valuation rule of thumb, page-18

This is in response to prhb, asking me to point to any other uranium miner where price per pound has been anywhere near US$9. I have based this upon research by drag100 on another site, much abbreviated:

(1) Feb 2007 Uranium One paid US$3.1 billion to acquire UrAsia. Resource 85 Mlbs (some reports 100 Mlbs).

(2) Date ?? Areva paid US$2.5 billion to UraMin to acquire assets of 236 Mlbs.

(3) Nov 2008 Forsys agreed to a takeover by GFI. C$579 million for measured and indicated resource of 61 Mlbs, estimated to be as much as 94 Mlbs. Exchange rate 0.82.

(4) August 2008 Rio sold Kintyre project to a JV for US$495 million. Resource 55 Mlbs (some reports 79 Mlbs).

So based upon the above:

(1) Feb 2007 US$31 - US$36 per pound
(2) Date ?? US$10 - US$11 per pound
(3) Nov 2008 US$5 - US$8 per pound
(4) Aug 2008 US$6 - US$9 per pound

You can see the variation. It is especially confusing because there may be a current JORC estimate, but an obvious indication of a larger resource, so what do you use when calculating the lbs in the ground? It appears that this is the reason for the conflicting reports of the amount of uranium in the above examples.

It seems to me that about US$6 per pound has been used when ALL of the resource is taken into account - although much higher values have been paid, this is conservative. This may result in an artificially higher value if you only look at what had been proven up at the time of the takeover.

So, for example, in EXT's case we have a current amount of 170 Mlbs (Zone 1 + Ida), but obviously a much larger amount is there in Zone 2 - say 300 Mlbs (Zone 1 + 2 + Ida). There is also strong indications that there is substantially more further south (Zones 3, 4, etc.). So do we use 170, 300, or an even higher figure - 500? 600? 700? 800?

I believe US$6 per pound is a reasonably conservative guess if we include the total extent of the whole resource, ie all of the strike including further zones below Zone 2. If we only look at Zones 1 + 2 + Ida we should use a higher US$/lb to take into account the value of the much greater resource out there.

So I think it is reasonable to use US$9 to US$12/lb on about 300 Mlb for Zones 1 + 2 + Ida, as a first approximation, to take into account the fact that we have only explored 6 km out of 15-20 km of strike.