I thought this was an interesting read and wanted to post it here for other people to read and comment....
I find this a very interesting time for U prices and companies alone.
BEING unashamedly and firmly one of the glass-is-half-empty crowd, Pure Speculation needs to detect only a zephyr of doubt to begin looking on the gloomy side of life. And being able to smugly throw in a "we did warn you" rider does add lustre to a spot of bad news.
The latest quarterly report from Sydney-based Resource Capital Research reminds us that the present uranium spot price is $US136 a pound; that's 45 per cent up from the $US95/lb level three months ago and a 111 per cent gain on the $US65.50/lb six months back. RCR is bullish, saying indications are for $US148/lb in the near term and $US165/lb by September 2008.
But we're now seeing a growing tide of reports from Canada saying there is concern the uranium price may have already peaked - although you have to factor in that power utilities are anxious to talk down the price. Buy orders are drying up, and some uranium for sale has been withdrawn from the market. Cameco, the world's biggest producer, saw its stock take a terrific hammering on the Toronto exchange early last week.
But it will be a correction, not a rout. The usual pattern is for buyers to re-emerge once prices come off a little, and there's no doubt that uranium demand will be strong in the years ahead. But those investing in companies with low-grade or unexplored tenements might like to pause for reflection.
NO doubt a good many investors are already scratching their heads at the price retreat in a range of uranium stocks.
Having one mine in operation and another on the way hasn't stopped Paladin Resources falling from $10.70 in April to $8.26 on Friday. On the exploration front, the once hot Toro Energy closed at 95c, compared with $1.28 two months ago. Alliance Resources has a slice of an advanced 15,000-tonne deposit in South Australia, with more high-grade hits last month. No good: its shares are at $1.74 compared with $2.85 in May.
And reports of further high-grade hits at Bigrlyi haven't restored Energy Metals to its April high of $8.34. Other recent market darlings have also suffered share price pain - Crossland Uranium Mines, A-Cap Resources and Black Range Minerals among them.
Yet a few continue to do well. Marathon Resources, one of the better fancied South Australian plays, was $3.88 at the start of April, $6.75 on Friday.
THIS all suggests that buying a uranium project might no longer be the quick fix for a lagging share price. But this hasn't stopped more from leaping in. The latest entrant is Pacific Enviromin. This company has previously been concentrating on bentonite, which, among other things, makes good cat litter. Now it has acquired 22,000sqkm of uranium tenements in the Northern Territory and a smaller parcel in Queensland.
But we still like something a bit more advanced. Thatcher Soak in Western Australia is living up to promise, with Uranex reporting intersections up to 0.82 per cent U3O8.
BACK in 1958, Don Walker acquired the Herberton assets of the Great Northern Tin Co, which had been a Queensland producer of that metal since 1881. He was subsequently Australia's representative on the former International Tin Council. Without him and his tenement holdings, North Queensland Metals would probably not exist.
NQM was a modest float last December, going to market for just $2.5 million with Walker on the board. It has just picked up another 13 tenements in the old tin mining area inland from Innisfail. And the company has an interesting strategy.
Tin mining in the area boomed until the 1930s, revived in the 1960s and then closed down again when the tin market went bust in the 1980s. There were several big companies mining their own deposits as well as buying ore from the hordes of small-time players (there being about 400 recorded mines in the area).
There are still plenty of prospectors with their own piece of turf, and NQM's plan is to develop several deposits on their own to supply one central treatment plant, but then go back to the strategy of the old days in terms of buying from any individuals who want to start producing ore.
The company hopes to have its core Baal Gammon project producing by late 2008 as a copper-tin proposition. But the 5.8 million tonne resource also has indium, used in electronics, at an average grade of 29 grams/tonne. NQM has received a lot of calls from Chinese companies about the indium.
INVESTORS in iron ore players getting up and running in Western Australia's mid-west might soon need to re-crunch their numbers. It had been assumed that companies not near railways would have to build their own and, indeed, Murchison Metals is working on such a study. There is also the Yilgarn Infrastructure Group, which fancies itself as the big port-rail player in the region, but it now faces having its nose put out of joint.
Babcock & Brown Infrastructure Group has entered the picture. It controls WestNet Rail, the 5100km railway network in WA. And it wants to build its own iron ore lines in the mid-west - serving Murchison's Jacks Hill mine near Meekatharra, passing the proposed Midwest Corp Weld Range development, with a branch out to Wiluna where Golden West Resources is working up a resource.
This means B&B would be putting up the capital for rail developments, not the individual mining companies - a huge slice off mine capital costs.
THIS column has always had a soft spot for energy juniors chancing their arm in the US. So it is heartening to see Redfork Energy believing it has a company-maker. This junior reports an initial coal seam methane reserve in Oklahoma of 37.5 billion cubic feet, worth about $270 million at present prices. Pipelines riddle the area, and the city of Tulsa is in close proximity.
Redfork is presently pumping about 600,000 cubic feet of gas a day with prices running at about $US7 per 1000 cubic feet. That's about three times what gas goes for here and the Bank of Oklahoma's long-term forecast is for prices to stay around that figure.
Redfork's David Prentice says margins are "very high". On top of that, each well - which has an expected 15-year life - pays back its capital within a year.
ALISTAIR Cowden wouldn't be the first resources boss with an overseas project to feel the local market is not exactly simpatico. His Vulcan Resources has been building up a considerable portfolio in Finland and needs some big money to develop the Kylylahti copper-cobalt-nickel project and get an idea of how much nickel there is at Kuhmo.
So $49 million of Scandinavian money will be coming in the door and Vulcan will list on the Norwegian Stock Exchange. Companies such as Vulcan are too small for the London and New York main exchanges, and London's AIM is seen as lacking liquidity.
But the Oslo bourse is patronised by a big swag of retail investors and is buoyed by Norway's equivalent of the Future Fund, the Norwegian Pension Fund, the biggest in Europe and primed with billions of krone from North Sea oil.
Kylylahti is particularly interesting because its cobalt element averages 0.24 per cent, which is high for that metal. Cobalt is now fetching $US61,000 a tonne and in high demand. Future supply growth depends on the large nickel laterite projects now in various stages of development (all experiencing delays) and on future mining in the Congo, which also has its problematic elements. In other words, supply is likely to be tight.
The Australian implies no recommendations regarding any of the stocks mentioned. The author does not own shares in any of the mentioned securities.