Sunday, July 16, 2006

G8 + Nuclear Power + China

G8 leaders agreed today to make low-enriched uranium available to each other for use in nuclear power plants. A conference with a keen focus on energy, nuclear power has been on the G8 agenda and uranium is the obvious benefactor. The resurgence in nuclear energy is being fronted by multiple countries, chief amongst them Japan, Russia, Great Britain, Canada, and the United States, not to mention China and India, not members of the G8 but clearly uranium-hungry countries.

Speaking of China, senior representatives of four Chinese trading companies will attend a conference in Perth next week with a view to signing equity deals with Australian uranium explorers. In order to build the forty or so reactors in the next fifteen years, China had signed a uranium treaty with several Australia months ago. Legislation allow uranium mining has not changed significantly since that time, but do not expect that to last. China will get its uranium, and Australian uranium stockholders would like nothing more than to see that happen.

Wednesday, July 12, 2006

July 12 Uranium Stocks Update: Paladin Resources (TSE:PDN)

Paladin officially announced their A$174 million ($130 million) bid for Valhalla Uranium Ltd.
The company is offering one share for every 3.16 Valhalla shares, valuing the company at A$1.45 a share, or 41 percent above the average price of the shares over the past 20 trading days. Valhalla directors recommended shareholders accept the bid in the absence of a higher one.

Of course, Summit Resources owns half of the Valhalla and Skal deposits and it was expected that they would have major objections at being overridden by Paladin on their Joint Venture (JV) with Valhalla. However, Summit has already come out with a terse statement stating that, pending legal consultation, Paladin did not trigger any pre-emptive rights in the original JV agreement between Summit and Valhalla. It is an admission of sorts that this deal will most likely go through successfully.

State of the Uranium World

Uranium has been heating up on all fronts in the last few weeks. Acquisitions by Mega Uranium (CVE.MGA), Paladin Resources (TSE:PDN), SXR Uranium One (TSE:SXR), and the merger of Bayswater Ventures (CVE:BVE) and Pathfinder Resources (CVE:PHR) reinvigorated uranium stocks while signalling the advent of the merger and acquisition phase of the sector.

In addition, England has thrown its proverbial hat into the uranium game with its just-unveiled Energy Policy:

Blair was speaking on the eve of the publication of a major energy review by his own government, which is expected to endorse greater use of nuclear power.

The establishment of new nuclear powerplants in the United Kingdom has been approved. Industry secretary Alistair Darling says that nuclear power would be a vital part of the mix of energy supply for the UK over the next 40 years.

A reader of my blog asked me about the new English uranium fund

Geiger Counter Limited, a new fund to concentrate on investing in uranium and nuclear power opportunities, launched this week on the London Stock Exchange [LSE:GCL] and Channel Islands Stock Exchange [CISX:GCL], offering investors yet another way into yellowcake.

Finally, uranium has even managed to propel itself to the world stage at the G8 conference. The idea of global nuclear alliance has been bandied around by several nations, although Germany and Italy has been reluctant because of minority acceptance of nuclear power amongst their respective peoples.

One potentially interesting sideshow is the attempt by Russia to alter the agreement with the United States on the sale of uranium.

Russian President Vladimir Putin has said he will urge Bush at this weekend's rich nations' meeting in St. Petersburg to alter two supply agreements in order for Russia to ship more enriched uranium to the United States.

Russia already supplies about half the enriched uranium used by U.S. nuclear power plants and the lawmakers said allowing Russia to "dump" more of the fuel in the U.S. market could scuttle construction of two planned American uranium enrichment facilities.

Additionally, Russian access to the U.S. market at this time is likely to result in market destabilization potentially jeopardizing resurgence of the nuclear-related industry.

Putin said he was against U.S. "discriminatory" restrictions on the sale of Russian nuclear fuel and will raise the issue with Bush when they meet at the G8.

The future outlook of the uranium spot price, and consequently, the entire uranium industry, is ultimately determined by supply and demand and readers would do well to do DD on not only the state of the uranium juniors, but the macroeconomic nuclear picture that is in a constant state of flux presently.


Tuesday, July 11, 2006

Jul 11 Uranium Stocks Update: sxr Uranium One (TSE:SXR)

SXR has done it again. A day after announcing a deal with Rio Tinto to acquire its uranium assets, SXR is buying most of U.S. Energy Corp.'s (NASDAQ:USEG) assets as well, specifically the Shootaring CanyonUranium Mill (the "Shootaring Canyon Mill" or the "Mill") in Utah and interests in a substantial land package comprising 40,589 acres of uranium properties in Utah, Wyoming, Arizona and Colorado.

This means that SXR will own two of the four conventional uranium mills in the United States and represents a continuation of their aggressive foray into American uranium.

In October 2005, U.S. Energy reported that independent consultants BehreDolbear & Company had estimated the replacement value of the Shootaring CanyonMill to be US $80.5 million.

As you can imagine, the land package itself is neither developed nor sounds all that impressive right now. SXR is basically buying for the mill and the land itself is a bonus. The most advanced uranium asset in USEG's portfolio is a 50% interest in the Sheep Mountain claims, 30 miles away from the Rio Tinto-acquired Sweetwater mill and with a historical (not verified) resource of 8.6 million pounds.

Neil Froneman, CEO of SXR, had this to say today:

We think that these two mills together, once they’re in full production will produce about five million pounds. So. you know, this has the potential to more than double the US output. I have no doubt that there will be other production, other than ours, but certainly five million is quite a decent number for the United States as an incremental value.

Remember, I quoted in my International Uranium Corporation (TSE:IUC) update that John Indall, Uranium Producers of America Executive Director stating that uranium production will head towards 20 million lbs/year in the U.S. SXR producing 5 million lbs and IUC producing another 1.5 million lbs will sure help to help that goal. Other production should follow from promising uranium assets of companies like Ur-Energy (TSE:URE), Strathmore Minerals (TSE:STM), and Energy Metal Corporation (TSE:EMC)

A conference call is scheduled for tomorrow by the company..we'll see what SXR has to say about their recent moves then.

Monday, July 10, 2006

Jul 10 Uranium Stocks Update: sxr Uranium One (TSE:SXR)

SXR Uranium One made a tremendous move today, acquiring Rio Tinto's (NYSE:RTP) Sweetwater Uranium mill and associated Green Mountain uranium properties located in south-central Wyoming.

Uranium One will pay Rio Tinto $110-million on closing, of which $65-million will be payable in cash and $45-million will be paid by way of the issuance of about 6.1 million Uranium One common shares.

The uranium game is clearly heating up with the spate of recent announcements. We are now witnessing move and countermoves by some of the biggest uranium juniors in their efforts to fast-track and grow their respective companies and shares of the uranium market on a worldwide level. Paladin's (TSE:PDN) takeover bid of Valhalla and now SXR's foray into the American market from its South African stronghold are key signals.

For the multinational multibillion dollar Rio Tinto, this is a great deal for them as well, letting a junior company do most of the work fro them. It would be interesting to observe over the next year or so what or if they have more ambitious intentions towards SXR.TO as the mammoth Dominion mine gets ready to produce 4 milllion pounds of uranium oxide in the spring of 2007.

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%.

July 9 Uranium Stocks Update: Paladin Resources (TSE:PDN)

A report from The West Australian claims that the trading halt of Paladin on the ASX is probably due to its attempted takeover of Resolute Mining-controlled Valhalla Resources and their uranium deposits in the Queensland region, where uranium mining arguably may be permitted sooner than any other Australian territory, although protection of the coal industry remains a considerable roadblock.

It is understood Resolute is negotiating to sell its 83 per cent stake in Valhalla to Paladin. Valhalla shares last traded at $1.22, valuing Resolute’s stake at just over $120 million.

Paladin’s chief focus remains on Langer Heinrich and the Kayalekera project in Malawi, but it has made no secret of its desire to start mining in Australia within five to 10 years.

This is a reasonable estimate of how long it will take for uranium to ever be mined out of new Australian mines. Paladin is trying to diversify its core holdings and $120 million, while significant for a $2 billion dollar uranium junior, is a fair price for future growth.

Yet the prospects of a trouble-free deal with Paladin appear unlikely, given Summit’s own desire to consolidate the Valhalla and Skal projects.

Summit Resources ASX:SMM owns a portion of the properties of interest and PDN.TO will likely have to negotiate with them to seal the deal.

I'd like to emphasize at this point that no official announcement has been made by Paladin as of this time. However, it seems that uranium merger mania might have struck again..

Saturday, July 08, 2006

Uranium Merger..Mania?

Intercontinental uranium marriages between Australian and Canadian juniors are signalling the advent of the M&A phase of the uranium cycle. Canadian junior Mega Uranium (CVE.MGA), with a market cap of roughly $375 million Cdn, offered a friendly bid for Australian junior Redport (RPT.ASX) at about $75 million undiluted. Apparently, Mega wants several of the uranium properties Redport owns in Western Australia, one of the few Australian areas where even the idea of further uranium mining has not met with fierce opposition.

I believe that uranium mergers such as the one being proposed will increase in rapidity. Urasia Energy (UUU.V) has proven that it is possible for a junior to have a viable uranium business model, and they started out less than a year ago. Just looking at a list by market capitalizations of the top fifteen or so Canadian uranium companies, it is not hard to believe that a fair number of them who are already producers or soon to be producers will start to swallow up their smaller uranium junior counterparts, whose market caps usually range in the $20-80 million range, who have great prospective uranium properties but are not interested or have not started to develop them.

Companies to keep an eye out for include my favorites Paladin Resources (TSE:PDN), sxr Uranium One (TSE:SXR), as well as the bigger uranium juniors like UEX Corp (TSE:UEX), International Uranium Corporation (TSE:IUC), Denison Mines (TSE:DEN), Laramide Resources (CVE.LAM), Fronteer Development Group (TSE:FRG), Aurora Energy (TSE:AXU), and Altius Minerals (TSE:ALS)

Friday, July 07, 2006

July 7 Uranium Stocks Update: Paladin Resources (TSE:PDN)

Paladin Resources (PDN.TO) has been in the news recently. Let's see what they have done..

(1) appointment of Brenden O'Hara to executive team

Paladin has a stated global expansion strategy, designed to allow the Company and its shareholders to benefit from the unique window of opportunity it has created for itself in the natural uranium supply industry. Mr O'Hara will have responsibility in this area of activity and his extensive business and corporate experience will considerably strengthen this cornerstone of the Company's growth.

How can Mr. O'Hara benefit Paladin? He was lured away by Paladin from the Australian Stock Exchange (ASX) itself, where he came into contact with many of the Western Australian companies listed on the exchange.

(2) first drawdown of $71 million bank finance project

Paladin has in place US$71M bank project finance facilities, consisting of a 7 year Project Finance Facility of US$65M and a Standby Cost Overrun Facility of US$6M.

Langer Heinrich remains on schedule to commence the staged commissioning of the plant on 22 September 2006. Overall, the project is 80% complete and construction is anticipated to be completed within the stated budget of US$92M.

As stated before in previous articles, Paladin is very punctual about its deadlines. No surprises here.

(3) trading halt on ASX

..Company's securities are in a trading halt on the Australian Stock Exchange ("ASX") as the Company has announced it is currently negotiating a potentially material transaction. The trading halt will be lifted following the release of an announcement detailing the transaction, expected to be made before opening of trading on TSX on Monday 10 July, 2006.

Interesting. Paladin's stock on the TSE has been soaring for the past few days. Right now I hesitate to speculate on what the material transaction might be, but I will definitely discuss it once it is made.

Overall, Paladin continues to impress me with their robustness. Their uranium mine is just over two months from producing and the uranium conditions remain very much in their favor.

Thursday, July 06, 2006

July 6 Uranium Stocks Update: Urasia Energy (CVE:UUU )

Urasia Energy's three and nine-month financial statements came out about a week ago and I thought it might be interesting to see what management had to say in their discussion and analysis. As I have said before, Urasia's performance in this quarter is to my mind very important as a rough barometer of how successful these new uranium producers (Urasia and soon to be Paladin (TSE:PDN), SXR Uranium One (TSE:SXR)) are going to be.

The Akdala planned annual production rate of 2.6 million pounds of U3O8 (1,000 tonnes uranium) was first reached on a monthly basis in April, 2006.

This means that because the three month quarter ended in April, the numbers do not reflect the planned annual production rate yet, whereas the next quarter's financial statements will.

ISL Uranium mine production, development and operations are critically dependent on how many wells can be completed and placed into production in a year. This is the single most important limiting factor in ISL Uranium production.

This is why Urasia Energy spent $13 million to purchase eight drilling rigs. They increased their number of rigs from 4 to 8, completed 39 new wells in this quarter, and increased their flow rates from the wells. All this added up to Urasia reaching their annual production rate in April.

The average unit price obtained for sales in the quarter was $38 per pound of U3O8, which resulted from recently negotiated contracts, as opposed to $17/lb obtained in the previous quarter from deliveries made in terms of older lower priced contracts. The spot price of uranium at April 30, 2006 was $41.50/lb U3O8. During the quarter the average unit cash cost per pound of U3O8 sold (including mining general and administration expenses) was approximately $10.00/lb U3O8, as opposed to approximately $11.00/lb U3O8 in the previous quarter.

Net income from operations from this quarter to April was almost +$4 million. As we all know, since April 30, the uranium oxide spot price is now at $45.50 according to With a higher uranium spot price and increased volume, revenue from uranium sales in this quarter will exceed the $14.38 million of last quarter.

The foreign exchange loss during the three months amounted to $12,403,000. The majority of the loss consists of a non-cash loss of $12,483,000 arising from translation of the future Kazak Income Tax liability in respect of the Company’s investment in Kazakhstan. During the quarter the Tenge strengthened approximately 7% against the US dollar. The translation loss was partially offset by realized gains on holding Canadian dollars which also strengthened against the US dollar.

This is the worrisome part. Urasia ended up with a net loss of $12 million, largely in part of this foreign exchange loss. I'm much less concerned about the size of the tax levy of the Kazakhstan government ($5.4 million) than I am about the Tenge continue to strengthen against the US dollar, which is not at all inconceivable. Taxes are much more predictable (even in a foreign country like Kazakhstan) and reflect the profitability of the Akdala operation for Urasia. Foreign exchange losses, however, essentially reflect nothing of the company's underlying business model or its future viability, yet stain the bottom line nonetheless.