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.