–Hold everything. How about a reality check?

–”Brazil’s plan to become one of the world’s biggest oil exporters hinges on exploiting crude 6 miles below the ocean surface in deposits so hot they can melt the metal used to carry uranium to nuclear plants,” reports Joe Carroll in Bloomberg this morning. It gets better (or worse, depending on your perspective).

–”Tapping what may be the biggest oil finds in the Western Hemisphere in three decades will require equipment that can withstand 18,000 pounds per square inch of pressure, enough to crush a pickup truck, pipes that can carry oil at temperatures above 500 degrees Fahrenheit (260 Celsius) and drill bits that can penetrate layers of salt more than one mile thick.”

–The oil industry is becoming metals-intensive. And not just any metals. Our friends at Diggers and Drillers call them ’super metals,’ which sounds about right. It takes a special kind of metal to withstand the heat and temperatures you find in off-shore, deep-sea oil operations. That’s probably the better investment angle than, say, buying Petrobras (NYSE:PBR).

–Think about this for a second. To produce oil from Carioca, Brazil will have to drill to a depth of 10,000 metres (32,000 feet). That is twice as far down as the world’s deepest current production hole. It’s also deeper in the ocean than Mt. Everest is high in the sky. It may as well be Mars or Venus or the moon for as otherworldly as the conditions are.

–The oil industry sure has come a long way from when Colonel Edwin Drake drilled his first well in Titusville, Pennsylvania in 1859. Drillers are going to places they’ve never gone before, and it’s not cheap. For example, Exxon had to develop special pipes for its Sakhalin II project in Siberia because steel pipes were shattering at the temperatures engineers encountered. Bloomberg reports that Chevron destroyed more than a dozen drill bits costing US$50,000 each in a $4.7 billion oil project in Tahiti.

–Where do you even buy $50,000 drill bits?

–Incidentally, did you know that Howard Hughes made his money in drill bits? We didn’t know it either until we researched the subject this morning. Cemented carbide cutting tools, or tools made of tungsten and diamond, are in great demand these days. But in the oil business, it was Howard Robard Hughes Sr. who introduced rotating steel cones to the wildcatters in East Texas in the first two decades of the twentieth century.

–Hughes held the patent on the first rotating tricone bit for 17 years, between 1934 and 1951. This was the peak of exploring and drilling in the Continental U.S. It made Hughes and his more famous and eccentric son Howard very rich. You can afford to be weird when you reach a certain level of wealth. It doesn’t make it right, though. If you want to see a picture of the Hughes drill bit, check this out.

–Resources Minister Martin Ferguson told the ABC that contrary to reports in The Australian last week, the Federal Government has not told Chinese companies to “back off” in their pursuit of their Australian quarry.

–Right. You don’t imagine the Federal Government could come right out and tell China to get lost. It doesn’t want that to happen. But in an interesting coincidence, Stephen Wyatt reports in yesterday’s Financial Review that the, “Chinese may relent in iron-ore negotiations.” This refers to the reluctance of Chinese steel producers to pay a ‘freight premium’ for Australian iron ore (over and above what China pays for Brazilian ore).

–We called the Foreign Investment Review Board (FIRB) ourselves yesterday to see if they publish any information on foreign companies seeking to acquire $100 million or more of an Australian publicly listed company.

–”No we do not,” we were told.

–Fair enough. Here’s what we know. In early April the FIRB shot down a bid by the Shougang Group (China’s sixth largest steel maker) for Mount Gibson Iron Ore (ASX:MGX). We know that Shenzhen Zhongjin Lingnan Nonfemet Co Ltd has a joint bid with and Indonesian firm Herald Resources Ltd (ASX:HER). We also know that China’s state-owned MCC Mining has bid A$400 million one Cape Lambert Iron Ore’s Ltd (ASX:CFE) iron ore projects.

–There are other deals in the works. China Shenhua Group, China Coal Energy, and Yanzhou Coal Mining Co Ltd (listed in Hong Kong and China’s third biggest coal producer by market cap) are all interested in Australian coal. And Chinese iron ore trader Haoning Group would like to buy a stake in iron ore producer Brockman Resources Ltd (ASX:BRM).

–That’s what we know. What we don’t know is what Australia and China are saying to each other behind closed doors. And we don’t know what other Aussie companies might be on Chinese watch lists.

–If the FIRB isn’t going to tell us, there are other ways of prospecting around. Gabriel has been working on some technical and fundamental stock screens that produce at least ten new trading ideas each day (five momentum up, five momentum down).

–We’re experimenting with the variables, but this morning we asked him if a stock with symbol UMC had shown up on any of his screens. “Yes, yesterday it did. On the momentum up screen.”

–The stock came up on our computer screen last night when we were reading up on news from the bauxite market. UMC is the United Minerals Corporation (ASX:UMC). Please read this next note. We are not tipping it and have done no diligence on the stock at all.

–We do note, however, that the company is chasing both iron ore and bauxite in the Pilbara. That got our attention. We aren’t tipping it, but we wanted to know more.