“Oil Investment in Somalia?”

August 11 update: Just a note that this stock, along with Chris DeHaemer’s other resource play Rusina Mining, has taken a significant hit of late. The hit this company is taking is probably almost entirely related to the current debate in the Somali government about setting up a new government oil company and new centralized oil policy, perhaps with investment from Indonesia and Kuwait and China. There might be some fear that this little resource company’s deal with Puntland could be superseded, though they claim that Puntland is independent from Somalia and will honor its agreement. Just a little more grist for your mill — there was a good article from Reuters yesterday that gives a solid update on the current debate and uncertainty.

Shares have fallen at least 20% or so from the highs they reached on the first round of teaser emails and newsletter recommendations from Taipan, and the emails continue to be churned out predicting several hundred percent gains by October, and more dramatic gains to follow. This one seems to me like more of a lottery ticket every day, even aside from the fact that the predictions of great oil reserves in Somalia are technically and officially “unproven” so far, but Somali politics may well cause more big moves one way or the other here in the coming days … or months … or whatever. Then again, someone wins the lottery every now and then, don’t they?

Here’s the original post from May:

This email ad came in for one of Christian DeHaemer’s Taipan newsletters (I didn’t click through to find out, I assume it’s Red Zone Profits or GRESSOR, though he may have others) and it refers to a special report that will be released “in three days” (the email is from yesterday, May 10).

And the Stock Gumshoe loves to jump the gun on these things, so let’s take a look.

It’s for a company that owns mineral and oil exploration rights in Somalia.

Stupid, right?

That was certainly my first reaction. But he of course backs it up by saying that this exploration is in Puntland, the “safest” part of Somalia, that is run by triabal chieftains and is somewhat autonomous from the Mogadishu government.

And the usual hyperbole: “This tiny 50-cent oil exploration company is, hands down, the single most lucrative investment opportunity I’ve seen in my entire life.”

My favorite part is the hint of conspiracy and international intrigue, as always:

“A band of bloodthirsty Somali pirates… a ruthless tribal warlord… a 900-ton cargo ship hijacked off Africa’s Horn…a fierce fire-fight in Mogadishu’s Bakara Market… a $25 billion bribery scheme… a suitcase full of crisp cool cash… and a tiny 50-cent micro-cap stock that could return 60 times your money.”

That’s a colorful quote! Sounds kind of like that Cameroon cobalt investment of a couple months back, eh?

“Tiny 50-cent “Oil Raider” Stuns Tribal Warlords … Black Hawk Down … Blood in the Streets … could be $8 by October”

Well that’s pretty much all the hints we’re given on this one … so can we crack it before DeHaemer releases his report?

I think you already know the answer to that question — this is the Gumshoe we’re talking about here! If I couldn’t crack it, I’d just pretend I didn’t get the email 🙂

This little 50-cent exploration company that has bought up mineral and oil rights in northern Somalia is …

Range Resources, Ltd. (RRS in Australia, appears to be RGRLF.PK on the US pink sheets)

They are trading at about 50 cents (Australian … 42 cents in the US), and they did make a deal with the autonomous chieftains of Puntland to acquire those mineral rights.

Now, before you run off to place your order (as if you’d be that impetuous!), there are a few things to note about this wee company:

I don’t know if it’s a great investment or a lousy one — I’ll leave that assessment to the professionals, I don’t even know if they have any earnings or history, or warrants, or whether they’re run by a pack of fools or a bevy of brahmin.

But I do know that their oil rights in Puntland are probably in some dispute, even as they have teams of people on the ground trying to find the old oil sites from when the majors were in Somalia, and maybe even doing some drilling by now.

A quick web search on the topic will be all you need to do in order to determine that the Mogadishu government doesn’t necessarily think the Puntland folks should be selling off these rights — they believe that the central government owns those oil rights, and may have already made a deal elsewhere. After just a few minutes I got very confused, but I am confident in saying that — at the very least — it’s worth a little research before investing in a company whose main asset is an exploration license in Puntland … or, for that matter, anywhere in Somaliland.

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I don’t dispute that there’s oil in Somalia — I have absolutely no idea, though I know there was plenty of exploration there before the “Blackhawk Down” years — but I would be careful about assuming that any Somali oil wealth would flow right to this little company. It might, but I’m not ready to give them the benefit of the doubt without doing more research than I’m willing to put in right now.

If anyone else has looked into this one at all, please share. (and be careful — there are five or six different companies called something like “Range Resources”, including a big and unrelated one on the NYSE).

Happy weekend, everyone.

June 1 Update: FYI, I just posted some more info about Range and their partner in the Somalia exploration project over on the forum. There’s another company involved, for those who might like a different way to get at this investing idea (and one that hasn’t doubled in the last couple weeks).


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Anonymous
May 14, 2007 12:48 am
Anonymous
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Anonymous
May 14, 2007 10:48 pm

It is always annoying when someone hypes a stock beyond recognition – you are wise to warn people you be careful – most of the story is true but they miss so much of the hard work that has been done by Range over the last 18 months. As for the TFG (Transitional Federal Govt) – they are behind the deal now after a little hesitation – the ‘guru’ from Taipan fails to mention 80% has been farmed out to Canmex Minerals and Peru has been sold to CTS (but Range retain equity in CTS).

If you want to work out if Range is now credible – look up Sir Sam Jonah the Chairman – you couldn’t ask for better credibility when doing any mining in Africa.

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Anonymous
May 16, 2007 11:25 am

three major instutions have recently bought big in RRS, the main one being UBS, surely these guys wouldnt be putting their money in something that they havent done their research on

One Guy
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One Guy
May 24, 2007 8:07 pm

One of our Aussie readers sent me a note this morning — Range bought out their partner in Somalia last night, it appears, and the stock jumped 20% or so. Maybe this one will indeed be a big winner … though I always believe you should be a little nervous about an investment that you wouldn’t be willing to get within a couple hundred miles of for any amount of money.

It’s definitely an interesting idea, at least.

Thanks,
SG

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