Uranium explorers making moves

Uranium exploration stocks are grabbing the spotlight at the top end of Western Australia’s best performing companies in a continuingly dominant resources sector driven by rising commodity prices.

Three uranium explorers make up the top four shareholder return spots by growth in market capitalisation in the year to June 2005 – Paladin Resources, Deep Yellow and Summit Resources.

Leading the overall list is Paladin Resources with a 1,057 per cent return to shareholders, slightly down on last year’s 1,127.3 per cent return.

It’s all about short supply, rising demand and the swing, particularly federally, to the view that cost-effective nuclear power is the leading alternative to greenhouse gas producing fuels.

In the past 30 years, the percentage of electricity generated by nuclear power plants in North America has grown from 4.5 per cent to more than 20 per cent, largely due to efficiency improvements in existing plants rather than constr-uction of new ones.

There are now 440 nuclear power reactors in operation in 31 countries, which is not a bad current market in itself.

Current world demand for uranium is about 77,000 tonnes per annum (tpa), rising between 1,200tpa and 2,400tpa to a forecast 125,000tpa by the early 2020s. 

World mine production is around 48,000tpa, the other 30,000tpa coming from near-consumed inventories and the down blending of weapons grade material.

With mining supply only expected to increase marginally to 54,000tpa in the next five years, the supply situation is expected to remain tight with strong upward pressure on prices, which have jumped from $US10 a pound to around $US30/pound in two years.

However, one of the counters to this otherwise rosy uranium mining scen-ario is the ability of the existing major producers to increase production.  

BHP Billiton has started an environmental assessment of its proposed $A5 billion expansion at its Olympic Dam operation in South Australia.

While this does not signal BHP Billiton’s formal commitment to undertake further expansion at Olympic Dam, it does mark the beginning of a two-year process of scientific analysis and extensive public consultation. 

Paladin’s 100 per cent owned Langer Heinrich uranium project in Namibia is expected to go into production in September next year, making the company the first new supplier to enter the uranium industry since 1983.

The $US92 million ($A120 million) project is designed to produce 1,180tpa worth $US65 million a year based on a very conservative uranium price of $US25/pound. Langer Heinrich has a mine life of 11 years and a process plant life of 15 years.

Paladin recently sold its Frome Basin exploration property in South Australia to new uranium hopeful Deep Yellow, which sits just below Paladin in second spot with a 907 per cent shareholder return for the year.

Paladin picked up 7.5 million Deep Yellow shares and 12.5 million unlisted July 2008 options exerci-sable at 12c per share.

Tanami Gold also recently sold the uranium rights to its 60,000 square kilometre Tanami-Arunta explor-ation portfolio to Deep Yellow for $400,000 and 30 million shares.

Deep Yellow is in the midst of a 600-hole drilling program at its Napperby/New Well Project in central Australia and aims to have a new resource estimate out by the end of next month.

The prospect, 150km north-west of Alice Springs, was discovered by Uranerz in 1979 and 9,000 metres of drilling by that company yielded a resource of 6,000t.

Fourth on the shareholder returns list, with 774 per cent for the year, is Summit Resources.

This is on the strength of its Mt Isa tenements, which the company says, contain over 75 million pounds of uranium oxide resources, making it “the most advanced uranium exploration company in Australia. Only BHP Billiton at Olympic Dam and Rio Tinto subsidiary ERA at Jabiluka in the Northern Territory, control larger uranium resources.”

These three will be joined on the Australian Stock Exchange lists over the next few weeks by new uranium explorers Contact Resources, Korab Resources, Monax Mining, Energy Metals and Nova Energy.

Just above Summit in third spot, with a 900 per cent return, is Fortescue Metals Group and its much-trumpeted $2 billion-plus Pilbara iron ore project.

The company is currently in dispute with the Aboriginal group which controls the land from which 45mt of its planned annual ore production is expected to come.

Precious Metals Australia came in at fifth spot with an annual shareholder return of 756 per cent on the back of finalising the acquisition of the Windimurra vanadium project at Mt Magnet in WA, believed to be the largest such deposit in the world.

The company raised $13.3 million earlier this year ahead of the expected $100 million redevelopment of the mine at an increased capacity of between 20 million pounds and 22 million pounds of vanadium pentoxide a year. The study is expected to be completed early next year, with redevelopment expected to take a further six to nine months.   

The old Tony Barlow Australia threw off the last vestiges of its suit hire business and became Aurora Oil & Gas in April this year.

It then raised $4 million and dived into 12.5 per cent and 16.6 per cent stakes in a suite of producing and non-producing gas properties in Texas, US.

All of which explains its artificially high fifth position on the list with a return for the year of 715 per cent.

Nido Petroleum, the old Sydney Oil Co Drilling and Exploration Trust (SOCDET), came in at seventh with a 675 per cent result, on the back of production from two oilfields in the Philippines and interests in three gas exploration blocks in the North Sea.

In eighth spot, with a 478 per cent return, is oil and gas explorer /developer Samson Oil & Gas, whose assets largely reside in the US.

The company has acquired 78 per cent of US company Kestrel Energy, which has oil and gas reserves of 26.1 billion cubic feet and annual production of 1.9 trillion cubic feet.

The first non-resources sector company to appear on the list is Neptune Marine Services in ninth place with a 450 per cent annual return to shareholders.

Neptune has had a number of recent successes in its global quest to commercialise its unique patented underwater welding technology.

These include its first export earnings from a ship repair contract with a UK company, an Australian Navy repair contract and agreements to facilitate the system’s commer-cialisation in 11 Asian countries.

Rounding out the top 10 is Vulcan Resources, with a 434 per cent annual shareholder return, as it pushes towards production from its 100 per cent owned Kylyahti Copper Project in eastern Finland.

Spectacular recent drilling results indicate a 500,000tpa plant, rather than a 300,000tpa plant as being the more optimal route. The pre-feasibility study is expected to be completed in September.

The company’s Kuhmo Nickel Project in Finland is also yielding excellent nickel-copper and nickel-platinum-palladium results.