Sunday, July 09, 2006

July 9 Uranium Stocks Update: International Uranium Corporation (TSE:IUC)

Revisiting IUC.TO

About a week ago, an interview with Uranium Producers of America Executive Director Jon Indall revealed his thoughts about uranium oxide production in the United States.

"It's fairly apparent this industry, in the next four to five years, could be producing in the range of 20 million pounds.” Questioned about the big jump from about two to three million pounds of current uranium mining production, Indall explained, "Conservatively, five to six years, but maybe even sooner."

This was nicely timed with the announcement three weeks ago by International Uranium Corporation that they were reopening their American uranium mines. Now their stock has rebounded from a closing low of $4.40 to $5.89 Cdn, but still a far cry from their 52-week high of $8.15. The stock had already been on a slow descent even before the steep market correction of all resources, most likely related to the absence of IUC's direction as to when to proceed mining. However, let's take a look at what IUC had to say about their re-opening and why I am re-recommending IUC stock now:

International Uranium Corporation (TSX:IUC) is pleased to announce the re-opening of its U.S. uranium/vanadium mines. Mining activity will commence immediately and mined ore will be stockpiled at the Company's wholly-owned White Mesa uranium/vanadium mill in southeastern Utah. Initial production rates will be approximately 3.4 million pounds of uranium and 5.9 million pounds of vanadium. The Mill is currently completing an alternate feed contract which will net the Company in excess of 500,000 pounds uranium in 2006.

I like many things in this paragraph. Immediately is probably the best word to my ears, as you do not hear this often in the uranium production side of things. 3.4 million pounds of uranium is also a tremendous number. Urasia Energy (CVE.UUU) averages 1.8 million lbs per year and they just achieved production rates in April 2006. IUC will mine 3.4 million lbs this year, as thereafter, plan on averaging at the 1.5 million lb level. Still, this is a great number and they will further benefit by mining tons of vanadium, which in itself is also a fairly expensive metal.

The Company holds conventional mining properties in the Four Corners region of the western United States. The properties are in three distinct mining districts; the Colorado Plateau, the Henry Mountains and the Arizona Strip. The Company intends to immediately commence mining activities at the Pandora, Topaz, Sunday and St. Jude mines on the Colorado Plateau. This will be followed by two additional mines in the Colorado Plateau region in early 2007. All of IUC's mines on the Colorado Plateau are fully permitted. In the Henry Mountains area, plans are to complete the permitting on the Tony M mine with production slated for late spring 2007. Development of the Bullfrog property will begin in the spring of 2007 and production is projected to begin mid-year 2008. The Company will also review and revise the engineering estimates for the fully permitted Arizona 1 Mine in the Arizona Strip district with development scheduled to begin early 2007 and production beginning in late summer 2007.

This is an extremely short timeline for production and, if indeed it is achievable, would vault IUC into the upper echelon of uranium juniors. Note that Paladin Resources (TSE:PDN) is planning production in September 2006 whereas SXR Uranium One (TSE:SXR) is starting in the spring of 2007 so IUC is really not far behind at all. It also helps that IUC has had their White Mesa mill operating throughout and have half a million pounds of uranium oxide waiting to be sold.

IUC is also pleased to announce that Mr. Harold Roberts, P.E. has been appointed IUC's Vice President of Operations and will be responsible for the Company's U.S. mine and mill operations. Harold was previously Vice President, Corporate Development and prior to joining IUC was the President of Energy Fuels Nuclear, Inc. prior to the acquisition of the Energy Fuels uranium assets by International Uranium Corporation. From 1975 to 1978, Mr. Roberts was with Western Nuclear, Inc., a subsidiary of Phelps Dodge Corporation, during which time he participated in the design, construction and operations of the Sherwood Uranium Mill, and was involved in numerous projects related to the company's mining and milling operations in central Wyoming. Beginning in 1978, Mr. Roberts was employed by Energy Fuels with his responsibilities including design and construction of the White Mesa Uranium Mill.

IUC really sounds like they are serious now. Bringing back the former President of the company that IUC bought out years ago and a guy with this much uranium expertise and experience was a coup.

In short, IUC's prospects brightened up considerably with their announcement mid-June. Although the stock is no longer as cheap as it was two weeks ago, it is still very reasonably priced now. With a market cap of just over half a billion dollars, IUC is actually undervalued and is trading at a discount of at least 10%.


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