Description

Continental Precious Minerals (CZQ.to)

Investment Case

Continental Precious Minerals is essentially a uranium exploration company that has 50% more cash than its market capitalization resulting in a substantial return if its stock price returns to its cash value.  It has up to 20 million pounds of conventional uranium in Sweden and over 400 million pounds of unconventional uranium in Sweden.  In essence, its cash burn rate is approximately $1 to $2 million per year.  Using the $2 million figure, it would take 5 years for CZQ’s cash to be used up before its cash balance would equal its current market capitalization.  The company has $27 million in cash and a market capitalization of $17.5 million (roughly $0.56 in cash per share using roughly 48 million shares outstanding).

I haven’t valued any of its uranium assets (it is easier to value the cash) – the conventional assets are located near the location where Areva is constructing a nuclear power plant in Finland.  There is some chance that the conventional assets could be sold as fuel for that power plant.  In the good ol’ days, $5- $10 per pound was reasonable as a sale value for these assets, but even using $1 per pound, this could add $0.40 to the stock price.  This would result in a total potential value of roughly $1 per share ($0.56 in cash plus $0.40 in uranium).

The unconventional resource was mined previously including during World War II, but hasn’t been for the last 20 years or so due to the low uranium price.  This asset has value, but I haven’t attempted to value it.

General Info

Continental Precious Minerals Inc. is a multi-mineral exploration company with multiple interests and exploration licences in Sweden. Since March 2005, Continental’s primary goal has been to advance its Swedish assets. To date, Continental’s exploration program has primarily focused on the Viken MMS licence, where it has defined a NI 43-101 compliant resource. The company will continue to conserve its capital, focus on further delineating the resource at the Viken licence and surrounding licences on a cost effective basis, completing the metallurgical and environmental studies already underway and completing a preliminary economic assessment of the project in the second half of 2009, while seeking to collaborate with a major mining company to advance development. The company will also evaluate expansion and diversification opportunities as they emerge in current market conditions.

Description of Unconventional Resource

MMS Viken has an inferred resource estimate of 1.166 billion tonnes containing 437 million pounds of uranium oxide (0.33 lbs/ton), 797 million pounds of nickel (0.62 lbs/ton), 7 billion pounds of vanadium pentoxide (5.57 lbs/ton) and 900 million pounds of molybdenum trioxide (0.71 lbs/ton). The resource estimate also includes an indicated resource of 13 million tonnes containing 6 million pounds of uranium oxide (0.38 lbs/ton), 9 million pounds of nickel (0.59 lbs/ton), 12 million pounds of molybdenum trioxide (0.8 lbs/ton) and 92 million pounds of vanadium oxide pentoxide (6.10 lbs/ton).  This resource estimate is based on 62 holes for a total of 11,828 metres at the project.

Catalyst