Purepoint Uranium: Upside Exposure to the Uranium Boom

Apr.18.07 | About: Purepoint Uranium (PUMGF)

Yesterday I added a small piece of Purepoint Uranium (OTC:PUMGF) to my portfolio at a price of $1.18. This is in keeping with my strategy to add several junior uranium explorers to my portfolio as part of a basket to provide upside exposure to the uranium boom. I may scout a few more junior explorers in the near future, but at the moment my speculative uranium plays are confined to Purepoint and Northwestern Minerals.

Why I like Purepoint

Purepoint operates exclusively in the Athabasca Basin of Saskatchewan, which has yielded a number of prolific uranium deposits including Cameco’s new Cigar Lake mine. The region has produced the world’s highest grade uranium mines, with grades regularly being double that of most other producing regions.

Purepoint was one of the first junior explorers to purchase exploration rights in the region (back in 2002), giving them a significant edge in site selection. Their 100% owned Turnor Lake project, on which the company has recently begun to be exploratory drilling, possesses many of the same geological characteristics as previous super-deposits in the region. In fact, the company was deemed to have the best prospects in the basin according to Northern Prospector magazine.

In addition to Turnor Lake, the company has several other properties that will be the subject of exploration, and is also involved in joint ventures with Cameco and Areva Resources to develop several more properties. This involvement provides Purepoint with some legitimacy, and might also set the stage for a potential takeover if the JV produces good exploration results (as we have recently seen with the Paladin takeover of Summit Resources).

Finally, the company has recently closed on a $16 million financing deal in order to finance project development. The price per share for the PIPE was $1.45 (Canadian, I believe), which means that my basis is essentially at the same level as the PIPE. For a company with excellent exploration prospects, getting in at the same price as the PIPE is very rare, and represents a very interesting opportunity.

All in all, Purepoint has all the components of a good junior exploration company: sufficient cash; good exploration prospects; joint ventures with industry leaders. The current market cap of $60 million appears to be quite low in relation to the exploration prospects (especially when compared to many other junior explorers), and the company’s drilling schedule for 2007 provides the opportunity to move the stock substantially higher as results are reported. I am content to buy and hold the stock in anticipation of those results, and I am looking forward to more drilling reports in the rest of 2007.

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