Miners develop properties despite low stock prices
This blog post is an edited version of a column published in Fuel Cycle Week, V9:N385, July 15, 2010, by International Nuclear Associates, Washington, DC.
Western U.S. uranium miners, like their Canadian cousins to the North, have seen their stock prices drop like rocks down a mineshaft over the past five months. Yet, despite significant losses in market capitalization, all of the firms in FCW's anecdotal listing of uranium firms doing business in the western U.S. shows increasing investment in new mining projects.
Stock prices have dropped for all eight firms in our list (see table) and four of them saw declines in their stock prices of more than 20% between Feb 5, the date of our last published stock table for these firms, and market close Jul 9. Of the eight firms, two managed to hold on to stockholder value relative to the other six.
Energy Fuels (TSE:EFR), which is developing the Pinion Ridge mill in Montrose County, Colo., a 500 ton/day facility, dropped just $0.07/share since February. More significantly, the firm announced July 7 a $3 million private placement which will fund its permitting activities through 2011. The deal gives the investor, Dundee Corp, a 19.8% equity position in the firm.
Ur-Energy (AMEX:URG), which is developing the Lost Creek ISR mine in Wyoming, held on the line on stockholder value with a price that dipped just $0.01/share over the five month period. Also, the firm, inked a deal for $5 million with Blackrock, Inc. for a 15.34% equity stake in the firm.
Demand for uranium expected to increase
The common factor for both firms is that they have major, near-term milestones ahead of them to develop their respective properties. Like other firms on the list, they see demand for uranium rising over the next few years as possibly as many as four new uranium enrichment plants begin operations in the U.S. Also, loan guarantees for as many as seven new reactors will be out the door by the end of 2010.
The U.S. Department of Energy inked a deal for a conditional commitment for a $2 billion loan guarantee with Areva for the Eagle Rock Enrichment Plant in Idaho. USEC told FCW earlier this spring the firm plans to resubmit its application for a loan guarantee for the American Centrifuge Facility the firm is building in Ohio.
The most significant development is that Urenco began production in June at its plant in New Mexico. At the other end of the spectrum, industry experts say a long shot development is GE-Hitachi’s new laser enrichment process which the company says has completed test loop work.
Energy Fuels new mill
Gary Steele, VP for Investor Relations at Energy Fuels, told FCW the permit for the Colorado hard rock mining mill is expected in January 2011. Even now the hunt is on for the expected $150 million which one industry expert says will be needed to build the mill to process output from area mines.
Steele told FCW the firm hopes to find a strategic partner who will, as part of the deal, have a preferred position for supply of uranium from the mill.
"The attractiveness of the deal is to lock in supply, " Steele said.
Is the money out there? Steel says if the capital becomes available after the mill gets its license, the plant could be built in 10-12 months and delivering product by 2Q2012.
As far as Dundee Corp is concerned, Steel is delighted with their role.
"Dundee stepped up its investment in the company," Steele said. "They are a solid partner."
Toronto-based Dundee Corp is an asset management company dedicated to private wealth management and investment in real estate and mineral resources. As of June 2010 it reports having $65 billion under management.
Rich Boberg, Director of PR at Ur-Energy (AMEX:URG), told FCW the company is on track to receive its permit this summer from the NRC for the Lost Creek mine in Sweetwater County, Wyo. The company received its underground injection control permit from the State of Wyoming in June.
Once the firm has its NRC license, Boberg told FCW it will take the firm about six months to build the mine. He said the company has the funds from the new investment to achieve production in 2011 of 1 million pounds a year.
"We will have another 1 million pounds of capacity at that facility, Boberg said. "It can be used for toll mining or eventually for our other Wyoming properties."
Bayswater looks ahead for Reno Creek
In April 2010 Bayswater (CVE:BYU) bought the Reno Creek property from Strathmore (CVE:STM) in a $20 million deal ($17.5M cash, $2.5M stock). It financed the acquisition with $20 million from Pacific Road Resources Funds (PRRF), an Australian private equity investor. Reno Creek was acquired by a newly created private company which is jointly owned by PRRF (72%) and Bayswater (28%).
According to a statement from Bayswater, the Reno Creek ISR site holds 15.6 million pounds of U3O8 of NI 43-101 compliant resources. As part of the deal with PRRF, Bayswater has the right to increase its holding to 50% by contributing further funding to develop the mine. Production is expected by 2015.
Uranium Energy Corp sees production starting in December
Uranium Energy Corp (AMEX:UEC) has started on well field development of its Palangana, Tex., ISR mine, which it acquired from a subsidiary of Uranium One last December. Construction is expected to be complete by September.
COO Harry Anthony told FCW in an interview earlier this year production could being by 4Q2010. The firm raised cash to pay for development of this property and general purposes when it sold its interest in the Ceboletta uranium project in New Mexico last April for $11 million.
Green groups won't take "no" for answer
Last month environmental groups concerned about the impact of uranium mining on the Grand Canyon had a significant setback to their cause. A federal district court judge denied their petition for a preliminary injunction to stop operations at Denison's (AMEX:DNN) Arizona 1 mine year Fredonia. The court ruled June 17 the main petition would not succeed in its merits.
The Center for Biological Diversity isn't taking "no" for an answer. On July 12 the group filed an appeal with the Ninth Circuit Court of Appeals. It continues to argue that Denison used outdated mining plans to restart operations and that the Bureau of Land Management erred in accepting them without requiring an updated environmental assessment.
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