The shine is back on uranium stocks

Drill rigs at Strathmore Minerals' Gas Hills uranium project in Wyoming. Photo by Strathmore MineralsDrill rigs at Strathmore Minerals' Gas Hills uranium project in Wyoming. Photo by Strathmore Minerals

Korea Electric Power Corporation is taking a 13.9% stake in Strathmore Minerals (STM-T) in a deal that will also give the Korean energy giant off-take rights to a portion of the uranium junior’s future production.

Strathmore’s deal with KEPCO is yet another example of the interest that has started to seep back into the uranium mining industry. On Jan. 23, Ur-Energy (URE-T, URG-X) signed a new uranium supply agreement with an unidentified utility based in North America that calls for total deliveries of 200,000 lbs. of uranium concentrate per year in a multi-year schedule starting in 2013. 

Ur-Energy’s strategy is to sell a pre-determined portion of expected uranium production capacity from its Lost Creek uranium project in Wyoming in term agreements with North American nuclear utilities at prices that will ensure the project’s financial viability. Since the end of December UR-Energy’s stock price has climbed 44 % to $1.25.

Under Strathmore’s agreement with KEPCO announced on Jan. 31, the Korean operator – which has 21 nuclear power plants in Korea with seven more under development – will acquire 14.59 million shares in a private placement at $0.55 per share for proceeds of US$8 million. 

That money will be used towards the first phase of exploration and development at Strathmore’s Gas Hills Beaver Rim area, also in Wyoming, and for permitting activities on the company’s nearby lower Gas Hills properties.

When Phase I is completed KEPCO will have the right to participate in a Phase II development program that would enable it to earn up to a 40% interest in the Gas Hills properties for an additional US$32 million in expenditures over three years.

Under the agreement KEPCO can buy a portion of any future annual uranium production from Strathmore’s properties, subject to pre-existing agreements. Future off-take purchases will be based on KEPCO’s equity ownership in Strathmore. 

Strathmore has more than 14,000 hectares of claims in the Gas Hills district of Wyoming, 6,475 hectares of which lie in what the company describes as the “highly prospective” and “relatively unexplored” portion of the Gas Hills known as Beaver Rim, to the south of the lower Gas Hills area. Shares of Strathmore have gained 39% since the end of December and are currently trading in Toronto at about 48¢ apiece.

As for Ur-Energy, it is completing mine planning and permitting activities to bring its Lost Creek uranium deposit into production. The company also plans to build a two-million-lbs.-per-year in situ uranium processing facility. The company expects to start production at Lost Creek in the second quarter of next year and ramp up production to about one million lbs. per year in 2014. 

With or without off-take agreements and strategic investors, the shares of several other uranium companies listed on the Toronto Stock Exchange have also taken flight since the beginning of 2012. Shares of Cameco (CCO-T, CCJ-N) have gained 27% to $23.46 per share, Paladin Energy (PDN-T, PDN-A) is up 35% at $1.92 and Uranium One (UUU-T) is 19% higher at $2.58 per share. 

For the week ended Jan. 27, Trade Tech’s weekly U-308 spot price was US$52.25 per lb. Following the crisis at a Japanese nuclear facility in March 2011, Trade Tech’s U308 spot price fell to US$48.85 per lb. on Aug. 26 – the lowest point of 2011.


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