September 13, 2012 - 6:58pm EST by
2012 2013
Price: 0.26 EPS $0.00 $0.00
Shares Out. (in M): 123 P/E 0.0x 0.0x
Market Cap (in $M): 33 P/FCF 0.0x 0.0x
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 0 TEV/EBIT 0.0x 0.0x

Sign up for free guest access to view investment idea with a 45 days delay.

  • Uranium


It was not so long ago that we buried common sense. At a gravesite nearby, we found another old friend- uranium. The year of mourning has come and gone but the unhappiness and despair remains. It would almost seem that the last bull has vacated the abode leaving only the sick, infirm and chronically optimistic.

But should we let uranium rest in peace?

Certainly with blood in the streets, valuations are in the basement.

Is there any hope for a revival? Let us take a look at the current state of the industry.

Post Fukushima many countries opted to slowdown or closedown their nuclear      industry in the light of public fear and panic. Germany, Japan. Italy ran for the hills.            US regulators hesitant over the years, became more so.

But the simple truth is- we have very few viable alternatives to nuclear power.

This fact is not lost on many foreign emerging markets. Presently 61 reactors                are under construction worldwide. China remains the leader in adding needed               power with 26 in various stages of building, with Russia building ten. The World  Nuclear Association tells us that 162 nuclear reactors are on order or planned.

This hardly seems nuclear power died! Again leading in the growth is China with a        thundering 51, followed 17 and 16 from Russia and India respectively. Several   European- Poland, Finland, England have all indicated they are moving ahead with nuclear energy.

These reactors will join 435 operating reactors!

What about supply? Can you see it- bankers lining up to fund uranium mining        projects, forgetting the time it takes to scope out, build and develop a mine, in              this environment. A long shot. Unless financing from non-traditional sources are available. And then the Russian-US accord to dismantle nuclear warheads should dry up eliminating an estimated 24 million of pounds which have hit market over the last several years.

Australia’s Bureau of resources projects a 5% increase in uranium production in        2012 to 77k metric tons growing to 110k metric tons in 2017. Offsetting this is anticipated worldwide mine output of 58k in 2012, growing to about 87k in 2017.       They project a price of about $74 then up from approximately $50 today.

To our mind one of the most interesting ways to play this depressed area is Strathmore Minerals (STHIF $0.27 or STM on Toronto).  While reserves are only historical and measured in the Seventies or so, best guess indicates 80 million net pounds in the ground found at several sites- this is a substantial number based on a market cap of only $33 million. Outstanding shares -123 million exist.

The most notable site is the Roca Honda, New Mexico originally worked by Kerr McGee with 17.5 million NI-43-101 pounds and another 15.8 million inferred pounds. Japan’s Sumitomo is a 40% partner in the project. Permitting is well along with estimated time of production three years away. A mine permit is expected within a year. NRC mill permit submission by end of year.

Gas Hills, Wyoming has 10 million historical pounds, another 5.6 million inferred and is estimated coming to market in 2016. Kepco  (Korean Electric Power) has invested $8 million in a private placement (C $0.55) to continue development of Gas Hills. They have an option to invest an additional $32 million over three years at their discretion.

Another noteworthy former Kerr McGee property is Church Rock also in New Mexico, (adjacent to a Uranium Resources (URRE) site) with an estimated historical reserve of 15 million pounds.

You get the idea. These three properties and others in their stable add up to 80 million possible pounds of uranium. Recently, Cameco purchased a sizeable uranium mine in Australia paying approximately $3.5 a pound. Generally we use a figure of 3% of the mineral price which would suggest $1.5 a pound. But let us chop this to $1 a pound, giving us about a $80 million valuation next to a market cap of $35 million. Not to shabby.

But now for the surprise. In May, Strathmore acquired a gold-copper prospect with an estimated 700,000 recoverable gold ounces in the ground. The Copper King gold copper project in Laramie County, Wyoming with development expected to take three years. Using the same 3% of mineral price with gold at $1700 gives us about $50 an ounce for a potential value of  $43 million- that alone greater then current market cap! In addition about 190 million recoverable pounds of copper are measured and indicated possibly worth another $10 million.

Thus to put this all together, we have estimates of uranium, gold and cupper reserves totaling $80, $43 and $10 million or $133 million for a market cap of $33 million.

In the past with a similar situation, Strathmore spun off Fission Energy (FSSIF) which went on to reward stakeholders nicely.



1.Industry is not loved putting it mildly- blood in the street.

2.Stock one of the most undervalued in Uranium industry.

3.Discovery of a gold subsidiary worth more than current market cap-

   potential corporate action or spinoff.


Potential corporate action liberating new gold play.
    show   sort by    
      Back to top