Post by
patientriskyinvestor on Sep 25, 2013 3:28pm
resource estimate
If I read the 9/23 Cannacord report correctly, they are estimating a 65 mill lb resource at PLS. With 100% success on current summer drilling program, hoping now for hits on parallel conductors OR outside of the 000-945 zone to dramaticallhy add to the resource. If Rob Chang of Cantor is correct that possibly we have connected the dots, ie, that 000-945 is one zone that is a single connected orebody then 65 mill lb is way too small a calculation. My only worry now is that Dev pulls the trigger too soon after the merger (assuming it is approved) and tries to sell too quickly b/c we are at this time looking at very low uranium prices and no real drivers to push price up in the short term (before next summer). Yes the HEU program is coming to a halt, but last shipment has already been made. Second, Japan has NO operating nuclear at this time, last unit down for maintenance. Korea has major safety issues to be addressed and a number of their reactors are down. Restart of Japanese nuclear is going to be very slow, they estimate 3 months to review each reactor, they only have 3 teams of around 50 inspectors and they just started. So optimistically (unless the teams can do parallel reviews of a number of reactors, which is unclear from any of the press releases) they may have 3 reactors approved to startup sometime in Dec, but more likely in Q1 2014. Japanese util are very conservative and generally keep a very robust stockpile (2 yrs in many cases) of uranium. Many also have long term uptake contracts and when they are not operating not sure if they are stockpiling more or it is being dumped into the spot market. Given the financial health of japanese util is not very good (regulated rates and very expensive relative to nuclear prices of LNG) my guess is they are having to dump, don't forget pre Fukushima 25% of Japans electricity came from nuclear.
I am disappointed that there is NO planned Fall drilling program (definitive merger agreement contained terms that severly restrict spending and prevent a fall drilling program) , they will concentrate this Fall only on analysing results and closing the merger and spinouts. So hopefully for long term investors like me, Dev will NOT rush to sell the co. in Jan b/c frankly it is bad timing in terms of a bad uranium market AND we will not have any drilling results after this summer's program as a driver for share price as they discover more lbs. For $6 mill summer program, which they have only announced 1/2 the results, and 100% success rate, they have, if Cannacord is correct, added roughly 30-40 mill lbs of resource or $300-400 mill at $10/lb. I would say that a 50x return on drilling investment is a reason to KEEP drilling and not slow down. Especially when there is NO need to return to the markets for cash and dilute for at least a couple of years beyond this current summer's program. Better to drill in the Fall and commence drilling in the Winter ASAP so that we continue to increase our lbs which is ultimately what an outside acquiror will base their takeout price on. Otherwise, the share price will inevitably drift down with no news once all the results from this summer are released and that is the WORST time to negotiate a buyout since any premium offered will be affected by the share price at the time. ie don't announce to the market you want to sell in Jan, rather aggresively drill as soon as ice is thick enough and as drill results start to come in, then think about talking to other parties, but not before that time.