Wednesday, April 9, 2014

Uranium Mine In The Black Hills Gets Federal Approval. Azarga Mining Is Elated. But Shareholders? They Still Look More Like Bagholders.

     Yesterday the Nuclear Regulatory Commission gave Azarga Uranium Corporation (PWE.TO--it still carries its symbol and trades as if it's Powertech, the company that will soon be absorbed by Azarga) its approval to go ahead and start its in situ mining venture in the southern Black Hills. That brought the requisite cheers from the company and some brassy projections about its outlook.  I don't normally follow penny stocks, which I think are the most laughable component of the stock market, but the brouhaha over Azarga/Powertch's plans to extract uranium here in the Hills has caught everybody's attention, and with good reason.  The company plans to inject water into the ground, dissolve the uranium that's down there, pump it to the surface where the uranium will be harvested, then release the water and all its contaminants back into the ground.  The company says it's safe, the NRC says its safe, and a lot of people living in the immediate area seem excited about the prospect of a little economic development.  But just as  its pending merger with Azarga didn't particularly excite Powertech investors when announced earlier this year, yesterday's NRC news fell on a generally apathetic trading community
     Seems contra-intuitive, but I note that as of midday today, the company's stock price  is up a whopping penny, from 7 cents/share to 8 cents/share.  Examining the stock a little more closely, I see that its average daily volume for the last 3 months is around 400,000 shares/day.  Sounds like a lot, but were talking about less than $30 thousand dollars worth of stock.  In fact, the stock market thinks the entire company is worth $12 million, so meager an amount that the company acknowledged last Fall in its 3rd quarter report (see the link below) that the expenses of permitting alone might be enough to take it under.  Obviously everything hinges on getting itself permitted to start operations in the Black Hills.  So naturally, the company couldn't have been more breathless about announcing the NRC news.  But as I examined the announcement I couldn't help noting that the required disclaimers (check it out yourself via the link) take up almost as much space as the announcement itself.  My favorite sentence is the one that reads "Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future."  Get that?  That's regulatory-ese for "don't believe everything that you read." 
     As iffy as the company's self-touting may be, I was really struck by the new Chairman's comments last February 26 regarding the permitting timeline.  He said that permits should be completed within 90 days thence.  Lessee, 90 days from last February 26 would make  May 27 the target date for the permitting process to be done.  Hmm.  Not sure how he came up with that, considering that the State of South Dakota will be holding hearings on this next August, per the March 9, 2014 edition of the Rapid City Journal (sorry, couldn't get the link to work).  There's no way permitting could be done before then, never mind by this coming May 27.   I invite company officials in the area to comment here on this mis-statement, which, intentionally or not, gave investors the wrong impression about the company's regulatory progress.  Do you see now why lengthy disclaimers are required when listening to company touts blowing their horns about how things are going?
     All in all, it's not much of a surprise that investors are remaining wary about the Black Hills venture.  Powertech surprised them and everybody else when it abruptly wrote down, by 85%, the value of a Colorado property during last year's 3rd quarter.  That property had been one of company's centerpiece assets up to then.  Last year's blow to the enterprise's credibility certainly hasn't been enhanced by its new chairman's claim that permitting is going on much more rapidly than it is.  I won't say the company's reputation is shot, but there's a reason people won't pay more than a few pennies a share for a company whose principals think so highly of themselves and their company's prospects. 

    

4 comments:

  1. John, how do you suppose this company will come up with the required reclamation deposits that I believe all mining operations have to come up with? This whole thing is really starting to smell no matter how much Fabreeze Hollenbeck and his masters try to spray on it. If it looks like a steaming pile and smells like one, it probably is. If you look at their geological studies there are uranium deposits all up and down the eastern side of the hills. If they are even close to being successful down south, it's only going to be a matter of time before they want to move north, I wouldn't expect anymore concern from state or federal government than we have gotten so far. Last time I checked, water was a pretty important resource in these parts, and not to be wasted.

    ReplyDelete
    Replies
    1. I haven't seen Azarga's financials, Tim, and so far my research hasn't turned up any amount of security money that the mine operators would have to post before getting started. Based on what I saw of Powertech's numbers, I'd say they were in such desperate cash straits that they probably couldn't come up with anything in the way of a security deposit Now that Azarga Uranium Corp. is publicly traded, more info will be forthcoming.

      Delete
  2. Hey John, Maybe Rio Tinto will buy it and then do like they did with Northern Dynasty up in Alask a couple of days ago. When they realized it was going to be a bust they gave the company to two different education groups That's probably the only way we will ever get the money that is needed for education in this State.

    Norhhttp://finance.yahoo.com/news/rio-tinto-grants-northern-dynasty-120000715.html;_ylt=AwrTWfwjMUZTlSgAp4XQtDMD

    ReplyDelete
    Replies
    1. Too beautiful to imagine, Lanny. Right now all eyes are on Japan. Uranium prices caved immediately after Fukushima, trading now at less than half their price before the tsunami. Amazingly, Japan is reconsidering whether to start up its other nuke plants and even develop new ones because of the huge outlay of money for foreign oil and LNG to sustain its fossil-fueled plants. At the $30-$35/lb. level now, prices are just about equal to uranium production costs. I think this is why Powertech gave up on its up-to-then highly-touted Centennial project in CO in favor of putting all its eggs in the Black Hills basket. Don't be surprised if Azarga/Powertech touts start pushing the notion that uranium prices are likely to rise to pre-Fukushima levels as a way of generating investor interest in this stock. I'm watching it.

      Delete