So I decided to go back and have a look at who the Shandong No 1 Institute of Geology and Minerals has been involved with in the past - I stumbled across BAU.
The first similarity that jumped to my attention was the price when the initial MOU announcement was made. With BAU the trading price was around $0.24 (the proposed placement price was $0.50). With UUL the trading price was around $0.11 (the proposed placement price is $0.21) - both at huge premiums to the market price
It's what happened to BAU in the months following that has got me upbeat about this placement. The FIRB approval for the BAU transaction was alot quicker but having spoken to the guys at UUL, there were delays over the xmas period. Within 3 months of FIRB approval for BAU, they were trading around $1.30
What UUL need to now is get around to the business of actually doing some exploration. After the placement monies are received they will approx $5m in cash with only 42m shares on issue. The top 20 shareholders after the placement will hold around 66% of the company.
The lack of liquidity will put alot of people off a stock like this but with the market price still trading at a discount to the placement price, there is a small arbitrage opportunity to be made, although my suspicion is that SDMG aren't looking to make a few cents here and there. One can argue that the price of BAU has long since been trading above a $1 and is back below the placement issue price to SDMG but as we trade in much smaller quantities, being able to get out when the going is good is much easier!
If you've got the patience, this looks like it could be a good entry price for a stock that will have exposure to the resurgent Uranium market. I'm in - looking forward to what the next few months hold. If it's anything like what happened to BAU, then I'll be a happy chappy.
Marchello
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