. It’s a gradual ramp up over time. At some point, let’s say, in early 2013, when we de-risk the project significantly, it’s possible that a company might want to buy us out.”

The company took a drubbing November 3 from 321 Gold’s Bob Moriarty over the apparent disparity between its market capitalization and the estimated value of its resource. To be sure, Stevens himself admits that he was expecting a stronger reaction from the market after the release of the NI 51-101. A 24% interest in Sekayu—which contains a best-estimate resource of over 1 trillion cubic feet, at a ball-park natural gas price of $0.50 per thousand cubic feet—has a present value of approximately $120 million. Which is more than seven times CBM Asia’s current market cap.

Stevens maintains, however, that this has less to do with the company than it does with the relative newness of the industry in Indonesia. “Things don’t move as fast in Indonesia as they do in North America at the moment because it’s a new industry. And the service sector is learning, and the government is learning, and everybody is really cautious. That’s been very frustrating for us. Companies like Core Laboratories and Weatherford International weren’t even set up in Indonesia until Exxon and BP got going. But it’s much better today.”

Long term, while Stevens doesn’t discount the possibility of full-scale production, he considers CBM Asia’s strengths to lie in exploration. He concludes, “We have a unique knowledge about the geology of Indonesia and CBMs specifically. I’ve been there for 15 years, and I first identified the potential. I’ve been involved with all the other projects as a consultant, and the government knows me well. If someone came along, and we had de-risked these projects, and they were willing to give us 10 times what we’d put in, we would say sure. Then we’d go out and do it again. If for some reason that doesn’t materialize, we’re certainly capable of developing the fields.”

CBM Asia currently has 70.6 million shares trading at $0.23 for a $16.3 million market cap. Its other projects in Indonesia include Kutai Basin, Kutai-West PSC and Kutai II. The company will be hosting a conference call and live webcast about the Sekayu resource estimate Thursday, November 10, at 9:00 AM PST.

Disclaimer: CBM Asia is a client of On Page Media.