she - needs a break

We have been looking at the reasons for why there is no urgency for further drilling.

Firstly, drilling is expensive, in the current world economic climate, and with the current SHE share price, funds need to be preserved, because raising capital for a uranium project in this climate would be difficult and may involve significant dilution.

The loss of the group in the last financial year, after providing for income tax, was $2.25 million dollars, with cash on hand at 28 July of $3.12 million dollars.

And, as most people know, without drilling, the share price is going knowhere.

The other thing to consider with the share price (now down over 500% since it's Feb 2011 highs), is the impending November deadlines for the Greek financial bailout (or orderly default) and the recapitalisation of European banks. Should this falter or fail, or should the Greek's default, then it is likely all world markets will take another tumble to the downside, SHE may fall into the 1 cent to 2 cent zone.

Secondly, in effect, SHE knows where the resource is, based on historical data and historical cores, so extensive further drilling may not add that much more information or value. Funds might be better expended on the community consultation process at the present time, given the rumours of community aggrievement.

SHE do state in the Community Engagement Action Plan, that a failure to understand the issues and expectations of the key participants could lead to failure of the project. SHE accepts there may be opposition to it's proposals, and that there are a wide range of perspectives and values regarding the development of Uranium projects in South Korea. Fukushima has not helped SHE.

Very prudently, SHE has commenced a regional hydrocensus, which involves a survey of private bores, and identification of water courses, springs, seeps and dams. Water pollution is a key community concern.

Thirdly, from the Annual Report, there are 40 million performance shares to be awarded simply for reaching an Inferred resource (and Nothing for reaching an Indicated or Measured resource), so there is no immediate incentive for the management of the company to want to upgrade the resource categories.

There is only approximately 7 million performance shares to be awarded for a pre-feasibility study, so you can see how the performance incentives are skewed, with little incentive to get to pre-feasibility at present, though there is always a possibility that this may change in the next financial year.

There are 7.5 million performance shares to be awarded for a binding off-take agreement on Vanadium, hence the announcement on 31 May 2011, on the establishment of a Vanadium Joint Venture Trading company with Yong Jin Specialty Steel.

In Total, there are 60 million performance shares on offer, and 274 million shares currently being traded, this means that performance shares potentially could make up 18% of future company shares on issue.

It may be that these performance rewards were designed around the minimum necessary requirements needed in order to attract a joint venture partner.

And then we have Tozai Holdings.
In the most recent SHE announcement, under the heading "Corporate", it states that Tozai Holdings wants to sell 51% of a tenement to SHE.
Click here if you want to see some Tozai Holdings information on YouTube, their uranium tenements get a brief mention at the end.

Tozai Holdings

So why do Tozai want to sell to SHE?
Perhaps it's because they may have applied for a mining license without consulting the local communities and farmers and regional councils, without doing any environmental studies, and without having any in-house mining expertise, or perhaps there is some other reason.

Perhaps it's because the local communities and farmers and regional councils may have told Tozai to go to hell.

Some companies can damage community relations for everyone.

Tozai probably figure they are not likely to be granted a license, so the next best way to make money would be to sell 51% of the tenement.

Tozai are probably shopping their tenement around to other mining companies, trying to get the best price.

SHE should accept nothing less than a 90% ownership of the tenement, for half the original asking price.

SHE, and the good people who work for her, deserve a break or two.

And so do you if you have read this far, as well as a drink.

Have a good weekend.

Gw