Thom Calandra Report: Uranium Before Sunrise

Speaking of uranium…

Many are moving – the equities that is, and not necessarily on uranium’s physical price.

I know a Montreal banker, Jean-Sebastien Jacquetin, who just toured with u308’s CEO (EWE in Canada) this past week in Hong Kong. The stock gained 65 percent: to 16 cents Canadian.

C’est vrai, but come on, most low-priced uranium prospectors are rising in the stock market. It’s January goofy times. Or sector shift. Or for my money, bargain bowl.

I thought I’d tell the story of how I came to own shares of another uranium prospector. Maybe some of us can repeat the profitable process, hopefully before sunrise.

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Voila. Aside from a single blazing biotech investment linked to influenza, one of my best performers (for 2013) is Lakeland Resources (LK in Canada).

Lakeland explores in Saskatchewan and Alberta and is a newbie on the uranium fields. (See property mapLakelandI recall being with the CEO and his team more than two years ago in Vienna and thinking, ‘Well, this prospector is cheap. Like all the rest.’ That was at 10 cents Canadian and perhaps 30 million shares outstanding.

At the time, Lakeland was a generic minerals exploration company. No uranium in the mix. Just gold.

I had spent maybe a week with the team that was behind Lakeland and a stable of high-risk companies operated inside Zimtu Capital in Vancouver, Canada.

I liked that the Canadians carried their flag proudly (I am American), draping it across their bus, handing out partnership flag pins and stuff like that. I liked that the group of about 25 geologists, executives and promoters did not get drunk at night, well, mostly. I liked that they stayed at modest motels, knew where the best schnitzels were, and most of all, I liked that half of them had ties to real folks in that part of Europe.

It’s one thing showing up at a Zurich or Geneva hotel and having 30 silk suits attend a free buffet to hear a lunchtime pitch. It’s another to be on the road and see old friends – Germans, Austrians, Swiss, Dutch – drop in for a sandwich at a roadside service station.

Or as happened, chase down the investor bus in their funny cars and motor bikes to say guten tag.

So, by the time we reached Vienna, and not sharing the agenda that occupied Ethan Hawke in the film “Before Sunrise” with Julie Delpy, I was buying Lakeland stock on my PDA, as we stood outside a commerce hall, ‘borrowing’ wireless from one of the book publishers on the second floor above is.

It was pouring. Chilly. I was sober. This is Europe. Nice architecture.

Who knows what cheap is? Not I. This Lakeland was $3 million market cap at the time.

Jonathan Armes, CEO, made me a promise on the Zimtu super-bus that was tooling us through Germany, Switzerland and Austria.

“When you buy in, I can’t promise which way the stock will go. I can promise that I will keep you posted, that we will use our money to get the best properties at the most reasonable prices and that we will be alongside you as a shareholder.”

That was Jonathan, somewhere after Munich and before Vienna.

Jonathan was righter than he’d have liked; Lakeland’s stock price during the next two years lost most of its schnitzel. Yet Jonathan and his administrative team at parent Zimtu Capital continued to keep me in their loop: at trade shows, mostly, and telephone calls.

This is more than I can say about at least half of the 35 or so resource companies I have owned and mostly still own since the Great Repression of Metals Equities began in March 2011.

In March 2013, Lakeland unveiled its Gibbons Creek purchase rights: eight uranium projects located within the Athabasca Basin of northern Saskatchewan and Alberta. The stock doubled to 12 cents, and it’s been on a tear ever since.

What I liked about that development was this: the letter was signed in late February 2013 and announced two weeks later, and the stock had little activity. Tight lips float ships – toit like Mick Jagger.

If all goes as planned in 2014, Lakeland will spend more than $1 million exploration-drilling in the Athabasca Basin. The cash comes from partner Declan Resources (LAN in Canada).

Let me not like Marc Antony or Sir Mick sit here or dance there and proclaim the technical prowess of Lakeland. I know little about uranium – just enough to be thankful that Mr. Armes and his team are in the fields and plains of 20 percent-plus rich grades.

Don’t read this the wrong way. I have seen uranium fields in the Wits Basin of South Africa. I am in touch with uranium investors, and I understand the politics of Russia, the nuclear needs of Japan and the anti-uranium stance of jurisdictions such as the USA state of Virgina, where I own Virginia Energy (VUI in Canada), of all forlorn uranium properties.

This is no advertisement for Lakeland. Back then in Vienna, I had no idea I was getting into uranium when I bought shares of a company that was connected to a middling Ontario gold property: Midas.

Mr. Armes and his Lakeland geologists and Radon-readers so far are knotting their vows. Their reports are confident yet not chest-beating promotional in the way a fledgling metals prospector often is. See: shareholder letter

Not that we can say the same thing about each of the companies in Zimtu’s fold (ZC in Canada). These days, some of the minerals that Zimtu’s portfolio companies pursue – graphite, potash, silicon, rare elements – are as much in the Radon flux as uranium is.

Zimtu owns stakes in Commerce Resources (CCE in Canada), Western Potash Corp. (WPX), Big North Graphite (NRT), Arctic Star Exploration (ADD) and Prima Fluorspar (PFF).

As for Lakeland, the Zimtu stake is 15 percent. The paragraph that got investors all worked up about Lakeland in press-release land is probably this one:

Lakeland’s land-based RadonEx values at 9.9 pCi (picocurie) are about 10 times higher as what Fission Uranium measured at Patterson Lake. 

Lakeland’s Gibbons Creek map displays, assisted by cash partner Declan Resources (LAN in Canada), are directional enough to orient an American investor (such as moi):

Lakeland publishes ample photos of the exploration activity. See photo suite.

Most of all, the comps are enticing (this means Lakeland was and still is comparably cheap for me to have taken a stake of 100,000 shares):

  • Fission Uranium  (TSX:  FCU)   |   $1.15 price   |   $361M market cap
  • NexGen Energy (TSX:  NXE)   |   $0.25 price   |   $32M market cap
  • Forum Uranium (TSX: FDC)   |   $0.38 price   |   $10M market cap
  • Lakeland Resources  (TSX: LK)   |   $0.22 price   |   $7M market cap

Lakeland, at least nominally, is about the cheapest thing at the Saskatchewan Basin. That’s the takeaway from this uranium parable. Even if it was a gold company at the time.

Could get cheaper? Oh yes it can, and for a second time in 27 months. Could go to $1 from 22 cents (Canadian) in a week’s time? That, too.

In the above list, the only one besides Lakeland that catches my investing fancy these days is Forum Energy, active in the basin’s Patterson Lake area. Once again, I am interested because it seems cheap compared with the rest of the lot.

Another of these, NexGen Energy, is more expensive than I would like as an investor and has way too many shares outstanding for my taste. NexGen I am told is drilling for uranium at the Rook 1 property in Saskatchewan right now. Rook 1 is adjacent to Fission’s PLS deposit on the Northeast side.

I know I am bound to offend some tiny prospector in the basin that I have passed over, and my apologies in advance to those. Lucky Strike Resources (LKY) is less than $3 million of market worth at 8 cents a share. I have spoken to its CEO, Ron Rieder.

Lucky Strike is part of a four-company Athabasca Basin syndicate. John Adams, founder of gold-copper developer Sandspring Resources in Guyana (SSP) and a uranium pioneer along with his father before him (Utah), is on Lucky Strike’s board.

If you add up the combined market caps of the four companies syndicate companies that are exploiting properties in the basin, it is less than $25 million. This is a fraction of the more visible and fissionable prospectors in the high-grade basin.

On the U308 front, aside from Lakeland, I own Kivalliq Energy (KIV), Virginia Energy at 10 cents, and one or two tiny stakes here and there. If you believe we are going to the moon on uranium, or at least back to clean energy in Japan, the most intense way to speculate is probably with the lowest nominally priced companies that feature share counts below 50 million outstanding.

I figure Mr. Armes will keep doing what every resources executive in Canada does to stay active: sell equity at insanely low prices. It’s January 2016 and Lakeland now has 50 million shares out, up from 33 million. The stock is at a buck-twenty for a $60 million market cap.

Don’t we all wish we could see the equity future?

Best to let the team at InvestorINTEL give us the geopolitical and clean-energy analysis for the world’s uranium fields.

I’ll take the cheap of the heap and then hope, as a stock technician friend of mine says, that before sunrise, all of the uranium companies will quadruple and more their share prices in 2014, even with a steady uranium price.

– Thom Calandra

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