Mining media reports and press releases for useful stuff.
This column on uranium mining in the western U.S. continues its admittedly non-rigorous coverage of the stocks of a handful of U.S., Canadian, and Australian uranium miners who are active in western states. The data and brief analysis may offer readers a snapshot of how uranium juniors active in western states are weathering the unusually difficult financial 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.
This blog post is an edited version of an article which was published in Fuel Cycle Week, V8, No.308, January 7, 2009, by International Nuclear Associates, Washington, DC.
Climbing out of the cellar or not?
In the ad-hoc sample of uranium junior stocks two clear trends appeared this week. First, the signature of the current recession was apparent as long ago as July 2008 with losses in stock value ranging from at least one-third to one half of market capitalization compared to 52-week highs. By Dec 31, there was not as single stock in this informal list that had retained more than 20% of its value relative to the 52-week high. If you want a picture of lost wealth, this is it.
Second, some of the stocks have started to climb out of the cellar although they have a long way to go. Every one of our nine sample stocks recorded modest price increases which at least moved the needle on the measuring gauge, but it isn't necessarily a signal of recovery. More likely, it could be a signal of the end of the panic phase of the current financial crisis and a move toward realistic valuation of companies and their prospects or maybe not.
Even more interesting, these trends are apparent across U.S. and Canadian stock exchanges. However, the record low stock prices still make all of the firms on our list attractive as takeover targets. Worse, the minor improvements in stock prices are not enough to signal the use of issuing new stock to capitalize major new ventures. Indeed, several of these firms announced additional cost cutting actions and retrenchment of operations to save precious cash. Only Powertech (TSE:PWE) was able to attract new funds from an existing investor owing to progress it is making towards production on two of its U.S. properties.
Bad news by the bushel
Western Uranium Corp (CVE:WUC) announced a shareholder rights plan "to ensure fair treatment in the event of an unsolicited takeover." With its stock closing at $0.68/share against a 52-week range of a $2.50-0.45, the firm is in the same boat as many other uranium juniors.
An unaudited 3Q2008 financial report issued by the firm showed it had $51.5 million in cash on hand and less than $0.7 million in current liabilities. With a market capitalization based on 59.73 million shares and a share price of $0.68, the firm is worth $40.6 million or $10.9 million less than the cash on hand. A hostile takeover could provide the buyer with significant cash premium at a bargain price.
The firm's primary drilling program is in the Bull Basin and Old Man Springs areas of Nevada. So far the firm has drilled 28 holes for 20,745 feet. One hole was drilled in the Midnight Mine area. The firm has not yet published core drilling results in an NI 431-101 report. The firm indicates on its website it will continue to acquire properties and engage in exploration.
It raises the question, separate from Western Uranium itself, whether some firms might issue shareholder rights plans to invite takeovers on the theory that a cash out now is better than waiting for a recovery. To be attractive in the current financial climate, a firm would need to be nearing production or have a producing property.
Even large firms are not immune from takeover jitters. EnergySolutions (NYSE:ES) a Salt Lake City conglomerate with nuclear waste cleanup contracts in the U.S. and the U.K. recorded a market closing price Jan 2 of $5.80 against a 52-week high of $27.85 or just over 20% of a value recorded shortly after the firm went public earlier this year.
Steve Creamer, CEO, told the Salt Lake City Tribune as long ago as Nov 19, "we're in a takeover position right now. There is no doubt about it. It scares me to death." Creamer and other executives reduced their share holdings from 62% of the firm to just 23% in a secondary offering in July 2008 thus giving up a controlling interest in the firm. Despite reporting profits for the past three years, and having a positive cash flow, Creamer says, " I think we are trading at a ridiculously low price."
Uranium Resources (NASDAQ:URRE) attracted a lot of attention with its announcement that it has initiated cost cutting actions to save $2.2 million. It eliminated three executive positions and slashed white collar salaries by 30-40% for other managers. The firm closed its office in Corpus Christi, TX, and Albuquerque, NM, and curtailed new exploration in Texas. The firm said in a statement it does not plan to have any significant capital expenditures in 2009 unless there is a significant improvement in the uranium market.
Also, the firm closed its Rosita property after producing just 7,700 pounds of U3O8. Operations at its Vasquez and Kingsville sites will continue in 2009. URI CEO Dave Clark said the firm is focused on slashing costs to control its cash burn rate through 2010. He added that if industry conditions and prices improve, the firm will expand development of its operations at its Churchrock site in New Mexico.
The firm reported having $13.5 million in cash on hand as of Dec 1 according to a filing with the SEC. The firm spent $10.4 million in 2008. unless the price of uranium increases significantly in 2009, it could spend as little as half that rate the next two years to get through 2010 without new infusions of capital.
Strathmore Minerals (CVE:STM), based in Riverton, Wyo., announced that it terminated the Juniper Ridge, Wyo. Joint Venture Agreement with Yellowcake Mining Inc (OTC:YCKM). Yellowcake has advised Strasthmore that due to the continued deterioration in existing market conditions, it is not able to comply with the terms of the agreement. Strathmore retains its 100% interest in this property.
According to its website, Yellowcake describes the Juniper Ridge project as being located in the Poison Basin uranium district in the south central area of Wyoming, close to the Colorado border. The total acreage of the property is 3,200 acres and over 2000 historical drill holes have been drilled on the project to verify the resource.
The roughly 2000 historical drill holes have been drilled between 100 and 300 feet in depth, and have shown an average grade of between 0.05% and 0.20%. Yellowcake assessed the grade as being economical for ISR mining.
Yellowcake's financials show no revenue for the past three years and its market capitalization drastically reduced by the current Wall Street crisis from a 52-week high of $1.25/share to just $0.04/share. Total assets are $1.8 million and total market capitalization using the Dec 31 closing price was $2.05 million.
New Horizon Uranium (CVE:NHU) confirmed it has abandoned two mining claims northeast of Hartsel, Colo. Bill Wilson, company president, told the Fairplay, Colorado, Flume Newspaper on Dec 26 the company decided not to pay the $125 federal claim fee for 100 properties saving a modest $12,500. Wilson said the firm has decided to make its Sand Creek property in Converse County, Wyo, its main priority.
Jeff Parsons, an attorney with the Western Mining Action Project, which opposed uranium mining on the Colorado property on behalf of nearby homeowners, told a group of homeowners in Fairplay they shouldn't relax because of New Horizon's decision. He said, "When uranium prices rise, others will come because there has been interest in mining in the area."
It is unlikely in the near term New Horizon will return to the area. For the past three years New Horizon has had no revenue from any of its projects. Its stock closed Dec 31 at $0.01 compared to a 52-week high of $0.55 with 20.3 million shares outstanding for a severely depressed market capitalization of $203,000.
Last February the firm raised $5 million in a brokered private placement for use on its Wyoming properties. On April 15, 2008, the company acquired the Buck and the Wild Horse properties, located in Colorado and Nevada, respectively. The Buck property in Montrose County, Colo., and San Juan County at the northwest end of the Paradox Valley. The Buck property is less than twenty miles from the Pinon Ridge Uranium Mill now being developed by Energy Fuels Corporation near Naturita, Colo.
The Wild Horse Property in Humboldt County, Nev., is in an area of previous uranium exploration by Exxon Corporation and adjacent to historic gold and mercury mining. The acquisition price of the two properties was not disclosed in press statements or on SEDAR.
The Converse County property is a joint venture with Canyon Resources Corp and through that firm with Uranium One. In January 2006, an exploration, development and operating agreement was signed to form the Converse Uranium Joint Venture. Later that same year the Converse JV organized the Sand Creek Joint Venture with High Plains Uranium, now known as Uranium One (TSE:UUU).
These joint ventures were formed with the objective to explore and develop areas of known uranium occurrences located along the southern end of the Powder River Basin in Wyoming. During 2006 and 2007 New Horizon completed 30 rotary drill holes at the Converse property totaling approximately 22,000 feet. Highlights of drilling results from the 2006/2007 drill programs include 22 holes encountering >0.02% U3O8. 6 feet 0.288% U3O8 13 feet 0.142% U3O8 10 feet 0.119% U3O8 12 feet 0.054% U3O8 10.5 feet 0.066% U3O8
So far the firm has not announced any economically recoverable resources from its properties nor published information in an NI 43-101 report.
Not all bad news in Wyoming
Marion Loomis, executive director of the Wyoming Mining Association, told the Wyoming Business Report on Dec 30 he doesn’t see uranium mining in Wyoming to be in as bad shape as in Colorado. While Loomis concedes that uranium prices have dropped from their 2007 peak of $137 a pound, “I don’t think anyone thought that they needed $137 a pound to keep the projects going.”
“When the prices moved up over $20 a pound, companies got interested again in developing reserves. The market has pulled back into a more reasonable price range, but companies remain very interested in developing properties."
Good news here and there
Uranerz (AMEX:URZ) reports NI 43-101 resources on West North Butte satellite properties in Wyoming. It estimates a "measured and indicated" mineral resource of approximately 2,837,015 pounds of U3O8 at an average grade of 0.153%, and an "inferred" mineral resource of 2,681,928 pounds of U3O8 at an average grade of 0.120%. The properties are located in the Pumpkin Buttes Uranium Mining District of the Powder River Basin, Campbell County, Wyoming.
In December 2007, the company submitted federal and state mining license and permit applications to build and operate the Nichols Ranch Uranium ISR Complex, including uranium in-situ recovery (ISR) wellfields and a central processing facility (complete with ion-exchange concentration and elution circuits, and drying and packaging circuits for finished yellowcake product) at the Nichols Ranch property, and a satellite facility with uranium ISR wellfields and ion-exchange plant at the Hank property.
Both the U.S. Nuclear Regulatory Commission and the Wyoming Department of Environmental Quality have accepted the company's applications to advance them to the next stage of their formal review process.
Powertech (TSE:PWE) reports that it has entered into a bridge loan agreement with Synatom for $2.5 million. The bigger news is that Powertech has also entered into an agreement to obtain $9 million from Synatom for working capital to move its mineral properties to production including the Centennial project in Colorado and the Dewey-Burdock project in South Dakota. Once the properties are in production, some of the product will be exported to Belgium.
In an unrelated action, Powertech announced that it had acquired additional mining claims and leases in Wyoming and South Dakota from Bayswater Uranium Corp. (CVE:BAY). Powertech purchased 381 mining claims and 8,186 acres in Wyoming mining leases for a total of 15,806 acres for $50,000.
White Canyon Uranium (ASX:WCU), an Australian company, has purchased 33 mining claims, known as the Lark-Royal Project, consisting of 682 acres adjacent to the firm's Daneros mine development project nearing Blanding, Utah. The seller is Uranium One which released the properties for $300,000. The properties are subject to a 21% royalty claim by a local prospector.
The new Lark-Royal property covers the northern extension of White Canyon's Daneros uranium deposit which is currently the subject of a mine permit application. Development of the Daneros mine for production is expected to take place in the first quarter of 2009. Exploration and drilling of the Lark-Royal property is planned for the third quarter of 2009.
A permit is expected for the Daneros property from the Bureau of Land Management later this winter at which time underground development of the mine will take place. Ore is expected to be shipped 62 miles to the Denison mill at Blanding, UT, within four months of start-up of mine operations.
White Canyon said in a statement is has $6.5 million in cash to develop these properties and will also advance its other southeast Utah properties including the Thompson, Blue Jay, Marcy, Look, and Geitus projects.
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An application was filed Dec 30 by Areva with the U.S. Nuclear Regulatory Commission (NRC) for the Eagle Rock uranium enrichment plant to be located 18 miles west of Idaho Falls, ID. The application is for a combined construction and operating license. 
At the NRC's kick-off public meeting on the licensing process, held in Idaho Falls on Dec 10, more than 400 people turned out packing a hotel conference room to standing room only in a show of support for Areva's planned $2.4 billion 'Eagle Rock' uranium enrichment plant. 
Also, AREVA announced on Dec 12 the formation of AREVA Enrichment Services, LLC (AES) a new subsidiary responsible for U.S. enrichment services and the future owner and operator of the Eagle Rock Enrichment Facility. Areva also named Sam Shakir (right) as President and CEO of AES. 
In addition to the plant being developed by USEC, Louisiana Energy Services, the U.S. subsidiary of URENCO, has an NRC license and a plant under construction in Eunice, NM, in the far southeastern corner of the state near the Texas border. There the company has just announced that it is doubling the size of the plant with startup planned for 2011. At that time it will produce 3 million SWU/year. By 2014 the plant expects production to achieve 5.9 million SWU/year. 
