Powertech Uranium Corp.

Powertech Uranium Corp (TSX:PWE), (FSE:P8A) & (NAS:PWURF)
Share price: CAD 4.01 (mar 23, 2007)
Number of shares: 32 million
Market cap: CAD 129 million
Resources: 17.2 mio. lb (NI 43-101 Inferred and historical)
Price per pund U3O8: USD 7.5
Estimated production start: Late 2009
Estimated production output in 2010: 2 mio. lb (rising to 3-4 mio.)
Estimated revenue 2010 (U3O8 = $95) : USD 190 mio.
Estimated production costs per lb: $ 24
Estimated profit 2010: CAD 166 mio (USD 142 mio.)
Price target 2010 at p/e 10: CAD 27.7 (60 mio. shares)
Price target at U3O8 in ground (10 USD per pound): CAD 6.29
12 month price target: CAD 9 (upside 124 %)

My analysis

I like Powertech’s management and technical team. I like their plans to produce in 2009 and the yearly peak production of 3-4 mio. lb. Powertech hosts deposits with average grades of 0,21 % which is high for ISL mining. They have a low resource base of 17.2 mio. lb. but they are expected to expand that resource estimate to 30 mio. lb., which will expand the production time by 3 years. I find Powertech a cheap uranium explorer and near term producer with lots of upside.

Note that my analysis is without taxes and without any risk price reduction, which make it difficult to compare this analysis with others who use them. Use my analysis to compare the different companies and their production and resources estimates. And please don’t forget to do you own due diligence.

Powertech Uranium corporate presentation:

Powertech Uranium Corp. is a mineral exploration and development company that was formed to develop low cost uranium properties with the shortest lead time to production.

The company is targeting North America and focusing on projects amenable to In-Situ Recovery (ISR) mining methods. The company presently holds the Dewey Burdock uranium deposit in South Dakota and the Centennial project in Colorado, two advanced stage projects with historical uranium resources totaling more than 17 million pounds of U3O8.

The company also holds two exploration projects in Wyoming known as Dewey Terrace and Aladdin. Both projects have known uranium mineralization as defined by previous drilling and have significant exploration potential.

The company has experienced management and a well qualified technical team with more than 200 years in all aspects of the uranium industry from exploration, permitting, designing, building, and operating ISR mines.

More information on Powertech Uranium Corp.
Read Sweden's Jordan Fund's analysis on Powertech, Loparn's analysis with 2007 price target at CAD 7.40 and this blog post about Powertech as a possible take over target for Uranium One.

Strathmore Minerals

Strathmore Minerals (TSX:STM), (FSE:UXP) (NAS:STHJF)

Share price: CAD 4.58 (mar 23, 2007)
Number of shares: 71 million
Market cap: CAD 325 million
Resources: 166 mio. lb (Historical, NI 43-101 Indicated and Inferred)
Price per pund U3O8: USD 1.68
Estimated production start: 2010
Estimated production output in 2010: 0.5 mio. lb (rising to 8 mio. lb. in 2020)
Estimated revenue 2010 (U3O8 = $91) : USD 45.5 mio.
Estimated production costs per lb: $ 20
Estimated profit 2010: CAD 41 mio (USD 35.5 mio.)
Price target 2010 at p/e 10: CAD 4.56 (90 mio. shares)
Price target at U3O8 in ground (10 USD per pound): CAD 27.26
12 month price target: CAD 8 (upside 74 %)

My analysis

I like Strathmore, their exploration and management team and I especially like their resource estimates. What I don’t like is that their estimated production stays fairly low until at least five years out and by that time the price of uranium may have fallen. Sprott Asset Management is a major holder and one might think they would know the uranium industry. Valued on their resources in the ground this is a very good play. With all the consolidation in the uranium industry I won't be surprised to see Strathmore acquired by some larger US or Canadian uranium company.

Strathmore Minerals corporate summery:

Strathmore Minerals Corporation is a Canadian based resource company focused in the strategic acquisition and development of uranium properties on a worldwide basis. Since 1996, the Company's strategy has been to acquire uranium resources that have been previously drilled or developed by others but dropped due to uneconomic U3O8 prices in the early 1980s. The company has also acquired one of the largest exploration land packages in the prolific Athabasca Basin of Saskatchewan, Canada. As a result of the uranium price rising from a low of $7 US to over $85.00 US, Strathmore is assessing all of its properties to determine how best to develop them, including the potential for future production.

Strathmore's Board of Directors, Senior Management and Executive Advisory Board include geologists with over 200 years combined worldwide experience in uranium exploration, development, permitting and mining. This experience compliments other team members, who over the past decade have established a track record for financing and building successful companies.

Strathmore Minerals corporate presentation

Paladin Resources

Paladin Resources (TSX:PDN) & (FSE:PUR)
Share price: CAD 8.27 (mar 16, 2007)
Number of shares: 501 million
Market cap: CAD 4,143 million
Resources: 188 mio. lb (Indicated)
Price per pund U3O8: USD 18,76
Estimated production start: 2.6 mio. lb. in 2007
Estimated production output in 2010: 6 mio. lb (probably higher)
Estimated revenue 2010 (U3O8 = $91) : USD 546 mio.
Estimated production costs per lb: $ 14
Estimated profit 2010: CAD 542 mio (USD 462 mio.)
Price target 2010 at p/e 10: CAD 9.85 (550 mio. shares)
12 month price target: CAD 10 (upside 21 %)

My analysis

From researching Paladin’s website I’m forecasting Paladin’s production to 6 mio. lb. in 2010, but it could very well be much higher. Their Australian projects might start producing right about that time. Furthermore, the planned acquisition of Summit Resources will push the production estimate up a notch. My 12 month target at CAD 10 is because of the surging uranium price and therefore the hunt for present uranium producers.

Resource Capital Research’s investment report on Paladin Resources (Sep 26, 2006)

Overview: Paladin Resources is an Australian company listed on the ASX and TSX. It is currently developing the Langer Heinrich uranium project in Namibia and has an advanced BFS at the Kayelekera uranium deposit in Malawi. PDN is positioned to become an established uranium supplier in 2006.

Langer Heinrich mine: The open cut and mill operation commenced staged commissioning Aug. '06. Capex is US$92m (incl. US$10m contingency) and average opex. is US$14.18/lb over LOM. Project life is currently 17 years at an initial production rate of 1,180tpa (2.6mlbspa) U3O8. Given the potential to increase the mine life to 25 years, a stage 2 plant expansion review is underway, with potential to increase the production rate to 3.7mlbspa (+ 44%) during 2008. The scale of the expected capacity increase will be driven by the uranium price and additional ore resources, off set by a potentially constrained water supply and ease of commissioning the alkaline leach plant. The deposit is open to the east where there is potential to find additional resources. PDN's hedging policy is to maintain exposure to the spot/term market. Uranium sales contracts to meet project financing requirements cover 6.6mlbs of production from 2007 to 2012. PDN indicates the contracts will generally receive market prices at time of delivery with some degree of price participation above contract cap levels.

Kayelekera: A BFS by GRD Minproc is underway. Project commitment is anticipated late 2006, followed by a 12 month construction period and commissioning in January 2008. Likely project parameters are open pit, mill processing, 1.0ktpa (2.3mlbs U3O8 production) for a minimum 10 year project life, opex ~US$15/lb.

Valhalla Uranium: (ASX:VUL) PDN's scrip takeover (38m PDN shares, ~A$1968m) of VUL has moved to compulsory acquisition. VUL's main asset is 50% of the Mt Isa Uranium Project (SMM 50%) and a 41.7% interest in the Bigrlyi deposit with Energy Metals Limited, ASX:EME. SMM is taking legal action in relation to pre-emptive rights in the Mt Isa Uranium Project against which PDN is indemnified in the event SMM wins.

Investment summary: Our NPV valuation is A$2.53/share, up 27% from A$1.98/share (10% discount rate) primarily reflecting our upward revision of the long term uranium price to US$35/lb from US$30/lb. PDN's share price has traded closely to its NPV valuation discounting the "forward" uranium price which is currently US$65/lb in 2007 (PDN NPV A$4.30/share).

More information on Paladin’s uranium projects:

Uranium One

Uranium One (with Urasia (TSX:UUU)) (TSX:SXR) & (FSE:A9Y)
Share price: CAD 15,88 (mar 16, 2007)
Number of shares: 300 million
Market cap: CAD 4,764 million
Resources: 269 mio. lb (Indicated)
Price per pund U3O8: USD 15.08
Estimated production start: 2.8 mio. lb. in 2007
Estimated production output in 2010: 13 mio. Lb (19 mio. lb. in 2012)
Estimated revenue 2010 (U3O8 = $91) : USD 1,183 mio.
Estimated production costs per lb: $ 14.5
Estimated profit 2010: CAD 1,167 mio (USD 994.5 mio.)
Price target 2010 at p/e 10: CAD 35.37 (330 mio. shares)
12 month price target: CAD 22 (upside 38.5 %)

Resource Investor’s article on Uranium One bid on Urasia

The combined company, with a fully-diluted market capitalization of approximately $5 billion, will trail only Cameco [NYSE:CCJ; TSX:CCO] in production once all its mines are operating, and be the only producer in Kazakhstan, South Africa, Australia, the U.S. and Canada - the five largest holders of uranium deposits.

The company will have estimated combined attributable annual production in excess of 7 million pounds U3O8 from five operations in 2008 - Dominion, Akdala, South Inkai, Kharassan and Honeymoon - with an estimated cash cost of $10-$12 per pound. By 2012, the company could produce upwards of 19 million pounds a year. In comparison, Cameco produced 20.9 million pounds of uranium last year.

“With imminent production from Dominion in South Africa, combined with an established production profile from the Akdala ISL mine, the new Uranium One will be an exciting low-cost, growth-oriented uranium company, with five mines in operation by Q1 2008,” said Uranium One CEO Neal Froneman, who will continue as President and CEO of the new company, in a statement.

Uranium One’s Dominion mine in South Africa, scheduled to commence production this quarter, is forecast to produce 3.8 million pounds per year by 2011 at an operating cash cost of $14.50/lb. The company’s Honeymoon in Australia, which was awarded a permit to export uranium last month, is expected to begin in early 2008 at 880,000 pounds per annum at $14.13/lb.

As of April 2006, Urasia’s Akdala JV mine in Kazakhstan has been producing at an annualized rate of 2.6 million pounds at about $4.8/lb U308. The company’s South Inkai and Kharassan projects are both expected to begin production later this year. UrAsia holds a 70% interest in all properties while Kazakhstan’s national atomic company Kazatomprom holds the remaining 30%.

The deal comes just one month after Urasia concluded uranium sales for 2007, signing a five-year agreement with an unnamed North American nuclear utility to sell 4 million pounds of uranium from its operations in Kazakhstan. More than 50% of the company’s sales contracts include floor price protection.

Uranium One said un-hedged and un-capped sales contracts provide exposure to further uranium price increases on substantially all projected production.

“The new Uranium One will be the pre-eminent growth company in the sector, with an unrivalled production growth profile. The company is well positioned to gain maximum benefit from rising uranium prices,” said Phillip Shirvington, CEO of UrAsia.

The combined company will have Proven and Probable reserve base of 49 million pounds of U3O8, indicated resources of 102 million pounds of U3O8 and inferred resources of 269 million pounds of U3O8. It will also have substantial Russian P1 resources at South Inkai and Kharassan.

The company will also have a strong balance sheet with a pro forma cash balance of approximately $389 million at December 31, 2006, but a debt of $183 million after the transaction.

A meeting of UrAsia shareholders to approve the transaction will be held on or about May 15. If the deal is not completed, UrAsia has agreed to pay a break fee to Uranium One under certain circumstances of $90 million.

UrAsia's chairman Ian Telfer, former Goldcorp CEO, said UrAsia's Board has determined that the transaction is in the best interest of UrAsia and its shareholders and that the exchange ratio is fair to shareholders. Senior officers and directors of UrAsia have also agreed to vote in favour of the transaction.

“The Board unanimously recommends that holders of UrAsia shares vote in favour of the transaction,” he said.

In the conference call, the companies addressed many concerns about the stability of UrAsia's Kazakhstan operations in central Asia. But executives said Kazakhstan is a stable country looking to encourage foreign investment, and there is no sovereign risk.

"We think we're pretty safe in that respect," said Shriveton during the call.

Uranium prices have jumped more than 10-fold in five years as demand from nuclear utilities continues to surge. Spot prices doubled last year from $36 to $72 per pound, currently at $75/lb.

Resource Investor’s article on the merged Uranium One:

UraMin Inc.

UraMin Inc. (TSX:UMN) & (FSE:UVL) (LSE:UMN)

Share price: CAD 5.58 (mar 16, 2007)
Number of shares: 214 million
Market cap: CAD 1,194 million
Resources: 236.4 mio. lb (NI 43-101 compliant)
Price per pund U3O8: USD 4.3
Estimated production start: Q4 2008
Estimated production output in 2010: 13 mio. lb
Estimated revenue 2010 (U3O8 = $91) : USD 1,183 mio.
Estimated production costs per lb: $ 25
Estimated profit 2010: CAD 1007 mio (USD 858 mio.)
Price target 2010 at p/e 10: CAD 43.79 (230 mio. shares)
12 month price target: CAD 12 (upside 115 %)

Resource Investor's article on UraMin (Feb 05, 2007)

Uramin was incorporated in February 2005 with the aim of acquiring and developing uranium deposits throughout the world. It now has projects in four African countries and Canada.

Three of the African projects are nearing production and are currently estimated to have attributable resources of 236 million pounds of U₃O_8, though note that so far just one of the resources is 43-101 compliant (the other two should be at partially compliant by May).

• Trekkopje (Namibia): Trekkopje, which is 100% owned by Uramin, is located about 70km east of Swakopmund on the Namibian coast and is quite close to two other uranium mines; Rio’s [LSE:RIO, NYSE:RTP] 68.6%-owned Rossing mine and Paladin Resources’ [ASX:PDN; TSX:PDN] Langer Heinrich mine. There is a 40 kilometres graded gravel road to the project and, importantly, water is available. Namibia is a both mining and uranium-friendly; the Rossing mine has been in production for thirty years.
  
  Although relatively low grade (at 0.014%) the Trekkopje deposit is vast. Independent consultants SRK have described it as world-class claiming that it may be the largest calcrete deposit in the world in terms of tonnage of mineralised material and contained tonnes of U₃O₈. About 80% of the resource is within 15 metres of the surface.
  
  The feasibility study for Trekkopje will be completed during the third quarter of 2007. Meanwhile a trial mine and processing operation is being built and will be producing at an annualised rate of 300,000-500,000 pounds of yellowcake by the end of 2007. The trial will be used to aid in the design of the full mine which is expected to produce at a rate of 1,500 tonnes per annum of U₃O₈ from the end of 2008.
• Bakouma (Central African Republic): Uramin hold a 90% share of 10 separate areas of uranium mineralization in Bakouma (the state holds the remaining 10%). There is an airstrip near the site and Uramin have invested half a million dollars to upgrade road access to the site.
  
  A previous feasibility study conducted in the 1970s indicated that there are resources of 41 million pounds of U₃O₈ with an average grade of 0.27% (and thus almost 20 times higher than Trekkopje).
  
  Uramin commenced a two year Definitive Feasibility Study (DFS) in August 2006 and have drilled some 9,400 metres. Recent results have been encouraging, suggesting that the resource could be significantly deeper than originally defined. Uramin have entered into a mining convention with the government which guarantees, inter alia, fixed taxes for 25 years and the right, if necessary, to take any issues to an independent tribunal in The Hague.
  
  Production at the project is expected to ramp up from the last quarter of 2009 to peak at 3000 tonnes pa in 2010, but with an average life of mine estimate of 2,600 tonnes.
• Ryst Kuil (South Africa): Uramin gold a 65% interest in a JV with two BEE partners in Ryst Kuil, which lies in the Karoo area of the Western Cape and was originally explored by Esso in the 1970s The total mineral resource was then outlined as 64 million pounds of U₃O₈ (29 million tonnes at a grade of 0.1%).
  
  Exploration work has recently begun with a target of completing an updated 43-101 resource by May of this year. An Environmental Impact Assessment is underway and no fatal flaws have been identified thus far. Infrastructure in the area is good with access to water, power and communications. The DFS is scheduled for completion by March 2008 and Uramin believe that the property is capable of being placed into commercial production in an open-pit operation by late 2009 at a rate of 2.6 – 3 million pounds of uranium per year with significant molybdenum by-products.

• Other projects: Uramin owns a number of other projects. Besides exploration licences in Chad and South Africa it holds an option agreement with Red Dragon Resources to acquire a 50% interest in the Rea property in the Athabasca Basin - a region which currently supplies 30% of the world’s uranium production. It also holds an option with Waseco Resources to acquire up to a 70% interest in the Quebec Labrador trough, one of the most prospective areas in the world for uranium.

Valuation

Shares in Uramin have already enjoyed an astonishing bull run. At today’s price of 200 pence they have almost trebled since listing on AIM last April at 68.5 pence, and they have quadrupled in the last six months rising from the low of 47 pence last July.

The top 10 producers currently account for more than 80% of world production. In the chart below, taken from a recent presentation, Uramin showed how its planned production for 2010 fits in with these other producers, though it notes that the chart needs to be interpreted with some care as it compares 2005 production for eight of the companies with 2007 planned production for Paladin (as this will be the first full year of production at Langer Heinrich) and 2010 production for Uramin itself. It thus takes no account of any production growth by the other companies. Nonetheless it seems likely that Uramin will be among the top half dozen producers by the end of the decade.

Uramin then compared the enterprise values on 8 January 2007 with the reserves and resources of these companies and demonstrated that the average value per pound attributed by the market was $14-$15 per pound compared to Uramin’s valuation of $2.48 if the resources at all three projects were considered, or $3.72 if just the compliant Trekkopje resources were taken.

Again this comparison has to be treated with some caution both because of the differing stages of project development and as Uramin’s share price has risen 38% since 8 January. Even at the new valuation however it still suggests that Uramin is currently competitively priced.

Investment Risks and Highlights

Uramin lists a comprehensive set of risks on the AIM admission document on its website. Besides the usual risks associated with exploration and mining companies and the political risks of the host countries these include the limited number of customers for uranium, issues accepted with the public acceptance of nuclear energy, and the possible impact of any Black Economic Empowerment legislation in Namibia on the Group’s activities.

Meanwhile factors favouring investment include:

• Uramin is well-funded with cash of $96m and no debt.
• It has an experienced and capable team with some respected names in the industry on the board. The Ghanaian non-executive Chairman, Sir Samuel Jonah, has had a long and successful career in mining. He is director of a number of companies including Anglo American, Amplats and Standard Bank, and is non-executive president of AngloGold Ashanti Ltd. CEO Ian Stalker has over 30 years experience in mining and has been involved in the development of eight mines from start to finish including five mines in Africa.
• The company holds significant resources currently estimated at 236 million pounds of U₃O₈ (though with the exception of Trekkopje these estimates are not yet 43-101 compliant).
• It has three near-term projects which are all near the surface and can be mined by open-pit operations.
• Namibia is mining and uranium-friendly.
• Uramin holds exploration permits in two regions in Canada and in Chad and South Africa. These could provide a pipeline for further projects.
• There could be significant news flow during the year with reports and resource updates expected during each quarter. These will culminate in production from the trial mine at Trekkopje by the end of 2007.

With its current market valuation of £424 million ($833 million) Uramin still appears to be competitively priced relative to its peers.

For more analysis on UraMin see Loparn, who also have got analysis of Energy Fuels (TSX:EFR), Powertech Uranium (TSX:PWE), Uranium Power Corporation (TSX:UPC) and Ur-Energy (TSX:URE).

More information on UraMin in Danish.

Denison Mines

Denison Mines (TSX:DML) & (FSE:IUQ)

Share price: CAD 13.25 (mar 16, 2007)
Number of shares: 188 million
Market cap: CAD 2,491 million
Resources: 59.6 mio. lb (historical, inferred & probable)
Price per pund U3O8: USD 35.61
Estimated production start: 1 mio. lb 2007
Estimated production output in 2010: 5 mio. lb
Estimated revenue 2010 (U3O8 = $91) : USD 455 mio.
Estimated production costs per lb: $ 14
Estimated profit 2010: CAD 451.9 mio (USD 385 mio.)
Price target 2010 at p/e 10: CAD 22,26 (203 mio shares)
12 month price target: CAD 17 (upside 28.3 %)

Denison Mines corporate profile:

Denison Mines Corp. (DML-TSX) is a diversified, growth-oriented, intermediate uranium producer. With 5 active uranium mining projects in North America (3 in the U.S. and 2 in Canada), Denison expects estimated production of 5 million lbs of U₃O₈ by 2010. The company was formed through the combination of the business and operations of Denison Mines Inc. and International Uranium Corporation on December 1, 2006.

Denison’s assets include an interest in 2 of the 4 licensed and operating uranium mills in North America, with its 100% ownership of the White Mesa mill in Utah and its 22.5% ownership of the McClean Lake mill in Saskatchewan. Both mills are fully permitted, operating and undergoing expansion. The share of the combined licensed annual milling capacity is expected to be 10.7 million lbs in 2007.

Denison enjoys a global portfolio of world-class exploration projects, including properties in close proximity to the company’s mills in the Athabasca Basin in Saskatchewan and in the Colorado Plateau, Henry Mountain and Arizona Strip regions of the Southwestern United States. Denison also has high potential exploration properties in Mongolia and, indirectly through its investments, in Australia.

Denison is the manager of Uranium Participation Corporation (U-T), a publicly traded company which invests in uranium oxide in concentrates and uranium hexafluoride. Denison is also engaged in mine decommissioning and environmental services through its Denison Environmental Services (DES) division.

Forsys Metals

Forsys Metals (TSX:FSY), (FSE:F2T) & (NAS:FOSYF)
Share price: CAD 7.30 (mar 16, 2007)
Number of shares: 56 million
Market cap: CAD 408,8 million
Resources: 21.6 mio. lb (NI 43-101 compliant)
Price per pund U3O8: USD 16.12
Estimated production start: 2009
Estimated production output in 2010: 2.5 mio. lb
Estimated revenue 2010 (U3O8 = $91) : USD 227.5 mio.
Estimated production costs per lb: $ 25
Estimated profit 2010: CAD 193.7 mio (USD 165 mio.)
Price target 2010 at p/e 10: CAD 27.7 (70 mio shares)
12 month price target: CAD 14 (upside 91.8 %)



Paradgim Capitals analysis (April 2006)
"Investment Thesis
Forsys Metals is an emerging uranium producer with assets in Namibia. Its main asset is its 90% interest in the Valencia deposit, which currently boasts a resource of 21.6m pounds of uranium in the inferred category. We are very optimistic about the short and long-term fundamentals for the world uranium market. The main reasons we like Forsys Metals are the deposit geology and the location of the company’s Valencia deposit. Valencia is close to infrastructure and within 150 kilometres of the deep water port of Walvis Bay. Perhaps most importantly, Namibia is a jurisdiction in which uranium mining is looked upon favourably and the speed with which a deposit can be permitted is second to none. Namibia has a long mining history and what’s more, a long uranium mining history from Rio Tinto’s 67% owned Rössing mine. The Rössing mine currently produces approximately 7% of the world’s uranium per year from its massive open pit operation. Beginning in Q3, Paladin Resources should commence mining uranium from its Langer-Heinrich deposit. Forsys Metals Valencia deposit is 30 kilometres from the Rössing mine and 40 kilometres from the Langer-Heinrich mine. In less than 2 years, Paladin was able to complete a bankable feasibility study for its mine as well
as nearly double the tonnage and grade of uranium by completing infill drilling. We feel that the geology of the Valencia deposit is favourable and that there is a strong possibility that the contained uranium could increase significantly by additional drilling. At present, the company envisions mining the deposit by an open pit, producing approximately 2m pounds of uranium per annum for a minimum of 10 years. The company has three drills operating at the site as part of a pre feasibility study that could be completed by year end. Nearly all of the company’s peers are in jurisdictions where obtaining a uranium mining permit requires at least 5 to 10 years and many are located in countries where uranium mining is not permitted under any circumstances. Furthermore, Forsys is the most inexpensive uranium developer based on its EV / pounds of NI-43-101 compliant U3O8 resources. We are initiating coverage with a Speculative Buy rating and a target price of C$5.15."

For more information in Danish about Forsys Metals.

Resource Investors article on Forsys Metals.

Forsys Metals official presentation.

Art Bechstein, I don’t know who he is, but I follow his posts on StockHouse and Wallstreet-online: A post about a fund manager who won't let go of his FSY position below 13C$ and a post about his valuation analysis of Forsys Metals and this list of Namibian uranium licenses. A post about his comparison of the Valencia deposit vs. UraMins Trekkopje.