Tuesday, January 31, 2006

2005 Energy Policy Act + President Bush's 2006 SOTU Address

2005 Energy Policy Act

Signed by President Bush on August 8, 2005, the Energy Policy Act contained widespread initiatives designed to guide America to the path for energy self-sustainability. Included in this 1700-page bill were several sections of nuclear energy. Chief proposals passing the senate pertaining to nuclear power include:

(1) Reauthorization of the Price Anderson Act: limits the liability of nuclear plant owners to $10.9 billion in case of an accident.

(2) Loan Guarantees for Nuclear Power: guarantees that exceed more than $2 billion dollars could be awarded to at least one nuclear facility from 2011- 2015. The loans could carry a significant subsidy of as much as 30 percent for each newly built nuclear reactor under the Nuclear Power 2010 program.

(3) Multiple Programs to Fund New Nuclear Reactors: funding initiatives in which the aim of the majority of these programs is to develop new nuclear reactors in the United States

$56 million in FY 2006 for the Nuclear Power 2010 program;
$45 million for the Generation IV Nuclear Energy Systems Initiative;
$24 million for the University Reactors Infrastructure and Education Assistance;
$70 million for the Advanced Fuel Cycle Initiative

(4) Nuclear Based Hydrogen Funding: $540 million for the Advanced Nuclear Reactor Hydrogen Cogeneration Project to build new nuclear reactors specifically to produce hydrogen. For fiscal years 2006-2015 $1.25 billion was allocated to the Next Generation Nuclear Plant Project for development of nuclear electricity and hydrogen development.

2006 State of the Union Address

President Bush, under fire politically and hindered by poor poll results, gives the 2006 State of the Union Address, upon which he has this to say about nuclear power as playing a role in reducing America's addiction to oil:

"The best way to break this addiction is through technology. Since 2001, we have spent nearly $10 billion to develop cleaner, cheaper, more reliable alternative energy sources, and we are on the threshold of incredible advances. So tonight, I announce the Advanced Energy Initiative, a 22 percent increase in clean-energy research at the Department of Energy, to push for breakthroughs in two vital areas. To change how we power our homes and offices, we will invest more in zero-emission coal-fired plants, revolutionary solar and wind technologies, and clean, safe nuclear energy."

Analysis: Not too many specifics yet, but when I browse the Department of Energy's (DOE) website and look at its nuclear division, aka Office of Nuclear Energy, Science and Technology, I noticed that some of key US utilities companies with interests in nuclear power have left public comments. They include:

Southern Corporation (SO)
Exelon Generation (EXC)
Progress Energy (PGN)
Constellation Energy Group (CEG)

Example: Southern Company (SO) wrote to the Office of Nuclear Energy in regards to the Energy Policy Act:

"Southern's comments are directed toward the provisions of section 638 that it views as most important to the fulfillment of the clear intent of Congress to encourage new investment in nuclear power plants. In order to accomplish this goal.."

Now I usually write about the production side of nuclear power, namely uranium and the companies that mine it. But it never hurts to have a general understanding of how policy affects the demand side of nuclear power. The United States seem to firmly on the course towards increasing their reliance on nuclear power, but words and action are two different things, and with its current political instability, it would be best to monitor the situation at present


Jan 31 Uranium Stocks Update: Urasia Energy (CVE:UUU)

Uranium Blockbuster

Jason Kirby, Financial Post. Published: Tuesday, January 31, 2006

What's it take to bring a uranium producer to market these days? Some highly sought-after mines in Central Asia, half-a-billion dollars and a Rolodex that stretches from Kazakhstan and Russia to London and Vancouver.

Oh, and enough adrenalin and sweat to fuel a nuclear reactor.

Until last November, there were just three publicly traded companies focused on producing uranium in the world, even as demand from energy-starved nations such as India and China has driven the price for a pound of uranium to US$37 from US$10 in early 2003.

Note: yesterday on Jan. 30th, the Ux Consulting Company, the leading source of uranium market news, announced that the month-end price of uranium oxide has risen to US$37.50.

But in early November, UrAsia Energy Ltd. debuted on the TSX Venture Exchange through a private placement and reverse takeover. In what was one of the most overlooked stock offerings of the year, UrAsia added its name to that short list of uranium producers.

The $504-million deal was not a conventional initial public offering and wasn't included in the Dealmakers rankings by FP DataGroup because the company isn't incorporated in Canada.
But it is a notable deal because it was among the largest ones on record brokered on Canada's junior bourse. It was also the biggest financing ever led by Vancouver-based Canaccord Capital Inc., which has rebranded its capital markets business as Canaccord Adams after the purchase of Boston-based investment bank Adams Harkness Financial Group last September.

Canaccord Adams was joined by BMO Nesbitt Burns Inc. and GMP Securities Ltd. The trio pocketed US$25-million in fees, with 40% of that going to Canaccord Adams.

Yet it was a financing that tested the mettle of everyone involved, from the global capital markets group at Canaccord Adams, lead by Paul Reynolds, to Vancouver financier Frank Giustra and his team at Endeavour Capital, a mining investment bank. Mr. Giustra is the former chairman of Yorkton Securities (now Orion Securities) and founder and former CEO of Lions Gate Entertainment.

Note: must be talented to jump from financial to film. And now he is at EDV. Makes me wonder if that past ROBTv segment of Stars and Dogs highlighting both EDV and UUU at the same time was a coincidence..don't think so. For fun, try reading two of Mr. Giustra's past articles in 2002 and 2003. Does his arguments hold up in 2006? You decide!

"In the end we had six weeks to do a deal that should have taken 14 weeks," said Gordon Keep, the acting chief financial officer of UrAsia and managing director of corporate finance at Endeavour.

The world of uranium mining has come a long way in the last few years. While Three Mile Island, and especially Chernobyl, made nuclear power all but verboten in the West through the 1990s, rising oil prices coupled with fast-growing economies in Asia have forced many countries to return to power by atom. By some accounts there are plans to build 130 new nuclear reactors by 2020, with China and India alone erecting 40 of them.

Note: I would really love to get a hold of a graph showing updated listings of every country building or planning to build nuclear reactors over what period of time. Wonder if there are any out there currently?

According to a report by Duncan McKeen, a mining analyst with GMP, global demand for uranium sits at 175 million pounds per year, while just 100 million pounds are produced annually. Demand is set to rise to 185 million pounds per year by 2010 and as to as much as 200 million pounds by 2018.

Money manager Eric Sprott, who has cheered uranium as an alternative to petroleum, has estimated demand could reach 300 million pounds in 20 years, and after factoring in inflation, drive prices to US$100 per pound.

UrAsia got its start when Mr. Giustra and Ian Telfer, CEO of Goldcorp Inc., approached Canaccord Adams last spring. They proposed putting together a new uranium producer and were looking for available assets. The three largest sources of uranium are Canada, Australia and Kazakhstan, and through its past exposure to the former Soviet state, Canaccord Adams' London office knew some of the largest available properties were to be found there.

"We've worked in Kazakhstan since the early days," said Canaccord Adams' Mr. Reynolds, in an interview from London. Canaccord Adams' London operation has emerged as the company's gem thanks to its involvement with the growing Alternative Investment Market, the junior arm of the London Stock Exchange. Canaccord Adams is the nominated advisor to 51 AIM-listed companies, many of them in the resource sector, and the business generated more than one-quarter of Canaccord Adams' $433-million in revenue last year. In Kazakhstan-based dealings, Canaccord first raised capital for Hurricane Hydrocarbons, the Calgary oil firm that eventually became Petrokazakhstan and operated in that country.

Note: never knew that. it makes sense, however, becaues I had been holding shares of an oil junior called Arawak which has operations in Kazakhstan as well and Canaccord is an firm that actively trades in the company.

"Today there are lots of investment banks pitching in Kazakhstan but I'd say our contacts are the best," Mr. Reynolds said.

Canaccord Adams put Mr. Giustra in touch with Sergey Kurzin, a Russian-born engineer and CEO of Oriel Resources, a chrome and nickel miner in Kazakhstan, and the group met with representatives of Kazatomprom, the state-owned uranium miner.

Through a complicated series of arrangements, UrAsia negotiated to buy a trio of uranium properties in the country. It raised roughly $60-million through a non-brokered private placement in early September and used the funds to buy a 30% stake in the North Kharasan project, which has the potential to produce a total of 3,000 tonnes of uranium. Kazatomprom would own the rest.

Then, in exchange for $5-million, UrAsia earned the right to buy into two even larger mining projects, the Akdala mine and the South Inkai project. Again, the state-owned company would retain a stake, this time 30%.

Throughout the negotiations, Mr. Giustra made repeated trips to meet with Kazakh officials. Meanwhile, the company relied heavily on Canaccord's mining analyst, Jim Taylor, who had visited the mines, for valuations and to aid its engineers.

But to seal the deal with Kazatomprom for the mines, UrAsia had to raise an additional US$345-million through a brokered private placement, and that's when the pressure really hit.
For one thing, UrAsia wasn't the only company in the running for the uranium mines, so time was of the essence. Rather than undergo the lengthy process of filing regulatory documents for an initial public offering, the company chose to do a reverse takeover of Signature Resources Ltd., a gold miner trading for 10 cents that four months earlier had hired Endeavour to help it find assets to buy. "They had an opportunity to buy those assets but they had to act quick and this enabled them to do it in a timely fashion," said Mr. Reynolds. "If they hadn't done the reverse takeover, they couldn't have raised such a substantial amount of money."

Given the rising demand for uranium as well as the strong performance of markets over the summer, the syndicate of investment banks believed UrAsia could fetch between $2 and $2.50 per share. That was in September.

But starting in October, equity markets tumbled, and demand from institutional investors for UrAsia's offering began to dry up. "We were originally going after it at $2.25 and then the market softened right in the middle," said Urasia's Mr. Keep. "It went from hugely oversold to not oversold."

Things only got worse in mid-October. That's when the Kazakstan government responded to China National Petroleum Corp.'s US$4.2-billion takeover of PetroKazakhstan by altering its laws to intervene and limit property rights over its strategic resources. "They changed their laws and it captured our acquisition without any indication of how to apply those laws," said Mr. Keep. "We had to make it up as we went along."

Meanwhile, Canaccord Adams, along with Nesbitt Burns and GMP, were busy drumming up interest among their key institutional clients. As it turned out, they were able to place $504-million with investors, with about 60% of the issue sold in the U.K. and Europe. Of the balance in North America, much of the demand came from the United States.

Note: that means a significant part of UUU is owned not by Canadians, but by foreigners. UUU is trade in the Berlin Stock Exchange. You can check it out here:

"The syndicate partners were very strong and the combined syndicate did a good job to ensure the deal was a success," said Mr. Reynolds. "It's been proven by the market that it was a big success."

On Nov. 7, UrAsia shares began trading at $1.80. The shares closed yesterday at $2.88.
The company is run by CEO Philip Shirvington, former head of uranium miner Energy Resources of Australia, while Mr. Telfer was named non-executive chairman. Mr. Giustra and Robert Cross, executive chairman of Northern Orion Resources, are also on the board.
UrAsia is expected to begin trading on the LSE's AIM exchange within the next two months. "It was your standard deal," Mr. Keep said. "Except everything was done with language barriers and time frames that were unrealistic but met. You had people all over the world trying to talk to each other with a 14-hour time change between them and you had the 10 worst days in the junior market. It was a huge push on everyone's time, energy and abilities to keep it all together."

Note: An AIM listing cannot hurt, and I'm pulling for UUU to have a TSE listing as well. ERA was previously mentioned in my article about Australian uranium.


2nd Uranium Stocks Pick: Paladin Resources (TSE:PDN)

Along with Urasia, there is another junior uranium company who has managed to take a shortcut into inevitable U308 production. Although their stories diverge somewhat, it is somehow fitting that amongst uranium enthusiasts such as myself who value present production, one is often mentioned with the other. This company is Australia's Paladin Resources.

As evidenced by the chart, Paladin has almost tripled since the 2nd quarter of 2005. An impressive return, and one that, when examining significant milestones for the company, would lead to the conclusion that the risk involved in buying this company is not as great as it seems.

Paladin is from Perth, Australia, and was mentioned in my last post about the importance of that country's impact on the uranium landscape. Having been stymied for years by their own government, Paladin decided to branch out into the more exotic parts of the world: Namibia and Malawi. Their project in Namibia is known as Langer Heinrich and the one in Malawi as Kayelekera.

Namibia's Langer Heinrich: A Little History

In August 2002, Paladin acquired 100% of Langer Heinrich Uranium (Pty) Ltd., the Namibian company holding the Project rights and completed a Pre-Feasibility study at a cost of US$ 1.26 million. This study was followed by a US$ 3.0 million Bankable Feasibility Study (BFS) that was completed in April of 2005. After full management review of the BFS, the Board resolved on May 9, 2005 to proceed with development of the project.

May 9, 2005 Press Release (Paladin Close $1.22Cdn)

Preamble: When I re-read all of Paladin's press releases, the one that's most interesting to me by far is this one, the day they gave the go ahead for development of Langer Heinrich.

The BFS document covers all aspects of the Project including resources/reserves detailing, mining, production, tailings disposal and uranium marketing. The BFS is supported by comprehensive environmental studies and management plans. The Project is designed to produce 1,180 tonnes (2.6M lbs) per annum (tpa) of uranium oxide concentrates (U3O8) from 1.5 M tpa of calcrete associated ores by ore beneficiation, alkaline leaching (heating to 750C), counter-current decantation, ion exchange, precipitation and calcining to produce saleable U3O8.

Using the ore reserve base of 22.24Mt at an average grade of 0.071% U3O8 the BFS has a scheduled mine life of 11 years and a process plant life of 15 years. Based on the mill throughput design of 1.5Mtpa of ore, the BFS shows 1,180tpa U3O8 can be produced for the first 11 years at a head feed grade of 0.0875% U3O8 and 401tpa U3O8 over the last 4 years, using the accumulated low grade stockpile grading 0.032% U3O8. The operating costs for the reserve defined BFS averages US$14.18/lb U3O8 over the life of the project and for the first six years costs average US$12.20/lb U3O8. The capital costs total US$92M including a 10% contingency plus an "accuracy provision" totalling US$10M. The capital costs have increased from that which were previously stated.

The BFS clearly indicates that the Langer Heinrich Uranium Project can be developed into a profitable mining operation. The BFS incorporates a uranium pricing schedule for U3O8 ranging from US$26/lb to US$35/lb over the 15 year period. The BFS financial modelling shows highly attractive returns can be achieved based on using defined reserves only. Paladin is currently unable to release the economic analysis resulting from the BFS work, which incorporates 50% of the Inferred Resources, due to restrictions under Canadian securities laws respecting disclosure of results of economic evaluation which uses Inferred Resources. Paladin intends to apply for an exemption order from such restrictions from the Ontario Securities Commission so as to be able to release this information.

Nevertheless, even on the reserve constrained BFS model and the conservative pricing schedule, the Project is able to pay back initial capital and working capital 3.5 years after commencement of operations (scheduled for start up for September 2006) showing the robust nature for the Project.

Analysis: there are several things to like about the last couple of paragraphs. First of all, rough mathwork would tend to agree with their calculations. Let's assume that within the next 3.5 years their projection of uranium oxide price was $27/lb (first three years of a 15 year price projection would be closer to $26 than $35 of course). So, 3.5 years 2.6 million lbs/yr * ($27/lb - $12.2/lb for operating costs) = $134 million. Enough to pay the capital cost of $92 million + 10% contingency. However, there is one happy flaw. Uranium is at $37/lb already. $113 million becomes $225 million. Paladin's transparency with their rojections and the direct way in which investors like I can pick up on what, when and how to best achieve their goals are is one that lends confidence.

All documentation for the Langer Heinrich Mining Licence Application, including the BFS, Environmental Assessment Study and Management Plan, has been prepared and presented to the Ministry of Mines and Energy in Namibia for review and approval. The application has been made for the maximum of 25 years. Initial responses have been favourable and approvals to allow the Project to proceed to development and mining are expected by the end of the 2nd quarter 2005.

Analysis: Excuse me? Did they say 2nd quarter? Indeed, remember this press release is dated May 9th! Apparently, there is a HUGE difference between obtaining uranium development and mining permits in Namibia than in Canada, let alone Australia. This was exactly the reason why Paladin came here.

September 16, 2005 Press Release (Paladin Close $1.97Cdn)
Paladin announces that the Namibian Minister of Mines and Energy, The Honorable Mr E Nghimtina at a ceremony held at site yesterday, September 15th, officially initiated the commencement of construction activities for the Langer Heinrich Uranium Project. The ceremony was attended by a number of Namibian Government officials, local community representatives, as well as Namibian media. In welcoming the Minister, Paladin Resources’ Chairman, Rick Crabb, noted that Langer Heinrich will be Namibia’s second uranium mine and will make Namibia the 4th largest uranium producing country in the world.

Analysis: May 9 to September 16. Shade over four months. Crazy.

November 9, 2005 Press Release (Paladin Close $2.03Cdn)
Paladin Resources Ltd (Paladin) is pleased to advise that drilling of the previously untested palaeochannel, extending west from the Detail 1 orebody, has returned very encouraging results. Compared to the previously reported Mineral Resources (estimated with the 300ppm cut off) the new resource estimates at 250ppm cut off represents an increase in contained U3O8 as follows:
· A 24% increase in the Measured and Indicated Resources (from 17,100t to 20,200t U3O8).
· A 52% increase in the Inferred Resources (from 15,700t to 23,800t contained U 3O8).

Analysis: That's quite an increase in reserves, although I do not think they are planning to pump more uranium oxide out each year. Rather this will probably lengthen the mine life.

December 21, 2005: Paladin Resources Ltd (Paladin Close $1.70Cdn)
Paladin has secured the services of Mr. Wyatt Buck, a top uranium operative who will assume the position of General Manager of Langer Heinrich mining operations based in Swakopmund, Namibia. Mr. Buck qualified as a Mechanical Engineer at the University of Saskatchewan in 1981 and was later a senior executive for 15 years with the Cameco Corporation, a Canadian company that leads in uranium production. For the past 2 years he held the position of General Manager of the McArthur River Mine and the Key Lake Mill, the highest producing uranium operation in the world.

Analysis: Quite an impressive resume, good move by Paladin to bring in a uranium specialist with this much experience. Another confidence builder.

January 19, 2006: Paladin Resources Ltd (Paladin Close $2.34Cdn)
Paladin has secured its first sales contract for a portion of its yellowcake (U3O8) production from the Langer Heinrich Uranium Mining Operation, scheduled for commissioning in September 2006. This sales arrangement with a major US utility is subject to finalisation of all necessary legal documentation. The sales contract is for the purchase of 2,145,000lbs U3O8 for delivery between 2007 and 2012. Pricing will be market related to be determined at time of each delivery with escalating floor and ceiling price components.

Analysis: Speed and efficiency seems to be the modus operandi for this company. Impressive how they haven't even began production an already has secured a contract that is NOT hedged, but will take advantage of the uranium price increases.

January 19, 2006: Paladin Resources Ltd (Paladin Close $2.34Cdn)
Paladin is pleased to advise that infill drilling of the Kayelekera Deposit, has returned very encouraging results. This work has produced a twofold benefit:
· Firstly, the results have added significantly to the presently stated Mineral Resource estimates for Kayelekera; and
· Secondly, have allowed most of these resources to be classified into the Measured and Indicated Resource Categories with a small percentage retained as Inferred Resources. As can be compared from the above, the resources for Kayelekera have been increased substantially. At the 300ppm cut -off limit, Measured and Indicated Mineral Resources identified amount to 15.31Mt grading 0.09% U3O8 and 3.4Mt of Inferred Resources at 0.06% U3O8 versus the previously stated 9.4Mt grading 0.12% U3O8. The resource estimates for both the 300ppm and 600ppm U3O8 cut-offs are provided herein because at this stage the economic cut -off that will be applied from the mine modelling work is unknown but is expected to be between these two cut -off limits. These results do show, however, that a 10 year mine life producing approximately 1,000t U3O8 per year is likely as a minimum and that the possibility exists to extend this mine life and/or annual production depending on the final economics that are determined from the BFS. The increase in tonnage and decrease in grade from the previously stated resources is due to the fact that the high grade core of the deposit was well defined by previous drilling and the new drilling focussed mostly on defining the peripheral zones of the deposit. Consequently, this work added mainly lower grade material to the resource estimations. In total, however, the new estimate has increased the contained uranium metal in the deposit by 4,820t U3O8 or 45%, by Paladin directors which is regarded highly significant.

Analysis: I do not have the space to go into Paladin and the Kayelekera project in Malawi, but this certainly sounds like good news.

January 27, 2006: Paladin Resources Ltd (Paladin Close $2.85Cdn)

Paladin has secured a second sales contract for a portion of its yellowcake (U3O8) production from the Langer Heinrich Uranium Mining Operation, scheduled for commissioning in September 2006. This latest sales arrangement with a US utility is subject to finalisation of all necessary legal documentation. The sales contract is for the purchase of 2,080,000lbs U3O8 for delivery between 2007 and 2012. Pricing will be market related to be determined at time of each delivery with escalating floor and ceiling price components.

Analysis: Unless my math is horribly off, 2007 to 2012 encompasses six years of production. The sum of two sales contracts announced January 19th and 29th is a year-and-a-half's worth of production (remember, Paladin projects 2.6 million lbs/year). So they have managed to sell a quarter of their six year inventory before even mining a single pound of it. I'll leave everyone to draw their own conclusions about this..

Paladin's website has presentaions (Nov 2005) on both Langer Heinrich and Kayelekera. I have linked their .pdf files respectively.

Conclusion: To this day, Paladin has kept everything on track, met its deadlines, and have given me no sense that they do not have full control of the situation. I like their straightforward, easy-to-understand presentations, and am fairly confident of the people they have in place. I will not say whether or not to buy it at this moment in time as I am not a chart analyst, but if you are like me and am investing for the long run, Paladin would be a worthy inclusion into the uranium portfolio.

Disclaimer: I own shares in Paladin, buying them at an entry price of $2.30.

As always, please do your own due diligence. Scrounge for info and know more about the company you want to place your hard-earned money into!!

comments and suggestions are very welcome as always!


Monday, January 30, 2006

Don't Forget Australia Has The Most Uranium!

Being from Canada, it's far too easy sometimes to focus in on what Canadian and American uranium companies are doing right now. To be honest, it's hard even to keep track and more and more juniors are springing out every day.

However, it would be really negligent not to take a look at how the Australian uranium environment is shaping up. After all, Australia has 41% of the world's uranium deposit. Kazakhstan second, Canada third. Just because they don't mine it now doesn't mean they won't in the future.

To that end, let's take a look at this January 19th article from the Sydney Morning Herald

Uranium winds of change blowing
by Jamie Freed

Australia is home to nearly half the world's uranium, but politics has conspired to stymie an industry in the midst of a global boom.

At first glance, Australia's lack of a nuclear power industry might seem curious to foreigners when they learn that Australia has more uranium than any other country.

It's not because of a lack of interest from mining companies, which tend to view Australia as a dream destination because of its stable political system, skilled workforce and abundant natural resources. Rather, restrictive government policy at the federal and state level has prevented most of the country's uranium from being mined.

At a meeting of the Asia-Pacific Partnership for Clean Development and Climate in Sydney last week, the focus was on measures the six member countries could adopt to reduce greenhouse gases.

Nuclear power was one topic at the forefront, as the United States, Japan, South Korea, India and China all have nuclear power plants – and are planning to build more to help tackle climate change. Australia, never having built a nuclear power plant, is clearly the odd one out.

Analysis: remember, United States and Australia are the biggest countries NOT to sign the Kyoto Accord.

Take Perth's Paladin Resources. Instead of mining or even closely studying one of its deposits in Western Australia, it will start production at its Langer Heinrich project in Namibia this year. Next on its list is a deposit in Malawi, one of the poorest and most corrupt countries.

Analysis: I like Paladin. Enough to recommend it? Stay tuned!

Geoff Gallop, is adamant no uranium mining will be allowed in his state while he is in office – and his present term lasts till 2009.

Analysis: Actually, I found out that Western Australian Premier, Dr Geoff Gallop, has resigned from Western Australia Parliament, to treat depression.

When Redport – a former gold explorer and Internet company – picked up the Lake Maitland uranium project in Western Australia last April, the market reaction seemed almost inexplicable.

The company planned to mine in Western Australia and ship the nuclear power plant fuel to China, despite both actions being illegal under state and federal policy. Yet shares in the tiny explorer more than doubled on the day of the announcement.

Unless investors – including institutions such as Fidelity Investments, which holds 12.7 per cent of Redport – have suddenly become keen to sink money into a project going nowhere, it seems a paradigm shift is afoot.

Analysis: China and Australia started talks January 18th about the latter exporting uranium to the former, albeit with strict safeguards. How to enforce the rule that China cannot use this uranium for nuclear warheads is beyond me, and beyond the Australians. Of course, I also contend that if China wanted warheads, they could get warheads. The States and Russia still point thousands at each other, what would China really bring to the table?

Industry veteran Tony Grey, who founded the now-defunct Pancontinental Mining, says: "Australia is still in irons as far as uranium development is concerned."

He should know. His company discovered the giant Jabiluka deposit in the Northern Territory in 1971 – and it still hasn't been
developed. "(But) having said that," he adds, "the winds of change are blowing."

Analysis: Jabiluka has reserves in excess of 160 000 tonnes of uranium oxide (that’s 320 million lbs), and is one of the world's larger high grade uranium deposits. Remember, not all uranium is created equal. The highest grade are in the Athabasca Basin and in Northern Australia.

Energy Resources of Australia, which runs the Ranger mine in the Northern Territory, has been stopped from developing the nearby Jabiluka deposit because of issues with Aboriginal landholders. It bought the deposit from Pancontinental in 1991.

ERA and the Mirarr people agreed last February to place the Jabiluka site on long-term care and maintenance, and Energy Resources will not develop it without consent from the indigenous group.

Analysis: ERA is actually controlled now by Rio Tinto Ltd.

Redport chairman Richard Homsany certainly believed change was coming when his company invested in Lake Maitland. "At the moment there is enormous pressure to re-examine that (Western Australia) policy on uranium mining," he said in April. "One cannot ignore the fact it is a clean fuel." Neither, in the present climate, can it be ignored that Australia is home to 41 per cent of the world's economic uranium reserves and the world's biggest uranium mine, BHP Billiton's Olympic Dam.

Analysis: Olympic Dam is the world's fourth-largest copper deposit and the largest uranium deposit. The mine capacity is 200,000t/y of copper and 4,300t/y of uranium and they’d like to quadruple uranium production in the future. An article all unto itself.

As always, please do your own due diligence. Scrounge for info and know more about the company you want to place your hard-earned money into!!

comments, suggestions, and your personal ideas are very welcome!

Sunday, January 29, 2006

Teasing out IAEA's "Analysis of Uranium Supply to 2050"

Now, this document is long. Over 100 pages long. Some of it is rather technical too. But you know what? It's an interesting and essential read!

Why do I say that? Well, because if you're investing money, wouldn't you want to know specifics? Exactly why am I putting my money into Urasia? Exactly why you are willing to spend money on a very specific resource sector? If reading will give you knowledge of overall uranium conditions & outlook, and make you actually believe in what you're investing, spelled out for you by a reputable source (come on, this is the IAEA here), then I fail to see why you wouldn't go for it.

Enough preamble, let's take a look at some of my personal highlights of the IAEA presentation:

About Supply + Demand

Lead times to bring major projects into operation are typically between eight and ten years from discovery to start of production. To this total, five or more years must be added for exploration and discovery and for the potential of completing even longer and more expensive environmental reviews. Therefore it would most likely be no earlier than 2015 or 2020 before production could begin from resources discovered during exploration started in 2000. On the other hand, longer delays will reduce the likelihood that the entire resource base of a large new project will be depleted by 2050. Put another way, discovery of a major deposit in 2030 will have much less impact on alleviating the projected shortfall between production and demand than will a project that is discovered in 2005.

Analysis: This is why I am much more interested in investing in companies who are getting uranium out of the ground now. Not tomorrow, today. There are at least ten times the number of uranium companies in Canada now compared to a few years ago, many of them who are small juniors with just land claims to their name. Granted, there are a couple of promising exceptions, but would I really want to invest money into them? Personally, no, because I don't have enough to throw at 10 non-producing juniors and hope some of them actually strike it rich or get bought out.

In terms of discovery to production time, every country is different. Australia has the tightest regulations, Canada and the States take years. Other countries are faster. Case in point, the joint venture between Kazakhstan and Japan, freshly minted, will start pilot production as early as 2007 and full production in 2010. That's only four years.

One of the things that strikes me when I peruse the Internet for uranium news is how many companies are planning on opening uranium mines in the near future (aka several years). While I do believe that uranium prices will go up, I suspect that overall uranium production will be able to match demand sooner than people think. This, however, just reinforces my belief that the best time to invest in uranium is right now, with the right company that can take advantage of this lag time.

About Uranium Type

Uranium deposits have been broadly grouped into 14 categories. Two types— unconformity related and sandstone — are considered to have the best potential to host significant SR.

Unconformity related deposits account for 18% of study RAR, but only 8% of the deposits or deposit groups included in study RAR, which is an indication of their high ore grade and resource potential. The largest known high-grade deposits in the world are located in the Athabasca Basin in northern Saskatchewan, Canada, including McArthur River (184 200 t U, average grade 12.6% uranium) and Cigar Lake (138 800 t U, average grade 11.5% uranium); both are unconformity related deposits.

The Athabasca Basin in Canada and the Northern Territory, Australia, host significant unconformity related resources, and they are both considered to have good potential for additional discoveries, even of the magnitude of McArthur River, Cigar Lake or Jabiluka.

Sandstone deposits: uranium deposits hosted in sandstones account for nearly 30% of the study RAR. Production from sandstone deposits is the cornerstone of the uranium industries of Kazakhstan, Niger, the USA and Uzbekistan. Areas considered to have the best potential for the discovery of significant new sandstone resources include:
—The Trans-Baikal region (valley type deposits) in the Russian Federation and northern Kazakhstan;
—The Gobi Basins in Mongolia;
—The Lake Frome Basin in Australia;
—The Yili, Junger and Erlian Basins in China;
—The Karoo Basins in southern Africa and Madagascar;
—The Franceville Basin in Gabon.

Analysis: What this means is that not all uranium is equal. And what this also implies is that Cameco is not going to leave the uranium landscape for a very very long time!

As always, please do your own due diligence. Scrounge for info and know more about the company you want to place your hard-earned money into!!


Saturday, January 28, 2006

Jan 28 Uranium Stocks Update: Urasia Energy (CVE:UUU )

A few points that were floating in my head about Urasia

(1) Canada has an all-business channel called "Report on Business" aka ROBTv. On January 25th, they had a guest analyst come on a segment called "Stars and Dogs", where they pick out stocks they liked and ones they didn't. On the "stars" list was Urasia. If you'd like to watch the segment, here is the link. (ROBTv has a website where you can watch previous episodes)

Lawrence Roulston was the guest and I did a little digging on him. Turns out he is the editor of a publication called Resource Opportunities, a subscriber supported publication dedicated to providing objective commentary on the resource industry. Now I can't exactly judge his credentials, if you're interested, you can check out the site. He has been on ROBTv several times in the past, including three times in 2005 so somebody must like him..

(2) Urasia is seeking to be listed on the TSE Exchange. Now, why would graduating from the Venture Exchange help? Think exposure. Think institutional buying. Because, to my knowledge, no big name analysts are covering UUU at this point.

Case in point, I bought a junior oil called Arawak that had its operations in Kazakhstan, Azerbaijan, and Russia. This was after the PetroKhazakhstan acquisition and I was interested to see if any other Canadian-listed operators were there.

Arawak has since done well for me (it also acquired other companies back when oil was still reasonably priced and thus were in good position to take advantage of rising prices) and has recently begun to acquire institutional coverage (Morgan Stanley has been buying up its shares like crazy). Still on the Venture, but inching up towards a TSX listing.

May UUU follow such a course!

(3) I found a November 15, 2005 PDF Urasia presentation. This is one of their slides detailing estimated production down the line. It's a good read so here's the link

(4) Price Targets. I have no personal price targets right now because I intend to hold UUU for a very long time (at least >1 year). However, here's the article on Goldeditor with someone else's price target. Apparently, Jordan Funds (this investor club in Sweden that I know really nothing about..you can check out their site here) had this to say:

Jordan Funds 2-3 year target: CAD $15 per share at USD 40 lbs/U308. Perhaps more realistic is Uranium at USD 80/lb within 2-3 years according to JF, the classic “the sky is the limit” prevails, or in Swedish, “do your homework” and take a strong look at UUU. For someone who is new in the uranium industry, UUU means high risk, for someone who knows more about the industry it means more like high chance. JF believes that UUU should be ranked in JF’s division 2 group as the top pick. As early as the year 2007, they may be among the world’s top 5 and perhaps in the upper half of the five foremost uranium companies in the world. (I.e. UrAsia, Kazatomprom, Cogema, Cameco and ERA) JF has meticulously and in a detailed manner gone through the uranium industry specifically, as well as the foremost companies. The 5 mentioned are “the big ones” in the future. Close behind the division 2 gang with less production in view, but still should also be profitable within a short period are: Laramide, Aflease, Southern Cross, Paladin, Uranium Resources, IUC, Denison and maybe Strathmore and UEX. Other companies in this sector can all be classified as high risk companies with accompanying chances and risks.

Right now - UUU.V is Jordan Funds top Uranium stock pick.

Analysis: I really don't know what "meticuously and in a detailed manner" really means but it is interesting to note that if you check out Jordan Funds' site (or Jordanfonden, because they are, well, Swedish) they have stakes in other uranium companies so that says something about UUU. Maybe not a whole lot to you and I, but something =P

As always, please do your own due diligence. Scrounge for info and know more about the company you want to place your hard-earned money into!!

Trivia: guess which country is Kazakhstan's easterly neighbour?

Uh huh, It's China..

Comments are very very welcome, especially those from the regulars @ Stockhouse!


Toshiba + Westinghouse Deal

Angela MacDonald-Smith in Sydney wrote a couple of Days ago on January 24th for Bloomberg.com about the Westinghouse deal. And remember, Australia has the most uranium in the world so I think she probably knows what she's talking about.

Bidding for Westinghouse Electric Co., designer of 61 percent of the world's nuclear reactors, signals increasing demand in the atomic energy industry for the first time in decades.

Toshiba Corp. is set to buy Westinghouse from British Nuclear Fuels Plc, the U.K. company said today, without giving a price. Toshiba plans to pay about $5 billion, said two people with knowledge of the talks who declined to be named. General Electric Co. and Mitsubishi Heavy Industries Ltd. had also bid.

Analysis: Toshiba managed to outbid GE, that company with a market cap close to $400 billion. Pretty impressive. Or desperate..either one is fine for me.

The winning offer is more than four times what the U.K. government paid for the business almost seven years ago. Since then, oil prices have more than tripled, helping to drive a nuclear-power boom as Asian countries plan new reactors needed to meet energy demand. Developed nations need an alternative to fossil fuels, which are blamed for global warming.

Analysis: The Kyoto Protocol is an agreement under which industrialized countries will reduce their collective emissions of greenhouse gases by 5.2% compared to the year 1990. The agreement came into force on February 16, 2005. As of September 2005, a total of 156 countries have ratified the agreement (representing over 61% of global emissions). Australia and the US are not part of the accord.

I really doubt that alternative fuels can sustain developed nations. They have forever been development, without much mainstream success. Nuclear power is clean and will not contribute to the greenhouse effect.

After three decades of stagnation, the nuclear industry may receive more than $200 billion of investment by 2030, according to the International Energy Agency.

Demand for nuclear power investments stretches across the industry. FPL Group Inc. of Florida agreed in December to buy Constellation Energy Group Inc. of Baltimore for about $11 billion, doubling the size of its nuclear business. The shares of Saskatoon, Canada-based Cameco Corp., the world's largest uranium supplier, jumped 91 percent in the past year.

Analysis: Cameco is really a very well run company with rock-solid management and owns the most valuable uranium mine in the world. It's market cap is closing on $16 billion Cdn, it's P/E is 86.5, and it's enjoyed an unbelievable run-up already. But it also is the best of breed..(Disclaimer: I do not currently own any shares in Cameco)

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., was quoted in the Wall Street Journal in June saying that the threat of climate change means he's open to investing in nuclear energy.

Anaylsis: Once again, this guy's insight is pretty amazing. Here I am at the end of January writing about uranium and he's already been probing over investing prospects half a year ago. Actually, probably longer. I still remember the first time I looked up how much a share in Berkshire Hathaway would cost. Maybe if you take off a couple of zeroes I could afford a few.



Friday, January 27, 2006

1st Uranium Stocks Pick: Urasia Energy (CVE:UUU)

The Urasia Story (PART I)


First, A Little Necessary Reading


from their own website:

UrAsia Energy Ltd. ("UrAsia") began trading on the TSX Venture Exchange (TSXV) on Tuesday November 8 under the trading symbol UUU. UrAsia is one of the four listed uranium producers in the world, and one of three now listed in Canada. UrAsia's annualized production is an estimated 1.4 million pounds of uranium, which comes from its 70% interest in the Akdala in-situ leach uranium mine in Kazakhstan. The company's goal is to be producing in excess of 10 million pounds annually by 2015 from at least three assets in Central Asia.


from the Managment Discussion and Analysis (Dec 15, 2005):

In September 2005, the Company signed a binding letter of agreement with UrAsia BVI pursuant to which the Company agreed to acquire all of the issued and outstanding shares of UrAsia BVI in consideration for the issuance of post-consolidation common shares of the Company.

In November 2005, the Company completed the Acquisition in consideration for the issuance of 413,581,250 post-consolidation shares of the Company to the shareholders of UrAsia.

As part of the Acquisition, UrAsia acquired a 30% interest in a Kharassan uranium project located in south central Kazakhstan through the purchase of a 30% interest in the Kyzylkum JV in consideration for approximately $89 million (US$75 million) of which approximately $44.5 million (US$37.5 million) was paid in cash and $44.5 million (US$37.5 million) was paid by the issuance of 24,181,500 ordinary shares of UrAsia.

As part of the Acquisition, UrAsia also acquired a 70% interest in the Betpak Dala Joint Venture (“Betpak JV”) in consideration for approximately $415 million (US$350 million). The Betpak JV has a 100% interest in the Akdala ISL uranium mine and a 100% interest in the South Inkai ISL uranium development project, both located in south central Kazakhstan.

Analysis of the Betpak JV Acquisition

Through raising about $500 million dollars (biggest ever for a Venture exchange stock), Urasia managed to vault themselves ahead of all the uranium junior exploration companies in a single stroke. Their 70% interest in the Betpak Dala Joint (the other 30% belongs to KazAtomProm [remember them?]) lets Urasia have immediate access to 1.4 million pounds of uranium oxide a year.

Thus, I'm not talking about a company just laying claim to as much land in the Athabasca Basin as humanly possible. God knows there are enough of them out there. This is immediate production that can take advantage of the upward prices of uranium. No waiting for seismic tests, no permits that take years to process. I cannot stress this enough. They are getting uranium out of the ground right now!

The Akdala ISL mine is estimated to have 18.77 million pounds of uranium. The people who checked the older Kazatomprom resource estimate and converted them to the new estimate uses the NI 43-101 gold standrad of reporting. Again, this is nothing like other companies who claim reserves based on "historical reports."

So, to recap the Akdala mine, they is 18.77 million pounds of uranium using the inexpensive ISL (in-situ leeching) technique @ a rate of 1.4 million lb/year with the potential of "establishing additional measured and indicated resources of 12 million to 13 million tonnes at a grade of 0.04% to 0.06% containing 5,000 to 8,000 t U (thats 10-16 million pounds if they are using short tons) by infill drilling of the inferred resources and extensions of the roll fronts within the current licences."

How about the Inkai project? After all, they did shell out $350 million US not only for Akdala, but for the potential in Inkai. Again, following NI 43-101 guidelines, they have an estimate of 14,068 tons (28 million pounds), with a potential for 32,000 to 40,000 more. This however, is only an estimation and it must be emphasized that Inkai is undeveloped as of right now.

Okay, so when Urasia made this acquisition in September 2005, the price of uranium was ~$30/lb US. Ah, but wait. That was in September 2005. Today is almost February and uranium is closer to $37/lb US. They had expected total Akdala revenue over the course of its mine life to be $30/lb * 18.77 million pounds = ~$560 million US. Now it is more like $700 million.

This is uber simplistic of course. I didn't factor in production costs and all the rest, but I also did not count the further expandability of the Akdala mine or their undeveloped assets in Inkai.

Fair's fair, but this is just to illustrate that Urasia bought Betjak BV (containing Akdala and Inkai) at the right time. By being quick and pulling the trigger on the deal they managed to snag assets that are growing in value by virtue of the rising uranium price.

What's the kicker here? To my knowledge, Urasia is not locked into a long-term uranium contract. How important is this? Well, think about it. Cameco has been around for years and years. So when uranium was traded @ < $10/lb, they would obviously hedge and sell uranium to the same buyer at a fixed price to ensure they won't be screwed over by the less than appetizing price. Cameco is still more or less hedged this way. If you look on the graph, the price of uranium has only recently begun to ascend steeply. What does this mean? Urasia is in the position to capitalize. Timing is everything, and I believe this company has timed things perfectly to be in the best position possible.

A Thought:

Do you know who is lurking in the background of Urasia as the non-executive chairman? Ian Telfer. Yes, the same guy who is CEO of the $9 billion US marketcap Goldcorp. If you believe in the right people, there you have it. I for one, am not about to bet against Urasia.



Wednesday, January 25, 2006

Japan + Kazakhstan --> Stock Uranium as China Looms

Ikuko Kao of Reuters News Service reports:

"Japanese firms are boosting investment in uranium sources in Central Asia as a revenue stream, since an expected surge in global demand for nuclear fuel is likely to keep prices at record-high levels"

Analysis: yes, the price of spot uranium is up to $36.5/lb, and shows no signs of slowing down. Simple supply and demand economics. Price is expected to shoot up to $45 next year. Some of the more adventurous analysts have speculated that it could go up to $500/lb. But let's just keep it conservative and say the probability of uranium price getting higher is very likely and that it will go lower, not so much. There is just not enough production right now; less than 10 companies in the world are actually getting uranium out of the ground.

Sumitomo Corp. and "Kansai Electric Power Co., Japan's third-largest trading firm and second-ranked utility, agreed on Monday with Kazakhstan's state-run KazAtomProm to jointly develop a uranium deposit in the country"

Analysis: why on earth would such big companies in Japan ever be interested in Kazakhstan?

"It's very important to look beyond oil to find a new income source especially when uranium prices are almost promised to rise to new highs," a spokesman at Sumitomo said.
Resource-poor Japan imports almost all of its oil and gas needs and has a government policy of supporting nuclear power with an aim to build five new nuclear power plants by 2010."

Analysis: it's true. Nuclear power supplies 20% of the electricity in this world. That is a ton of power. And there's only so much supply. We are actually not producing nearly enough uranium right now to supply demand, but the deficit is being made up by converting old Soviet weapons. Unfortunately, that particular agreement ends in about eight years. Supply will even be stretched further, as new nuclear plants are being built. But by who?

"Japan will still have to import uranium and wants to avoid competition with China, which has also been rushing for stakes in projects and to secure resources to meet energy demand.
"We need to secure uranium stakes before the competition with China starts over again," the Sumitomo spokesman said. "

Analysis: and there it is. Just as China (and India) is driving the oil boom, it also will drive the uranium market. China is planning to build 2 new power plants every year for the next twenty years. Other countries around the world are doing the same thing (although not nearly as drastic) and others still are contemplating whether or not to delve more into nuclear power (whole other discussion). If you can imagine that with only 440 or so power plants right now, more being built, and supply destined to drop off rather sharply until a massive amount of production is undertaken some time in the future, you can understand why uranium investing makes some sense.

Tuesday, January 24, 2006

A Synopsis of the Uranium Stock Story

As an investor who came late to the oil and gas boom, it was pretty frustrating to see all the gains being realized in the markets and knowing that, while it might still be worthwhile to sink money in oil stocks (particularly in the oil sands sector), most of the boom had already passed. Sure there was money still to be made, but the downside is palpable. Geopolitical tensions in Iran and Nigeria are propping up crude oil prices right now, but the fundamentals (aka supply and demand) do not suggest that $70/barrel is feasible.

So, the question is,

What else?


Over the next little while, I will be elucidating more of the story and will recommend a few companies who are in the best position to cash in on this yet undiscovered phenomenon

For those who would want some more info now, feel free to check out this guide. It gives a good introduction and spells why so many investors like me are eager to do our own due diligence and make good decisions.


Beware, however, while reading this. This article should only serve as introduction as it is heavily biased. Uranium is going to make a lot of money for crafty investors, but only those who do their own research and THINK for themselves tend to make up this particular group!