| -> | | | | Velikhov said. "The uranium price can hit any mark |
| As reported by the Wall Street Journal, Sunday | | | | at a time of crisis." Ironically, both crisis and |
| night's revelations that China National Nuclear Corp | | | | turbulence have come about because of the |
| (CNNC) may strengthen its ties to UraMin could | | | | Asian and Russian scramble to lock-up the |
| represent a broader picture than an ordinary | | | | uranium resources of entire countries. |
| acquisition of a near-term uranium producer. | | | | The energy battle in Africa is good news for the |
| There is an ongoing global war for energy | | | | two front-runners in Namibia: UraMin and Forsys |
| security, which appears to be politically inspired. | | | | Metals. We've called this a horse race, over the |
| China and Russia are the main opponents, | | | | past several months. Both endeavor to become |
| especially in Africa, but have rivaled each other, | | | | the 'next miner' following Paladin Resources in this |
| over the past several years, in Central Asia. The | | | | country. |
| goal for both nations is not only energy security | | | | Yet, both companies are vulnerable to acquisition |
| but political influence and alliance over their | | | | efforts by Russian or Chinese companies. Or |
| targeted territories. | | | | either could be acquired by one or more majors |
| On May 12th, Russia, Kazakhstan and | | | | hoping to build up their uranium reserves. In the |
| Turkmenistan signed a declaration to upgrade and | | | | case of Rio Tinto, acquiring one or both could |
| expand transport pipelines along the Caspian Sea | | | | mean expanding uranium operations in this |
| coast directly to Russia. The project relies mainly | | | | country. |
| upon the vast Turkmen gas reserves. This is part | | | | Acquisition Candidates |
| of Russia's growing monopoly of Central Asian | | | | Just as the announcement by Energy Metals |
| gas. Although Europe was shocked by Vladimir | | | | Corp, regarding a potential sale of the company, |
| Putin's new arrangement, the Chinese were | | | | fueled weekend speculation as to the 'next' |
| flabbergasted. | | | | takeover candidates, the same could occur this |
| We've been following developments in Central | | | | week with African acquisition candidates. |
| Asia, and had reported upon milestone events in | | | | One might be misled into believing China would |
| both of our uranium publications, and again (with | | | | focus on Niger, where the company has built a |
| far greater details) in our soon-to-be-released | | | | foundation, and Russia's focus would remain in |
| Investing in China's Energy Crisis. | | | | Namibia. However, in a state visit to China this |
| After more than two decades in power, Turkmen | | | | week, Namibian Defense force chief exchanged |
| strongman Saparmurat Niyazov passed away this | | | | views with Guo Boxiong, Central Military |
| past December. In April 2006, Niyazov had signed | | | | Commission vice chairman, on promoting relations |
| a framework agreement on oil and gas | | | | between the two countries. |
| cooperation. By August, Niyazov had announced a | | | | In February, Chinese President Hu Jintao visited |
| pipeline, designed to pump gas to China, would be | | | | Namibia to sign an economic deal with Namibia |
| opened in 2009. The deal died with the dictator, it | | | | giving the country a grant of US$4.3 million and an |
| appears. | | | | interest-free loan of the same amount. |
| A few weeks ago, a spokesman for China's | | | | Reportedly, some of the money would be used |
| National Reform and Development Committee | | | | to boost group tourism from China to Namibia. |
| announced China was unlikely to reach its natural | | | | This is the same tactic China has utilized in |
| gas target of a 10-percent portion of the | | | | courting relationships in South America to help |
| country's energy portfolio by 2010. Increasingly, | | | | develop natural resource deals. |
| Russia has shut China out of Central Asia in | | | | With US$1.2 trillion in foreign currency reserves, |
| obtaining long-term, multiple energy sources. | | | | China is exercising its financial biceps. In March, the |
| Aside from South America, where China has | | | | country formed the Huijin Fund as the state's |
| strengthened the country's ties with Venezuela | | | | investment arm. Up to US$400 billion have |
| and others, Africa is a prime hunting ground for | | | | reportedly been placed in this fund for investment |
| China's future energy security. China has | | | | purposes. On Sunday night, the Huijin Fund |
| established a strong foothold in the Sudan for | | | | invested US$3 billion to purchase a stake in about |
| petroleum. But, Africa is rich in uranium deposits. | | | | 9.9 percent of the Blackstone private equity firm. |
| According to a report published by the | | | | Our research suggests the fund is likely to |
| International Atomic Energy Agency in 2005, | | | | strongly invest in natural resources. |
| Africa has 18 percent of the world's known | | | | On this basis, we can not rule out a simple carving |
| recoverable uranium resources - about six | | | | of Africa. We don't believe China will quietly step |
| percent less than Australia and one percent more | | | | back and focus the country's uranium acquisition |
| than Kazakhstan. We began coverage on both | | | | efforts in Niger, permitting Russia to concentrate |
| Namibia and Niger, after Russia sent a delegation | | | | on Namibia and South African uranium. |
| to Egypt to discuss the nuclear renaissance. At | | | | In Niger, we covered two 'early days' prospective |
| the time, our research pointed to Africa, | | | | uranium juniors over a year ago. North Atlantic |
| particularly those countries, as ripe for future | | | | Resources acquired a uranium permit in the |
| uranium production. Chinese prospectors raced to | | | | 1900-square kilometer Abelajouad in this country. |
| Niger within weeks after our initial coverage. | | | | This past April, the company increased its holdings |
| During 2006, Namibia became saturated with | | | | to nearly 3,000 square kilometers. In late April, |
| numerous exploration plays hoping to capitalize on | | | | Northwestern Mineral Ventures announced |
| the country's uranium resources and relaxed | | | | uranium mineralization in assays from rock |
| environment. Consequently, the Namibian Minister | | | | samples after a first-pass reconnaissance on its In |
| of Mines and Energy closed the country's | | | | Gall and Irhazer uranium properties. Both would |
| exploration window. Since then, Niger has become | | | | need to further explore their properties before |
| a new hunting ground. We expect this country to | | | | attracting serious interest from the Chinese. |
| become just as saturated as Namibia has been. | | | | However, in Namibia both UraMin and Forsys |
| China is eager to capitalize upon the continent's | | | | Metals are actively progressing toward mining |
| uranium resources before Russia outmaneuvers | | | | uranium on their properties. Either could be the |
| them as has been accomplished in Central Asia. | | | | first, but we believe both should become winners |
| According to an email we received from | | | | in the uranium bull market. Because China has |
| TradeTech's Gene Clark, after presenting at the | | | | carefully aligned with UraMin, or at least shown an |
| China Power & Alternative Energy Summit | | | | inkling to do so, we suspect Russia might begin to |
| on May 18th, he told us China's official target for | | | | look more carefully at Forsys Metals. This is |
| nuclear power capacity was '40 GWe by 2020 | | | | purely speculation based upon our premise of |
| and another 18 GWe in the following five-year | | | | 'uranium Politiques.' We do not have any 'inside |
| plan.' This confirms China's aggressive plans to | | | | track' on this matter. |
| acquire sufficient uranium to reach this capacity, | | | | Fortunately, we had the opportunity to chat with |
| and would be foolish to rely on just Australia. | | | | Forsys chief executive Duane Parnham late last |
| Typically, China has built its energy portfolio | | | | week. His company had announced the completion |
| through numerous deals across multiple regions. | | | | of the pre-feasibility study on the company's |
| This past October, Yang Changli, vice president of | | | | Valencia uranium deposit in Namibia. We missed |
| China National Nuclear, said it would seek uranium | | | | the company's conference call, but were allowed |
| not only from Australia, but from Canada, | | | | the opportunity to discuss his company's |
| Kazakhstan, South Africa and Namibia. In an | | | | prospects and future plans during a telephone call. |
| interview Yang gave during the 15th Pacific Basin | | | | The company's pre-feasibility study was prepared |
| Nuclear Conference, he said, "China won't rely on | | | | by Australia-based Snowden Mining, which used |
| any single supplier of uranium because of energy | | | | the guidelines of Australia's JORC code. |
| security considerations. | | | | Subsequently, the Valencia uranium mineral |
| Namibia is the First African Focus of Uranium | | | | reserve was classified as Probable Reserves. |
| Politiques | | | | These were calculated at 24 million pounds U3O8. |
| On May 14th, Russia's second-largest bank | | | | We asked about production. "We are now |
| Vneshtorgbank and Russia's state-run nuclear | | | | modeling 2.4 million pounds per year," Parnham |
| exporter Tekhsnabexport announced they were | | | | told us. He expects to payback in less than two |
| considered a joint venture to operate in Namibia | | | | years. With Forsys as with all near-term |
| through licenses they directly hold and through | | | | producers, some early conversations have begun |
| investments in other companies which have | | | | about pre-selling the company's uranium |
| obtained licenses in Namibia. | | | | production after production has commenced. |
| In March Russian Prime Minister Mikhail Fradkov | | | | His company's news release talked about six |
| announced his country was prepared to building | | | | month of stripping during the initial part of the |
| nuclear plants in Namibia. Neighboring South Africa | | | | operation so we started there. "We'll start when |
| had previously warned Namibia to expect | | | | we get a mining license and then looking at |
| reductions in energy supplies. Namibia is dependent | | | | production." When will the company complete its |
| upon South Africa for electricity and has forecast | | | | ongoing environmental assessment? "We are |
| an energy deficit of 300 megawatts within the | | | | hoping to have an environmental decision by year |
| next three years. | | | | end," Parnham told us. "We are hoping to have |
| On May 10th, Russia and Kazakhstan signed an | | | | enough data to apply for a mining license in early |
| agreement to set up the International Uranium | | | | 2008. If that's successful, then obviously the |
| Enrichment Center, anticipated to come onstream | | | | decision to go forward will be made at that time." |
| by 2013. As part of this announcement, Sergei | | | | For the time being, the company plans to expand |
| Kiriyenko, head of the Federal Nuclear Power | | | | its resource. "The pre-feasibility is just the first |
| Agency, said, "Any country can become a | | | | snapshot of the situation," he said. "We are finding |
| member of the center by signing an | | | | the pit optimization study is only looking at a very |
| intergovernmental agreement granting it | | | | small portion of the overall resource." Does that |
| guaranteed access to uranium enrichment | | | | mean the resource is actually larger, then? "It's a |
| services." We conclude Namibia may wish to | | | | heck of a lot bigger," he told us. "It's just a |
| participate in this arrangement. | | | | function of how much data you have available to |
| Enter CNNC on Sunday night. The Chinese | | | | punch into the model. Then, how much does the |
| company's deputy general manager for uranium | | | | model give you back? The evaluation process is |
| procurement announced to Bloomberg News that | | | | ongoing. You'll probably see a change in the pit |
| CNNC and UraMin will start 'more formal' talks this | | | | design very shortly because we have the ability |
| week. | | | | to move more resource into the reserve |
| UraMin is a prime acquisition candidate for the | | | | category." |
| Chinese because of its uranium prospects in both | | | | We talked about his company's horse race with |
| Namibia and Niger. The company also has holdings | | | | UraMin. How does it look? "Neck and neck, toe to |
| in South Africa and the Central African Republic. | | | | toe," Parnham said. "I think it shows there's |
| We are now facing a new era of uranium politics | | | | opportunity in Namibia, and that's good that there |
| or rather 'Uranium Politiques.' And there is good | | | | are a number of us working for a common goal." |
| reason for this to escalate. Yesterday, the U.S. | | | | Finally, we asked what has emerged as the key |
| Energy Information Administration issued | | | | question: Is Forsys a ripe plum for the picking. He |
| 'International Energy Outlook 2007.' The report | | | | offered both sides of the coin. "Where the real |
| announced, "World marketed energy is expected | | | | opportunity lies is putting a property into |
| to grow by 57 percent between 2004 and 2030." | | | | production," he responded. "The operation isn't all |
| The most rapid growth in energy demand is | | | | that difficult so it's not a deposit that our |
| anticipated in non-OECD Asia. The majority of this | | | | expanding team couldn't put into production." And |
| energy demand growth would come from China | | | | then Parnham left the door open. "Anything can |
| and India. This was the reference case - the | | | | happen. It's an open market, and we are a public |
| middle ground of growth. | | | | company. But, we are certainly geared toward |
| Also on Monday, leading Russian nuclear expert | | | | putting this into production." |
| Yevgeny Velikhov, head of the Kurchatov | | | | And from what we've seen among the recent, |
| Institute, told reporters at a news conference | | | | significant consolidations, those companies who |
| that the recent surge in uranium prices "may still | | | | have commenced production, and those closest |
| grow by another order of magnitude." He believes | | | | to production, are the prime acquisition candidates. |
| the uranium price will continue to rise as global | | | | Why should companies developing projects in |
| uranium demand soars while supplies remain tight. | | | | Africa become the exception instead of the rule? |
| "The global energy market is very turbulent," | | | | |