Friday, December 23, 2016

Would-be Black Hills Uranium Miner's Biggest Stakeholder Was Just Indicted For Fraud In New York

     Azarga Uranium, the mining outfit that has been trying for about a decade now to set up a mine in the southern Black Hills, has financial underpinnings that have always looked shaky to
Azarga's Biggest Shareholder
The Company They Keep?
me.  
As South Dakotans consider the ability of this company to follow up on its plans and have the financial wherewithal to make things right if their operations disrupt the local landscape and groundwater, Azarga's finances should be kept under some very close scrutiny.  I have my doubts about the company's ability to even function, so flimsy is its financial superstructure.  I noted here a couple of months ago that its biggest stakeholder, a New York (albeit registered in the Cayman Islands) hedge fund called Platinum Partners, which owns 30%, is an outfit with some history.  At the time one of its associates had just been arrested for wire fraud and the fund itself was liquidating two of its largest positions.  

     Now it comes out that the partners at PP a few days ago were charged with fraud.  The 49-page indictment is consistent with the claim that the fund was effectively a Madoff-style Ponzi scheme.  Guilt has yet to be decided via due process, but if the facts in the indictment are accurate, this is an outfit that was on the ropes and desperate to cover up its hopelessly mangled finances.  It holds a 30% stake in Azarga that might have to be liquidated.  Dumping all that stock on the market would be some tough news to beleaguered Azarga shareholders who've already watched the stock price go from around $40/share ten years ago to 25 cents/share today.  A massive wave of selling is likely to put even more downward pressure on the stock. Azarga's 2015 annual report, issued last March, includes a cautionary statement by its auditors that "material uncertainties" in the company's financial position "cast significant doubt about the company's ability to continue as a going concern." (Italics mine.)
     The combination of the long delays in the permitting process to get the Black Hills (known locally as "Dewey-Burdock" for its location) mine operating and the crushingly low price of uranium, which hasn't recovered from the pounding it took after the Fukushima nuclear reactor disaster in Japan a few years ago, has been devastating to Azarga's fortunes.  Its stock now languishes in the slums of the
Platinum Partner
Alleged Perp
(from NYTimes.com)
securities world, the penny-stock market. Its hopes for a revived stock price are based on the prayer that uranium markets and friendly regulators will converge into a positive outlook for the company. Meantime, it just keeps bleeding cash, operating at continuous losses, and now has to contend with a major shareholder that's fighting a criminal indictment. The State of South Dakota, generally, and residents of the Black Hills, specifically, need to keep an eye on this company's financial fortunes. Like its auditors, I have my doubts about Azarga and I'd like to see the company come out with some specifics about the soundness of its financial footing before anybody starts drilling holes at Dewey-Burdock.  

1 comment:

  1. Could it be that the beleaguered price of uranium as you point out, is part of the reason behind the assertion a couple of days ago, by both Trump and Putin, that they are interested in pursuing an increase in nuclear armaments, and that is also behind President Obama and the current Congress, at looking to spend a trillion dollars to upgrade our current nuclear armament program? How would one go about researching whether any of the "players" have investments in uranium?

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