Investing


Send an Email
Favourite Sites
  • Whitney Tilson
  • Recommended Booklist

  • Favourite Blogs
  • Calculated Risk
  • Reflections on Value Investing
  • "The market can remain irrational longer than you can remain solvent" - John Maynard Keynes

    Monday, August 24, 2009

     

    Strathmore to Sell Pine Tree-Reno Creek, Wyoming, Uranium Project to Bayswater for US $30 Million (STM.V STM)

    Strathmore Minerals has agreed to sell Pine Tree-Reno Creek, Wyoming properties (Sale Properties) to Bayswater for $30M USD.

    $30M USD is 43c CAD per share of STM. On August 18th STM closed at 43c CAD.

    The sale properties are about 10% of Strathmore’s uranium or slightly less if you adjust for the reliability of the estimates. . It’s probably reasonable to assume that this deal values STM at about $4.5 CAD in the even of an orderly liquidation. I valued Strathmore in a prior post based on the Rio Kintyre sale at about $7.50 - $12 CAD based on an orderly liquidation.  A lot has happened since July 2008 but $4 - $7 is still supported by this deal with Bayswater.

    My original valuation of Strathmore as a going concern is in the teens. Again nothing has changed dramatically but that’s unlikely to be realized until they have some properties producing.

    This is a sound deal for Strathmore. They are probably giving up a couple of dollars per share in the very long term for cash now. Not doing this deal could risk everything. There are some conditions that need to be met including Bayswater raising $36M. They have 4 months to close the deal. There is a small break fee of $250k which STM would have to pay if they accept a better offer or Bayswater will need to pay if they fail to close.

    The problem is that Bayswater’s market cap is currently $17M CAD. It is unclear how they think they will be able to raise $36M. STM have a bit of a history of entering deals with companies that simply can’t pay. The same has happened with Great Bear & the Chord property.

    The recent concerns about STM have been whether or not they have the cash to see through production.

    They continue to be able to sell equity in properties that they acquired for cash. Real properties with Real Uranium deposits, even if they can't raise equity or debt financing.

    Strathmore went through a dramatic decline from 2001 to 2003, reaching 6c. In 2005 it reached $5.18. In Strathmore Groundhog Day I outlined that STM would survive this crisis just like the last one.  In the end when you have real assets you can always generate cash.

    If this goes ahead it will be great for STM. If it doesn’t, then STM will need to find another source of cash which they are very likely to do successfully.


    Comments: Post a Comment

    << Home

    Archives

    April 2003   May 2003   June 2003   July 2003   August 2003   September 2003   November 2003   January 2004   February 2004   March 2004   April 2004   May 2004   June 2004   July 2004   September 2004   October 2004   February 2005   March 2005   April 2005   May 2005   June 2005   July 2005   August 2005   September 2005   December 2005   April 2006   May 2006   June 2006   January 2007   December 2007   February 2008   April 2008   May 2008   June 2008   July 2008   August 2008   September 2008   October 2008   November 2008   December 2008   January 2009   April 2009   May 2009   July 2009   August 2009   September 2009   October 2009   January 2010   February 2010   April 2010   July 2010   August 2010   October 2010   November 2010   January 2011   February 2011   April 2011   June 2011  

    Disclaimer and Disclosure Analyses are prepared from sources and data believed to be reliable, but no representation is made as to their accuracy or completeness. I am not paid by covered companies. Strategies or ideas are presented for informational purposes and should not be used as a basis for any financial decisions.
    To reduce Spam click here for my email address.

    This page is powered by Blogger. Isn't yours?