Pink Sheets

A recent press release from Strathmore Minerals clarifies how they intend to monetize and mine at least some of their properties, and some results of work they've been doing lately. Letter of Intent:

To earn its 50 per cent interest in the Hall Lake Project, NAG must make an initial cash payment of C?$150,000 to STRATHMORE. Furthermore, NAG must also advance $400,000 for property exploration costs before October 15, 2005 and an additional C?$600,000 before September 15, 2006. Upon completion of the second year expenditures, the companies will form a joint venture to continue the exploration of the project. STRATHMORE may buy back a 1 per cent interest in the project by issuing 25,000 shares to NAG.

To earn its 50 per cent interest in the Duddridge Lake Project, NAG must make an initial cash payment of C?$150,000 to Strathmore. Furthermore, NAG must also advance C?$250,000 for property exploration costs before April 30, 2006 and an additional C?$450,000 before April 30, 2007. Upon completion of the second year expenditures, the companies will form a joint venture to continue the exploration of the project. STRATHMORE may buy back a 1 per cent interest in the project by issuing 25,000 shares to NAG.

Duddridge Lake cost the company about C$350K. It's effectively selling half of it for C?$850K.

Some more work was done at Duddridge conforming to the new mining standard (NI 43-101), estimating something like 400K pounds of U3O8 inferred mineral resource, but we all know about mines and liars. The previous estimates were fairly high. I had estimated 500K. I don't know exactly how this all lines up.

rough envelope style calculation:
Based on Q1 05: The total mineral assets are carried on the books at C$3.8 million, most of the rest of assets is cash. In this case, assets = equity = C$28 million. Market cap is about C$62 million. We use 41 million share count for this calculation. Assuming Duddridge was carried on the books at cost (it's late at night and I don't feel like looking it up) and the total monetization of mineral assets ends up being about the same rate that we sold half the rights to NAG, it would add $14 million to the assets, bringing them up to C$42 million and the company isn't worth what it's selling for now. On the other hand, it wasn't clear before this how Strathmore would be able to mine the U3O8. I don't know any details of who pays the mining expenses. However, if each share now represents 0.75 pounds of minable U3O8 in the ground, then if mining costs are US$25/lb and Strathmore pays half of the total mining costs and the spot price of nearly $30 is accurate, then Strathmore made a bad deal with NAG. Either way, the market may not approve of the details of the press release. Or perhaps my logic of off (which is very possible... it's late).

UPDATE: Yep, the market didn't like it. This is the second time I've had an investment based on long term demand/supply imbalances. The first one, LVLT, was not fun and still hasn't resolved after 3 years.