Wednesday, September 17, 2014

Powertech Uranium Can't Get Its Financial Act Together

    Powertech Uranium is the company that has been trying to set up a uranium mining operation in the southern Black Hills for a few years.  That the company has met with some ferocious resistance in the region is well-documented, both here and elsewhere. That the company has been suffering financially as a result of the long delays in Powertech's efforts to get the necessary state and federal permits is a sidebar of particular interest.   This isn't about the science of in situ mining (which amounts to using groundwater as the source for extracting uranium and forever altering the composition of that water as a result), this is about the company's ability remain financially viable as the expenses and delays involved in the permitting process mount up.
     There's been an eye-catching jump in Powertech stock's trading volume in recent days, even as the stock price has been hitting all-time lows of 5 cents/share.  High volume and a plummeting stock price don't augur very well for a publicly traded (PWE.TO) company, especially one like Powertech that languishes in the nether world of penny stocks, a market where speculation, rumor and hype are often the drivers of share prices.  Just from the price and volume action in PWE stock it seems obvious that something with this company is out of whack.  Then suddenly last Friday along came confirmation.  In a news release dated 9/17, Powertech announced that another delay in its long-planned merger with Azarga resources is occurring.  Azarga is the deep-pocketed, Asian-based company that essentially planned to take over Powertech, effective last July.  That union was later pushed back to this month, and now the deal isn't supposed to take place until late October.
    Checking a little more deeply into the latest news, I got some tangible support for my opinion of this company's weak financial condition.  Powertech is on the ropes.  In fact, I think the company is essentially broke, a conclusion that comes clear if you scan the news release I linked.  Powertech is now borrowing cash from Azarga, probably in order to maintain its meager operations, in 6-figure units that have to be repaid at usurious rates before the merger occurs.  I mean, if you have to borrow money and pay it back, plus 15% to 30%, in less than two years, I can tell you that you're cash-strapped to the point of desperation.
     Analyzing this last bit of news, I'd also say that further delays in the merger are forthcoming, considering that Azarga's lending timelines stretch out over the next few months. There's some wiggle room around the planned merger completion date of 10/31/14.  Something is seriously amiss.  Given the dump-it-now action in Powertech stock, given that Azarga is essentially lending money to its weak sister in order to keep the company afloat, given the continued delays in the permitting process, and given the shaky nature of the various entities (including--here's the story about the troubled Singapore-based Blumont Mining) involved in the coming merger, I'd have to conclude that something is not right in the house of Powertech.  As I noted in an earlier post, there's a whole lotta shakiness goin' on.
   

2 comments:

  1. When you were scanning the announcements, did you see that Powertech just announced they raised $5 million?... Would have thought that would be relevant.

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  2. It's contingent on regulatory approval. Given Powertech/Azarga's history of announcements that don't pan out (e.g., the timeline of the permitting process at Dewey-Burdock, the twice-postponed merger itself), I think it's best to wait and see how this stock-floating scheme plays out before paying much attention to it.

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