| As reported by the Wall Street Journal, Sunday | | | | and turbulence have come about because of the |
| night's revelations that China National Nuclear Corp | | | | Asian and Russian scramble to lock-up the uranium |
| (CNNC) may strengthen its ties to UraMin could | | | | resources of entire countries. |
| represent a broader picture than an ordinary | | | | The energy battle in Africa is good news for the two |
| acquisition of a near-term uranium producer. | | | | front-runners in Namibia: UraMin and Forsys Metals. |
| There is an ongoing global war for energy security, | | | | We've called this a horse race, over the past several |
| which appears to be politically inspired. China and | | | | months. Both endeavor to become the 'next miner' |
| Russia are the main opponents, especially in Africa, | | | | following Paladin Resources in this country. |
| but have rivaled each other, over the past several | | | | Yet, both companies are vulnerable to acquisition |
| years, in Central Asia. The goal for both nations is not | | | | efforts by Russian or Chinese companies. Or either |
| only energy security but political influence and alliance | | | | could be acquired by one or more majors hoping to |
| over their targeted territories. | | | | build up their uranium reserves. In the case of Rio |
| On May 12th, Russia, Kazakhstan and Turkmenistan | | | | Tinto, acquiring one or both could mean expanding |
| signed a declaration to upgrade and expand transport | | | | uranium operations in this country. |
| pipelines along the Caspian Sea coast directly to | | | | Acquisition Candidates |
| Russia. The project relies mainly upon the vast | | | | Just as the announcement by Energy Metals Corp, |
| Turkmen gas reserves. This is part of Russia's | | | | regarding a potential sale of the company, fueled |
| growing monopoly of Central Asian gas. Although | | | | weekend speculation as to the 'next' takeover |
| Europe was shocked by Vladimir Putin's new | | | | candidates, the same could occur this week with |
| arrangement, the Chinese were flabbergasted. | | | | African acquisition candidates. |
| We've been following developments in Central Asia, | | | | One might be misled into believing China would focus |
| and had reported upon milestone events in both of | | | | on Niger, where the company has built a foundation, |
| our uranium publications, and again (with far greater | | | | and Russia's focus would remain in Namibia. However, |
| details) in our soon-to-be-released Investing in China's | | | | in a state visit to China this week, Namibian Defense |
| Energy Crisis. | | | | force chief exchanged views with Guo Boxiong, |
| After more than two decades in power, Turkmen | | | | Central Military Commission vice chairman, on |
| strongman Saparmurat Niyazov passed away this | | | | promoting relations between the two countries. |
| past December. In April 2006, Niyazov had signed a | | | | In February, Chinese President Hu Jintao visited |
| framework agreement on oil and gas cooperation. By | | | | Namibia to sign an economic deal with Namibia giving |
| August, Niyazov had announced a pipeline, designed | | | | the country a grant of US$4.3 million and an |
| to pump gas to China, would be opened in 2009. The | | | | interest-free loan of the same amount. Reportedly, |
| deal died with the dictator, it appears. | | | | some of the money would be used to boost group |
| A few weeks ago, a spokesman for China's National | | | | tourism from China to Namibia. This is the same tactic |
| Reform and Development Committee announced | | | | China has utilized in courting relationships in South |
| China was unlikely to reach its natural gas target of a | | | | America to help develop natural resource deals. |
| 10-percent portion of the country's energy portfolio | | | | With US$1.2 trillion in foreign currency reserves, China |
| by 2010. Increasingly, Russia has shut China out of | | | | is exercising its financial biceps. In March, the country |
| Central Asia in obtaining long-term, multiple energy | | | | formed the Huijin Fund as the state's investment arm. |
| sources. | | | | Up to US$400 billion have reportedly been placed in |
| Aside from South America, where China has | | | | this fund for investment purposes. On Sunday night, |
| strengthened the country's ties with Venezuela and | | | | the Huijin Fund invested US$3 billion to purchase a |
| others, Africa is a prime hunting ground for China's | | | | stake in about 9.9 percent of the Blackstone private |
| future energy security. China has established a strong | | | | equity firm. Our research suggests the fund is likely |
| foothold in the Sudan for petroleum. But, Africa is rich | | | | to strongly invest in natural resources. |
| in uranium deposits. | | | | On this basis, we can not rule out a simple carving of |
| According to a report published by the International | | | | Africa. We don't believe China will quietly step back |
| Atomic Energy Agency in 2005, Africa has 18 percent | | | | and focus the country's uranium acquisition efforts in |
| of the world's known recoverable uranium resources | | | | Niger, permitting Russia to concentrate on Namibia |
| - about six percent less than Australia and one | | | | and South African uranium. |
| percent more than Kazakhstan. We began coverage | | | | In Niger, we covered two 'early days' prospective |
| on both Namibia and Niger, after Russia sent a | | | | uranium juniors over a year ago. North Atlantic |
| delegation to Egypt to discuss the nuclear | | | | Resources acquired a uranium permit in the |
| renaissance. At the time, our research pointed to | | | | 1900-square kilometer Abelajouad in this country. This |
| Africa, particularly those countries, as ripe for future | | | | past April, the company increased its holdings to |
| uranium production. Chinese prospectors raced to | | | | nearly 3,000 square kilometers. In late April, |
| Niger within weeks after our initial coverage. | | | | Northwestern Mineral Ventures announced uranium |
| During 2006, Namibia became saturated with | | | | mineralization in assays from rock samples after a |
| numerous exploration plays hoping to capitalize on the | | | | first-pass reconnaissance on its In Gall and Irhazer |
| country's uranium resources and relaxed environment. | | | | uranium properties. Both would need to further |
| Consequently, the Namibian Minister of Mines and | | | | explore their properties before attracting serious |
| Energy closed the country's exploration window. | | | | interest from the Chinese. |
| Since then, Niger has become a new hunting ground. | | | | However, in Namibia both UraMin and Forsys Metals |
| We expect this country to become just as saturated | | | | are actively progressing toward mining uranium on |
| as Namibia has been. | | | | their properties. Either could be the first, but we |
| China is eager to capitalize upon the continent's | | | | believe both should become winners in the uranium |
| uranium resources before Russia outmaneuvers them | | | | bull market. Because China has carefully aligned with |
| as has been accomplished in Central Asia. | | | | UraMin, or at least shown an inkling to do so, we |
| According to an email we received from TradeTech's | | | | suspect Russia might begin to look more carefully at |
| Gene Clark, after presenting at the China Power & | | | | Forsys Metals. This is purely speculation based upon |
| Alternative Energy Summit on May 18th, he told us | | | | our premise of 'uranium Politiques.' We do not have |
| China's official target for nuclear power capacity was | | | | any 'inside track' on this matter. |
| '40 GWe by 2020 and another 18 GWe in the | | | | Fortunately, we had the opportunity to chat with |
| following five-year plan.' This confirms China's | | | | Forsys chief executive Duane Parnham late last |
| aggressive plans to acquire sufficient uranium to | | | | week. His company had announced the completion of |
| reach this capacity, and would be foolish to rely on | | | | the pre-feasibility study on the company's Valencia |
| just Australia. | | | | uranium deposit in Namibia. We missed the company's |
| Typically, China has built its energy portfolio through | | | | conference call, but were allowed the opportunity to |
| numerous deals across multiple regions. This past | | | | discuss his company's prospects and future plans |
| October, Yang Changli, vice president of China | | | | during a telephone call. |
| National Nuclear, said it would seek uranium not only | | | | The company's pre-feasibility study was prepared by |
| from Australia, but from Canada, Kazakhstan, South | | | | Australia-based Snowden Mining, which used the |
| Africa and Namibia. In an interview Yang gave during | | | | guidelines of Australia's JORC code. Subsequently, the |
| the 15th Pacific Basin Nuclear Conference, he said, | | | | Valencia uranium mineral reserve was classified as |
| "China won't rely on any single supplier of uranium | | | | Probable Reserves. These were calculated at 24 |
| because of energy security considerations. | | | | million pounds U3O8. |
| Namibia is the First African Focus of Uranium | | | | We asked about production. "We are now modeling |
| Politiques | | | | 2.4 million pounds per year," Parnham told us. He |
| On May 14th, Russia's second-largest bank | | | | expects to payback in less than two years. With |
| Vneshtorgbank and Russia's state-run nuclear | | | | Forsys as with all near-term producers, some early |
| exporter Tekhsnabexport announced they were | | | | conversations have begun about pre-selling the |
| considered a joint venture to operate in Namibia | | | | company's uranium production after production has |
| through licenses they directly hold and through | | | | commenced. |
| investments in other companies which have obtained | | | | His company's news release talked about six month |
| licenses in Namibia. | | | | of stripping during the initial part of the operation so |
| In March Russian Prime Minister Mikhail Fradkov | | | | we started there. "We'll start when we get a mining |
| announced his country was prepared to building | | | | license and then looking at production." When will the |
| nuclear plants in Namibia. Neighboring South Africa had | | | | company complete its ongoing environmental |
| previously warned Namibia to expect reductions in | | | | assessment? "We are hoping to have an |
| energy supplies. Namibia is dependent upon South | | | | environmental decision by year end," Parnham told us. |
| Africa for electricity and has forecast an energy | | | | "We are hoping to have enough data to apply for a |
| deficit of 300 megawatts within the next three | | | | mining license in early 2008. If that's successful, then |
| years. | | | | obviously the decision to go forward will be made at |
| On May 10th, Russia and Kazakhstan signed an | | | | that time." |
| agreement to set up the International Uranium | | | | For the time being, the company plans to expand its |
| Enrichment Center, anticipated to come onstream by | | | | resource. "The pre-feasibility is just the first snapshot |
| 2013. As part of this announcement, Sergei Kiriyenko, | | | | of the situation," he said. "We are finding the pit |
| head of the Federal Nuclear Power Agency, said, | | | | optimization study is only looking at a very small |
| "Any country can become a member of the center | | | | portion of the overall resource." Does that mean the |
| by signing an intergovernmental agreement granting it | | | | resource is actually larger, then? "It's a heck of a lot |
| guaranteed access to uranium enrichment services." | | | | bigger," he told us. "It's just a function of how much |
| We conclude Namibia may wish to participate in this | | | | data you have available to punch into the model. |
| arrangement. | | | | Then, how much does the model give you back? |
| Enter CNNC on Sunday night. The Chinese company's | | | | The evaluation process is ongoing. You'll probably see |
| deputy general manager for uranium procurement | | | | a change in the pit design very shortly because we |
| announced to Bloomberg News that CNNC and | | | | have the ability to move more resource into the |
| UraMin will start 'more formal' talks this week. | | | | reserve category." |
| UraMin is a prime acquisition candidate for the Chinese | | | | We talked about his company's horse race with |
| because of its uranium prospects in both Namibia and | | | | UraMin. How does it look? "Neck and neck, toe to |
| Niger. The company also has holdings in South Africa | | | | toe," Parnham said. "I think it shows there's |
| and the Central African Republic. | | | | opportunity in Namibia, and that's good that there are |
| We are now facing a new era of uranium politics or | | | | a number of us working for a common goal." |
| rather 'Uranium Politiques.' And there is good reason | | | | Finally, we asked what has emerged as the key |
| for this to escalate. Yesterday, the U.S. Energy | | | | question: Is Forsys a ripe plum for the picking. He |
| Information Administration issued 'International Energy | | | | offered both sides of the coin. "Where the real |
| Outlook 2007.' The report announced, "World | | | | opportunity lies is putting a property into production," |
| marketed energy is expected to grow by 57 percent | | | | he responded. "The operation isn't all that difficult so |
| between 2004 and 2030." | | | | it's not a deposit that our expanding team couldn't |
| The most rapid growth in energy demand is | | | | put into production." And then Parnham left the door |
| anticipated in non-OECD Asia. The majority of this | | | | open. "Anything can happen. It's an open market, and |
| energy demand growth would come from China and | | | | we are a public company. But, we are certainly |
| India. This was the reference case - the middle | | | | geared toward putting this into production." |
| ground of growth. | | | | And from what we've seen among the recent, |
| Also on Monday, leading Russian nuclear expert | | | | significant consolidations, those companies who have |
| Yevgeny Velikhov, head of the Kurchatov Institute, | | | | commenced production, and those closest to |
| told reporters at a news conference that the recent | | | | production, are the prime acquisition candidates. Why |
| surge in uranium prices "may still grow by another | | | | should companies developing projects in Africa |
| order of magnitude." He believes the uranium price will | | | | become the exception instead of the rule? Especially |
| continue to rise as global uranium demand soars while | | | | when two super powers are both eagerly trying to |
| supplies remain tight. "The global energy market is | | | | establish stronger uranium footholds in this continent. |
| very turbulent," Velikhov said. "The uranium price can | | | | COPYRIGHT© 2007 by StockInterview, Inc. |
| hit any mark at a time of crisis." Ironically, both crisis | | | | ALL RIGHTS RESERVED. |