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Saturday, April 08, 2006

SXR Uranium One Inc. (SXRFF)

SXRFF, website

2005 annual report
2004 annual report
Q3 05 report
Q2 05 report
Q1 05 report

Feb 27, 2006 presentation

The 2005 annual report is from their website.

The annual report is presented as of 3/28/06.
Full year ending Dec 31, 2005.
Incorporated in Canada.
Uranium operations are in South Africa, Australia, and Canada
Gold operations are in South Africa

Reverse merger by way of Aflease Gold and Uranium Resources Limited. Scheme of arrangement under the Companies Act, 1973 (South Africa). Finalized Dec 8, 2005. Souther Cross Resources, Inc. changed name to SXR Uranium One Inc.

Southern Cross operations are included as of Dec 8, 2005. The Dec 31, 2005 balance sheet represents the final company. Comparative info is for Aflease. Shares of SXR Uranium One are traded on the Toronto Stock Exchange and the JSE Ltd (Johannesburg) stock exchange.

Uranium One's principal assets are
Uranium One will sell (at book value, receiving at least 20% of the purchase price within 3 years of the first venture profit payout, with 20% paid during each 3-year period after that) a 26% interest in the Dominion Uranium Project and Bonanza Gold Project (all the South Africa operations) to its black economic empowerment joint venture partner, Micawber 397 Ltd. Aflease (Uranium One?) will manage the joint venture operations. (OPINION: It would be much more effective and dignified to have Uranium One to take the same amount of money and send a qualified large group of black kids to mining college and allow them to do meaningful internships within the company).
The Micawber transaction will be accounted for when the risks and rewards of the transaction are deemed to have passed to Micawber.
Seems like it's a huge liability right now. Why wait?

Skipping ahead, looks like they have about 13 million warrants and options and 71 million shares on Dec 31, 2005. So let's assume 90 million totally diluted shares on Dec 31, 2005.

They raised C$170 million in Q1 2006 by issuing 22.3 million shares. So I'll bump my totally diluted share estimate to 110 million shares.

The shares (SXFF on "other OTC") are trading at about US$8.50 per share. I don't want to pay more than $10 per pound in the ground of uranium (i.e. 93.5 million pounds of uranium after accounting for the effects of the joint venture), preferrably something like $1 (i.e. 935 million pounds of uranium after accounting for the JV).

Honeymoon has indicated resources of 9 million pounds.
Dominion now has been increased 65% to 16.1 million pounds of indicated uranium resources, 146.6 million pounds of inferred resources, but with the joint venture we can only count 11.9 million pounds indicated resource and 110 million pounds inferred resource. They plan to mine 2 million pounds per year starting in 2007 and ramp up to 4 million pounds per year in 2011.
They have some exploration in Australia.
They have a joint venture in the Athabasca Basin of Canada. No resources or reserves determined yet.

- S T O P -

Misc stuff below just to keep the notes somewhere:

From the Q3 2005 financial statements:
New board:
Neal Froneman (CEO)
Jean Nortier (CFO)
Andrew Adams (non-executive Chairman)
Mark Wheatley
Terry MacGibbon
Ken Williamson
Terry Rosenberg
John Sibley


ML 6109 + MPL 15 + MPL 64, "Honeymoon", 5.8 sq miles, 100% owned
EL2937, "Yarramba", 175 sq miles, 100% owned
EL 2958, "Goulds Dam", 129 sq miles, 100% owned
EL 2978, "Katchiwilleroo", 252 sq miles, 100% owned
EL 3017, "South Eagle", 144 sq miles, 100% owned
EL 2896, "Ethiudna", 300 sq miles, Equinox Joint Venture

EL 3214, "Karkarook", 35 sq miles, Oliver Joint Venture
EL 3397, "Yeltacowie", 235 sq miles, 100% owned
EL 3398, "Hesso", 323 sq miles, 100% owned
EL 3399, "Charlinga", 358 sq miles, 100% owned
EL 3400, "Bowen Hill", 233 sq miles, 100% owned
EL 3415, "Kangaroo Bluff", 282 sq miles, 100% owned
ELA 84/05, "Mt Wedge", 271 sq miles, 100% owned
ELA 260/05, "Kielpa", 34 sq miles, 100% owned

First phase of Goulds Dam Project exploration finished. Airborne electro-magnetic (AEM) and gravity surveying. Also, 84 rotary mud holes (about 7 miles) drilled on three exploration licenses.

Geological survey coverage of Ethiudna is poor. No AEM, only a widely spaced gravity survey. Since drilling equipment was in the region, they did some drilling. The 9 holes on the southern traverse was good, one showed what sounds like fairly good ISL qualities. Needs follow-up surveys and more closely spaced drilling. New discovery.

Resource Capital Fund L.P. and Resource Capital Fund II L.P. owns 16% of the stock.


Maybe they have 100 million pounds of extractable U3O8. That would make the stock cost about $9.35 per pound in the ground based on the current stock price and my estimate of totally diluted shares (Strathmore is closer to $1 or even less). There are political issues as well. In terms of using this as a means to diversify my uranium investment, I fear that with SXR I'd be giving up a lot of the long tail upside that I get with Strathmore, I still get the same risks if uranium prices were to drop, plus there are some extra risks. Maybe I'd look more closely at SXR at $4 per pound.

Yes, I read on VIC that Strathmore has screwed up at least somewhat (not being able to get drilling done due to a long backlog). And given how uranium keeps going up, it would be nice to be able to diversify within uranium stocks. The thing I like about Strathmore is that they have a lot of properties with a lot of drilling done and, although most of it hasn't gone through NI 43-101 compliance in the statements [yet], it's fairly clear that they do have a whole lot of uranium. So my estimate of the chances of Strathmore being a poor investment in the case that uranium prices don't drop is extremely low. It's fairly easy to do the NI 43-101 work and then sell the properties one-by-one. Simple.

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