Thursday, February 23, 2006

4th Uranium Stocks Pick:: sxr Uranium One Inc. (SXR.TO)

Do you like uranium? Do you like gold?

Well, how about a company that will do both?

Let me introduce you to the stock of a company with one of the best chances to be the next impending and inevitable uranium producer: sxr Uranium One Inc.

Company Description

sxr Uranium One Inc. is a Canadian uranium and gold resource company with a primary listing on The Toronto Stock Exchange and a secondary listing on the JSE Limited (the Johannesburg Stock Exchange). The Corporation owns 100% of the Dominion Rietkuil uranium project in South Africa and the fully permitted Honeymoon uranium project in South Australia. Through a joint venture with Pitchstone Exploration Ltd., the Corporation is also engaged in uranium exploration activities in the Athabasca Basin of Saskatchewan. The Corporation's Aflease Gold and Uranium Resources Limited subsidiary owns the Modder East gold property and related gold assets in South Africa.

Uranium Assets

I'm not going to focus on sxr's exploration projects today, because, although they are promising, well, everybody else's uranium explorations seem promising too. What really separates SXR.TO are two projects, Dominion and Honeymoon, each of them possessing a great chance of being full-blown uranium producers in 2007.

On January 3rd, SXR.TO put out a press release with revised estimates for their Dominion properties, and frankly, they are impressive:

16,121,000 pounds of uranium in the indicated category
146,608,000 pounds of uranium in the inferred category
amended independent technical report on the Dominion property prepared by SRK Consulting (available on SEDAR)
346,000 ounces of gold in the indicated category
2,213,000 ounces of gold in the inferred category
mineral resources have been reported in accordance with the classification criteria of the South African Code for Reporting of Mineral Resources and Mineral Reserves (the SAMREC Code).

Yes, I did not spuriously add an extra zero to the uranium inferred category. The Dominion property is possibly sitting on one of the largest uranium reserves in the world.

Of course, the main question one must ask is: are they going to develop it? How much will it cost? Why should I buy this company's stock?

A bankable feasibility study for the Dominion Project is expected to be completed by April 2006. It will be used by Uranium One to progress mine planning and design and to facilitate project financing.

Production at the Dominion is planned to commence in the first half of 2007, initially at 2 million pounds per year of uranium oxide, ramping to 4 million pounds per year by 2010.

The project has significant infrastructure in place, including a relatively new CIL gold processing plant, which will form part of a larger complex designed to recover both uranium and gold from the Dominion and Bonanza South ore bodies. The CIL plant is already processing ore from Bonanza South, but has considerable capacity for further expansion.

So, yes, SXR.TO has its sight set on uranium production, not just uranium discovery or uranium exploration. What makes this assertion more convincing is their recent closing of financing. On Jan 13th, SXR.TO posted a news release stating its intention of raising $65 million Cdn, earmarked as part of Dominion's construction costs. However, the company posted on February 7th a statement saying that they had actually raised $170.6 million Cdn! How did this happen?

Cash pours in to Uranium One offer
David McKay
Tue, 07 Feb 2006

Neal Froneman, Uranium One CEO, said the placement – in which a total of 22.3 million shares were placed – had introduced a number of new investors to the company register, including pension funds that had not expressed an interest before.

Analysis: if this is true, then this is a big boost. Pension funds are usually more conservative in which stocks they buy.

Moreover, the shares were placed at an average price of C$7.65, representing a 2.3% discount to the five-day volume weighted price of Uranium One's shares. But since the capital raising began three weeks ago, Uranium One’s shares had appreciated 30%.

Analysis: On January 13th, SXR.TO closed at $6.55Cdn. Today it closed at $7.60Cdn. Not bad for a company that just introduced 22.3 million new shares.

Analysts said that the Dominion mine, forecast to cost $130m in 2004 money, was now fully banked. Froneman said the interest in Uranium One's shares meant that the company could re-examine the debt portion of the funding for Dominion, originally planned at a 60:40 ratio in favour of equity. In addition, there was almost no requirement for Uranium One to enter into fixed contracts with buyers.

Analysis: Just as UUU.TO and PDN.TO are uranium producers who are/will be unhedged, SXR.TO is seeking to capitalize fully on the upswing of the uranium oxide price.

In a separate but related announcement, Aflease Gold, which is controlled by Uranium One, unveiled a 28% increase in its Modder East reserves, a prospect on the east Rand of Johannesburg. The updated reserve is related to a bankable feasibility study the company is completing.

Analysis: I have only started to talk about sxr Uranium One Inc., and in the next few addendums, I will explore their other uranium property, Honeymoon, which has one of only three permitted licenses in Australia to mine uranium. SXR.TO owns 80% of Aflease Gold, and its contribution to sxr's assets will also be delineated later. Plus, I will examine some of the people behind this darkhorse powerhouse.



Anonymous madmatrix said...

Hi Hombre Munchkin ,
This is Lou.
But how to buy this stock? This is traded in Canada. I'm new guy to stock. Very interested in Uranium stock.

10:22 PM  
Blogger Spelunca said...

hi lou. sxr is listed in canada and also on the JSE in South Africa. i'm not sure if you can buy sxr through that exchange. there are some brokers that can do international stocks, but i'm not sure what country you're in..?

1:28 AM  
Blogger charlottebandit said...

Welcome back spelunca! Looks like this board has new life once again.

Didn't see much on uranium with the other board, which was probably (other than NUC) which was why you returned. Bravo.


As for SXR Uranium One, you could buy the american exquivalent through (SXRFF.PK).

You could go to the Pink Sheets site and do a symbol search for each uranium stock (UUU, PDN...etc).

8:04 AM  
Blogger charlottebandit said...

Great DD on SXR spelunca. Very thorough coverage on Dominion deposit.

Honeymoon is very sweet (Australia) and fully-permited! I'm sure you're going to hit that next week. I'm looking forward.


By the way, how many stocks do you plan to cover for the best junior stocks?

8:37 PM  
Blogger Spelunca said...

haven't really given that much of a thought..initial goal of maybe 10? not really a hard # at all tho

4:18 PM  
Blogger charlottebandit said...

Tell me about (# of U companies). I saw your U listing of Canadian companies and it's a nightmare to go through if someone's starting their DD on U companies.


10 would be a great number if you could swing it because that's a lot of time to dedicate for research and stuff.

I'm also checking out Toshiba (TOSBF) since they acquired Westinghouse earlier this month. We'll see.

2:43 PM  

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