Micro-Cap Review Magazine Winter 2011

$5.
00
Quarter 3 2011
microcapreview.com
Resource & Energy Issue
Investor Targeting Q&A w/ John Viglotti, PRNewswire

Sheldon Shelly Kraft [9]
The Value of Social Why Invest in Media Applications Micro Cap Energy Companies Roger Maggio [12] Knocked Down But Not Out
Michael Bodino [22] Dr. Gerald Bailey [44]
One on One Interview with Eric Sprott

Sheldon Shelly Kraft [76]
Understanding Gold
Grant Williams [70]
[48] Small Broker Dealers Doug Shriner
Li ion batteries, electric & hybrid cars, fuel cells, nuclear, solar, graphene...
Where is the graphite going to come from?
NortherN Graphite corporatioN (NGC:TSXV)

Simple mining and metallurgy of a premium large flake, high purity graphite deposit located In Canada, close to infrastructure and markets Project is highly scalable to meet future demand. Bankable feasibility and permitting by 1Q 2012. $70 million capex and one year to build.
Graphite is the Next strateGic MiNeral

It is one of two natural carbon polymers and has the highest natural strength/stiffness of any material. Graphite is corrosion and heat resistant, the lightest weight of all reinforcements and an excellent conductor of heat and electricity. The anode In a LI Ion BaTTery IS made from GraPhITe. ThErE ArE No SUbSTiTUTES!
Graphite deMaNd is oN the rise.
Traditional steel and automotive demand is growing 5%+ per year New uses will lead to even greater demand growth
//
The price of graphite has more than tripled since 2005 China produces 70% and production & exports to decline
//
The EU and USA have named graphite a supply critical mineral Shortage of exploration and development projects
//
WWW.NortherNGraphite.coM
phoNE: (613) 241-9959
fAX: (613) 241-6005
iNfo@NorThErNGrAphiTE.Com
NortherN Graphite corporatioN (NGC:TSXV)
E D I T O R I A L
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Micro-Cap Review Magazine is published Quarterly, Spring, Summer, Fall, Winter POSTMASTER send address Changes to MicroCap Review Corporate Offices. Copyright 2009 by Micro-Cap Review Inc. All Rights Reserved. Reproduction without permission of the Publisher is prohibited. The publishers and editors are Not responsible for unsolicited materials. Every effort has been made to assure that all Information presented in this issue is accurate and neither Micro-Cap Review Magazine or any of its staff or authors is responsible for omissions or information that is inaccurate or misrepresented to the magazine. Micro-Cap Review is owned and operated by SNNWire.com
The resource sector is hot and the energy sector is volatile
Leslie Richardson Dr. Gordon Chui Eric Sprott Michelle Romero Lance Kimmel
his trend began with the increasing prices due to demand of the underlying commodities of oil & gas, precious metals and rare earth elements in todays global economy. Global economic conditions are causing oil prices to drop as demand drops. The value perception of paper currencies has fallen on hard times. Several countries have needed bailouts to stave off bankruptcy! Debt is rising globally! And the US is in a debt ceiling faceoff. U.S. sovereign debt has been downgraded and EuroZone countries like Spain, Greece and Italy are downgraded and teetering on thin ice. In this issue of the Micro-Cap Review Magazine a common theme of currency versus precious metals is throughout. Sooner or later debt is going to suffocate global economic growth and have a drastic affect on how governments manage the funding of social responsibility and retirement payment obligations. Many investors today are long physical Gold rather than having their money in mutual funds, currencies, debt instruments, or equities whereas years gone by an investor long physical gold or silver was thought of as quirky or paranoid and contrarian. Having a diversified portfolio is no longer the established mantra but rather it is necessary to hedge against inflation or currency devaluation which is now in vogue. I hear smart cries from the professionals for the return to the Gold Standard and whispers from politicians for the same. I wouldnt be surprised if we begin to hear more and more from our elected officials and hopeful candidates about returning to a Gold Standard. Perhaps we will be paying for gasoline at the pump with gold and silver. I feel sorry for the Y generation who twittered and Facebooked for the election of the President because now the same volunteers that went out and got him elected are suffering financially. Problem is now these same sup-
porters, voters and campaign workers arent making enough money to fill up their gas tanks, buy a decent meal in a restaurant, make student loan payments or cover their expenses and are taking to the streets. Never mind the mounting global debt that their grandchildren will be born into. Getting a job is almost out of the question and the hope of going to college to learn to earn is now moan and groan, cant pay my loan. Even with a job, runaway inflation is still worse than the NYC bed bug invasion of which there is a short term fix. Hard to lower jobless rates while HP and Cisco are letting go over ten thousand employees. Jobs will only come from funding small business, micro-caps, entrepreneurial business models, garage developers, and incubating science and new drugs. I see micro-cap CEOs struggle every day and at every financial conference I cover I hear how tough getting funded has become. I give so much credit to the unsung heroes, the investment bankers, private equity funders focused and specializing in the micro-cap space getting deals funded. U.S. micro-cap companies are in competition with the global micro-caps that are competing for funds both in the U.S. and abroad. Smartly North Americans, Aussies, Europeans, and Asians are exploring, developing and producing mineral projects throughout the world. I recognize how important a Ruby Creek, cover story, is to the micro-cap entrepreneurial spirit, everyone loves a good success story. Within the pages of this issue of the MicroCap Review you will find articles and company profiles that may begin to change your investment strategies and influence how you plan to invest in your future. I look at the micro-cap marketplace of companies and I see Opportunity! What do you see? n
This Publication is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Micro-Cap Review Magazine and its employees are not, nor do they claim to be registered investment advisors or broker/dealers. This magazine contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 relating to companies future operating results that are subject to certain risks that could cause results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements. This publication undertakes no obligation to update these forward-looking statements. Micro-Cap Review Magazine, its owners, employees, their families and associates may have investments in companies featured within this publication and may elect to sell these investments or purchase additional investments in these companies at any time. However, the policy of our editorial staff is to avoid any pre-publication trading of featured stocks or sales until the release date of the magazine. In order to be in full compliance with the Securities Act of 1933, Section 17(b), where the publisher has received payment for advertisement/advertorial of a security, the amount and type of consideration will be fully disclosed. All information about the Company contained within an advertisement/advertorial has been furnished by the respective Company and the publisher has not made any independent verifications of such information and makes no implied or express warranties on the information provided. Readers should perform their own due diligence before investing in any securities mentioned. Investing in securities is speculative and carries a high degree of risk. All MicroCap Review Disclaimers apply http://www.microcapreview.com/disclaimer.php before investing view www.sec.gov/investors
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Micro-Cap Review Magazine
PROFIT PLANNERS MANAGEMENT, INC. Accountants & Business Advisors A Micro-Cap Company Service Provider
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SEC Reporting & Compliance

SEC Filing (10K, 10Q, 8K and Registration Statement) SEC Comment Letters Intermediary with SEC and Auditors Sarbanes Oxley Compliance for Small Public Companies Technical Research
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Micro-Cap Review Magazine www.microcapreview.com
CONTENTS
WWW.MICROCAPREVIEW.COM QUARTER 3 2011
F e AT ured ArTICL es
6 9
Need a P.A.L. . . . Whos your D.A.D.-dy? (Part I) by Joshua Soloway Capital Markets Visibility Program Drives Investor Engagement for Small-cap and OTC Companies by Sheldon Shelly Kraft The Value of Social Media Applications by Roger Maggio The Decade for Debt Financing by Jim Schnorf The Future of Thorium as Nuclear Fuel by Mickey Fulp Knocked Down But Not Out Oil & Gas Commodities Create Opportunity in U.S. Energy by Michael Bodino The Tiger Stops Roaring by Lance Jon Kimmel Technology & Oil Lead to Bonanza Returns! by Dr. Gordon Chiu Talk to Thousands of Active Investors In Real-Time. (In Your Pajamas.) Why Invest in Micro Cap Energy Companies by Dr. Gerald Bailey Small Broker Dealers An Endangered Species Why We Should Care by Dr. Doug Shriner
50 52 56 59 68 70 74 76 79 80 82
12 14 16 22 24 29 38 44 48
New BD Formations & BD Withdrawal Summary by David Alsup Performing Due Diligence on a Micro-Cap Oil & Gas Company by Erik Nelson The Beltway Matters by Elvis Oxley Indonesia A Country on the Path of Sustainable Growth Supported by Vast Natural Wealth by Leslie Richardson Should I buy gold or gold stocks? by Laura Stein Understanding Gold by Grant Williams My View on How Gold is Perceived in Various Different World Economies? by John Percival One on One Interview with Eric Sprott, Leading Money Manager and Investor, Sprott Money, Inc. The Silver Companion! by David Bond Q&A with Larissa Sprott on Precious Metals Including Gold and Silver Investing by Shelly Kraft PRESS RELEASES? Looking Into the Numbers. by James Richmond
Finance & Investments

40
Ask Mr. Wallstreet: Micro-Cap, Where has Wall Streets trickle down affect gone? by Sheldon Shelly Kraft
Profiled Companies
20 32 42 66
Northern Graphite Ruby Creek Resources Pretium Resources Inc. Chestnut Petroleum
Viewpoints
84
It Was Meant to Be by Rabbi Stephen M. Robbins
Legal, Tax & Accounting

91 94
The Compliance Corner by Chet Hebert Ombudsman by Jack Leslie
Comics
92
Wall Street Chicken
F E AT u R E D A R T I C L E
Need a P .A.L.Whos your D.A.D.-dy? (Part I)

odays schizophrenic markets have us all wondering where our friends have gone. In times like these, who couldnt use a Principal American Liaison? A bona fied P .A.L. if you will.
Enter the OTCQX, a revolutionary alternative for non-U.S. public companies that seek increased liquidity, higher valuations and a broader capital market presence. The OTCQX represents a unique opportunity to achieve these things while gaining unfettered access to the worlds deepest capital market, the USA. But you need not go it alone. A good PAL can help you survive and thrive in treacherous times. Its no secret that an established presence in the US capital markets works wonders for a companys financial strength, yet many of the most successful companies avoid the US due to excessive regulation, onerous reporting obligations, and exorbitant expenses. But the game changed with the recent creation of the OTCQX, a revolutionary marketplace where qualified international companies can list their securities in the US without becoming subject to ongoing reporting and compliance regimes like the infamous Sarbanes-Oxley. By qualifying under a wellestablished exemption, OTCQX-listed international companies avoid such obligations provided that they meet the requirements of their primary exchange. The OTCQX is a fully electronic marketplace with over 250 listed companies and an
n By j Os h u A s OLOw Ay
aggregate market capitalization of over $1 trillion. OTCQX enables issuers to diversify their shareholder base and increase liquidity while offering US investors greater access and transparency. US investors can easily access OTCQX-listed securities through major brokerage firms like Schwab, E*TRADE, and TD Ameritrade. The OTCQXs electronic quotation and trading platform provides real-time, level 2 quotes and connectivity to all major US broker-dealers. The liquidity increases that follow OTCQX issuers do not stop at the border. OTCQX listings often increase trading volume and valuation on the issuers primary exchanges. For example, the most recent data shows that 120 days after listing on the OTCQX, Canadian companies experience trading volume increases of 82% in the US and 22% in Canada, as well as share price increases of 21% in the US and 19% in Canada. As traditional exchanges consolidate, they become increasingly disconnected with issuers, often acting more like regulators than service providers. Meanwhile, the OTCQX offers issuers a bevy of services like OTCIQ, which provides historical quote and trade data as well as customized Market Reports for distribution to directors, management, and shareholders. Dedicated OTCQX Market Services Specialists are available to answer issuers questions regarding trading performance and market maker information. The OTCQX continues to attract junior mining, biotech and energy companies that want to tap into newfound interest among US investors who were previously unable to access such opportunities. Though the OTCQX is particularly advantageous for smaller companies, many large cap companies now list on the OTCQX to avoid full reporting in the US. Repsol, Roche, BNP Paribas, Adidas, AirFrance, Peugeot and BAS all left their traditional exchanges to join the OTCQX. If your company is listed on a recognized international exchange such as the TSX,
1
TSX-V, or AIM,1 you may qualify to list in the US without the ongoing regulatory headaches and hefty price tag. Qualifying companies must have Total Assets of $2 million and one of the following: Net Tangible Assets of $1 million; Net Income of $500,000; Revenue of $2 million; Or Global Market Cap of $5 million. All companies listing on the OTCQX must be sponsored by a certified Principal American Liaison (PAL), who guides the company through the listing process and advises on their OTCQX obligations. Each year, the PAL re-reviews the company to ensure that it: satisfies its disclosure obligations; meets OTCQX requirements; and continues to qualify for the 12g3-2(b) exemption. The PAL remains available to help issuers meet their obligations with the least time, expense, and hassle possible. A PAL must have a firm grasp of the companys business and industry to help balance disclosure obligations and business considerations. This understanding also enables the PAL to ensure clear communication between the company and the OTCQX. An effective PAL must also be equipped to advise the company on strategies for attracting and communicating with US investors. This includes a responsibility to act as the issuers principal disclosure attorney in the US. Only qualified law firms, broker-dealers, and ADR Banks can obtain the PAL license. Paramount among these requirements is that the PAL must have substantial experience advising issuers on securities matters. When selecting a PAL, an issuer should consider which PAL is best equipped to provide counsel on securities matters, disclosure requirements and maintenance of good standing with the OTCX. Although ADR banks and broker-dealers can list a company, they are not necessarily in the business of counseling issuers on securities laws. Public companies often face issues that may irreparably harm their public image if
not handled properly. To meet such challenges, a company must have the guidance of a PAL who has the experience and expertise to resolve issues effectively and efficiently. A strong presence in the New York marketplace can make a big difference in avoiding and resolving issues as well. There is no substitute for the ability to directly interface with the OTCQX team as issues arise. Moreover, a New York-based PAL provides access to the best service providers in the securities industry, which increases the visibility and viability of the listing. Not all PALs are created equalpick your friends wisely. n
about the author

Joshua Soloway is CEO of Soloway Group PC, a premier provider of PAL. With over 50 years of collective experience, Soloway Groups attorneys regularly advise at every stage of the public company life cycle. Mr. Soloway previously worked at PricewaterhouseCoopers LLP, where he advised clients on myriad international finance and securities transactions. He has also built several businesses and gained extensive experience in the finance, oil & gas, tech and mining sectors. Mr. Soloway holds a BA degree from the University of Colorado and a JD degree from Boston University. For further information, please visit www.solowaygroup.com or contact Mr. Soloway directly at: jsoloway@solowaygroup. com.
For a complete list of recognized international exchanges, see: http://www.otcqx.com/qx/iQualifiedForeignExchange.
F E AT U R E D A R T I C L E
Capital Markets Visibility Program Drives Investor Engagement for Small-cap and OTC Companies
PR Newswires New 12-month Calendared Investor Relations Strategy Is Easy and Affordable to Implement
f youre reading this Micro-Cap Review, chances are, you are well aware of the devastating impact the financial environment has had on small and micro-cap com-
panies. Simply: money is harder to raise, investors are hard to indentify and getting any notice from the financial press and portfolio managers is beyond challenging.
JMV: Most professional investor relations tools are not created for smaller listed companies. We have identified that, across the entire capital markets landscape, thousands of small-cap, OTC and TSX listed companies are being underserved and ignored by many investor relations service providers. M-CR: Why are small companies underserved and ignored? JMV: In my opinion, most large IR service providers have placed all their sales focus exclusively on mid to mega-cap companies and big-ticket products like stock surveillance. They have neither the sales bandwidth nor the support resources to execute a product specially created for small-cap and OTC listed companies. This has left an IR void that has, unfortunately been filled by stock promotion. M-CR: What do small-cap and OTC companies need? JMV: They need investors and influencers to hear their story AND they need to deliver their story in a consistent and contiguous manner.

To help companies simultaneously address all those issues, PR Newswire - the global leader in news and information distribution services for professional communicators has launched Capital Markets Visibility 365 , their newest service SPECIFICALLY built for small-cap and micro-cap companies. To explain the program, Micro-Cap Review sat down with John M. Viglotti, VP of Investor Relations and Compliance Services at PR Newswire. M-CR: What was the genesis of Capital Markets Visibility 365?
n BY SHELDON SHELLY KRAFT www.microcapreview.com
M-CR: Consistent and contiguous manner thus the 12-month program? JMV: Yes. Capital Market Visibility 365 is a calendared strategic marketing plan. Once it is set-up, it almost runs on auto-pilot. M-CR: The program addresses three targeted audiences. Why? JMV: Without exaggeration, our clients shareholder messages will reach a targeted audience of hundreds of thousands. Each of the targets delivers different value to small-cap and OTC companies: Individual investors for immediate liquidity and (hopefully) buy & hold loyalty. Institutional investors for dramatic volume activity and Wall Street visibility. Financial and sector media (and bloggers) for third-party validation. M-CR: Will institutional investors have interest in companies under $100 million market-cap? JMV: Smart buy-side and sell-side analysts keep an eye on all companies within their sector, even if a specific company is too
Do you have a sample strategic calendar people can see? JMV: Yes. Normally, Id say click here for more information, but as this is a printed interview, I invite anyone to simply call me directly at 201-360-6767. My email is john. viglotti@prnewswire.com. M-CR: Thank you, John. JMV: Thank you. I appreciate the opportunity to introduce Capital Markets Visibility 365 to your readers. n
John is responsible for the development of PR Newswires products and services to help public companies communicate with their key stakeholders. Viglotti has 25 years experience in the development, management and marketing of financial content and delivery platforms including Thomson One Investment Banking , StreetSight, BondWatch, IRtrack, and Amex IR Online. These platforms and associated proprietary content sets are market leaders serving over 6,000 institutional and corporate clients worldwide. In 2009, John formed Quantitative Targeting LLC (QT), focused on the creation of algorithms that measure the compatibility between a public company and institutional investors to aid investor relations professionals in their buyside targeting efforts. Prior to QT, John was VP of Content Strategy for Thomson Reuters and Managing Director of Georgeson Shareholder Analytics. At Georgeson, John was responsible for the global stock surveillance and shareholder analysis team as well as building dashboards for investor relations and institutional sales and trading. Prior to Georgeson, John spent 14 years with financial media companies in content, product and business development roles. John began his career in the financial media industry with a SEC based newswire, Federal Filings, which was acquired by Dow Jones. JohnViglotti VP, Investor Relations Products and Services PR Newswire/MultiVu 350 Hudson Street | 3rd Floor | New York, NY 10014 Phone 201 360 6767 | Mobile 212 729 8350 Fax 201 942 7013 john.viglotti@prnewswire.com www.prnewswire.com
small today to publish an opinion or take a position. Small-cap and OTC companies must build a consistent and contiguous brand presence with the institutional investors within their sector to clearly differentiate and distance themselves from the inconsistent pump and dump marketing that is pervasive. M-CR: Will Hedge Funds take a position in a company under $100 million marketcap? JMV: The answer is often yes. To help with that, our Quantitative Targeting algorithm will identify portfolio managers that may prefer smaller-cap firms matching their investment style to a specific clients exact stock attributes. M-CR: What are the components in the program? JMV: There are 11 moving parts to the program combined from six different services and partners including PR Newswire and RetailInvestorConferences.com. M-CR: 11 moving parts! It sounds complicated!
JMV: Its not complicated, its calendared. We give clients an entire plan, monthby-month plan. Theres nothing else like it. M-CR: What is the cost? Or is that a secret? JMV: Like the program itself, were very transparent. Capital Market Visibility 365 is $3,000 per month. Its a huge value. M-CR: Are there variations or options? JMV: The only Capital Market Visibility 365 variation, for this launch, is clients may substitute one of the two live virtual conference events (RetailInvestorConferences. com) with an IR Room - investor relations website. Companies MUST have an IR Room its where investors go AFTER they receive your news. M-CR: Why arent SEC files included in this program? JMV: This is a visibility / marketing package. We are keeping the product focused on that rather than the compliance aspect of investor relations. M-CR: What do companies need to do to begin their Capital Markets Visibility 365?

10
The Value of Social Media Applications

he tipping point of change of all media evolution, from cable TV, internet and now social media, remains the same. Change is caused by providing a more defined and timely experience. Consider the most basic social network.the community in which you live. Is it the same today as it was 20 years ago? Most likely, it is not. Your community has evolved to serve the needs of citizens within its borders. On-line social networks are no different because they serve either a specific purpose or a general purpose. Social networks have no geographic borders, no imposed or elected government providing true democracy. As a user, you are free to choose with whom you want to interact or what area or areas of interest fill your passion or need, allowing you to define your needs areas needing improvement. Social network users dictate their direction and functionality, just like citizens of any community do and have done, long before on-line social network communities existed. They have eliminated geographic borders, including for the most part government
n By ROg ER mAg g IO
control or interference. With your borderless social network and the click of a mouse, you can communicate with one person, hundreds or thousands instantly, to reach people anywhere in the world to meet on-line, regardless of culture, race or political views, to share and learn from each other in ways that have already changed the politics in this country and governments in Egypt, Bahrain, Yemen and Libya. Companies like LinkedIn Corporation, a business social media, have reached valuations greater than 7B in market cap after going public. The growing problem with webbased social media plays is the changing macro-environment shifting to mobile over web thanks to Apple Incs iPad and iPhone. How many active business people stay at home or have time at the office sitting in front of a desktop communicating with their potential clients? The solution will be shifting into mainly smartphones and tablets for social media needs thus the trend: Social Mobile Media Applications. Some people believe it could be analogous to the Bakken Formation of Technology like the Bakken Formation within the oil and gas fields. Apple Inc. would not be the same company with such stellar earnings if the success from their smartphone (iPhone) and tablet (iPad) sales revenues were removed. Mobile smartphones only account for 25% of all cell phones in the US, growth is huge. They are outpacing sales of PCs and laptops by providing an uninhibited real time experience to individuals on the go. Today, the average individual has less time to spend in front of a desktop and will decidedly spend more time being productive via a smart
phone. That quantum leap will dramatically create all forms of revenue for the new Social / Mobile network, driving valuations higher, while requiring a smaller universe of users to monetize. No longer do you need 750/M users to create substantial shareholder value. It can be as little as 1/M. Everyone says that social media will monetize. It will, but not like anyone expects. Social media will monetize around data because data. Data is the only thing that advertisers, corporations, governments, and other people are willing to pay for and instant mobile connectivity is the driving force. As an example, in the first half of 2011, Eric Schmidt, former Google CEO, decided to make an investment into a startup company called Quixey (private), a search engine for mobile apps. After receiving 3.8M in Series A funding, Quixey Inc., may have valuations of 100M. Sensing opportunity, MIT startup Mobile Genius LLC (private), a provider of mobile application development and advisory services elected to position itself with Social Media Group Inc., just as it did with a public version of Quixey, called Mimvi Inc., (OTC BB: MIMV) believing in aligning with enterprises that utilize mobile applications with patent capabilities. The convergence of data for social / mobile networks will create the new monetized innovation economy. You will either be a part of it or be as extinct as a tube in a television. n
Roger Maggio is the CEO of Social Media Group Inc. (dba, Social Media Holdings), located in River Edge, NJ) Website is www.socialmediagroup.co (not .com) and contact is roger@socialmediaholdingsinc.com
12
13
The Decade for Debt Financing

With Attractive Equity Raises for micro-cap, small-cap and private entities poised to remain challenging, debt structures will continue to evolve to help fill the financing needs
lthough equity for major transactions ($500 million and up in enterprise value) has clearly become more abundant in recent monthsresulting in materially higher multiples for acquisitions in this space equity raises with attractive terms for smaller transactions and for small-caps and private entities in general has remained challenging. There is a strong likelihood this trend will continue, at least in general, for a number of years ahead, with exceptions for specific sectors and specialized deals, for example raising equity for cloud computing firms in the first six month of 2011 has been less problematic than with other sectors.
the Challenges in eQuity Markets

At the forefront of ongoing challenges for fair and attractive equity raises in the micro-cap, small-cap and private entity markets is the demise of the traditional micro-cap, smallcap IPO market. Since this article is limited to a discussion concerning U.S. markets and is focused on debt alternatives, a detailed analysis of the micro-cap, small-cap IPO market and post-IPO support in general for small-cap firms is not possible. Suffice it to say that this market has been in a period of continuous and substantive decline since

n By j Im s Ch NORF
1997 for a whole host of reasons. The virtual elimination of small IPOs as an exit strategy severely limits liquidation options for equity investments in private firms that historically would have viewed a traditional IPO as a likely exit mechanism. From a practical standpoint, a sale of the company to a strategic or financial buyer becomes the only likely scenario for returning funds to investors. For existing micro-cap and small-cap companies, the inability of firms to be reasonably compensated for research and executing trades makes after-market support very challenging. I have the privilege of hosting the annual meeting of the International Stock Exchanges Executives Emeriti (see www.capitalmarketexperts.net) and for those readers interested in this subject, we have created a Small Business Task Force headed by David Weild, former Vice-Chairman of NASDAQ, to address these issues. The substantively more complex and burdensome regulations that equity raises face compared to debt financing result in the need for a material premium on overall yield. Although regulatory issues and concerns are probably overstated in terms of what percentage of the total problem they actually cause (and issues such as the proliferation of electronic trading, decimalization, etc. are understated or not even mentioned), there is no question that the attractiveness
14
of debt structures is greatly enhanced by the less burdensome regulatory environment for these types of financings. The trend has been for the spread in the scope of difference in regulatory burdens between these alternative funding structures to increase, not lessen. We currently see no likelihood that this spread will materially decrease, at least in the near term, thus continuing to favor lending oriented raises. A variety of other factors will favor the rise of debt financing as an alternative to equity in the days ahead. The concern over dilution with raising equity at prices deemed by company principals to not be in the long term best interest of shareholders will remain a constant issue. In many cases companies will elect a debt option with the plan to defer an equity raise until more attractive terms can be negotiated. The recent noteworthy financial reporting irregularities of select Chinese domiciled firms subsequent to reverse merging onto U.S. exchanges resulted in the typical reaction of taking macro level steps to ensure such events cease to occurwith the result that the market for Chinese reverse mergers was immediately decimated. We believe that many worthy Chinese domiciled firms (and other foreign domiciled firms wishing to trade on U.S. exchanges) will find funding solutions via listings in other countries, or thru debt structures. These types of macro reactions to issues have pronounced long term consequences that can fundamentally change entire dynamics. Approximately 30 years ago, while I was working at Caterpillar, Inc., an embargo was put in place on the exporting of earthmoving/ construction equipment to the Soviet Union. Though the dollar loss of that particular transaction was significant, it was not catastrophic to the companybut the underlying message that the United States would use an embargo to impose its social agenda had far reaching effects on the firm. Another issue that will challenge equity investments into small-caps and private equity will be a growing need for current cash yields. With a dramatic decline in the
risk free rate of return as evidenced by the concurrence of the academians and consultants around the country, interest rates and dividends are compressed to levels that make current yields on debt structures seem especially attractive. Although a number of major pension funds by policy limit investments into the traditional Bulletin Board stocks, these types of institutional investors face tremendous pressure to generate overall current portfolio yields in the 8% annual return range in order to meet actuarial contribution requirements. In recent months I have spoken with a number of major U.S. pension funds that are venturing into the high yield bridge loan space or focusing more on preferred stock structures with meaningful current distributions. Likewise, in meeting with sovereign foreign wealth funds on my recent trip to Asia, it is quite clear that a number of these entities believe equity type yields can be attained through innovative debt transactions in the U.S. marketswith much simpler due diligence, less challenging negotiations, and less risk.
Debt Will ProviDe at least a Partial solution

Given all the regulatory pressures, the issues with current yield, and the changing nuances of marketplace requirements involving equity, debt financing structures will continue to evolve to fill at least part of the missing funding gap that will not be able to be fulfilled by traditional equity raises. The fact that debt transactions are almost always much simpler and faster than equity financings will be a major influencer in the months and years ahead. We continue to see new variations in debt financing terms and structures being implemented to serve as a surrogate for equity. For established companies generating revenues from financially viable customers, we believe purchase order financing will continue to grow in significance as a replacement for equity raises. The purchase order financing business was in a state of despair with the easy credit markets in the middle of

the last decade. Now many of these firms are able to charge a significant fee per month (for example 2%) plus a percentage of profits on ordersand sometimes with a guaranteed floor yield regardless of how short the borrowing period is. Though on the surface this may not appear to be an attractive alternative, it is materially less costly in the long run than a highly dilutive equity offeringand much, much faster to consummate. As an example, we have arranged multiple tranches of purchase order financing for a firm exporting products to South America where the speed in closing the funding was paramount, or a major customer would have been lost. The alternative would have been for the client to take an equity partner and give up a major stake in his companyforever. Debt structures that incorporate underlying collateral as security, coupled with some form of upside yield potential, are poised to grow in popularity. Though not necessarily the traditional mezzanine type financing structure, the end result will be similara base yield coupled with the potential for meaningful return enhancements. We believe many of these structures will be a senior debt base (as opposed to subordinated debt), coupled with yield upside. With the challenges smaller firms will have in raising equity, debt providers are concluding that they can have their cake and eat it too. The return enhancers will certainly include options and warrants for the lenders, but will also include more non-traditional type terms, for example revenue participation certificates or guaranteed floor yields via puts upon the sale of the company or some other type of liquidation or financing event. n
Jim Schnorf, CPA, CMA, MBA is the Founder and President of Wall Street Strategic Capital, Inc. (www. wsscapital.com) and a number of other entities that arrange non-traditional debt financing including bridge loans, facilitate revenue opportunities with government agencies and large entities, and arrange strategic partners and high profile board members/ endorsers for client firms in the U.S. and approximately 20 foreign countries. He is a frequent guest speaker at conferences and symposiums involving debt funders, major pension funds, and private equity firms and most recently presented at the SuperReturn Conference in Boston.
15
The Future of Thorium as Nuclear Fuel T

horium is one of five abundant, long-lived, naturally-occurring radioactive elements in the Earths crust. Potassium, thorium, and uranium are the important internal fuels that cause Earths interior to be hot, magmas and volcanoes to form, the crust to float on the mantle, tectonic plates to move, the outer iron core to be liquid, and the inner iron core to be solid. Radioactive decay of these elements releases energy that fuels the Earth. Without radioactivity, our world would be dead as the moon, a barren rock with no ocean or atmosphere.
Radioactivity also fuels modern society. Approximately 14% of the worlds electricity is generated by radioactive fuel, mostly lowenriched uranium. But there is an alternative nuclear fuel: Thorium. Thorium is a silvery-white metal, is very heavy at number 90 on the periodic table, and is three times the abundance of uranium in the crust. Thorium consists almost entirely of one isotope with an extremely long half-life of 14 billion years, about the age of the universe. It slowly emits alpha particles, the least penetrative decay product that can be stopped by a single sheet of paper.
By mICKEy Fu Lp
16
Thorium was first used in mantles for gas lighting. Todays uses include magnesiumthorium alloy, tungsten-thorium arc welding, carbon arc lamps and spotlights, heat resistant ceramics, and petroleum catalysts. However, the amounts used are miniscule because of concerns about low-level radioactivity and waste disposal. Because there is so little current demand, there is no current exploration, development, or mining of thorium. Thorium occurs mostly in the mineral monazite, a common rock-forming mineral in alkalic igneous rocks. Starting in the early 1900s, monazite was mined for its rare earth element content from heavy mineral sands. Heavy mineral sands are weathered deposits formed in beach environments where minerals are concentrated because of high density. They are strip-mined throughout the world as sources of titanium, zirconium, tin, niobium, tantalum, and garnet. Many heavy minerals sands contain significant monazite. After valuable minerals are recovered, waste products, called tails, with concentrated monazite are left behind. There are abundant supplies of monazite-rich tails in many countries of the world:
WorlD resourCes of thoriuM in tonnes (usgs, 2011)

Thorium has been investigated as a nuclear fuel source to produce electricity since the late 1940s. The United States government built an electricity-only nuclear reactor in Shipping port, Pennsylvania in 1957 as part of President Eisenhowers Atoms for Peace initiative. It ran on thorium from 1977 until decommissioning in 1982. Thorium is different than uranium when used as nuclear fuel. It is not fissile, meaning it cannot go critical and generate a nuclear chain reaction. Thorium must undergo neutron bombardment to sustain a nuclear reaction. Neutron bombardment of thorium results in this reaction: Th232 + Neutron = U233. Uranium233 is well-suited for use in nuclear reactors. There are significant advantages to fueling nuclear reactors with thorium. It is more abundant than uranium, emits only low-level alpha particles, has one isotope and does not require enrichment, is much

more energy efficient than uranium, and produces less longer-lived radionuclides and no plutonium that can be made into atomic weapons. Because there is no chain reaction, there is no chance of meltdown. Nuclear waste containing fissile uranium and plutonium from past operations can be used as start-up fuel. Thorium-fueled breeder reactors recycle radioactive materials so little waste is left behind. There are two disadvantages: Fuel fabrication is more difficult and the U233 fuel that is bred can be used to make atomic weapons, albeit with difficulty. With obvious advantages over uranium as nuclear fuel, why doesnt the United States or the world have a thorium-based nuclear power industry? There are two major reasons: In the late 1940s to early 1950s, abundant thorium was envisioned to replace uranium when limited sources of that metal were depleted. However, many new, rich uranium deposits soon were discovered in the Western United States and incentive to develop thorium-fueled reactors disappeared. Uranium-fueled nuclear reactors produce plutonium that can be used to make atomic bombs. During the Cold War the United States military wanted a steady source of plutonium for its nuclear weapons program. There are several types of thorium reactors that share common characteristics: They can operate at relatively low temperatures, the infrastructure footprint can be small, and they are very power dense making them amenable to size scaling. Countries that experimented with thorium-fueled reactors in the past include the United States, China, Canada, France, Germany, Great Britain, Japan, Russia, Norway, and Sweden. Those with current research, demonstration, or development plans include Brazil, Canada, China, France, India, Russia, and the United States. Besides the Shipping port, Pennsylvania plant, a thorium molten salt reactor at Oak
17
With abundant resources of thorium and lack of uranium, India is the only country with a sustained effort to use thorium in large scale nuclear power generation. Its 20 year goal is to generate 75% of nuclear power from thorium and reprocess used fuel for recycling.
Ridge National Laboratory successfully ran from 1964 until 1969 when Congress cut funding. In a political move, the US Atomic Energy Commission shut down all research on these reactors in the mid-1970s. The commercial-scale Fort St. Vrain reactor ran on thorium and high-enriched uranium fuel from 1976-1989. Currently, US-based Lightbridge Corporation, formerly Thorium Power, is collaborating with French and Russian interests to develop commercial thorium-fueled reactors. Canada has signed agreements with the Chinese to develop thorium fuel for their CANDU reactors. Thorium can be used in advanced Generation IV nuclear power plants. With abundant resources of thorium and lack of uranium, India is the only country with a sustained effort to use thorium in large scale nuclear power generation. Its 20 year goal is to generate 75% of nuclear power from thorium and reprocess used fuel for recycling. According to the World Nuclear Association, commercial-scale development of thorium nuclear reactor is restrained by high fuel fabrication costs, recycling and reprocessing difficulties, and because U233 can be made into weapons. However, in my opinion the main reason is basic economics. The worlds entire nuclear fleet is uranium-fueled and historical and current investments to produce cheap electricity from nuclear power are astronomical. Despite significant safety and environmental benefits, government and corporate entities are reluctant to commit the time, human resources, and capital to develop thorium fuel alternatives. Thorium as nuclear fuel is cleaner, safer, and advantageous over uranium. Technology for several types of thorium reactors is proven but must be developed on a commercial scale. In my opinion: The world is a decade away from any major commercialization of thorium nuclear reactors. It is likely to occur first in India or China. There could be a near-term synergy between a rare earth element producer that processes monazite and consigns the thorium to a sovereign entity seeking a nuclear fuel source. Perhaps the most promising niche for thorium-fueled electrical power is in small modular reactors designed for remote locations. Thorium will supplement base load electrical generation in the next decade but will not replace uranium-fueled nuclear power in our lifetimes. Burning uranium to make the light switch work is not going away anytime soon. With that in mind, I suggest you pick your speculations carefully. Mickey Fulp Mercenary Geologist n
The Mercenary Geologist Michael S. Mickey Fulp is a Certified Professional Geologist with a B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc. Geology from the University of New Mexico. Mickey has over 30 years experience as an exploration geologist searching for economic depos
its of base and precious metals, industrial minerals, uranium, coal, oil and gas, and water in North and South America, Europe, and Asia. Mickey has worked for junior explorers, major mining companies, private companies, and investors as a consulting economic geologist for the past 24 years, specializing in geological mapping, property evaluation, and business development. In addition to Mickeys professional credentials and experience, he is high-altitude proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made four outcrop ore discoveries in Peru, Nevada, Chile, and British Columbia. Mickey is well-known and highly respected throughout the mining and exploration community due to his ongoing work as an analyst, writer, and speaker. Contact: Contact@MercenaryGeologist.com Disclaimer: I am not a certified financial analyst, broker, or professional qualified to offer investment advice. Nothing in a report, commentary, this website, interview, and other content constitutes or can be construed as investment advice or an offer or solicitation to buy or sell stock. Information is obtained from research of public documents and content available on the companys website, regulatory filings, various stock exchange websites, and stock information services, through discussions with company representatives, agents, other professionals and investors, and field visits. While the information is believed to be accurate and reliable, it is not guaranteed or implied to be so. The information may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. I accept no responsibility, or assume any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information. The information contained in a report, commentary, this website, interview, and other content is subject to change without notice, may become outdated, and will not be updated. A report, commentary, this website, interview, and other content reflect my personal opinions and views and nothing more. All content of this website is subject to international copyright protection and no part or portion of this website, report, commentary, interview, and other content may be altered, reproduced, copied, emailed, faxed, or distributed in any form without the express written consent of Michael S. (Mickey) Fulp, Mercenary Geologist.com LLC. Copyright 2011 MercenaryGeologist.com. LLC All Rights Reserved.
18
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2011 VANCOUVER
RESOURCE INVESTMENT CONFERENCE January 22-23, 2012

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19
p ROFILED COmpANIEs
supplying the green revolution

graphite: the next strategic Mineral
While mining has not traditionally been associated with the green revolution, graphite may prove to be a notable exception. Concerns over the future supply of fossil fuels and increasing pressure to reduce our carbon footprint have led to a wide ranging search for alternative energy sources. Graphite is an extraordinary mineral that is critical to many of these emerging clean energy technologies including lithium ion batteries, fuel cells, solar power and nuclear energy. However, China produces 70% of the worlds graphite and after 20 years of providing it cheaply to the world, China has had enough. Its production and exports are now expected to decline, export duties have been imposed and export licenses are required. Prices have tripled in the last few years in response to this supply demand dynamic. Cheap Chinese graphite kept prices depressed for many years and as a result there are very few exploration or development projects in the pipeline. These supply concerns have led both the European Union and the USA to declare graphite a supply critical mineral. However, investor awareness of the graphite situation is at an early stage and valuations
n By g REg BOw Es
are still low. There are currently only two publicly listed graphite companies in North America but many more will soon follow. As such, graphite represents the same investment opportunity presented by lithium or rare earth stories 3 or 4 years ago. Northern Graphite Corporation (NGC:TSXV) is a new company that is well positioned to take advantage of the compelling supply/demand story that has developed in the graphite industry. NGCs Bissett Creek project is an advanced stage project that is located in Ontario, close to infrastructure. A bankable feasibility study and full permitting are expected to be completed in the first quarter of 2012. Bissett Creek is a unique large flake, high purity deposit that is highly scalable to meet future demand growth.
graphite flakes (mesh size) and the carbon content, with larger flakes and higher carbon content commanding premium prices. Prices for the industry standard large flake (+80 mesh), high purity (94-97%C) premium product have tripled since 2005.
lithiuM ion battery DeManD groWing raPiDly

Graphite is the anode material in Li ion batteries. The only substitute is synthetic graphite which is not quite as good, much more expensive and has limited production capacity. The manufacture of these batteries requires 20-30 times more graphite by weight than lithium. Li ion batteries can be made using flake sizes down to -100 mesh (small) as long as the purity is high enough. It typically takes 3 tonnes of flake graphite to manufacture one tonne of the spherical graphite used as the anode material in batteries. It appears that the large flake graphite that will be produced at Bissett Creek will have a much higher spherical graphite yield.
Li ion batteries are currently used in most handheld electronic devices such as cell phones, power tools, MP3 devices and laptops. In the future, substantial additional demand is expected to be generated by the expanded use of Li ion batteries in electric vehicles (EVs) and hybrid electric vehicles (HEVs). Currently every major automotive company has or is planning on introducing EVs and HEVs to their product line up. The average HEV will require 2kg of graphite and EVs will use 25-50kg. Based on this consumption, even moderate market penetration by EV/HEV vehicles will require multiples of current annual flake graphite production.
graPhite, a forM of Carbon

Graphite is one of only two naturally formed polymers of carbon, the other being diamonds. Graphite is extremely strong, corrosion and heat resistant, an excellent conductor of heat and electricity, an exceptional lubricant, and is the lightest weight of all reinforcements. Traditionally graphite has mainly been used in the steel and automotive industries but it also has a multitude of other uses in electric motors, batteries and lubricants. Demand for these applications is growing at 5% per year due to the industrialization of emerging economies and a good case can be made for graphite based on this fact alone even without taking into account growing demand from new applications. Graphite is priced based on the size of the

fuel Cell DeManD Potential

While fuel cells do not have the profile they had a couple of years ago, all major car com www.microcapreview.com
20
panies have continued quietly working on fuel cell vehicles. There are fuel cell buses and taxis operating today and Toyota is planning the commercial introduction of vehicles by 2015. The average fuel cell vehicle will require 80kg of graphite to produce, which is more than an EV. Many of the large electronic companies are also developing stationary power plants based on fuel cells. According to the USGS, large scale fuel cell use could consume as much graphite as all other current uses combined.
Pebble beD nuClear reaCtors

In the wake of the tragic events in Japan, concern over the safety of nuclear energy has been brought to the forefront. Pebble bed nuclear reactors may offer a solution, providing clean nuclear energy without the inherent dangers of traditional reactors. In a pebble bed reactor, the fuel is uranium embedded in graphite balls. Each of these reactors will require 3,000 tonnes of graphite to start and an additional 600- 1,000 tonnes per year for every 1,000MW of energy produced. The Chinese have already built an operating prototype, have two commercial units under construction and are planning 30 by 2020. The pebble bed will be the first passively managed reactor generating safe nuclear energy.
won the Nobel Prize for Physics in 2010 by being the first to isolate graphene which is a testament to its importance. Graphene is transparent in infra-red and visible light, flexible, and stronger than steel. It conducts heat ten times faster than copper can carry 1,000 times the density of electrical current of copper wire. Graphene is a wonder material that will revolutionize LCD touch screens and monitors, create super small transistors and super dense data storage, increase energy storage and solar cell efficiency and will transform many other applications. Graphite from Northern Graphites Bissett Creek Project has been used to make graphene on a test basis. An eminent professor in the field at the Chinese Academy of Sciences used Northern standard 95%C, large flake graphite to create graphene. The test indicated that graphene made from Northerns jumbo flake is superior to Chinese powder and large flake graphite in terms of size, higher electrical conductivity, lower resistance and greater transparency.
the bissett Creek ProjeCt

Northern Graphites Bissett Creek project is located in Ontario, Canada, 100 km East of North Bay. It is only 17km from the TransCanada highway and close to infrastructure. This proximity to North American steel and automotive markets offers a freight cost advantage. The Company has a large, 100% owned land position with 18 claims and 1 mining lease totalling 3,000ha. A full feasibility study was done on the project in 1989 including a proven and probable reserve (all of which predated NI 43-101). A NI 43-101 preliminary economic assessment was completed in 2010. It contemplates 19,000 tonnes of annual graphite production over a 40 year mine life with very good eco
graPhene
A graphite flake is much like a deck of cards, it consists of many thin layers stacked on top of one another with weak bonds holding them together. Delaminating these layers to the lowest common denominator results in one atom thick sheets of carbon with the carbon atoms arranged in a honeycomb pattern. This is graphene. Scientists at the University of Manchester
nomics based on an average graphite price of UD$ 1,700/t. Production is expected to be 70% extra large flake, high purity graphite which will command premium pricing on the market. An additional 20% is large flake which is currently selling for between $2,500-$3,000/t and 10% is medium flake which is currently valued at $2,200-$2,500/t. The Bisset Creek project is unique as most graphite deposits consist mainly of low value amorphous powder and a blend of small, medium and large flake sizes. Bissett Creek is a surface deposit with minimal over burden, a low waste to ore ratio, and will be mined by simple open pit methods. The ore will be processed using conventional flotation methods and a 95% recovery achieved. Operating costs will be $1,000/t based on contract mining. The estimated cost of mine construction is C$62 million, making it relatively inexpensive to build and operate. Northern Graphite could double production to meet rising demand by shortening the mine life to 20 years which is still substantial. Furthermore, 50 of 51 holes drilled in 2010 intersected similar widths and grades to the resource model and the deposit is now over 1Km2 in size and still open to the north and south as well as the east. As a result, the potential exists to double production again if required. A new resource calculation will be available shortly. Northern Graphite is expecting the completion of a full bankable feasibility study in late 2011 and all permitting in the first quarter of 2012. The mine will take approximately one year to build. With an experienced management team, and an advanced stage, high quality project, Northern Graphite is well positioned to benefit from, rising graphite prices and strong demand from new applications. n
Northern Graphite Corporation NGC:TSXV Contact: Greg Bowes CEO 290 Picton Ave. Suite 201, Ottawa, Ontario, Canada. K1Z 8P8 Phone: (613)241 9959 Fax: (613) 241-6005 Email: info@northerngraphite.com Website: www.northerngraphite.com Shares Outstanding: 31,575,405 IPO: April 18th, 2011@ $0.50/share
21
Knocked Down But Not Out Oil & Gas Commodities Create Opportunity in U.S. Energy
iven the recent rollercoaster ride in the global equities and commodities markets caused by the weakened economic landscape, we have taken a step back to reevaluate energy equities and to highlight some of the interesting opportunities created given the flight to liquidity toward cash and larger cap investments.
In the oil and gas arena, the sell in May and go away theories are magnified during June through August given the seasonally weakest demand period for hydrocarbons during the second quarter. However, post Labor Day equity performance tends to improve as the oil and gas commodity strip pricing begins to change ahead of the higher demand quarters of the year that peak during winter. More specifically, pricing of the natural gas strip has increased from September to December an average of 15% during the past decade while crude oil strip pricing has fallen 4% on average during the same time period (although both the oil and gas strip tend to rise from February through April every year). Current weakness in crude oil and natural gas prices could provide an attractive entry point for investors particularly ahead of winter. The market has become so nega-
n By mICh AEL BODINO
22
tive that any improvements in forecasted economic growth could send oil and gas prices much higher. Fundamentally, fully cycle returns necessary for a healthy sector suggest that there is limited downside in the commodity prices from current levels. Further, and supporting our cautious but increasingly bullish stance on natural gas, we believe that anecdotal data points suggest that the rate of change in natural gas demand exceed changes in supply for the first time in about a half dozen years. It is early in the shift, but reductions in the rig count have suggested that the top producing state (Texas), the top producing play (Haynesville), and the top producing companies may be nearing or have peaked in terms of natural gas production. Looking at the forward curve for WTI crude oil, it has historically weakened post Labor Day and through the end of the year. However, crude prices have been ratcheted down the past couple months as a result of gloomy economic forecasts. Another item convoluting the picture is the Brent WTI spread. Although most of the country sees the dropping WTI price across their televisions or in the paper, Brent influenced pricing is benefitting over half of U.S. production and should be creating equity valuation disparities due to regional price differences as Brent is generating around a 25% premium to WTI for some oil producers. The forecasts for slower economic growth and oilfield service cost inflation have negatively impacted oil weighted equities as margins have eroded, growth rates slowed, and valuations have been impacted. However, many companies are more fundamentally sound than where they were a year ago as balance sheets have improved. Still, many companies are trading at lower valuations today than over the past year. We believe the market is tighter than many believe from a supply and demand standpoint. Therefore, we expect to see investors begin jumping on the energy equity bandwagon after Labor Day and would not be surprised to see bounces out of some of the
gas weighted equities. Although we look at all cap size companies, one micro cap that we recently initiated coverage on that has numerous catalysts and has diversified its oil and gas portfolio is U.S. Energy.
u.s. energy (useg; $2.45; buy; $8.50 Pt)

Although the company began in 1966, Riverton, Wyoming based U.S. Energy has had an interesting year. Prior to its Brigham Exploration (BEXP) Bakken joint venture, the company had a couple small working interest participations primarily in the Gulf Coast region, a high profile Molybdenum project, an investment in a geothermal company, and ownership in some real estate properties. Over the past year, the E&P division has grown materially on the coattails of success in its Bakken program with an additional Bakken joint venture, the entry into the Eagle Ford and continued expansion therein, plus an interesting California project. What really got our attention in U.S. Energy was that despite its entry into a number of new projects, the companys stock price has been under pressure given a series of seemingly negative data points that in reality have had very limited financial impact. The myriad of factors that knocked down U.S. Energys equity price roughly 60% year to date include industry factors like falling oil prices, a flight away from smaller cap to large-cap liquid names among investors, and weak Bakken oil pricing combined with rising costs and weather related project delays. Specific to USEG, the company also announced the loss of its Molybdenum partner, delays with its California project, as well as dry hole in Colorado on its first operated well. Nonetheless, we believe USEG is particularly attractive at current levels given its valuation and numerous near term catalysts that include the drilling of four to six Bakken wells in 2H11, the completion of its second Eagle Ford well, and the drilling of a potentially impactful project in California. USEG

is the least expensive Bakken operator on an acre-per-million-dollars of total enterprise value basis and on an EV/EBITDA basis. Further, additional catalysts could include the sale of its real estate portfolio as well as inking another partnership for its high potential Molybdenum project in Colorado. During 2Q11 production remained roughly flat with weather-related oil volume decreases partially offset by increases in natural gas and NGL production in the onshore Gulf Coast. Production is expected to ramp in 3Q11, as weather-related effects subside and wells waiting to be completed are put on production. In fact, most Bakken producers could post record levels of production. Our full-year 2011 EPS, CFPS, and EBITDA estimates are $(0.02), $0.57, and $17.2MM, respectively, and our 2011 production estimate is 8,705 Mcfepd. We have assigned a Buy rating and $8.50 per share 12-month price target based on 13.7x and 5.0x our respective 2011 and 2012 EBITDA estimates. Michael Bodino Head of Energy Research Global Hunter Securities, LLC n
This material has been prepared by Global Hunter Securities, LLC a registered broker-dealer, employing appropriate expertise, and in the belief that it is fair and not misleading. Information, opinions or recommendations contained in the reports and updates are submitted solely for advisory and information purposes. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore except for any obligations under law, we do not guarantee its accuracy. Additional and supporting information is available upon request. This is not an offer or solicitation of an offer to buy or sell any security or investment. Any opinion or estimates constitute our best judgment as of this date, and is subject to change without notice. Global Hunter Securities, LLC and our affiliates and their respective directors, officers and employees may buy or sell securities mentioned herein as agent or principal for their own account. Not all products and services are available outside of the US or in all US states. Copyright 2011.
23
The Tiger Stops Roaring

O
to late-2010, it started to become clear that in some, but by no means the majority of, cases, it was too good to be true. Something was wrong with the financial information being provided by some of these tiger enterprises. Fueled by whistleblowers, notorious online talking heads and periodic regulatory audits of companies and accounting firms, around June 2010, the SEC and PCAOB started sending out informal inquiry let-
What is Happening with Chinese Public Companies?
ne of the bright spots on the public company scene in recent years has been the rise of Chinese companies going public in the U.S. The sheer size of the ever-growing Chinese domestic market was certain to present an almost endless supply of companies with millions of dollars of predictable revenue and profit. It seemed too good to be true. And by mid- ters to accounting firms, asking for voluntary cooperation with a fact-finding process about their practices involving Chinese public company clients. These Dear Accountant letters were the first clear indication that a significant regulatory review of Chinese companies was underway, largely focused on the integrity of financial reporting. By the fall of 2010, the SEC began to formally investigate certain Chinese companies and some PCAOB-registered accounting firms. By the end of last year and continu-
n By LANCE j ON KImmEL
24
ing to the present, bans on taking on new Chinese clients have been put in place for some accounting firms. A steady stream of accountants and clients out the door began at other accounting firms. Non-reliance letters were issued by certain accounting firms to their clients. Independent directors of some Chinese companies stepped down; some even signed consent orders with the SEC. Other Chinese companies delisted from U.S. stock exchanges. And other companies threatened to fight back. FINRA began looking at the role of investment banking firms in the going public and capital raising process and how they were conducting due diligence. A chill in the equity markets descended on Chinese companies long before the debt crisis exploded in Europe and the U.S., as investors began to question the integrity of the financial information they were receiving and, to a lesser degree, the entire process of a Chinese companys going public and raising capital. As early as the beginning of this year, predictions of how long it would take for the Chinese public company market to recover ranged from six months to a number of years. What went wrong? As with all things Chinese, the answer is varied, nuanced and complex. One problem is a clash of cultures and varying expectations that come from those cultural differences. Chinese companies are often run by one or more family members. They have paramount authority and all other employees show great deference to the head of the company. This deference may be further magnified if there are age differences between employees and their boss because of the great respect older people are accorded in China. Even questioning a position taken by the company chairman could be interpreted as a challenge and that is socially unacceptable in China. However, this inhibition by employees who, let us say, are part of the companys in-house finance department, could thwart the proper functioning of internal controls, and disclosure controls
It is important to note that the vast majority of accounting errors are not the product of any deception by company management, but sometimes U.S. accounting principles are just not being employed or applied consistently in the preparation of financial statements.
and procedures, which are cornerstones of modern securities laws and the regulations of the SEC and stock exchanges. A related issue is that this unwillingness to act in any manner that may be interpreted as an unacceptable challenge to authority may extend to the consultants that are common in Chinese public companies. Because of language barriers that may exist in the form of the employees of a Chinese company not speaking English, as well as broad unfamiliarity in China with the technical requirements of U.S. public company reporting, including Regulation S-X (the SEC accounting rules for public companies), it is common for Chinese public companies to hire consultants usually bilingual, younger China-based accountants who often come out of large global accounting firms to interface with management and prepare the financial package that goes to the auditors for review or audit. The problem is that because these consultants are paid by the company, they see themselves (not incorrectly) as reporting and accountable to management. And the same deference that is shown by the Chinese employees of a company to its chairman often extends to Chinese consultants, who may also be reluctant to raise sensitive issues or question a position taken by management. Additionally, some of these consultants just arent that good at what they do, inhibitions or no. Enter the auditor. In a post-Sarbanes Oxley world, the PCAOB-registered auditor has become the final line of defense. No lon
ger advisors to management, the auditor is hired by and reports to the Audit Committee (or the Board of Directors as a whole if the company is not required to have and does not have an Audit Committee), brings an independent perspective to the companys financial reporting before signing off on the financial statements, and reveals problems with internal controls (even for smaller reporting companies, which are not subject to auditor attestation of internal controls). The SEC and PCAOB have been greatly concerned of late whether accounting firms have been fully following generally accepted auditing standards (GAAS) for their Chinese public company clients, given the geographic distances, language barriers, reliance on consultants and different levels of cooperation that have been discussed above. It is important to note that the vast majority of accounting errors are not the product of any deception by company management, but sometimes U.S. accounting principles are just not being employed or applied consistently in the preparation of financial statements. If the auditor does not follow GAAS strictly, as appropriate for the situation and risk, the last line of defense can be breached. In the budget-conscious world of Chinese companies, an audit firm may quote a price for their services (almost always a flat fee) which, as a practical matter, requires them to limit the number of times and days they spend in China for field work, relying on their own outsourced China-based bilingual Chinese consultants (not the same group as
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the companys consultants). If these boots on the ground are not, in regulatory parlance, being properly supervised and fully engaged in the process or just not that good - errors may occur in their work that just flow through to the final, filed version of the financial statements. The sheer number of regulatory actions and non-reliance letters (that is, an auditor notifying a company that its financial statements can no longer be relied upon) indicates that the regulators are not off the mark with their concerns that something is seriously wrong with financial reporting by a number of Chinese public companies. The problem is systemic even though it is not universal. The marketplace is reacting in a number of ways. Generally speaking, Chinese stock prices have been hammered, significantly under-performing the market as a whole. Some accounting firms are radically changing their policies and procedures; others are leaving the China market, voluntarily or otherwise. Some investment banking firms are now requiring an additional level of forensic accounting interposed between the company consultants and the auditor, at least when there is a public offering involved. Some directors of Chinese public companies are realizing the benefit of the Audit Committee charter and are hiring their own professionals to monitor the situation and any remediation that may be required on a case-by-case basis. In other companies, management understands that the Western adage you get what you pay for requires them to adjust their budgets in choosing consultants and auditors. This phenomenon has a long way to go and there will continue to be a major shakeout. Dishonest companies will be revealed and they will fade away. Professionals who are not adhering to the rigorous standards of their professions will likewise peel off. Investors will be wary for some period of time. But the marketplace is both forgiving and has a short memory. Those Chinese companies with wise management, who assure their employees and consultants that
fully following regulatory compliance when they access the U.S. public markets is expected and encouraged, and hire only those professionals who adhere to the same standards, will continue to find a welcoming environment among investors and regulators and help restore confidence to Chinese public companies as a whole. Lance Jon Kimmel 2011 n
Lance Jon Kimmel is the founding and managing partner of SEC Law Firm, which represents growth companies around the globe and the regulated professionals who serve them. Mr. Kimmels practice focuses on public and private securities offerings, SEC reporting, corporate governance, mergers and acquisitions, representation of companies before the SEC and stock exchanges, and SRO compliance for investment bankers and other service providers. He handles capital raising at every level, from seed capital to initial public offerings, from reverse mergers to PIPEs, from equity credit lines to bank credit facilities. Mr. Kimmel is actively involved in alternative public offering strategies, including reverse mergers for domestic and Chinese companies in the United States, and working with private and public companies going public or dual listing internationally on the AIM in the U.K., the TSX in Canada and the Frankfurt Stock Exchange. His clients reflect the spectrum of 21st century business, from manufacturing to medical devices, from biotechnology to green technology, from financial services to the entertainment industry, from real estate to consumer goods. As one of the most frequently quoted securities attorneys in America, Mr. Kimmel has contributed his insights to NPR Marketplace, Dow Jones, Sky Radio, the Los Angeles Times and Bloomberg Forum,
among other mainstream and financial broadcast and print media around the world. Mr. Kimmel has written numerous articles and speaks often on current legal issues in the corporate finance and corporate governance arenas in the U.S., the U.K. and China. He co-chairs the Growth Capital Conference in Los Angeles, serves on the Securities Regulation Committee of the American Bar Association, served as a national coordinator of the SECs Small Business Forum and has given testimony to the SECs Advisory Committee on Smaller Public Companies on reform proposals to ease the burdens of the Sarbanes-Oxley Act for smaller reporting companies. SEC Law Firm 11693 San Vicente Boulevard, Suite 357 Los Angeles, California 90049 Tel: (310) 557-3059 Fax: (310) 388-1320 www.seclawfirm.com email: lkimmel@seclawfirm.com
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Technology & Oil Lead to Bonanza Returns!
or savvy corporations, they know that a natural pricing boom in commodities when combined with the right technological advances will
As an example, the majority of the worlds steel historically came from massive integrated mills that were very costly to build (>$10 billion). A minimill was the nascent technology that provided a new way to make steel from melting scrap steel in electric arc furnaces. They were named minimills because their approach provided an end product of molten steel without need for blast furnaces, massive-scale rolling or finishing operations. The bottom-line was the novel technology of minimills made steel for twenty percent lower cost than integrated mills. Revisiting what happened in the steel industry, integrated mills disregarded this technology as a non-threat and gladly gave away portions of businesses that had low margins starting with the rebar then angle, rods, pipes and eventually transforming the entire industry. Minimills overtook the market share of integrated mills within 20 years (Figure 1)!! A popular commodity speculation is that peak oil will eventually arrive where the
create massive earnings.
n By DR. g ORDON Ch Iu www.microcapreview.com
Figure 1. Micro-Cap Review Magazine
29
Figure 2.
some of todays profits on tomorrows disruptive chemistry technologies. Today, we know that four surfactant classes namely di-tridecyl sulfosuccinic acid ester (Figure 2), a coconut diethanolamide (Figure 3), alkylpolyglycosides and alkylpropoxy sulfate sodium salts increase oil production in most significant ways.
teChnology #2: horizontal oil Drilling

Figure 3.
world will no longer find new supplies of oil. This has led to government and investors to embrace alternative energy methods. While some alternative energy businesses have met success, many thousand-fold have failed. More importantly, they have failed to replace oil usage due to cost, safety, storage, transportation, and numerous other inefficiencies. Today, oil continues to be in high demand and if there were any hiccups in the supply or discovery, this would create significant economic problems to numerous developed and developing countries. As an example of our modern dependency on oil, any internal conflicts in the Middle East including the events in Libya, Saudi Arabia, Iran, and Iraq have led to immediate rises in oil prices threatening global growth. Those who bet on alternative technologies like algae, geothermal, hydrogen-fuel cell, hydroelectric, lithium storage, nuclear, solar have made and lost fortunes during mini-bubbles but overwhelmingly agree that nothing has come close to replacing oil.
teChnology iMProveMents in oil itself:

How about oil extraction becoming internally more efficient? Advances in oil innovation technologies have been brewing for nearly 30 years. These investments in technologies that increase oil yield are much less known to the mainstream investor. Here we will examine two game changing technologies.
teChnology #1: surfaCtant CheMistry

Silently over the course of three decades, multiple breakthroughs were made at United States universities in the field of surfactant enhanced oil recovery technologies. Companies that have targeted these investments to increase their yield have made fortunes. As an oil producer, you wont turn down methods which can increase future yields even if it requires spending

Another powerfully disruptive technology for oil is horizontal oil drilling. Once upon a time, drilling companies just dropped holes in the ground every few hundred feet in a primitive attempt to get oil by targeting an oil reservoir. Historically, oil drilling companies left massive amounts of money on the table without additional technologies. Wells were deemed to be inefficient or discontinued prematurely while also leaving massive footprints on the land with visible vertical wells everywhere. As science and technology evolved combined with dedicated investments over three decades, horizontal oil drilling became a reality. Using a combination of unique materials, this bent pipe solution can snake around reaching isolated oil pockets or follow an oil reservoir that meanders across a terrain. While it remains more expensive than vertical drilling, the yields are significantly higher. Furthermore, rather than drilling 20 vertical wells, you could drill two or three for the same recovery!! This has led to increased profits due to higher and longer term yields.
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competencies. And for those companies and management that resist technology adoption, they will miss out on these bonanza returns and may even risk extinction. n
about the author

Dr. Gordon Chiu is an execution-driven businessman with nearly two decades of combined domestic and international experience in biomedical, chemical, cosmetic, medical, and technology industries. He has been invited to serve on the board of public and private companies and to provide vital advice to the board while increasing overall shareholder value. His solid background and broad experience has allowed him to accomplish and advice in areas of Alzheimer research, breast cancer research, dermatology, drug addictions research, green technology, and antimicrobial research. He started his career as a research scientist at Pfizer Inc. and Merck & Co., Inc. and has healthcare and marketing experience with strong links to Wall Street and Asia. His educational background began with a B.S. degree in chemistry from Rensselaer Polytechnic Institute, graduating summa cum laude. He graduated with an M.S. degree in chemistry from Seton Hall University with high honors. Additionally, Dr. Chiu was globally distinguished as an M.D./Ph.D. candidate under the National Institutes of Healths Medical Scientist Training Program for four years at the Mount Sinai School of Medicine where he also researched, developed, consulted, and advised Dr. Huachen Wei in the department of dermatology in skin cancer research. Seeing the opportunity to impact foreign policies in healthcare, he transferred his credentials to the fully accredited University of Bridgeport School of Naturopathic Medicine to receive his doctorate in naturopathic medicine. With this translational background, he has investigated the validity of foreign treatments and their success level for public health. He has also been chosen to serve as an advisory role in the identification of low cost solutions (i.e. non-invasive diagnostic equipment) for emerging countries that cannot afford to maintain armies of physicians across numerous sub-specialties. His years of experience and continuous involvement have created deep relationships within the scientific, business, and medical communities. Dr. Chiu has developed and owns methodologies called directed combinatorial algorithmic libraries (D.C.A.L.) that are used in various commercial applications, composition development and research. Disclosure: Dr. Chiu has been appointed as an independent adviser to SNN.
Figure 3.
looking into the future: Methane hyDrate Crystals (MhC)

This is still ahead of the curve and the science is irrefutable that frozen natural gas crystals contain super-concentrated levels of methane molecules trapped inside frozen water. One volume of MHC can release more than 150 volumes of methane gas (Figure 4)!! It is hypothesized that 200,000 trillion cubic feet (tcf) of MHCs are believed to exist in the permafrost region and in the coastal waters around North America. Compare and contrast that figure to the US National Petroleum Council in its 2007 report, Facing the Hard Truths about Energy, which estimated conventional gas resources totaling approximately 1,400 tcf. Nearly 150 times more reserves created!!
While critics will mention that an economical process to exploit this vast energy resource is yet to be developed, there were similar criticisms made about surfactant chemistry and horizontal oil drilling thirty years ago. By 2015, even critics believe potential breakthroughs in MHCs will be realized and may have game-changing effects on the world.
ConClusions:
Technology in higher yield oil production has arrived bringing bonanza results due to investments over thirty years ago. Properly implemented, this will continue to positively impact profits of those junior oil corporations that decide to combine geology, engineering and chemistry into its core

31
p ROFILED COmpANIEs
tanzanias next gold Producer

ruby Creek resources
introDuCtion
n the late 1970s as gold rose rapidly, gold mining stock prices shot into the stratosphere. Today one would think that investors holding gold stocks would be celebrating just as they did back then. Unfortunately, there is little to cheer about, as many gold mining stock prices are lower today with gold trading above $1800 than they were when gold first passed $1000 in March 2008. There are various theories ranging from metal ETFs taking investment away, to arbitrage trading where hedge funds go long the metal and short mining stocks. BUT, there have been gold mining stocks that have delivered massive returns as gold raced to $1800. The primary characteristics of this outperforming class of stocks are small cap gold miners that have either discovered new large deposits through exploration or have rapidly increasing gold production rates. Ruby Creek Resources is one of those fortunate miners. Ruby Creek is about to begin gold production on its Gold Plateau Project located in southern Tanzania. The Company now has sufficient equipment to achieve a gold production rate of 600 plus ounces per month by the end of this year. Ruby Creek anticipates that 25,000 35,000 ounces is achievable for calendar 2012 followed by further production expansion to an annual rate of 50,000 - 75,000 ounces/year by the end of 2013. Production cash costs are anticipated to be less than $400/ounce.
about tanzania
This East African country, now known as Tanzania, became a British Mandate after World War I. British rule came to an end in 1961 after a relatively peaceful transition to independence for Tanganyika, as it was then known. The neighboring island of Zanzibar merged with Tanganyika to form the nation of Tanzania in 1964. There was one party rule until 1991 when democratic elections were first held. Tanzania has enjoyed political stability ever since becoming a unified nation in 1964. The countrys Constitution of 1977 underwent major modifications in 1984. Tanzania has three branches of government; Executive, Legislative and Judicial. Law is based on English common law with judicial review of legislative acts. Swahili is the official language and English is spoken extensively. Tanzania has abundant mineral resources. Since the introduction of the 1998 mining act that guaranteed land tenure, Tanzania has received the attention of some of the largest gold mining companies in the world, including African Barrick (ABG.L), AngloGold Ashanti (AU) and Resolute Mining (RSG. AX). In 2010 Tanzania was tied for third with Mali behind South Africa and Ghana in gold production. Tanzania has substantial reserves of precious and base metals as well as gemstones such as tanzanite (mined in Tanzania only), rubies, diamonds, and sapphires.
cost gold production. He acquired controlling interest in a small mining company, Ruby Creek Resources, and initiated work to identify, acquire and develop promising gold projects in East Africa. In November 2009, Ruby Creek announced its first gold property acquisition from Douglas Lake Minerals, 125 sq km of the Mkuvia Project located in southern Tanzania. In May 2010, Ruby Creek acquired the remaining 255 sq km of the Mkuvia Project from Douglas Lake. Ruby Creek manages the Project and owns a 70% interest with 25% owned by Douglas Lake and 5% by the original prospecting license holder. In September 2010, the Company began expanding its land holdings after recognizing multiple extensions of gold showings. Through a series of acquisitions, Ruby Creek has extended its Gold Plateau land holdings to 1500 contiguous sq km today, with over 1100 sq km owned 95% or better. Another announced acquisition about to close is the privately held Gold Standard (Tanzania). This acquisition adds mining and equipment and most importantly Ruby Creeks first mining license. The Company expects its second mining license to follow shortly thereafter.
golD Plateau ProjeCt

The Gold Plateau Project has grown to 1500 contiguous sq km (579 sq miles) now encompassing 1 Mining License, and more than 12 prospecting properties, including the GS1, GS2, Mk1, Mk2, Mk3, Mk4, Kap1, Kap2, Kap3, Keigei, Tunduru North and Tunduru South, all with indications of large placer gold deposits. These properties have similar characteristics of coarse surface sand
ruby Creek history

Robert Slavik visited Tanzania in early 2008 looking for gold mining opportunities. Impressed with what he saw, Mr. Slavik developed a plan to establish near-term low
n By TOBy h ANs EN
32
remote area on August 1, 2010 that has now grown to a 100-man operation. Test mining operations are expanding on other locations leading the Company to potentially its second mining license. The big question relating to this expansive placer deposit at the Gold Plateau is: where did the gold originate? It is believed that the gold visible on surface throughout the region may have come from either a single source or several sources in the area. This is supported visually as the gold recovered throughout the Gold Plateau is rough, showing the apparent imprint of the host rock from which they originated and hence not travelled far. Led by a team of seasoned geologists in February 2011, Ruby Creek identified a heavily oxidized sulphide outcrop approximately 6 km south of the Gold Plateau Camp on the Mk2 property. There is also potential hard rock drill targets located on the GS1 and GS2 properties. Ruby Creek will be coordinating surface exploration with aerial magnetics to further define gold source targets. A drill program is anticipated to commence in 2012.
business MoDel
The nature of the deposit at the Gold Plateau readily lends itself to quickly producing gold. Ruby Creek believes there are areas on the Project where gold grades far exceed the cut-off grade. Instead of raising capital and repeatedly diluting shares as the majority of junior miners do, Ruby Creek has chosen to first produce gold, and then conduct intensive exploration. Our intent is to mine the deposit instead of the equity market. The cash flow expected to be generated from operations expands gold production and funds placer and source rock exploration.
figure 1: ruby Creek Properties at the gold Plateau
and repeating layers of highly weathered conglomerate and clay. Gold mineralization in the area was first discovered by the Geological Survey of Tanzania, which conducted a country wide geochemical survey program. STAMICO, the State Mining Corporation, reported volumes of up to 12 g/t gold in heavy mineral concentrates in the current rivers including the Mbwemkuru. Small-scale artisanal gem mining commenced in 2002. However, significant amounts of gold were recovered and the area quickly turned to gold mining. Only recently did modern exploration begin. Douglas Lake in 2008 2009 performed surface exploration on what is now the
GS1, Mk1, Mk2, Mk3 and Mk4 properties. The results show fine gold distributed over most of the 430 sq km (170 sq mile) surface. Subsequent investigation by Ruby Creek has led us to believe that similar gold showings exist on the other properties resulting in their acquisition. In 2009, Douglas Lake issued a 43-101 Technical Report from the results of their $2 million exploration program. An inferred resource of 27,500 ounces graded 0.30 g/ cubic meter was reported (the economic cutoff is 0.10 g/cubic meter at $1400 gold). This explored area is less than 0.10% of the entire Gold Plateau Project. Ruby Creek established a Camp in this

Mining infrastruCture & eQuiPMent

Ruby Creek began developing infrastructure to support gold production in early August 2010. Today the Camp houses 100 employees and contractors with comfortable accommo-
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figure 2: random surface exploration results
dation with a full kitchen, laundry, entertainment and sports. Farms were added; helicopter landing pads and a medical clinic opened in May for treatment of employees and our neighbouring villagers. Road improvement and construction continues. Ruby Creek is expanding its mechanical and fabrication facilities and is adding an airstrip. Through a series of in-country acquisitions, Ruby Creek has obtained numerous pieces of essential mining equipment. We have five excavators, loaders, 2 bulldozers, 5 dump trucks, trommels, jigs, high volume concentrators and fuel, transport and support trucks. The present processing capacity is in excess of 200 tons/hour and we hope to add a 500-ton/hour plant followed by 1,000 ton/hour production plants. To reduce transport costs, Ruby Creek recently purchased a Bell 222 helicopter for gold delivery, geology and medivac work. We charter out the helicopter 15 days per month greatly reducing our operating costs.
mining activity. The Companies were founded and are led by Managing Directors Johan Coetzee and Johan Viljoen. They have designed, developed and worked all aspects of modern mines and equipment ranging from mine startup operations through to major production. They are also designing both the
medium scale plant to triple our processing rates as well as the much larger plants. Ruby Creeks geology team is led by Chief Geologist Jan Serfontein. Jan has explored for a wide range of precious and base metals in many African countries. He co-founded an exploration company which was successfully listed on the AIM Exchange in London, Cluff Platinum Ltd, which resulted in the highly successful Blue Ridge platinum mine. Jan earned a Geology degree from the University of Pretoria where he was later honored for his exploration work. Jan is leading the extensive exploration of the deposit, which has just begun. Robert Gray is our onsite Project Manager. Bob served as an Infantry Officer in the Rhodesian Regular Army. Following his service he attended the University of South Africa obtaining a Bachelor of Science and Masters Degree in Business Leadership. He has a broad knowledge of the African minerals industry, particularly in gold, diamonds, dimension stone, coal, tantalum, and titanium.
ManageMent teaM
Ruby Creek is led by President, Director
Mining anD geology

South African based JCD and JFPS Projects plans, develops and oversees Ruby Creeks
figure 3: operating Wash Plant system at the gold Plateau Project.

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and CEO, Rob Slavik. He has a background in the timber and resources sector. For six years, Rob was the President of a company with operations in Madagascar. His experience in negotiating with local business interests has proved to be invaluable in Ruby Creeks rapid success of property and equipment acquisitions in Tanzania. In the years prior to Ruby Creek, Rob has worked analyzing businesses and reviving several failed publicly traded companies selling them to entrepreneurial interests. He graduated in engineering and business administration from the British Columbia Institute of Technology. Toby Hansen joined Ruby Creek in July 2010. Toby began his career designing rare earth magnetostrictive transducers for medical, oil/gas and industrial applications. Over his 18-year engineering career he has earned six US Patents with two pending. Toby holds a Bachelors Degree in Mechanical Engineering from the University of Utah and a Masters Degree in Engineering Mechanics from Iowa State University. In 2003 he began writing a newsletter helping him to accumulate considerable knowledge in the gold
and mining industry. His responsibilities with Ruby Creek are four-fold, Corporate Communications, Corporate Financing, Process Engineering and Gold Revenue. Myron Landin is the New York based Chief Financial Officer. He brings more than 35 years of financial experience to Ruby Creek. Myron holds a B.A. in economics from Stony Brook University and attended Pace University Graduate School of Business. He is a Certified Public Accountant licensed in the State of New York. Dan Bartley joined the Ruby Creek management team in June 2011 as its Controller. He has over 25 years of both public and private financial consulting and reporting experience. He received a B.Sc. Degree in accounting from Long Island University and M.A. in Theology from the Seminary of the Immaculate Conception. Dan is a Certified Public Accountant.
Board and is the Partner-in-Charge of New York based Marcum LLPs SEC Practice Group. Marcum is one of the largest independent public accounting and advisory services firms in the US. As Partner-In-Charge of the SEC Practice, Broker-Dealer Services and Transaction Services groups, he assists clients with regulatory compliance issues and complex deal structures. David received his B.B.A. from Baruch College in 1988 and is a CPA licensed in the State of New York. Darren Ofsink is an independent Board member. He is co-founder of GuzovOfsink, LLC, a New York City based law firm and Managing Partner in its corporate transactions, securities and international practices. Darren is a specialist in complex securities and corporate transactions, compliance and governance as well as international transactions and offerings.
boarD of DireCtors
Ruby Creeks Board is Robert Slavik, David Bukzin, and most recently Darren Ofsink. David Bukzin is the Chairman of the
loCal CoMMunity initiatives

We take our social and environmental responsibilities very seriously. At our Camp, we are presently building school desks for 1300 primary school students located within a 45 km radius. Rubys President Rob Slavik has recently accepted a nomination to the Hassan Maajar Trust aimed at improving National education. We have opened our Camp employee medical clinic to our surrounding neighbors. Ruby Creek will soon become the rural medical training facility for the Weill Cornell Bugando Medical School located in Mwanza. Students will be provided housing, meals and a monthly cash stipend to learn and practice medicine at the Gold Plateau Camp. We have built and are operating a school for children aged 4 - 12 living in a local mining village. Future initiatives include providing high recovery hand mining equipment and micro-loans to local artisanal miners, combating mercury contamination and providing mercury retort systems that safely recycle the toxic substance used by local miners.
figure 4: gold recovered from ~10 cubic meters of material at mining test site.
36
figure 5: Mother and Child receiving Medical Care from our Dr. noah.
CorPorate CaPital struCture & finanCes

Ruby Creek is committed to minimizing share dilution. The Company has successfully raised more than $6 million in a series of non-brokered private placements since June 2009; paying no commissions. The basic strategy has been to raise capital as needed. Consequently, Ruby Creek will soon be a gold producer with only 39 million shares outstanding; 54 million fully diluted. All of the financings have priced equity significantly higher than the previous placement. As of August 1, 2011, the Company had $2.0 million on hand, which is sufficient operating cash through the end of 2011. Ruby Creek currently trades on the US:OTC market with the trading symbol, RBYC. The Companys strategy is to seek greater exposure by listing on the AMEX when we meet the 2 requirements: a $2 share price and a fully independent Board of Directors. For strategic purposes, Ruby Creek is also planning to list on the Dar es Salaam Tanzanian Stock Exchange.
ruby Creek investMent Case

The Company has one of the smallest diluted share structures as an emerging gold producer in the mining sector at 39 million common shares with a market cap (August 1, 2011) of $39 million. Due to the low cost nature of the Gold Plateau project, Ruby Creek believes it can be operating positive cash flow upon achieving a production rate of 500 ounces per month at $1500 gold. The cash generated from operations will be used for extensive placer and hard rock exploration going forward. Expanding gold production will require much less capital than traditional hard rock extraction methods. We are extremely proud of the extensive progress Ruby Creek has made in such a short period of time and after proper due diligence, hope to welcome you as a shareholder. n For Further Information Contact: Toby Hansen Corporate Communications +1.212.679.5711 ext 310 thansen@rubycreekresources.com www.rubycreekresources.com

Forward-looking statements are based on the expectations and opinions of the companys management on the date the statements are made. The assumptions used in the preparation of such statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statement. This article contains forward-looking statements, which address future events and conditions, which are subject to various risks and uncertainties. The companys actual results, programs, and financial position could differ materially from those anticipated in such forward-looking statements as a result of numerous factors, some of which may be beyond the companys control. These factors include the availability of funds, the timing and content of work programs, results of exploration activities and development of mineral properties, the interpretation of drilling results and other geological data, the uncertainties of resource and reserve estimations, receipt and security of mineral property titles, project cost overruns or unanticipated costs and expenses, fluctuations in metal prices, currency fluctuations, and general market and industry conditions. Disclaimer: This corporate profile is based upon information provided by the issuer or company representative. The information is not intended to be, and shall not constitute, an offer to sell or solicitation of any offer to buy any securities. It is intended for information purposes only, and to increase awareness of the company profiled. Safe Harbor Statement: The statements in this advertorial or profile relating to future products, partnerships, technology, and positive direction are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some or all of the aspects anticipated by these forward looking statements may not, in fact, occur. Factors that could cause or contribute to such differences include but are not limited to contractual difficulties, demand for the issuers common stock, and the companys ability to obtain future financing. Micro-cap Review Magazine may have received payment to publish and print this advertorial or corporate profile. Micro-cap Review Magazine disclaimers apply and may be reviewed at www.microcapreview.com/disclaimer.php. Before investing in any security, you are strongly advised to review all public filings of the issuer of such security, which can be found at www.sec.gov, as well as warnings published by the SEC at www.sec.gov/investros and to consult with your professionals.
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ecognizing a need for consistent and engaging communications, three of the worlds leading organizations focused on education and disclosure to individual investors - BetterInvesting, PR Newswire and MUNCmedia - have aligned to create RetailInvestorConferences.com. Retail investors ownership of stock is decisively vital for many companies that need to develop new liquidity to raise capital and... Have little or no Wall Street interest and activity Need a retail investor base to complement their institutional presence Want to forge deeper relationships with retail investors in context to Dodd-Frank reform and ongoing proxy access regulations Issue regular dividends Can leverage their marketing brand and generate Investomers Small and micro-cap companies, in particular, need more accessible, timely and affordable opportunities to transparently tell their story to a potential audience that can buy their stock. Furthermore, retail investors can be a solid and loyal ownership base for companies as they are apt to trade less frequently. Each month, Retail Investor Conferences. com showcases 10 public companies to present their growth vision in an engaging virtual conference environment. We selected a monthly schedule as the market is too dynamic and there are too many companies to limit opportunities on an annual or even quarterly basis.
RetailInvstorConferences.com surveys the audience each month, to qualify their investment style. Since its launch, RetailInvestorConferences. com has help thousands of individual investors find exciting new investment opportunities and, of course, small and micro-cap companies discover a new audience.The depth of quality engagement with prospective investors during our presentation, the trade booth and in the days following was well worth our investment, said Meghan OSullivan, PR, Regenicin. Were building new relationships with an audience who would have never heard our story without RetailInvestorConferences.com. Thats powerful for an OTC company. Shawn Roberts, the Director of Investor Relations at, TSYS offered this viewpoint his experience with RetailInvestorConferences. com; I believe the RetailInvestorConferences. com allows more people to attend a corporate presentation. Therefore, I can reach more interested investors in a cost effective and efficient way. The Q&A in my virtual booth was very beneficial for both me and the attendees.
Investors are able to get the information they need in order to make an educated decision about potentially adding our stock to their investment portfolio, Roberts finished. The appeal to attracting retail investors is not limited to small companies. Large and mega-cap companies also present at the monthly events, bringing their own investor and media following, eager to hear directly from companies RetailInvestorConferences. com provided a way for me to be able to reach out to individual investors in a cost efficient manner, commented Delia H. Moore, Manager Investor Relations, Aflac. I was able to reach a group of investors that I likely would have normally not been able to do if it were not in a virtual format. Building credibility begins with visibility. Live virtual events are a highly efficient and affordable media to get your CEO directly in front of targeted investors without the burden and stress of travel. n
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Duesseldorf image Duesseldorf Marketing & Tourismus GmbH; San Francisco image San Francisco Convention & Visitors Bureau photo by L. Sommer
2011
BIOTECH
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2012
F I N A N C E
A S K M R . WA L L S T R E E T
Where has Wall Streets trickle down affect gone?
f you ever sat in a seat in the Wall Street vicinity you heard the term trickle down affect. It was a pole you could lean on while the big board was moving higher while the emerging growth companies sat in cement.
when its down. Even the best stock pickers have doggy doo moments. How does the stockbroker evade disaster with his client? How does the client settle down to continue waiting in a bull market? Has the bull market stalled? Where is the light at the end of the tunnel? What is the easiest arrow to pull out of the financial advisors quiver? Why it is the trickle down affect of course, (unless of course the cash is sitting on the sidelines after taking a profit) What is the trickle down affect you ask? It has to do with the movement of investment capital. The Dow Jones Industrial average is 30 stocks which represent the NYSE and the NASDAQs finest, and is the leading indicator of the stock market, also known as the Blue Chips, and by the way, the blue chip name came about because in the game of poker the blue chips had the highest value. Moving forward, blue chips are where big money invests and sets the direction of all markets based on these blue chips having earnings per share, news, volatility and enormously large capitalization. Blue chip stocks bull rallies are like an elephant herd trampling through the jungle as stocks beat Street projections and economic news is good, giving investors compelling reasons to continue investing in blue chips and their listed cousins. So long as a rally sparks buying all except shorts are thrilled. Sooner or later the best bull run

Why arent the micro-cap stocks moving? Cried investors seemingly stuck in stalled smaller cap stocks complaining to their stockbrokers. When will what you put me in start moving higher? I could do better in CDs. or Why am I stuck in the stocks it must be your selections. There are answers to clients that a stockbroker can give ranging from the it will be okay just wait to the you dont like it take your account elsewhere but dont come running back for the hot IPO or APO. Every investor is patient given some price movement up or down as long as there is movement, which is also known as volatility and despite the fact that there are No Guarantees on Wall Street, stockbrokers are held to a higher order of correctness, he/she better be right. The old love hate relationship. They love their broker when the portfolio is up and hate the broker
n By s h ELDON s h ELLy KRAFT
draws technical analysts to recognize its indicators and recommend selling and profit taking and of course, nothing goes up forever. Profit taking is cash in investors hands. The cash can sit on the sidelines as the bull market has priced itself too high to re-enter blue chips or the money can start looking at whats undervalued and what stocks havent moved yet. Today there are many choices for money managers to invest their money with the global market appeal of international equities. Investors ride hot markets not only hot sectors in US markets. Sometimes an entire country can appear to be undervalued but the moment the charging bull looks down in the USA for undervalued micro-cap stocks; here comes the best friend, the trickle down affect. Money coming into undervalued lower markets. Stocks that have been buried in concrete begin to lift their heads up as money begins to pick away at these lagging undervalued stocks. Undoubtedly the selloff of a decent bull market is the earliest of early beginning of the trickle down buying frenzy the beginning of a new baby bull rally in the micro-cap stocks as investors are playing with the houses money. It can be an amazing time in the market. It is like a dry desolate desert coming to life from an African monsoon rain or the awakening of a forest after the snow melts. Life is good and investors are happy. n
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No Boring Lawyers
Award Winning Business Lawyers

Contact Lynne Bolduc 16148 Sand Canyon Avenue Irvine, CA 92618
OSWALD & YAP

www.Oswald-Yap.com
Telephone: (949) 788-8900 Fax: (949) 788-8980 E-mail:LPB@Oswald-Yap.com
p ROFILED COmpANIEs
Pretium resources inc.

Creating value through gold in Canada with a rapidly developing high-grade gold story and one of north americas largest undeveloped gold projects
retivm is aggressively advancing its Brucejack Project, a high-grade gold exploration and development opportunity in northern British Columbia. In June 2011, a preliminary economic assessment (PEA) was completed which evaluated the potential for an underground mining operation based on the higher grade gold and silver resources defined to date on the project. The PEA outlined an underground mining operation producing an average of 173,200 ounces of gold and 1.1 million ounces a year for the first ten years, for total life of mine (16 years) production of 2.2 million ounces of gold and 14.7 million ounces of silver. The estimated base case, pre-tax net present value discounted 5% (NPV) for the project is US$662 million, with an internal rate of return (IRR) of 27.1%, using base case metals prices of US$1,100/oz gold and US$21/oz silver. The estimated NPV using recent spot prices of $1,536.36/oz gold and US$37.89/oz silver is US$1.416 billion, with an IRR of 48.3%. The total estimated capital cost for the project is US$282 million. The higher-grade resources at Brucejack comprise 903,000 ounces of gold and 21.9 million ounces of silver Measured and Indicated, and 1.9 million ounces of gold and 7.5 million ounces of silver Inferred, using a cut-off of 5.0 grams of gold-equivalent per tonne. An update to the Brucejack PEA will commence after this seasons +50,000-meter drill program which is now underway. One of the first holes drilled, SU-115, intersected 18,755 grams per tonne gold over 0.6 meters, a record for the property. Hole SU-115 was drilled in the Valley of the Kings Zone, an area where previous drilling has encountered multi-kilogram gold intersections. The Valley
assets before selling them to Pretivm in December 2010. He is joined by a team of other seasoned industry executives with experience in precious metals exploration, strategic development, financing, and project development. Pretivm debuted on the TSX on December 21, 2011 at $6.00 per share. n Michelle Romero Investor Relations Director Pretium Resources Inc. #1600 570 Granville Street | Vancouver BC Canada | V6C 3P1 Toll Free: 1877-558-1784 | mromero@pretivm.com | www.pretivm.com | TSX : PVG
of the Kings Zone is an area of particular emphasis in the program, which is focused on further delineating and expanding the projects known high-grade gold mineralization. Concurrent with the PEA update, Pretivm will either proceed with a pre-feasibility study or advance directly to a full feasibility study for the Brucejack high-grade project. Pretivms neighboring Snowfield Project is one of North Americas largest undeveloped gold projects, with Measured and Indicated resources of 25.9 million ounces of gold, 75.8 million ounces of silver and 2.98 billion pounds of copper, and Inferred resources of 9.0 million ounces of gold, 51.0 million ounces of silver and 1.10 billion pounds of copper, plus molybdenum and rhenium resources. A joint engineering study with Seabridge Gold Inc. is underway to examine the economics and opportunity of developing Pretivms Snowfield and Seabridges KSM projects as one operation. The study is expected to be completed in the fourth quarter of 2011. Pretivm was launched in late 2010 by industry veteran Robert A. Quartermain, who has spent over 35 years in the resource industry from grassroots prospecting through mine development. Bob was previously President and CEO of Silver Standard Resources Inc., which owned the Brucejack and Snowfield

Forward-looking statements are based on the expectations and opinions of the Companys management on the date the statements are made. The assumptions used in the preparation of such statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forwardlooking statement. This article contains forwardlooking statements, which address future events and conditions, which are subject to various risks and uncertainties. The Companys actual results, programs and financial position could differ materially from those anticipated in such forward-looking statements as a result of numerous factors, some of which may be beyond the Companys control. These factors include: the availability of funds; the timing and content of work programs; results of exploration activities and development of mineral properties, the interpretation of drilling results and other geological data, the uncertainties of resource and reserve estimations, receipt and security of mineral property titles; project cost overruns or unanticipated costs and expenses, fluctuations in metal prices; currency fluctuations; and general market and industry conditions. www.microcapreview.com
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With Obamacare, a towering U.S. debt burden, a global sovereign debt crisis, ongoing currency devaluations and the potential for spiraling inflation all looming over our financial landscape...this years New Orleans Conference will provide the crucial insights investors need now more than ever.
or nearly four decades, investors looking for safety and profits in a turbulent world have made a point of attending the annual New Orleans Investment Conference.
newly-legalized gold bullion, the New Orleans Conference has, year after year, pointed them to specific investments that have quickly multiplied in price. Thats especially true in the current environment of high metals prices, where the mining stocks recommended at this event frequently jump three and four times over in value in the weeks after the conference.
The answers will be provided by perhaps the finest roster of respected experts in the history of investment events, including Glenn Beck, Dr. Charles Krauthammer, Dr. Marc Faber, Peter Schiff, Stephen Hayes, Dennis Gartman, Stephen Moore, P.J. O Rourke, Dr. Stephen Leeb and dozens more of todays top experts on geopolitics, economics and investment markets. Established in 1974 to show investors how to buy
Being held from October 26-29, 2011, the New Orleans Investment Conference is likely to be the most profitable and enjoyable investment youll make all year. To lock in the lowest price and guarantee your place in our convenient host hotel, youll need to register now by calling toll free 800-648-8411, or by visiting www.neworleansconference.com.
This year, the New Orleans Conference will once again feature the most successful advisors in metals and mining, including Brien Lundin, Rick Rule, Frank Holmes, Brent Cook, Lawrence Roulston, Adrian Day, Thom Calandra, Gene Arensberg, Chris Powell, Mary Anne and Pamela Aden and many more.
2011
www.microcapreview.com Micro-Cap Review Magazine
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Why Invest in Micro Cap Energy Companies
ne of the most perplexing questions in the investment market regards how to participate in the energy market in a viable, yet profitable manner, considering all the risk in energy prices. One approach that minimizes that risk is in the micro cap arena. The growth in world energy demand is forecast by essentially all knowledgeable parties to continue upward. The International Energy Agency is currently issuing forecasts of 2 to 3 percent annual growth. The majority of this consumption, some 60%, will be in the form of oil and natural gas, with oil being around 35%. In fact oil will remain the most cost effective energy source over the next 20 years or more, due to the ease of transportation to any area and the available infrastructure for its delivery to the consumer. The effort in the
industry is continually focused on finding more oil to sustain this enormous consumer appetite. With growth and consumption continuing to be upward, it is wise to have some type of energy production in the portfolio. The most conservative item would suggest being oil-related. The large growth area is in transportation, particularly in the emerging markets and population growth areas like China and India. In the United States alone the daily oil consumption is currently almost three times the amount being produced. This indicates a very attractive opportunity to invest in a market where the demand for the product is continuing to go up while the ability to produce that product is becoming more difficult. This is not to say the raw material exists in less volume, but rather
n By DR. g ERALD BAILEy
44
With growth and consumption continuing to be upward, it is wise to have some type of energy production in the portfolio. The most conservative item would suggest being oil-related. The large growth area is in transportation, particularly in the emerging markets and population growth areas like China and India.
that volume, called reserves, is to be found in increasingly more harsh environments, like the Arctic, in offshore deep water, and in very difficult to extract oil shale formations. This difficulty translates to an unfortunate cost disadvantage to the consumer, but to a fortunate investment situation for the owner. It is smart to consider that if one must pay more for the product, then mitigate that exposure by owning some of the raw material. Oil in the form of transportation fuel will be the big player. Add to this the numerous applications of hydrocarbon based products used by the world population and the case for oil is very strong. The world uses computers, petrochemicals, plastics, medicines, fertilizers, tires, and list goes on. An investor can consider several choices. Investment can be made by direct ownership in oil properties, but the risk is the variety of operations and the management of the projects. Then there is the purchase of stock in the major oil companies. This has shown to provide steady, long term growth and dividends, but not immediate aggressive returns. It is suggested that micro cap companies can provide potentially higher rewards and faster growth rates, while being of manageable size. Micro cap companies are those in the range below the very large companies and above the smaller, more limited companies. That sounds very mundane as a description, but there are significant differences besides the market place value. Obviously
the key as in any investment is to have made the correct, informed decision about the company in question. At the risk of making general statements, there are several points that apply. The micro cap is normally at that stage in life where they are past initial development and have begun to establish a firm program of operations. They should have a program forecast, a development plan, and an exit strategy. The exit is hopefully to be acquired by a larger entity. This model is usually because the larger groups have often gotten to their position by letting the growth companies devote effort to forming a sound company and demonstrating success, which makes an acquisition a proven situation. The micro cap often have the advantage of sufficient cash on hand to execute plans, while at the same time being small enough to be flexible and able to adapt quickly to business changes. Having a smaller management team is usually one good aspect to watch for. It is not uncommon to find a micro cap with a board of perhaps five members and an executive team that has direct involvement in the daily operations. This is typical of the energy or oil micro cap. Usually the management is energy people who accept the direct assignment of overseeing the field operations. This has evolved as an example of how best to develop oil other than oil persons themselves. The micro cap energy field is full of such models. To the investor it gives confidence in the knowledge of the management

and the hands-on approach. In addition the micro cap is more likely to be responsive to the ideas of its staff, not being burdened by the longer term corporate ideology of the larger competitors. This proves to provide an atmosphere of agility, openness, and responsiveness. Energy is a growth market. It can attract capital. Yet it still remains a risky area for those who do not know the effort required to be successful in finding the resources and getting the product to market. There is no shortage of buyers for the product. And the price of energy, and particularly the price of oil, is forecast to continue to rise. There will be the usual up and down swings, but the trend over the next 20 years will be up. For those micro caps who lay out a firm development plan, to execute a measured growth, and take advantage of the demand and price rise, potentially there will be very attractive returns for the investor. If all aligns by plan this could culminate in a one of several results, with steady stock appreciation and a good profit upon a buyout by the larger group. n
about the author

Dr. Gerald Bailey is Chairman of Bailey Petroleum, where he is involved in business development consulting and operations management of several oil and gas production ventures, both domestic USA and internationally. Dr. Bailey has over 45 years experience in the petroleum industry with extensive engineering, management, and executive assignments. He is a former Exxon executive, having been the President of the Arabian Gulf region. Dr. Bailey is a graduate chemical engineer from the University of Houston and serves on a number of industry boards among which are BCM Energy Partners Inc., Vanguard Energy Corporation, and Well Grounded Energy. He is a member of the Middle East Policy Council, Society of Petroleum Engineers, American Institute of Chemical Engineers, and is a registered Professional Engineer in Texas.
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Small Broker Dealers An Endangered Species Why We Should Care S

ince 2000 the number of Broker Dealers has been shrinking. The then 5200 members were primarily small firms with most having fewer than 10 reps. Not surprising is that most of these firms (over 4000) were nickel BDs (firms with $5,000 capital requirements). These firms are fiercely independent. They set their policies based on their interests, talents and markets. This was the last bastion of financial entrepreneurs and mavericks with limited financial resources. Today there are fewer than 4200 firms and the trend continues. We have been losing firms in record numbers. In fact since the end of 2010, firms have been closing at rate of almost 1 a day. This is a bad thing. Small companies are the backbone of employment,
innovation and growth. Small firms are the segment of the financial industry where small and growing companies get funding (risk capital). At a time when our economy needs fresh investment capital most, this part of our industry is shrinking. Why is this happening? Please follow along as I discuss the most significant reasons. How we deal with risk has evolved from essentially compliance and supervision to more regulatory oversight. The burden of this shift has become oppressive. Definitions, expertise, rules, forms, concentration, diversification, disclosures, verification, due diligence, errors and omissions insurance and legal scrutiny have made the purchase of risk capital (especially Reg D) securities increasingly treacherous. Where once an environ-
n By DOu g s h RINER
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Today there are fewer than 4200 firms and the trend continues. We have been losing firms in record numbers. In fact since the end of 2010, firms have been closing at rate of almost 1 a day.
ment of coordination existed between firms and regulators, today the market is dominated by an adversarial tension. The general perception that more is better permeates regulation and infects compliance. More staff, more Written Supervisory Procedures, more reviews, more training, more disclosures and disclaimers, etc. Regulation is responding to the market. The market is responding to the information available. The firms must adjust to remain compliant and competitive. It is a seemingly never ending downward spiral. Margins are getting squeezed and the only real innovations coming from this are new ways to extract income from the reps directly and their clients indirectly. This can sustain itself until a significant event occursand one is always on the horizon. The roots of our industry problems are cultural and societal - something for nothing. We live in era when someone is always making it big on some magical event. A neighbor or cousin sold his business for millions; the guy at the club bought some obscure security and made millions; a coworker knows a guy that knows a guy that got a million dollar settlement through litigation; and the most damaging is the volume of law firms soliciting investors, promising restitution from investment losses by attacking the E&O policies of the BD. This has created an environment where the actual risks of the investment are shifted from the client to the rep and BD. Its a pretty good model for the clients, their attorneys and regulation but devastating to the industry. FINRA has built a dispute resolution system that caters to plaintiffs attorneys at the expense of the rep and BD. There appears to be no such thing as a frivolous complaint.
When documentation is available demonstrating compliance, evidence of acceptance and suitability of transaction are made available to all parties the complaints should be dropped but they continue to arbitration. In arbitration, even though these same documents demonstrate compliant and righteous transactions, there is still a strong possibility of an award against the rep and BD, not to mention the expenses accrued for defense and arbitration fees. The net result is heads you lose, tails you lose. It is a zero sum game and the rep and the BD pay at every turn. Settlement has become the norm. The attorneys know this. The basic cost of arbitration has jumped to almost $100,000 for a full-on defense. The E&O carriers quickly settle and then rewrite the policies or drop the insured. FINRA and the SEC have adopted FAS 5, the financial hammer of complaints. This is the regulation stating inclusion of an amount in the firms quarterly financial statements reserving for complaint settlements or expenses. This is real area of concern today. How do you know what the costs are going to be? The FinOp and the CEO have to sign off on this amount. You can get a letter from your attorney estimating a cost or you can reserve the full amount of the claim. This has an immediate and dramatic effect on the condition of the BD and its ownership/management team. If the reserved amount is available as a deposit or pledge, it emboldens plaintiffs counsel to settle for the full reserved amount. If additional funds cant be readily made available, the risk amount identified by counsel or the full complaint amount become contingent liabilities of the BD. Is the firms net capital sufficient to support these liabilities?

If not, time to contact the SEC and FINRA and inform them of a capital inadequacy. If you dont contact FINRA or the SEC and dont include the potential settlement or expenses on your latest quarterly filing, the firm and its management team are in violation of FAS 5 and are subject to regulatory penalties and closure of the firm. The same is true of a settlement or adverse award, except the amount is a direct obligation which reduces net capital (dollar for dollar) and is immediate. If you dont have the cash available now, you must cease operations until the funds are available. Plaintiffs counsel is aware of these risks to the BD. This creates an unfair negotiating advantage for the clients. Either the rep and BD pay the settlement, the firm reserves significant funds for the defense, or hope the E&O provider will honor its agreement. If the E&O provider comes through, it may exclude certain products or services from future coverage. Today it is very common for 1031/TICs, REITs, drilling programs, promissory notes and fiduciary activities to be excluded from coverage. Simultaneously, deductibles have taken a significant jump up. Then you have a policy that protects the insurance carrier and not the rep and BD. Small BDs cant compete and remain compliant in the risk capital markets given these circumstances. Margins that were razor thin are now non-existent. More and more, small BDs are moving to the RIA platform, selling out or just closing their doors. What does this mean? The Risk Capital market is losing sponsorship. Worthy companies seeking funding between $5,000,000 and $25,000,000 have fewer and harder choices. These companies are the engines of growth in America. Their fuel is money. Who will replace the small BD? Perhaps we should ask our Congressmen. n
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New BD Formations & BD Withdrawal Summary

As of 31 July 2011, reported 15 August 2011
11 neW forMations anD 19 WithDraWals 5 neW bDs Were Private PlaCeMent firMs & 5 other neW bDs Were firMs With Clearing arrangeMents anD one firM listeD as other.
The chart to the right shows the last 13 months, the number of firms, with the types of firms admitted.
NewBDFormations&BDWithdrawalSummary Asof31July2011,reported15August2011.
11NewFormationsand19Withdrawals 5newBD'swerePrivatePlacementfirms&5othernewBD'swerefir arrangementsandonefirmlistedas"other."
Thechartbelowshowsthelast13months,thenumberoffirms,withthetypesoffirms Year to date Summary 2010-2011 YeartodateSummary20102011
Last15monthsstatistics:(Theextrathreemonthsgivesabettertrend)
NewBDWPvtCaptiveOtherMutFStocksFixedForeign Pl PPVarOwned May,2010 13 19 6 0 1 1 4 1 0 Jun,2010 12 26 6 0 2 0 3 1 3 Jul,2010 12 13 5 0 2 1 5 0 0 Aug,2010 13 38 7 2 0 0 3 0 2 Sep,2010 16 14 9 2 2 0 2 0 1 Oct,2010 16 21 9 3 2 1 1 0 1 Nov,2010 19 31 11 1 1 1 5 0 2 Dec,2010 17 23 5 4 1 2 5 0 2 Jan,2011 20 46 11 3 2 2 2 0 3 Feb,2011 16 49 6 2 0 0 10 0 5 Mar,2011 21 40 9 2 1 2 7 0 1 Apr,2011 16 17 7 2 1 1 6 4 5 May,2011 12 18 7 0 0 1 4 3 1 Jun,2011 9 23 4 1 0 0 3 4 2 Jul,2011 11 19 3 2 2 0 4 5 3 (12)Totals18633912Monthrollingnetloss:153firms. TheratioofnewformationsvsBDwithdrawalsis54%.

n By DAv ID ALs u p
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NEWADMISSIONS:11NEWFirmsinJuly.(The12monthrollingaverageis15n www.microcapreview.com permonth.)
NEW ADMISSIONS: 11 NEW Firms in July. (The 12 month rolling average is 15 new admissions per month.) Clearing: Five more Firms were admitted in July, with Clearing. This is the sixth month in a row with increased clearing new members. There were four of the same in June, Four in May, Five in April, vs. Seven in March, and 10 in Feb. Strength: The rolling 12 month average new firms admitted with clearing arrangements is still strong with 51 firms (this represents 27% of all BD admissions in the last 12 months.) NOTE: There are approximately 2800 firms currently with Clearing Arrangements. ( 3029 in 2006.) This 27% of all new BD admissions is telling us: Firms are gaining admission first with minimum requirements and minimum numbers of reps and it has been noted that many of these new firms will pick up clearing arrangements and then add new reps and new lines of business AFTER admission. RIA ADMISSIONS, included with the BD: One firm this month, none last month. NYSE Firms: No new admissions in July. Possibly one firm will do NYSE trading. Private Placements: July had five new PP firms, 2 were captive (and Foreign Owned) vs. June with 5,vs. Seven in May, vs. nine in April. There have been 89 PP firms admitted in the last 12 months. This is 48% of all firms admitted. If you throw in the 21 captive PP firms, the rolling total is still 111, which is 59% of all new admissions. Debt/Fixed Four firms that were admitted will trade debt instruments, & all four seem to be 100K B/Ds.
An additional firm was Foreign Owned and possibly self-clearing for debt instruments. Foreign Owned Firms: Three known Foreign owned firms were admitted in July. The 12 month rolling total is 32 new foreign owned firms (17% of all new admissions last 12 months). Note: We count Foreign owned firms only as a percentage of all firms. The categories of their B/Ds, such as PP, Clearing, etc, are counted in the master statistical file. Back-testing. August 2010 Revisited: BOTTOM LINE: Six firms increased rep count, four of which are now north of 25 reps. One firm has over 200 employees. One firm added clearing, along with trading virtually all securities. No firms had RIA capability. (One is in process of registration) BDW STATISTICS: 19 Firms folded in July, vs. 23 in June, vs. 18 in May, vs. 17 in April,, vs. 40 in Mar, 49 in Feb, & 46 in Jan). The monthly BDW average is still averaging 28 closings. Of the 18 BDWs in July: -SIX firms were either Expelled or Cancelled for not paying dues. There were 12 in June. This seems to be failures to pay either Arbitration or Enforcement awards. -Only three firms had more than 30 reps, the largest being about 70. -The largest firm went through a merger. The other two were victims of large arbitration awards. -Almost all the rest of the Firms had less than 10 reps. Known SEC REGISTRATION RETENTION, after filing BDW. (They kept their RIA) (We remove non-equities firms such as Distributors, Pvt Placement, Energy, etc.) July Net: 10 firms SEC Retention: 5 firms June Net: 12 firms SEC Retention 5 firms

May April Mar Feb
Net: 10 firms Net: 10 firms Net: 27 firms Net: 30 firms
SEC Retention: 3 firms SEC Retention 10 firms SEC Retention: 10 firms SEC Retention: 14 firms
In the last six months, 47% of equities related firms have kept their RIA. Last Comments: There should be 4599 FINRA Member firm CRD Numbers as of July 31, 2011. Compliance Automation Tools available via TCD. TCD Compliance SCORE for 3012 and Risk Control. And NOW INCLUDES ENHANCED BRANCH OFFICE SUPERVISORY REVIEW Online Annual Compliance Questionnaire ACQ. Online Outside Business Activity Questionnaire OBA. Web Page Monitoring Service to track Branch Office sites. Automated WSP Analyzer with Color Markup. If you like what you see, Electronic monthly subscriptions are available, in summary form as shown above, or with full details. n
David Alsup is National Director - Business Development The Compliance Department, Inc He is also on the Advisory Board of SNN Incorporated He can be reached at: dalsup@thecompliancedepartment.com
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Performing Due Diligence on a Micro-Cap Oil & Gas Company

very time you fill up your car with gas you are impacted by the price of oil. Across the board commodity prices have risen to historic highs, crude oil is no exception to this. In fact, oil is probably the most visible and easily felt commodity with movements in its price having a very noticeable impact on almost everyone world wide. It seams like everywhere you turn there is someone touting a new start up oil & gas company or a drilling program with a set of oil leases. Over the last several years Coral Capital Partners has evaluated and performed due diligence on countless oil & gas companies, and leases. With so many investors giving serious consideration to investing in these small and micro-cap oil & gas companies I thought now would be a good time to discuss what I look for when I am evaluating these projects for Corals clients. There are a large number of small and micro-cap companies in the oil & gas industry. Being able to conduct a reasonable
n By ERIK NELs ON
amount of due diligence on these companies in order to properly evaluate them goes a long way towards helping ensure investors have a successful investment. While many investors have a tendency to lump oil and natural gas together; it should be noted that economically oil is not natural gas, and the economics of the two can be quite different. This is due to the basics fundamentals of supply and demand. There is a shortage of crude oil in this country; we import almost 20 million barrels of oil a day. We however have a surplus of natural gas in the United States to the point we are starting to look at exporting liquefied natural gas (LNG) to other countries. It used to be that natural gas was found in similar formations with oil, however this all changed when natural resource companies began combining horizontal drilling with advancements in rock fracturing technologies. This allowed natural resource companies to unlock huge reserves of natural gas which were previously out of reach. As a result while the price of oil rose dramatically over the last five years, the price of natural gas is actually down from where it was five years ago. Natural gas from these shale deposits is sometimes referred to as unconventional gas or shale gas. I do not see the surplus of natural gas being dramatically reduced anytime soon. These unconventional gas wells typically produce high volumes of natural gas and the major gas companies are drilling more wells regardless of the overall economics just to maintain their lease positions. Additionally once you hit a major natural gas find you need to build a pipeline in order to get the gas to the market and get paid. In some parts of the

country a lack of pipeline capacity causes the gas produced in those regions to be sold at a discount due to a lack of pipeline capacity. Oil does not have these issues. Oil is easily trucked from storage tanks at the well site to the refinery. Despite the recent massive oil discoveries in the Bakken formation, production from this region may never increase fast enough to overtake the current supply and demand imbalance in this country. As result I see continued high prices for crude oil. This should lead to favorable economics for those natural resource companies focused on crude oil production. When I am conducting due diligence or evaluating an oil & gas company for Coral Capitals clients it is very useful to understand several key items. Working Interest (WI): This is the operating interest that the owner of the lease, or portion of, has the right to drill, produce, conduct operating activities and share in all the costs associated with the exploration and development of the lease. I typically like to see a company with a solid majority Working Interest percentage. In my book, the closer to 100% the better. This gives a company more control over its own destiny. I do not like to see a company with a minority Working Interest position. This places the company at the mercy of the majority Working Interest owner; and if that owner decides to drill a lot of uneconomical wells the minority working interest owners will be stuck paying for them. Net Revenue Interest (NRI): This is the amount of revenue that the lease owners keep after paying the royalties to the owners of the mineral rights and all other non-oper www.microcapreview.com
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ating interests. In the past it was typical for the owner of the mineral rights to keep a one eighth, or 12.5% Net Revenue Interest. This meant the typical lease owner had an 87.5% Net Revenue Interest. With the current high price of oil and all the recent interest in domestic on-shore production the owner of the mineral rights are able to keep a higher percentage than in the past and as a result an 82.5% to 80% Net Revenue Interest is much more common. However, oil fields require much more maintenance that natural gas fields, and with the higher maintenance expenses for an oil field it is really difficult for an oil company to make a profit if their NRI is below 80%. Therefore I would look to avoid any companies that have less than 80% NRI on their oil leases. Field Operations: Once a well has been drilled and completed it just doesnt flow endlessly on its own, those darn things require constant maintenance. It is important to know if a company is operating its own fields, and if not, what its cost of operation is. Most small companies do not operate their own fields, so it is not a deal breaker when looking at small oil and gas company, but what is important to know is if operating costs on a per well basis are relatively low. There is an old saying in the oil and gas industry about a field being operated to death; basically you want to make sure that the operating expenses are not going to eat up all the profits from the oil and gas production. Decline Curve: This is an important one. So many times a company will issue a press release regarding a new well or talk about a new well during a presentation and will tout that the well produced a certain number of barrels per day. Every well will see a decline from its initial production within a reasonably short period of time. What is important is where the well production will stabilize. For example if a company drills a well and the initial production is 25 barrels of oil per day, but a month later the wells production has declined and stabilized at 10 barrels of oil per day, then you would value the well based upon the stabilized 10 barrels
of oil per day, not the initial 25 barrels per day. The same for natural gas. You cannot expect to produce an accurate valuation on the oil field if you do not know what to expect for long term production. Reserve Report: This is a report produced by a geological engineering firm that attempts to estimate the total amount of oil or gas in place, how much of it is recoverable and over what length of time. Typically a reserve report will attempt to provide an estimate of the net present value of this production. For those who are unfamiliar, the net present value (NPV) is the estimated current value of future cash flows discounted at an appropriate interest rate in todays dollars. The typical discount rate is 10%, and thus you will tend to see a lot of discussions concerning NPV (10), which is the value today of the cash flows at an interest rate of 10%. Typically a Reserve Report is something that you will see when evaluating a private project or drilling program, and is not typically included in the public filings of a company. The Reserve Report should be from a well known and reputable firm. Production Records: The drilling of oil and natural gas wells is highly regulated by individual states. Every state requires a certain level of reporting on the production from each and every well. These reports are a matter of public record. Any company that is evaluating a lease with prior production should have copies of these production records. They become important when a company is attempting to evaluate a lease for purchase. Without these records it is very tough to get an estimate on the value of a field. While these records are not something that is typically disclosed in a companys public filings; they are something you will want to make sure a company has when you are looking at a presentation on a private drilling investment. When looking at a private project, if they dont have the past production records then I would probably pass on the project. If you are looking at an oil or gas project then here are a few terms you will need to know.

Proven Oil & Gas Reserves: Oil and Gas reserves for which there is at least a 90% confidence of their being able to be recovered under favorable economic conditions. Proven Developed Reserves (PD): Proven developed reserves are those where there are existing wells, that may or many not be in production, where minimal additional investment is required in order to recover the oil and gas in place. Proven Developed Producing Reserves (PDP): Proven developed producing reserves are reserves where there are existing wells in production that are capable of recovering the oil and gas that is in place. Obviously I place a greater significance on PDP than on PUD (see below) or unproven reserves. Proven Undeveloped Reserves (PUD): Proven undeveloped reserves require additional capital investment; most typically the drilling of additional wells in order to recover the oil and gas that is in place. Unproven Reserves: Unproven reserves are those where there is a 50% (or greater) confidence level of recovery but for some reason the reserves are not able to be classified as proven. This most typically will occur when a company owns a large lease but has not drilled the required number of exploratory wells needed to prove up or establish the required confidence level in the reserves. Exploratory Well: A well drilled to find and produce oil and natural gas reserves not already classified as proven. Production Stimulation: Currently most companies in the oil and gas industry are either drilling into shale formations with a very high probability of success or they are reworking old fields in order to increase production. The vast majority of the small and micro-cap oil and gas companies I have seen over the last couple of years tend to be those that are looking to build their companies by employing a strategy of acquiring older, neglected fields and reworking those fields to increase production. This can be a low risk and very smart way to build a company; but it is also important to have an understand-
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ing as to how the production of a field can be increased. Oil wells require a lot of maintenance and if they are neglected for any length of time their production levels will decline. One of the most basic ways of increasing production is to rework the wells. Many times this will involve replacing equipment and sometimes even re-boring the well. If done properly this can be a cost effective way of boosting production. It is important to know what the companys plans are and how it controls the cost associated with these plans. Another method of stimulating well production is through water flooding. This is when a company pumps water down an old well in an attempt to pressurize the field and in the process push the oil that remains underground towards the production wells. This is a proven and highly successful technique. However, the drawback associated with this is that the oil produced typically comes to the surface with a fair amount of water mixed in, which needs to be separated and properly disposed. This can dramatically up the costs associated with operating a field. A more advanced method of pressurizing a field involves injecting a gas into the field. The most common gasses used in injection stimulation are either carbon dioxide or nitrogen. Carbon dioxide is a more abundant and cheaper gas to use, however it can react underground to form carbonic acid which can be highly corrosive to the equipment in the oil field. Nitrogen is slightly more expensive to use, but it generates better results and doesnt form acidic compounds that eat up the equipment. When I am evaluating oil field stimulation I prefer to see either a form of nitrogen or carbon dioxide stimulation. The other strategy for upping the production from an existing oil and gas lease is to look for deeper reservoirs. Typically what has happened is a lot of these older fields were drilled back when oil was much more abundant and the equipment was a lot less reliable. As a result, many times they simply quit drilling when they found their first, and
shallowest, reservoir. In many of the projects I have reviewed it is believed that there are much more productive reservoirs a little deeper, and within very economical reach, just below the existing producing reservoirs. If a company can successfully drill down into these reservoirs then it can dramatically increase the production and value of the field. I would want to at least see some potential for this in any project I was seriously considering. Management: This is a key item for any company, in any industry. It is critically important in the oil and gas industry which has had a habit of attracting bad actors throughout its history. When I am evaluating an oil and gas company I take a close look at the management of the company. Not only do I read the SEC filings and look at the material the company is supplying, but I also conduct my own research on the internet. I do a variety of searches on the management teams and the board of directors of the company. I look to see how their past projects have performed, and I look to see if they have had any regulatory problems in the past. When I performing a full service due diligence project I will even pull a full professional background report. I will also look to see if the board and management have any involvement with other public companies. If they do, then I will look to see how those other companies have fared. My theory is that an apple typically doesnt fall far from the tree. Another thing I feel it is important to review is the ownership of the company. Does the current management own a meaningful stake in the company? I also look to see if any of the major shareholders are corporation or limited liability companies. This is important as a lot of bad actors like to hide their ownership through limited liability companies (LLC). When I see a LLC with a significant ownership position I will do research on the company and who the principals are behind the company. I am by no means saying that having an LLC as a shareholder is a bad thing, but it is amazing

what you can find when you take a look. In an ideal situation, I like to see the management own a fairly reasonable position in the company with everyone having a fairly reasonable background and track record of success. If I find any regulatory problems or red flags regarding the board of directors or management, I am gone, there is no way I would consider an investment. Structure: I believe in simple, clean corporate structures. For most micro and small cap companies this means having a reasonable number of shares issued and outstanding. In my world this is somewhere between 10-50 million shares, not hundreds of millions. I like to see a single class of common shares and at most a few different classes of preferred. I am generally good with project specific structures as long as they are transparent and are not a backdoor way of rewarding management at the expense of the company. What I do not like to see is convertible debt or preferred that doesnt have a hard floor to the conversion price. I also do not like to see project overrides to management or board members; I feel this creates a conflict of interest that places their interest above those of the shareholders. Hopefully you will find the above information useful and helpful. Proper due diligence on a project does not guarantee a successful investment; but it can go a long way towards making sure that you avoid undesirable companies and place your hard earned investment capital in a company with a good chance of succeeding. n
Erik S. Nelson is the President of Coral Capital Partners, Inc. (www.coralcapital.com) and Sterling Investment Services, Inc. (www.sterlinginvestments. com). Coral Capital Partners provides advisory services to private and publicly traded companies as well as to private equity partnerships and investment banks. Sterling Investment Services, Inc. (www. sterlinginvestments.com). Sterling is a publisher of a weekly market commentary and a daily trading blog. He can be reached at (404) 816-9220 or esn@ coralcapital.com.
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The Beltway Matters

ffordable energy powers our nations economy. Every aspect of our lives depends on it - from the gas that you put in your car to the coal and natural gas that produces most of our electricity.
The energy industry also creates millions of good paying jobs directly and indirectly. It isnt just responsible for the paychecks of rig workers, but also extends throughout entire communities reaching all the way to small businesses like restaurants. But all this is predicated on a delicate balance, one that can be turned upside down with a single new regulation or piece of government red tape. As business owners and investors know, a spike in prices at the beginning of the production process creates ripples that can be felt in your bank account. The numbers are staggering. Here are a few facts about the impact the energy industry has: The oil and natural gas industry accounts for 7.5 percent of the national GDP and supports 9.2 million jobs in the U.S. The oil and natural gas industry produced 2 million jobs for Americans from 2004 to 2007. Higher gasoline prices hit American families hard: A one penny increase in the price of a gallon of gasoline costs consumers an extra $4 million each day. Though the United States today is undoubtedly dependent upon foreign markets, we have approximately 163 billion barrels of our own recoverable oil, which would be enough to replace imported oil from the Middle East for over 50 years. House Republicans have kept that in mind this year as our team has worked hard to roll back costly, unnecessary regulations and reduce government interference so we can unleash American made power, thus creating jobs and keeping prices low. The House Energy and Commerce
n By ELv Is Ox LEy
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Committee is on the front lines of this fight and a sample of the bills that have been introduced and passed thru the House are listed below: H.R. 2021: the Jobs and Energy Permitting Act The development of Alaskas arctic waters alone could produce up to 1 million barrels of oil per day and create more than 50,000 American jobs. The bill was approved by the full House. H.R. 1938: the North American-Made Energy Security Act Completion of the Keystone XL pipeline will carry nearly 1.3 million barrels per day into U.S. markets and create more than 100,000 American jobs. The bill was approved by the full House. H.R. 910, the Energy Tax Prevention Act This bill would to protect 1.4 million jobs or more threatened by the Obama administrations highly controversial plan to regulate greenhouse gas emissions across all sectors of the economy, which will drive manufacturing overseas and increase the price of electricity and gasoline, food, and products sold nationwide. The bill was approved by the full House. H.R. 2021, the Jobs and Energy Permitting Act. Experts say this legislation would create and sustain more than 54,000 jobs by eliminating the regulatory roadblock that is currently standing in the way of the development of oil and gas resources in the Beaufort and Chukchi Seas off the coast of Alaska. The bill was approved by the full House. H.R. 1938, the North American-Made Energy Security Act It would create more than 100,000 jobs by cutting through the regulatory red tape that has delayed construction of the Keystone XL pipeline, which will bring crude from Canada and North Dakota to U.S. refineries. The bill was approved by the full House. Unfortunately each of these bills has stalled in the Senate where Democrat leaders have - in most cases refused to allow an up or down vote or even a debate. But we wont
allow their inaction to stop us from trying to spur the economy. This fall the House is set to consider the following pro-growth, pro-jobs legislation. Readers are encouraged to contact their Senators and ask them why so many good bills are sitting idle on their desks for consideration, while our country continues to suffer in an economic morass. Energy and Commerce solution to Utility MACT and Cross-State Air Pollution Rule H.R. 2401, the Transparency in Regulatory Analysis of Impacts on the Nation (TRAIN) Act, sponsored by Rep. John Sullivan (R-OK), would require a cumulative economic analysis for specific EPA rules, and specifically delay the final date for both the utility MACT and CSAPR rules until the full impact of the Obama Administrations regulatory agenda has been studied. In total, 1,000 power plants are expected to be affected by the new rules and middle class Americans annual electricity bill could increase in many parts of the country of anywhere from 12 to 24 percent.
new, achievable rules that do not destroy jobs, and provide employers with an extended compliance period. Increased costs and regulatory uncertainty for the American cement industrythe foundation of nearly all infrastructure projectsare likely to offshore thousands of American jobs.
energy anD CoMMerCe solution to neW Coal ash regulations

H.R. 2273, the Coals Residuals Reuse and Management Act, sponsored by Rep. David McKinley (R-WV), would create an enforceable minimum standard for the regulation of coal ash by the states, allowing their use in a safe manner that protects jobs. EPAs plans to regulate coal ash under Subtitle C of the Solid Waste Disposal Act will cost billions of dollars, affecting everything from concrete production to building products like wall board, resulting in an estimated loss of well over 100,000 jobs. These bills offer a balanced approach protecting the environment, while at the same time putting Americans back to work. Getting them passed wont be easy, but dedicated lawmakers must consider the immediate, positive ramifications to our countrys current economic state that these bills can deliver. Article by Congressman Joe Barton, Chairman Emeritus of the US House of Representatives Energy and Commerce Committee. Mr. Barton represents the Sixth District of Texas. www.joebarton.house.gov Elvis Oxley, President of Oxley Consulting, LLC (www.GovernmentContracting.net) contributed to this article. n
Elvis Oxley President Oxley Consulting, LLC 122 C St. NW, Suite 240 Washington, DC 20001 desk (202) 266 - 0435 cell (202) 251-1866 fax (202) 628 - 1988 elvis@oxley-consulting.com
energy anD CoMMerCe solution to boiler MaCt

H.R. 2250, the EPA Regulatory Relief Act, sponsored by Rep. Morgan Griffith (R-VA), would provide a legislative stay of four interrelated rules issued by the EPA in March of this year. The legislation would also provide the EPA with at least 15 months to re-propose and finalize new, achievable rules that do not destroy jobs, and provide employers with an extended compliance period. These new stringent rules will impose billions of dollars in capital and compliance costs, increase the cost of many goods and services, and put over 200,000 jobs at risk.
energy anD CoMMerCe solution to CeMent MaCt

H.R. 2681, the Cement Sector Regulatory Relief Act, sponsored by Rep. John Sullivan (R-OK), would provide a legislative stay of these three rules and provide EPA with at least 15 months to re-propose and finalize

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MCR Crossword Puzzle
Across
34. biological cells found in all multicellullular organisms 35. Mr._____ Sprott 3. the other yellow metal 36. precious metal 8. sell without owning 37. futures 9. AHT 39. company on the cover of Quarter 4 of 2010 10. mercenary geologist 41. high frequency trader trick to capture the spread 11. to make an investment to reduce risk of adverse price movements 43. rule #1 never lose money rule #2 never forget rule #1 in an asset 44. 10k 12. bio 45. the only natural buyer in the stock market 14. buy or sell executed at best price acurrently available 46. number of rare earth elements 15. long term equity participation securities 18. company on the cover of Quarter 2 of 2011 19. a gold-mine is just a hole in the ground with a liar at the top 1. set of rules for accomplishing a task in a certain number of steps 21. life 2. opposite of trading 24. sell a stock on the 4. term for borrowing against long position in your portfolio 25. video press release company 5. ECN 28. US regulatory agency 6. globex mining CEO 33. company on the cover of Quarter 3 of 2011 7. old name pink sheets
Down
13. convertible into common stock 16. favorite precious metal of David Bond 17. purchased NYSE 20. to trade against inefficiencies in at least two markets 22. that which is paid for the use of money 23. buy precious metals from 26. a buy and hold is a short term trade that went 27. net income-dividends over outstanding shares 29. a temporary recovery from a prolonged decline or bear market 30. never invest in a company with out understanding its finances 31. Canadian Stock Exchange where junior mining and resource companies are listed 32. 43-101F1 38. buy a stock on the 40. commodity traded over $100 per barrel 41. an options strategy in which the investor holds a position in both a call and a put with the same strike price and expiration date 42. extensible business reporting language www.microcapreview.com Answers in the classifieds
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Indonesia A Country on the Path of Sustainable Growth Supported by Vast Natural Wealth
ndonesia is poised to take its place on the global stage. It is home to the fourth largest population in the world, behind the United States, China
The country is on the path of sustainable growth and is expected to surpass $1.1 trillion in GDP by 2015, up from $540 billion in 2009, according to the World Bank and IMF. The countrys economic growth over the next decade is due to favorable demographics including a rapidly growing consumer base, improving infrastructure and development of the nations vast natural resources. As a result of the countrys strong economic outlook, Indonesia has become a major investment destination in the region after China and India. Indonesia is commonly regarded as the natural resources powerhouse of Asia and is the worlds largest exporter of thermal coal. The country boasts a rich endowment of natural resources, including considerable deposits of crude oil, natural gas, tin, copper, coal and gold. Indonesias prolific petrochemical production ranks it seventh for natural gas exports in the world. The country is the worlds second largest producer of tin and nickel and the worlds fourth

and India and has the largest economy in Southeast Asia.

inDonesias natural resourCes:
Petroleum Tin Natural gas Nickel Cobalt Bauxite Copper Zinc Coal Gold Silver Lead
n By LEs LIE RICh ARDs ON www.microcapreview.com
largest copper producer, according to the U.S. Geological Survey (USGS). Indonesias mining industry accounted for 10.8% of the countrys GDP in 2009 and minerals and related products contributed to one-fifth of its total exports. With an increase in both the global economy and commodity prices, Indonesia is well positioned to capitalize on its rich natural resources. Until recently, there has been limited investment in Indonesia, particularly in green field projects, primarily due to high level of corruptions, inadequate infrastructure
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and uncertain regulations. However, with new initiatives, regulations and increased commitment to improve infrastructure, the countrys mining industry has entered a period of rapid growth. As new roads and bridges are constructed the undeveloped parts of the country that contain much of the vast natural resources and are difficult to access will become easily reachable over the next decade. Research and Markets Indonesias Mining Report Q1 2011 report forecasted that the industry will reach US $149.8 billion in 2015, for an average annual growth rate of 11.5%. Copper, coal and gold production are predicted to experience the strongest growth at 15% per year. Foreigners have taken notice and have been increasing their investments in developing the vast natural resources that abound in Indonesia. In the first quarter of 2011, foreign investment increased 11.6% to $4.6 billion, with a quarter of that going into funding 79 mining projects. The Indonesian government anticipates foreigners will invest $3.2 billion in the mining sector for the full year 2011 in an effort to capitalize on the increase in demand for global commodities. Foreign investment is expected to continue increasing as the government works on improving the countrys regulation framework. As a result of the countrys strengthening regulatory and economic environment, Indonesia was recently upgrade by Fitch and Moodys ratings agencies, which lifted their sovereign rating to one notch below investment grade. Furthermore, an executive at Fitch Ratings commented that the country could reach investment grade by early 2012 citing the countrys economic resilience, recent improvement in external liquidity and strengthening fiscal solvency measured by declining public debt ratios as catalysts for the upgrade.
est coal miners Kaltim Prima Coal (KPC) and Arutmin. Adaro Energy (JK: ARDO) is Indonesias second largest thermal coal producer and operates the largest single coal mine in the country. State-owned PT Timah Tbk is the worlds largest integrated tin mining company. It is the tin-rich Bangka regions biggest operator, followed by PT Koba Tin. Top foreign miners in Indonesia are Newmont Mining (NYSE:NEM) and Freeport McMoRan Copper & G (NYSE:FCX).
Coal
Indonesia is the second largest coal supplier to the world market after Australia and ranks seventh in terms of production. The country exports coal to countries such as India, Korea, Taiwan, Japan, EU, US and China. Indonesia is expected to lead global growth in thermal coal exports over the next decade with producers Bumi Resources and Adaro Energy predicted to become two of the top three coal exporting companies worldwide by 2015, according to Wood Mackenzie, an energy consultancy firm. Growth in Indonesias coal output over the next five years is expected to be driven by expansion from the countrys top 10 miners that make up about two-thirds of the countrys production. Wood Mackenzie has also stated that six of the 10 largest mine expansions globally will be in Indonesia and predicts that Indonesia will make up 39% of global increases in coal exports, followed by Australia at 36% of export growth. The growth in Indonesias coal exports reflects the coal industrys ability to respond to the rapid increase in demand for thermal coal. As an archipelago of over 17,000 islands, a significant proportion of coal transport in Indonesia is water based, which enables for coal to be transported along rivers via barges to the open sea for loading onto greater vessels. Coal resources in Indonesia are scattered in a number of large islands including Sumatra, Kalimantan, Java, Sulawesi and Papua. In particular, Sumatra

and Kalimantan are noted for having the largest reserves. Indonesian coal is very suitable to fuel power plants as the low sulfur content means it does not cause much pollution. Indonesias coal export growth is expected to be fueled in large part by China and India, where greater power demand is predicted to drive growth in use of coal significantly over the next five years. India is set to surpass Japan to be the top importer of Indonesian coal with estimates that the country will import up to 60 million tons in 2011 and up to 90 million tons in 2013. Chinese coal imports could more than double by 2015 to 200 million tons from around 90 million tons in 2011, according to Noble Group. By 2020, Indonesias annual production is predicted to be above 500 million tons for an increase of over 50% from production in 2010 of 320 million tons. The surge in Indonesias coal production will require significant investment, particularly as newer mines move farther inland.
inDia investing in inDonesia Coal

India is ramping up its investment in Indonesia in an effort to secure energy and minerals supplies to ensure it keep its economy fully powered up. Indias investments in Indonesia began picking up pace in 2007, when Tata Power Co. (BOM: 500400) paid $1.3 billion for 30% stakes in two large coal mines run by PT Bumi Resources. More recently, Indian conglomerates Reliance ADA Group and the Essar Group and Coal India (BOM: 533278) are among companies that expanding their interests in Indonesia to feed their power stations. Reliance ADA Group plans to invest between US$5 billion and US$10 billion in Indonesias mining infrastructure and Essar Group has agreed to buy the Aries coal mines in Indonesia for $200 million. Essar Group stated that it is also looking at development in oil and gas, power plants and coal-bed methane projects in Indonesia. Coal India, the largest coal
key Players
Indonesias mining sector is dominated by Bumi Resources (JK: BUMI), which owns Indonesias largest and fourth larg-
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A SNN INCORPORATED AND MICRO-CAP REVIEW MAGAZINE SURVEY

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q Alexandria Minerals q Ask Mr. Wallstreet q New BD Formulations & BD Withdrawal Summary q The Beltway Matters q Cambridge House q Captial Markets Visibility q Check Alt q Chestnut Petroleum q Compliance Corner q Concord Private Jet q DM Roth q The Decade for Debt Financing q EBD Group - BIOTECH Europe q The Future of Thorium as Nuclear Fuel q Globex q Gold Bullion q Hard Assets Summit q Hard Assets Investment Conference q Indonesia q MCR Crossword Puzzle q Marcum LLP q Mergent Investor Relations q Mines & Money q My View on How Gold is Perceived q NIBA q NOIC q Need a P.A.L. q News Releases q Northern Graphite q Oakmont Insurance q Ombudsman q One on One - Eric Sprott q Oswald & Yap q PRN/VF q Performing Due Diligence on a Micro-Cap Oil & Gas Co. q Pretium q Profit Planners q Q&A with Sprott Money on Gold-Silver-Metals q Rye Patch q SNN VPR q Should I Buy Gold or Gold Stocks q The Silver Companion q Small Broker Dealers - An Endangered Species q Soltoro q Sprott Money q Talk to Thousands of Active Investors in Real-Time q Tanzanias Next Gold Producer - Ruby Creek Resources q Technology & Oil Lead to Bonanza returns! q The Tiger Stops Roaring q USEG - Knocked down But Not Out q Understanding Gold: Why this Bubble is Nothing of the Sort q The Value of Social Media Applications q Wallstreet Chicken Episode 4 q Why Invest in Micro Cap Energy Companies
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1. As an investor, when do you increase your micro-cap portfolio q During Dow Jones 100 point declines q During Dow Jones over 250 point declines q During Dow Jones 100 point increases q During Dow Jones 250 point increases q I do not use the Dow Jones as a gauge for investment 3. Should micro-cap CEOs blog? q Yes q No 5. Besides the US market for micro-caps, what other markets do you follow for same? q Frankfurt q London q Mexico q Hong Kong q Other________________________________ 2. Which social network do you think a micro-cap CEO should use? q Twitter q Linked In q Facebook q Stumbleupon q None q As many as possible 4. Should micro-cap CEOs use email blasts? q Yes q No 6. Do you consider micro-cap stocks safe when the larger markets are achieving new lows? q Yes q No q I never consider micro-cap stocks safe q I invest in micro-caps only
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producing company in the world, is in talks to buy up to a 40% stake in Golden Energy Mines, a mining subsidiary of energy firm Dian Swastatika Sentosa (JAK:DSSA).
CoPPer anD golD

Indonesias copper deposits are gold-rich porphyry copper deposits which is typical of the islands of Southeast Asia. In 2010, the countrys copper production industry generated total revenue of $6.3 billion. The majority of Indonesias copper production comes from two major mines, the Grasberg and the Batu Hijau Copper-Gold Mines. The Grasberg Mine Complex, located in the province of Papua in Indonesia, is owned primarily by PT Freeport Indonesia, a subsidiary of Freeport-McMoRan. The property contains the largest recoverable reserves of copper and the largest single gold reserve in the world. Annual production from the Grasberg Mine is estimated at over 58,000,000 grams of gold; along with 600,000 tons of copper; and 170,000,000 grams of silver. The Batu Hijau open-pit Copper-Gold mine is located on the Sumbawa Island in Indonesia. It is owned by PT Newmont, a subsidiary of Newmont (45%), Nusa Tenggara Mining Corp. (35%), and PT Pukuafu Indah (20%). Indonesia is the seventh largest producer of gold in the world and the second largest producer in Asia. Over 70% of Indonesias production is generated as a by-product of copper mining at the Grasberg and Batu Hijau mines. While the United States Geologic Survey indicates that Indonesias total estimated gold reserves are approximately equivalent with those of the United States; in 2009, Indonesia produced less than half the total of gold compared with the United States. Located in East Java, Indonesia is the Tujuh Bukit project, a large gold-silver-copper system, with a gold-silver rich oxide cap, underlain by gold-silver-copper epithermal mineralization, with a potentially very large coppergold porphyry system at depth. Intrepid Mines Limited (ASX:IAU) has an 80% economic
interest in the Tujuh Bukit Project through a joint venture agreement with Indonesian company PT Indo Multi Niaga (PT IMN). The company estimates that the Tujuh Bukit project contains 8.8 billion pounds of copper and 14 million ounces of gold.
the new law is largely positive and globally competitive.
PolitiCal anD investMent risks

Indonesia is considered to have a stable economic outlook and be fundamentally sound. However, investment risks such as lack of infrastructure, allegation of corruptions and illegal mining remain a primary obstacle to attracting foreign investors. While the
governMent suPPorting eConoMiC DeveloPMent

In an effort to provide greater certainty for investment in its mining industry, in 2009, Indonesia reformed the industry by enacting a new law on mineral and coal mining which went into effect February 1, 2010. The law is intended to balance the interests of foreign investors wishing to invest in Indonesias highly lucrative mining industry with those of Indonesian nationals, wishing to ensure that a fair proportion of the wealth derived from the exploitation of Indonesias minerals is retained by Indonesians for the benefit of Indonesia. Under the 2009 law, regional governments will issue mining licenses instead of the central government. The law also reduced the lifespan of the new regulations to 20 years, down from the 40 years specified in the previous law, and requires miners to set aside 25% of their production for sale in Indonesia. The new mining law has created some controversy regarding the benefits for supporting the long-term growth of the industry. Standard & Poors Ratings Services issued a report stating that the regulatory overhaul of Indonesias mining industry would hurt companies performance citing increased operating costs, possible delays in awarding mining licenses because of decentralized decision-making and requirements for greater domestic processing as factors that could weight on profits. Complaints of a severe bottleneck in mining license issuance have been reported, despite the new mining laws aimed at increasing efficiency. Even with the complaints that the new mining laws will stymie growth in the sector, Wood Mackenzie says Indonesia is relatively well-placed to attract investment and others industry players have commented that

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government is making a continued effort to improve the countrys business environment, including spending up to $34 billion to build roads, ports and power plants by 2017, many have been disappointed at the slow pace of the governments promotion of economic reforms and cracking down on corruption and illegal mining. Additionally, offsetting the pro-investment regulation reform nationally are immature local governments that can increase investment burdens, often through opaque measures, and fuel the perceptions of risk.
junior Mining CoMPany Plays

Southern Arc (CVE: SA) was the first Canadian junior exploration company since the 1997 Asian economic crisis to return to Indonesia. Southern Arcs key exploration region is the Sunda-Banda magmatic arc stretching across the islands of southern Indonesia. The company has currently assembled a portfolio of four projects on the islands of Lombok and Sumbawa. Southern Arc has identified and continues to identify new gold prospects and increased the potential size and grade of known prospects by
diamond drilling, surface and trench sampling, and geological mapping. Challenger Deep Resources Corp (CVE: CDE) is an Alberta-based junior miner focused exclusively on coal in Indonesia, specifically in East Kalimantan. The Company has assembled an experienced team to pursue the identification, acquisition and exploration of coal prospects in the region. Through its wholly owned subsidiary, PT Bestindo Energy, the company has recently completed its first acquisition of the Tabang Project. Intrepid Mines (ASX: IAU) is an international precious metals development and exploration company with primary operations in Indonesia. It operates the Tujuh Bukit exploration activity which is funded under a joint venture alliance in respect of the Tujuh Bukit gold-silver-copper project in eastern Java, Indonesia. Kalimantan Gold Corporation Limited (CVE: KLG) is a Canada-based company focused on gold, coal and copper projects in Indonesia with exploration rights in East and Central Kalimantan. Pan Asia Corporation Ltd (ASX: PZC) is an Australia-based company engaged in the exploration and development of resources in

Indonesia. During the fiscal year 2009/2010, the Company entered into an agreement to acquire Innovation West Pty Ltd which holds a number of thermal coal assets. East Asia Minerals Corporation (CVE: EAS) is a Canada-based mineral exploration company with gold and copper exploration properties in Indonesia. The Company has a 70-85% interest in six advanced gold and gold-copper properties located in Aceh Province, Sumatra, and Sangihe Island, North Sulawesi. Kingsrose Mining Limited (ASX: KRM), is an Australia-based company that specializes in high grade, narrow vein underground gold mining. The company owns 85% of PT Natarang Mining, an Indonesian company holding a contract of work with the Indonesian government covering 10,540 hectares of prospective ground centered on the Way Linggo mine. The mine produced close to 27,000 ounces of gold in 2010-11 and is yielding 15 grams of gold from each tonne of ore mined. Bligh Mining Pty Ltd is an Australian company established to investigate and develop mineral mining opportunities in Indonesia. Bligh Mining is registered private company and plans to have an Initial Public Offer (IPO) on the Australian Securities Exchange (ASX) by the end of 2011. Bligh Mining has acquired operational licenses over two projects on the Indonesian island of Flores, both considered highly prospective for base metal and manganese, the PT Manggarai Manganese and base metal tenement in the East Manggarai Regency and the PT Tamarindo Karya Manganese and base metal tenement in Central Manggarai Regency. n
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p ROFILED COmpANIEs
Chestnut Petroleum
how Chestnut Petroleum continues to forge a strategy to satisfy the demand for energy.
tarting in the mid-19th century, the first one hundred years of the petroleum industry in the United States were marked by huge discoveries of oil that numbered in the billions of barrels. These early discoveries and the development of petroleum refining techniques provided the nation with an economically abundant energy source that went a long way in meeting its energy needs.
Today, however, the picture of domestic energy production is significantly different. Over the years, U.S. energy demands have steadily increased, and new big oil and natural gas discoveries are exceedingly rare. An estimated 90% of the oil produced today comes from fields more than 20 years old; 70% comes from fields more than 30 years old. Far from only being a domestic issue, demand for energy continues to surge worldwide. Therefore, to continue to buffer and diminish the nations reliance on energy imports, every drop of domestic oil and natural gas produced today puts the U.S. one step closer to energy independence. While the major petroleum producers can assume larger risks and expenses related to developing new sources of oil and natural gas in unproven, unconventional fields, smaller independent producers will continue to aggressively pursue ways to maximize domestic production in older, established fields. Securing proven oil and natural gas reserves in developed, producing acreage has opened up tremendous investment opportunities because future energy demands will undoubtedly increase as supply inevitably shrinks, forcing the value of recoverable oil and gas higher and higher. There is an old adage in the oil business that goes, The best place to find oil is in an oil field. While the message is exceedingly and almost jokingly simplistic, its truth illustrates how most domestic oil and natural gas development companies identify opportunity, deploy capital and build value in older oil fields throughout the United States. Many smaller, independent producers have benefited greatly from drilling new wells and re-entering old wells in proven fields that major producers no longer find economically sustainable in their business model. One such company that looks for oil and natural gas where they know they will find it is Chestnut Petroleum, Inc., a pri
ESTABLISHED. SELECTIVE. COMMITTED.

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n By LAu RA p u CKETT
vately owned owner-operator based out of Richardson, Texas. Chestnut Petroleum follows a philosophy of buying smart, managing costs and improving productiona no-nonsense approach to asset management that drives its ability to create value throughout all of its operations. Over the past 17 years, Chestnut Petroleum has quietly built a reputation for uncovering and maximizing production potential through the acquisition and development of small, multi-well properties in well-established fields. This is the sweet spot of energy investingwhere smart infusions of capital backed by a proven track record of success set the stage for sustaining a propertys cash flow potential and building wealth through investing in energy. Led by third-generation oilman Mark A. Plummer, Chestnut Petroleum invests its efforts in established fields that not only have been steadily producing hydrocarbons for decades but in fields where the companys inhouse staff of geologists, geophysicists, drilling engineers and production engineers have intimate, first-hand knowledge. Chestnut Petroleums management and operations teams have been involved in the drilling and ongoing operations of hundreds of wells and can speak from experience on the geological and mechanical risks involved with each well project. The company leverages this knowledge to mitigate development risk to enhance each projects return potential.
For over 18 years, The Chestnut Group of Companies has followed a philosophy of buying smart,
managing costs, and improving productiona no-nonsense approach to asset management that drives the ability to create value throughout all of its operations. The Chestnut Group of Companies prides itself
Many of Chestnut Petroleums properties include offsetting proven undeveloped drilling sites as well as recompletion and re-entry projects. Timelines for development vary by property; however, the companys development schedules include both short-term and long-term project initiatives. A prime example of Chestnut Petroleums passion for the pursuit of oil and natural gas production is an ongoing field development project in the GillisEnglish Bayou production fairway of Calcasieu Parish, approximately 10 miles north of Lake Charles, Louisiana. In early 2011, Chestnut Petroleum began a two well drilling project in the GillisEnglish Bayou field. This acreage, which the company acquired in 1994, is located in an area of the field that was discovered by Texaco and Sun Oil in 1961 and has produced an estimated 10 million barrels of oil and 136 million mcf (thousand standard cubic feet) of natural gas to date. In addition to the fields oil and natural gas production potential, Texaco and Sun Oil actively pursued a twenty-plus-year gas injection program that pumped over 85 million mcf of natural gas into the field in order to enhance oil recovery. After careful due diligence, Chestnut Petroleum selected the two drilling locations to target the areas of the field where remaining injection gas and the associated oil may be captured. According to Plummer, This twowell project fits perfectly into our strategy of aggressively developing energy assets throughout all of our leases. Drilling in this area was especially attractive for a couple different reasons. First, we know oil and gas is present because of our past successes in this field. Second, our analysis and due diligence show us the opportunity to recover additional natural gas that Texaco and Sun Oil pumped into the ground over the course of twenty years. It just takes capital commitment and know-how to benefit from these types of opportunities. Drilling of the first well has been completed, coming online in July 2011, and
operations are ongoing in preparation to drill the second well. With a strong foundation of experience as a savvy owner-operator, Chestnut Petroleum uses its expertise to pursue a wide range of energy-related investment opportunities. Over the next twelve to eighteen months, the company plans to conduct multiple drilling projects on its South Texas acreage in Jackson County, its East Texas acreage in Cherokee County, and additional drilling and rework projects in Calcasieu Parish, Louisiana. In addition to its drilling and rework projects, the company has had tremendous success in structuring investment portfolios designed to deliver consistent cash flow driven by both non-operated working interest ownership and royalty ownership. The company anticipates pursuing a production acquisition project in 2011. Chestnut Petroleum is also in the process of launching a drilling services company, which will allow the company to better control its well development costs. Once in place, the drilling services company will deliver additional profit potential throughout Chestnuts own operations as well as through providing drilling services to other oil and gas companies looking to capitalize on opportunities in Chestnuts areas of operations. A registered professional engineer with nearly thirty years of oil and natural gas production engineering and exploration experience, Mark A. Plummer founded Chestnut Petroleum, Inc., in 1994 as an independent oil and natural gas company and operator of many of Chestnuts wells. In 2003, Chestnut Energy Partners, Inc., a FINRA-registered broker-dealer, was formed as the exclusive broker-dealer and placement agent for Chestnuts many offerings. Rounding out the Chestnut Group of Companies, Chestnut Exploration, Inc. was established in 2006 as an energy and natural resources company and acts as the general partner for Chestnuts projects. This integrated business model provides the Chestnut Group of Companies

unique industry advantages, such as firsthand knowledge of the oil and natural gas industry, expert in-house assessment capability and experienced oversight for each of its energy development projects. The companys portfolio of assets currently encompasses interest ownership in 345 wells throughout four states in the following fields: GillisEnglish Bayou Unit, Calcasieu Parish, Louisiana; East Texas Field, Gregg County, Texas; Signal Hill East Unit, Long Beach, California; Hardeman County, Texas; Barnett Shale, Hood & Tarrant Counties, Texas; Lea County, New Mexico; and Eliasville Field, Texas. While some of these wells are 100% held by the company, many are owned in partnership ventures. The combined monthly production of portfolio wells exceeds 26,000 barrels of oil and 90,000 mcf of natural gas. While there are no absolute guarantees in the oil field, there are some common sense certainties that stand out that make owning producing oil and gas properties a smart move. In the years ahead, there is no doubt that oil prices will continue to fluctuate as they always have. Common sense shows, however, that prices will inevitably be forced higher and higher by ever-shrinking supply and continually increasing demand. In addition, a sharper focus on developing more sources of oil and natural gas in the United States is critically neededbrought on by the ongoing instability in the Middle East and the rapid growth of Asian economies. While the giant oil companies drive the push to develop new oil supplies, Chestnut Petroleum will continue to focus on acquiring and developing smaller, multi-well properties throughout its core areas of operations. Building on its seventeen years of success, the company will continue to apply its operational expertise to increase production potential and build wealth for its equity partners. As Plummer says, Theres no better time than now to buy producing oil and natural gas properties. n
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Should I buy gold or gold stocks?

S
ome people came to my home for dinner one evening and they asked one of the most popular question asked of me, What is the difference between owning physical gold and gold stocks. My first advice to my friends is it is important that when you invest that you only invest within your comfort zone where when you go to sleep at night you can sleep soundly. The difference between owning gold and gold stocks is vast. Gold will give you an edge against inflation or the money printing which most governments are partaking in. When President Nixon debased our currency from gold completely it allowed as much money printing as our government wishes to do which causes inflation leading to higher prices; as inflation occurs the price of gold will rise. I have always seen gold as a simple way to say real wealth as gold is real wealth I never looked at the price I purchased nor have I ever traded my gold since I consider myself a terrible timer and I did not ever want to be a Sold Out Bull having and owning real wealth. The best investment I have made throughout my life has been simple and carefree and that is just buying gold on a regular bases and putting it away; not only has this investment paid off well financially it has given me the security that I can travel anywhere in the world and barter for the necessities of life; it is easier to sell a piece of gold than a painting of great value or a piece of jewelry as I can go into a bank see the price of gold for the day and make the trade for a currency I may need. I could surely trade and carry a piece of gold much easier than a valuable piece of art. I have always found gold stocks of great interest however as an investor you must understand gold stocks can give you a great deal of leverage in your investment portfolio owning gold stocks is not owning gold. When the price of gold goes up generally gold stocks will also rise in price however there are times when the price of gold goes up and if there is a sell off in the market gold stocks can also go down since gold stocks are stocks and certainly will fluctuate with the markets. Gold stocks can fall into three different categories a Senior/ Major which is a producer, as Junior which will become a producer after acquiring the proper permits which takes time and build
ing the infrastructure to build a producing mine open pit or underground. The last category is an exploration company which can give you the most leverage and can be the most frustrating giving the greatest reward which is the exploration mines; as management within these generally small companies seek out potential property to drill and discover gold these are also the companies which larger gold mining companies seek to buy to increase their reserves in order to continue to produce. Before investing in any company it is a good idea to set your goals as to exactly the amount of leverage you are seeking; check out management, where their property or projects are located their share structure and of course the amount of money they have to operate with as large amounts of money is needed for equipment, ongoing reports and skilled labor which is hard to find. You should consider calling up management from a company you are interested in to ask some basic questions about their drill programs and background of their geologists who determine the drill program Speaking to someone in the company not only can give you valued information about the company you are thinking of investing in but give you general information about the industry which I have always found of value. Generally mining companies are very happy to speak to investors and take the time to answer all questions. Good Luck & Happy Investing! n
n By LAu RA s TEIN
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69
Understanding Gold
Why This Bubble Is Nothing Of The Sort
s far as we know, gold was first mined by the Egyptians over 5,000 years ago. Presumably, its first appeal was simply that it was shiny - but gradually, the wealth of applications for which gold is suitable have revealed themselves. Gold is the most emotional of investment assets. Ever since those early days, it has captivated man and preserved a value that many fail to understand. The point is moot. Whether you understand why an ounce of a particular metal is worth $1700 to someone or not doesnt matter; there will always be someone willing to take your ounce of gold from you at the market price. At every juncture of golds inexorable 11-year rise, those who dont understand the reasons WHY gold is climbing relentlessly higher, call it a bubble and warn of a major correction and the end of the bull run; but so far they have been hopelessly wrong. The reason is that they dont understand the powerful forces behind golds remorse-
less appreciation. They apply standard investment metrics to an asset and assume that what goes up, must come down. While ultimately this is, of course, correct, the level from which gold will eventually come down is likely to be significantly higher than where we see it today. According to an article in National Geographic Magazine, only 161,000 tons of gold has ever been mined - enough to barely fill two Olympic-sized swimming pools - and more than half of that has been produced in the last 50 years. Today, new discoveries are rare, harder to access and the quality of the deposits is nowhere near the levels we saw in the days when gold could literally be picked up off the floor. In fact, the largest gold nugget ever found was the Welcome Stranger nugget, found just 3cm below the surface in Moliagul, Australia. It contained 72.02kg of pure gold. It fetched its finders 9,381. Today, it would sell for roughly $4.35 million dollars. That difference in price is part of the fundamental misunderstanding of golds
n By g RANT w ILLIAms
Source: Dollardaze
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Source: Bloomberg
function today as the anchor of the value mechanism by which society functions. In the intervening 142 years, the value of gold hasnt gone up; so much as the value of the monetary means of appraising it has gone down through a continuous process of devaluation and inflation. During that time, the same tired reasons to not own gold have been dragged out by those who call the top at every possible turn. In almost every negative assessment of gold, the leading edge of the argument goes something like this: Gold pays no dividends or interest and produces nothing Very true. It pays no interest and produces no dividends (and, while were at it, lets also point out that gold also costs money to store), but to answer these points, all one has to do is to look at two charts. Firstly, that of the purchasing power of the dollar versus the amount of dollars in circulation since 1971 when Nixon famously and foolishly ended the Bretton Woods-era peg to gold. Secondly, a look at the yield paid on US 10-year treasuries over the same period: After the inflation-fueled spike in both gold and interest rates in the late 1970s/ early 1980s, gold consolidated and spent a little over 20 years going sideways in a fairly stable range while the yield on US government securities fell steadily narrowing the gap between the non-interest-bearing yellow metal and its risk-free nemesis. Of course,
during that period of falling bond yields, inflation was doing its best to chip away at those headline yields to bring the differential even closer together. As gold has risen dramatically in price since the turn of the century, one could easily look at the chart represented here and claim that gold is in a bubble it sure looks like the chart of an asset in a bubble. But charts can be funny things. A look at a logarithmic chart of gold over those last 11 years presents a different case altogether: Nothing to see here folks. Move along. So, during that 11-year secular bull market in gold, how much of the global investment
pool has flooded into gold, inflating the bubble? Well, as it turns out, not much at all. In 1968, almost 5% of the worlds investible asset base was held in gold bullion. At the height of the gold bull market that peaked in 1980, a little fewer than 3% of that (admittedly much larger) pool had found its way to gold. But if we fast forward to 2010, we find that a staggering 0.7% of global financial assets are held in gold despite the explosion in vehicles such as ETFs which are expressly designed to make it easier to do so. But understanding the truth about why gold is soaring is the key to unlocking the bubble myth. The real reason why gold is not even approaching a bubble is that it is no longer just an investment, a store of wealth and an inflation hedge. Now, almost 40 years to the day since Richard M. Nixon closed the gold window and ended the Bretton Woods monetary system, gold is, once again, a currency. Not just that, but just about the only viable currency in existence. Every major fiat currency in the world (with the exception of the Swiss Franc) has made new lows against gold. The Euro and the Dollar are both now clearly flawed pieces of paper issued by essentially insolvent entities and the race to the bottom is well and truly on.
Source: Bloomberg
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Source: Bloomberg
In a recent edition of Things That Make You Go Hmmm.. I wrote at some length about the history of the dollar and posed the question of why the end of the fiat currency system and a return to a gold standard is such an incomprehensible idea to just about everyone: in the last 200 years, not only has the dollar actually been on a fixed standard of sorts (nearly always versus gold) for LONGER than it has floated or been purely fiat, but the changes between those systems have come, on average, roughly every 21 years with the last change being 38 years ago. When put in those terms, its surely not quite so hard to imagine something similar happening again? Clearly, the return of gold to the centre of the financial universe as an anchor to whatever new reserve currency emerges from the impending wreckage would provide a floor
to its value and, based on the fact that there is clearly only enough gold to underpin the massively inflated global monetary supply at far, far higher levels than currently quoted, my contention is that, far from being in a bubble, gold is just getting started on a journey that will re-establish it as the only sound money on the planet. But theres one more reason I expect gold to move considerably higher in the coming months and that reason is the worlds Central Banks. On September 26, 1999, The Washington Agreement was signed, restricting the total sales of gold to no more than 400 tonnes annually over the following five years for a group of mainly European Central Banks. The agreement was re-signed for another 5 years in 2004 with the limit being increased to 500 tonnes per year. Gold as % Of Reserves 74.7 71.7
Country 1 2 3 4 5 6 7 8 9 10 11
Source IMF
Gold (tonnes) 8,133.5 3,401 2,846.7 2,451.8 2,435.4 1,054.1 1,040.1 775.2 765.2 615.5 614.8
USA Germany IMF Italy France China Switzerland Russia Japan Netherlands India
As a consequence of these agreements, Central Banks had been selling their holdings steadily each year for 10 years until, in 2009; China spoiled the party by announcing they had almost doubled their reserves with on-market purchases. Chinas purchase of gold bullion in 2009 helped them diversify part of their rapidly depreciating hoard of dollars, but in terms of making a dent in either side of that particular swap it did very little indeed. As you can see from the table, despite doubling their holdings in 2009, China only has a paltry 1.7% of its reserves in gold. India - revealed as another voracious buyer of gold in the past 18 months - has a mere 7.1%, while Russia has been buying gold almost every month but still only holds 6.7% of its reserves in the barbarous relic. With the recent announcements of gold purchases by the Central Banks of Mexico, Thailand and South Korea, its clear that the custodians of sovereign wealth have become worried about the amount of paper assets they have accumulated and so they have joined the rush to physical gold. The thing about Central Banks is this: they are the largest holders of fiat currency on the planet and the least price-sensitive buyers of gold. Now that the fundamental shift from sellers to buyers has begun amongst them, you can count on the Central Banks foreshortening any meaningful fall in the gold price for quite some time. Bubble? I dont think so. Not yet. n
71.4 66.1 1.7 16.4 6.7 3.0 59.4 8.1
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My View on How Gold is Perceived in Various Different World Economies?

In my opinion, He Who Holds the Gold Makes the Rules.
You just have to go back to the De Gaulle time when France demanded Gold for US dollars to see the truth in this, he basically made the US change the rules and that was the start of the major perception change in the world view of the US Dollar. Right around 1971. Up until then the US dollar was backed by Gold, and the Middle Eastern oil exporters took US dollars for their oil, one resource (oil) effectively for another resource (gold) then with no Gold backing the US dollar just became another piece of paper, although backed by a very large and thriving economy. So they in part started buying the physical Gold in the market and through to 1980 the price of gold appreciated markedly all the way to $800 plus. Then the banks figured out they could sell forward positions in gold and became the conduit by which the gold companies could sell gold forward to the Middle Eastern buyers and raise the funds to get into production, this took the pressure off the physical market and you had a gradual downturn in the price of gold, the banks then decided to continue to sell forward positions but gear the situation to maybe as high as 10 to 1 therefore continuing the downturn in the price and borrow the physical from the
n By j Oh N p ERCIv AL
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Technology has changed the way mines and smelters work and I am sure the environmental problems can be addressed if given the chance.
Central Banks but in a much larger way. They also worked out a carry trade in which they borrowed a low rate of interest 1 to 2% from the Central Banks and sold the gold for funds to put into Government Treasuries at a higher interest rate such as 4 to 5% money for nothing and as the price continued to fall because of their selling borrowed physical they thought they could cover at lower prices. Obviously, this is no longer the case. This was all very profitable and had the backing of the US Government as they wanted to keep the US dollar strong, while the Europeans and US, essentially the West was prepared to lend the gold, but it all started to come unstuck with the emergence of China and India as very large powerhouses and purchases of physical Gold, over the past few years some of the outstanding short positions have had to be delivered as physical gold to the Middle Eastern buyers and other owners of the paper. This has meant a return to higher prices and it is just starting. Lets look at Australia and Canada which are both very similar but are small share markets on the World stage. They both I believe have a very good understanding of resources and the price of commodities. Both have currencies supported by their resource exports and will continue in my view to have strength against in particular the US Dollar. Gold and gold mining is in the blood of most in both countries and will continue to hold a pre-eminent position in the resource markets. The US is only starting to now recognize what made the county strong originally was resources, Energy, Oil and Agriculture. The basic share market has very little understanding of the resource market although the Oil and Gas areas are well covered due to the
enormous size of the market. Banking and the creation of paper profits has been the name of the game for the past few years but as evidenced by the debt position we now face the gravy train is coming to a very sticky end, although the banksters will live well in their ivory castles while the rest starve. There is technology which is still a world leader but without commodities like Rare Earths, minerals, oil, energy and so on there will be restricted opportunity here as well. In my opinion the United States of America is still one of the best resource countries in the world with the infrastructure necessary but the EPA, government and regulatory interference needs addressing otherwise others will control and own the best positions in resources for their use only. Gold and Silver mining as well as Copper are getting significant attention and should explode in coming years as the rules start to change and the Investment Community starts to invest in the MAJOR way which is only possible in the US. I am confident the opportunities in the USA in the resource sectors are some of the best in the world at present because they have been overlooked and put down by the Government, environmentalists etc for so long. Technology has changed the way mines and smelters work and I am sure the environmental problems can be addressed if given the chance. It would not be a surprise to see Gold and Silver mining being given a very strong boost by Government Agencies as they recognize the power of these basic world Commodities. Gold, Silver and Copper mining in my view will be star performers in coming years as the tide turns in favor of resources in the US. Coal and Gas will not be too far behind.

China, India and Russia for differing reasons but basically control and power will continue to purchase Gold and Silver as these metals are a protection against currency disruption. China has little gold and their population has been encouraged to save and buy, this is to build the overall holding of Gold against the US dollar and give some security. It has traditionally been a savior in times of peril and will remain so for the Chinese. The Government has been accumulating to spread their risk. India has always been the largest accumulator of Gold and as their vast middle class becomes more affluent they will continue to purchase and my expectation is that in the physical the tonnages purchased will continue to grow. Russia is also buying to increase their reserves. Europe has debt problems at present but the basic saving of Gold and Silver is alive and well. Europeans understand the value of Gold and Silver more than anyone and will continue to accumulate. Hope this gives some idea of where I think things are going, but the main thought is that we are only at the start of a strong advance in the value of Gold and Silver, no matter what currency you talk about. There will be hiccups on the way. There are differing views from many commentators but the Trend is your Friend and it is UP. n
John M.E. PERCIVAL Executive Director - Operations of Goldsearch Limited. Australia Has been involved in investment and merchant banking for over 25 years including 15 years as General Manager Investments for Barclays Bank New Zealand Limited. Has had extensive experience in stockbroking, corporate finance and investment management. Is a Director of Musgrave Minerals Limited. Australia On the Advisory boards of Gold Finder Explorations Limited (GFN.V) and Chief Consolidated Mining Co ( CFCM.PK)
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One on One Interview with Eric Sprott, Leading Money Manager and Investor, Sprott Money, Inc.
ric, your predictions on the state of the North American financial markets has been on the money, pardon the pun. Here we are, summer 2011, please share your near term predictions? Im not really one for short term predictions. We tend to take a long-term view on the markets and try to position ourselves in sectors that will survive and outperform. 1. Please share your long term predictions? I am a long term believer in precious metals bullion and precious metals equities. When I look back on the last ten years, its obvious that gold has been the place to be invested. Its outperformed virtually every other asset class. I strongly believe silver will be the investment of the next decade. 3. With more than $8.5 Billion US under your combined funds management, doesnt your opinion and actions move markets? I personally manage about half of that total amount. Weve built a unique team of portfolio managers here at Sprott, each of whom manages their own separate equity mandates. We certainly do have a strong presence in the small and mid-cap resource market and weve garnered a lot of success in that area over the past several decades. There tends to be an increased interest in a company after we get involved because investors appreciate the homework we perform before we invest in a new name. 4. The Sprott name in Canada is superfluous with dead on predictions and financial
insight, how do you view the United States financial condition? Weve written about the US debt situation before and remain concerned about the health of the US economy. The US Federal Reserve has used its easy money policy to prop up the US economy and at the same time, the US government has continued to run large budget deficits. This has resulted in a two-fold problem. The government has grown larger and the low interest environment is making it difficult for the saver to get an acceptable return. I do believe, looking back on this period, we will all acknowledge the glaring policy error in enforcing 0% interest rates. Theyve punished savers in order to save the system, but they havent addressed any of the underlying problems that got us here. I believe that difficulty will be reflected more clearly in the markets in the months ahead. 5. What advice would you give to an experienced investor in todays economy and why? Buy and hold investing is not dead you just have to own the right things. 6. Your criticism and global warnings about paper currencies are alarming and well known, what are your recommended alternatives to paper money? It is hard to buy milk with gold or silver. We have been believers that over time all fiat paper currencies lose their value. This has been a reason why we have been proponents of holding precious metals. Gold and
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History has taught us that all fiat currencies lose value over time. We have seen extreme examples where this happens over a relatively short time frame, like the Weimar Republic and more recently, Zimbabwe.
ourselves to protect from a very difficult market. Were now invested approximately 70% in gold and silver bullion and related equities in our long portfolios. Weve also increased our short exposure in our hedge funds over the past few months to protect from market declines. 12. If you could advise the leaders of the industrial world what would be your 3 key suggestions? 1) End the Fed 2) Downsize government 3) De-emphasize banking 13. Do you think the U.S will ever go back to some sort of gold standard? Gold is acting like the worlds reserve currency today. I dont know how the politicians will react to the dollars decline, but I do believe precious metals will continue to benefit from the uncertainty and act as a store of value for savers. n
Eric Sprott is Chairman of Sprott Inc., CEO, CIO and Senior Portfolio Manager of Sprott Asset Management LP and Chairman of Sprott Money Ltd. Eric has over 40 years of experience in the investment industry. He has been stunningly accurate in his predictions including foreseeing the current financial crisis. He chronicled the dangers of excessive leverage, as well as the bubbles the Fed was creating, while correctly forecasting the tragic collapse of the housing and financial markets in 2008. Erics predictions on the state of the North American financial markets as well as macroeconomic analysis have been presented in a monthly investment strategy newsletter entitled Markets at a Glance. After earning his designation as a chartered accountant, Eric entered the investment industry as a research analyst at Merrill Lynch and Company Inc. In 1981, he founded Sprott Securities (now called Cormark Securities Inc.), which today is one of Canadas largest independently owned institutional brokerage firms. After establishing Sprott Asset Management LP. in December 2001 as a separate entity, Eric divested his entire ownership of Sprott Securities to its employees. Erics investment abilities are well represented in his track record in managing the Sprott Hedge Fund LP, Sprott Hedge Fund LP II, Sprott Bull/Bear RSP Fund, Sprott Offshore Funds, Sprott Canadian Equity Fund, and Sprott Managed Accounts. Since its inception Sprott Money Ltd. has prided itself on superior customer relations, providing its clients with only the highest quality bullion products in addition delivering them discreetly and on time. More information on Sprott Money can be found at www. sprottmoney.com www.microcapreview.com
silver serve as a store of value. Precious metals equities are also winners in this scenario as their profitability is fueled by precious metal prices. Gold was around $250/oz in 2000 and it is now worth just over $1600/oz. You were able to convert your money to gold ten years ago, and you are able to convert your gold to money today. 7. The US debt will only get worse in the foreseeable future, US investors should hedge this inevitability, and what do you recommend? Ive recommended owning precious metals and hedge funds which hedge. A hedge fund, when structured properly, can offer protection from market declines. We launched our hedge fund back in 2000 when we recognized the market was going to turn, and we havent looked back. In our view, were still in the midst of a long-term secular bear market for equities. The hedge fund structure offers far more flexibility to protect wealth in this type of environment. 8. Being a student of history what historical events have contributed to your current insight regarding the world economy? And do you see history repeating itself? History has taught us that all fiat currencies lose value over time. We have seen extreme examples where this happens over a relatively short time frame, like the Weimar Republic and more recently, Zimbabwe. While I do see a lot of similarities with past events, the situation with the US dollar is slightly different due to the US dollars reserve currency status. Many emerg-
ing market countries still desperately need the US consumer to purchase their goods. Theres no question that were in a different environment today, one thats dictated more by government-induced liquidity than anything fundamental. It will be a tougher market for investors to navigate with plenty of bumps along the road. 9. What would you recommend investors to study and monitor in developing their own personal financial strategies? Follow the earnings. Earnings drive equity valuations. I also believe investors should take note of commodity price fluctuations. A 20% move in an underlying commodity will change the business of the companies that produce it. The market doesnt always react to these changes consistently, and investors can reap the rewards if they act appropriately. 10. Everyone has a mentor or guru and many think of you that way. Who is your business guru? I have tremendous respect for many market thinkers today. A few names that come to mind are Ian Gordon, Marc Faber, Meredith Whitney, Nouriel Roubini, James Turk and Frank Veneroso, to name a few. 11. As debt increases globally and inflation rears its ugly head and gold, silver and precious metals continue to appreciate, is this the perfect storm and is Sprott Funds in the right place at the right time? I would think we would do extremely well in that scenario. Weve certainly positioned

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The Silver Companion!

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eflecting on the long journey I have walked with silver, commencing more than 40 years ago when Lyndon Johnson and the banksters turned our beautiful silver coins into subway slugs of pot metal, broke their promise to redeem my hard-earned Silver Certificate dollars for the real thing, and then shoved an Army draft card into my stern-bearings, I wonder if silver were actually the best companion a free man or woman could have. Silver can sure break your heart. In the 1980s it crashed to just 10 percent of its peak price in January of 1980. Story back then was, Kodak had found a way to replace silver in photographic film. Who knew they were fibbing? Who knew, back in 1979, that the U.S. Government would unleash nearly 2 billion ounces of the poor mans gold on the market, auctioned to the bullion banks to suppress silvers price in order to head off the assault on the U$ Dollar and bankrupt the legendary Hunt Brothers of Texas, who were leading that charge? Contrary to popular myth, the Hunts never attempted to corner the silver markets: they merely asked the exchanges to play by the rules and make good on their promises of delivery which the Hunts had paid upfront for. And for that the Treasury and the Fed changed the exchange rules and crushed them, because the sellers, mainly brokers and bullion banks, had no silver for delivery it was all just paper nonsense. And paper nonsense it remains today. No other exchange-traded metal or commodity trades at such an absurd ratio of paper overhang to physical supply as does silver. The paper-trades in silver equate to nearly a years worth of physical supply, but yet theres less than a few weeks physical silver supply backing those trades languishing in the warehouses of the exchanges. So has silver been a good companion? Well, consider the gas station in Oregon that in the summer of 2011 was selling gasoline for 20 cents per gallon provided it was paid for in pre-1964 U.S. silver coins! We obsess over much about the short-term price gyrations of silver. Over the long haul silver has served us well and will continue to do so. However, to predict where is silver going in the next 90 days is a fools errand. I quote a friend and one of the worlds most reputable analysts of the metals markets, in response to my question about where

he thought prices were going. Here is his answer, from a May 6 email: I think prices could consolidate briefly above 32, then fall to around 28 later in May, then rise back in late June, before falling to around $26 in July and August. Specific enough? So there you have it. Even the brightest bulbs in the tree havent a clue. And yet he could still be right. As I write this, on July 20th for publication a few months hence, who knows what August, September and October might bring? My late dear friend and mentor Paul Sarnoff, who wrote some 30 books on investing and wrote, most importantly for our conversation, Silver Bulls: The Great Silver Boom and Bust in 1980 (Arlington House:1980) had a ring-side seat on the silver markets. Paul used to joke: Analysts dont have crystal balls. We just walk like it. But even Paul ignored his own quip, and soon after the monster crash from $50 to $10.88 in the silver price, he gleefully predicted, Eighty in the 80s for silver. He was wrong; silver would dive to below $5 in that decade and stay there for nearly 20 years before encroaching upon a price half that much actually in real dollars a quarter of it. Would that Paul and his delightful wife Lucy be around today, to see the silver renaissance, they would be chuckling, as they always did when they were together. Ill be thinking of Paul and Lucy when, next time in Oregon, I fill my empty gas tank all the way up with a half-pocketful of twelve quarters, three bucks in real American change, far less than the current cost of a gallon. Yes, silver has been a good partner on this journey. n
n By DAv ID BOND www.microcapreview.com
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Q&A with Larissa Sprott on Precious Metals Including Gold and Silver Investing
What are the benefits, if any, for an investor to buy gold or silver rather than stock in a gold or silver stock? I believe physical gold and silver are the ultimate perseveration of wealth in uncertain economic times. Stocks are very liquid in a normal market. When the market is crashing however, stock prices can drop quickly, making it difficult to sell stocks at a reasonable price. In the event of a market downturn, the best way protect your money is by holding gold and silver physical bullion. Is there a difference in gold or silver quality specifications when purchasing gold or silver? What quality should an investor purchase? Sprott Money only buys and sells investment grade bullion that is atleast 99.9% pure and ISO certified. We offer our clients a variety of products in a range of prices so that they can find a option that best suits their bullion needs. The products we carry are manufactured by highly-recognized private refineries such as Johnson Matthey or issued by the government through the Royal Canadian Mint or the US Mint. The public is concerned about fake bars, how does an investor protect themselves? Always buy your bullion from a reputable bullion dealer. Many of our gold and silver bar offerings are stamped with a registration number for further assurance. What are the steps necessary for an investor to both purchase and take delivery of metals? We strive to make purchasing bullion as easy, fast, and safe as possible. Clients can place their order with real-time pricing online at www.sprottmoney.com or over the phone at 1-888-861-0775. We then ship the order by insured courier within 72 hours of receiving payment. If an investor in metals wants to sell a portion of his physical position, how is it done? Selling to Sprott Money is as easy as buy
ing from us. We actively buy investmentgrade precious metals. Give us a call at 1-888-861-0775, and one of our sales associates would be happy to provide you with our current buy prices. What are some rules of thumb to follow when purchasing metals? Aside from buy low and sell high?! First and foremost, dont be afraid to ask questions. There are so many fine details surrounding purchasing in the physical bullion market. For starters, inquire about the purity of the bullion that you are purchasing. Investors may be unaware that investment grade gold and silver bullion is .999+. Investment grade bullion is more liquid than coins and bars with lower purity. We strive to create a two way, liquid bullion market. So whatever you purchase from us, we will gladly buy back in the future. Also be aware that all bullion dealers will charge a slight premium over the spot price. Be sure to ask if there are any hidden service or administration fees above and beyond the premium on the bullion. Lastly, you should know that gold and silver bars generally garner a lower premium than coins. There is no right bullion to purchase; its all about your personal preference. What is unique about Sprott Money pricing? One feature that is unique about the
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mendations. I can tell you is that a large portion of my own personal portfolio is invested in physical bullion and hedge funds, and it will continue to be for the long term. (I am not a short-term investor) In the event of a market downturn, I want my portfolio to be protected and I feel the best way to do so is to hold physical bullion and avoid paper certificates. Also invest in a hedge fund that has a net short position and keep a generous cash reserve. That is the strategy that protected me in 2008 and I believe it will be the prudent asset allocation for me going forward. Sprott Money is sponsoring the GATA conference in London in August. Can you please explain the importance of this? We have been a proud supporter of GATA for many years and will continue to be in the future. I think there is absolute validity to their findings and research. Investors should have the right to purchase bullion on a fair and level playing field. I admire GATA for having the courage to speak out and expose the incongruities in the gold and silver market. What is the most important thing you have learned from your father to be as successful as you are in Sprott Money? I learn lessons from him every day! But I think the most important lessons are to work hard, be honest and learn from your mistakes. It has been an absolute privilege working with my father. He had the faith and confidence in me to run Sprott Money and I would like to thank him for that.
Sprott Money business model is that we offer real time market pricing. Most competitors have a 15 minute time delay. Given the volatility of the commodity market, one could imagine that a pricing delay of this nature could end up adversely affecting the consumer. We want to give our clients the opportunity to capture real time, live market prices at a competitive premium. What has caused the prices of silver and gold to appreciate at the rate they have? Its simple economics. When demand increases and supply decreases this puts pressure on the price. I can only speak from my own experience, but I have seen 6 8 week delays in the delivery of product from various government and private mints. Any delay in the supply chain will inevitably cause an increase in price. I think the increased demand for bullion comes from growing uncertainty in the economy, a loss of confidence in the dollar and the sovereign debt crisis in Europe. Gold and silver have historically held their value
and have never gone to zero; I cant say the same for paper currencies. Is there a real or perceived shortage of gold and silver supply? When a major government mint tells you there is no inventory whatsoever and please dont call back for at least a month thats not a perceived shortage thats real. Unfortunately, I have seen this happen many times. Thankfully we carry large reserves at our depositories in the event of shortages. Unlike our competitors, we do not sell what we do not have in stock. This is a cornerstone of our business model. Far too often I hear about our competitors selling product that they dont have in stock and the client has to wait upwards of 6 months for delivery. Thats not fair or just. Do you have any recommendations for the near and long term future for metal investors? I am not an investment advisor any more so I cannot provide any investment recom
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PRESS RELEASES? Looking Into the Numbers.

here are many questions to be asked when I consider buying a junior resource companys stock. With so many juniors to choose from and seemingly each with a convincing story to be heard, it is essential for me to ask questions to gather the facts. As an exploration and past mine geologist, I have developed 5 categories of questions that I use in my investigation of a companys story with a geology focus; the fundamentals for me. However, any consideration of a companys fitness for my portfolio goes beyond geology. I need to know how does the geology lead into the multi-faceted challenges that face any company in bringing a defined resource into a producing mine. Can the company or successor navigate this property into a mine. All other questions
are examined in this light. Can the project ultimately become a mine. One particular indicator I look for is how much technical information is included in the companys press releases and on their public web site. It takes work to go to sedar. com to read the geology (or any) portion of a NI 34-101 to assess this, so ultimately weight is put on the information in a companys press releases and related supporting data on their website. It is important for me to look as closely as I can at the published information from a company, looking for red flags to inform my choice. Does the company have a website? I figure a company has an obligation to keep me informed with whatever data they have; this is essential stuff to me as a shareholder. Function rules form in website design for
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me; I am satisfied initially only to have links to the companys SEDAR or EDGAR filings. Then I can digest the filed information more conveniently. Ultimately, a companys website is a measure of the quality of the company: its people and their asset(s). I could care less about how pretty the website is; I am looking for transparency and that comes in the form of facts data that is easily found. So, what about red flags? If the data is available, how does the information in any press release from a company match whats in the data? This is where worth and value begins to take on meaning for me. One consideration is this, how is the company reporting (calculating) weighted average intercepts in length and grade? Grade and interval length are common features in news releases that are read with more than passing interest. How this information is formed, and calculated, should be clearly stated in the news release, or easily found in the supporting documents on the companys website. It matters. If this information is not clearly evident then I want to see the assay logs from which the interval weighted average is calculated. If this data is not available then this is a red flag for me. Why is this information behind a veil? This scenario played out for me recently when a friend asked about a certain mining company. It turned out that I held the same companys shares. I purchased them several months back after I took an initial cursory look at the companys website and public filings. I satisfied myself that there was potential in their project and took a small position. They reported long, near surface intercepts of open pit grades, with highergrade intercepts and visible gold. Because the company was a topic of conversation, I decided to look more closely into the companys published data to better understand what the company had. Fortunately, they published their drill results in cross section. What I found was one hole reported a weighted average intercept of ~0.5 g/t over 150 meters. This included 60 meters above their cut-off grade, and 90
meters below the cut-off grade (essentially barren material) in the 150 meter calculated weighted average. Another hole reported ~0.6 g/t over 125 meters. This included 40 intervals (meters) above the cut-off (some individual assays of high-grade rock over short intervals) and a full 85 meters of barren rock. All I could do was shake my head. Open pit mines are mined in the horizontal, one bench at a time. Barren rock does not make a mine and although the average calculation is accurate, to my eye it did not represent the continuous grades in the rock required to make an open pit mine. The reported average grade over the given intercept length was only possible because of clusters of higher-grade rock averaged out over not insignificant lengths of barren rock. This was a major red flag. I took this information and sold my shares at a modest loss. In this case a cursory look had a cost for me and is reminder to be more vigilant and thorough. Another instance where assay logs played a major role in my decision to buy shares concerns a placer in Tanzania. This placer has been a personal interest of mine for several years and I am a current shareholder. It was not until the previous owner published a table of independently generated assays, over regular intervals of ALL the pits dug, that I judged this placer did indeed have the potential to be something special. To my satisfaction the potential was BIG. I increased my position at that time. I have freely offered good supporting ideas to management for the development of their placer mine and ideas to initiate the search for the mother lode. I became more involved because of a table of independently generated assay data. The Prudent Man test for locating a mining claim on public lands in the US requires that the discovery must meet a certain threshold where a prudent man would expend his time and capital in pursuit of developing his location/discovery of a valuable resource mineral. Being a prospector is risky business to be sure, one that requires some good measure of prudence when eval
uating a discovery or opportunity. Selecting micro-cap exploration companies is very risky business, at best. The only measure of prudence for me resides within the data that I can find and my ability and desire to get in and evaluate and understand the picture it paints. n
about the author

I have been involved with gold mining since 1977. First with placer gold, operating a small placer mine for a decade in a remote wilderness area of California, supplying the operation with burros and mules. Not wanting to be 60 and turning boulders looking for my next meal, I returned to school and earned a BS in Geology and later an MS in Geology With Distinction. My first job as a geologist was with Viceroy Resources as an exploration geologist, walking the mountains of the Mojave Desert. I advanced to exploration field supervisor and ultimately worked as the mine geologist of the Castle Mountain Mine. As the mine geologist, I did the geostatistics for the Castle Mountain Mine and assisted in calculating the reserves, developing the mine block model and mining plan for the first 5 years of the mine. My work as mine geologist led to the recognition of coarse gold in the Castle Mountain deposits and subsequent installation of a 1000 TPD mill/gravity recovery circuit to treat the high-grade ore. My work on the Castle Mountain Mine also led to a first in open pit mine operation. At my suggestion, Viceroy thickened the mill/gravity circuit tailings and agglomerated them to the -3/8 crushed rock headed for the leach pad; an idea I had while pondering in the silence of the wilderness years before. This eliminated the need for an expensive tailings impoundment facility and getting a second shot at the gold left in the mill tailings, directly improving project economics. I continue to hold and work my wilderness placer claims, for love of the game. I since have worked with a group of coastal engineers and scientists authoring numerous technical papers covering coastal erosion issues and the activities of man. Half of the planets people live within a few miles of the coastlines of the world and this interaction of people and shoreline has shaped history in many ways. This work is ongoing. I like to do research and I like to write about what I find.
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v IEw p OINT
It Was Meant to Be
s life becomes more complicated, I hear people so frequently respond to the outcome of a problem with the phrase that goes something like this: It was meant to be.
This neo-spiritual attitude speaks of acceptance and resignation, while assigning responsibility for the outcome to some fateful force that seemed to have meant it to be. While many people see this attitude as one that engenders a sense of being at peace with an outcome, it also reflects an attitude of fatedness about events that leaves one with a sense of resignation and helplessness. As psychologist, rabbi, counselor, advisor and coach, I see this phrase reflecting the problem of the contemporary human dilemma of there being more to every outcome which then can be planned for or even considered. This sense of fatedness reflects peoples sense of helplessness at affecting the outcome of their lives, while attempting to find some sense of meaning from the outcome which will help them cope with the result. From all of the perspectives with which I face my life and work, in support and in cooperation with the lives of others, I cannot accept this explanation of outcome of it was meant to be as a sufficient response to understanding how I got where I am, and it certainly is not very helpful to the people, organizations and institutions with which I work, to help them understand and then respond to an outcome which was not foreseen. There is an old Yiddish proverb that goes, Man plans and God laughs. This is a somewhat humorous perspective on the reality that sometimes things just happen that dont make any sense, in a way that we can explain. But yet they may have meaning for us which
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can help us better understand the most fundamental of all human issues. It is the problem of choice and free will. My over fifty years of work as rabbi and counselor has essentially come down to the issue of, how do I know if I made the right choice, about whatever I have to deal with? Even if the outcome is what I want, does that mean that it is the best for me and all concerned or is it simply that which makes me feel better? A wise man named Akiba once said, Everything is foreseen but permission is given. This was his response to the problem of free will and Gods role in affecting our lives. And whether it is God or the universe or society, or the market, humans always see that there is some greater, wiser or more powerful force which somehow knows what will happen regardless of how much they may know. So the phrase, Everything is foreseen does not mean that we live in a universe of predetermination in which choice is simply an illusion and that decisions are already made for us. It does reflect that there is some greater overview of our lives and the choices that we face, but that that overview and/or the one who is the viewer (God, et al) withdraws from control so that the second part of the quote, but permission is given, means that control from a higher level is suspended so that individual choice has meaning and purpose. It reminds me of the time when I was a child, and my parents seemed to be able to know what I was going to do, or the time when I was a parent of younger children and seemed to know what my kids were up to. But in each of those cases, I didnt act on what I knew but rather withheld my capacity to affect an outcome in order that my children learned to make decisions or, as in the case of my childhood, my parents withdrew so that I would learn to make my own decisions. In other words, I have the permission and even encouragement to make a mistake or a bad choice. Within limits, of course. Making a mistake once or twice was reasonable until I learned how to foresee my
own risk and negative outcome, but when it went too far, then either my parents or I stepped in to be a boundary-setting, limiting agent that would attempt to create wisdom and good decision-making skills. In this case, making bad choices was not considered failure but a necessity in order to prepare for healthier living. Over five decades later, I have become wise enough to know that there is no stage to which I arrive at which I am protected from my own bad choice. What I have learned is that the consequences of bad choices exacts higher and higher tolls, the older I become and the wiser Im supposed to be. As I am in my wisdom years, maybe the wisest thing I know is what the true limits to my wisdom are, and how much I still have to learn about making the good choices. This is true for every person I have ever worked with and all of those I continue to work with. For those of us who are in the business of giving advice, and who are expected to know how to teach people and guide them to make good choices, my own inner search for integrity is consistently tested. While old questions seem to repeat themselves from one decade to another, over and over again, the answers and responses to them are not always the same because conditions and possibilities change. So while there are eternal questions, there are not always eternal answers. There are some principles which I have learned to apply to decision-making which, I find by trial-and-error over all the years, have always stood up well in usage so that I have come to rely on them. Since this magazine is essentially about making the right choices, I thought I would offer some of them to you in the hopes that you will find them helpful in confronting your own freedom of choice. The first thing I always ask myself is, Why do I have to make a decision at all? What are the conditions that require my choosing to do something different than whats happening in the present? Usually, it is because the current outcomes are unsatisfying. Since I

am unhappy with the results of an earlier choice Ive made, or an earlier choice made by others that affects me, there is something within me that calls me forth to change the conditions under which I work and live. So, at the very beginning of any change, I must begin to understand what it is that needs changing and why it must change. The how is left for later. The necessity to be able to clearly articulate the motivations for alternatives to the present status quo should be so clear that they can be laid out in a series of simple declarative sentences. If it requires great analysis to explain why a change must be made, the complication itself should begin to tell you that the perception is somehow inaccurate. The need for change and the decisions which motivate them require clarity so that while there may be doubt about an outcome or even a strategy, there is no doubt about the necessity for the change and for the obligation to choose a different path. That clarity is usually found not only in ones own personal perspective on a situation but rather by examining the network of impacts that a choice has made because no choice exists by itself. While permission is givennamely, we have free will to chooseour freedom is not limited by God or some great universal power, but it is limited by the choices of other humans. All humans exercise some form of will which make them choose paths for themselves which either support, intersect or interrupt your own freedom. They clearly happen, and in ways that were not even aware of. Some may intend to clearly disrupt our own decision-making capacity, while for others, they make a choice which is not aimed at us or may have anything to do with my own particular situation, but the impact is profound. To perceive and understand the network of choices and contending forces that either support or limit the activity of my own choice is fundamental to being able to make any good decision. We must have a very clear and hard-headed reality about how
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much impact and reach our decisions can have in the lives of others and, in the averse, how much theirs have upon us. Whether its in family or in business, without understanding the intersection of contending needs, we will never found a way to make choices that maximize to their potential, and we are always surprised when things dont go the way we want. In so many cases, its usually because we have not well considered the reality of contending necessities. There are many stakeholders in decisionmaking, and I find that the more of those people who have a stake in the choice that you include in the discussion, the more knowledge you truly have about whatever situation faces you, and the more you are able to make that so desired commodity the informed choice. In Talmudic law, thousands of years ago, the requirement to reveal all information (in other words, to have complete transparency about any business deal) was the litmus test as to whether or not the agreement could stand under law. If it was found that information had been withheld, the agreements were automatically abrogated. This teaches us that at the heart of any good decisions are integrity and honesty. Whoever must withhold information or dissemble about the information required to make a choice has already established that there is no honesty in the discussion and the one who withholds the information is considered the same as a thief. To feel the freedom and well-being of integrity and transparency is a great inner test about the quality of any decision you may make and of the people you work with. None of us want to do business with people we cant trust. The problem is that we so frequently dont know that we cant trust them until it is too late. My experience has been that that usually happens because those involved in making the decision are too anxious to get the decision made rather than to make sure that all of the details are as accurate as possible. Impatience is the midwife of any bad choice. The out-of-control appetite for the new
choice, which lies behind the impatience, is a pretty reliable signal that whatever decision you are making has probably got serious flaws built in to it. If you want something so badly that you are willing to suspend good judgment in order to make it means that you have already decided to give away your choice for the sake of trying to get what you want. Once you surrender choice, theres nothing else for you to get. At that moment, you become the prisoner of your unfulfilled appetite and you have no freedom in the first place with which to make a decision, and you have no distance for objectivity in analyzing the elements of the choice. But all things are telescoped into the overwhelming need to have what you want rather than to work for what is good for you. While every choice we make is serious, we frequently lose a sense of perspective about our choices so that every decision feels like life or death. Having been a person who has had to face life or death decisions a number of times in my personal life, as well as many times in my professional life, I can testify that one of the most important things in being able to make the right decision is a good sense of humoreven for issues that are not funny and, in fact, do contain issues of life and death, it is very important to have a sense of perspective so that we understand and accept our limitations and simply are never infallible about the choices and decisions we face. By sense of humor, I do not mean that we laugh at the problems that face us, though sometimes we understand that there is a lighthearted side to everything we face as humans. This lightheartedness comes from the familiarity and the repetition with which we seem to face the same human condition over and over again, so that while the proverb, Man plans and God laughs, is very serious, it also has a funny side to it. Its like the pratfall in a comedy. We learn that there is also a way of finding something lighthearted in the struggles that we have to go through. Without humor, I would have never survived the illnesses I have endured all these years.

There are many more indices by which we can both prepare for and judge as to whether or not we are making good decisions. In the work that I do with individuals, families and businesses, I consistently focus on the question of learning a process by which one can make decisions more meaningful and more purposeful. Most of all, I would suggest that there is always life after a decision is made. One of the greatest realities of human life is our capacity to survive. It is this survivability that makes it possible for us to both make good decisions and to turn bad decisions in to good learning, so that next time, we dont repeat the same errorswhich is the ultimate goal of good decision-making, and that is making a bad decision only once.
biograPhy
Rabbi Stephen M. Robbins, Psy,D. is a psychologist in private practice in Los Angeles. He and his wife Cantor Eva Robbins are the clergy of Nvay Shalom, a Transdenominational community. He is also the co-founder of the Academy for Jewish Religion/ California in which he is a professor of mysticism and spiritual psychology. He is a deeply profound spiritual teacher of Jewish mysticism and ancient traditions of healing. He is available for consultation and coaching for individuals and businesses that seek to expand and strengthen the work community and corporations. He is also specialized in family and individual counseling with an eye towards the healing of unresolved traumas and conflicts.
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The Compliance Corner

F
or many of you who were road warriors or did a lot of traveling will remember the summer of 2000, when sitting on the tarmac for hours on end was a common occurrence.
Well this has not been a bad summer for travel, but I think we can agree it has been an awful summer for investors. And when investors lose money, it is only natural that the regulators go looking for a culprit. And that is when compliance has to be doing its job! Over the past few years, The Compliance Department has been accumulating informational statistics to assist broker-dealers in spotting trends and patterns. Under the leadership of David Alsup, we have been able to forecast the demise of many brokerdealers and the regulatory initiatives that have led to their downfall. I bring this up to highlight the fact that red flags abound in our industry if we will just open our eyes and look. There is plenty of money to be made doing things the correct way. Much attention has been focused on the broker-dealers and reps who concentrate their business on receiving certificates in microcap securities and providing liquidity for those securities. The market for microcap securities can be just as legitimate as any other equity market provided that the broker-dealer establishes sound procedures, follows the procedures and provides the buyer with sufficient information to make a prudent decision about investing. Hype and exaggeration are not the way to go. It is interesting to note that many of the regulatory actions did not involve the transaction but rather were directed at bad sales practices, AML issues, lack of supervisory pro
cedures, lack of due diligence and the all time favorite, fraud. If you are going to be in the business, design reasonable procedures that not only protect the broker-dealer but also protect the investors who may be solicited. With the wealth of information available on the internet, troublesome issues should be easy to spot and avoid; less than honest promoters can be ferreted out; and the Firms reputation can be preserved; just for starters. Follow the news, keep up with regulatory issues, and dont be afraid to decline a transaction. The old adage youre only as good as your next trade doesnt matter if you are booted out of the business. Work smarter, make a lot of money! n
about the author

Chet Hebert is founder and president of The Compliance Department Inc., a compliance consulting firm located in Centennial, Colorado. The firm assists broker-dealers and investment advisors in the areas of firm formation, compliance, CRD service bureau, outsourced back-office processing, and branch office audit services, including AML and Regulation S-P compliance. For more information about the firm, please visit www.thecompliancedepartment.com or call Chet at (303) 339-9870.
n By Ch ET h EBERT www.microcapreview.com
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TSX Venture: AZX Frankfurt Stock Exchange: A9D Pink Sheets USA: ALXDF
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and development company with one of the largest property packages along the prolific, gold-producing Cadillac Break in Val dOr, Quebec. The Company has two NI 43-101 compliant gold resources at Orenada and Sleepy, and is currently focused on advancing its Akasaba and Sleepy projects. Roughly 10% of the Company is held by Agnico-Eagle Mines Ltd., who has three producing gold mines in the region.
Alexandria Minerals Corporation is a Toronto-based junior gold exploration
Corporate Highlights
Global Gold Resources Strategic Partnerships Infrastructure-rich
446,000 oz. Au M&I and 452,000 oz. Au Inferred Agnico-Eagle Mines 10% Owner; Teck + IAMGOLD Corp. 7%; with NioGold at Siscoe East 4 gold mills within 15 km of Alexandrias properties (total combined output capabilities: 16,000 tpd)
POSITIONED FOR GROWTH

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Akasaba 29,000 m drilled to date, additional 25,000 m drill programme underway Sleepy 11,000 m drilled, additional 3,800 m underway
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v I E w p O I N T s
n By j ACK LEs LIE
ombudsman
I
n the current environment we face today, one must reexamine their vigilance.
The Broker Dealer community has been decimated by excessive oversight and is facing more rules and regulations than ever before. To keep up to date the Broker Dealer needs help. The tools available come at a premium cost to most. In the last twenty-two months the ranks have shrunk by almost one-third. Litigation is part of the problem. With class action suits and potential devastation from an award, a Broker Dealer must rely upon better documentation to defend these actions. Continuing education simply does not provide enough benefit to assist the Broker Dealer community. The need for compliance has always been there. The need to understand your rights and how to defend them has not been available without expensive legal advice. I am evaluating a number of options being presented to the Broker Dealers. I would like to see FINRA offer an educational seminar on a number of issues. The first would be how to avoid Arbitration. What measures to take to restructure your compliance department to account for this potential situation? What to expect in an Arbitration process and how to potentially settle the issues without the huge costs involved. The education process for many is too complex. No one is asking you to practice law. Yet the first place you go to when a complaint occurs is to an attorney. I would propose a flat fee to go to Arbitration. The attorney fees have escalated to enormous sums. FINRA is supposed to be a SRO. Yet they account for a large cost as well if you go to Arbitration. Since the class action suits have begun, settlement is very rare. That would stop if a maximum fee were enforced by FINRA. This should apply to the entire judicial system. The Plaintiff rarely gets the money they expect and even if the Defendant wins he can be put out of business by huge legal costs. An appeal process should be allowed when the award is excessive. It does not make sense when an award is more than the loss incurred by the Plaintiff. When does the client take responsibility for their investment decisions? If the Risk tolerances are within the limits of a clients investment why does he get solicited to file a complaint and litigation? Limits need to be established. If a rogue broker breaks the rules, why does the Broker Dealer have to pay the entire award if the broker fails to do so? In addition the Broker Dealer may be personally held accountable. Education, seminars, and FINRA being the envoy for the Broker Dealer are an appropriate way to move ahead. n
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