In Unprecedented Move Cameco Takes Stake in Uranium Junior
By David J. DesLauriers
23 May 2007 at 11:05 PM
resourceinvestor.com
TORONTO (ResourceInvestor.com) -- Well-sponsored Western Uranium Corp [TSXv:WUC] which closed today up 10 cents at C$3.70 per share announced this morning that Cameco [TSX:CCO; NYSE:CCJ] would acquire a 10% interest in the company at C$3.80 per share.
The market seems to have totally missed this incredibly significant announcement which places WUC head and shoulders above its peers. The answer as to why may possibly be that the stock was not halted, the title of the press release was innocuous, the content of selfsame release was likely edited by Cameco and sellers from a cheap private placement late last year foolishly took profits (2 million shares traded today) just as the party is about to begin.
That is a lucky break for investors new to the story because it gives them the opportunity to acquire shares in WUC at lower prices than those paid by Cameco. What investors need to realize is that Cameco apparently has only taken equity stakes in junior uranium companies three times in company history!
Unlike Goldcorp [TSX:G; NYSE:GG] or some of the precious metals majors who every so often will take a piece of an attractive junior, Cameco never does that with anybody! What that tells your correspondent is that Western Uranium must have some pretty special and potentially world-class assets.
Where Should the Stock Be?
Given the current uranium market and this incredibly unique stamp of approval from Cameco, we would have thought that WUC shares would have traded up to at least C$5 today on the way to probably C$10 in the next couple weeks as the market figures out what is going on.
We still believe that that should unfold. It is our understanding that Westwind Partners could issue an upgraded buy rating shortly (current target C$5.30 per share), and combined with increasing recognition in the press and from industry commentators over the coming days, Western will begin to head north.
Some Highlights / Catalysts
Western will have significant news flow including drill results over the coming months. Western is doing a spin out of its lithium assets which include potentially one of the world’s largest lithium deposits (8 billion pounds!). That will create value.
With over C$50 million in cash, Western Uranium should be able to aggressively increase its historical resource across its properties, currently at 31 million pounds of uranium. Clearly Cameco believes that that is where WUC is going and indeed Cameco will pay per pound discovered.
If drilling really goes well, shareholders of Western could be in for a dividend equivalent to even as much as the current price of shares over the next 12-18 months!
Conclusion
We suggest that investors review the Cameco press release linked at the top of this story, and the company’s properties, and investor presentation. In the mining exploration business there is no better way to bet than with the smart money at the world’s largest, $18 billion uranium company.
Indeed, with 100 million pound plus potential on Western’s properties, and Cameco’s experts betting on the story (the only company in which they have taken an equity interest) we believe that Western shares will begin to climb in short order and there is no reason in this uranium market that we could not or should not see a C$10 handle on Western by mid-June.
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