I should tell you up front that this isn’t the newest teaser in my inbox — I’ve had it come in from readers a few times in the last month or so, but I think it was probably written right around the beginning of the year … in part because of some of the specific news teased, and in part because of the fact that the stock being teased is a uranium junior, and the tease was clearly written before the Japanese earthquake, tsunami, and nuclear disaster.
Which isn’t to say that it’s necessarily a bad or stale investment — indeed, if you believe in the inevitable picture of increased uranium demand that is drawn by Luke Burgess in this long-winded ad, or by many other teasermeisters in the aftermath of the Fukushima plant’s destruction, then perhaps now is a fabulous time to get in on a commodity that has a rising demand curve but an expected upcoming severe supply shortage. And yes, I suppose “aftermath” is probably the wrong term to use, since they’re still trying to stabilize those reactors and stop radiation leaks even now, as we’re hitting the two-month anniversary of that earthquake.
The big picture is one you can decide for yourself — do you think most of the reactors currently deployed, and the majority of the ones in planning or construction (mostly in China) will be built and operated five years from now? If so, the uranium shortfall from the end of the Soviet decommissioning program (“megatons to megawatts,” which ends in 2013) will mean that supply falls significantly short of the demand from all of those reactors. If you think many old reactors will be shut down, as they’re fighting about doing with the Vermont Yankee reactor (which is about 40 miles away from Gumshoe Manor), or new reactor plans will be kiboshed, particularly in China … well, then maybe there will be plenty of uranium. Uranium is not a particularly liquid commodity, and it’s largely traded on long term contracts and pretty tightly controlled, but it is currently, according to Cameco, the most prominent pure play company in the business, trading at about $56 a pound … way off of the highs of about $140 in 2007, and off of the highs of about $70 that it hit at the turn of the year before the Japanese earthquake, but also well above the lows in the $40 range in early 2010.
Burgess, at least when he put his name to this teaser, was a staunch believer in uranium for the foreseeable future — and given the strong wording, it’s hard to believe that a single nuclear plant disaster would change his mind, at least a disaster like this one that seems (so far, at least) to be far less damaging than Chernobyl. It’s certainly possible that he’s since been opining otherwise about uranium, though I haven’t seen that — and most of the mining folks whose teasers and notes I see believe strongly in a much higher future price for uranium even if they might, in some cases, be cautious at the moment.
The basic spiel of the ad is that cheap energy, in the form of fossil fuels, is ending — with reiterations of the peak oil arguments and charts, and with lots of frightening pictures and quotes about gas lines, food shortages, and rioting in the streets. All of which is possible, though figuring the probabilities is probably beyond my pay grade (and the folks who do figure those probabilities? They have to do a lot of guessing, too. Sorry, I mean “estimating” and “forecasting”).
And he doesn’t try to keep secret the idea that he’s pitching uranium as the only feasible solution to our need for cheap energy:
“You see, we already know where our next 80 years of energy will come from…
“1 gram = 3 tons of Coal
“Ironically, the element that will save humanity is the same element that almost destroyed it just a few decades ago.
“This fuel is so powerful, in fact, the Navy’s largest and most expensive ship — the Nimitz class aircraft carrier — will run for five years on just a few pounds.
“And it’s 97% cleaner than any fossil fuel known to man, producing no greenhouses gases at all.”
What he does try to keep secret is the name and ticker symbol of the company he believes has cornered one of the most prospectively valuable uranium projects in the world, in Argentina.
As so often they do, Burgess invents a name for the secret figure who he says has “solved our energy crisis” — he calls him Carlos Becker. Here’s the intro to the teaser:
“You’ve never heard of Carlos Becker…
“In fact, that’s not even his real name.
“I had to change it to protect him and the identities of his multi-billion dollar corporate clients.
“Because in a few short years, your way of life — and the lives of everyone you know — will become profoundly dependent on Carlos Becker’s work.
“Everything you take for granted…
“The heat in your home… the electricity feeding the lights in your office… all the way down to essentials like clean water, fresh produce, and hot coffee…
“Will be around for at least another 80 years, thanks to an accidental discovery he made half a world from where you live.”
And no, he didn’t have to change the guy’s name to protect his clients — the company he’s working with certainly discloses the guy’s real name, and quite proudly … but he did have to change his name if he wanted to keep the name of the company a secret for his subscribers.
Anyway, this “Carlos Becker” is a geological consultant, and apparently he was on an interview with Burgess about the discovery of this massive resource — I’ll save you the details since my blather’s going pretty long today anyway, but he basically says that the geiger counter readings were so high and so consistent that they thought the machine was broken.
And the site he discovered? In Burgess’ words:
“It was so huge, in fact, that it would take years to map out the specific contours and boundaries of this project… all 1.2 million acres of it.”
And the ad also tosses in the fact that President Kirchner last year re-opened the potential for Argentina to be a uranium producer, something it had cut off after Chernobyl … they even plan to have their third reactor (mostly constructed for years, but delayed since Chernobyl) online this year — they have two older nuclear reactors that have operated for decades, but both the uranium and nuclear industries were “on hold” for a long time until recently. So far, they don’t seem to have backed off of that plan after Fukushima.
After that, we get to what is always my favorite part — the part where, once we’re hopped up on excitement about the huge potential of a particular theme or trend … we’re told that it all rests on the back of one little company that can make you rich. Here’s that bit:
“What’s most shocking is that this future will not be in the hands of a huge multi-national conglomerate…
“Or even a network of smaller companies…
“The gigantic resource will be in the hands of a single junior mining outfit valued at less than $22 million today.”
Yes, that’s freakishly small — keep that in mind when we get to the part where I tell you the ticker, I don’t know if you’ll even like this stock, but if you and half a dozen of your friends go out and buy shares it will probably move the price … so be careful.
But not yet — we’ll be careful in a moment, right now we’re still supposed to be drooling with money lust.
“The irony is that uranium, something we’re quickly running out of, isn’t even that rare.
“In fact, there’s more than enough uranium locked in the Earth to get us through this energy crisis…
“Almost a century’s worth of known reserves, to be exact…
“And more than a thousand years’ worth of total implied resources based on current consumption levels….
“It just needs to be mined and processed.
“And with so much work to be done — and potentially trillions of dollars to be made off the exploding market over the next few years — the only major question is who will be lucky enough to produce this crucial material…”
After that we get a list of the stocks that enjoyed huge run-ups in the most recent uranium bull run (yes, the one that took a bit of a body blow with Fukushima) … stocks like Cameco and Denison, which most folks know as big producers, but also more junior explorers and miners like Crosshair Exploration, Uranerz, and Ur Energy. But then the goes on to pretty much tell us, in different words, that “we ain’t seen nothin’ yet” …
“But none of these stocks will even come close to the company I’ve been waiting to tell you about…
“Twenty-two years ago, Argentina’s government shut down the uranium industry.
“As this was happening, the man behind this story, Carlos Becker, was just starting to build his list of international clients. But even at this early stage, he had good reason to seriously consider Argentina’s own massive potential as a uranium supplier…
“It was only a question of when the opportunity could be seized — and who would get the biggest piece of the pie.
“Uranium, as I mentioned, is a fairly common element…
“But what Mr. Becker discovered that day was no ordinary property. At 1.2 million acres, it would become one of the biggest uranium projects anywhere in the world.
“But it’s not even the size of the project that’s really important here… It’s the type of formation Mr. Becker found.
“You see, what he discovered is the world’s most coveted type of uranium deposit.
“It’s called a sandstone deposit … it’s known as the holy grail of the uranium mining industry …”
And yes, in case you forgot …
“… it will all be in the hands of just one tiny junior mining company.”
So … some more clues about this tiny company?
“… my newest uranium exploration stock — trading at just 30 cents right now — is perfectly positioned for some of the largest investment gains we’ll see.
“Based in Vancouver, this company combines decades of expertise with a solid business plan to develop what could be the one of the largest uranium deposits in the world.
“The project covers an incredible 1.24 million acres in Southern Argentina’s Patagonia region, and was personally selected by a leader of the uranium mining industry.
“When I first told you about him, I sort of downplayed Mr. Becker’s role in the global uranium mining community. The truth is, Carlos Becker is Argentina’s premier uranium property scout.”
We get a few more clues about “Becker,” too — including that he discovered the big Cerro Solo uranium deposit in Argentina, and that he was a mine manager for the Argentinean National Atomic Energy Commission (CNEA), which, we’re told, gives him the connections to get this project moving.
And a few more clues about the project and the company?
“They’ve just completed a survey that pin-pointed two brand-new mineralized systems.”
“By the company’s own implied resource estimate, anywhere between 72 and 96 million pounds of uranium are ready to be produced right on their own land.
“Even at today’s prices, this resource could be worth as much as $7.49 billion.
“That amounts to 31,436% of this upstart company’s current market cap!”
Then, for our coup de grace, we get a P.S. in the ad that provides our urgent updates …
“P.S. This company just announced an unexpected expansion to its technical advisory board, taking on several key new members for the development of their Argentinian property… Several days later, exploration work on the property was ramped up, with new drill test results indicating higher than ever uranium concentrations.
“This rapid turn of events can only mean one thing: Time is already running short. If you wait to hear about this story in the open media, it’ll already be too late.”
So what is this company that Burgess was calling his “1 Uranium Stock of 2011?” Well, the Thinkolator hasn’t had much of a workout so I had it process a few quick Lindsay Lohan stories quickly to get it warmed up … then feed in those clues … and we find that this is almost certainly …
Blue Sky Uranium Corp (BSK in Canada, BKUCF on the pink sheets)
And yes, it is ridiculously small and illiquid — and it’s been going down, so don’t rush out to buy it just because I’m writing about it here. I don’t particularly want to buy a uranium explorer myself right now, and I’m not an expert on this sector by any means, so I haven’t gone in to look very closely at how this guy compares with the other teensy junior uranium explorers. And yes, to remind you, this teaser has been forwarded to me in recent weeks, but it was clearly written before the Japan earthquake — probably in late January or early February, if I’m to guess… and to be clear, have no idea if Burgess is still touting this pick, or still recommending it to his subscribers.
Certainly the story is a good one, though — “Carlos Becker” must actually be Jorge Berizzo, who has indeed been a key player in uranium exploration, such as it has been, in Argentina since the 1970s. And he does take credit, at least in Blue Sky’s presentations, for discovering Cerro Solo when he was with the CNEA, and for identifying all of the targets that Blue Sky is exploring. As far as I can tell he’s a consultant, I didn’t notice any indication that he’s an employee or board member, and I don’t know if he owns shares.
The other clues also match up well — the company claims 500,000 sq. km. of exploration land, and that converts to 1.24 million acres, which is the number in the teaser, the shares were priced around 30 cents before the Japanese earthquake, which did equal a market cap of about C$22 million (they’re down about 30% from then, with the shares at 20 cents Canadian and with a market cap of C$15 million today). Which is why I’m sending out the email today after the market closes, I like to unearth these stocks and I can’t take responsibility for what people do once they hear about microcap ideas, but I figure if my article goes out after the market closes there’s at least more chance to evaluate the company on its merits. And in case you’re wondering, no, it’s not just Blue Sky that’s still down — Cameco (CCJ) and most of the other uranium stocks have also failed to recover from the post-Fukushima crash that they all took, so investor concern is not just with the tiny juniors, but with the sector as a whole.
Blue Sky is currently exploring its two primary project in the Rio Negro area, called Santa Barbara and ANIT, and they seem pleased with the results so far (from hand-dug sample pits, trench sampling, and radiographic surveys) — and they have announced several interim results of testing and surveys this year, along with that expansion of their technical advisory board in early January — the news that bumped the shares up a bit in February was that their ANIT project, which is the one that has sucked up most of their cash so far, has mineralized material that can be upgraded and therefore cut processing/transport costs.
They also raised another million dollars just a few weeks ago, an offering that was oversubscribed at 18 cents (it had been announced at $700,000, just to give you another indication of how absolutely teensy the company is), so the fully diluted share count is now somewhere in the neighborhood of 100 million shares, and they probably have a few million dollars in cash on hand. They’ve accumulated a deficit of about $17 million, and one assumes that if they’re going to ramp up exploration they’ll need to raise a lot more money, since they ran a deficit of more than $5 million last year and they have permitting and expansion and exploration ambitions that I assume could quickly overrun their cash balance.
So … that’s about all I know on this topic — if you want the pitch from the company, their investor presentation from a couple months ago is available on their website here and their financial filings are here. There are plenty of other Argentinian uranium exploration projects being run by other companies that don’t exactly match our clues, including UrAmerica, which I think is still private, and Cauldron Energy in Australia, and of course there are also hundreds of uranium juniors looking for potential mines in the US, Canada, Africa, Central Asia, and pretty much everywhere else you can think of — most of these projects will never be developed, of course, but who knows, maybe Blue Sky will be fortunate … they are working with a lot of land, and apparently they have some good experts on hand, and after that, well, your guess is probably better than mine. Which is why we want to hear it. Your guess, that is — if you’ve got thoughts on Blue Sky, or uranium mining in general, feel free to shout ‘em out with a comment below.
Free Financial Dashboard with Great ToolsI check my net worth and my portfolio (combined from several different brokerage accounts) using Personal Capital at least once a week, it's free and brilliantly organized.
Personal Capital has great tools for tracking spending (they can cut your spending by 15%), but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.