Investment Overview
Major Holdings
The major holdings consist of Humboldt’s investment in four junior resource companies. During the past year the market value of Humboldt’s investments in these companies recovered from their low point in 2008, and increased by $5.7 million from March 31, 2009 to $8.6 million at the end of Q1 2010 including an additional investment of $921,000 during 2009.
Humboldt’s investments in these companies have been evaluated at their market value, based on the bid prices of the securities held at the end of the period. The actual value for these holdings, when realized, may vary significantly from the carrying value.
Diaz Resources
Humboldt’s investment in Diaz Resources Ltd. remains the largest individual holding in the Company’s investment portfolio, representing approximately 7.8% of Humboldt’s net asset value. This value has declined during the quarter to $4.0 million reflecting Diaz’s high natural gas weighting. Humboldt owned 32% of the outstanding shares of Diaz at March 31, 2010. Diaz is actively involved in a heavy oil horizontal drilling prospect in the Lloydminster area of Alberta, which if successful will increase the company’s exposure to oil.
Tuscany Energy Ltd.
Humboldt’s holding in Tuscany make up 7.0% of Humboldt’s net asset value. Humboldt currently owns 38.5% of the outstanding shares of Tuscany.
Tuscany is an early stage junior exploration and production company mainly focused on oil exploration in Alberta and Saskatchewan. For Q1 2010 Tuscany’s production averaged 151 BOEd and the company reported cash flow of $230,000. Late in 2008 Tuscany made a significant oil discovery with a horizontal well in the Dina formation under its existing shallower oil production at Evesham, Saskatchewan. In order to finance the development of the play Tuscany issued 8.7 million shares at $.06 per share, through a rights offering. In the fourth quarter of 2009 Tuscany entered into a plan of arrangement to acquire Goldmark Minerals Ltd through the issue of 12.2 million Tuscany shares. Goldmark’s assets included $1.4 million of working capital. These two transactions provided the necessary working capital to allow Tuscany to drill its second horizontal well on the property in Q4 2009 and a third well is planned for June, 2010. Humboldt owned 35% of the shares of Goldmark prior to the transaction. Humboldt also increased its holdings in Tuscany through an over subscription option in the rights offering.
Sharon Energy Ltd.
The carrying value of Humboldt’s investment in Sharon Energy Ltd. represents 3% of the Company’s net asset value at March 31, 2010. Humboldt owned approximately 24.5% of the outstanding shares of Sharon.
During 2009 Sharon sold its US subsidiary in exchange for 2.3 million shares of Magnum Hunter Resources Corporation, a
rapidly growing Texas based exploration and production company. The Magnum Hunter shares have subsequently increased in
value and have a market value of over $11 million at the date of this report.
Sharon is being managed by the Diaz management team and plans to focus its exploration efforts on horizontal oil prospects in Alberta and Saskatchewan.
