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Things are Beginning to Add Up
Friday, August 25, 2006

Today we were shocked when we looked up a quote on the Toronto Stock Exchange for SXR. We were forced to refresh the page and then begin investigating how at 10:30 the stock had already traded 4 million shares and not moved significantly in any direction. We have watched in awe over the past few weeks as it seems that all volume has dried up for nearly all uranium stocks and new that 400,000 shares per day was the 3-month average, however recently it has been at about 180,000-380,000 and generally on the lower end of that range. So naturally when we saw this, we were confused. This is significant because someone dumped a block of nearly 3.7 million shares (10x average volume) in one swift trade that was not only absorbed by the market, but successfully absorbed! This is a positive sign where we now know that the stock has had low volume and it is not a lack of buyers, but rather a lack of sellers! Apparently there are some out there who want these shares, and when available they will buy.

My hypothesis here is that all the current investors who are in these stocks understand the fundamentals and have the financial heft to have survived the past downturn. Remember, I have said all along that we could not have another significant upturn until we shook all the weak hands out of the market. We think this explains what now appears to be the suckers rally that took place nearly 2 months ago, the subsequent fall and now the lack of trading in these stocks. We do not believe that the stocks will go up dramatically just through these smart investors buying, but rather through the masses rushing back into the very same stocks that they rushed out of so quickly and abandoned trading in for the past quarter.

We also have been going through some papers that have been sitting around for some time now, and decided to act upon these 'leads'. We had an interview with Neal Froneman, who happens to be the CEO of SXR, saying that his company was very interested in another acquisition that made sense in the United States. We found this interesting as it supports our thinking that Cameco and SXR and those future producers group would become major players in the uranium patch. However, we were intrigued to see that he seems almost more interested in adding good managements teams and, much more importantly, good geologists. UR Energy and Strathmore were mentioned as potential buyout targets, which make sense as it seems that SXR is interested in adding ISR capable teams to its line-up. SXR is a traditional mining company and seems to possess the knowledge in open pit mining, but it is my opinion that they realize that they will need highly capable ISR knowledgeable individuals to bring Honeymoon online. What better way to do that through an acquisition that also adds some great properties that will soon be producing in the near future? I cannot think of one and if you can please leave a note in the comment box, because that could be the next big 'thing' in the uranium industry. We are not sure about the possibilities surrounding this, but we will be looking into this further and shall revisit the topic at a later date.


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