Western Uranium WURNF
June 01, 2009 - 12:15pm EST by
2009 2010
Price: 0.80 EPS $0.00 $0.00
Shares Out. (in M): 60 P/E 0.0x 0.0x
Market Cap (in $M): 48 P/FCF 0.0x 0.0x
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 48 TEV/EBIT 0.0x 0.0x

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     The past year has re-priced many companies 40, 60, and some even 80 % below where they were months ago.  At these low price levels certain industries and their corresponding companies merit a reevaluation and possible investment.  Over the past several years, Uranium has been on a roller coaster ride rising from  $9/lb in 2000 to a peak of $138/lb in 2007.  Now priced at $60 /lb, established miners and Western Uranium in particular find themselves well positioned to take advantage in the coming years.

      There are 436 reactors currently in operation globally today consuming about 168 million pounds of the mineral.  At this moment 151 new reactors are currently under construction  or planned.  Adding these 151 reactors will increase reactors worldwide by 35% and an additional yearly demand of 59 million pounds of  uranium.  This equates to a huge 55% increase from today's current levels and will cause expanded exploration and excavation year to year.  With an additional 266 units being proposed, the surge in demand will be enormous over the coming decade.      

     The Nuclear Regulatory Commission (NRC) is currently processing applications for 26 new  facilities. This number is enormous considering there hasn't been a new plant built since the Three Mile Island disaster in 1979. Nuclear power accounts for about 20% of the power used in the U.S. currently and the  ironic part is that if every one of these new plants were to come to fruition,  it would still only amount to half of what is necessary to maintain the status quo.  Internationally,  nuclear power is viewed much more favorably and has taken much bigger portions of countries overall energy consumptions.  Over 75% of France is currently handled by nuclear power with the goal to be 100% in the coming decades.  Two significant considerations for France has been environmental and cost. The three main energy sources  are coal, gas, and uranium. Of the three, uranium is the most environmentally friendly and nearly emission free.    In terms of cost, according to the Nuclear Energy Institute  coal fired plants run at $2.47/kWh while gas fired run at $6.78/kWh;  nuclear in comparison is running at only $1.76/kWh. With 31 million pounds of uranium in the ground, WUC sits in an enviable position to take advantage of renewed mining efforts.

    Global mining now generates about 107 million pounds annually, immediately creating a deficit of over 61 million pounds which currently is made up primarily by government inventories.  This solution will only last for a finite amount of time and with the constantly growing demand for the resource, new avenues of supply must be tapped. Three areas largely relied on to fill this need are Kazakhstan, Saskatchewan, and  Australia. 

      Kazakhstan  increased production by a substantial 28% to 19 million pounds in 2008 with a goal of 50 million pounds by 2015. This may be overly optimistic since the prime minister recently announced all state run facilities to freeze hirings until year-end and to cut staff by 50% and salaries by 15%.

      Saskatchewan contains Cameco's Cigar Lake deposit which is the worlds largest undeveloped uranium resource. A 2006 flood in the mine and a push to develop nearby properties could delay for several years production from this property.

       Australia, although promising, has had restrictive uranium mining rules that has retarded production. A new political environment offers promise that will relax these restrictions as will the proposed expansion of BHP's Olympic Dam property. This would increase production by about 20 million pounds but its timeframe is uncertain.

       Western Uranium (WUC-CA,WURNF) is poised to become an important player in uranium land.  WUC  easily stands out as an especially interesting stock when evaluating  the three  important ingredients for valuation;  product, cash, and management.  WUC has properties in Nevada, New Mexico, and the Thelon Basin in Canada.  The most exciting of these properties is in the Kings Valley area of Nevada,  which was previously explored and worked by the Chevron and Anaconda companies.  WUC  is currently evaluating their three sites;  Kings Valley North, Kings Valley South,  & Moonlight.  The potential for this area so great and valuable, that giant miner Cameco signed a partnership  agreement with WUC over a year ago.  This is only the third time in Cameco's  history that they have bought stock in a junior miner,  having purchased 10% of the company at $3.80.  Cameco is very excited with the geology in this area and views it as similar to a Russian project containing 600 million pounds of U308 spread over twenty deposits.

      Virgin Valley, Nevada also offers good prospects for additional discoveries. Originally prospected by Exxon, it holds historical reserves of 13 million pounds of uranium and several attractive prospects.

    Also worth mentioning is their land in the Thelon Basin in Canada  which is geologically similar to the Athabasca Basin-  one of the most prolific uranium areas in the world,  producing over 30% of the worlds uranium requirements from high grade deposits, and is near the 130 million pound Kiggavik deposit.  Total historical resources for Western Uranium place estimates at around 31 million pounds of U308,  which at current prices would have an insitu  value of  $1.86 billion or valuing the in ground reserves at $2 per pound results in a $62 million estimate.

     Recent financials indicate about  $ 50  million in the bank,  enough to fund operations for the next few years.  WUC has approximately 60 million shares outstanding with little debt. 

     Recently Wurnf  announced a 5.6 million share buyback.  Management strongly believes current share prices do not adequately reflect the true value of the company and thus has gone ahead with the buyback process.

     Exploration in Kings Valley, Nevada recently encountered gold intercepts of as much as 12 grams in the northern end of the property. The geology similar to other important gold finds out West may even turn out to surprise all.


     Also we should not forget holdings of 15 million shares of Western Lithium (WLCDF). Western Lithium acreage in Nevada and initially  discovered by Chevron is estimated to have between one billion to as much as 24 billion pounds of lithium reserves recently selling for over $3.00 a pound. With almost every car company in the world working on an electric car and lithium battery, one can assume a safe,  giant domestic source would attract wide interest. Outsourcing from Bolivia adds unnecessary political and transportation issues.


     Not unmindful of the interest generated in its assets, WUC  has recently created a shareholders rights plan- guess there are "sniffers"  about.


     And why not.  Let us take stock:


  • 1. A miner with cash of $50 million
  • 2. Domestic Uranium reserves of over 30 million historical pounds with exciting exploration prospects drilling.
  • 3. About one third share of Western Lithium ( worth about .20 cdn) behind every shares of WLC.
  • 4. Unexpected and attractive new gold discoveries.
  • 5. Well regarded management reinforced with Cameco's purchase at $3.80.


   Available today at your local broker for about $0.80 American.


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