Tuesday, December 9, 2014

News Flash! Azarga (nee Powertech) Uranium Thinks Uranium Prices Will Double . . .As for Rest Of The Trade? Mmm, Not Quite So Sure.

Uranium:  a price chart only a mother can love
     Azarga Uranium Corporation (used to be called Powertech, but since a merger will be called Azarga going forward) thinks the price of uranium will double in the near term, say, the next few years. Azarga is the company that is seeking permits to forever alter the groundwater in parts of South Dakota's Black Hills by drilling holes into the ground, injecting chemicals into the water down there, pumping it up to the surface, removing the uranium content from the liquid, then pouring the used water back into its natural formations, forever changed in composition by the procedure. Some say the process is perfectly safe, others say its dangerous, I say don't take a chance.  
     So far the undertaking has been delayed by a well-coordinated, fiercely protective organization of local residents, causing the permitting stage to stretch out for years. Yay, is what I say. Meantime the corporate honchos at Azarga, located mainly in Hong Kong but with a significant financial presence coming from Singapore via a dubious outfit called Blumont Mining, have a stock whose price needs to be nurtured.  Currently trading on the Toronto Stock Exchange at 39 cents/share, Azarga (AZZ.TO) has lost about 90% of its value in the last few years (most of that time it was known as Powertech). Looking at the chart above you can see how the uranium market has fallen precipitously in the past few years.  If you think the drop was created by the Fukushima nuclear reactor disaster in 2011, look again.  Uranium peaked in '07, then made a feeble comeback in 2011, only to be smacked back down by Fukushima that same year.  
     Anyway, you can see that the fortunes of Azarga stock are closely tied to the fortunes of the market for uranium itself.  It came as no surprise to me that Azarga's CEO Alexander Molyneaux
Noted uranium tout Alexander Molyneaux
was on Bloomberg a few weeks ago touting uranium, claiming the price will double in a few years.  Positive forecasts on financial media can have a market-moving effect on stock prices.  In this case, not much happened, as the stock has since traded in a range of a few pennies since Molyneaux's bullish utterance.  
     Why the market indifference?  Probably because everybody else that has anything to do with uranium isn't particularly excited about its price prospects.  A piece in the South China Morning Post (east Asia is where uranium markets are centered and most actively traded and followed) a couple of days ago notes that spot (current) prices for uranium are too low to encourage new mines. The piece argues that $60/lb is the threshold price for new mines to begin operating, well above the current $39 level.  The article also argues that global supply will exceed demand well into the next decade, a contention supported by the fact that uranium mines around the world have shut down in recent years, as the Post reports.      
      My take is that if the uranium market does improve substantially in coming years, existing dormant mines will be re-started, adding to the supply without having to absorb all the start-up costs that could financially hobble a new supplier like Azarga.  In the face of all this, Molyneaux claims the Black Hills mine will be up and running by 2016--a start up date that he's pushed back several times in recent years. Considering all the supply/demand fundamentals in the uranium market, all I can say is: good luck with that.  

1 comment:

  1. My shares are down 70% after holding for a little over a year...my original 100 shares have been reduced to 10 after the merger. Buyer beware!

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