Forsys Buyout Is Off - Where Should Investors Look Now? The long awaited buyout of Forsys Metals (FSY-TSX) and their low grade But for investors, the real point is that GFI was willing to pay roughly $5.80 per pound of uranium from a junior. There have been few buyouts of uranium juniors – despite the majors like Cameco, To guess rightly in the future, we first need to look at history. I see three themes behind the very few buyouts in the uranium sector – big size, low grade, and location.
Forsys Buyout Is Off - Where Should Investors Look Now?
The long awaited buyout of Forsys Metals (FSY-TSX) and their low grade
But for investors, the real point is that GFI was willing to pay roughly $5.80 per pound of uranium from a junior. There have been few buyouts of uranium juniors – despite the majors like Cameco,
To guess rightly in the future, we first need to look at history. I see three themes behind the very few buyouts in the uranium sector – big size, low grade, and location.
The junior uranium companies who have been purchased all produced low to very low grade uranium. Forsys’
Even the new producers in the world, like Paladin Energy and Uranium One, have grades of less than 1% U3O8, and often 1/10th of 1%. Almost all the world’s new uranium production since 2005, when the uranium price moved up and the sector attracted investment, has been less than 0.5% U3O8.
Size is also a factor.
The location theme is simple –
But since 2005, it has been a hot-bed (if you’ll pardon the pun) of activity. Paladin’s Langer Heinrich mine has started production. Bannerman Resources and Extract Resources, both listed in
Bannerman and Extract are obvious buyout targets, as they fit the three criteria mentioned above. (Rio Tinto, which owns Rossing, owns 20% of Extract.) Bannerman trades on the Toronto Stock Exchange, symbol BAN, and on the Australian exchange symbol BMN. Extract trades under the symbol EXT on both
A dark horse candidate for a buyout would be Uracan Resources, symbol URC on TSXv, if they can prove up their 40 million pound Double S deposit. Uracan is included because the Double S has the same grade and geology as Forsys, but trades at one tenth the value per pound in the ground. In fact, Uracan trades at the second lowest valuation I can find from over 30 uranium explorers, at roughly 56 cents per pound. The industry average is about $3.50 per pound.
Uracan’s Double S deposit is located in
That can be important when it comes to permitting. Many industry observers see the fact that Forsys had their mining permit as the real reason it was bought out – it is actually lower grade than both Bannerman and Extract.
There has never been a uranium mine in
The uranium deposits these companies are developing are all simple, low cost earth moving operations. It’s something that investors – institutional, retail and debt - can understand.
With all the technical problems that world leader Cameco has been having with Cigar Lake, the deep, high-grade model has not given investors much joy. Hathor Explorations (HAT-TSXv) is the only junior uranium explorer to discover high grade uranium (2 metres of 70.0% U3O8) and get investor attention.
Where does history say investors should look for the uranium buyout? In companies with low grade, BIG deposits, located in good mining jurisdictions.
-- Posted Wednesday, August 19 2009 | Digg This Article | Discuss This Article - Comments:
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