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NWT Uranium (TSX: V.NWT, Stock Forum; 20 cents)
www.nwturanium.com
Shares Outstanding: 126 million
Cash: $22 million (17.5 cents/share)
Investments: $9 million (seven cents/share)
Accounts Payable: $231k/Taxes $1 million
Today’s discussion centers around uranium but this past week there was also important news from London listed Niger Uranium, of which NWT owns 34%. This gives NWT exposure to the nickel market and Zimbabwe, where mining companies from around the world (in particular China) have been cutting deals. News excerpt from the October 8thZimbabwe Herald is below.
“AIM listed mining giant, Niger Uranium has joined the current scramble to exploit Zimbabwe's largely untapped nickel reserves after announcing that it would be investing in nickel exploration in Zimbabwe and South Africa. Niger Uranium said in a statement this week that it had formed a joint venture with Southern African Nickel with interests in a portfolio of nickel projects in the two countries. The investment would be spread over 20 years. Niger's investment in the country comes at a time when a number of foreign companies have shown a huge appetite to invest in the country's mining sector.”
Uranium
At $48 we’re a long way off the price hit mid 2007 but the price of uranium in 2010 has shown signs of life again. Most believe the price in 2011 will hold stable near $60 per pound but as we saw three years ago, almost anything can happen. In addition, anytime we see events with Cameco (mine flood or a strike for example) we see just how susceptible the price is to supply disruption.
This week India’s Minister of State Science and Technology said their country is planning on acquiring mines abroad to source fuel for its reactors. “Nuclear energy was emerging as an option which cannot be ignored in the quest to meet the world's increasing energy demands while reducing release of greenhouse gases.” Speaking at a function at the Indira Gandhi Centre for Atomic Research here, IAEA deputy director general YA Sokolov said the IAEA-installed nuclear capacity across the world was about 370 GW, contributing about 14% of global power generation. However, only a small fraction of the energy from natural uranium, about 1-3%, is used and the rest left in the spent fuel, he added.
It is clear India wants to push dependency upon nuclear power and we are seeing the same thing from China, which has an aggressive plan to build 30 to 40 new nuclear power plants over the next 20 years. The Russians are also planning to build a large number of nuclear reactors so they can use nuclear power domestically and increase their exports of natural gas to Europe.
It takes a long time to build a nuclear power plant or develop a uranium mine and that requires long-term planning – in particular, sourcing a secure fuel supply. NWT has significant exposure to uranium through its holding of Niger Uranium and this is important because we have seen that China is more than willing to invest and ship commodities from Africa. In addition (and this is still very early), last month NWT was able to sign an exploration development deal with the Vietnam Atomic Energy Institute (VAEI). The proximity to China and India is important but the economics of their uranium industry is unknown.
Most countries now realize that it will be impossible to feed the world’s demand for power and still cut Co2 emissions. Without nuclear power, few alternatives exist beyond hydro and wind – and its land footprint can be huge. Feeding the people of China and India is already a concern, let alone taking up huge tracts of land to produce the same amount of power that one nuclear plant can produce.
There is plenty of uranium on the market right now, but it takes years to develop a uranium mine. Many analysts believe that several years from now as more power plants come on-stream, we could face a supply crunch. If that were to occur, there is no short-term fix (given the time it takes to bring more production on-stream). The bulk of the cost associated with producing nuclear power is in the upfront capital costs, so even a move from $50 to $100 on the price of uranium would have little impact on the economics of building a plant. Those variable costs (just like coal or natural gas) are simply passed along to the consumer.
Conclusion
NWT may be more of a mid-to-long-term play (unless we see some short-term news), but given the fact it trades below its cash and investment value, it is an excellent way to manage risk and gain exposure to the uranium sector (and now nickel through Niger Uranium). I am not a big fan of the amount of stock outstanding (120 million), but it does provide good liquidity near 20 cents.
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Disclosure: Danny Deadlock owns 35,000 shares of NWT Uranium (TSX: V.NWT) purchased in the open market.
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Current and past reports are archived on our Stockhouse message board at: https://stockhouse.com/Groups/GroupInfo.aspx?g=50540
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Danny Deadlock has specialized in micro cap and small cap companies for over 25 years and is a registered member of the Stockhouse community since 1997. You can find his website at www.MicroCap.com - a service that has specialized in TSX and TSX.V penny stocks since 1998. You can also email Danny at microcap@telus.net
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