mey/forsys/bannerman comparison

For those relatively new investors wanting to find out more information about the uranium industry, producing countries, ore types and mining/extraction methods etc this is an very good read:

http://teabagmachine.blogr.com/stories/2010-03-17-Uranium-mining/

Im currently doing more research on the Namibian mines inparticular. Marenica, Langer Heinrich (Paladin), Trekkopje (Areva), Etango (Bannerman), Valencia (Forsys) and Inca (Deep Yellow) to try and get my head around just why Marenica (MEY) is so cheap.

I believe it concerns over the project economics with U308 prices at only US$40 but having said that all companys are not been 'valued' equally.

Take a quick comparison with Forsys 'Valencia' project for example. Ive picked Forsys as they have one of the closest operations geographically to Marenicas operation and the geology is very similar:

Valuations:
Forsys is currently valued at 3.73 AUD$ per lb (roughly the industry average). Marenica is valued at around 1 AUD$ per lb (i.e a 75% discount)

Why the difference?

It the resource size or grades? (I dont think so).
Both are relative low grade operations which may not be economically viable at 40 $US /lb.

Forsys Valencia have declared resource of 60.5m lbs @156ppm (using a 67ppm cut off) - only 7.2m/lbs is 'proven' the rest is inferred
(or 49.8m lbs @194ppm using 100ppm cut off). Some of the ore is up to 350m deep.

Marenica have declared 85m lbs @170ppm (using 80ppm cut off) - 12mlbs is measured/proved rest inferred. Most is within 40m of the surface. (Density measurements used for inferred resource between 2.2 to 2.6m/t3 - quite conservative).

Forsys have just completed a very detailed feasibilty and estimate operating costs of a mining (using various extraction methods) of between 32-35 US$ per lb (Bannerman quoting similar figures). Hence some people concerns about economic feasibilty of these operations with U308 price just above $40 at present. However Forsys are still planning to bring Valencia into production. One reason is that it will take 2-3 years to get things up and running and U308 price may be much higher by then.

http://www.forsysmetals.com/News_2010/FSY%20NR%20Feb%204%202010%20Final.pdf

Marenica is currently working on its own feasibilty study which it aims to release by June 2010

In conclusion:
Marenica looks very cheap on valuation grounds (so does Bannerman) in comparison to Forsys Metals (and Deep Yellow, Paladin etc) who have similar operations in Namabia even when one takes into accout the lowish grades of ore in the region and feasibilty concerns. And it also ignore the potential for even more resource upgrades (MEY currently exploring another 16 potential sites)

Looking purely at Forsys, Marenica has more lbs in the ground at better grades, lower depths as well as having a potential partner (areva) and their desalination plant on their doorstep which could results in lower production costs and yet they are still at a 75% discount to Forsys valued at the 'sector average'.

If you think thats crazy, have a look at Bannerman (also hit by feasiblity concerns). They have 150m lbs in the ground of similar grades to MEY and trading at s similar valuation.

If you are a patient investor and firmly believe the Uranium price will recover, they looks to be 'value' in Marenica and Bannerman. Simply acquiring an 'average valuation' at some point in the future would result in a multi bagger from at these prices. Of course you could play it safe and buy Extract were most of the good news is already priced in and pay 10x the price.

D