interesting article

came from the UK based minesite...................

There are a lot of reasons why an investor in uranium stocks should follow Uranex, an Australian-listed explorer with a dual focus on interests in that country, and Tanzania in Africa. Asset quality is one factor. Management quality another. But hidden behind those two positive features is a fascinating relationship Uranex has struck with an arm of the Chinese Government. Until now, the link with the Department of Overseas Uranium Resources Investment of the China National Nuclear Corporation (CNNC) was a curiosity which did not seem to contain a great deal of value. It wasn’t a secret, just that no-one really talked much about it after the signing of a letter of intent on April 4 last year – that was until Minesite’s Man in Oz discovered what appears to be the trigger which could unleash significant value in Uranex, and the time when that might happen.
October 25 is the time, of that there is little doubt. Precisely what happens on that day remains to be seen. But, if “two-plus-two equals four”, and has not been mangled into some other inscrutable Chinese number, then on that day a large slice of capital in Uranex could be heading to CNNC. The reason the date is so important is that it represents the second anniversary of Uranex’s listing on the ASX. It is also the date on which a 39.5 per cent stake in the stock comes out of escrow.

Goldstream Mining is the holder of what amounts to a controlling stake in Uranex, a result of Goldstream’s “parental” role in the creation of Uranex. Most of the assets in the uranium float came from Goldstream, including the very promising Bahi discovery in Tanzania, and a slice of the Thatcher Soak uranium deposit in Western Australia. Goldstream, by floating off Uranex, gave the best possible indication that it was interested in pursuing other interests, including the Cairn Hill iron ore project in South Australia – an asset which has also attracted the interest of Chinese buyers.

It was while exploring the Chinese puzzle with Robert Edwards, a director of Uranex, at a uranium conference in the Australian port city of Fremantle that Minesite’s Man in Oz put together his “two-plus-two”. It started with a question about the China relationship. Edwards described it as a method by which Uranex could win introductions to other parts of the Chinese nuclear industry. “They introduce you to another company, such as SinoSteel,” he said. So, they’re using you as an explorationist? “They could,” Edwards said. “We could go to them directly if we wanted a joint venture, or needed assistance with a feasibility, or geologists.” And then the key question: Couldn’t they simply wait for you to prove up something and then buy you?

“They could, there’s a lot of ways to do it,” Edwards said. “Our biggest shareholder is Goldstream Mining, and they’re in negotiation with the Chinese over the iron ore in South Australia, and they have 39 per cent of us, and their shares come out of escrow in October, so whether they maintain their equity in us, or divest it, we don’t know.” Minesite: “With CNNC as a natural buyer?”. Edwards “They could be a natural buyer, I imagine, or not necessarily them, some company allied, one of their nuclear power station groups.” So, there you have the trigger date, October 25, after which something can happen to a 39.5 per cent stake in Uranex, most probably with a Chinese flavour to it.

The residual part of the riddle is whether Chinese interests would want a controlling stake in Uranex, or a slice of that stake. The answer, if your believe analysts at Deutsche Bank, has to be yes. There are two messages in that statement. First, that Uranex is a rare beast in that it is one of the few small uranium stocks that Deutsche has researched, and issued an unequivocal buy tip. The full research paper is available on the Uranex website. Secondly, that Deutsche, like Edwards, is particularly enthusiastic about Bahi and Thatcher Soak.

Minesite’s Man in Oz does not share Deutsche’s optimism about the Western Australian assets because the government of that state remains implacably opposed to uranium mining, and while the impasse has been cleared at a national government level, it could be years before the next level of Australia’s uranium logjam is broken, and in Australia state governments make mining law. Whatever the politics, Deutsche has applied values to Thatcher Soak (6,000 tonnes of uranium) and Bahi (2,400 tonnes and growing) to arrive at a discounted cash flow value per Uranex share of A$3.59. Given that Uranex is currently trading at A$1.53 there appears to be what might be called “latent potential” in the stock.

Interestingly the Deutsche document does not appear to make any reference to the CNNC relationship, or the fact that Goldstream’s 39.5 per cent stake comes out of escrow on October 25. An interesting oversight as that date represents the trigger point for a possible change of control, or some other corporate deal that could represent the real launch of Uranex.