Seeking Alpha
Profile| Send Message|
( followers)  
sxr Uranium One (SXRFF.PK) was formed in December 2005 in a merger of Aflease Gold & Uranium and Southern Cross Resources.

In July of 2006, SXR purchased the assets of US Energy Assets.

On February 12, 2007, SXR entered into a merger agreement with UrAsia Energy Ltd. giving SXR exposure to large ISL projects based in Kazakhstan.

On June 4th, SXR acquired Energy Metals Corp. (EMU) for stock at a ratio of 1shr EMU = 1.15 SXR.

When the acquisition of EMU is complete, the combined company will have a market value of $7.8 billion with $678 million in cash (includes in-the-money warrants and options) with a completely unhedged book. SXR will have production and asset exposure to the 5 largest Uranium jurisdictions, Kazakhstan, South Africa, Australia, Canada, and the United States.

Key assets acquired in the EMU transaction:

1. Six US properties with an estimated production of 8-10 million lbs. by 2013.

2. The Hobson ISR processing facility which is being expanded to 1 million lbs/year.

3. EMU's share of their uranium holdings indicates 196 million lbs. of Uranium.

4. Ownership of two mills to process production.

Selected property review:

Dominion (South Africa) – A Certificate of Registration was issued in February 2007 allowing the mine to proceed with operations. The processing of ore has started with delivery slated for the second quarter of 2007. Production is expected to rise to 3.8 million lbs. by 2011. Cash operating costs are estimated to be $14.5/lb according to the Phase 1 feasibility study with a 30 year project life. Probable and proven reserves are 31.3 million lbs. with indicated reserves of 34.8 million, and inferred resources of 199.2 million lbs.

Honeymoon (Australia) – Design work is underway and infrastructure is proceeding with an ISL project in South Australia. This will be the 2nd operating mine for SXR in 2008 with 880,000 lbs. of Uranium processed per year. The property has indicated reserves of 12.9 million lbs. and inferred reserves of 7.9 million lbs. Average operating costs over the life of the mine are estimated to be $14.13/lb with expected capital costs of $40 million.

Betpak Dala JV (Kazakhstan) – 70% ownership and all loans have been repaid ahead of schedule ($62.6 million as of 12/31/06.)

Akdala (Betpak JV) – World's largest ISL mine in the world with an estimated cash cost of $12/lb. and 1st quarter production of 497,000 lbs. of Uranium. 17.4 million lbs of proven and probable reserves with 10.9 million ounces inferred. SXR is authorized to market 100% of production on behalf of the JV.

South Inkai (Betpak JV) – Cash costs of $10/lb with a 25 year project life. 7.3 million lbs. in production by 2010. Production should start at the end of 2007. Construction is currently behind schedule but not off target for a 4th quarter start. Exploration and production drilling are on schedule. SXR is authorized to market 100% of production on behalf of the JV.

Kharassan – SXR holds a 30% ownership stake in the Kyzylkum JV located in Kyrgyzstan. Production is slated to start at the end of 2007. Drilling and construction are behind schedule but not off target for a 4th quarter start. 4.1 million Indicated and 22.6 million inferred resources. The mine is slated to start production in the 4th quarter of 2007 with expansion to 2.3 million pounds of production by 2011. A cash cost of $10.5 per pound is expected with the project having a 30 year life.

Other Properties:

Pursuant to the original merger of Aflease and Southern Cross, SXR retained a 68% ownership of Aflease Gold.

SXR owns 100% of the Modder East mine gold mine in South Africa. Surface construction is complete with production beginning in the 3rd Q of 2009. It is estimated that the mine will produce 110,000/oz per year at a cash cost of $217 oz.

Aflease also owns 7 exploration licenses in Kyrgyzstan.

SXR is a difficult company to value because there are no revenues. However, they are ahead of most juniors in that they have acquired multiple large deposits that will be profitable even if the Uranium price drops because of ISL mining's low cost structure. Current production should provide more than enough cash flow to fund the rest of SXR's project pipeline. Needless to say, SXR is about to join the ranks of major Uranium producers and I am going to add SXR to my portfolio.

SXRFF 4-mo chart

SXRFF 4-mo chart

Source: sxr Uranium One: The Newest Uranium Major