Monday, December 07, 2009

Fundamentally Uranium

Bias: Company-negative, Sector-Positive

Geopolitical/Environmental/Exploration Risk

Uranium may be a relatively plentiful compound, but its extraction can be fraught with objections. Countries who do not rely on uranium projects to provide a substantial source of income (ie First World countries) often suffer from objections by their own constituents when a uranium mine--real or potential--is deemed to be too close for comfort.

Case in point an interesting battle in mining-friendly Quebec that pits the doctors of a small northern town of Sept-Îles versus Terra Ventures Inc. (CVE:TAS, TAS.V) . Terra is best known perhaps for having a piece of the Roughrider uber-deposit in Saskatchewan owned by Hathor Exploration Limited (CVE:HAT, HAT.V), but whose Lac Kachiwass project, dubbed as its "most advanced property at this time due to its historic exploration and historic resource estimate" is a potential ~5.6 million lb Rossing-type (large tonnage, low-grade) deposit.

This property was acquired by Terra in March 2007, with additional contiguous properties bought the next year. So far the company is still in the midst of waiting for assay results from their 2009 summer drilling program. Recently the company was allowed to build an access road to the Lac Kachiwass deposit that is 13 kilometres from the town, near Lake Kachiwiss which flows into the municipal water supply.
This has the town's doctors up in arms and threatening mass resignation. Twenty doctors of all disciplines in total, not an insignificant number anywhere and certainly potentially devastating for a small town, have been fighting Terra on grounds of potential uranium contamination.
Terra Ventures will soon divest itself off assets including Lac Kachiwass into its own company while keeping the its core asset--the stake in Hathor's property--within Terra. Surprising? Not so much given the potentially protracted and already-bitter battle in Quebec. Ostensibly, this move is happening as Terra felt the market was only pricing them based on their core asset (Terra has a market cap of ~$22million Cdn).
I am really interested to see how much the market prices in the new company..


Tuesday, December 01, 2009

Technically Uranium

Since my last post on November 22nd in which I remarked on a range-bound tightening between $6.35 and $7.30, let's see what our benchweather U.TO has done:

The conclusion? Not much from the looks of it. Closes have been in the range of $6.58 to $7.00 Cdn, so pretty much stuck in the ever-contracting triangle.

In the short term, if my hypothesis stands correct, the trading range becomes even narrower as we head into the end of the year. Specifically in the next two weeks, breakout above 7.2 (ideally 7.4) or breakdown below 6.45 may be important. RSI at 20 certainly indicates some immediate support as evidenced by today's trading action; you can see that this is the fourth time this year RSI has dipped to that level.

It is interesting to see this stock from a different perspective:

Ever since the precipitous fall from grace in April 2007, uranium has been trying to establish a base for the better part of a year now. I can almost convince myself that I see half of a bowl being drawn out, which would be an optimistic viewpoint.