Winston’s Growth Stock Report

Your Source for High Potential Stocks

Issue 46, November 11, 2010

Lest We Forget

Lots of news this week including our favorite metal, gold. Gold rallied to a new record high on talk that currencies should return to the gold standard. If central banks around the world had never given up on gold as the backing of their currencies, the economic world at large would be in much better shape. Conversely, we as investors would not be cashing in on this spectacular gold bull market.

The Financial Times reported that Robert Zoellick, President of the World Bank, stated leading economies should consider readopting a modified global gold standard to guide currency movements. It’s a nice thought but it will never fly. The unseen forces who control the banking system want total control and they can only do that by controlling the monetary system and the debt which we as taxpayers are inherently responsible for.

The new benchmark high is $1421.

Petromanas Energy Inc (PMI, TSXV) Seismic Program Completed on Blocks D-E

A 6 Billion Barrel Opportunity for Light Oil and Gas

Last week Petromanas announced the completion of seismic work on Blocks D & E which moves the company one step closer to what many oil and gas gurus consider to be one of the last mega sized oil exploration plays left in the world available to retail investors. The exploration blocks Petromanas acquired cover 6,500 square kilometers, virtually all of Albania’s currently explored acreage.

Exploration by blue chip oil and gas companies only opened in 1990. Communist rule had kept Albania’s vast resource potential restrained up until that point. However civil unrest then drove out the early oil explorers but not before some interesting geological discoveries were made.

According to an independent resource valuation that reviewed the historic data, Gustavson Associates of Boulder, Colorado reported on December 15, 2009, that the Petromanas blocks contain 14 prospects with more than 6 billion barrels of prospective oil resources in a P50 scenario.

The report estimated P50 resources of 3.2 billion barrels in 11 prospects in Blocks A, B, D and E; and 2.8 billion barrels of P50 resources in three prospects: Blocks 2 and 3 – giving us a total of 6 billion barrels.

The primary exploration targets are deep, a minimum of 13,000 feet. Data from the 1990’s showed a large Ionian formation extending over blocks A, B, D, E, 2 and 3. This is the main target area.

This year Petromanas has been building upon the historic data. The company has merged around 4,000 km of 2D seismic from previous exploration campaigns and constructed of clearer picture of the underground trend. An additional 189 km of 2D seismic was acquired covering Blocks A and B to fill in the picture underground more clearly while also re-processing about 800 km of historic seismic data.

This past week the company announced that 105 km of 2D seismic was shot on Blocks D and E. This work fulfills the work commitment for the first phase of exploration on those blocks. By combining the historic data with this new information the exploration risk will be reduced while helping to target high potential drilling locations.

Meanwhile seismic work has also continued on Blocks 2 and 3 which should be completed early this coming year. This seismic survey includes 140 km of 2D which is being shot around the very prospective Shpiragu Discovery.

Within Blocks 2 and 3 lies the Patos Marinza petroleum system, the largest onshore oil field in Western Europe. Not surprisingly, most of Albania’s oil fields are located in this area. Over 300 million barrels of oil have been reported produced from shallower fields in this zone. Of particular interest to us is one of our best performing oil picks, Bankers Petroleum who have 5.7 billion barrels Original Oil in Place at the Patos Marinza oil field in Block 2. Petromanas is going after the deeper targets in this area. As you can see from the map below, just east is the Shpiragu Discovery.

In 2001 Occidental Petroleum drilled the Shpiragu-1 well and hit a 600 meter column of light oil. This well produced 400-1200 barrels of oil per day of light, 37 degree API oil which is very valuable as opposed to heavier oil which is more costly to process.

Blocks 2 and 3 are considered lower risk as the Shpiragu discovery confirmed the oil is there. And as I previously mentioned, historical seismic imaging from the 1990’s show that the productive Ionian formation extends over Blocks A, B, D, E, 2 and 3. These facts substantially reduce the exploration risk within Blocks A, B, D and E. In turn, these geological findings increase the probability that the giant anticline outlined by Shell and Coparex seismic is in fact the oil saturated Ionian formation.

There are currently three potential targets on Blocks 2 and 3; the Shpiragu, Shpiragu 1 and Shpiragu 2. The expectation is that Petromanas will re-enter the Shpiragu 1 well which if successful could be followed by another well at Shpiragu 2. Though don’t expect Petromanas to go it alone with a drill program. Though they know the oil is there, the cost of re-drilling the Shpiragu 1 well could run about $22 million.

As Petromanas intimated in their news release, once they have the new seismic data and have reevaluated the targets, the deeper plays will be farmed out to industry partners. In other words, a big blue chip oil company with deep pockets like Royal Dutch Shell (ADR, NYSE), Occidental (OXY, NYSE) or an equal caliber company would be likely partners. I would suspect that talks with at least on large player have been ongoing as a drill program for 2011 is still being referred to. Gustavson’s report estimates a 36% chance of success. Not favorable odds but the risk to reward ratio is staggering. The Shpiragu Prospect is estimated by Gustavson to possibly contain 666 million barrels of oil.

Another likely drilling prospect for 2011 is the shallower depth Jubani prospect of Block A to the far north. By the end of this year Petromanas should have completed a phase I work program on Blocks A and B which include the reprocessing of 200 km of 2D seismic, the acquisition of 190 km of new 2D seismic which will cost $3 million plus incorporating historical data, geological and geophysical work. Going forward, each additional phase of work will be spread over 2 years and will include the drilling of one well.

According to Gustavson, Jubani has a P50 estimate of prospective recoverable oil resources of 151 million barrels. Gustavson also estimates that if gas is present, Jubani could have 632 billion cubic feet or recoverable resources. The approximate depth to the top of the structure is 1,400 meters. A relatively shallow depth compared to other prospects makes this drill program comparatively less expensive running about $5 to $6 million.

Summary

Petromanas presents an opportunity to fully realize the potential of Albania’s deep oil structures which are estimated to contain 6 billion barrels of oil. PMI has the benefit of literally millions of dollars worth of historic geological work going back decades. Shell, Coparex and others had established a good understanding of the deeper structures with the help of 2D seismic work. Petromanas has added to their understanding with their own work gathered since 2007.

Today Petromanas has an opportunity to now fully develop and explore these structures. What might be referred to as being in the right place at the right time, PMI picked up these assets after Shell and others abandoned Albania during the period of extreme unrest in that country and the conflict in neighboring Kosovo. Albania has proven they are now stabilized and are aligning themselves with the West. As a current NATO member and potentially a new member of the European Union, this country’s potential can now be brought forward. For PMI shareholders we have a unique opportunity where the company has “superbly defined, giant, virtually drill ready prospects” to quote Gustavson’s resource evaluation report of 2008.

This is a high risk but extremely high reward speculation which has caught the eye of the likes of Quantum Partners which is run by George Soros’ Soros Fund Management, Wanger Asset Management and Endeavour Mining.

There are never any guarantees in the oil patch but if you’re willing to risk some money, you could be richly rewarded.

Orsu Metals (OSU, TSXV)

Orsu jumped 20% this morning based on positive results from the Taldybulak Scoping Study in Kyrgyzstan. This is the play where Orsu has a 40% interest in the Gold-Copper-Molybdenum deposit with Gold Fields who are also the operators.

The highlights of the study include:

• Average annual production of more than 240,000 oz gold, 26,000 t copper and 900 t molybdenum;
• US$516 million initial CAPEX;
• US$815 million pre-tax NPV7.5;
• 24.7% pre-tax IRR (using US$1,150/oz Au, US$3.00/lb Cu, US$15/lb Mo);
• 17 years Life of Mine
• 6 Years Payback from start of construction

It should be noted that only indicated and inferred mineral resources were used in the Scoping Study which calculated a total resource of 254 M tons of ore. Mineral Reserves, which are more precise resources based on closer spaced drill holes, have never been estimated.

The Scoping Study is a preliminary estimate of the technical and economic viability of project and is a necessary step prior to a full feasibility study. The study did show though that there is a high Initial Rate of Return for the project which is expected from a porphyry type deposit of this nature.

For a more precise evaluation of this deposit, infill drilling must be done to move the ore into a reserve category. To that end, after the winter a 5,000 meter program will start which should upgrade the value of the deposit.

New Gold (NGD, TSXC/AMEX) Q3 Results

New Gold has released their Q3 results which showed improved gold production along with continued development of the New Afton and El Morro mines.

Production was 91,332 oz at a cost of $435 which is expected to help hit the yearend target of 358,000 ounces.

Hold for continued growth.

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Stock Listing – most recent entry dates

Apoquindo (AQM) April 24, 2009 54 cents; holding

Catalyst Copper (CCY) Entered Jan 6/10 25 cents; accumulating

Donner (DON, TSXV) Dec 4/09 heads up alert 0.15 cents, Jan 17/10 doubles holding free shares

Edgewater Exploration (EDW, TSXV) Entered June 28/10 90 cents accumulating

Encanto Potash (EPO, TSXV) Entered July 31, 2009 .027 holding

Endeavour Mining (EDV, TSX) Entered Feb 4/10 $1.73; Profits taken Ap 9@ $2.42

Holding Free Shares

Hathor (HAT, TSXV) Top Uranium Pick

Entered March 28, 2006 $1.32; Ap 21/08 sold $2.64, Oct 21/10 sold $2.33 holding free shares

Nevsun (NSU, TSX) Feb 4/10 Buy Alert 2.19, profits Oct 20/10 $5.39 holding free shares

New Gold (NGD, TSXV) Dec 29/08 Best Speculative Pick $1.76 June 11/10 doubles holding free shares

Orsu Metals (OSU, TSXV) Bottom Fishing Pick July 23/10 @16 cents, Sell Oct 3 @32 cents and holding

Petroamerica (PTA, TSXV) Nov 6, 2009 Speculative at 70 cents, Jan 8 new pick accumulate slowly 71 cents; Oct 16/10 buy @0. 405 cents; accumulating

Petromanas (PMI, TSXV) Feb 24/10 30 cents. Profits taken Apr 9/10 @ 72 cents; holding free shares; May 2/10 re-accumulating at 33 cents

Potash One (KCL, TSX) Top Potash Pick Entered May 14, 2008@ $3.19 holding

Uracan (URC, TSXV) Speculative Uranium Pick Apr 30, 2010 Alert 18 cents; holding

Ventana Gold (VEN, TSXV) Entered Mar 18/09 $1.33, holding free shares. 52 week hi $12.91

Wildcat Silver (WS, TSXV) Entered July 10th, 2009 0.485 holding