Three trends no waiting
This blog post is an edited version of an article published in Fuel Cycle Week, 02/18/09, V8N315, by International Nuclear Associates, Washington, DC
Three trends are emerging in an informal tracking of a small set of stocks. The first is that the 52-week high for all nine stocks is declining over time as the early effects of the current recession become more visible. The second is that the catastrophic loss of wealth by stockholders may have produced a long-term effect on the industry which will only be cured by a rapidly rising price per pound of uranium in long-term contracts. Spot price variations, especially the speculative roller coaster of 2007-2008, will not improve the ability of uranium juniors to raise funds by issuing shares of stock. The third trend is that record low prices of stocks, and the price of uranium, have stimulated a series of shareholder rights measures by firms which see themselves now vulnerable to hostile takeovers.
A portfolio of one million shares of stock for each of the nine firms, purchased 52 weeks ago, would have been worth $27.3 million. At the market close Feb 13, this same portfolio would have been worth just $1.7 million having lost 94% of its value.
One of the significant implications of the remarkably low stock prices is that even if firms are able to raise funds through private placements, they may not be able to retain majority control of new mining production or new mills.
Energy Fuels (TSE:EFR) finds itself in exactly this position trying to raise funds for a new uranium mill in Montrose County in western Colorado. A new mill capable of handling 1,000 tons of ore per day could cost $50 million, but the firm's stock is trading at just 6% of its 52-week high. With a total market cap of just $14 million, the size of the facility it wants to build is worth more than three times what the company is worth.
On Feb 3 the firm adopted a classic shareholder rights plan that is triggered if anyone attempts to buy more than 20% of the firm's stock, which at the Feb 13 closing price, would be $2.8 million or 10.5 million shares. The firm said in a statement that it is not aware of any takeover bid at this time.
Despite falling uranium prices, $47/lb on Feb 9 according to Ux Consulting, Energy Fuels is pressing ahead with plans to develop a uranium mill in western Colorado. The firm is three months away from completing some of its environmental studies and has launched the process for applying for a special use permit from Montrose County.
George Glasier, CEO, told the local news media his firm has claims to five uranium mines in Colorado and Utah, but that the firm put the one that was in production, the Whirlwind mine, on standby last November laying off nine people. He said that when the price of uranium goes back up, the mines will go back into production leading to demand for the mill. He did not say what the price had to be to prompt these decisions.
Much ado about nothing in Utah?
While Energy Fuels is in hot, if underfunded, pursuit of a new uranium mill, a similar drama is unfolding across the state line in Utah. There Mancos Resources LLC of Vancouver, B.C, and with offices in Cortez, Colo., is reportedly focused on developing a new uranium mill on 640 acres in Emery County, Utah, that would process 1,200 tons of ore a day representing a new investment of $125 million if it can find investors for the project.
Last year Bluerock Resources (CVE:BRD) agreed to merge with Mancos and then late in 2008 abandoned the plan demanding its initial investment of $200,000 be refunded which it got. That was not a good sign of confidence in the project. Since then Mancos has pursued the mill on its own. However, the setback with Bluerock has not stopped local economic development officials from promoting the mill as having a start-up date of 2012. No one from Mancos itself has been quoted in Utah news media reports.
Mike McCandless, director of economic development for Emery County, called the agreements "a step forward." Emery County commissioners approved a rezoning of the land slated for the industrial park in December 2008.
Opponents of the mill have focused on water use as the mill is in the process of applying for 800 acre feet of water for mill production. Three groups have filed protests over water rights with the State of Utah. However, hearings with Utah regulatory agencies have been postponed with Mancos reportedly claiming it was not ready to proceed.
One of the protest groups, Red Rock Forest, said on their web site the hearings were postponed because the Mancos mill is "speculative" and that the firm is not ready to answer questions from Utah regulators about the economic feasibility of the project.
Meanwhile, Bluerock Resources (CVE:BRD) , which has once entertained high flying visions of merging with Mancos, and later thought the better of it, has given up on another project. On Feb 2 it ceased permitting, development, and option payments to vendors for the J-Bird mine and told investors its toll milling agreement with Denison Mines was unlikely to process any ore in the near term.
Utah pushes back on Transition Power
A parallel development on 1,500 acres at the same industrial park in Emery County involves a controversial plan for a 3,000 MW nuclear power plant now known as the "Blue Castle" project. Former state legislator Aaron Tilton, who is now the head of Transition Power, a private group of investors, said, "all of our preliminary studies show this is an excellent location for a nuclear power plant."
Transition Power has not yet submitted a license application for the plant to the NRC, but told the Salt Lake City Tribune on Feb 2 the plant could cost as much as $15 billion or $5,000/Kw Hr. A license application could cost between $25-50 million. Transition Power submitted a Letter of Intent to the Nuclear Regulatory Commission on January 30, 2008, stating that they intended to submit an Early Site Permit Application or a Combined License Application for two nuclear units by April 2010.
Transition Power has not responded to inquiries that it has the money to pursue the license or the plant itself. The firm hasn't explained where the name "Blue Castle" comes from or how it is relevant. The industrial park is located in Green River, Utah.
The plant is controversial from a consumer perspective because Tilton's firm wants the state legislature to authorize it to recover construction costs while the plant is being built. Critics of that plan have pointed out that less than a third of the plant's electricity, about 900 MW out of 3,000, would be used in Utah and the rest would be wheeled to southern California. They argue there is no reason why Utah citizens should have to pay up front for a nuclear plant that will generate electricity to be sold out of state.
Powertech (TSE:PWE) which has made significant progress toward permitting and production for its Centennial ISL mine near Nunn, Colo, some 16 miles east of Ft. Collins, is facing a new round of opposition from an environmental group. Jay Davis, a spokesman for Coloradoans Against Resource Destruction (CARD), says the group is now gathering data from ISL mines in other states including Texas, New Mexico, and Wyoming to argue their case against a permit for the Centennial Project.
Richard Clement, CEO of Powertech, says the firm is collecting local environmental data from air, water, and soil samples. He expects the permit process to conclude in late 2010 and the mine to be ready to go into production by mid-2011.
Elsewhere in Colorado, the Bureau of Land Management (BLM) inked an approval for expanding uranium mining at Denison Mines (AMEX:DNN) properties in the Big Gypsum Valley near Naturita, Colo. The new activities at the Sunday Mine include expansion of waste rock areas, access roads, and additional drilling. BLM said the environmental assessment found no significant impacts from the expansion of mining activities.
The U.S. Nuclear Regulatory Commission (NRC) threw a big rock in the pond at Cameco's Crowe Butte mine in Chadron, Neb. Cameco (NYSE:CCJ) has applied to a license change to expand the mine. However, the NRC granted standing to local interveners who raised a series of potential show stopper questions one of which even the NRC said could be "fatal" to the application. The key issue is whether the mine can be owned and operated by a foreign company. The NRC said it is a legitimate subject because it goes to the issue of how NRC regulations could be enforced with the mine ownership located in Canada.
Other issues have to do with potential arsenic contamination of groundwater and allegations that pollution from the mine is responsible for a cluster of cases of pancreatic cancer in Chadron. While studies of nuclear workers historically have found some links between exposure to uranium and pancreatic cancer, the disease is also related to smoking and diabetes.
The mine has been in operation since 1991 and produces about 800,000 pounds of uranium a year. Cameco is seeking to expand the mine to a 2,100 acre site about seven miles from the current mine.
Strathmore Minerals (CVE:STM) announced it has inked option agreements to lease about 2,000 acres of private mineral rights on parcels adjacent to its Pine Tree-Reno property in the Pumpkin Buttes uranium mining district in central Wyoming. Strathmore said the options were acquired because of the "long-term exploration potential" of the properties and the historic resource estimates associated with them.
Uranium City Resources (TSE:UCR) announced plans to commence drilling in the southern edge of Catron County, New Mexico. The firm will file a permit application with the Bureau of Land Management once it has completed a plan of operations.
In September 2008 the firm announced entered into an option agreement with Running Fox Resources (TSE:RUN) to earn up to a 60% interest in 178 lode mining claims covering 3,160 acres located in a well known area of mineralization south and west of Albuquerque, New Mexico.
In the late 1970s, this area was the subject of exploration efforts by Gulf Mineral Resources, Pioneer Nuclear, Occidental Petroleum and Energy Reserves Group.
There were a couple of positive developments in Arizona and New Mexico where the uranium mining industry has been taking a beating from environmental groups and Native American tribes. In Arizona the Mohave County commissioners there voted on Feb 6 to ask Congress to reject a bill that would ban uranium mining in Arizona in an area south of the Utah border. Gary Watson, one of the commissioners, said that the Bureau of Land Management was killing off jobs in the area having started with bans on forestry and livestock grazing. He claims that if uranium mining is allowed to proceed, that it would create 300-500 jobs.
Mohave County covers the western end of the Grand Canyon which has been the focus of efforts by U.S Rep. Raul Grijalva (D-Ariz.) who is on his second run to ban all uranium mining in and around the national park's boundaries. The County Commissioners claim that the legislation is too broad and would impact the Arizona Strip mining district which they say contains 375 million pounds of U3O8. The county commissioners claim the strip is outside of the area of concern covered by Grijalva's bill.
Vane Minerals (LON:VML), has unhappily done some drilling in right in the middle of the whole ruckus over uranium mining near the Grand Canyon. It also says it is proceeding with exploration and drilling for the one of its projects which is in the Arizona Strip Mining District west of the areas targeted by environmental groups.
It said it was sufficiently encouraged to proceed with additional drilling to develop a NI 43-101 report on the resource to be published at a future date. According to a Reuters report on Feb 6, the announcement about the Arizona Strip property drew a new investment for one million shares worth $432,130 by Vane's executive director Matthew Idiens.
New Mexico, Idaho Projects
A $3 billion uranium enrichment facility under construction by Louisiana Energy Services (LES) in Eunice, NM., in the far southeast corner of New Mexico is planning the first tests of its centrifuge equipment. LES President Reinhard Hinterreither said 20 grams of UF6 would be shipped to the facility in March. He said the facility expects start-up of operations in late 2009.
Fortress Financial Group, New York, (FFGO:PK) said in a statement it acquired 25 uranium mining projects in Idaho. According to a release, the properties in Idaho include several mines that have a uranium production history. The Skyline Uranium Project is in Lemhi County, about 5 miles south of the town of Salmon. Skyline Uranium is comprised 400 acres of mining claims. The El Toro projects are also in Lemhi County, about 15 miles northwest of the town of Salmon. It includes 500 acres of mining claims. And, the Kriley Gulch Uranium Project is about 12 miles north of Salmon and has substantial existing works, including four adits and a shaft.
The company also bought properties in Arizona and Montana.
The Arizona "Grand Gulch" Uranium Project consists of one patented mining claim (20 acres of private land) south of St George, Utah located on the Colorado Plateau of Northern Arizona. It is a historic copper mine with known uranium deposits.
In Montana the uranium mines are in the Pryor Mountains of Carbon County and include 1,400 acres. There are five previously productive mines; Dandy, Marie, Old Glory, Sandra and Swamp Frog Mines.
The company said it will buy back outstanding stock and change the name of Uranium Mining & Exploration Projects to Skyline Uranium Corporation and will reorganize a board of directors by March.
No information was released on the price for the properties acquired in all three states or who sold them and under what terms.
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