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Ready For Rare Earth Rebound In 2014?
http://seekingalpha.com/article/1918721-ready-for-rare-earth-rebound-in-2014?source=email_portfolio&ifp=0
Dec. 27, 2013 3:47 PM ET | 7 comments | About: REMX, Includes: FXY, LYSCF, MCP, UUP
Disclosure: I am long MCP. (More...)
For weeks, I told you about the increasing tensions between China and Japan and the potential impact on the rare earth sector ETF (REMX). It was announced yesterday that Japan's Prime Minister Abe went to visit the Yasukuni War Shrine which was criticized by the Chinese and the Americans. The debate is over territories in the South China Sea which is rich with natural resources.
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We are seeing both China and Japan moving toward nationalism as Japan deals with rising inflation and major debt challenges. The U.S. is very disappointed with Abe's move as they do not want to rattle China which holds a large amount of U.S. dollars (UUP) and bonds (TLT) and controls the supplies of 18 critical industrial metals.
The underlying concern is that the rise of China has affected the Japanese as their domestic industries have suffered due to higher labor and electricity costs. China is a major importer of Japanese cars. Both countries are boosting spending on their military.
The U.S. may be tapering to allow the Japanese to devalue the Yen to boost their economy and avoid conflict with China. The Chinese want a stronger Yen (FXY) so that China's exports are cheaper. Japanese central banks are increasing quantitative easing while Bernanke announced a $10 billion taper.
We may be on the verge of a repeat of a rare earth crisis which started in the summer of 2010. That is when China cut off rare earth exports when Japan detained a Chinese fishing boat in disputed territory. This sparked a mania in the rare earth mining sector in the West as end users realized the need for a secure supply for these critical elements needed for high tech industries such as telecommunications (IYZ), defense (PPA) and the automobile sector. They realized without rare earths computers, smartphones, cruise missiles, stealth aircrafts and automobiles could not be built. There are pounds of rare earths in your automobile in places where you would least expect it.
Every year around the holiday time a new craze emerges to capture our imaginations. Remember Beanie Babies, My Little Pony and Cabbage Patch Kids? Will the rare earth ETF be the must have for this holiday season to prepare for a shortfall in 2014 as the global economy expands?
Do not be surprised to see the beaten down rare earth miners propel once again to the front pages of the mainstream media. End users will no longer rely on China and the highest quality assets are already gaining attention from the Europeans, Americans, Canadians, Japanese and Koreans.
Share prices in some of the smaller junior names could double and triple similar to 2010. Many of the questionable rare earth companies which are far from production have already been weeded out by the recent market declines. Molycorp and Lynas (OTCPK:LYSCF) are the only rare earth producers outside of China. In the junior heavy rare earth space stick to the companies with infrastructure in mining friendly jurisdictions. Mining rare earths is extremely difficult and requires environmental and regulatory support.
It should be noted that the Rare Earth ETF has no Western rare earth producer in the top 10 of its holdings. The name of the ETF should be changed to the industrial metals ETF.
A rare earth producer which I believe should rebound off of these lows is Molycorp (MCP). Molycorp is the only rare earth producer on the NYSE and in the Western Hemisphere. It should be considered as Molibdenos Y Metales (MOLYMET) invested $90 million at $6 per share. These guys are not dopes. Investors can purchase Molycorp below that price now and below book value.
Molycorp just announced recently that the final unit of its multi-stage Cracking Plant at Mountain Pass is operational. This could help boost production and decrease unit costs. Once the system is optimized at Mountain Pass I wouldn't be surprised if Molymet makes a bid for Molycorp especially if the price is near their previous purchase at $6. Molycorp is way undervalued as its revenue per share is $3.68.
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Molycorp recently declined due to the dilutive financing announced in October, but may be on the verge of closing that gap and finally turning higher. Major volume has come in today on no news which is very bullish. This may mean the smart money is anticipating a rebound in this deeply discounted situation.
$PRCP - Perceptron: A Takeover Candidate Poised To Benefit From Robotic And 3D-Printing Revolution
http://seekingalpha.com/article/1918391-perceptron-a-takeover-candidate-poised-to-benefit-from-robotic-and-3d-printing-revolution?source=email_tec_edi_pic_0_0&ifp=0
Dec. 27, 2013 11:57 AM ET | 5 comments | About: PRCP, Includes: AME, CGNX, CIMT, DDD, FARO, GOOG
Disclosure: I am long PRCP, CIMT. (More...)
Editors' Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.
PRCP Highlights
Perceptron, Inc. (PRCP) produces technology that is used in two of the fastest-growing industries, robotics and 3D printing. It has a low enterprise value of $60 million compared to its market cap of $92 million, and the company has $33 million in cash with no debt in a hot and growing industry. This makes PRCP an attractive acquisition target.
Three 3D-imaging companies have been acquired during 2013, and all three acquiring companies are in different industries: AMTEK, Inc. (AME), a diversified machinery manufacturer, LMI Technologies Inc., a 3D-imaging company, and 3D Systems (DDD), a 3D-printing company. This proves PRCP technology is useful in a variety of industries.
FARO Technologies Inc. (FARO) and Cognex Corp. (CGNX), both of which are competitors to PRCP, are actively looking to put their excess cash to work by acquiring other companies. PRCP sensors are used in robot guidance solutions, but FARO and CGNX sensors haven't evolved that far yet, a fact that makes PRCP an attractive investment.
Credit Suisse analysts believe this sector is ripe for future mergers and acquisitions because of increasing demand for industrial automation. Over the past half-year, Google, Inc. (GOOG) has acquired seven technology companies related to robotics. The company's expected targets are in manufacturing, not consumers.
The 3D-imaging market has a synergistic relationship with both robotics and 3D printing giving PRCP unlimited future potential. The 3D-imaging market is expected to grow as quickly as the 3D-printing market, around a 25-percent CAGR.
PRCP's revenues and net income have consistently grown for the past five years. With the company's current backlog at record levels, we foresee even higher sales and growth in future quarters, making it a "Star."
We believe PRCP is severely undervalued and should be valued at around $26.50 per share, which is up about 250 percent from current levels.
With FARO and CGNX continuing to make new highs, we expect PRCP also will make new highs soon.
PRCP has $33 million in cash ($3.69 per share), and that figure is growing. It is possible an acquisition, stock repurchase or special dividend could be announced in the not-too-distant future.
Perceptron Technology Enables Best Corvette Ever!
Background
Perceptron is a global, non-contact vision and metrology company with more than 30 years of experience in laser-based technology and applications. Perceptron offers a wide range of specialized inspection and measurement solutions, including dimensional gauging, robot guidance, gap-and-flush, wheel alignment, robotic scanning and portable scanning. Helix is Perceptron's newest 3D-metrology solution and is the world's only sensor of its kind. It utilizes Intelligent Illumination to process features in 3D and then translate the 3D point-cloud data into CAD. This technology is used in two of the fastest-growing industries, robotics and 3D printing.
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Introduction
PRCP has a low enterprise value of $60 million compared to its market cap of $92 million, and the company has $33 million in cash with no debt. Poised to benefit from two of the fastest-growing industries, PRCP is a prime, attractive acquisition target. The stock recently has pulled back from its highs, giving investors a buying opportunity as PRCP is much cheaper in valuation than its peers. The 3D-imaging market is expected to grow as quickly as the 3D-printing market, and PRCP technology is used in robotics and 3D printing. This gives PRCP unlimited future potential. 3D Analytics has completed a thorough review of PRCP and determined the stock is grossly undervalued. Consequently, we assign a buy rating on the stock with a $26.50 price target, which is up about 250 percent from current levels.
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AMETEK acquires Creaform
On Oct. 29, 2013, AMETEK, Inc. announced it had acquired Creaform, Inc. for approximately $120 million. Creaform is a leading developer and manufacturer of innovative, portable 3D-measurement technologies and a provider of 3D-engineering services. Creaform is a privately-held company based near Quebec City, Canada, with annual sales of approximately $52 million.
LMI acquires 3D3 Solutions
On May 1, 2013, LMI Technologies Inc. signed an agreement to acquire 100 percent of the shares of 3D3 Solutions, a Burnaby, Canada,-based company and a leading supplier of 3D-scanning software and hardware products. The takeover will result in the integration of 3D3 under the LMI Technologies brand to create a powerhouse in 3D-scanning, visualization and measurement solutions for both inline factory automation and offline 3D-scanning markets such as reverse engineering and 3D printing. The terms were not disclosed.
3D Systems acquires Geomagic
On Jan. 3, 2013, 3D Systems announced it had signed a definitive agreement to acquire Geomagic, Inc., a leading global provider of 3D-authoring solutions, including design, sculpt and scan software tools that are used to create 3D content and inspect products throughout the entire design and manufacturing process. This acquisition was subject to customary closing conditions and was expected to close during the first quarter of 2013, after those conditions were met. Terms of the transaction were not disclosed.
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FARO Technologies looking to acquire
In the Q3 conference call, FARO Technologies President and CEO Jay Freeland said, "Our cash balance, up 15 percent since Jan. 1, now sits at $182 million. This gives us plenty of flexibility. We continue to look at acquisitions that could enhance our business strategically."
Cognex looking to acquire
In the Q3 conference call, Cognex CEO, President and COO Robert J. Willet said, "The best use of that cash, from our perspective, would be to use it to - in acquisitions. And we have an active program. We are looking at potential entities to buy in different markets, in different geographies." CGNX currently has a cash balance of $217 million.
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Google aggressively acquiring technology companies used in robotics
On, Dec. 4, 2013, The New York Times published an article titled, "Google Puts Money on Robots, Using the Man Behind Android." The following excerpt is taken from that article:
Over the last half-year, Google has quietly acquired seven technology companies in an effort to create a new generation of robots. And the engineer heading the effort is Andy Rubin, the man who built Google's Android software into the world's dominant force in smartphones. The company is tight-lipped about its specific plans, but the scale of the investment, which has not been previously disclosed, indicates that this is no cute science project. At least for now, Google's robotics effort is not something aimed at consumers. Instead, the company's expected targets are in manufacturing - like electronics assembly, which is now largely manual - and competing with companies like Amazon in retailing, according to several people with specific knowledge of the project. A realistic case, according to several specialists, would be automating portions of an existing supply chain that stretches from a factory floor to the companies that ship and deliver goods to a consumer's doorstep. "The opportunity is massive," said Andrew McAfee, a principal research scientist at the M.I.T. Center for Digital Business. "There are still people who walk around in factories and pick things up in distribution centers and work in the back rooms of grocery stores."
PRCP specializes in using robotic technology for industrial manufacturers to automate assembly processes, which could make the company a favorable target for Google to acquire.
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3D imaging market is expected to grow substantially
Robotics are the future of industrial automation, putting PRCP in a strong position to benefit. A group of Credit Suisse analysts pointed out last year that companies which make and sell industrial-automation technology that both monitors and runs industrial manufacturing processes are an attractive long-term investment target. The $152 billion global industrial-automation market has grown 6 percent a year, on average, since 2003, which is nearly twice as fast as overall industrial production. There is increasing consolidation among makers of automation technology. Companies have been looking to expand horizontally by making products for different types of manufacturing, and vertically, by targeting different levels of manufacturing operations. Thus, the sector has become ripe for mergers and acquisitions. PRCP already has been paving the way toward automating the manufacturing process for automakers.
In our previous article on Cimatron (CIMT), we said CAD/CAM software is essential for the designing and manufacturing of 3D parts. 3D imaging also is essential to the 3D-printing revolution because it enables you to scan a part or physical object and translate the 3D point-cloud data into CAD, where it can be reproduced or modified. Helix, PRCP's newest technology, does just that. The 3D-imaging market is expected to grow as quickly as the 3D-printing market, with both expected to have compounded annual growth rates of around 25 percent.
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Source: MarketsandMarkets
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Financials
On Aug. 28, 2013, PRCP announced strong fourth-quarter results and record fiscal 2013 sales. The stock jumped from $8 to almost $15 a share. The stock recently has pulled back considerably from its highs, as on Nov. 13, 2013, PRCP announced disappointing results for the first quarter of its fiscal year 2014. According to its recent conference call, PRCP is making progress with Helix sales and bookings and expects to issue the next release of its Vector Software platform within the next 12 months. Also, backlog increased to $35.9 million (a record level), which generally leads to higher sales in future quarters.
With PRCP trading close to its $6.62 book value per share, one would assume the company is a slow growing "Cash Cow." However, over the past five years, PRCP quickly and consistently has been increasing revenues and income, with even a greater future ahead because of technology to be used in two of the fastest-growing industries. In the growth-share matrix, PRCP is a "Star."
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A peer-group comparison shows PRCP is significantly undervalued
When comparing PRCP to FARO and CGNX, we find PRCP to be severely undervalued in all the valuation measures shown below.
By taking the ratios below and averaging them, we conclude PRCP should be valued at $26.50 per share, which is up around 250 percent from current levels.
(click to enlarge)
PRCP should soon make new highs
With FARO and CGNX making new highs, we believe PRCP will soon follow once investors realize how much the company is undervalued compared to its peers. Here are some yearly charts.
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PRCP high cash balance
PRCP has $33 million in cash ($3.69 per share), and that figure is growing. Possible uses for this cash include acquisitions, a stock repurchase or a special dividend, any of which would benefit shareholders and increase the value of the stock.
On Nov. 30, 2011, PRCP initiated a growth strategy through a combination of organic growth and evaluating the possible acquisition in a synergistic technology-oriented business in a complementary, non-automotive market segment.
On Sept. 27, 2012, PRCP announced a special dividend of $.25 per share. On May 7, 2013, PRCP announced an annual dividend of $.15 per share. Currently, that is a 1.40-percent yield for shareholders.
On Oct. 19, 2010, PRCP announced a $5 million stock-repurchase program.
Since the company is currently paying an annual dividend, we believe PRCP's best use of its cash would be the acquisition of a complementary, non-automotive company followed by a stock repurchase program.
Current Risks
In the recent 10-K filing, we found two risks worth noting:
First, PRCP revenues are highly influenced by the sale of products for use in the global automotive market, particularly by manufacturers based in the U.S., China and Western Europe. These manufacturers have experienced periodic downturns in their businesses that could adversely affect their level of purchases of PRCP products. We believe PRCP has technology that can be useful in a variety of industries and hope management will diversify the company's customer base.
Second, PRCP is a party to a suit filed by 3CEMS, a corporation based in the Cayman Islands and the People's Republic of China. The suit was filed on or about July 19, 2013, in U.S. District Court for the Eastern District of Michigan. The suit alleges that PRCP breached its contractual obligations by failing to pay for component parts to be used to manufacture optical video scopes for the company's discontinued commercial-products business unit. 3CEMS alleges that it purchased the component parts in advance of the receipt of orders from PRCP based on instructions 3CEMS claims to have received from PRCP. The suit alleges damages of not less than $4.5 million. PRCP intends to vigorously defend against 3CEMS' claims. The outcome is highly uncertain at this point, but the damages being sought are small compared to PRCP's cash of $32.8 million.
Conclusion
We believe PRCP is undiscovered, which creates a huge opportunity for investors to profit. PRCP should be an attractive acquisition target for a variety of industries, including two of the fastest-growing industries, robotics and 3D printing. PRCP is cheap in valuation despite being a growth company with an even brighter future ahead. Consequently, we assign a buy rating on the stock with a $26.50 price target.
$GLUU - Glu Mobile: 3 Different Insiders Have Sold Shares This Month
http://seekingalpha.com/article/1919081-glu-mobile-3-different-insiders-have-sold-shares-this-month?source=email_rt_article_readmore
$GMO - General Moly: This $1 Steel Rebound Play Is A Top Pick For A January Effect Rally
http://seekingalpha.com/article/1916831-general-moly-this-1-steel-rebound-play-is-a-top-pick-for-a-january-effect-rally?source=email_portfolio&ifp=0
Dec. 26, 2013 9:28 AM ET | 6 comments | About: GMO, Includes: MT, PKX
Disclosure: I am long GMO. (More...)
General Moly, Inc. (GMO) shares have been battered in 2013 for a number of reasons including weak metals prices and production delays, however, the stock appears to have bottomed out now and it could soon act like a "coiled spring" in January, as it rebounds from oversold levels due to the end of tax-loss selling pressure and even short covering. This stock started out 2013 by trading at a 52-week high of $4.25 on January 7, but more recently it has been hammered by plenty of tax-loss selling and short selling which has pushed the shares near 52-week lows of just over $1.
This is a great time of year to buy cheap stocks from frustrated investors who are selling shares in order to harvest tax-losses. With this stock trading for about a quarter of its 52-week high, it's easy to see that many investors have losses and that makes this stock a prime candidate for tax-loss selling. As the chart below shows, General Moly shares were very recently trading for about $1.60, but as tax-loss selling season started in November and continued into December, this stock has not been able to have a break and it has been pushed down to about $1.17. The chart also shows that the 50-day moving average is about $1.42 per share and the 200-day moving average is around $1.80 per share.
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Significant Near-Term Upside Potential As Tax-Loss Selling Ends And A Potential Short-Covering Rally Begins:
Once tax-loss selling pressure ends, this stock could begin a strong "snap-back" rally which could take the shares somewhere between those key levels (the 50- and 200-day moving averages) of $1.42 to $1.80. As the tax-loss selling ends, it should show increased strength and this often leads to a short-covering rally. There is a significant short interest in this stock and many of them have made strong gains, but probably would prefer to defer taxes on those gains by waiting to cover in January 2014. By doing this, it will postpone tax liabilities for another year; because of this, there is a strong chance that the combination of the end of tax-loss selling and short covering in early January will make the stock jump.
According to Shortsqueeze.com, there are over 3.7 million shares short. Average daily volume in this stock is about 354,000 shares, so the short interest is equivalent to around 11 days worth of trading volume and about 11% of the float. Shorts have greatly benefited from tax-loss selling pressure in recent weeks, but the tide is about to turn with the end of tax-loss selling pressure and investors could take a fresh look at the positive long-term fundamentals and upside catalysts for General Moly:
Company History, Valuable Partnership Deals and Reasons Why Molybdenum Is A Key Industrial Metal:
General Moly is developing two major molybdenum projects and its goal is to "grow into the largest pure-play molybdenum producer in the world and a molybdenum supplier of choice to customers around the world." Both of its projects are based in Nevada which means that geopolitical risks are essentially eliminated. Its "Mt. Hope Project" is fully permitted which greatly reduces downside risks for investors. Furthermore, it is one of the world's largest molybdenum development projects and is a joint venture between General Moly, which has 80% ownership and the rest is owned by POSCO (PKX), which is a major South Korean company and one of the world's largest steel producers. General Moly also has 100% ownership of its "Liberty Project" which has molybdenum and copper.
The joint ownership of the Mt. Hope Project with POSCO is significant as it validates the potential of this mine and also because POSCO consumes a large amount of molybdenum in order to make steel. General Moly has also attracted the interest of another huge steel company. In 2007, it raised $70 million through a private placement with ArcelorMittal (MT), another global metals giant which also consumes significant amounts of molybdenum. It appears that POSCO and ArcelorMittal will both have vested interests in the success of General Moly and potentially be significant customers.
The use and price history of molybdenum needs to be considered next. Molybdenum is the 42nd element on the periodic table and it has the sixth highest melting point of any elements, which makes it ideal for use in construction, metals, and many other industrial applications including military and space exploration (because of its strength and heat resistance.) According to Commerce Resources Corp., this following break-down shows how molybdenum is used:
37% is used to create construction grade steel.
22% is used in the manufacturing of stainless steel.
15% is used in chemicals such as lubricant grade MoS2.
9% is used in the creation of tool and high-speed steels.
7% goes towards cast iron.
6% in molybdenum metal.
4% towards super alloys.
Molybdenum is primarily used as an alloy agent when manufacturing steel. It increases the strength, resistance to corrosion and extreme temperature capabilities of steel. Molybdenum is also vital in the chemical and oil industry as it acts as an agent to remove sulfur from liquid fuels. Before the 2008 financial crisis, molybdenum prices were averaging over $30 per pound, but were crushed down to about $9 per pound and have remained depressed. However, things could be at a major inflection point and an improving global economy could be setting the stage for a large rebound in molybdenum prices. With General Moly trading for just over $1 per share, it is almost like buying an option that could become a multi-bagger when prices rebound. For this to happen, the economy needs to continue growing and demand for steel in particular needs to increase.
A Cheap Way To Play the Turnaround In the Steel Industry:
While the steel industry has yet to fully recover, by taking a look at the stock charts of POSCO, ArcelorMittal, and U.S. Steel (X) below, it is clear that the market is starting to expect much better days ahead for the industry. POSCO, ArcelorMittal and U.S. Steel shares have all started a major uptrend recently and this sign of strength should eventually begin to benefit companies like General Moly because as steel demand grows, so will demand for molybdenum. Investors looking for bargains in the stock market and cheaper ways to play the emerging recovery in the steel industry could begin to take an interest in beaten down stocks like General Moly. Take a look at the charts of these leading steel companies below which seem to confirm that this industry (and therefore molybdenum demand) is coming back:
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Risks and Rewards:
General Moly has a strong balance sheet with about $27 million in cash and almost no debt (just around $874,000). The cash on the balance sheet is equivalent to nearly 30 cents per share and the book value is about $1.48 per share. This solid balance sheet reduces risks for investors. The company will probably increase its debt levels in the future in order to complete mine engineering and maximize future production and revenues, which could be a potential downside risk for investors (if terms are not favorable), but if they are, the stock could surge. The other potentially significant downside risks include production delays and/or if molybdenum prices were to decline, but that does not seem likely now and especially not at these low levels. In order to get a sense of the value of the stock and the upside potential it offers if molybdenum prices rise, it is worth considering the following statement made by General Moly (especially the underlined part, considering the market capitalization is just over $100 million today), in a recent shareholder update on the project which states:
"On a look forward basis, economics for General Moly's 80% ownership in the Mt. Hope Project, at a $15.00 per pound flat long-term molybdenum price, anticipates an after-tax Net Present Value (NPV), discounted at 8%, to be $707 million and an internal rate of return (IRR) of 17.6%. General Moly's 80% ownership in the Mt. Hope Project, which includes the impact of off-takes, other contractual agreements and specific working capital assumptions, equates to $7.72 per current outstanding share. For every $1 change in the molybdenum price between $10 and $20 per pound, the after-tax NPV of the Mt. Hope Project changes by approximately $190 million. The Mt. Hope Project is NPV breakeven at an approximate $11.15 per pound molybdenum price and undiscounted cash flow breakeven (going forward excluding sunk capital as of October 2013) at approximately $9.75 per pound molybdenum price."
The fact that General Moly has a market capitalization of just over $100 million and that just a $1 per pound increase in the price of molybdenum is equivalent to about $190 million in "NPV" or net present value, shows why this stock could be like an option on the rebound in steel and a potential long-term multi-bagger. In spite of the currently soft market price for molybdenum and the project delays, some analysts are bullish on this stock. On December 6, 2013, Zacks Equity Research issued a "buy" rating on the stock and encouraged with a small rally in the stock, Zacks' stated: "....make sure to keep a close watch on this firm in the near future."
While this stock still appears speculative, the long-term upside potential could be in the multi-bagger range, especially if management executes, and if molybdenum prices rise. With the global economy showing renewed signs of strength, and the steel industry stocks indicating a turnaround is coming, it appears to be an ideal time to buy this stock. Furthermore, with steel industry giants already showing significant interest in General Moly, it would not be surprising for the company to be targeted as a takeover. In the short term, these shares appear poised for a "January Effect Rally" that could be sparked by the end of tax-loss selling and short covering. Based on the short interest and the 50- and 200-day moving averages, I believe this stock could trade back at around $1.50 to $1.80 in January which is where it was in early November before tax-loss selling began. This could give investors gains of about 50% in the near term. Longer-term, the share price will depend on how strong molybdenum prices rebound, but the potential upside appears very significant.
Here are some key points for General Moly, Inc.
Current share price: $1.18
The 52-week range is $1.04 to $4.25
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
$MCP - Molycorp: A Top $5 Stock Pick For A 'January Effect' And Short-Covering Rally
http://seekingalpha.com/article/1917911-molycorp-a-top-5-stock-pick-for-a-january-effect-and-short-covering-rally?source=email_rt_article_readmore
Dec. 27, 2013 4:36 AM ET | 3 comments | About: MCP
Disclosure: I am long MCP. (More...)
Molycorp, Inc. (MCP) shares were surging ever higher in 2011, and that momentum and investor optimism took the stock to over $70 per share for a while. At that time, many investors seemed to believe that rare earth minerals were going to be the next big thing, but clearly that level of optimism was excessive. More recently, many investors have become decidedly bearish by shorting the stock, and many others have sold out of pure frustration. However, as most investors realize, timing is everything when it comes to investing, and that seems particularly true when investing in Molycorp, Inc. For a number of reasons, it could now be the right time to buy this stock, here's why:
1) Molycorp shares have a 52-week low of $4.51, and a 52-week high of $11.81. With the stock now trading just below $5, it is close to the lows. Investors who bought this stock when it was trading for $30, $40, $50, $60 and even over $70 in 2011 have losses, and investors who bought it even this year when it was trading at more than double the current price, also have losses. That makes this stock an ideal candidate for tax-loss selling which happens in the last few weeks of each year as investors sell "losers" in order to offset taxes on their winning trades. By taking a look at the chart below, it clearly shows a stock that has traded (for the most part) in a range between $5 to $8 per share from April to October. However, more recently (in the peak tax-loss selling months of November and December), this stock has been under obvious pressure which has pushed it just below $5, and kept it from making some of the big rallies it has made multiple times, before tax-loss selling season began. However, that could change since tax-loss selling pressure is about to end in just a few days. The end of tax-loss selling pressure could greatly impact Molycorp shares and make it an ideal candidate for a "January Effect Rally".
(click to enlarge)
2) When looking for stocks that could rebound significantly when tax-loss selling pressure ends, it can be even more rewarding to consider ones that have an above-average level of short interest. According to Shortsqueeze.com, there are about 59 million shares short in Molycorp. This is significant because the average trading volume is about 3.6 million shares, which means the short interest is equivalent to around 16 days worth of trading volume. It is also significant because the short position represents nearly 32% of the float. Now there are two more points to consider: 1) If the stock can trade for nearly $5 per share in the midst of weeks of (probably very heavy) tax-loss selling pressure, it stands to reason that it will trade for more once this selling pressure ends on December 31. 2) Many shorts have significant gains in Molycorp this year and it also stands to reason that it could be desirable (but probably not smart) for them to wait until January to cover since this will allow them to defer taxes on the gains for an additional year. For these reasons, Molycorp shares could be poised for big gains into January since the end of tax-loss selling should help the stock rebound, and in turn, this sudden strength could cause some shorts to cover. Finally, buying pressure from shorts who were waiting until January to cover in order to defer taxes could also lead to a short-covering rally in this stock. Again, timing is everything, and these reasons lead me to believe that the time is right to buy now.
Now let's look at some longer-term reasons to consider buying Molycorp: This company is one of the world's largest rare earth producers and it is based in Mountain Pass, California. Since Molycorp and "Project Phoenix" are located in California, this company does not have the type of geopolitical risks that other mining companies are exposed to. This reduces risks for investors and it makes Molycorp well-positioned to supply the U.S. and the world with rare earth minerals which are used in products ranging from televisions, mobile phones, magnets, lighting, catalytic converters for cars, and more. The demand for rare earths is poised to grow over time, especially as the global economy improves and as the population expands.
Molycorp has made significant investments to develop its rare earth mines and the company is expected to see rapid revenue growth. Analysts expect revenues to surge from about $579 million in 2013, to around $865 million in 2014. That is a jump of roughly 50% and strong growth rates could continue for years to come as production increases and prices improve. This growth is what should help to turn the corner in terms of profits as analysts expect the company to lose about $1.09 in 2013, but see losses of only 27 cents for 2014. While losses are a potential downside risk for investors to consider, the rapid revenue growth mitigates a lot of this risk. Furthermore, the company is expected to be cash flow positive as soon as sometime in 2014. Another potential downside risk to consider is the pricing for rare earths. If the global economy were to experience another recession, the demand could drop and impact revenues and profit margin for Molycorp. However, the economy does not appear to be at risk of recession now, and demand for the type of tech and other products that use rare earths seems likely to grow.
In October, analysts at Cowen and Company raised the price target on this stock to $8.60. With the stock now trading for nearly $5 per share, this would imply potential gains of around 80%. Analysts usually set price targets for the next 12 months, so if that target is reached it would be quite a strong gain for investors. However, even that could be too conservative as Jason Bond makes a solid case for Molycorp shares to be a multi-bagger in about 18 months in this article. In the short term, I believe this stock is poised for a major rebound in January as tax-loss selling ends and as shorts cover. These forces could push the stock back up towards $5.96 which is the 200-day moving average.
Molycorp is clearly a compelling investment as a short-term rebound candidate and it has long-term growth potential. Some industry watchers have even suggested that Molycorp could be an attractive takeover target for a global manufacturing giant like Nissan (OTCPK:NSANY) or Siemens (SI), as this would secure access to the rare earths used by these companies. At this time, I am focused on stocks like Molycorp which have significant upside potential in a January Effect rally. To read about another metals mining (molybdenum) stock trading for $1, that also has January Effect rally in the short term and multi-bagger potential in the longer term, you can read more on that in this article.
Here are some key points for Molycorp, Inc.
Current share price: $4.85
The 52 week range is $4.51 to $11.81
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Insider Transactions
http://www.canadianinsider.com/node/7?ticker=MGP
$URG breaking out on daily chart
Breakout on weekly chart above $1.39
$URG - watch for breakout above $1.27
http://finviz.com/quote.ashx?t=urg&ty=c&ta=0&p=d
Uranium Stocks To Watch in 2014: Raymond James Top Picks
http://uraniuminvestingnews.com/17055/uranium-stocks-to-watch-in-2014-raymond-james-top-picks.html?pmc=E-1&MyID=lakotaeagle@gmail.com&utm_source=Resource+Investing+News&utm_campaign=45ed06dfd7-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_f83d87db0f-45ed06dfd7-248737485
Thursday December 26, 2013, 4:30am PST
By Vivien Diniz - Exclusive to Uranium Investing News
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Tops StocksUranium has been 2013's hot ticket. And it looks like 2014 is shaping up to be even better.
In light of all the activity in the market, Uranium Investing News spoke with Raymond James’ David Sadowski to see which stocks we should keep an eye on in 2014.
Cameco (TSX:CCO, NYSE:CCJ):
With jet-boring now underway at Cigar Lake, Cameco looks like it is on track to bring the project into production in 2014.
“Cameco has been a long favorite for ours.” Sadowski told UIN, ” It has an unrivaled asset base of a low cost high grade operations in low risk jurisdictions, a robust contract book, diversified business model, and they also pay dividends. So the company has always been the blue chip go to of the industry.”
For the coming year, Sadowski believes that Cameco “has got the potential to break out beyond its $23 dollars share price resistance leve, as Japan resumes operations at its reactors, which we think will de-risk the space and put up a pressure on uranium prices.”
Ur-Energy (TSX:URE)
Ur-Energy is the world’s newest uranium producer, with its flagship low cost Lost Creek ISR operation in Wyoming. On December 23, the company announced the completion of its first sale of yellowcake. Ur-Energy sold a total of 90,000 pounds of U3O8 at an average price of $62.92 per pound to two U.S. based utilities. Total gross revenue of the sale is $5.7 million.
“Ur-energy is run by a veteran team who designed and built a pretty cutting edge facility that’s already running above the expected rate,” Sadowski said, adding “on a corporate level production out of Lost Creek is slated to be delivered into some pretty attractively priced contracts, and they have also just secured $34 million dollars in state bonds for the Wyoming government.”
“We think that one is going to go higher in 2014. We have a strong buy rating and a $1.80 target” on Ur-Energy, Sadowski said.
Fission Uranium (TSXV:FCU)
It should be no surprise that among Raymond James’ uranium stocks to watch, we find Fission Uranium, quite possibly one of the most talked about uranium discoveries of 2013.
“Patterson south project of the world’s last known high grade open pitiable uranium deposit. It has immense exploration up side, but at current trading levels it’s getting little to no value for additional pounds beyond what we think they already delineated,” explained Sadowski.
In 2014, the company is planning a winter drill program, which Sadowski says is “one to watch,” along with the subsequent summer program the company is planning to release its resource estimate
Sadowski does caution that “investors shouldn’t be shocked if it comes early ’15 rather than late ’14, but there’s room for a positive surprise there for sure. I think that resource should be significant, especially if exploration momentum continues.”
Kivalliq Energy (TSXV:KIV)
Nunavut-focused Kivalliq Energy started off 2013 with a 60% increase in its resource, expanding its estimate to 43.3 million pounds of uranium within 100 to 200 meters of surface.
Kivalliq, according to Sadowski is one of the world’s premiere uranium explorers and have done “great job identifying targets and being very successful drilling those targets and finding uranium.” Furthremore, he believes that there is quite possibly over 100 million pounds of uranium all in that property.
With the impressive news that Kivalliq put out in early 2013, it is quite possibly that the company could have a strong year advancing the project. Currently, Kivalliq has been focusing more on engineering work, and desktop studies as they progress towards a PEA. however, the company is also gearing up for its next drilling program when the markets are a little more favorable.
Uranium Participation Corp
Also on Sadowski’s list of stocks to watch is Uranium Participation Corp (TSX:U), the world’s only physically backed uranium fund. The fund is managed by Denison Mines
For Sadowski, UPC is “a great one for exposure to the uranium price, or uranium price and rebound without the typical exploration development or mining risks associated with some of the other equity.”
Denison Mines (TSX:DML, NYSEMKT:DNN)
Denison Mines is quite possibly one of the most dominant land holding junior in the Athabasca Basin. The Wheeler River is one of the world’s highest grade uranium projects with Wheeler River that has a total great average rate there is 16.6 percent U308 for a 16 million pound deposit.
Denison is “definitely a company that we will see do well,” Sadowski said, adding ”[t]hey are probably my top recommended names in the space for sure.”
Who are you watching?
At Uranium Investing News we are always interested in companies that are on your radar. Let us know which stocks you think will make big moves in 2014.
Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.
$DNN - Uranium Miners To Benefit From Short- And Long-Term Catalysts
http://seekingalpha.com/article/1916981-uranium-miners-to-benefit-from-short-and-long-term-catalysts?source=email_rt_article_readmore
Dec. 26, 2013 10:17 AM ET | About: DNN, CCJ, Includes: URA
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DNN over the next 72 hours. (More...)
The Fukushima nuclear disaster made the world take a second look at the safety of nuclear energy and many countries halted construction and plans to build nuclear reactors. Japan shut down all but two of its 50 nuclear reactors after Fukushima. As a result of this, uranium prices have been on a steady free fall since the Fukushima disaster in March 2011. However, this initial knee jerk reaction is starting to fade and there are a number of strong catalyst on the horizon for uranium producers.
(click to enlarge)
Short-Term Catalyst:
End of Megatons to Megawatts
In 1993, the United States signed an agreement with Russia called Megatons to Megawatts. The agreement was a 20-year program where Russia down-blended the equivalent of 20,000 nuclear warheads to produce more than 14,000 metric tons of low-enriched uranium. This uranium supplied the United States with nearly half of its nuclear generated energy over the past two decades, which is almost 10% of the country's total electric needs. The final shipment from this program arrived in Baltimore on December 10, 2013, marking the end of the agreement. To make up for the end of this supply of uranium coming to the US, USEC (USU) signed a 10-year agreement with Russia's Techsnabexport (TENEX) to provide USEC with Russian enriched uranium. However, this agreement will only supply half of the uranium previously supplied under the Megatons to Megawatts program and won't reach that level until 2015. This new agreement won't come from down-blending nuclear warheads, but rather from Russia's commercial enrichment activities. In 2013, US nuclear plants required 19,622 metric tons of uranium. Taking into account the end of Megatons to Megawatts and the new agreement between USEC and TENEX, there will have to be 4,000-5,000 metric tons of uranium coming from new sources in 2014 and beyond.
Japan restarting reactors:
In July 2013, Prime Minister Shinzo Abe's Liberal Democratic Party LDP won majority control of the Upper House in Japan. The LDP is known for its pro-nuclear platform and the Prime Minister has been a vocal advocate of restarting Japan's closed nuclear power plants. Japan has been spending billions of dollars importing oil, LNG and coal to make up for Japan's electric demands in the absence of nuclear energy, which accounts for one-third of Japan's energy. On July 8, 2013, four nuclear plant operators applied for safety inspections for 10 reactors. This was the first step under Japan's new Nuclear Regulation Authority to restart reactors. Even Tepco (owner and operator of the Fukushima plant) has been granted approval from a once reluctant local governor to seek approval for restarts of the largest nuclear reactors in the world, Kashiwazaki-Kariwa.
Going through the lengthy new safety procedures and regulations have been slow to say the least. To restart these nuclear reactors, a huge safety checklist must be completed that can take up to six months to complete and at current levels, inspectors can only review 3-4 reactors at a time. Analysts initially estimated nuclear reactors would start going back online by the end of 2013 or mid-2014. Now the consensus is for the first group of reactors to resume operation between spring and summer of 2014.
Long-Term Catalyst:
New Reactor Construction
There are currently 60 nuclear reactors under construction in 13 different countries. Most notably China has 30, Russia has 10 and India has 6 under active construction. Even the United States is building its first nuclear reactor in over 30 years. Most recently a nuclear plant near Omaha, Nebraska, was allowed to reopen after being closed since April 2011 due to flooding and safety concerns. Below is a list of reactors expected to go online in 2014 alone.
2014
Russia, Rosenergoatom
Novovoronezh II-1
2014
Russia, Rosenergoatom
Rostov 3
2014
Slovakia, SE
Mochovce 3
2014
Slovakia, SE
Mochovce 4
2014
Taiwan Power
Lungmen 1
2014
China, CNNC
Sanmen 1
2014
China, CPI
Haiyang 1
2014
China, CGNPC
Ningde 3
2014
China, CGNPC
Hongyanhe 3
2014
China, CGNPC
Yangjiang 2
2014
China, CGNPC
Taishan 2
2014
China, CNNC
Fangjiashan 2
2014
China, CNNC
Fuqing 2
2014
Korea, KHNP
Shin-Kori 4
2014
India, Bhavini
Kalpakkam
2014
Russia, Rosenergoatom
Beloyarsk 4
Stock Picks:
Uranium miners as a whole should benefit from these positive catalysts, but Denison Mines (DNN) and Cameco (CCJ) are my favorite plays in the sector.
Denison Mines is a uranium exploration and development company with interests in exploration and development projects in Canada, Zambia, Namibia, and Mongolia. The company exploration project portfolio includes 49 projects and totals approximately 603,000 hectares in the Eastern Athabasca Basin region of Saskatchewan. Denison's interests in Saskatchewan also include a 22.5% ownership interest in the McClean Lake joint venture, which includes several uranium deposits and the McClean Lake uranium mill, one of the world's largest uranium processing facilities, plus a 25.17% interest in the Midwest deposit and a 60% interest in the J-Zone deposit on the Waterbury property.
(click to enlarge)
(click to enlarge)
Company management has made the #1 goal at Denison Mines to develop the strongest portfolio of strategic uranium deposits in the Athabasca Basin through resource development and strategic acquisitions. As seen in the charts above, Denison has done a tremendous job acquiring key pieces of land throughout the basin in just a six-month period. The discovery of the Phoenix deposit on the Wheeler River Property is the most significant new uranium discovery in the Athabasca Basin in years.
The company saw a net loss of $45 million due to a $35.6 million impairment loss to reduce the carrying value of the company's Mutanga project to its estimated recoverable amount. Despite the bad quarter, Denison still has $29 million in cash on-hand and very little debt. Denison has positioned itself very well when uranium prices increase. Currently trading around $1.15/share, Denison has tremendous growth potential when uranium prices rise. But like all small cap stocks, investors must have a strong stomach.
Cameco
Cameco is one of the world's largest producers of uranium in the world, accounting for roughly 14% of production from its mines in the US, Canada and Kazakhstan. The company is also a leading provider of processing services required to produce fuel for nuclear power plants. At nearly 16 times larger than Denison Mines, Cameco is a much more established company than Denison and offers much more downside protection. Even with uranium prices at 5 year lows, Cameco is still managing a healthy profit.
Cameco managed a Q32013 net income of $211 million on $597 million in total revenue due to increased sales volume and higher realized prices. The company also took on restructuring and cost-saving strategies that are now starting to pay off. In the third quarter financial statement, the company gave an update on the uranium market.
We believe the market will continue in this state until Japanese reactors begin to restart, helping to clear inventories. Progress on this front continues. As of October 29, five utilities had applied to restart 14 reactors, and Japan's Nuclear Regulatory Authority is currently carrying out evaluations. Over the long term, we believe nuclear will remain an important energy source for the country, both in terms of its economy and meeting its environmental goals.
Over the long term, we believe the fundamentals for the industry remain strong. Most notably, China has reaffirmed its substantial growth targets out to 2020, and indicated plans to pursue further growth out to 2030. Their growth is palpable as construction on two more reactors began during the third quarter, bringing the total under construction to 30.
In Q32013, Cameco delivered its first shipments of Canadian uranium to China under the new Canada-China Nuclear Co-operation Agreement signed in 2012. With 30 new reactors currently being built in China, Cameco has cemented itself in a solid new market.
Bottom Line
The uranium market is poised for a rebound in 2014. Both Denison and Cameco expect uranium prices to gradually rise once the Japanese reactors begin restarting. The restarts along with the end of Megawatts to Megatons should narrow the gap between the supply and demand side of uranium. Denison and Cameco have weathered the uranium price meltdown and are strongly positioned when uranium prices creep back up
$URG - Ur-Energy: A Uranium Giant In The Making
http://seekingalpha.com/article/1916811-ur-energy-a-uranium-giant-in-the-making?source=email_rt_article_readmore
Dec. 26, 2013 9:25 AM ET | About: URG, Includes: URA
Disclosure: I am long URG. (More...)
Author's Note: This article discusses a microcap stock. Please be advised of the risks associated with microcap stocks. Ur-Energy Inc. had no input into the selection of the title of this article nor into the commentary that precedes the interview section. The text of the interview is an abridged transcription of a conversation between Lazarus Investment Partners LLLP and Ur-Energy. Lazarus is a shareholder of Ur-Energy and received no compensation for this article.
Introduction. Are you interested in hearing about a hot stock in a roaring sector? The kind that breaks new highs on a daily basis with huge momentum and strong analyst support behind it? If so, read no further. But if you are interested in a flat stock in a hated and misunderstood sector where you have the chance to make a highly contrarian investment that just might work out far better than anyone is anticipating, this article is for you.
Here are a couple of stats to wrap your head around: US utilities consume 55 million pounds a year of uranium. This year, US mines will produce only 4 million pounds a year of uranium.
Enter Ur-Energy (URG) (TSX: URE.TO). 100% owner of the 42,000 acre Lost Creek project in Wyoming, Ur-Energy is the world's newest uranium production facility. According the company's NI 43-101 report from November, Lost Creek contains:
Measured: 4.85 million pounds (in 4.29 Mt @ 0.057%)
Indicated: 3.80 million pounds (in 4.04 Mt @ 0.048%)
Inferred: 4.74 million pounds (in 4.72 Mt @ 0.051%)
No one seems to have noticed, but in a country starved for uranium, Ur-Energy made the transition this year from being an exploration company to being a production company. Ur-Energy is estimating it will produce 1 million pounds of uranium next year. This will make the company the producer of 20% of US uranium supply in 2014.
Resource overview. The Lost Creek project is based in Sweetwater County, Wyoming, about 100 miles from Casper. Lost Creek is estimated to have an internal rate of return [IRR] of 87%. (That number is not a typo, although it may come down a bit when the Preliminary Economic Assessment [PEA] gets updated shortly. ) The project is estimated to have an 8 to 10 year mine life (likely to be extended in the new PEA) and to contain 13.4 million pounds of uranium, including inferred pounds (8.65 million pounds net of inferred). Based on the April 2012 PEA, which will be updated soon, cash costs were estimated at around $16 a pound. Uranium in the spot market today is trading for approximately $35 a pound.
Lost Creek uses the in-situ method for resource recovery. Unlike traditional mining where teams of people use heavy equipment to move huge amounts of material, with in-situ recovery there is an automated, underground system in place that moves solution containing uranium to a central facility for processing. It's a low cost production method with minimal impact to the environment. (There is a 5-minute video available on Ur-Energy's site if you care to learn more.) Below is a picture we took on a recent site visit. It gives a feel for how little disturbance this type of mining causes (and note how little there is around).
Well sites at Lost Creek
Nearly ten years after its incorporation, Ur-Energy announced that on August 2nd of this year it began uranium production operations. On December 4th the company stated that it shipped its first batch of uranium, about 35,000 pounds worth. On December 23rd the company disclosed that it sold 90,000 pounds of uranium at $62.92 a pound, for gross revenues of $5.7 million. The September 2013 financial report commented, "The Company is in a state of transition and as such the quarterly financial information table reflects that transition." If you like stocks at inflection points, this one is worth a look. Better yet, in this case you don't have to wait for things to happen soon - big things have already happened, and the market has not yet reacted.
Banging our heads against the wall. At this writing we believe we are the second largest shareholder of the company (just behind BlackRock). It's a big investment for us, and we make big investments for a reason: we think they'll pay off. Our investment thesis in Ur-Energy looked for a number of catalysts to occur in 2013. Everything we were looking for, and more, happened, but the company's share price has barely budged. It's a good thing we are patient investors, even if at times we feel frustrated. In the management interview below, you'll hear Ur-Energy's Chairman echo our sentiment with his disbelief regarding Ur-Energy's stock price being flatlined.
Here are some of the top headlines so far in 2013 and the stock's reaction:
(click to enlarge)
Applying averages to press releases doesn't strike us a method that would conform to scientific scrutiny, but we'll do it anyway:
In 4 of 8 significantly positive announcements the stock traded down.
The average move in these 8 announcements is $0.02.
The average move in the first 7 announcements (excluding the Russell announcement, which has the least to do with the fundamentals of the company) is $0.00.
The net price share move over the 6-months from 6/17/13 to 12/17/13 is +$0.02, from $1.14 to $1.16.
We won't get into the details of each of these announcements, but suffice it to say it is the story of a company getting cheap funding, expanding its resource, starting production, shipping product, and the stock price staying flat. The resource expansion announcement disclosed that measured uranium was up 16% (650,000 pounds), inferred uranium up 65% (1.87 million pounds), and indicated was down 8% (350,000 pounds), for a net gain of 2.17 million pounds. That somehow caused the stock to trade lower.
"Candidly, if somebody had told me three years ago that I would get all of my permits behind me, that I would build out my processing plant in the timeframe that I said I would, on time and on budget, get my commissioning behind me and be delivering yellowcake -- and that I would still be trading a little over $1 a share, I would have thought it was not possible. Absolutely not possible."
- Jeff Klenda, Ur-Energy's Chairman
[Update for subsequent event: On December 23rd Ur-Energy made several significant announcements: that it closed on a private placement for $5.2 million, that it finalized the Pathfinder acquisition you'll soon read about, and that it completed its first uranium sales for $5.7 million at an almost 80% premium to spot pricing. In addition, on the same day Seeking Alpha published a well-done article by Nazim Macbeth focusing on Ur-Energy that was one of the top three articles of the day, and accompanied by another bullish article on uranium that also made it to the top ten. What was the impact of all this to Ur-Energy shareholders? The stock closed up one cent.]
Naturally, this raises the question of "why?" The most honest answer we can give is that we don't know. We see an investment opportunity in the shares based on the mismatch between company progress and the stock price. Uranium spot pricing explains only part of the picture. Uranium fell about $5 a pound from June through July, but that doesn't explain Ur-Energy's share price stagnancy since July, in the face of so many positive announcements and uranium pricing holding steady. We continue to hold our large position in Ur-Energy and regard it as one of our favorite investments. There are several catalysts we see on the horizon that can turn this stock sharply higher.
(click to enlarge)
A little about uranium. Uranium stocks are out of favor. The Global X Uranium ETF (URA) is down 31% this year. Behind this decline is a fall in the spot price for uranium, from the low $40's at the beginning of the year to around $35 today. But even that doesn't tell the whole story, as uranium was on a bull run in early 2011 when it surpassed $70/pound. Fukushima (March 2011) caused an abrupt change of course in uranium pricing and the commodity has been in a downtrend since. No doubt, there is a fundamental basis to the downtrend as some reactors went offline and various agencies announced plans to reconsider their nuclear strategies.
Uranium is a weird market. Most of the commodity trades outside the spot market, but spot is what gets all the attention. There is a huge gap between what the current uranium price is in the spot market ($35) and the market's long term price ($50). Uranium stocks are underfollowed and little understood. Retail investors seem to have an outsized influence on share prices in the sector, and an affinity for overreacting to news headlines about commodity prices. There are two things we see investors miss when thinking about the connection between uranium spot price today and Ur-Energy's shares: the company's long term contracts and upcoming events that should drive uranium prices higher.
Long term contracts. One thing investors often miss with Ur-Energy is that the company is not at the mercy of uranium spot price. Ur-Energy has 6 long term contracts in place to sell uranium to 4 different US nuclear utilities. These contracts span 2013 through 2019 and in aggregate address between a third and half of Ur-Energy's production. Average pricing on these contracts is estimated at over $60 a pound. As we said, the spot market doesn't tell the whole story so even though spot pricing is $35 a pound and the long term commodity price is at $50, Ur-Energy will be selling a significant portion of its uranium at approximately $60. This revenue stream de-risks the company while still providing investors with uranium exposure should spot pricing move higher.
Upcoming uranium supply/demand events. There's a reason why the long term uranium price is so much higher than the spot price. The market is anticipating a number of events that will impact the supply/demand characteristics of uranium. Highlights include:
A starting point of mismatched supply/demand. Last year global consumption of uranium outpaced global production by approximately 18%, or 28 million pounds.
The megatons-to-megawatts program expired this year. Under this agreement, Russian uranium was repurposed for utilities' usage. This program provided 13% of global uranium supply and close to half of US supply.
In 2014 Japan could restart its fleet of nuclear reactors (54 reactors were idled following the Fukushima tsunami). Raymond James is estimating that 30 gigawatts eventually get turned back on, starting at 9.5 gigawatts in 2014 (vs. 0 running in 2013). The average reactor in Japan has just under one gigawatt in capacity.
Worldwide there are 66 nuclear plants under construction, 160 planned, and 319 proposed. With 435 operable reactors worldwide today, the addition of new plants should add materially to demand.
There are significant regulatory and capital obstacles to bringing new uranium mines on line. Ur-Energy's mine took close to 10 years and over $166 million.
Globally, large scale uranium production growth is being cut back, including at Cigar Lake, the world's second largest high grade deposit.
Due to tank bursts and other issues at certain major mines (Ranger, Rossing), about 7% of 2014 global uranium supply is suspended (estimate by Cantor Fitzgerald).
(click to enlarge)
Source: Ur-Energy
Not everyone agrees when exactly the supply/demand imbalance will start to move uranium pricing materially. Some experts are calling 2014 the year of uranium. But to be fair, others say that it could be as long as two years until supply is worked through and uranium's price really starts to move higher. We'll point out that even if the return to $70 uranium is a couple of years away, every small price move higher is incremental profit for Ur-Energy. Even Raymond James, who sees oversupply through 2016 (and a shortage crisis in 2020) is expecting a $10/pound move in uranium next year.
(click to enlarge)
Guidance and resource expansion. On top of the 13.4 million pounds of uranium that Ur-Energy has (including inferred) at Lost Creek, the company just closed on the acquisition of Pathfinder Mines Corporation. Pathfinder adds an estimated 10 million pounds at its Shirley Basin site and 4.7 million pounds at the Lucky Mc (pronounced "Mac") site. In addition, Pathfinder brings a byproduct disposal facility-one of only four in the country-that will allow Ur-Energy to address its own needs, as well as the needs of others.
Remember that Ur-Energy will be producing 20% of the uranium in the US in 2014. Next year's production is estimated at 800,000 pounds at the minimum, with 1 million pounds more likely. The company is anticipating being cash flow positive in 2014. Consider as well the additional asset value of 10 to 15 million pounds from the Pathfinder acquisition, and you have one of the most unique uranium plays around.
Ur-Energy's Chairman, Jeff Klenda, explains in the below interview that investable, producing uranium companies are few and far between. As much as the sector is currently out of favor today, he is expecting tremendous investor appetite for Ur-Energy once uranium prices pick up and interest returns to the space. He thinks investors will find that there are very few companies that can absorb the capital that will want to enter.
Upside. Our view on Ur-Energy is conceptually similar to our thesis on Silver Bull. In both we see asset value protecting our downside, a base case where we make a decent return, and a bull case where we make multiples and multiples on our money. Both are investments in unique assets in very out of favor sectors, but where there are strong balance sheets, and a credible path to returning to favor in the medium term.
Ur-Energy's market cap is $142 million. This is below the estimated $166 million in equity the company raised over its life to get it to this point. That's one sign to us that this asset is undervalued.
There are very few comp transactions to reference in the space. This gets back to the point we made earlier, about the scarcity value of uranium plays. But, to have something to consider, we offer you the following sloppy math. Over the past couple of years, a handful of advanced exploration projects transacted at prices ranging from $7 to $11 a pound in the ground. We don't have in front of us what the economics of those projects were or what counts towards a pound in the ground. If we count all of the uranium (including inferred) at only Lost Creek and Pathfinder (see below resource profile for reserves we are leaving out) at $10 a pound (even though it could possibly be higher since Ur-Energy is a producer), you get to a valuation double today's market cap. But keep reading.
Jeffrey Wright at H.C. Wainwright has a $2.00 price target on Ur-Energy, which is 72% higher from here. Raymond James analyst David Sadowski has a price target of $1.80, 55% higher from here. He also wrote that he sees shares trading today at 60% of net asset value [NAV], which implies 67% upside just to reach the group average. Moreover, he sees the entire group as on sale since it has historically traded at 1.5x NAV. This implies 150% upside for Ur-Energy to get to the historical average, and we think that given the quality here, shares should trade at an above average valuation. You get a double discount on Ur-Energy as it's a cheap stock in a cheap sector.
(click to enlarge)
Source: Raymond James
In February of 2011, when uranium was at its high, shares of Ur-Energy crossed $3.25 a share. Recall that this was the price it reached when it was still over two years away from production and had a host of issues to sort out. This was also before the company added millions of pounds from the Pathfinder acquisition. Raymond James is predicting $70 uranium in 2017. Once uranium prices climb, how does Ur-Energy, now that the resource has de-risked itself and is producing a million pounds a year, not blow past its prior highs? And even if it only matches prior highs, you have close to a triple.
Here is where it gets really interesting. If, for example, we add $35 a pound to uranium pricing (to get to the pre-Fukushima $70 price) and consider only the 8.65 million pounds at Lost Creek and assign zero value to almost 5 million inferred pounds and zero value to Pathfinder, that's an additional $300 million or so in value ($2.50 a share) that can appear (this is on top of the value that the company gets for the first $35 a pound of uranium). Recall now that Shirley Basin could have more uranium than Lost Creek, and that there are probably millions of inferred ounces at Lost Creek, even if it's less than 5 million. Yes, this oversimplifies it all; taxes, time values, presold uranium, etc. all matter. We also haven't broached the additional value of the company's earlier stage Lost Soldier project and its 8.6 million measured and indicated pounds, just 14 miles from Lost Creek. The main point however is that if a few things click for this company, there's a path for shares not to be worth 70% to 150% more, but 5x to 10x more than they are today.
Here's what we wrote about Silver Bull, and it applies here too:
"This is win/win big - either we make a lot of money, or we make really a lot of money. . . . We can't control, or even predict [commodity] prices, but we can buy rare trophy assets when they are out of favor and deeply undervalued, and put ourselves in position to get really lucky if a few things crack our way. . . . Many of our greatest investments have been along these lines - where we don't have a lot to lose if we are wrong, have a base case where we do just fine, but also position ourselves to hit a grand slam if we get lucky. It's not about waiting for luck to fall randomly from the sky, rather sticking around spots where it's plausible for luck to fall and waiting patiently with a bucket to catch it."
Now you know why we are a top-two shareholder of the company.
A picture from our site visit a few months ago. Even with great emptiness around, it took nearly 10 years to get this mine permitted and in operation. It goes to show how difficult it is to develop an asset like this.
Risks. Just as part of the upside in Ur-Energy lays in the prospect of higher uranium prices, risk lays therein as well. Continued flat uranium pricing will make it hard for the sector and this stock to take off. The possibility of lower uranium prices also has to be considered, and that would be a negative, even though there's plenty of fat between the current uranium price and Ur-Energy's production cost. Related to this are both the headlines and the facts coming out of the nuclear power industry. There is one primary usage for Ur-Energy's uranium, and if the utilities reduce their demand, or if fears of such spread, uranium stocks could get hit.
Another risk that we think about with our investment here: what if we are right but too early? Some argue, plausibly, that the miners can't work until uranium prices move, and that the move won't come for over a year, at the earliest. We delineated reasons above why we believe that not to be the case and why we see catalysts arriving earlier, but are cognizant that we may turn out to be wrong. Yes, many reactors are in the works, but it will take a long time for them all to enter operation. The market may not be willing to give the stock credit in anticipation of uranium demand that's coming, if it has not yet arrived.
Hard to handicap but worthy of mention are the host of things that can go wrong at the mine or in the industry. We wrote above that tank problems at two major global production sites took mines out of service. Despite Ur-Energy's success and experience in permitting, getting permits to bring additional sites online will be what the process always is - only slightly easier than spotting a sasquatch. No one was expecting a Japanese typhoon to result in the Fukushima disaster, but things like that happen and can have materially negative effects on the industry.
Summary.
Ur-Energy is a cheap stock in a cheap, out of favor industry.
The company reached an inflection point recently, graduating from an exploration company to a production company.
Over the past 6 months the company announced a host of positive advances, yet the stock price is unchanged.
Management is expecting the company to be cashflow positive in 2014.
Between a third and half of Ur-Energy's revenues are locked in at prices around 70% above spot.
Uranium demand is expected to rise dramatically and supply is already below consumption, and declining further. This sets the stage for higher uranium prices.
The company just closed on an acquisition that doubled its uranium reserves.
We see upside up to 150% today plus a path to make many multiples of our money if a few things come together.
One of the biggest risks we see to our investment is the thesis taking longer to play out than we are anticipating.
Uranium mines are very rare assets and there are only a few investable producers to consider.
The company's Lost Creek project is expected to produce 20% of US supply next year.
Chairman interview. We express our appreciation to Jeff Klenda, Ur-Energy's Chairman, for a recent conversation. We are pleased to share a transcript with our readers.
Can I ask you to open with an overview of Ur-Energy's key resource at Lost Creek?
Jeff: Sure, I think that with Ur-Energy it's important to understand that for the last several years we have been a permitting story but, as of October of 2012, we received our final record of decision from the BLM and, since then, we have built out our processing plant and entered production. We are focused on our Lost Creek project. It is our flagship property and it's located in the south central part of the State of Wyoming.
How about some stats about the project? What makes it unique and what do we know about the resource?
Jeff: What we know about the resource is that we've just recently been adding to the known resource of the property. We have measured and indicated, as defined under the Canadian rules, about 8.65 million pounds. Total, adding inferred in there, we're about 13.4 million pounds. We did a preliminary economic assessment on the project back in April of 2012 and, at that time, we determined that we have, based on the known resource, about an eight- to ten-year mine life.
The things that we find unique about the property are that it combines all the elements that you like to see in a project. Not only do we have a very well-defined resource that's shallow, we have great permeability and porosity. It is a very large area and we consider it to be a very scalable property, meaning that we think we're going to be able to grow the resource quite a bit in the years ahead. But, in addition to that, even though some people would say we're out in the middle of nowhere, we have great infrastructure surrounding the project. We're quite unique in that there are very few properties that have all of those elements in one package.
In terms of project economics, what do the studies say about its returns profile?
Jeff: Well, right now I want to make sure that I'm cautious about what I say here from the standpoint that we have recently released an increase in our known resources and that was press released in the month of November. Consequently, we are required under TSX and NYSE regulation to release an updated preliminary economic assessment [PEA] based on that updated resource estimate. So, when I say that we -- I would be quoting the April 2012 PEA, or preliminary economic assessment. Our numbers indicated at that time that we would have a cash cost of $16.12 per pound on a cash basis and that, for life of mine with full capital cost recovery, we would be at about $36.50 per pound, that we would have an eight- to ten-year mine life and that the IRR on the project would be roughly 87%. And, again, I would caution that those numbers will change upon the release of our new PEA very shortly.
But they should change to the upside?
Jeff: We think that we're going to come in very much in line in terms of our cost on a per pound basis to produce uranium. Obviously, with the additional pounds, we should be able to increase the mine life. But I think that, because of the lower pricing in uranium at $35, $36 a pound spot price, we'll probably see the IRR on the project drop a bit.
What does it mean if uranium prices go back to $40 where they were this summer, or even to $45 where they were at the beginning of the year?
Jeff: Well, for our project it has a huge impact. Based on the numbers that I just gave you that are contained in our preliminary economic assessment, if I can produce a pound of uranium at $16 a pound and the current spot price is $35, $36 a pound, I'm still profitable. But, for every $5 rise in spot prices, that has a dramatic impact on our margins and our bottom line. We become very, very profitable with every incremental, much more profitable with every incremental increase in spot pricing out there in the marketplace.
Are you able to quantify the impact?
Jeff: It's important to understand that we have made it a high priority of our company to be sure that we have a certain amount of our production covered by long-term sales agreements or what are called offtake agreements. These are absolutely critical and I think that this is one area in the marketplace where we have done a better job than virtually any of our peers. We began entering into them three years ago and, since that time, we have put in place a total of six offtake agreements with four major US utilities.
In terms of quantifying what higher prices mean to us, in between a third and 50% of our aggregate production at Lost Creek will be under these long-term agreements and they will average in excess of $60 a pound. Obviously, in a $35 spot environment, that gives great margins. But the rest of it is left open to the spot marketplace so, to the extent that all other pounds are going to be sold, presumably, into the spot market in 2014 and likely in 2015, then our profitability will rise and fall with the spot pricing.
Has the company offered any guidance regarding how many pounds they hope to sell next year?
Jeff: We have. We are licensed to produce 1 million pounds a year at Lost Creek. We are projecting that we will produce a minimum of 800,000 pounds next year but we firmly believe that we will be able to produce the full 1 million pounds for Lost Creek in calendar year 2014, so that's our guidance.
So if I just take the minimum to be cautious, 800,000, and I use spot at $35 a pound, that's a minimum of $28 million in revenue?
Jeff: Sort of. Keep in mind that for next year we also have a certain number of pounds that have already been contracted for, for delivery in 2014, at over $60 a pound. So our numbers are going to be improved. We will not be simply vulnerable to spot contracts or spot pricing for our sales.
Why has uranium pricing been weak this year? And what's your outlook for the next 18 months?
Jeff: Well, you cannot have a reasonable discussion about the uranium sector without talking about Fukushima. And, of course, this was the earthquake and subsequent tsunami that struck the Fukushima Dai-Ichi facility in March 2011. That was truly a black swan event. The most significant impact has been that Japan has 54 reactors that have been idled. This has definitely created, at least short term, an overhang of supply in the marketplace.
But what I think we're seeing here is that, because of the low pricing we're seeing a significant amount of supply come out of the marketplace. We have seen numerous delays of major projects that were scheduled to come into production between now and calendar 2020. But, in addition to that, we've also seen a number of current producers drop offline, most recently, Rossing and Ranger owned by Rio Tinto (RIO).
So, we're seeing future supply being impacted by these lower prices. And, as the old saying goes, the cure for low prices is low prices.
Tell me about the company's cash situation.
Jeff: Last quarter we had about $6.2 million. Last week we announced that we actually shipped our first yellowcake from Lost Creek. In fact, we made two deliveries last week. The first was in the amount of 35,000 pounds and that was press released to the marketplace. We are anticipating our first cash flows right at or about the first of the year in 2014.
[Post-interview note: on December 23rd Ur-Energy announced that it completed the sale of $5.7 million worth of uranium at the average price of $62.92 per pound.]
Do you anticipate 2014 to be cash flow positive?
Jeff: We believe that we will be, yes. And that would include debt service. We were successful in October in securing a $34 million industrial revenue bond with the State of Wyoming under very favorable terms. It was a 5.75% coupon rate, which is one of the lowest that I've heard anybody securing recently.
What are the big things you see going on in the uranium industry?
Jeff: The uranium sector has very, very few players, and the list is shrinking as lower prices push away companies with less attractive projects. That leaves me bullish on our prospects because it makes us so much scarcer.
If you want to gain a perspective on what the future value is of our company and where we think we can build that value, I think you really have to look at the situation here in the United States. The US is far and away the largest consumer of uranium on the planet, anywhere from 55 to 58 million pounds a year. Yet, the US is one of the smaller uranium producers worldwide. The US will only produce about 5 million pounds next year.
And where we really feel Ur-Energy has the opportunity to build value as an organization is by ramping up our production to 1 million pounds per year. If the United States produces approximately 5 million pounds next year in 2014, we will be 20% of the domestic production in the country. And we feel that there's real opportunity to grow that production and become an even larger percentage of the overall production in the US.
What is Pathfinder and what's the opportunity there?
Jeff: Well Pathfinder, very simply, we believe is our future. Pathfinder is a North American corporate subsidiary of the French nuclear giant, AREVA. When we agreed to buy Pathfinder, essentially what we agreed to do was buy a significant portion of AREVA's remaining assets in the United States. And it's a great suite of assets. It includes two well-defined projects, specifically Shirley Basin and Lucky Mc. There are about 10 million pounds there that are extremely well-defined, already permitted and licensed.
But, in addition to that, we're getting AREVA's massive database that defines projects in 23 US states. We also feel there's real hidden value in the acquisition is that we're getting what's called an 11e2 byproduct disposal facility and it's one of only four in the United States. So, in essence, not only does anybody who wants to produce in the United States need a place where they can dispose of low-level contaminants, and that's what this facility provides, but in addition to that, most importantly, we've provided for that disposal for ourselves. So we see this acquisition as being a terrific suite of assets that are going to be very, very accretive to our company.
[Post-interview note: on December 23rd Ur-Energy announced that it closed on the Pathfinder acquisition.]
Forgive me for pouring salt into a wound but I look at the past few months, you've had some very positive announcements. One related to a $34 million financing from the State of Wyoming on friendly terms. You've announced that you've entered production and that you have actually sold your first yellowcake. You've announced that you found significantly more uranium than you thought you had. You announced that production is exceeding expectations. But the stock price is the same or even lower than it was in June of this year. You keep announcing good things and the stock is not reacting. What am I missing?
Jeff: That's absolutely correct. I don't think that you're missing much of anything. I think that we're not just announcing good things; we're announcing great things. And it's been a source of frustration for us.
Candidly, if somebody had told me three years ago that I would get all of my permits behind me, that I would build out my processing plant in the timeframe that I said I would, on time and on budget, get my commissioning behind me and be delivering yellowcake -- and that I would still be trading a little over $1 a share, I would have thought it was not possible. Absolutely not possible.
We've been frustrated but I think that it goes back directly to the uranium supply overhang in the marketplace, which is being worked off and will not be there for much longer, but it is a fact of life and it is there right now. And, even though the vast majority of pounds that are traded in the marketplace are actually traded in the term marketplace, spot price seems to get most of the attention.
There are a couple of things that are going cause that to change. One, we know that the Japanese are going to begin restarting their reactors and we should see that here in the first half and certainly throughout 2014. That's going to be a big impetus for the marketplace, I think from a psychological standpoint, if nothing else. But, in addition to that, of course, the Chinese continue to build out. There are some 66, depending on who you're reading, 66 to 70 reactors that are being currently constructed and, of those, 30 are being built out in China.
If you think back to not that long ago, between August of 2010 and February of 2011, during that six month period of time, we saw spot rise about 60%. Our stock went from $0.80 a share all the way up to $3.38 -- that's more than a 300% increase -- and that was with no substantive news coming out on it.
If uranium pricing makes that big of a difference, what reason would you give someone to invest in Ur-Energy rather just buy the commodity?
Jeff: Well, that's a great question. And I'll tell you this, let me refer back to a comment that I made earlier when I said that the dwindling number of companies in the uranium space were really one of the most bullish factors surrounding the uranium space. In 2007 there was a survey done. There were 585 names in the uranium space. Now that number's probably closer to 50, maybe 60. I firmly believe that, by the time we get into the middle of 2014, I don't think that there are going to be 20 companies out there, globally, that anybody is going to want to pay any attention to.
The simple fact of the matter is that when the uranium space is hot, when the spot price is moving, there's a lot of capital that comes tumbling into this space. The next time when we see that, there are going to be very few investable companies out there to absorb that capital.
What I'm hearing from fund managers across the nation is that the ones that are the contrarians are right now doing their homework. They're doing their due diligence. And they're deciding which companies they like so they can be ready to pounce at the right time. When the turnaround comes, and I think it's on its way, I believe that the movements of selected equities in the uranium space are going to be spectacular to the upside.
What are the most important risks that an investor should be aware of other than uranium pricing?
Jeff: I think that our greatest risk here is simply delays due to permitting and licensing. I think that pricing is going to be what it is. We cannot control that. But the permitting process, despite the fact that we have a well-defined process in the United States, the timing on that process is uncertain and, unfortunately, that can bring financial hardships to a company. But, we seem to have done a pretty good job of working our way through that on Lost Creek and we're confident we can do a good job of working our way through the permitting and licensing hurdles with Shirley Basin as well.
Would you like to offer any summary remarks?
Jeff: Sure. I think that one of the most compelling reasons to be in the uranium space right now is the simple fact that the number of companies out there that are suitable for investment are very few. Over the past few weeks Ur-Energy has entered production. We're making our deliveries. We're cash flowing. Right now, there are only a few of us that can say that. We've transformed ourselves from an exploration company to a production company, and the market has not given us credit for that.
When uranium pricing turns, we'll be at the top of the heap since there will be just a handful of investable companies in the space. We see supply coming offline and reactors being built, so we are bullish on uranium pricing.
In the meantime, we're going to continue to ramp up our production. We intend to add to known resources so that we can continue to demonstrate expansion and scalability at Lost Creek. In 2014 we'll advance Shirley Basin to application with both the state and federal authorities. So, we're going to have a big year ahead of us in 2014 and the time for investors to look at us is now, so they can be ahead of the game.
Thank you, Jeff.
Jeff: You bet.
Presentations
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Our breadth of knowledge, experience, and resources across some of the world's most demanding, stringent industries is what keeps TechPrecision, and its clients, at the leading edge of innovation. TechPrecision understands the extreme environments, wide-ranging operating parameters, and advanced materials requirements of the Cleantech, alternative energy, medical, aerospace, and defense sectors. We deliver fabrication and machining solutions that ensure your large-scale components can perform the way they are engineered to.
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TechPrecision: Company Overview
Founded in February 2006, TechPrecision Corporation is a holding company that's driven to provide businesses with the most well-engineered, cost-effective turnkey solutions to their large-scale component and equipment manufacturing challenges. By assembling experienced metal fabrication companies that specialize in unique, demanding global industries, TechPrecision provides clients with access to knowledge, resources, and technologies that span some of the most demanding manufacturing sectors.
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$TPCS - Techprecision (TPCS) Bonus Research
http://poisedtotriple.com/techprecision-tpcs-bonus-research/
Before we get started, you should know that all of our research is provided exclusively to PTT Research paying members in advance of it being published on our blog. In this case, after pushing our TPCS Breaking News Alert out the door, we continued to investigate the magnitude of Mevion’s big announcement. The results were far more bullish than we anticipated. This bonus report was issued to our PTT Research members on Monday. Many of our members pay for their Lifetime subscriptions with just one pick. So check us out!
According to information gleaned from Mevion’s website, the industry has been excitedly anticipating last week’s patient-treatment news. Based on what we found there (and other sources, which I will describe shortly), I expect that Mevion could end up being one of the hottest medical device IPOs of 2014. Here’s the rundown:
Four additional Mevion S250 proton therapy systems are already under installation (at Robert Wood Johnson University Hospital in New Brunswick, NJ…the Stephenson Cancer Center at Oklahoma University in Oklahoma City, OK…First Coast Oncology in Jacksonville, FL…and the Proton Therapy Center at Orlando Health).
In addition, the Seidman Cancer Center at University Hospitals in Cleveland, OH broke ground on their Mevion S250 center in September of this year, and has taken delivery of the first system module, thus making Mevion Medical Systems the leading supplier of proton therapy in the U.S.
In St. Louis, the Siteman Cancer Center just released a powerful new video showing how amazing the Mevion S250 is. I was personally blown away and touched by what this device is going to do for cancer patients. The implications for children was particularly heart wrenching.
The positive tidings are coming from other circles as well. American Shared Hospital Services is a company that enables facilities to obtain Mevion systems. From a recent call, we picked out these highly bullish comments:
“So we are seeing where our potential services increase weekly. We are probably in negotiations with over 10 hospitals or more about putting in Mevion units. I think it’s clear at this point that those large three and four room systems do not make economic sense. If you look at what has happened in the last two or three years, no machine has really done more than 900 patients a year…and so many of the large room machines, if they were single rooms, would be quite profitable.”
“We are encouraged every day. Some hospitals that were thinking about putting in larger rooms are no longer considering that. So, the interest is large. We’re also finding that interest in institutions to finance these, once the Mevion machine is treating patients. So I’m encouraged by what’s happening and I think, clearly, the (Mevion) proton business is going to explode in the next six months.”
“We spent a day with the MEVION sales staff recently. They have a backlog of over 17 machines and there seems to be even new orders or potential orders coming every week. They expect that backlog to increase dramatically in the next few months.”
$WLT - Walter Energy: Weak Met Coal Price Remains A Concern
http://seekingalpha.com/article/1916361-walter-energy-weak-met-coal-price-remains-a-concern?source=email_rt_article_readmore
Dec. 26, 2013 4:16 AM ET | 1 comment | About: WLT
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Walter Energy (WLT) is the leading met coal producer in the U.S. and produces premium quality met coal. As WLT is mainly engaged in met coal operations, its earnings are highly sensitive to met coal prices. Met coal prices in recent times have stayed weak, and I believe oversupplied met coal markets will limit a met coal price recovery in the near term. Last week, the met coal quarterly benchmark price for 1Q2014 settled at $143/ton, its lowest level since 2009. As met coal markets remain oversupplied, I am downgrading WLT from 'buy' to 'hold'. Also, WLT has experienced price appreciation of approximately 50% in the ongoing second half of 2013, which limits any stock price appreciation in the near term.
Lower Met Coal Price and oversupplied Markets
Last week, the 1Q2014 met coal benchmark price settled at $143/ton, down from $152/ton for 4Q2013. The 1Q2014 benchmark price remains the lowest since fiscal year 2009's annual settlement price of $129/ton, indicating that met coal markets remain oversupplied. Also, due to excess supply, the met coal spot price continues to drop; last week, the met coal spot price was down $1 to $137/ton. I believe that oversupplied met coal markets will limit any met coal price recovery in the near term. The following chart shows the recent met coal benchmark price trend.
(click to enlarge)
To address the concerns of oversupplied met coal markets, coal producers need to cut supply, delay the completions of new coal mines and coal demand needs to strengthen; however, supply cuts remain the most important driver for a recovery in coal markets. Having said that, supply cuts do not appear to be forthcoming in the U.S. in the near term, and it is expected that at minimum, met coal production in 2014 will at least equal the 2013 production levels. WLT, Alpha Natural Resources (ANR) and Teck Resources Limited (TCK) are likely to maintain their 2013 met coal production levels in 2014, whereas Arch Coal's (ACI) met coal production in expected to increase in 2014 year-on-year, as it is planning to ramp up its production at the new Leer mine in 2014. Therefore, I believe met coal markets will remain oversupplied in the near term, which will limit a met coal price recovery.
Financial Flexibility
WLT's mine 4 and mine 7 are cash positive in the current depressed coal market conditions, as these mines have cash costs of approximately $115/ton and $105/ton, respectively. Also, both these mines in Alabama have lower transportation costs, as they are closer to ports. WLT's has Canadian mines, which are unprofitable in the current tough market conditions, and has a highly debt-loaded balance sheet; WLT currently has a debt-to-equity of 335%. Despite the fact that WLT has reduced its operational costs in recent times, share price performance remains dependent on met coal pricing and capital structure headwinds. I believe that in order to strengthen its balance sheet and improve its financial flexibility, WLT can issue equity, which might portend well for the stock price. Also, any equity issuance would help the company improve its capital structure and navigate through the ongoing industry downturn.
Conclusion
I believe met coal prices are expected to remain weak in the near term, as met coal markets remain oversupplied. Also, supply cuts remain the most important factor for a recovery in met coal prices. Moreover, I believe WLT should consider equity issuance as an option to strengthen its balance sheet and survive the prevalent difficult times. Furthermore, due to depressed coal market conditions, coal stocks continue to trade at depressed valuations, which I believe is justified; WLT is currently trading at a P/S of 0.5x and P/B of 1.1x.
Due to excess met coal supply and weak met coal prices, I am downgrading WLT from 'buy' to 'hold', and recommend investors to keep a check on met coal supply in the market, as it could have a notable impact on the stock price as we move forward.
$UEC - watch for change of trend to the upside above $1.95
$GEVO - Gevo Sponsored Research Leads to UL Approval of Isobutanol for Gasoline Storage & Dispensing Equipment
http://seekingalpha.com/news-article/8527541-gevo-sponsored-research-leads-to-ul-approval-of-isobutanol-for-gasoline-storage-dispensing-equipment?source=email_portfolio&ifp=0
Mon December 23, 2013 8:30 AM | About: GEVO
NEWS PROVIDED BY:
GlobeNewswire
ENGLEWOOD, Colo., Dec. 23, 2013 (GLOBE NEWSWIRE) -- Gevo, Inc. (GEVO), the world's only commercial producer of bio-based isobutanol, today confirmed that Underwriter Laboratories (UL) has approved the generic use of up to 16% isobutanol in UL 87A pumps by any manufacturer meeting ASTM specifications, providing all of the service stations across the country with the assurance that isobutanol blended gasoline will work in their current gasoline pumps without the need to purchase new equipment.
Gevo has been working with UL for several years to approve the use of isobutanol in UL 87A pumps. UL in working with various companies and independent laboratories compiled data for their scientific determination on isobutanol. Gevo sponsored a large study based on SAE J1681 and using a model created in a previous UL investigation with ethanol-surrogate gasoline fuel blends.
"I am very pleased with what we have accomplished with UL. They are great organization to work with in the commercialization of isobutanol," said Glenn Johnston, Executive Vice President for Regulatory Affairs at Gevo. "This removes another hurdle in the commercialization of renewable isobutanol in on-road gasoline
About Gevo
Gevo is a leading renewable chemicals and next-generation biofuels company. Gevo's patent-protected, capital-light business model converts existing ethanol plants into bio-refineries to make isobutanol. This versatile chemical can be directly integrated into existing chemical and fuel products to deliver environmental and economic benefits. Gevo has executed initial commercial-scale production runs at its isobutanol facility in Luverne, Minn., constructed in conjunction with ICM, a leading provider of proprietary ethanol process technology, and has a marquee list of partners including The Coca-Cola Company, Sasol Chemical Industries, and LANXESS, Inc., an affiliate of LANXESS Corporation, among others. Gevo is committed to a sustainable bio-based economy that meets society's needs for plentiful food and clean air and water. For more information, visit www.gevo.com .
Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements that are not purely statements of historical fact, and can sometimes be identified by our use of terms such as "intend," "expect," "plan," "estimate," "future," "strive" and similar words. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of the management of Gevo and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although the company believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Gevo in general, see the risk disclosures in the Annual Report on Form 10-K of Gevo for the year ended December 31, 2012, as amended, and in subsequent reports on Forms 10-Q and 8-K and other filings made with the SEC (SCUR) by Gevo.
$URRE - Navajo Nation Council Resources and Development Committee Resolution Acknowledges Uranium Resources Existing Right-of-Way and Surface Use at its Churchrock Properties
http://seekingalpha.com/news-article/8533501-navajo-nation-council-resources-and-development-committee-resolution-acknowledges-uranium-resources-existing-right-of-way-and-surface-use-at-its-churchrock-properties?source=email_portfolio&ifp=0
Tue December 24, 2013 6:55 AM | About: URRE
NEWS PROVIDED BY:
GlobeNewswire
CENTENNIAL, Colo., Dec. 24, 2013 (GLOBE NEWSWIRE) -- Uranium Resources, Inc. (URRE) (URI) announced today that on December 23, 2013, the Navajo Nation Council Resources and Development Committee ("NNRDC") acknowledged the right-of-way and surface use at its Churchrock properties licensed by the U.S. Nuclear Regulatory Commission. The NNRDC has the authority to take action with regard to right-of-way issues. The Committee acknowledged the right-of-way and surface and mineral access rights granted in the 1929 Deed by the Santa Fe Pacific Railroad Company. The same access rights were passed to URI as the successor-in interest to the Deed.
The NNRDC also authorized the creation of a Subcommittee to work with the Navajo Nation Executive Director of the Natural Resources Division and the Department of Justice, along with representatives of URI. The Subcommittee's task is to consider the terms of an agreement that results in mutual gains for both the Navajo Nation and URI, considering the right of way and surface use granted in the 1929 Deed.
Christopher M. Jones, President and CEO stated, "The Committee's resolution is a very positive development for URI. We look forward to future discussions with the Subcommittee and the potential gains for both the Navajo Nation and URI from the development of a mutual agreement."
About Uranium Resources, Inc.
Uranium Resources, Inc. explores for, develops and restores uranium projects. URI has over 206,600 acres of uranium mineral holdings in New Mexico, processing facilities and properties in Texas, and an NRC license to recover up to three million pounds of uranium per year using the in situ recovery (ISR) process. The Company acquired these properties over the past 20 years, along with an extensive information database of historic drill hole logs, assay certificates, maps and technical reports.
Uranium Resources routinely posts news and other information about the Company on its website at www.uraniumresources.com .
Biggest US coal plant closures of 2013
http://www.mining.com/biggest-us-coal-plant-closures-of-2013-87594/?utm_source=digest-en-coal-131223&utm_medium=email&utm_campaign=digest
Ana Komnenic | December 18, 2013
US coal plant closures
It's no secret that the US is abandoning coal in a big way: Over the next decade, US power companies have formalized plans to permanently retire nearly 28,000 megawatts (MW) of coal-fired generating capacity.
According to a report from SNL Financial, by 2015, US power plants will have to comply with the Environmental Protection Agency's (EPA) 'Mercury and Air Toxics Standards' which sets limits on plant emissions.
Coal-fired power plants – the biggest source of US electricity generation – are hit particularly hard by these standards. As a result, companies have been gradually retiring non-EPA-compliant plants, with the biggest spike in closures expected between 2014 and 2016.
Surprisingly, the pace of retirements has slowed in 2013 compared with 2012 when 8,800 MW of coal capacity was permanently shuttered.
This year's, the US will forsake just under 6,000 MW of coal power – 34% less than the previous year.
Source: SNL Energy, Aug 2013 | Map credit: Whit Varner
Here are the biggest US coal-fired power plant closures of 2013, grouped by company and based on data compiled by SNL Financial.
1 – FirstEnergy Corp
FirstEnergy Corp retired the largest amount of coal power in 2013 in terms of megawatts. By closing its Hatfield's Ferry Power Station and Mitchell Power Station in Courtney Pennsylvania, the company took nearly 2,000MW of coal out of the US power mix. In total, about 380 employees were affected, according to a FirstEnergy news release. The company decided to shutter the plants because the cost of EPA-compliance was too high.
2 – Duke Energy
Duke Energy – the largest electric power holding company in the US – shut down three coal units in North Carolina this year, totalling 1,342MW. Among the closures was Duke's first large-scale power plant, the 256-megawatt Buck Steam Station in Rowan County which began operating in 1926.
3 – Southern Company
Through its subsidiary Georgia Power, Southern Company shuttered two units of its Harllee Branch power plant as Georgia Power shifts toward nuclear power, 21st-century coal technology, natural gas and renewable energy. Combined, the units produced about 500MW.
He is the best by far - served in the Alaska government with and good friends with Sarah Palin - I have met him and he is a world class individual and mining professional
$PNPFF - Pinetree Capital Ltd. Acquires Securities Of Coro Mining Corp.
http://www.pinetreecapital.com/investors/news_releases/index.php?&content_id=652
TORONTO, Canada (December 23, 2013) Pinetree Capital Ltd. (TSX: PNP), announces that on December 20, 2013, it acquired ownership of 1,000,000 common shares (“Common Shares”) and 500,000 common share purchase warrants (the “Warrants”) of Coro Mining Corp. (“Coro”) representing approximately 1.0% of the total issued and outstanding common shares of Coro as of December 20, 2013. As a result of this transaction, Pinetree and its joint actors collectively held, as at December 20, 2013, an aggregate of 15,715,000 common shares of Coro, including the Common Shares, and rights to acquire an additional 1,000,000 common shares of Coro upon the exercise of convertible securities (the “Convertible Securities”). Of these totals, Pinetree owns 14,715,000 common shares, including the Common Shares, and the Warrants (the “Pinetree Convertible Securities”) directly. In the event that the Convertible Securities are fully exercised, the holdings of Pinetree and its joint actors represents a total of 16,715,000 common shares of Coro or approximately 11.1% of all issued and outstanding common shares as at December 20, 2013, calculated on a partially diluted basis assuming the exercise of the Convertible Securities only. In the event that the Pinetree Convertible Securities are fully exercised, the direct holdings of Pinetree represent a total of 15,215,000 common shares of Coro, or approximately 10.2% of all issued and outstanding common shares as at December 20, 2013, calculated on a partially diluted basis assuming the exercise of the Pinetree Convertible Securities only.
These transactions were made for investment purposes and Pinetree and its joint actors could increase or decrease their investment in Coro depending on market conditions or any other relevant factor.
Uranium Miners Outperforming In 2013 May Be Just The Beginning
http://seekingalpha.com/article/1913791-uranium-miners-outperforming-in-2013-may-be-just-the-beginning?source=email_rt_article_readmore
Dec. 23, 2013 4:17 PM ET | 1 comment | About: URA, Includes: ARVCF, BWC, CCJ, FCUUF, FLR, RIO
Disclosure: I am long DNN. (More...)
At the end of 2012, the investment community laughed at my prediction that 2013 will produce phenomenal gains in the uranium miners (URA). Read my interview with The Energy Report at the end of 2012 which may have signaled the bottom in the uranium miners.
(click to enlarge)
In 2013, our uranium bellwethers Areva (OTCPK:ARVCF) and Cameco (CCJ) have significantly outperformed the S&P 500 (SPY) by a significant margin. The uranium price has been making a very bullish turnaround since early November. Cameco is on the verge of a breakout at $22 and we may soon witness a golden crossover of the 50 and 200 day moving average.
(click to enlarge)
Now those who ridiculed me claiming uranium was dead are now coming to the realization that the uranium sector which was reviled by investors a year ago is now coming back in favor. Areva and Cameco are significant outperformers in 2013 as well as the small nuclear modular reactor manufacturers such as Babcock and Wilcox (BWC) and Fluor (FLR) which I have highlighted over this past year. This may already be benefiting the junior uranium explorers in the uranium rich Athabasca Basin.
For years I have predicted that the recent low price in uranium which hit 8 year lows in 2013 may actually be the catalyst to look for higher grade and more economic uranium deposits particularly in the Athabasca Basin in mining friendly Saskatchewan and in low cost in situ uranium operators in the United States as the Russian Megatons to Megawatts expired in 2013.
This low uranium spot price may actually be causing a uranium rush for these lower cost production capabilities. Higher cost uranium mines are being shut down or delayed all over the world. This could cause a major shortfall as demand picks up in emerging economies.
However new uranium discoveries are receiving a lot of attention especially in the Athabasca Basin which is the highest grade uranium mining district in the world. Some of the older mines such as Rio Tinto's (RIO) low grade Rossing and Ranger Mine have been facing technical challenges.
(click to enlarge)
This low price in uranium is possibly the reason why Cameco, Rio Tinto and Denison (DNN) have been buying junior uranium explorers in the Athabasca Basin trading at bargains due to the weak resource sector. These assets are high grade meaning potentially lower production costs in a stable jurisdiction. Smart money knows nuclear power is here to stay as there are more reactors operating and under construction now post-Fukushima than from before the once in a millennium natural disaster.
Even after Fukushima, the Athabasca Basin has been the one bright light in a resource sector covered with darkness. Right after Fukushima, Cameco and Rio Tinto, both with billions of dollars of market cap went into a bidding war over Hathor. Rio won with a bid of $642 million. Eventually, Denison bought out Fission for its J-Zone asset next door to Roughrider making itself a target for either Cameco or Rio.
(click to enlarge)
Now, Fission's (OTCQX:FCUUF) new spin out is buying Alpha for $180 million for the new Patterson Lake South Discovery. What does all this M&A activity in Athabasca uranium miners mean in a bear market in the resource sector?
Smart money is telling us that the Athabasca Basin represents one of the great areas to make exponential wealth in the discovery of uranium. Companies can go from a $3 million market cap to $180 million if a new discovery is made. Look at the Athabasca Basin bellwethers such as Cameco, Rio and Areva whose share price has moved significantly higher to pay top dollar for the best discoveries in the Basin. The Athabasca Basin is attracting capital that is looking for 10-20 fold increases.
$FCX - Freeport CEO Adkerson waives contract in return for stock award
Freeport McMoRan (FCX) is restructuring its employment agreement with CEO Richard Adkerson, tying his compensation to the stock's performance.
Adkerson will give up his salary, bonus, and rights to severance and change-of-control payments in exchange for restricted stock worth ~$36M; he will continue as CEO, president and vice chairman.
FCX says the agreement is another step of progress in strengthening its corporate governance practices, with further modifications ahead in its executive compensation program.
This Market Current was sent to 21,512 people who get email alerts on FCX
http://seekingalpha.com/currents/post/1480381?source=email_rt_mc_readmore
International Tower Hill Announces Management Reorganization And Appoints Tom Irwin as Chief Executive Officer
http://www.ithmines.com/news/index.php?&content_id=341
Vancouver, British Columbia, December 23, 2013 – International Tower Hill Mines Ltd. (“ITH” or the “Company”) - (TSX: ITH) (NYSE-MKT: THM) today announced that the Company will reorganize senior management and its Board of Directors, and implement a reduction in the work force. These changes are being made to focus the Company’s efforts on project optimization opportunities, maintenance of environmental baseline activities required for permitting, advancing discussions with companies holding confidentiality agreements and conserving cash. The Company will retain the strong development and permitting team for moving the project forward, while maintaining ITH’s significant gold asset.
The Company is pleased to announce that Mr. Thomas Irwin has been appointed President and Chief Executive Officer effective January 1, 2014. Mr. Irwin has been serving as Vice President, supporting corporate strategic initiatives as well as being responsible for technical matters for the Company’s Livengood Gold Project.
Mr. Irwin will succeed Don Ewigleben, who became CEO in September 2012, after having previously served as the Chairman of the Board. Mr. Ewigleben recently informed the Board of his desire to seek an orderly transition now that the Company is properly organized for its present activities in conserving cash and in view of the current market conditions. Mr. Ewigleben has agreed to assist the Company in this transition as a consultant and counsel.
"I am very pleased to take on the role of Chief Executive Officer of ITH as our team continues to advance the Livengood Gold Project,” said Mr. Irwin. “With the benefit of my long history in Alaska, I am confident the region remains one of the best mining jurisdictions in the world and I believe in Livengood as a world-class multi-million ounce gold project. With Tom Yip, as CFO and Karl Hanneman, as Alaska General Manager, along with our strong development and environmental team, we are uniquely positioned to move Livengood forward with a joint venture partner.”
Mr. Irwin is well suited for this phase of the Company’s development with over 40 years of experience in the natural resource industry, including construction, operations, optimization, and permitting major mining projects. Prior to joining ITH, Mr. Irwin served as the Commissioner of the Alaska Department of Natural Resources for six years. As Commissioner, part of his responsibilities included close communication and negotiation with major companies and management of Alaska oil, gas and mining resources, which annually produce several billion dollars of revenue for the State.
Prior to his role with the Alaska Department of Natural Resources, Mr. Irwin held senior positions at the Fort Knox mine located 45 miles southeast of the Livengood project. From 1992 to 1996 Mr. Irwin was Vice-President of Fairbanks Gold Mining, Inc., a subsidiary of AMAX Gold Inc., responsible for engineering at Fort Knox during project design and permitting. From 1996 to 1999 he was Operations Manager responsible for mine start-up and operation and General Manager of the mine from 1999 to 2001. Following these positions he became the Vice President, Business Development for Fairbanks Gold Mining Inc., then a subsidiary of Kinross Gold Corp. Prior to his work in Alaska, Mr. Irwin was General Manager of AMAX Gold's Sleeper Mine in Nevada and manager of AMAX’s Climax mine in Colorado. Mr. Irwin has a degree in Mineral Engineering-Chemistry from the Colorado School of Mines.
As part of the Company’s reorganization, effective January 1, 2014, Mr. Ewigleben will step down from the Board along with Mr. Dan Carriere, Mr. Tim Haddon and Mr. Roger Taplin; Mr. Anton Drescher, Mr. Mark Hamilton and Mr. Thomas Weng will remain on the Board and Mr. Weng will be the Lead Independent Director of the Board.
Total ITH staff will be reduced by approximately 30% effective January 1, 2014, affecting both the Denver and Fairbanks offices.
About International Tower Hill Mines Ltd.
International Tower Hill Mines Ltd. controls a 100% interest in the world-class Livengood Gold Project, accessible by paved highway 70 miles north of Fairbanks, Alaska, which contains a mineral resource of 731 million Measured tonnes at an average grade of 0.61 g/tonne (14.4 million ounces at 0.3 g/tonne cut-off), 71 million Indicated tonnes at an average grade of 0.56 g/tonne (1.3 million ounces at 0.3 g/tonne cut-off) and 266 million Inferred tonnes at an average grade of 0.52 g/tonne (4.4 million ounces at 0.3 g/tonne cut-off).
$SLW - Will Silver Wheaton Plummet Further?
http://seekingalpha.com/article/1913531-will-silver-wheaton-plummet-further?source=email_rt_article_readmore
Dec. 23, 2013 2:41 PM ET | About: SLW, Includes: GLD, SIL, SILJ, SLV, SLVP
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Shares of Silver Wheaton Corp. (SLW) have sharply decreased during December: The stock fell by 5.8% since the beginning of the month (up-to-date). The weak silver market, especially after last week's FOMC decision to taper QE3 by $10 billion, is also dragging down Silver Wheaton's stock. Gold and silver ETFs such as iShares Silver Trust (SLV), SPDR Gold Trust (GLD) have also suffered from the weakness of precious metals and sharply declined during December. Will Silver Wheaton continue to plunge? What should we expect from the company's performance in the fourth quarter?
Fourth-quarter report
The company is likely to release its fourth-quarter earnings report during the middle of January 2014. Until then, let's see how the company may have done during the quarter. Based on the company's expectations, production of gold and silver in the first three quarters of 2013, and the changes in the prices of precious metals, I guess the company's revenues will sharply decline in the fourth-quarter compared to the parallel quarter in 2012. The main reason for the drop in revenues is sharp fall in precious metal prices. The fall in prices will offset the expected rise in both gold and silver production. The table below summarizes the changes in the expected revenues of the company in the fourth quarter. It shows a 21% drop in revenues during the fourth-quarter of 2013, year over year.
(click to enlarge)
Let's turn to analyze the company's silver and gold production. Let's start with silver.
As you can see in the table below, the company's silver revenues are likely to decline by roughly 26%.
(click to enlarge)
The plunge in the price of silver will offset the potential rise in silver sales (in ounces).
Moreover, the company's gold production is likely to also rise by over 31%, which will nearly eliminate the 24% decline in the price of gold. Most of the expected rise in gold production is due to Silver Wheaton's acquired Sudbury and Salobo mines at the beginning of the year along with the rise in the company's 777 mine's production.
(click to enlarge)
Keep in mind, these sales volumes could be lower due to the gap between precious metals produced and sold. The delay in delivery could result in a much lower amount of precious metals sold. In particular, in the third-quarter of 2013, the company sold, on average, only 83% of its silver output. During the first nine months of 2013, this ratio was 86%. In the above calculations I assumed the ratio will be 90%; if the company sells sustainably less than its production, this could reduce even further its revenues.
In terms of profitability, in the third-quarter the company's profit margin fell from 72% in 2012 to 47% in 2013. This trend is likely to continue in the fourth-quarter due to thee reasons:
Low gold and silver prices: The sharp drop in precious metals prices will narrow the company's profit margin.
An increase in production costs: The cash cost of silver production rose by over 2% in the third-quarter; cash cost of gold production increased by over 27%. Higher cash costs are also likely to shrink the company's profit margins.
A rise in the share of gold revenues from total revenues: Gold has a lower profit margin than silver; therefore, the rise in share of gold revenues out of total revenues means Silver Wheaton's profitability will contract.
These factors suggest the company is likely to show another drop in profitability in the fourth-quarter. In such a case, this could also cut down Silver Wheaton's dividend payment for the next quarter.
Bottom line
The upcoming fourth-quarter earnings report isn't likely to show an increase in profit margin or revenues. Even Silver Wheaton's higher gold and silver production won't offset the sharp drop in precious metals prices. Further, the potential drop in profitability could result in a reduction in the company's future dividend payment. Finally, the ongoing weakness in the silver market is also likely to keep Silver Wheaton's stock low.
$USU - American Centrifuge Program Passes “Station Blackout” Test
Personnel and Backup Systems Successfully Meet Stress Test of a Total Power Outage
Further Affirmation of Centrifuge Operational and Technical Readiness and Robustness
DOE, NRC Representatives Observe Test
Test Follows Recent Milestone Achievements for Technology Critical to National and Energy Security
http://phx.corporate-ir.net/phoenix.zhtml?c=93662&p=irol-newsArticle_print&ID=1886826&highlight=
BETHESDA, Md.--(BUSINESS WIRE)--Dec. 23, 2013-- The USEC Inc. (NYSE:USU) American Centrifuge program in Piketon, Ohio, has successfully passed an unannounced “station blackout” test that is part of a program to prove the uranium enrichment technology’s technical readiness. Technicians, without warning, interrupted the external power supply to the commercial demonstration cascade facilities in order to test the responsiveness of equipment, backup systems and personnel at the uranium enrichment plant to a total loss of outside power. This test is part of the cost-shared research, development and demonstration (RD&D) program with the Department of Energy (DOE), designed to demonstrate the technical readiness of the American Centrifuge to meet national security needs.
“I am pleased to report that all of our personnel on duty and all of the plant equipment, including the 120 centrifuges that were running with full inventory of uranium hexafluoride gas, responded safely and within expected parameters, with no unusual events or issues related to the total loss of power,” said Paul Sullivan, vice president, American Centrifuge and chief engineer. “This was a litmus test for us, and our people and technology came through it with flying colors.”
Representatives from DOE and the Nuclear Regulatory Commission observed the test, which took place December 18.
The successful loss of power test and the recently announced achievement of key milestones for centrifuge reliability, cascade performance and centrifuge manufacturing quality as part of the RD&D program are crucial to demonstrating that the American Centrifuge, as America’s only indigenous uranium enrichment technology, can effectively serve the national and energy security needs of the United States. The recent achievements included reaching 20 machine-years of operations at the production-scale cascade of centrifuge machines. The formal test results for the three recent milestones and the loss of power test will be reviewed and certified by DOE. Previously, six other technical milestones were successfully achieved as part of a June 2012 cooperative agreement between USEC and DOE.
As previously disclosed, USEC and DOE are in discussions regarding extension of the American Centrifuge RD&D program beyond January 15, 2014, subject to Congressional appropriations. USEC is currently working with stakeholders, including DOE and Congress, to achieve an extension of the RD&D program and to identify the best path forward for deployment of the centrifuge technology.
USEC Inc., a global energy company, is a leading supplier of enriched uranium fuel for commercial nuclear power plants.
$PNPFF - Pinetree Capital Ltd. Acquires Securities Of Augusta Industries Inc.
http://www.pinetreecapital.com/investors/news_releases/index.php?&content_id=651
TORONTO, Canada (December 23, 2013) Pinetree Capital Ltd. (TSX: PNP) announces that on December 19, 2013, it acquired ownership of 18,000,000 common shares (“Common Shares”) of Augusta Industries Inc. (“Augusta”) representing approximately 8.9% of the total issued and outstanding common shares of Augusta as of December 19, 2013. As a result of this transaction, Pinetree held, as at December 19, 2013, an aggregate of 52,272,112 common shares of Augusta, including the Common Shares, and rights to acquire an additional 7,777,778 common shares of Augusta upon exercise of certain convertible securities (the “Convertible Securities”). In the event that the Convertible Securities are fully exercised, the holdings of Pinetree represents a total of 60,049,890 common shares of Augusta, or approximately 28.5% of all issued and outstanding common shares as at December 19, 2013, calculated on a partially diluted basis assuming the exercise of the Convertible Securities only.
This transaction was made for investment purposes and Pinetree could increase or decrease its investment in Augusta depending on market conditions or any other relevant factor.
$GEVO - Gevo Supplies U.S. Army With Fuel for the Black Hawk Helicopter
The World's First Isobutanol Bio-Jet Fuel Performs in Multiple Aircraft Platforms
http://ir.gevo.com/phoenix.zhtml?c=238618&p=irol-newsArticle&ID=1886769&highlight=
ENGLEWOOD, Colo., Dec. 23, 2013 (GLOBE NEWSWIRE) -- Gevo, Inc. (Nasdaq:GEVO), the world's only commercial producer of renewable isobutanol, announced that the U.S. Army has successfully flown the Sikorsky UH-60 Black Hawk helicopter on a 50/50 blend of Gevo's ATJ-8 (Alcohol-to-Jet). ATJ is a renewable, drop in alternative fuel for JP8 that addresses the Army Energy Security Strategy and Plans mandate that the Army certify 100% of its air platforms on alternative/renewable fuels by 2016. This flight marks the first ever Army Aircraft to fly on the isobutanol ATJ blend. Flight testing is being conducted at Aviation Flight Test Directorate (AFTD) on Redstone Arsenal, AL and is anticipated to be complete by March 2014. Certification programs like this are part of the Department of Defense's long-term energy strategy, as evidenced by the U.S. Navy's recent announcement of its "Farm to Fleet" program through which it will begin to blend biofuels at 10% to 50% rates with conventional jet fuel (JP-5).
This testing is being performed as part of the previously announced contract with Gevo to supply more than 16,000 gallons to the U.S. Army. "Gevo's isobutanol can be used to produce a variety of conventional military jet fuels such as JP5, JP8 and commercial aviation jet fuel. We are pleased to see that the Department of Defense is moving forward with its 'Farm to Fleet' initiative and we would like to see the alcohol-to-jet from isobutanol be used as a blendstock for the 'Farm to Fleet' program that aims to produce renewable fuels in the USA," noted Patrick Gruber, Gevo's chief executive officer. "We greatly appreciate the U.S. Army's partnership and support in this effort. ATJ from isobutanol is a clean burning, homegrown, bio-jet fuel, and we have a potential route to deliver aviation biofuels at scale and at competitive cost for many aircraft platforms including military and commercial."
Gevo's patented ATJ fuel is truly the same as petroleum jet fuel. It is designed to be fully compliant with aviation fuel specifications and provide equal performance, including fit-for-purpose properties.
$ONVO - How To Play Organovo Holdings
http://seekingalpha.com/article/1911681-how-to-play-organovo-holdings?source=email_portfolio&ifp=0
Dec 22 2013, 13:29 | 19 comments | about: ONVO
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Use of 3D printing for producing human tissue, also called as bioprinting, has been made commercially viable through the initiatives of Organovo Holdings (ONVO). Next year, Organovo will launch its first bioprinted liver tissue. This 3D printing technology creates human tissue with the help of its own NovoGen MMX Bioprinter. Organovo aims to provide a technology that will solve the complex problems of biotech companies by providing an opportunity to test drugs on functional human tissues to better understand of drug's effects on the human body. In addition to this, the company plans to provide therapeutic applications by providing 3D tissues that can be implanted into the human body to repair or replace damaged or diseased tissues. The following is the application of bioprinted human tissue:
3D printing is not a new phenomenon, industries use it to build prototypes and finished products, but use of this technology for making functional human tissue is a new application. Use of this technology in biotech will revolutionize drug manufacturing by providing functional preclinical 3D human tissue, as it simulates the human biology, thus giving better results during drug trials. Preclinical trials are usually done on animal tissues before clinical trials, but animal samples don't always react the same way as human tissue.
Organovo isn't new to drug development; the company worked on two active research contracts last year with Pfizer and United Therapeutics Corporation. These collaborative research agreements involved use of Organovo's NovoGen MMX Bioprinter technology for facilitating drug discovery, thereby solving the specific needs of the company.
What is the future of Organovo's technology?
Organovo is working on developing its bioprinting technology for changing the future of drug trials and therapeutic applications. Organovo is a development stage company and currently generates revenue from grants and research agreements like the one with Pfizer. The company is working on its first product launch next year. This will be human liver tissue, which will be used in toxicology by pharma companies. Currently, the company doesn't have product based revenue, but its first product launch next year will be its first commercial transaction. It will facilitate drug discovery with the tissue's extended lifespan of up to 40 days. Current liver cells used in labs have problem replicating the nature of the human liver and had a short time span of viability. Therefore, this product will address these issues and will provide human biology simulating 3D printed tissue to companies.
The future of bioprinting is the use of this technology for making fully functional human organs to meet the customer demand. The company has demonstrated printing of the first fully cellular engineered human artery; it uses stem cells from fat tissue (like bone marrow) to create arteries. Use of Organovo's cell by cell 3D printing approach in developing human organs for transplant will be an important milestone, but this technology is still years away from producing human organs such as the liver or kidney. These organs require networks of blood vessels and other tiny structures to live, and 3D printing isn't capable of integrating blood vessels yet. Therefore, this technology is limited for regenerative medicine, and it will help in surgeries.
One cannot expect bioprinting to grow as quickly as traditional 3D printing. The medical world has been using 3D printing extensively, but use of this technology for bioprinting is a different ball game. Up to now, around 5.5 million patients have been treated using 3D parts, from prosthetic limbs to 3D-printed titanium jaw implants, around the world. 3D printing has been used extensively for making hearing aids, with more than 10 million printed hearing aids currently in use around the world. The medical 3D printing market is expected to grow from $354 million in 2012 to $965 million in 2019.
In addition, investors cannot expect Organovo to simulate the growth of 3D printing market leaders 3D Systems (DDD) or Stratasys (SSYS). 3D Systems specializes in all three 3D printing segments, i.e prototyping, direct digital manufacturing, and consumer. It provides end to end solutions in the 3D printing market, ranging from materials to 3D printers. On the other hand, Stratasys has focused on industrial grade printers, but with acquisition of Makerbot, the company now has a leading position in the consumer segment.
Organovo' changing market sentiments
Market sentiments towards Organovo have been changing quickly. At the beginning of the year, Organovo's share price was around $2.36 per share, but in November, the share price was high as $12.75, thus almost reaching a $1 billion market cap. This was due to bullish sentiments after the company announced in an October 22 Conference that it has achieved the 40 days performance target for its 3D bioprinted liver tissue, which will be launched in 2014. This October announcement added no new insight about the company's product pipeline, as it was just a progress report of previously announced news. Since then, there have been bearish sentiments towards the stock, and share price plunged below the $9 mark. Organovo entered an equity distribution agreement with JMP Securities, in which it may sell 4 million through its sales agent. This will help it raise cash and strengthen the cash position for funding growth initiatives. However, it will also put downward pressure on its share price.
So is this the right time to invest in Organovo?
Organovo's future revenue generation remains uncertain. As there is no new release regarding the company's upcoming product, its future revenue generation has come into question. The company is currently dependent on research agreements and grants for revenue generation, but its first product is expected to launch by December 2014, thereby creating doubts about Organovo's revenue next year.
Currently, the share price is benefitting from market sentiments with no clear fundamental support to the current stock appreciation. After reaching a market cap close to $1 billion in November, its share price has fallen, reducing its market cap, which is currently around $677 million. Its current trailing twelve months revenue is $693,000, and its price to sales ratio is just above the 1000 mark. This variation denotes that market sentiments are driving the stock price without much fundamental strength.
Bioprinting isn't a fad, and this technology will prosper in the future. I believe in Organovo' growth potential, so with a long-term view, investors should invest in this future technology with the understanding that there might be volatility. This stock isn't recommended for risk averse investors.
$TPCS - Shares Of Techprecision Are Poised To Triple
http://seekingalpha.com/article/1911831-shares-of-techprecision-are-poised-to-triple?source=email_portfolio&ifp=0
Dec 22 2013, 20:56 | 8 comments | about: TPCS
Disclosure: I am long AAPL, OTCQB:TPCS. (More...)
(Editors' Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.)
During my time on Seeking Alpha, 10 of my 21 official picks to triple have doubled, tripled, or been acquired. Last week, Globalstar (OTCQB:GSAT) became #9. This week, Seagate (STX) became #10.
Based on significant breaking news, I believe Techprecision (OTCQB:TPCS) could soon become #11. I spoke with the company about the news on Friday afternoon. This article will discuss the news, its implications, and numerous other opportunities that should set the stage for shares of TPCS to triple in value.
On Thursday, privately-held Mevion reported on a major milestone in its quest to become the world's dominant supplier of proton-beam cancer therapy systems. Unbeknownst to most investors, this is big news for publicly-held Techprecision , which was awarded a 5 year, $115 million contract to be the exclusive manufacturer of Mevion's new S250 Proton Therapy System.
TechPrecision is a diversified manufacturer, specializing in the production of large components that require an abnormally high degree of precision. For the past several years, TPCS has been gearing up to ride the wave of several high-growth markets, including smart phones, Solar, Nuclear, Oil & Gas, and advanced cancer therapies.
After years of heavy lifting, the company finally appears well-positioned to reap the rewards.
Despite the company's many capabilities, its old management team seemed content to exist on a diet of one-off / custom projects with little or no lasting value. Turning that around required two things:
1) A reorganization of the corporate structure / culture.
2) Executing against a number of long-term deals to raise the value of TPCS to a strategic level.
That is the mission of CEO Leonard Anthony, who was named TPCS's Chairman in January. We have had multiple discussions with Mr. Anthony, who clearly aims to underpromise and overdeliver. I believe that Mr. Anthony's turnaround plan is succeeding. TPCS's excess spending has been reigned. More importantly, deals involving two hot companies set to ready to ramp up.
Here's the rundown:
Sapphire - Shares of GT Advanced Technologies (GTAT) skyrocketed on the news of a $578 million strategic agreement with Apple (AAPL). In turn, TPCS received a multi-million dollar order to begin supplying sapphire furnaces as part of this relationship.
But this is just the beginning. Based on what we are seeing in the underlying demand for sapphire, TPCS's furnace business should ignite in 2014.
In fact, thanks to new cost efficiencies in the marketplace, we believe that sapphire is on the cusp of wide-scale commercial adoption. Cell phone screens and grocery checkout counters represent two potentially huge opportunities. Our research suggests that a sapphire phone should only cost $15 more than a glass-screened phone. Considering that most consumers spend that much on screen protectors, it seems like we've hit a no-brainer inflection point on cost.
Of equal importance, sapphire is virtually unbreakable and scratch-proof as compared to any other transparent surface (except diamond). Sapphire is 2.5x harder than Gorilla Glass and GTAT expects that most smartphones will employ sapphire within the next few years (based on discussions with phone manufacturers). If they're right, a significant increase in industry-wide capacity will be required.
TPSC gets $50,000 per oven with high-30s margins. Based on our calculations, 1% of the cell phone market would require the equivalent of 3,000 TPCS furnaces. Of course, we need to take market share into account, but GTAT's leadership position gives us confidence that TPCS is in position to be a beneficiary here. We believe this will be a $20 million opportunity for TPCS within a few years.
Cancer Treatment - Proton-beam therapy is on the rise and TPCS was awarded a 5-year, $115 million contract with Mevion, arguably the industry's hottest proton-beam vendor. Under the terms of the deal, TPCS will be the exclusive manufacturer of Mevion's new S250 Proton Therapy System.
On Thursday, Mevion reported on a major milestone, setting the stage for TPCS's mega deal to ramp up. Mevion's recent round of funding ($55 million in June) was granted to accelerate proliferation of the S250 into the marketplace. This indicates a great deal of confidence on the part of Mevion's investors.
If all goes well, we calculate that this could become a $50 million business for TPCS by 2017. We would also anticipate a hot IPO for Mevion before long, which would surely draw attention to TPCS's role in its success.
Nuclear - TechPrecision had been supplying components to the nuclear power industry for over 50 years. It remains one of the few U.S.-based precision manufacturers with nuclear component (N-Stamp) certification. President Obama's nominee for Secretary of Energy, Ernest Moniz, is a nuclear advocate. Regardless of your political views, the administration is demonstrating a clear commitment to nuclear energy.
In fact, nuclear proliferation is now accelerating on a global basis. There are over 400 nuclear power reactors operating in more than 30 countries. Dozens more are under construction in 13 countries. Most of the new construction is taking place in Asia. However, according to the World Nuclear Association, "there are major plans for new units in the USA and Russia."
One problem with this is that the majority of containers (a.k.a. casks) used to transport nuclear isotopes are over 30-years old. For obvious safety reasons, we estimate that over 500 of them need to be replaced with newer, safer casks. At present, we believe that TPCS is the only manufacturer of modern NRC-Approved isotope transportation casks. They have already proven their ability to manufacture them to the NRC's approval. If / when they prove they can ramp production, we expect orders to start coming in. At a price of $1 million apiece, this appears to be a $500 million opportunity in its nascent stages.
Naval: On April 10, the U.S. government provided approval for the purchase of 10 Virginia-class submarines. The reason is that the Navy is seen as providing more bang for our budget dollars. By shifting spending there, overall military spending can be cut without a loss in military might. At one point, TPCS was doing just $300k of work per Virginia-Class sub. It has since grown that number to $7 million per sub. That's $14 million per year under the new work order.
TPCS could conceivably increase their share to $15 million per submarine by building more assemblies for its current customers, who include General Dynamics, Babcock and Wilcox, and Northrop Grumman. The government's order for 2 submarines per year (versus the usual 1) requires General Dynamics (GD), Babcock and Wilcox (BWC), and Northrop Grumman (NOC) to scramble for additional manufacturing resources. This provides cause for optimism as it relates to TPCS's opportunity here. In the meantime, $14 million per year seems like a solid bet.
Other Opportunities - TPCS is also involved in other areas, such as Oil & Gas and the solar market (which could finally rebound in the coming year). The Oil & Gas opportunity would be relatively new, but Solar was a major revenue contributor for TPCS a few years ago (GTAT was its primary customer). Investors shouldn't hold their breath waiting for these opportunities to bear fruit, but we felt it was prudent to mention them for those of you looking to do additional due diligence.
Valuation: Because of its past troubles, shares of TPCS pulled back to levels close to its book value. Via direct discussions with the company, we determined that its current operations can support upwards of $60 million in revenue. This gives the company a good amount of operating-margin leverage. In other words, any new revenues will contribute disproportionately to the company's profitability.
Because of this, along with 1) the financial prudence of its new CEO and 2) its line-up of opportunities we believe that TPCS is most likely to find financing for its ongoing and future projects.
Once that becomes a certainty and TPCS returns to profitability, investors will inevitably turn their attention to revenue growth and earnings forecasts. From that perspective, Mr. Anthony believes that the company's unique capabilities and N-stamp certification give it the ability to thrive, given continued direction and leadership.
Ultimately, its capabilities and leadership could support a multi-hundred dollar business. However, for now, investors should remain grounded and focused on the future size of its current opportunities -- and how much of that opportunity TPCS can execute against. A sample model is displayed below.
Looking at the stock chart, we can see that the company has been forming a bullish wedge. Once Mevion's news becomes more widely known, I believe the shares should break out, leading to a rapid 40%+ move above $1 per share. This would represent a good near-term target. From there, further positive tidings would serve as catalyst for further share appreciation.
(click to enlarge)
To be clear, a move would above $1 would merely be a good starting point, if all goes well (as investors can see from the opportunity chart above). Recently, ARC Group Worldwide (ARCW), another specialty manufacturer, rocketed from $5 to $44 as word spread that it is involved in another hot market (3D printing). Though I believed that to be an overreaction, its current valuation remains well above 2x revenue.
For TPCS, a comparable valuation would represent close to $5 per share.
The Bottom Line: TPCS now appears to be in good and prudent hands. Accordingly, we believe that the recently decimated share-price offers investors an attractive level of risk/reward. Considering the risks against the potential rewards, we believe that shares of Techprecision are poised to triple.
Accordingly, the company is an official constituent of the Poised To Triple Speculative Portfolio.
$SZYM - For Solazyme, It Is All About Control
http://seekingalpha.com/article/1912141-for-solazyme-it-is-all-about-control?source=email_portfolio&ifp=0
$BRIZF - Brazil Resources Inc. Increases Size Of Previously Announced Private Placement To Up To $5,500,000
http://www.brazilresources.com/news/index.php?&content_id=79
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This press release is not to be distributed to U.S. newswire services or to be disseminated in the United States. Any failure to comply with this restriction may constitute a violation of U.S. securities laws.
Vancouver, British Columbia – December 23, 2013 – Brazil Resources Inc. (the "Company" or “Brazil Resources”) (TSX-V: BRI; OTCQX: BRIZF) is pleased to announce that due to strong demand it has increased the size of its previously announced non-brokered private placement (the “Private Placement”) of units of the Company (each, a “Unit”) at $0.55 per Unit from aggregate gross proceeds of $5,000,000 to aggregate gross proceeds of up to $5,500,000 or 10,000,000 Units.
Amir Adnani, Chairman, stated: “We are very pleased with the level of participation by insiders, existing shareholders and other investors in the Private Placement. As previously disclosed, the funds from the Private Placement will be used to advance the Company’s São Jorge and Cachoeira projects and to further strategic initiatives of growing through accretive acquisitions.”
Each Unit will be comprised of one common share of the Company and one common share purchase warrant (the “Warrants”). Closing of the Private Placement is expected to occur within December and is subject to receipt of all necessary approvals, including the approval of the TSX Venture Exchange (the “TSXV”) and definitive subscriptions.
The Company may pay a finder’s fee to one or more arm’s length parties on a portion of the Private Placement in accordance with the policies of the TSXV. All Units, common shares and Warrants issued under the Private Placement will be subject to a four-month hold period from the closing date, in accordance with the rules and policies of the TSXV and applicable Canadian securities laws and such other restriction as may apply under foreign securities laws. Each Warrant will entitle the holder thereof to acquire one common share at an exercise price of $0.75 up to 5 years after the closing of the Private Placement, subject to the terms thereof.
The Units, common shares and Warrants have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any U.S. state securities laws and may not be offered or sold in the United States absent registration or an available exemption from the registration requirement of the U.S. Securities Act and applicable U.S. state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Units, common shares or Warrants, in any jurisdiction in which such offer, solicitation or sale would be unlawful.
For further information regarding the Private Placement please refer to the Company's press release dated December 16, 2013.
About Brazil Resources Inc.
Brazil Resources is a public mineral exploration company with a focus on the acquisition and development of projects in emerging producing gold districts in Brazil, Paraguay and other parts of South America. Currently, Brazil Resources is advancing its Cachoeira and São Jorge Gold Projects located in the State of Pará, Brazil.