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Monday, August 21, 2006

Strathmore stakes a claim (STM.V, STHJF)

Strathmore Minerals (collected entries) announced a new staked claim in Grants Pass, NM.
According to the New Mexico Geological Society Guidebook 54 (Uranium Resources in the San Jaun Basin, New Mexico, in Geology of the Zuni Plateau by V.T. McLemore and W.L. Chenoweth, 2003, pp. 165-178), previous exploration conducted by Utah International and related companies defined a drill-indicated resource of 5 million pounds U3O8 grading 0.12%. In addition, the Company is in possession of historic drill-hole gamma logs for the Dalton Pass Project. The calculation of a new NI 43-101 compliant resource estimate for the project is forthcoming.
If we assume that this remains the same, then based on my uranium estimate assumptions, the extractable uranium would be around 3 million pounds at a cost of around $30 per pound (just based on the concentration alone, not on depth or ISL possibility). If the yellowcake sells for the current spot price of 47.25, that results in around $52 million gross. I'm assuming they'll need to give up half of that in perhaps a joint venture to mine the stuff, which would result in a bottom line addition of $26 million. I'm currently assuming 100 million shares totally diluted. So this adds 26 cents to the value of the stock less discounting for time. Let's call it 17 US cents.

Also, they staked 26 new claims in the Church Rock area of NM... it's on Federal land. This was based on poring over their Kerr-McGee database (purchased 2004 along with Church Rock and Roca Honda). Looks perhaps OK, with potential low concentration (bad) resources within sandstone (good for cheap and environmentally friendly ISL mining). The low concentration stuff becomes valuable if uranium prices continue going up a lot more as the higher cost of extraction is more than overcome by the high selling prices.

UPDATE, next day:
The spot price of uranium jumped another 75 cents to $48.00. A 75 cent increase in the price of uranium would increase my estimate of the value of Strathmore by about another 15 cents.

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