BNN Uranium Stocks, Rob Lauzon (II)

Rob Lauzon Middlefield Capital on Thursday Nov 29

URANIUM ONE (TSE:UUU): they have their own issues; we trimmed half our position around $13 when Kazakhstan government enacted laws that allowed them to change natural resource law. It got me thinking, once Uranium One really starts making cash flow out of Kazakhstan in 2-3 years, will they change their contract. Subsequent to that, company basically reduced production guidance by about 40% due to sulphuric acid shortage in Kazakhstan. Also they are having problems commissioning their Dominian mine as well. This company has had many rosy projections, CEO was talking about $200 uranium, too promotional. They bought Urasia and EMC, two big large acquisitions, question is do they have labour, manpower to integrate. It is underweight, management has to prove themselves to investment community because most of community has been disappointed. Until we see production come on stream sooner, the stock should trade back to $11-12 but we are in wait-and-see mode until then.

UUU 3mo and 2yr charts

UR-ENERGY (TSE:URE): yeah I would buy it at this price. This is an in-situ leach recovery method, more environmentally friendly, lower cost. They have two projects that they are working on bringing into production probably in 3 years, Lost Creek and Lost Soldier. They filed some permits, looks like they are on track. They have about $1 in cash; if you buy it around $3.50, quite insulated. You really want to load up if at $3, currently looks good value. For anyone looking for near-term exposure in US, Ur-Energy is definitely takeover candidate.

URE 3mo and 2yr charts

My Take:

Uranium One is the amalgamation of two of my previous picks, sxr Uranium One and Urasia, with EMC thrown in for good measure. The stock has been battered by production problems in Kazakhstan, where sulphuric acid, a necessary reagent for uranium production, is in short-supply. The company is trying to address the issue and the company uranium producer in the country, government-owned Kazatomprom, is building a sulphuric acid plant, but will not come onto production until 2010. Uranium One is having experiencing similar growing pains as Paladin, but after the tax loss season is over, investors should give a hard look to these new uranium producers who have been rightly discounted by production issues, but whose share prices will appreciate once these growing pains have been addressed.

Ur-Energy is another one of my favorites; its strength of management led by long-time uranium specialist William Boberg and geographic stability in the US, coupled with a matter-of-fact, low-key approach leads me to believe that this stock is worth holding onto long-term.

BNN Uranium Stocks, Rob Lauzon (I)

Rob Lauzon Middlefield Capital on Thursday Nov 29

TRIEX MINERALS (CVE:TXM): it is a name we quite like as an exploration company; it comes with it risk of being exploration company, not producing uranium; their goal in 5 years to find uranium in east side of Athabasca as well as Hornby Basin and Alaska. Triex actually raised some money yesterday, I purchased more shares, think it is great buying opportunity. They staked early claims near McArthur River near producing mines; the Pasfield Lake project looks quite exciting over next year, year and a half. I think it will probably trade to $3.50-$4.00 in next 6 months.

TXE.V 6mo and 2 yr charts

CROSSHAIR EXPLORATION (CVE:CXX): we are watching Crosshair quite closely, had some pretty interesting drill results, drilling in same area as AURORA ENERGY (TSE:AXU) in Labrador; comes with it risk as exploration play, a lot of fixed cost if they ever decide to build a mine due to lack of infrastructure; potential for this company and AURORA to share cost. We do not own it right now but we are looking at and in our radar screen.

CXX.V 6mo and 2 yr charts

PUREPOINT URANIUM (CVE:PTU): looking at the chart it has probably found a bottom here in the 35-40 cent range. We do own a small amount of Purepoint in a few of our smaller funds that purchase flow-through shares. The one thing about Purepoint is that they have staked a lot of land in swampy deep areas of Athabasca, tougher to find it and more expensive if they do find it.

PTU.V 6mo and 2 yr charts

My Take:

Crosshair is the largest of the three companies mentioned, with a market capitalization of around $130 million Cdn while Triex is at $55 million and Purepoint is only worth around $19 million. Risk, of course, is understandably inversely correlated to these rankings. The project mentioned in Labrador for Crosshair is its Central Mineral Belt Uranium Project, in which they are going to start drilling again after the new year. Its bigger cousin, of course, is the $1 billion company Aurora Energy, who differ in that the latter has an NI 43-101 compliant resource.

Query: Opportunities Amidst Disinterest

As alluded to in my last post, much speculative interest and short-term momentum has gone out of the uranium sector. Share prices that went parabolic just months ago have come back down just as or even quicker than they ascended. And still, if one believes in the fundamental story (and really, you only have to consider the logic in governments just suddenly abandoning their billions of dollars budgeted for new reactors overnight) of increasing uranium demand, even the pain endured over the last several months can be tolerated.

However, words can and should only sway so much. What follows are chart examples to illustrate my point.

DENISON MINES (TSE:DML AMEX:DNN)

3 months

DENISON MINES (TSE:DML AMEX:DNN)
2 years

PALADIN RESOURCES (TSE:PDN)
3 months

PALADIN RESOURCES (TSE:PDN) 2 years

Yes, the last few months have not been kind to uranium equities. Fluctuations in the spot price and an overdue correction took its tool on most uranium stocks, from seniors like Denison Mines and Paladin Resources all the way to the hundreds of small uranium juniors, including many of the more risque types; many of their 3 month charts look a lot worse than the two I have shown.

Regardless, the point of showing a 3 month and a 2 year chart is to point out that the long term trend has not been broken, mostly in part, I belive, to the fact that the uranium story itself is a good one, a valid one, and one that has not changed materially in the last several years. Corrections will come and go, this one lasted a good several months, but they also present as buying opportunities to the patient investor with an eye for short-term bottoms.

Both of these stocks seem to be oversold at this point and I would be shocked to see either of these be lower than their current price in several months.