Description

  The world is adjusting from the long held belief that traditional fuel sources  are efficient and plentiful. Even more progressive is the now confirmed fact that fossil fuels are harmful to the environment and the atmosphere.   The push has begun in earnest for alternative fuel sources and a newfound confidence in the nuclear option has created demand in countries worldwide. The Nuclear Technology Roadmap  states in their June 2010 report that with attention towards nuclear power growing a significant capital outlay is needed to keep up with the ever growing demand. It is estimated that to meet its energy needs by 2050, the U.S. will have to invest $883 billion, China $893 billion, and $389 is necessary in India are just a few examples.

     Sustainable energy and the failings of oil have been the driving forces behind nuclear recent renaissance. With a huge power to resource ratio and negligible emissions, nuclear power offers an extremely viable solution. Safety has also evolved considerably from the early days with 30 year successful track record in the western hemisphere. Europe in general, and France in particular, have gone full force into designing more productive, efficient, and safer plants which are now being used as models for other country's upcoming sites. France is currently running over 70% of its power needs from uranium and its goals are even higher.

       The worlds electricity demand is increasing twice as fast as overall energy use. It is likely to rise 76% between now and 2030. Nuclear power provides about 14% of the worlds electricity to this point which offers great room for expansion.  Energy Resources of Australia reports that about 55 nuclear plants are currently being constructed around the world, with 100 more planned over the coming decade. China itself has about 55 being built at this moment. The essential ingredient to this growth will be uranium. The IAEA estimates that there was about 600,000 tonnes of uranium unused in 2007. This " inventory" will be depleted within 40 years only if the demand remains the same. With the great increase of projects the concurrent increase in uranium will deplete the stock markedly  quicker. New supplies that are economical and reliable must be found and tapped.

       Uranium stocks had a huge growth spurt between 2004 and 2007 but went through gyrations since that time. At this stage the best course of action is to find a well run, underfollowed  company  that has come down with the market more than necessary and offers a good opportunity for investment. We feel we have found such a company with Strathmore Minerals.  Along with being an underfollowed company, it offers the three most important characteristics of a winning investment; solid fundamentals, experienced management, and a valuable reserve inventory.

      Two components make up the viability of mining uranium; political and financial. Strathmores two main deposits are within the borders of the United States . This helps when it comes to negotiating mining rights, creating infrastructure, and actually maintaining an operation, versus companies in more politically unstable areas such as competing companies in South America and Russia.

      The company's potential reserves total about 110 Mm lbs. The two sites with the biggest potential are Gas Hills and Roca Honda. Roca Honda, in particular, is one of the largest planned uranium mines in the U.S. in over 30 years. The latest estimate has Roca containing NI 43-101 indicated resources of 17.5 million lbs. and inferred resources of 15.8 million lbs. of U₃O₈.  Roca is still slated as "fast track" to begin mining sometime in 2013. The property is owned 60% by Strathmore and the balance by Sumitomo Corp. of Japan. When the decision is made to begin mining, Sumitomo will incur the initial $50 million of development costs.  The property is located in the Grants Mineral Belt of New Mexico; which was North Americas largest uranium producing district up until 2005, when it was surpassed by the Athabasca Basin in Canada.  What makes the property even more precious is that its located on U.S. Forest Service Land, which means the company will not be required to negotiate with multiple underlying land owners for any surface right needed.  Roca Honda has an estimated 20 year mine life increasing ability to expand into other potential developments. The company is also in a solid financial position with $ .29 per share of cash in the bank.

    The attractive valuation of Strathmore (sthjf) is easily seen when compare to several of its peers. The following table clearly shows the costs of buying historical uranium reserves on the floor of  various exchanges, rather than going out actually exploring for new finds:

    On September  09, 2010, the board of directors authorized a share buy-back program. Over the next twelve months sthjf will buy back up to 4,390,000 of its common stock through Toronto Stock Exchange.  This is another indication of managements positive perspective of its company and the bullish perception of its owners for the future.

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