Second “Energy Crisis Pick?” Not so much. Argh.

I wrote last night about the energy crisis pick that was being teased as a beneficiary of the “Dallas Step Change Resolution,” and, if you’ll recall, I ran out of steam (and words) before getting to the second company that was teased in that ad.

The ad was for Mike Burnick’s Market Shock Trader, and it was all about two companies that will benefit from increased investment in alternative energy … the first one was a sugarcane ethanol play, I wrote (though couldn’t identify it exactly), and the second one is also a little paltry with the clues …

The teaser made over the top promises, of course — including this: “Buy in today, and you could bank your first 100% gains
before the first day of A Very Hot Summer…”

Summer is about a month away … so are we really going to get 100% gains in a month? One hopes that this gets the skepticism flowing in any reader’s mind, but you never know.

Here are the clues we get:

“The “Giant Killer” of a Company that Picked Up the Goldmine Exxon Threw Away…

“ExxonMobil was sitting on a goldmine and they blew it…

“They failed miserably and dumped all of their primary alternative energy assets…That’s why today’s Dallas Clean Energy Resolution is so important…

“Because one company slid in and plucked nearly a billion-dollars worth of ExxonMobil’s neglected alternative energy assets practically for a “song.”

“I call this company the “Giant Killer” of the energy industry. Today, it’s up tenfold from 2005 and has sported 1400% returns on ExxonMobil’s mistake – no wonder Exxon’s shareholders are so concerned!

“And no wonder the Rockefellers are insisting that ExxonMobil pick up the pieces and refocus on this all important profit-churning trend of the future.

“You might be thinking right about now that if they’re up so much it’s probably too late – not so…

“You can still get in on this company and “steal” the stock – currently selling at 50% off its high!!”

Good stuff, huh? Unfortunately, still a little light on the clues … but let’s give it a whirl.

As far as I can tell, the only really significant alternative energy assets ExxonMobil has owned have been related to coal and nuclear power. They do currently invest in battery technologies and other alternative energy R&D areas to some limited degree, and they’ve invested in solar and efficient electric motors in the past, but as far as I know have never developed any particularly valuable “assets” in those areas — I’d say that most of their capabilities outside of the core oil and gas exploration, production, and exploration business have always been in chemicals. And in the last twenty years, you might say “all”, not “most.”

And they do a lot of transactions almost every year — they’ve sold oil and gas fields to other companies, refineries to Valero, pipelines to Buckeye Partners and others … but none of that counts as “alternative” in my eye. They’ve also sold mineral resources, like a Chilean copper mine, as they steadily got rid of non-petroleum assets over the years. In fact, they sold out of so many businesses in the 1980s that it makes the head spin a bit — and indeed, their legendary (at least for his retirement package) previous CEO, Lee Raymond, was brought in largely to make those decisions and cut off all the unprofitable side ventures to refocus the company (which is probably partly why he was stubborn about any reinvestment in solar or anything else, compared to competitors like Shell and BP).

So what did they own, when it comes to nukes? And who did they sell it to?

I’m most interested in the uranium story here, since it seems unlikely that coal is going to be the alternative energy solution if you’re approaching it from an environmental perspective — yes, I know there is clean coal, but I don’t think that was ever what ExxonMobil was into.

But ExxonMobll did have several uranium mining projects in the late 1970s, and was one of the largest suppliers of uranium to US power plants before eventually giving up most of that business right around at the bottom of the uranium market, when nuclear power was a pariah in the US.

Exxon for years owned rights to the controversial Crandon mine site in Wisconsin, a site that was consistently blocked by Native American interests and other local protests. They sold it to Rio Algom, which was bought by BHP Billiton, who then later sold the site to Nicolet Minerals, which was later bought by a few local tribes, who withdrew the mining permit applications. So that’s a dead end.

They also had a fair number of mine sites for what was often called “yellow oil” in Wyoming and New Jersey, among other places. New Jersey eventually banned uranium mining, and the Wyoming assets were apparently sold to Wold Nuclear (the unmined reserves) and Everest Minerals (the plant and equipment and, most significantl, the operating and controversial Highland mine).

As far as I can tell, nothing significant is going on with Wold Nuclear at the moment, to the extent that they still exist. Wold Nuclear was a private company run by former US Congressman John Wold (who was also a geologist, and was selected as the “Wyoming Oil/Gas and Mineral Man of the 20th Century”), and I suppose it might have been bought by someone, but I don’t know if their Wyoming sites are active.

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But more interestingly, Everest Minerals later sold the Highland Mine to a new company called Power Resources.

And then Power Resources was bought by Cameco, which I think is still the world’s largest uranium producer.

The Highland Mine has recovered significantly from the troubles during Exxon’s day, though for all I know it may be locally controversial, but it has been combined with the neighboring Smith Ranch and is still producing lots of U3O8 using newer techniques, and is a larger part of the reason why Cameco produces more uranium in the US than anyone else.

So, maybe that’s an interesting one to consider … though it, too is a guess and a stretch. Uranium is certainly a “hot” alternative energy source again, and ExxonMobil (then Exxon, I think), certainly did sell off the Highland Mine for a “song” 20+ years ago. But Cameco’s stock price is not up tenfold since 2005, which was part of the clue, and I haven’t dug through the filings to see if they’ve earned 1,400% returns on the Highland Mine (though I doubt it). The share price is also not 50% off it’s high, though it is down a bit from the $55 or so they hit last year (right around $40 now).

Exxon Nuclear, by the way, was their big nuclear power plant division, and that was sold to a German firm that was later bought by Siemens. Siemens then sold its nuclear plant division into a joint venture with Areva, a French company, partly because the Germans also started to hate nuclear power for environmental reasons — the joint company was called Framatome. Can’t buy that one, apparently, so another dead end.

So … my best guess on this one, even though I’m pretty sure it’s wrong? Cameco, a huge company and certainly a good proxy for uranium, if you want to invest in uranium — though it has taken some hits in the last year with flooding at their biggest mine, the not-yet-producing Cigar Lake in Saskatchewan that still has a few years before it’s expected to be productive. The other big producer that’s fairly steady is BHP Billiton, with the Ocean Dam mine in Australia, and Rio Tinto is also a big uranium miner, but neither of those two is anywhere near a “pure play” on uranium the way Cameco almost is.

Lots of hair on Cameco, but that’s at least one alternative energy-related company that picked up assets from Exxon for a “song,” albeit quite indirectly, and a long time ago.

Well, this stinks — two in a row without a reasonable solution. The Gumshoe is getting cranky.

And hey, if you want a real alternative energy company that’s loosely affiliated with ExxonMobil, you could always check out Electrovaya (trades in Toronto) — they’re making electric cars that use an ExxonMobil film in their lithium batteries — one of the “alternative energy” initiatives of ExxonMobil Chemical. Of course, if you had invested in them a few years ago you would have lost a fortune by now (share price in 2001: $8. Share price today: 26 cents.)

Others that have a hair’s worth of connection? Daystar technologies (DSTI) is using the same name (Daystar) as Exxon’s subsidiary that was, in the 1970s, one of the most important solar players in the US. The new DSTI has not had a particularly nice run of it, though, and appears to have no connection to Exxon other than the name. The original Daystar was sold to American Solar King, which sold solar systems that were installed through Sears until subsidies disappeared in the mid-1980s, I think they went out of business after that. Perhaps a cautionary tale for all the solar companies that got the heebie jeebies when it was recently reported that Germany might cut solar subsidies?

But not a particularly useful investing idea for us.

OK, so the next time I’m definitely not going to bother to publish my writeup if I don’t have a good solution. Honest.

And if you happen to have a good knowledge of ExxonMobil’s spun-off technologies or assets and have a better solution, please let us know. If it’s too obvious and I missed it, I might break my keyboard with my forehead, but I’m sure we’d all like to know anyway.

If you’d like a head start on that, some of the other significant companies sold or spun off by ExxonMobil (and Exxon and Mobil, going back a little ways) are Reliance Electric, Exxon Office Systems (which sold word processors), Montgomery Ward, and Container Corporation (which Mobil sold to Smurfit Stone) — not really an alternative energy name or a massive performer in the bunch … Reliance Electric is interesting, but more of an industrial electric motor company, I think they’re owned by someone else now (Rockwell Automation, if memory serves). ExxonMobil also has some significant interests in the Syncrude Alberta oil sands project, but I don’t think they’ve sold them.

In the meantime, have a great weekend! It will be, I hope, blessed with some more useful Gumshoe information … soon.



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May 30, 2008 4:00 pm

I believe the company you are looking for is Brazil-based Cosan Group CZZ

Brazil-based Cosan Group is the largest grower and processor of sugarcane in the world, the largest ethanol producer in Brazil (and the second largest in the world), and the largest sugar producer in Brazil (and one of the three largest sugar producers in the world).

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May 30, 2008 4:06 pm

Sorry This was my first time leaving a response my response was for

“Dallas Step Change Resolution: Energy Crisis Picks”

Gravity Switch
Gravity Switch
May 30, 2008 4:11 pm

Aha! You’re right — didn’t think of another ethanol one for this pick, but that makes perfect sense.

Thanks Troy — you may have saved the Gumshoe’s hide. I see that you put this same comment in for the other article, too, the one that was clearly for a sugarcane ethanol company, and that may be right — but since CZZ just bought some ExxonMobil assets worth near a billion dollars I think it’s actually a better solution for this second one.

Cosan, for the rest of you, did just buy Esso in Brazil last month for around $800 million, which gives them a good distribution network. Not particularly an alternative energy asset in ExxonMobil’s hands, though I’m sure Esso must have also dealt with ethanol in Brazil since it’s omnipresent there, but perhaps it will be more of one in Cosan’s hands … sneaky, but much more appropriate than the guesses I made. Don’t know why I missed it, but I’m glad you didn’t, Troy.

Cosan trades on the NYSE as CZZ if you’re interested in looking into them. They listed here in the U.S. last summer to try to raise money for some very ambitious expansion, which I guess includes this Esso deal.

Jee, sure am glad I wrote all that blather about uranium.

Cosan is not a slam dunk, to be sure, they’re spending a whole lot of moneym, Petrobras may c