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Uranerz (NYSEMKT:URZ) is a company I first started considering in late November of last year. I passed on, choosing instead to focus my investments on Uranium Energy Corporation (NYSEMKT:UEC) as an up and coming uranium producer. I still like UEC more, and so for those who do not want to venture too deeply into the world of small-cap uranium stocks, UEC remains my favorite pick.

But for those of who us who know this sector is prime for some mega moves to the upside over the course of the next 2-3 years, I think Uranerz is one that has to be watched.

First, the reason I like UEC more is because it is more focused on uranium mining in Texas, which I think is a much, much better legislative environment than Wyoming -- which is where Uranerz and others have their primary focus. Texas is more independent and less bureaucratic; Texas laws enable the state to do all of its uranium permitting on the state level, without having to get federal approval as well. As David Snow of Energy Equities observes, the permitting process for uranium mining in Texas typically takes two years, while it takes three years or more in Wyoming. This gives Texas-based companies like UEC a big head start, which is why they were able to launch the first new ISR uranium mine in five years back 2010.

But of course that is not to say that Uranerz and its home field of Wyoming are void of opportunity; quite the contrary. Wyoming is still a hot spot for ISR mining in North America, as Cameco (NYSE:CCJ), Uranium One, Tigris Uranium Corp, and Ur-Energy Corp are amongst the firms looking for uranium in Wyoming. So, Wyoming does have an emerging value network that certainly is worth investing in. I don't think it's as good as Texas, though, which I think is important to note.

Now, back to Uranerz. Here's the short list on why I think it's a company that needs to be watched:

1. As I've noted before, uranium is one of the investment opportunities I find to be the most promising. So, at the very least, Uranerz is in the right sector.

2. I view ISR mining as a key technology that will enable uranium to be mined at lower costs -- an especially important consideration when we observe that uranium is still selling at just over $50/lbs, and that the price of uranium probably needs to go beyond $75 to get more miners interested in seriously investing. Uranerz is focused on ISR mining, so that is another plus for it.

3. In terms of balance sheet, the company has sufficient cash -- $33 million -- and no debt, which means it should be able to get to production without much of a problem. Production is slated to commence in the second half of this year, so we're not that far off.

4. Of critical importance is its affiliation with two major firms in the nuclear industry -- Cameco , the largest uranium miner in North America, and Exelon (NYSE:EXC), a major nuclear power plant operator in the US. These connections ensure the firm is "plugged in" to a value network that will enable the company to get its product out of the ground and into the market.

5. In terms of share structure, the firm has about 10 million in options and warrants with an average strike price just above $2.50. It's currently trading at $2.53, so I find this price to be a very good one. It's also trading at about 4X book value, which I think is quite reasonable given the positives this company has going for it.

The company's latest presentation, updated for February 2012, can be viewed here (pdf).

In conclusion, I think Uranerz is a great buy at these prices. But be forewarned: it is quite volatile. It's more than 50% off where it was last year at this time, but it's still up over 38% for the year. So this stock is going to be quite the ride.

Source: Uranerz: Add It To The List Of Uranium Stocks To Watch