My Energy is Ur Energy...
Tuesday, March 28, 2006

...literally, and maybe it should literally be your energy too. This seems to be one of the few uranium companies who have not seen a dramatic run-up in its share prices relative to its reserves. Now this does not mean that the stock has not seen any appreciation, which it has...went from the low $1's to a recent high of $2.17...but this company is still undervalued. Most companies trade at price relative to their resource in the ground...Ur Energy does as well, but what makes this stock stick out is that there are 2 pounds in the ground for every share! Think about that...that means that this company is trading at $1 per pound...in our opinion that makes this stock grossly undervalued considering that the recent spot on uranium (per pound) was $40.25.

This company has its major holding in Wyoming (a state where the Governor recently declared that, “we are open for business” when asked the state's stand on uranium companies setting up shop). This is extremely bullish in that now the state permits will not be “hard” to get due to a reluctant state government trying to delay a project. Also the residents of this Western state seem to be overwhelmingly in favor of the jobs that will be created from new mines. The company has 9 properties in Wyoming with 2 being major reserve containing properties. These two properties are Lost Soldier and Lost Creek...both properties contain significant drill holes and the company is going through and confirming all the information from historical data by performing their own drill program. It must also be noted that the company recently purchased the historical logs to one of its properties, although we do not know from which company they purchased these results from or for which property. For these two properties, there are two important reasons to be excited, because although the historical results are not NI 43-101 compliant, the historical owners are Cameco (which drilled in 1998) at Lost Soldier and Conoco-Texasgulf (1978) at Lost Creek. Cameco estimated that Lost Soldier had 26.6 million pounds in the ground and Conoco-Texasgulf estimated 12.8 million at Lost Creek. The gem in all of this could potentially be Radon Springs, another one of the companies projects. Texasgulf was the historic operator at this site (drilled in '78 as well) and reported 34.3 million pounds with an average grade of .02%. So the company will most likely be using in-situ mining (drilling and pumping out a liquid-like substance) which is cheaper than open pit mining, less labor intensive, and much more environmentally friendly. This is also the only economical way in which this company will be able to get the uranium out of the ground and to market. This is our most recent buy and we are quite confident that as the year 2008 approaches (the year in which their first mine will open) the stock will climb in anticipation. This is a company that must be bought and then held for the long term, because the way we see it is that some very good gains may be realized before the mines begin to open, however after they start to monetize their resources the stock will shoot up further (we also anticipate that the price of uranium will be much higher as demand grows in the years ahead).

Updating you on our recent picks, Canwest has been setting new highs...today backing off an all-time closing high at $8. We still fully anticipate CWPC to hit our price target of $10 before the year is over, realizing that we may have been too conservative in our analysis we may actually be surprised should this stock shoot above $10 before the year is over...at which time we may switch our consensus (depending on the news) to a higher price. However, at this time we believe that the company has entered a window where the price will stagnate as a result of consolidation in its stock price. All indicators are positive with increased volume as the stock rose higher and higher. So our thinking is that it will present you the opportunity to buy within this window...we are not sure how long this window will be open but our best guess is 5 weeks which will be about the time they gain their listing on the AMEX stock market. At that time we believe the company will release its drill results, that are long overdue, in order to gain some recognition for the company and develop a following. After those events the next event will most likely be the announcement of their reserves or a strategic partner entering into the equation, when it comes to these two events your guess is as good as ours.

Canalaska and the other junior uraniums have mostly been calming down a bit and consolidating, with the exception of Paladin which has been on a tear recently after the announcements of contracts. This is a group that you must have patience with so as not to sell and take the quick profits because for those who wait it is our belief that you will be richly rewarded (we are keeping all of our shares). Should you take profits now you risk missing out on the next unforeseen rally...the last one being set off by an unexpected purchase of a private company by Hathor, and then you will be forced to buy in at a higher price. My belief is that riding out the ups and downs with a basket of these companies is safer than taking the risk of trying to “trade” a basket of these stocks (plus keep in mind the capital gains-short term- that will be accrued by this strategy). HOWEVER, NO ONE EVER GOT HURT TAKING PROFITS!

We see an opportunity to buy more shares in these stocks right now as they should cool off. Take note that Strathmore and Canalaska have drilling programs going on right now on some very promising properties. I just spoke to representatives at Canalaska today and they assured me that although their press release stated they had been behind on their drill program, they are currently on schedule and fully expect to release their results in mid-April. After wathing the stock fall sharply down on this press release we called, but still cannot figure out why they released this information if it was a mute point. It seems to have confused many people and probably would have been left untouched. So with these two stocks we must patiently wait until at least mid-April for any news about potential reserves as is the same with Titan Uranium. Be patient with these stocks and the potential reward could be quite gratifying.

Now we have noticed that Cameco and International Uranium have been stagnate, and in both cases actually down. We have had some concerns with those who are worried about “The Uranium Movement” and its strength with its 800 pound gorilla not actively participating in the general uptrend. Our view is that this large cap is consolidating and that many investors sold this stock for the same reason they bought the juniors...if merger activity picks up (we anticipate this to pick up in the second half of next year) then Cameco will be a buyer which will put pressure on its shares while lifting the companies with a chance of being bought out. Same case goes for International Uranium which has a market cap nearing $1 billion.

With that being said we believe that Cameco will eventually have to pay dearly for its folly in not grabbing promising land holdings when uranium prices were lower. You could argue that hindsight is 20/20 or better, however it simply does not make sense not to add a “buffer” between your large producing mines and the land beyond. This could have been done for nearly nothing, however in the years ahead we see Cameco and Cogema (owned by French nuclear conglomerate Areva) moving from their god-like status in the uranium sector today to more mortal status as “The Uranium Movement” continues to progress. What is more...when (notice we did not say if) the Australian government opens up for business, many of those companies invested over their will be able to construct their mines and infrastructure and in a year, or few short years, become large producing companies themselves. Due to this we believe that Cameco should be a holding in your portfolio, however we would like to have more invested with the juniors in order for the potential to have higher gains.

Recommendations:

3/28/2006

Ur Energy-------UREGF-------US$1.73*
*-Denotes a company we own shares in before the publishing of this article on the blog.