Western lands uranium gopher for 02/21/09

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.

The obvious strategy to counter that likelihood is to adopt a shareholder rights plan that is triggered when a buyer's holdings exceed a certain percentage of publically traded stock.

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.

Arizona Update

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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Vietnam explores nuclear energy

Developing nation said to be talking to Westinghouse

Reuters reports Vietnam is negotiating with Westinghouse to build the country's first nuclear power plants. The wire service cited state run news media from Hanoi.

Vuong Huu Tan, Director of the Vietnam Nuclear Energy Institute, told the online VnExpress newspaper Westinghouse was "the potential partner" for two proposed 2,000-MW plants, which would equate to four AP1000s. At $2,500 Kw, the total investment could equate to $5 billion.

Total GDP in 2008 was estimated at $248 billion which makes this single investment likely to show up on the scorecard of every economist watching the country's growth. The country's current energy use is based on oil and natural gas. It cosumes 271,000 bbls/day of oil. It also exports 395,000 bbls/day.

Westinghouse doesn't have a lock on the deal

Tan emphasized to Reuters that Vietnam is still reviewing reactor technologies.

"We will see which one of them has more potential than the others later, before submitting the selection to the National Assembly for approval in May. We haven't considered choosing any particular partner or technology for the plant yet," Tan told Dow Jones Newswires.

Reactor vendors the U.S., Russia, Japan, France, China and South Korea have come to Hanoi to express their interest in the project, he said.

Tan said that If the National Assembly approved the project in May 2009, construction of the two plants in the south central province of Ninh Thuan would begin in 2015 and take five years to complete.

According to a report from Dow Jones Newswires, Vietnam's fast-growing economy is creating demand for electricity far in excess of current capacity. The country has total installed power generating capacity of 15,000 MW, but plans to raise capacity to 24,000 MW by 2010 and to 82,300 MW by 2020.

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AEHI finds the SEC

Idaho penny stock firm with nuclear energy ambitions files a 10-Q

The Idaho Statesman reports that Alternate Energy Holdings Inc. (AEHI:PK) says the Securities and Exchange Commission (SEC) has accepted its registration statement. The 10-Q form filed by AEHI last week reports the firm, now based in Eagle, ID, has $409,000 in total assets and no reported income according to unaudited results. It’s enough to buy one of the ritzy town’s foreclosed homes, but not enough to set up shop to build a nuclear reactor.

The company said in a statement it will conduct audits and file required financial reports to keep its information current with the SEC and available to potential investors.

AEHI still has plans to raise money, at least $6 billion, to build an Areva EPR nuclear reactor, the Idaho Energy Complex, near Mountain Home, ID, in Elmore County.

However, Unistar, which is building the EPR units in the U.S., does not list AEHI’s project on its website list of commitments. AEHI did send a letter of intent to the NRC which dutifully listed the project as an expected application for a COL due by the end of 2009.

Based on the cost of COL for the Callaway, MO, Unit #2 for Ameren, an Areva EPR to be built by Unistar, AEHI could expect to spend at least $40 million on its COL application. With just 1% of that amount as cash on hand, the company has a long way to go. It’s prior efforts to raise funds, including two public announcements of having booked investment bankers, have not produced the need funding.

AEHI’s stock at market closed on Feb 20 at $0.05/share against a 52-week range of $0.40-0.03 with market cap of $3.72 million.

Rickards guilty of charges, plans appeal

In an unrelated story, an Idaho anti-nuclear activist was found guilty of trespassing at a public meeting organized by AEHI last year. Peter Rickards was originally charged with assault after he tried to hand out anti-nuclear leaflets at a public meeting organized by AEHI in Glenns Ferry, ID, last summer.

According to a report by KMVT-TV, Twin Falls, ID, Rickards says the judge withheld judgment at sentencing and said as long as Rickards does not repeat the offense within the year, the charge will be dropped. Rickards said he plans to appeal on the grounds the tresspassing charge should not have been brought in the first place due to the fact he was entering a public event.

Rickards is a podiatrist with a practice in Twin Falls. He's been a high profile anti-nuclear activist in Idaho for the past two decades.

The arrest of Rickards is the second incident in which AEHI tangled with anti-nuclear activists in Idaho. Last year AEHI sued the Snake River Alliance (SRA) for calling the firm a “scam.” The SRA is a self-appointed "watchdog" of all things nuclear in the gem state.

For her part, SRA director Andrea Shipley later claimed the statement was an “opinion” and not a fact. AEHI subsequently dropped the litigation, but not before making a big deal out of being insulted by Ms. Shipley’s over-the-top rhetoric.

AEHI’s hard line approach to public criticism of its atomic energy project may earn it kudos among Idaho’s ‘cave’ people’ [conservatives against virtually everything], but it does not bode well for its ability to successfully navigate an NRC regulatory process for a new nuclear reactor with its multiple opportunities for public input.

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NRG will move STP ahead without Austin

Twin reactors in Texas are said to be on short list for loan guarantees

NRG Energy said it would steam ahead with its plans for 2,700 MW to be generated by two GE-Hitachi ABWR reactors for the South Texas Project (STP) units 3 & 4.

This is despite the fact the City of Austin, TX, which is an investor in Units 1 & 2, turned down NRG’s proposal that the city also invest in the two new units. This is the second time Austin has rejected NRG’s proposal.

The Austin City Council voted on Feb. 12 against participation in the proposed expansion of a South Texas nuclear plant. The city of Austin currently owns 16 percent of the South Texas Project. Anti-nuclear groups convinced the city council that the NRG project could have uncontrolled costs that would sink Austin’s municipal utility under a huge burden of debt.

They relied on a report from a consultant the city hired to evaluate NRG’s proposal. It concluded that an Austin investment in the proposed project could have the city paying $2 billion over the next seven years.

That sum would require significant debt relative to Austin Energy’s size. The analysis said that could in turn result in a downgrade of its credit rating and lead to higher future borrowing costs.

NRG CEO David Crane told Reuters the company has identified 15 potential parties it believes will be interested in joining NRG and the municipal utility in San Antonio in expanding Texas' largest nuclear plant by 2016.

In a press release, STP updated the investor profile of the project.

In light of the progress made by the project in terms of regulatory schedule, the Department of Energy loan guarantee process and the conclusion of the EPC agreement, NINA has initiated a partial sell down process in the STP expansion.

“Bringing in additional equity investors will enhance the project’s capabilities and advance NINA’s strategic goal of developing and promoting ABWR facilities in North America,” said Steve Winn, NINA President and CEO. “This equity sell down diversifies ownership and provides potential investors strategic benefits such as partnerships on new ABWR development projects as well as other financial arrangements that enhance the project’s execution capabilities and adds value for all participants.”

Currently NINA and CPS Energy each own 50% of the 2,700 megawatt planned expansion of the South Texas Project nuclear facility. After the sell down, it is expected that each would own 40% and a new owner(s) would have a 20% equity interest although other ownership outcomes may arise. The ownership interests of STP 1&2, (NRG 44%, CPS Energy 40% and Austin Energy 16%) are not affected by this proposed sale.

First mover seeks loan guarantees

According to the Houston Chronicle, NRG Energy’s proposed expansion of the South Texas Project is on a shortlist for federal loan guarantees that are essential for its financial plan.

Utilities with projects worth $188 billion applied for a share of the $18.5 billion in loan guarantees through the Department of Energy, but only two or three will qualify for a piece of the insurance.

“We fully expect to be one,” NRG’s Crane said.

His confidence is bolstered by two recent events. According to the Houston Chronicle, the Nuclear Regulatory Commission gave the company a new timeline for review of its application for a construction and operating license for the two 1,350-megawatt reactors, which should have the company ready to break ground in 2012.

The project also signed an engineering and construction agreement with Toshiba, the main contractor for the project, which commits that company to meet tough scheduling, cost and quality standards.

Hostile takeover still there

Exelon’s efforts to effect a $6 billion all-stock hostile takeover of NRG took another hit this week. A second major investor in NRG told the Chicago Tribune Feb 10 that the deal undervalues the company. NWQ Investment, which owns 5.5% of NRG, said that Exelon must improve its offer.

“We have to get a better deal than that,” said Darren Peers, managing partner for NWQ.

Two weeks ago Solus Asset Management also said the offer by Exelon was not in its interest and declined to sell its shares.

The two firms and eight other investors own 54% of NRG and so far it appears they are not buying Exelon’s offer. For its part Exelon told the Chicago Tribune it expects to have controlling interest of NRG’s stock by May and will name its own board of directors.

Exelon has not had good results seeking to develop its own new nuclear power plant in Victoria County, Texas. It recently scrapped a commitment to a GE-Hitachi ESBWR reactor design after the Department of Energy express doubt that it would reach the market soon enough to qualify for loan guarantees. This put Exelon near the bottom of the list of projects seeking federal loan guarantees.

The Victoria Advocate said the Exelon project in Texas was “at a dead stop.” Exelon responded that the project was not dead, and that it was seeking a new reactor design for its license application to the NRC.

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Germany’s Merkel says cutting nuclear will harm energy security

Chancellor Andrea Merkel says early abandonment puts growth at risk

The BBC reported Feb 11 Chancellor Angela Merkel (right) has come out against early decommissioning of its 17 nuclear power plants which provide over 20 GWe of electricity.

“The head of the government said, "I believe that it is not in order when we are one of a very small number of countries intending to shut down nuclear power plants, while all the others talk about building new ones."

Merkel told a top-drawer group of industry leaders, "We must be willing to do all we can to achieve high economic growth rates," Merkel said addressing some 1,500 guests at the Berlin Chamber of Industry and Trade. Those arguing in favor of an early abandonment of nuclear power "are putting growth at stake".

Germany imports over one-third of its natural gas from Russia and learned once again this winter how unreliable that country can become in supplying it when shifts in political winds don’t go in the right direction.

Merkel stressed that she was not in favor of building new nuclear reactors but "I do not intend to disconnect the most reliable ones in the world first".

Last July Merkel returned from the G-8 summit in Tokyo the only member of the diplomatic meeting to be moving away from nuclear energy. She realized her country was at risk and began speaking out about retaining the country’s nuclear power plants. Green groups say they will make the issue a centerpiece of the national elections in September 2009.

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South Carolina moves out on two reactors

Regulators unanimously approve the request to build two AP1000s

The state’s largest utility, South Carolina Electric & Gas (SCE&G), will join with a state-owned utility to build two new nuclear power plants. SCE&G and Santee Cooper will build two Westinghouse AP1000 nuclear reactors at the V.C. Summer nuclear power station near Jenkinsville, SC.

The South Carolina Public Service Commission unanimous approved the request for the project. The approval moves the two reactor project well towards the head of the line for federal nuclear loan guarantees. Competition for the federal insurance is intensifying as green groups that supported President Barack Obama during the election have flexed their muscles in Congress cutting off expansion of the program beyond the current limit of $18.5 billion.

An application for a combined construction and operating license for the two reactors in under review at the NRC. Approval is expected by 2012.

SCEG plans to finance the reactors by recovering construction costs while the plant is being built. A series of rate increases will be implemented over the next decade to pay for the plant. Santee Cooper said it would pay its $4.4 billion share of the plant out of cash holding and bonds.

Nine Mile plant COL delayed

In an unrelated development, and to show how the limits on loan coverage is affecting the industry, Constellation Energy / Unistar asked the NRC to delay license review of the planned 1,600 MW Areva EPR for the Nine Mile plant in New York. UniStar said it wants to focus attention on UniStar's planned reactor at the Calvert Cliffs plant in Maryland. Earlier, UniStar dropped Nine Mile out of the competition for federal loan guarantees for nuclear power, also to concentrate on the Calvert Cliffs proposal.

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Nothing for nuclear in Economic Stimulus

Congress kicks loan guarantees to the curb

Green groups scored a significant victory this week convincing a House-Senate Conference Committee not to include $50 billion in federal loan guarantees in the giant Economic Stimulus bill. The legislation, without support for nuclear energy, subsequently passed in the House and Senate and will be signed by President Obama on Tuesday Feb 17th.

Se. Robert Bennett (R-Utah), who was the primary sponsor of the measure, pointed out that the current federal loan guarantee program, authorized for $18.5 billion, doesn’t come near to matching the industry’s needs. Applications for $122 billion are pending according to the Department of Energy.

According to the Associated Press, Bennett said, "The only opposition that erupted publicly was that I had somehow gone into the tank with the nuclear industry. The anti-nuclear folks raised a significant political attack on the whole program."

Mitch Singer of the Nuclear Energy Institute (NEI) said many of the groups opposing nuclear loan guarantees are being hypocritical because they don't oppose the billions of dollars in loan guarantees in the stimulus package earmarked for renewable energy sources like wind and solar.

“The loan guarantees are important primarily because they act as a catalyst for new technology, new plants and clean energy technology to access capital at a reasonable rate. It's an interesting juxtaposition. They don't seem to have a problem with any kind of economic stimulus for their preferred technology.”

AP reported that some members of Congress also have expressed concern about the existing loan guarantee program, which has yet to make a final loan decision even though the program has existed since early 2006.

At a Senate hearing on the program, Sen. Jeff Bingaman, D-NM, chairman of the Energy and Natural Resources Committee, and Sen. Lisa Murkowski of Alaska, the panel's ranking Republican, both raised the possibility that the program might be better managed by an independent entity and not the Energy Department.

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