“10-Bagger Pick #1” — Small Mining Outfit Turning Trash into Uranium

By Travis Johnson, Stock Gumshoe, June 21, 2010

Today we’re taking a look at a stock that’s getting a fair amount of attention from Andy Obermueller as he throws out the lure to catch subscribers for his new Fast-Track Millionaire newsletter. His pick of iCad (ICAD) a week or two ago has shown a big price spike (though that could evaporate as interest cools, of course), so I thought folks might like to know about another tiny company he’s teasing now.

And I do mean tiny — this is a company with a market cap of $8 million, so just from Andy writing about it and me mentioning it today it will probably go up, even if we both said mean things about them.

Here’s how he teases it in his recent ad:

“10-Bagger Pick #1 — A tiny $8 million company that has discovered $12.2 billion of uranium where no one else was looking….

“It’s a small mining outfit that is literally turning trash into treasure. I think this company is going to make a killing. Here’s why…

“It has discovered an ingenious way to extract uranium from coal ash.

“I didn’t even know this myself, but coal contains trace amounts of uranium. About 50 parts per million. The uranium stays in the ash after the coal is burned.

“This tiny Canadian outfit claims it can extract uranium from coal ash for $35 a pound. The spot price of uranium is about $45 a pound.

“So we’re looking at a fat $10 per pound profit.

“Not only does it have a patented extraction process, it also has a customer: China. It has signed a deal with the China National Nuclear Corporation to extract uranium from a coal dump.

“And let’s be clear: China doesn’t care what the uranium costs, only that it has access to it. China has 21 new nuclear power plants under construction. And they won’t produce a single watt without uranium.

“Luckily for China, it has 2.7 billion tons of coal ash. Which means they are sitting on 270 million pounds of uranium that only this company can extract for them.

“At a margin of $10 per pound, that’s $2.7 billion in profits. You don’t think that will make this penny stock take off like a rocket?

“The nice thing about this pick is that it already has a solid gold mining business. So that takes a lot of the risk out of this small stock. Its uranium recovery project is a bonus.

“I think this stock has ’10 to 1′ written all over it. It’s a true swing-for-the-fences play.

“It’s trading at just under 10 cents a share. At that price you can buy a ton of the stock and have some fun.”

Well, I’d be the last to tell you not to “have some fun” or “swing for the fences” … as long as we all remember that the big home run hitters also set strike-out records, and having fun often ends up making you feel worse the next morning.

So who is this? This stock must be Sparton Resources (SRI in Toronto, SPNRF on the pink sheets).

And yes, it really is an $8 million stock — absolutely teensy — so it probably won’t surprise you to hear that, on the back of this first round of Andy’s teasing and touting, the shares are already up 10%+ on more than ten times their normal trading volume. As I type, the shares are up to about 12 cents, but they were “just under ten cents” a week or so ago and hovered around that price for most of May and June, after hitting 20 cents over the Winter.

And yes, being an $8 million stock means that they aren’t really doing much yet and have many projects in the early stages — though they do seem to be going through a “refocusing” to give most of their attention to the most promising near-term projects, it appears. Here’s how they describe their status, from a recent press release:

“Sparton is currently rationalizing its global portfolio of projects. Consideration has been given to both commodity and market conditions and management’s time limitations.

“The primary focus in China is to improve cash-flow at the producing Huajun germanium operations, and complete the evaluation of the Guojiaping Exploration Licence which contains a large, shale hosted vanadium deposit with associated uranium mineralization. At Lincang, the secondary uranium recovery program will advance through finishing a bulk sample test and completion of a final feasibility study.

“Sparton is extremely well positioned to capitalize on its favourable standing in the Chinese mining industry with additional opportunities being evaluated on an ongoing basis. All of these projects have a positive environmental footprint and are receiving strong support from all levels of PRC government.

“Domestically, Sparton continues to explore its Marmion Gold Project, which is contiguous to the claim holdings of Brett Resources Inc. (“Brett”), and is located approximately 25 km north of the town of Atikokan in northwestern Ontario.

“Brett management recently announced its intention to recommend a friendly take over by Osisko Mining Corporation with a view to fund and advance its Hammond Reef deposit, now reported to contain 6.7 million ounces of gold. The Atikokan area is now being recognized as having excellent exploration potential. Sparton is also continuing its non conventional uranium and germanium recovery evaluations in western Canada.”

The company has a page explaining their coal ash uranium recovery program here, it sounds as though they’re still testing extraction from a specific coal source that has “anomalously high” uranium content. They also have some early gold exploration projects, some rare earth potential, and some other possible projects in their pipeline. As you might expect from a company of this size, almost every press release they put out contains terms like “financing,” “encouraging,” “preliminary,” “evaluate,” or “potential.” Perhaps it goes without saying, but words like “revenue” and “income” do not play a large role in their releases, at least not yet.

So what do you think? Feel like a little lottery ticket fun with an $8 million stock that’s just getting this unexpected level of attention, or would you rather wait a while, see if the attention cools off, and check back on how their “encouraging” projects are going? Or is this a little too crazy for you whether it’s at eight cents or 15? Let us know with a comment below!


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20 Comments on "“10-Bagger Pick #1” — Small Mining Outfit Turning Trash into Uranium"

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Bob Blick
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June 21, 2010 7:23 pm

I think my days of playing penny stocks are over. Law of averages never caught up to me so sticking with companies I know are solid.

A Lewis
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A Lewis
June 21, 2010 7:30 pm

Sparton Resources is already my largest investment! Nice to hear the touting. I am invested with a particular interest in the Chebucto offshore gas field – which could add 40 cents a share. But when? At today's gas prices or more likely at tomorrows higher prices.

John Marson
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John Marson
June 21, 2010 7:37 pm

EITnIt is impossible ter text right here!It is

John B. Dunlap
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John B. Dunlap
June 21, 2010 8:17 pm

Nice little summary of Sparton's wheeling and dealing in China and a good description of their proprietary uranium extraction technology was published in the Economist earlier this year. Read it here: http://www.economist.com/node/15865280?story_id=1
I like the grimy, low-tech alchemy which produces the U. Coconut husks and whatnot. Believe I'll peel off a few bills for some of these shares. Thanks, Gummy.

Norman Adler
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Norman Adler
June 21, 2010 8:22 pm

Enter text right here!N.Adler
I read about thiis uranium from coal ash possibility several years ago. So, how come it still isn't a commercial process?

Peter Kelly
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June 21, 2010 8:32 pm

Question….Would you pay the Ameritrade broker to buy the Toronto stock for you or buy the pink sheet stock? Just wondering……….

Olive
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Olive
June 21, 2010 9:06 pm

Thanks, Travis! Look forward to reading you everyday!
Off topic: the Forum, Contact, and FAQ pages are "frozen." I can't read updated comments in the Forum or contact you, even when I'm logged in. Help!
Thanks!

Sam Godambe
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Sam Godambe
June 21, 2010 9:20 pm

It's interesting that a few days ago I saw one video clip naming the Sparton and they getting a big contract from China to extract the Uranium from the coal ash.

Over the weekend while watching Andy Obermuller's teaser on four stocks (of course ICAD was one them) I straight away knew that he was talking about the same company. Is n't it a coincidance…………..

Gravity Switch
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June 21, 2010 10:55 pm

Andy has also touted ERII in the past, he pitched it as the \”inventor who was kidnapped by Saddam Hussein\” … I'd bet it's probably this one again, bad chart or no.

Jeff
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Jeff
June 21, 2010 7:27 pm

ERII. That brings back unpleasant memories. I bought it after reading about it in Gumshoeland, and now I’m down 50 %. Consequently, I’m wishing that someone had kidnapped Andy Obermueller before he started touting it.

Martin
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Martin
June 22, 2010 12:11 am

One word describes this type of investment – SPECULATIVE. Don’t invest with money you can’t affort to lose period. I would not buy into this until they have a proven process ( by proven I mean demonstatable by a pilot plant that proves economics are feasible ) and a Major backer willing in invest large sums of money. At this stage the stock would probably not be in the pennies but much more safer and potential would still be huge.

Wiebach
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Wiebach
June 22, 2010 7:34 am

One technical problem I can see is that those huge amounts of coal ash that need to be processed can probably not be found or generated at one place, but are scattered all over China and would have to be shipped to that uranium plant, and then redistributed somewhere, which renders this idea not so attractive.

Going loco
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Going loco
June 22, 2010 4:22 pm

I think the price of uranium is going down – is this right?

And is the stuff so scarce that it's genuinely economic to get it out of coal ash?

Mike
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Mike
June 22, 2010 6:38 pm

I read a book by James Lovelock about his GAIA hypothesis, and after advocating nucleur power he said that when uranium ores run out, there's enough radioactive bits in granite to fuel nuclear power stations for an awfully long time, although I don't think he gave an extraction method or how much it would cost.

I'd guess that if there's lots of metals in the sea it should be more concentrated in salt. Maybe that's why salt is bad for you! 🙂

B Byrne
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B Byrne
June 23, 2010 2:08 pm

I find it interesting and not sure what it means, that Sparton in the last few months was written up favorably in the Wall Street Journal, and the Economist, they also did a radio interview with the BBC and the share price showed no reaction. But on the mention of this newsletter writer leads to millions of shares traded and a modes price increase.

Jeff Miller
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Jeff Miller
June 27, 2010 1:12 pm

Myron, you have a very interesting approach can you share some of the stocks you are invested in right now and where you find your pennies, short of Gumshoe? Your right, who cares if bounces over the fence, it is still a double!!!

james moylan
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March 22, 2011 11:52 am

I have a web site where I research stocks under five dollars. I would never invest in individual uranium stocks I would instead buy an exchange traded fund that invests in them like Global X Uranium ETF (URA).

Gravity Switch
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June 22, 2010 7:21 am

Hi Olive — thanks, it’s not just you, I’ve got some kind of little gremlin that’s messing up all those pages. Trying to fix, though it’s being intransigent, and anyone’s always welcome to email me instead of using the contact or FAQ forms (ILoveStockSpam@gmail.com)

B Byrne
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B Byrne
June 22, 2010 6:10 pm

You do know Exxon is passing on including Chebucto in their development of the are. Check Sparton's latest MD&A for the details.

A Lewis
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A Lewis
June 23, 2010 4:15 pm

Yes, the over 1BcF of gas which is Spartons share of the Chebucto field will remain an asset. It is way possible that Sparton will be taken over before the asset is even developed. Or that the asset will be developed when gas prices are significantly higher.

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