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