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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (76775)	12/24/2006 8:53:39 AM
From: Ed Ajootian	Read Replies (1) \| Respond to of 206223

eplay, I don't really follow the Canadian oil sands companies so I won't be able to help you. Many others here do, maybe they can help. I know that conventional oil reserves are getting a value of something like $20-25/bbl. these days. Oil sands reserves should be valued at a lower price than that, due to the substantially higher development & production costs. I have dabbled in stocks of companies that work with commodities other than oil & gas, but have tended to remain concentrated in the O&G companies. I understand this business pretty well right now, top to bottom, and it took about a decade to get to this point. It seems crazy to trade that all away and become a neophyte in another business, just because the commodity price underlying that business is going idiotic.

To: energyplay who wrote (76775)	12/24/2006 4:42:36 PM
From: Wyätt Gwyön	Respond to of 206223

the $5/bbl valuations only apply to the oil sands companies that have serious current or imminent production, with cash flow putting dividend yield around 4%. those are "improved" resources with tens of billions of capex projects, which took many years to complete, already in the ground. the oil sands that are just unimproved OOIP are valued nowhere near that level. i think oil sands will always be valued rather low relative to conventional peers because the bottleneck is the extraction rate: if you can only produce two percent of your resource per year, people are going to value it based on cash flow more than the resource per se. there are conflicting philosophies regarding how resource cos should be valued: cash flow or resource in place? resource in place may result in a much higher valuation, which is why this approach is favored by the companies. but it is generally more conservative to value based on some version of cash flow, so that you don't count your chickens before they hatch. after all, what good is the resource if it's just sitting in the ground? but others will say it keeps its real value just fine in the ground. this type of argument has been used, e.g., to say that gold miners are undervalued even though they look expensive on conventional metrics. i don't know what the extraction rates are for uranium cos, but if URME has 95 mm market cap and $1.8 billion resource, meaning its resources are only valued at 5 cents on the dollar, then i must assume they have a lot of capex dollars and years between themselves and appreciable cash flow. i am just guessing that the capital equipment alone required to extract and process 30 million pounds of uranium will cost a lot more than $95 million. btw, what are the extraction costs for URME's in-situ?