UrAsia Energy has been trading for only a year but it is by far the most heavily traded uranium stock on the TSXV.
With uranium prices destined to move upward over the next few years, companies who
are planning on starting or increasing their production will see the biggest gains in their stock values. And by my estimates, UrAsia will continue to climb in 2007 and beyond as their business plan unfolds.The reason for UrAsia’s big following in the market is really twofold. First and foremost, their plans for production growth willposition the company for significant revenues and profits over the next few years. And secondly, UrAsia is unhedged. Simply stated, as uranium prices go up, the companywill be able to sell at current market prices and will not be locked into a specific price, made in advance of production.
Cameco for example have locked themselves into future contract sales which have
limited their ability to ramp up revenue. Even by 2008, only about half their production will be available for sale at higher prices. With unhedged production growth, UrAsia’s prospects look outstanding over the coming years ahead.
Here's a snapshot of UrAsia's assets:
The Akdala Mine – In Production
The Akdala uranium mine is currently UrAsia’s key asset in that it is providing cash
flow to the company. In April, the company achieved its goal of ramping up production
at Akdala to its full capacity of 2.6 million pounds per year. About 1.8 million pounds isattributable to UrAsia’s 70% stake in the mine.
With the price of uranium on a strong upward trajectory, the benefits of a significantincrease in production capacity are not only bullish today, but each and every quartergoing forward for years to come.
UrAsia’s first sales contract came in February 2006 representing about 200,000 pounds
of U3O8 for delivery in Q1 of 2007. In April a long term contract was made with an Asian utility company for the purchase of approximately 780,000 pounds of U3O8 for delivery this year and the purchase of 1 million pounds per annum for the period starting in 2007 to 2010. The sales contracts secured by the Company since it acquired the mine in November 2005, represent the sale of approximately 70% of Akdala's annual production for 2006.
UrAsia is able to successfully negotiate both short and long term contracts with its
customers at market related prices. According to Phillip Shirvington, President and CEO, UrAsia is experiencing strong demand from utilities for long term contracts for delivery toward the peak 2011 timeframe. This is when I expect prices to eclipse $100 a pound.
With the Company remaining an unhedged producer, this will allow them superior cash
flow as prices increase dramatically over the next few years.
South Inkai and Kharassan – Mines in Development
The South Inkai mine site is UrAsia’s main development project in which they have a
70% stake. Production is on track to begin in late 2007 with initial production coming in at 5 million pounds per year. (UrAsia’s share would be 3.5 million.) The company believes the production could be eventually doubled at South Inkai.
37 million pounds are currently classified as inferred however more drilling can place this uranium into measured or indicated classification which they would target for early production.
Historical Soviet data shows that 203 million pounds were outlined however UrAsia
plans to drill an estimated 500 drill holes in order to show 43-101 compliant resources, acceptable to the Security Exchange Commission.
UrAsia also holds a 30% interest in the Kharassan project. Production is expected to start here in 2008 and by 2011 the management is projecting production of 5.2 million pounds. To date 43-101 compliant resources are 89 million pounds and the noncompliant Soviet numbers add another 141 million pounds. The management believe another 600 drill holes should be enough to upgrade the resource to 43-101 standards.
This is another key reason to own this stock now. I expect UrAsia to report dramatically higher reserves in the coming 6-12 months – possibly a ten-fold increase. This is important, because most companies are trading at a market cap of $15 per pound uranium in the ground. For UrAsia to add hundreds of millions pounds in reserves over the coming year – a distinct possibility – that would add billions to the market capitalization of the company, multiplying the stock price tremendously.
Kyrgyzstan – Exploration Property
UrAsia owns 100% of their large land licenses in the country of Kyrgyzstan.
UrAsia has seven exploration licenses in Kyrgyzstan that are rarely talked about but
appear to have strong exploration upside. Canada’s GMP Securities report suggests that there could be up to 1 BILLION pounds of recoverable uranium in those projects.
Russia’s Aton Capital believes there is a conservative 550 million pounds of recoverable uranium in Kyrgyzstan. The reason why they are still considered exploration is because although they were drilled like Swiss cheese, this work was done back in 1950 – it’s very old data but the potential here is huge.
Exploration activities at Kyrgyzstan have been underway for some time and drilling has already started. To that end, UrAsia will spend US$9 million over the course of the next two years to drill some 100 exploration holes averaging 300 meters in length.
Conclusion
As I’ve stated numerous times. I believe we will see the spot price for uranium at $100 in the future. UrAsia stands to benefit both from organic growth and an up trending spot price.UrAsia is the only publicly traded unhedged uranium producer in the world. Its net
uranium production is running about 1.8m pounds from the Akdala mine which is in full
production. With the South Inkai and Kharassan mines coming into production, the
company could be producing 4 million pounds per year by 2009, steadily increasing to
11.4 million pounds by 2013.
UrAsia is a buy for short and long term growth.
http://www.hathor.ca/_resources/...le_uranium_bull_market_oct2006.pdf
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