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Thursday, July 10, 2008

Strathmore Minerals (STM) Comparative Valuation

I wrote about Strathmore Minerals back in 2005 , it has done a wonderful round trip from around $1.8 up to $5.50 or so and then back again to about $1.51 today. In fairness they spun off 1/3 share of FIS which is worth about 25c.

I mention this because Rio Tinto just sold their Kintyre deposit in Western Australia. They received $495M USD for between 62-80M pounds of Uranium Oxide (U3O8).

Importantly

Rio never completed a JORC compliant reserve estimate

You aren't allowed to mine Uranium in Western Australia and both the state and Federal government are against Uranium mining.

Rio has sold the in ground resource for $5.88 to $7.69 per lb. Of course grade matters and based on this reference the grade in Kintyre is bettwen 1.5 - 4 Kg/t U3O8 (.15% - .4%).

Strathmore's average site has a grade of 0.7 Kg/t and only a quarter of their pounds on an equity basis exceed 1.5 Kg/t. Their best grades are at 2.1 Kg/t. Clearly none of STM's areas are as high quality as the Kintyre deposit. That has to be balanced in Strathmore's favor against the fact that mining Kintrye is currently illegal.

STM has between 1.3 and 1.6 lb per share depending on how you weight the measured, indicated, inferred and non-NI 43-101 resources. At the price Cameco and Mitsubishi just paid, STM would be worth $7.5 - $12 per share. STM is worth less because of the awesome grades at Kintyre but this needs to be balanced against the uranium mining ban and lack of JORC compliant resource estimates.

posted by Neil  # 6:49 AM

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