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Investor Success Follows Management
Success Richard (Rick) Mills As
a general rule, the most successful man in life is the man who has the best
information One of the soundest strategies for
investing in junior resource stocks is investing in management with a proven
track record in creating value for their shareholders. Investors follow these
successful mine builders from company to company, year after year, as they build
and sell off their success stories to larger companies. I’ve been watching
one such company for a while. It’s run by a management team that has multiple successes behind them - and
they just reported their highest grade drill results ever causing the stock to
trade multiple times its normal volume. This junior is
headed up by Gregg Sedun – a former mining and securities lawyer. He was a
founding director of Diamond Fields
Resources which was sold to Inco for $4.3 billion in 1996. He was then a
founding director of Adastra Minerals which sold to First Quantum Minerals for
$300 million in 2006. Mr. Sedun was also
a founding shareholder of Peru Copper which sold to Chinalco for $840 million
in 2007. At some point, a string of “wins”
becomes a proven track record in creating value for shareholders.
Mr. Sedun is currently the CEO of Uracan
(URC-TSX) – a little known Canadian exploration company which is developing one
of the largest uranium resources in Canada. Sedun is partnered with Clive Johnson
and Tom Garagan - the two driving forces behind Bema Gold. Bema Gold was sold
to Kinross in 2008 for over $3 billion. Also involved in Uracan are Frank Giustra
and Gordon Keep - the brain trust behind the single most successful buyout of
the uranium mania - they sold Urasia Energy to Uranium One for $3 billion in
2007. That deal went from a 40 cent seed
financing to an $8 a share buyout in under two years! Success follows these guys. And although
Uracan has explored only 4% of its 1000 sq km stake, it has already discovered 40
million pounds of compliant inferred U3O8.
The average market valuation, according to Canadian brokerage firm
Canaccord Capital, is $3 per pound in the ground, giving URC a theoretical
valuation of $120 million, or roughly $1 share.
Given that URC is trading at 19 cents and has a market cap of $25
million, this suggests a promising value play.
The drill results returned grades of 480
parts per million (ppm 0.048% or 0.96 lbs/t) U3O8. That’s 50% higher grade than Forsys
Metals and Bannerman Resources have with their African uranium deposits - Forsys
has a $320 million market cap and Bannerman has an $80 million market cap. Uracan’s
uranium is in Quebec, Canada, which has been named the top mining jurisdiction
in the world by the Fraser Institute, an independent think tank – North
American mining assets often trade at a premium, not a discount. It appears that Mr. Sedun has brought
his Midas Touch to Uracan. One thing we know for sure is that Sedun
has a knack for getting in ahead of the big story, and staying with it until
the end. His companies seek to add resources in an environment of surging spot
prices. Diamonds, copper and cobalt – he
sold them all at the end of extended runs. Is Uranium due for a run? Haywood Securities reported last week
that uranium production was down at both the Olympic Dam and Rossing mines, two
of the largest producers in the world - but the market did not pick up on
this. Continued shortfalls are expected
in the near to mid-term. China has quietly approved the
construction of 28 new nuclear power reactors by 2020. They are under pressure to convert to cleaner
energy sources. Each reactor will
require 300 tonnes of uranium a year. In a recent financial report, Octagon
Capital Corporation forecasts a 65% increase in the price of uranium by the
year 2013. These initial 12 URC drill holes into
Costebelle represent a 350 m strike length and the system is open to depth and
along strike. There are eight holes left to report on from the 20 hole
winter program.
Greg Sedun is running a company with a
large land package in a politically stable, geologically proven area and is
reporting stellar drill results. His
partners have also realized big gains for their shareholders in the last
decade. Keep your eye on the coming drill results this summer. Many can talk the talk, few can walk the
walk, Sedun has proven, more than once, he is capable of walking the walk. For
this reason alone Uracan should be on every energy investors radar screen. Is it on yours? Richard (Rick) Mills If you're interested in
the junior resource market and would like to learn more please come and visit
us at aheadoftheherd.com *** Richard is host of
aheadoftheherd.com and invests in the junior resource sector. His articles have
been published on over 200 websites, including: Wall Street Journal, SafeHaven,
Market Oracle, USAToday, National Post, Stockhouse, Casey Research, 24hgold,
Vancouver Sun, SilverBearCafe, Infomine, 321Gold, Kitco, Gold-Eagle, The
Gold/Energy Reports, Calgary Herald and Financial Sense. *** Legal Notice /
Disclaimer
Richard Mills does not own shares in any
company mentioned in this article and no companies mentioned are advertisers on
aheadoftheherd.com |
