Mining media reports and press releases for useful stuff.
This is an edited version of an article originally published in Fuel Cycle Week, V7N307 on 12/10/08 by International Nuclear Associates, Washington, DC. This is the last publication of this column for 2008. The column will resume in January 2009.
This column continues its admittedly non-rigorous coverage of the stocks of a handful of U.S. uranium miners who are active in western states. The data and brief analysis may offer readers a snapshot of how U.S. uranium juniors active in western states are weathering the unusually difficult conditions of the current market.
This analysis is not to be considered investment advice. I do not own any of the stocks discussed in this column.
Bad to worse
In terms of stock price trends, things have mostly gone from bad to worse. Five of the nine firms recorded new 52-week lows for the price of their stock during the past two weeks although four of the five had minor gains by market close Dec 5 that pulled them out of the cellar.
Stock Exchange & Symbol
52- Week Low
12/05/08 Closing Price
New 52-Week low
The major problem for all nine firms in that their very low stock prices make them attractive takeover targets. The low stock prices also make it nearly impossible to raise capital by selling new stock. This puts firms in a position of having to closely watch their burn rate of cash on hand in existing projects.
Uranium winter coming soon to a mine near you
An industry that was complaining last year about labor shortages for geologists and engineers is now likely laying some of them off to preserve working capital. For uranium juniors which have no projects in production, and no prospects for revenue, hibernation could be the next step. If the global recession lasts until 2010, as some economists predict, it could be a long sleep.
George Glasier, CEO of Energy Fuels (TSE:EFR), told the Denver Post on Dec 4, "We don't like suspending operations and layoffs, but we have to preserve capital to get through this and protect stockholders." He added that 10 jobs have been lost at the Whirlwind mine in Mesa County, Colo. The firm stopped production there last month.
Michael Collins, CEO of Bluerock Resources (CVE:BRD), which operates and is in production at the J-Bird uranium mine, told the Denver Post, " the firm has been caught in a liquidity crunch." Like other uranium juniors, Collins said, "It has been very difficult to raise money." However, Collins also told the Durango Telegraph on Dec 4 that the firm is "recapitalizing its operations," and that he expects significant growth in 2009 as a result.
New Horizon Uranium Corp.(CVE:NHU) has also shelved plans to develop a uranium mine in Colorado. William Wilson, the firm's COO who also now doubles as its new CFO, told the newspaper, "There just isn't any financing out there."
Last February the firm raised $5 million through a brokered private placement to fund the company’s continuing exploration programs on its Converse and Sand Creek joint ventures in Converse County, Wyo., and Summit project in San Miguel County, Colo. Wilson did not say whether the firm was continuing its work with these properties or is sitting on the cash.
Bayswater Uranium Corp (CVE:BAY) reported it has sold select claims in South Dakota and Wyoming to Powertech Uranium Corp. (TSE:PWE) for $50,000 and a stake in future yellowcake royalties. The area consists of 381 mining claims and 8,186 acres of Wyoming State mining leases for a total 15,806 acres. The claims sold consist primarily of early-stage properties that do not fit the company's plans to focus on core properties.
Low stock prices make for ripe pickings
Acquisitions for cash of junior uranium companies with attractive holdings will likely come from outside investors and not from other uranium firms. For example, Warren Buffet made a surprise move to buy Constellation Energy for a song when the firm's stock fell to a record low price. Are there similar large investors now reviewing possible acquisitions in the uranium mining industry?
One industry CEO said last week he thinks the uranium business is "ripe for consolidation" once the price of the metal rises above $60/lb. It remains to be seen what impact, if any, the recent closure of some mine operations in the U.S. and Canada will have on supply and thus prices. On Dec 1 the spot price of uranium stood at $55/lb according to both Ux Consulting and Trade Tech.
Industry consolidation could come a lot sooner. Reuters reported on Nov 26 that Accord Nuclear Resources, a U.K. firm, has set up operations there and in the U.S. to pick up uranium firms for cheap prices due to sliding equity values. The firm believes the long-term outlook for the nuclear industry is bright. In the U.S. Accord has a joint venture with First Reserve Corp. Both are private equity firms.
Accord CEO Charles Scorer told Reuters that First Reserve shares his firm's objectives to invest several hundred million to buy uranium mines in the U.S. He emphasized that the firm will be considering acquisition of properties that are in production or near-term production. He also said the firm would not be interested in acquiring firms that are still prospecting potential properties. Scorer said, "most of the assets are undervalued because of the credit crunch and the fact that we are funded gives us good opportunities."
Alex Krueger, Managing Director of First Reserve Corporation, said, “Nuclear energy is gaining more focused interest as the result of a structural need tied to increased fossil fuel costs and carbon emissions standards impacting other forms of power generation."
The firm's principals also said their focus on production means that once they buy mines they intend to sell uranium on the global market.
Denison mines (AMEX:DNN), which shut down the Tony M mine in late November also announced that it is opening another Utah mine that has higher grades of uranium. CEO Ron Hochstein told the Deseret News Nov 26 the Beaver Shaft mine in San Juan County also has vanadium used to make steel alloys. He also said the firm would continue to operate the Rim Canyon uranium mine in San Juan County.
Denison also operates the White Mesa mill near Blanding, Utah. The threat of competition has occasionally emerged over the horizon, but so far has not moved beyond the proposal stage. While Denison has a mill that continues to seek ore, at least it doesn't have competition for it. In 2006 Uranium One (TSE:UUU) bought the rights to the Shootaring Canyon Uranium Mill.
However, Dane Finefrock of the Utah Division of Radiation Control said new operations there are years away given the regulatory approvals that would be need to start it up again. Last September Mancos Resources LLC shelved its efforts to open a uranium mill in Green River, Utah.
Powertech (TSX:PWE) is pushing ahead with development of ISL mines in Colorado and South Dakota. At the Centennial Project near Nunn, Colo., the firm is nearing completion of data analysis to support permit applications to state and federal regulatory agencies. It expects to submit the applications in the first half of 2009. At the Dewey-Burdock Project in South Dakota, the firm expects to submit permit applications to state and federal agencies by the end of this month.
Uranium Energy (AMEX:UEC) announced Dec 4 it has filed all permit applications for the Goliad Project near Victoria, Tex. This is the firm's "flagship project" for ISL uranium mining in south Texas. The applications include mining and environmental permits that have to be issued by the Texas Commission on Environmental Quality (TCEQ). Harry Anthony, COO, said the firm hopes to start operations by 2010.
While the firm has exploratory projects in five other states, Anthony said it will concentrate on the Goliad mine to preserve capital. CEO Amid Adnanai said the firm raised $15.3 million last summer but that capital preservation is the order of the day due to "uncertainties in market conditions."
Anthony noted that Texas has eight proposed nuclear reactors which will drive demand for uranium in future years. If all of them are built, he added, it will make Texas one of the largest nuclear energy states in the nation.
Environmental headaches are still with us
Cameco's (NYSE:CCJ) headache at the Crowe Butte ISL mine near Crawford, Neb., got bigger this week. The Nuclear Regulatory Commission (NRC) granted status to "interveners" who oppose the expansion of the mine. The NRC said five groups and some individuals from these groups would be allowed to argue their case before the agency regarding the modification of Cameco's license.
In their ruling released Nov 21, the NRC grants status to representatives of the Oglala Sioux Indian Tribe, the Western Nebraska Resource Council, and several individuals. The key environmental issue is whether there is evidence of a hydraulic connection between the Chadron formation aquifer, which provides water for mining, and other aquifers or surface water bodies.
According to the Chadron News Record for Nov 25, the issue of ownership of the mine was raised in two separate arguments. One contention is that Crow Butte failed to disclose its foreign ownership in the license renewal application, However, NRC said it was aware of it when the agency approved Cameco's purchase of controlling interest in the mine ten years ago.
Opponents also contend that the Atomic Energy Act and other laws prohibit the NRC from granting an ISL uranium mining license to a foreign company. NRC agreed the prohibition is clear with regard to uranium enrichment facilities and power plants, but not in regard to "source materials licensing." However, NRC also said the issue is "potentially fatal" to the license renewal.
Other issues of contention, according to the Chadron Record, that will be argued before the agency include:
- whether the contingency plans for a spill at the mine are adequate to handle non-radiological contamination;
- whether a past spill raises serious doubts about the company's ability to safely handle mine operations;
- a claim that Crow Butte failed to consult the tribe on cultural resources at the mine site;
- if wetlands at the site are being harmed by min contaminants; and
- whether the most current scientific data regarding the area's hydrogeology was used in preparing the license application.
The NRC ruled the issues relating to past performance at the mine are relevant to the license renewal because the agency must ensure the public that "the facility's current management encourages a safety-conscious attitude" and must provide "reasonable assurance that the facility can be safely operated."
The interveners have until December 21 to submit their briefs. The NRC did not set a date for its next hearing.
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