Thursday, February 27, 2014

This Is Interesting. A Few Weeks Ago I Told Powertech Uranium To Get Lost. Well, They Did . . . Sort Of

     Powertech Uranium is the concern that has been trying to set up a uranium mine--known as Dewey-Burdock--in the southern Black Hills for a few years now.  Their proposed process involves messing with the groundwater in the area using what's known as "in situ" mining technology, a method of extracting uranium that has its risks, the principal risk being groundwater contamination for many, many, many years to come--maybe forever.  I know that federal regulators have given their nod, but still get queasy when I think about environmentally-greenlighted projects that have gone awry just the same.  Ask those folks who live around the Yellowstone River in Montana how they feel about the environmental impact statements that got approved by federal authorities before things went haywire there.  Same goes for those poor folks in West Virginia whose water smells like H-E-double-L.  Risks that may seem reasonable on paper can go catstrophically wrong, and I fear that the uranium mine proposed in the southern Hills could have a double-edged follow through:  first off, the mine itself could go bad.  Then there's the likelihood that  its presence may open the floodgates for similar speculators looking to extract value out of our Hills, leave a royal mess, and ship the profits elsewhere.  I just don't like it.
     Anyway, I said as much a little while back and suggested that Powertech take a hike.  Well, in a way they did.  All this talk about the company piqued my interest in its financial condition, and as I noted before, the company is kind of a joke.  In the third quarter of last year it abruptly wrote down the value of a Colorado mining property by 85%, just like that.  As to its financial statement and balance sheet for that quarter, pee-yew.  Even by  "penny stock" standards, the component of the equities markets where Powertech had been languishing at less than 10 cents a share, the numbers were head-shakingly abysmal.  Basically, Powertech was on the ropes--a point made very clear by a comment in that Q3 report which showed that it had everything riding on getting Dewey-Burdock permitted:  "The Company’s focus is furthering its permitting applications at its Dewey-Burdock project.  Therefore it will incur future losses which cast significant doubt as to the Company's ability to continue as a going concern." 
    Okay, we know that the company was hanging by a thread.  It obviously needed a cash lifeline, which it got last year from a firm called Azarga Resources in the way of a capital injection that would presumably lead to a merger with Azarga.  Well,  the Azarga merger just happened, the new company being named Azarga Uranium.  The news release dated yesterday tells the story of Powertech's desperation.  A single sentence in the announcement says it all:  "(The merger) is intended to reduce Powertech's exposure to permitting risk at Dewey Burdock."  Azarga has significant interests in mines around the world, per the news release, but it isn't a public company as yet, at least until regulators at the Toronto Stock Exchange, where Powertech had been listed, give the go-ahead for the new enterprise's stock to trade publicly.
     I think this is important news that should trouble opponents--me included--of the Dewey-Burdock project.  Where Powertech had been just barely hanging on, financially, and staked everything on Dewey-Burdock, its new incarnation as Azarga Uranium probably gives it significantly more financial staying power.  On the upside, a company like Azarga, with extensive interests in mines and deposits in the United States and central Asia, may not think the trouble and expense of developing Dewey-Burdock is worth the permitting risk that apparently hamstrung Powertech for the past few years.  We'll see.  Much as I'm glad  that Powertech finally ran out of patience and resources to pursue this thing, I'd be wary of Azarga's intentions.  This is likely to go on for a while.

8 comments:

  1. John I wish there were more Republicans like you! My father and his side of the family is very similar and it just makes sense.

    Lynn G.

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  2. Thanks, Lynn. I just try to take a utilitarian approach to things, not an ideological one. In a society with so many competing interests, we have to work toward accommodation, not confrontation. Appreciate the comment.

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  3. I was going to say that my close South Dakota lifelong Republicans relatives are pretty irked about the Beef Plant, EB-5 and what has been going on. They volunteered to tell me and they hold Rounds and the DD administrations responsible. I know they will not vote for either of them or Noem. They are not the type to go to online blogs or forums. Lynn G.

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  4. I think many Republicans in South Dakota are having their reservations about Daugaard and Noem. Haven't made up my mind about the Governor's race yet, but I'll be supporting Corinna Robinson for Congress. Kristi Noem's track record doesn't impress me, and her willingness to shut down the government and let the U.S. Treasury default on our government's debt takes her out of consideration for me as a serious representative. I don't think elected officials should be advocating anarchy, which by definition is a state of society without government.

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    1. How many times should we raise the debt ceiling without any attaching any offsetting spending cuts? As a point of reference, the last 55 times the debt ceiling has been raised, 28 of those times Congress has attached meaningful spending restrictions so it's not unprecedented. As another point of reference, as I'm sure you're aware, our national debt is $17.4 trillion. The interest alone on this debt is projected to be $233 billion in 2014 mostly due to the Federal Reserve holding interest rates artificially low (~2.4%). Any nominal increases in the rates and the interest payments will balloon.

      So at what point does the national debt become a concern to you? I seriously doubt that Ms. Noem desired to shut down the government but rather wanted to attach spending cuts to limit future increases. Nevertheless, you are entitled to your opinion. One safe bet, however, is that Corinna Robinson will hand her vote over to Harry Reid just as Tim Johnson has and our national debt will continue to grow unchecked.

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    2. I don't share your doomsday scenario about the debt, Anonymous, mainly because I've lived through similar episodes--post WW II, early 1980s and early 1990s, when the debt seemed alarmingly high. At about the same time we had a steady decrease in annual deficits (which actually turned into surpluses by mid- to late-'90s) that came about because economic growth caused tax revenues to outpace spending. Eventually the structural debt represented a smaller percent of GDP and the doomsday predictions receded into memory. We're seeing an annual reduction of the deficit every year now, going back about 5 years. I believe this is the trend that has given the financial markets enough optimism to keep them at or near all-time highs. Obviously we have different views, this happens to be mine. Congresswoman Noem, who appears to have bought the doomsday view of things believes that an appropriate response to her demands for spending cuts is to shut down the government, along with taking the U.S. Treasury's ability to pay the nation's bills and debt payments. I just happen to believe that this is the antithesis of legislation and representation. Burning down the village is not the way to save it. It takes work and the skills of persuasion, not the blustering of threats and the imposition of anarchy. Congresswoman Noem has failed at her job, which is why I'm willing to step across party lines and give Ms. Robinson a try. Thanks for coming on and raising these ultra-important issues and giving me a chance to expand on my views.

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  5. John, As one who is RINO Republican myself, I must admit that I have also been very impressed, but not necessarily surprised by your stance on many issues. You remind me of some of the Republicans of my younger years, like Everett Dirksen and Howard Baker. Politics doesn't have to be the death to your side that it has become since Roe vs Wade, with heels dug in on both sides of the aisle, even though, I doubt that you could find very many Democrats who are in favor of abortion, only in a woman's right to the command of her own body.

    I am constantly amazed at the fact that our Federal and State governments have no qualms about allowing foreign companies to come into the US to extract our minerals, and or soil our environment, and really don't even have any concerns about holding them responsible in advance for the possible damage that they may do to our environment. And these people like to call themselves conservatives. Teddy Roosevelt must be turning over in his grave.

    Have you been able to ascertain, whether Powertech's permits will pass to Azarga or do they have to start all over?

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    1. Lanny, as the transaction turns Azarga into a wholly owned subsidiary of Powertech, even though the name has been changed, I'm reasonably certain that all the permitting issues involved between Powertech and any regulatory authorities will pass, as is, to the newly formed company. Note that one of the important reasons for the merger was to "reduce Powertech's permitting risk" with respect to Dewey-Burdock, the risk having been enunciated in Powertech's Q3, '13 statement as consisting of financial obligations in pursuit of further permits. The deeper financial base associated with the merger either eliminates or substantially ameliorates that risk, which is the point of the merger in the first place. I have to assume that the existing permitting process will carry over to the new concern. Appreciate the comments regarding our similar standing as Republicans. Some of our most progressive leaders, e.g. Lincoln and Teddy Roosevelt, have been Republicans, both of them concerned with providing as broad a base of equal opportunity as possible. That's me--and I think you're on the same page. Thanks for commenting.

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