Another Merger in the Uranium Patch
Saturday, April 22, 2006

It seems that the 'Uranium Patch' is starting to heat up with another merger announced. This time it is between two diverse Canadian Juniors that will create a new Junior company with extensive land holdings (to say the least) around the world. Also, the combined company will have nearly $11 million in the bank to use exploring their land holdings.

In case you missed it, which we must admit we nearly did if it had not been for someone far wiser than us, the merger I am talking about is between Bayswater Ventures and Pathfinder Resources. Bayswater will be the acquiring entity with Pathfinder shareholders receiving .588 shares, for each share currently owned, in the new company. Separately, and not contingent on the deal being completed, Pathfinder will hold a private placement of which Bayswater will be the sole buyer of $2 million in shares which will come to a total of 3,333,333 shares. That means that the cost per share will be $.60 and this will now form a 'basement' price should the deal fall apart.

The new company will possess some very interesting prospects around the world, with most being within 2 of Canada's most prolific Uranium exploration areas. The company will control a 100% interest in 1 million acres in Labrador, Canada. This land borders the Labrador holdings of Aurora Energy Resources (the recent spinoff of Fronteer Resources - Ticker-FRG) which holds “Measured and Indicated Resource of 22.2 million pounds with an additional Inferred Resource of 13.4 million pounds”. Their Labrador holdings will be the largest in the district which logic would indicate that they have a good chance at finding uranium with the large reserves known to be in the Central Mineral Belt (CMB). The company will also control 33% of the land in the Thelon Basin. This holding encompasses nearly 2 million acres where the company will attempt to find Athabasca type deposits. Their last holding in Canada is the Newfoundland holding where they control land that covers half of the Hermitage Uranium Belt. This holding is only 88,000 acres, which is small compared to its other holdings yet poses another potentially large project. In Niger the company has applications for 100% interest in 2 million acres. Niger is the fourth largest Uranium producing country and open for business due to the huge need for jobs in that area of the world. As other uranium companies are finding out, the problems are not getting the permits and building these mines, its securing the resources to run them (i.e. water and power). We feel that the country will take care of this infrastructure problem as it receives the royalty payments from the mines that will be opened in the next few years starting in 2007.

This acquisition was viewed particularly well by the shareholders of Bayswater with the stock rising over 16% after being unhalted for the news pending. Shares in Pathfinder rose a more modest 7%. Our opinion is that as long as the acquirers in these acquisitions can experience this much upside, then they will continue to make these purchases as it clearly benefits their shareholders. Our outlook long-term has not changed, being that we believe that those companies that can establish at least one mine that will be operational before 2008 will be the acquirers in the years following. They will pick off the most promising juniors, or those with the best drill results to date (not today, but in the future) and this will allow for more focused development in exploration and bringing mines into production. So start looking for the best companies that are bringing mines into production soon and pay careful attention to the drill result announcements.

Updates:

Cameco: Company recently started to ascend from its recent levels where it was consolidating no doubt due to oil rising above $75. If oil can stay above $70 (which will depend upon Iran and an Ethanol shortage) then this stock makes a run above $45.

CanAlaska: Recent article in the Globe and Mail has the company's CEO talking about a recent visit from the Chinese. Supposedly they discussed CVVLF's extensive land holdings in the Athabasca region, but our bet is they were more specific than that. Shortly after we read this article, the company released its field study on the large acreage that is split by the Saskatchewan/Manitoba border which revealed extensive evidence that Uranium exists throughout. The big question is: Are the Chinese going to foot the majority of the bill in order to form a Venture here?...that will be the big question, and if they do we believe that CVVLF will double much as Urasia did after their Chinese announcement. Do not expect this stock to move much until after its announcement of its recent drilling next to the McArthur River Mine due out sometime in May (early May at the earliest is what the company's IR stated).

CanWest: Rumors have also been swirling about this company as well. There have been reports that helicopters have recently picked up activity around their oil shale holding-Pasquia Hills-which they own 90% and Nova Chemicals owns 10%. Nova is NYSE listed and had $4 billion USD in revenues in 2005 alone. To feed gasoline to this fire, it is also rumored that a drill rig has been seen being mobilized by the property. Nova is the operator of this project due to its 200 engineers that it has pledged and a research facility, and CanWest's IR is saying that the company was told “we will tell you something when we think you need to know” by Nova. So either Nova is pushing forth with the drilling of the 75 hole program, and then going to send CWPC the bill, or the lease has expired and a new aggresive company (maybe Shell) is trying to discover what lies beneath. This is a possibility given that the operator is in charge of renewing the lease, and CWPC will not know anything until given a heads up by Nova. This could offer some upside to the stock should Nova's drilling program confirm both companies' assumptions of 2.4 billion barrels of oil within the ground. But should the company lose the holding, it will be a minor setback that in my honest opinion should not weigh the stock down.

LUPE.ST: This stock broke above SEK$100 for the week finishing at a new all time high of SEK$106.50. This stock will perform as oil does, so as oil goes so goes Lundin...that shall be our mantra until they begin to drill add production in Sudan and their other holdings...maybe Venezuela or Norway too?