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Continental Precious Minerals (TSX:CZQ) is listed on the TSX market and at 22 cents it is valued at C$12.48 million – yet sits on net cash of C$13.8 million. It also happens to own a potentially enormous Uranium prospect in Sweden. In two years time, Continental will either have farmed out its prospect to a major so meaning that it sits on a royalty stream (but has no capital commitments) or it will be a cash shell – its projected expenditure over the next two years is less than $3 million. On a risk reward basis that looks pretty attractive to me.
The company’s sole asset is the MMS Viken prospect ( containing 72 licenses) in Sweden – a country with an active mining industry: there are 82 active projects within the Kingdom. On the basis of 133 diamond drill holes covering 26,293 metres Continental claims that this is Europe’s largest uranium resource. The resource is available from surface to a depth of 200 metres and is 1.5 kilometres wide and 2 kilometres long but open at length. A NI-43-101 inferred resource on about 10% of the total land holding shows 1 billion pounds or Uranium as well as 16.7 billion pounds of vanadium and 1.5 billion pounds of Molybdenum. Recovery rates from ore samples taken have been about 85%.
The company claims that by operating 2 open pit mines it could create a project with a 16 year mine life and 4 year payback and that the NPV is $1.04 billion. Actually it reckons that by using a leaching process it could improve the maths significantly. We shall see. The issue for Continental that – even on a leaching model this mine would cost well over a billion dollars to put into production. Thus it needs a major or a Chinese partner to make any headway. It claims that “discussions are underway with several major companies.” We shall see.
The stock price has crashed – like all Uranium plays – after the Japanese disaster but nuclear power is not going away. The Chinese are currently undertaking a programme to build 64 new nuclear power plants and they need a secure feed as do plants elsewhere. The Swedish Government, at least, is pro nuclear and publically supports Uranium mining.
The company will burn $1.5 million per annum on maintaining its licenses, further metallurgical testing to establish recovery rates and PLC costs. And so in a worst case scenario in two year time it will have $11 million cash and if no-one at all has any interest in the project the company’s CEO and founder Ed Godin will – I suspect – reluctantly let Viken drop and use Consolidated as a cash shell. That limits the downside. On the upside, if there is a jv or farm out agreed even a 2% carry on such a project ( and Godin insists that he will get far more) is worth 150% of the current market cap. There are risks and this is not one for widows and orphans (especially since it is on the TSX) but on a risk/reward basis it might be worth a small flutter.
Looks like Kendall went out at Check 11. He tweeted that this was the hardest race he had ever done, but that it was an awesome experience.
‘The Chinese are currently undertaking a programme to build 64 new nuclear power plants and they need a secure feed as do plants elsewhere’
Thorium powered or all uranium powered? Need to be more specific.