By 2013, Canadian-based Uranium One (SXR on TSX) expects to produce 28 million pounds of uranium annually, second only to Cameco (CCJ on NYX; CCO on TSX).
Recently, Cameco’s stock price has hovered around US$51 (C$56). That’s 4 times greater than SXR’s current price at the US$13-level (C$14).
Yet SXR has a strong competitive advantage over Cameco in that the company has not locked into long-term contracts with low uranium prices. Unlike Cameco, SXR can negotiate its contracts based on current record prices for “yellow cake”. Current uranium spot price has risen to around $135 per pound in June from US$70 just 6 months earlier.
Rising uranium prices seem to be a long-term trend fuelled by blossoming demand. America alone has 103 nuclear plants that require some 50 million pounds of uranium per year. As attitudes towards uranium as an alternative fuel turn positive, global demand for uranium is expected to grow.
Uranium One Production
Even before its proposed buy of Energy Metals (EMC on TSX), Uranium One was already strongly positioned to become a leading global uranium producer and exploration company.
SXR has two international uranium projects in production:
- Akdala Uranium Mine in Kazakhstan (70%-owned by SXR) with 2.8 million tons of proven uranium (probable reserves 9 million tons)
- Dominion Reefs Uranium Project in South Africa with 18.5 million tons of probable uranium.
The uranium mining company continues drilling-stage projects on other international properties, including:
- Honeymoon Uranium Project in South Australia with an estimated 1.2 million tons of probable uranium.
- Shooturing Canyon Uranium Mill in the state of Utah with 4.56 million tons of inferred uranium mineral resources.
By 2013, SXR’s existing properties could produce some 18 million pounds of uranium annually.
Acquisition of Energy Metals
The US$1.5-billion purchase is subject to a shareholder vote in late July 2007 and regulatory approvals.
The deal will give SXR a portfolio of uranium mines located in America, the world’s largest consumer market for uranium. Energy Metals owns uranium properties in Arizona, Colorado, Nevada, New Mexico, Oregon, Texas, Utah and Wyoming. Two of Energy Metals’ uranium mines are already in production, with 9 other projects under development. Within 6 years, total annual production from 8 to 10 million pounds of uranium is expected.
With Energy Metals’ American properties under its belt, the new SXR will become a titan in the U.S. uranium sector with the potential to become the uranium supplier of choice for U.S. nuclear utilities. Plus, SXR retains its internationally diversified portfolio of uranium properties with assets in the world’s top uranium jurisdictions.
Among publicly traded, pure-play uranium mining companies, SXR will become the world’s second-largest uranium reserve and resource base – but with a current stock price equal to one quarter of the cost for Cameco’s shares.
Sources for this Article
This article presents independent calculations and insights based on data drawn from the Management Discussion & Analysis (May 11, 2007) and the news release Uranium One Announces Definitive Agreement to Acquire Energy Metals Corporation (June 11, 2007) from uranium1.com.