UraMin-Uranium producer in the near term

From ash999 [314] - part of article (below) refers to UraMin, as second choice to SXR Uranium One [quoted Toronto & Jo'burg], link:




Another top uranium share: UraMin

Another uranium share I like very much is Uramin. Galahad Gold, in which I have a 10% interest, owns 20 million shares. This gives me an indirect interest in two million Uramin shares and together with my family I have a further substantial shareholding.

Uramin is a year or so behind SXR and is more of a value investment than an immediate earnings play. Uramin has three main uranium licenses:-
1. In South Africa mainly in the Ryst Kuil Channel, after allowing for the black empowerment percentage, it has 27m pounds of uranium.
2. In Namibia at Trekkopji it has 157m pounds.
3. In the Central African Republic at Bakouma it has 41m pounds.
Note: The pounds of uranium referred to above are based on the total of Measured and Indicated and Inferred resources.

All three resources are open to further development. In Namibia, for example exploration rights have just been granted over a further 91,161 hectares adjoining the Trekkopji deposit of 37,368 hectares. Production is expected in South Africa and in the Central African Republic by 2010 and in Namibia a trial mine could be in operation by late 2007.

In addition to its three main properties Uramin also has a 50% interest in an attractive exploration project in the Athabasca Basin and it has further resources in Chad, Botswana and Mozambique.

A particular attraction of Uramin is the very low cost to its shareholders for every pound of uranium. As I pointed out if you buy shares in several well-known producers you pay about US$13 a pound. In Uramin, which is quoted on AIM, at the present price of 99p the cost per pound of uranium, after dilution for a recent £35m placing is about US$2.20. Many analysts do not use the cost per pound argument. They point out that no allowance is made for the grade of the deposit and there is no distinction between pounds of uranium that may not be produced for 40-50 years and those that will be produced during say the next ten years.

There is also no distinction between Measured and Indicated resources which need a considerable amount of money spent on them to lift them to Measured and Indicated status. However, the cost per pound is one of the few rough-and-ready measures available to compare the relative value of mining stocks. One of the leading Canadian brokers, Canaccord, uses it in their weekly Junior Mining report and I have found it to be a reassuring statistic with several other mining stocks in which I have invested successfully.

Although Uramin will not be in production in a big way until 2010, in 2011 it plans to be producing 5000 tonnes of uranium oxide per annum, which would make it one of the top six producers in the world. Hopefully as this begins to be anticipated the gap between its cost per pound of US$2.20 and the average of US$13 will close, resulting in a substantial rise in the Uramin share price.

First published in Investing for Growth, 16/12/2006