Friday, December 17, 2010

Western lands uranium gopher for 12/18/10

Year end stock table shows significant improvement over six months ago

This column is an expanded version of my coverage published in Fuel Cycle Week, V9:N404 12/09/10 by International Nuclear Associates, Washington, DC

gopherThe soaring increase in the spot price of uranium from $40/lb June 1 to $61/lb Dec, a 53% increase, resulted in spectacular increases in the stock prices of both uranium juniors and producers. (spreadsheet) For instance, juniors Powertech (TSE:PWE) and Strathmore (CVE:STM) saw significant stock price increases as did producers Denison (AMEX:DNN) and Uranium Resources (NASDAQ:URRE). The increase in the spot price once again proves the principle that stock value is a partially a function of a firms proven uranium resources relative to the spot price. (UX: $61.75/lb on 12/13/10)

An investor who bought 100,000 shares of each of the firms in FCW's selected stock portfolio would have committed just under $800,000 last June and reaped a profit of $1.5 million if the shares were sold Dec 1.

Several firms immediately benefitted from the higher stock prices, though the two that had the most gains trade on American rather than Canadian stock exchanges.

Ur-Energy stock options cash out

Perhaps the clearest signal these surging stock prices are good news for investors is the report that Ur-Energy (AMEX:URG) received $3 million in proceeds from the exercise of stock options that carried a strike price of $1.25/share. The company's stock price cleared $2.33/share on Dec 1.

Bob Boberg, President and CEO, said in a statement the funds will be used to complete mine permits for the firm's Lost Creek Wyoming uranium deposit.

Uranerz offers stock

Another firm to take advantage of rising stock prices is Uranerz (AMEX:URZ) which on Dec 1 said it would offer up to $20 million of stock for sale. A rising stock price results in lower dilution for other investors.

Since last February the firm's stock has risen from $1.35/share to $3.36/share. Had the $20 million been raised last June, the firm would have issued 14.8 million shares of stock. However, at $3.36 the firm only has to issue 5.95 million shares.

The firm said it would use the proceeds to fund construction at its Nichols Ranch ISR mine on the Powder River basin of Wyoming.

Uranium Energy starts production

The spot price wasn't the only factor boosting the stock price at Uranium Energy (AMEX:UEC) which saw a rise over six months from $2.45/share to $6.86/share. The firm has started processing the first shipment of uranium resins at its Hobson processing plant. The action follows the start of production Nov 17 at the firm's ISR mine at Palangana, also in south Texas. Uranium Energy purchased the Palagana site from Uranium One in 2009.

CEO Amir Adnani said the site is expected to produce 400,000 pounds of uranium in 2011. He said that with production for the Goliad site coming online in 2011, the firm expects to produce one million pounds U3O8/year.

Also, Adnani did what all uranium mine CEOs do well. He predicted higher prices for uranium in the next 12-15 months.

Palangana is the first of four mines the firm will bring into production. Harry Anthony, COO, said the firm plans to start production at its Goliad ISR site in 2011.

Energy Fuels acquires supply for planned mill

Rising stock prices have boosted confidence for firms to expand their holdings. Energy Fuels (TSE:EFR) inked an agreement with Uranium One to acquire two Utah State mineral leases and 13 unpatented claims, covering 1,400 acres, adjacent to the Energy Queen mine near La Sal, Utah.

CEO Steve Anthony said the acquisition will improve the economics of the entire operation. The firm plans to reopen the Energy Queen mine to supply ore to its planned Pinion Ridge Uranium Mill, which is being developed as a 500 ton/day facility in Montrose County, Colo.

Energy Fuels plans to develop an underground mining operation at the new sites. Historic estimates, not NI 43-101 compliant, put the resources at 184,000 pounds U3O8 and 800,000 pounds V2O5.

The deal doesn't involve any cash. Instead, Energy Fuels will get the parcels in return for providing unspecified electronic databases of mining information. Uranium One will also receive a 1% royalty on any production from these parcels.

Energy Fuels also acquired a 641 acre lease from the Department of Energy (DOE) in western San Miguel County, Colo. DOE cited a historic estimate from the 1970s for the site of 156,000 pounds U3O8 and 1.5 million pound V2O5.

Energy Fuels CEO Steve Anthony said uranium mined from this lease would also be destined for the Pinion Ridge mill once it is built.

While Energy Fuels was rounding up new resources for its planned mill, anti-nuclear groups focused on the firm's management team. Travis Stills of the Energy Minerals Law Center in Durango criticized the decision by Energy Fuels to hire Richard Cherry, who was CEO of Cotter Corp. from 2000-2006. Stills said Cotter's track record of regulatory violations during Cherry's tenure should have raised red flags for Energy Fuels.

CEO Anthony dismissed this tack saying he hired Cherry as a consultant to help develop uranium supply contracts. Anthony said Cherry won't have management responsibilities related to the mill.

Daneros Mine shows good ore results

White Canyon Uranium Ltd. (ASX:WCU) reports that ore sent to Denison Mines' White Mesa mill in November had a grade of U3O8 processed averaging 0.291%. The company said these results are in line with its expectations. The firm expects to process 40,000 tons of ore at the Denison Mill. The firm said the rising spot price of uranium is an incentive for it to fast track production.

Black Range gets expanded permit

Black Range Minerals (ASX:BLR) got the OK from the Fremont County, Colo., county commissioners to include the newly acquired Hansen uranium deposit in its current exploration permit at the company's Taylor Ranch project. Black Range says historical estimates of the Hansen site, which was extensively drilled in the 1970s, indicate as much as 30 million pounds U3O8 (not NI 43-101 compliant). The acquisition of the Hansen site consolidates holdings by Black Range in the Tallahassee Uranium District in Fremont County.

The company acquired the 21 claims by issuing 500,000 shares of stock. At market close Dec 3, the stock traded at $0.04 a share making the transaction worth $20,000.

The stock was briefly the subject of regulatory review on the Australian Stock Exchange. In October it spiked upwards despite no material information being released by the company. The stock has traded in a 52-week range of $0.02-$0.06 with 638 million shares outstanding.

Despite its exploratory work in the U.S., Black Range has not seen a significant bump in its stock price. Last June is traded at $0.03/share and six months later it is trading at just one penny more. Despite the firm's advanced prospecting at Taylor Ranch, investors haven't lined up to buy the stock.

One reason may be the firm hasn't yet published an NI 43-101 report nor an economic feasibility study. If Taylor Ranch goes into production a few years from now, it will be an underground operation. Another issue will be access to toll milling.

The Cotter uranium mill located in Canon City, Colo., is within easy haul distance by truck from the Black Range site. There is no other mill within economic haul distance by truck for the Black Range site in Fremont county. The good news is Cotter is planning to reopen the mill by 2014 with new equipment.

The bad news is a new state law requires Cotter to clean up the tailings from previous mill operations before a new mill can be built on the site. Cotter is disputing state agency financial requirements for decommissioning the old mill.

Last October the Colorado Department of Public Health issued an order requiring Cotter Corp. to commit $10 million to cover estimated costs to install and monitor groundwater wells and prevent groundwater contamination off-site. A month later Cotter rejected the state's demand and requested mediation to settle on an amount.

The mill processed uranium from 1958 to 1987. In 1988, the mill was designated as a Superfund cleanup site by EPA.

Cotter cannot get state approval to build a new mill until it resolves cleanup issues for the old one. Black Range might have a better chance of building its own mill rather than waiting for Cotter to clean up its old site.

That assumes it can get the permits to build a mine and bring it into production. Those are a lot of "ifs" which may be the reason why its stock price hasn't moved at all despite a rapidly rising spot price.

Peninsula gets NRC visit

The NRC completed a pre-license review at the Peninsula Energy Limited (ASX:PEN) Ross Uranium (ISR) site in Wyoming. This is the first time the NRC has visited a site for the purpose of conducting a pre-submission review. The site visit included a tour of the Ross area, review of data and groundwater models to be used in the application, and a workshop to review the draft of the application.

In its meeting summary of the Oct 26-28 meeting, which took place in Oshoto, Wyo., 180 miles northeast of Casper, the agency noted that the company invited the public to attend the site tour. The NRC also confirmed to FCW the meeting is a first-of-a-kind for the agency.

Tonty Simpson, CEO, said his firm was "pleased with the review," and is now working on NRC's comments to craft a final application.

NRC OKs restart of Irigaray & Christensen Ranch

The Nuclear Regulatory Commission has authorized Uranium One USA, Inc., (TSE:UUU) to restart its Irigaray and Christensen Ranch in situ uranium recovery facility, after determining that the company is prepared to protect the health and safety of workers and the public, and the environment, during operations.

The Irigary and Christensen Ranch facility, located in Johnson and Campbell counties in eastern Wyoming, is regulated under a single NRC license. Recovery operations ceased in 2000. Site operator Cogema applied in 2007 for permission to restart operations.

The NRC authorized restart in September 2008 subject to two conditions: that the company update its financial surety for decommissioning, and that the facility pass a preoperational inspection. NRC completed the onsite portion of the preoperational inspection on Dec. 9, and Uranium One, which purchased Cogema this past January, updated the surety on Dec. 16.

The NRC notified Uranium One by letter dated Dec. 17 that it had fulfilled the conditions for restarting operations. The facility is authorized to produce up to 2.5 million pounds of U3O8 annually.

Uranium One closes on sale to ARMZ

Uranium One announced it has closed its sale of two mines in Kazkhstan and properties in Wyoming in the U.S. to JSC Atomredmetzoloto (ARMZ) for $610 million. The primary interest ARMZ has in Uranium One is in two mines in Kazakhstan which are the Akbastau and Zarechnoye mines.

The deal also includes Uranium One's NRC licensed Irigaray-Christensen ranch ISR mine in eastern Wyoming. A brief political tempest in a teapot took place in October when four House Republicans protested the sale on the grounds uranium from the Wyoming property might be sold by Russia to Iran.

The NRC said in a statement these concerns were unfounded as the U.S. subsidiaries of Uranium One lack export licenses to sell their product overseas.

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