forsys rumours and mey

Plenty of Forsys Rumours in the Canadian press in recent days. The rumours revolve around KEPCO looking to potentially finance the construction of the Valencia mine. Forsys invited tenders in Feb.

Note KEPCO is the Korea Hydro & Nuclear Power Co & they entered a memorandum of understanding with Forsys in Feb 2007.

http://www.mineweb.com/mineweb/view/mineweb/en/page38?oid=39237&sn=Detail

The Canadian listed shares have certainly been reacting to these rumours in recent days rising from $3.95 on 11th March to $4.85 as I write on very good volumes.

Now lets revisit my recent comparison between Forsys (FSY) and the Marenica (MEY) Operation next door.

Valuations (EV/lb):
- Forsys currently valued at US$370m (60m lb resource) or $6.16 per lb
- Marenica valued at US$62m (85m lb resource) or $0.73 per lb

Resource
- Forsys 60.5m lbs @156ppm (67ppm cut off) or 49.8m lbs @194ppm (100ppm c/o).
- Marenica 85m lbs @170ppm (using 80ppm cut off). 16 new targets currently been drilled and resource could exceed 100mlbs by year end

Economic costs
- Forsys - most ore found in a pit up to 350m deep. Feasibilty study released Jan 2010 estimates costs of an opencast mining operating at between $32-35 per lb

- Marenica 94% or ore not deeper than 40m, 80% not deeper than 20m. Scoping study to be finished by June 2010, operating costs estimated to be similar to the nearby Trekkopje operation of $25-30 per lb.

Potential Partners
Forsys Has a memorandum of understanding with Kepco
Marenica Areva JV? already a 10%+ shareholder)

Takeover / JV possibilities:
Forsys takeover likely to trigger a Canadian National Security Review (see below), a lot of hassle off a pontial bidder

http://www.thefreelibrary.com/Canadian+National+Security+Review:+Broad+Application+In+The+Uranium...-a0207124186

Marenica Arevas Trekkopje mine only 30km away with MEYs ore of the same geoology but higher grade there making a future JV a really possibilty.

In Summary
Marenica has more ore, of a higher grade and found at a shallower depth than Forsys. Furthermore Marenica is on the doorstep of a potential JV partner and their mining operation is closer to cruicial mining infrastructure such as desalination plant and deep water port and extraction costs are likely to be lower than Forsys.

YET FORSYS IS VALUED EIGHT TIMES MORE HIGHLY THAN MEY - YES EIGTH TIMES!!

It it easy to get caught up in short term movements & spooked by director sales etc but some times who just need to step back a little and survey the situation.

We all know the Chinese, Japanese, Koreans and Arabs etc are all desperate to secure 'yellowcake' to fuel their expanding nuclear programmes. Large/cheap sources of U are increasingly hard to come buy and lead times are long hence the scramble to secure supplies now particulary with U prices so low.

If you were the Koreans, Chinese or Areva etc and had the chance to take out/ JV with Forsys or MEY to develop their mining operation which one would you opt for? Would you pay 8 times more for Forsys? This premium is clearly crazy even when you take into account their other minor operations.

D

PS Quick summary of the Namabia U308 operations can be found on the link below:

http://www.reuters.com/article/idUKGEE5B801220091211?type=companyNews