Monday, November 20, 2006
Strathmore Minerals (STM.V, STHJF) wants a mill and other U news
The stock also went up over 13% today, but that's probably because a big investor seems to think that Cameco's Cigar Lake mine will be delayed by 2 years (the market might be thinking even 2 years is optimistic). And they're thinking uranium prices might go up a lot more.
Cameco Corp. (CCO CN): RBC Dominion Securities Inc. boosted its uranium price forecast for 2007 to an average of $100 a pound from $55, saying a flood at Cameco Corp.'s Cigar Lake mine in Canada will delay production for two years.Here's their short term plan for how to seal the water leak by pumping concrete into the mine.
Getting back to Strathmore Minerals, there is currently only 1 operating uranium mill in the United States (it's in the White Mesa complex in Utah). Strathmore wants to open a mill in the Grants, NM area so they can proceed with a conventional mine (not an in situ mine) to extract a significant portion of the 33 million pounds of uranium ore in an NI 43-101 compliant measured, indicated, and inferred resources.
They bought 650 acres for now (with road and rail access), but they'll also be checking on other areas. They have to jump through a lot of hoops for the Nuclear Regulatory Commission. I'm assuming they'll also need a power generation source or power lines. It's worth noting that these guys are old salts in the business and that can make a big difference in terms of getting stuff done.
If this all works out, then Strathmore will be in the enviable position of having a mine and a mill and 33 million pounds of uranium ore in the ground with the price going to $100 a pound. They'll still need the mining people in perhaps a joint venture, and the mining people and equipment will be in short supply, but so will having a permitted mine and a mill. If Strathmore gets 50% of the profits and it costs $40 per pound fully burdened (I have no idea if this is even close to correct) to mine and mill the ore, this should result in about 25 * .5 * (80 - 40) or about $500 million dollars spread out over a number of years. That assumes extracting 25 million pounds and a selling price of $80 per pound. I had assumed about 100 million totally diluted shares of Strathmore, so that's $5 per share, but must be discounted for time. This is just a guess and a $40 cost of mining and milling could be way off. But I'm betting they'll be able to sell at a significant profit, no?
Of course then there's all the other properties like Athabasca Basin.