Russell Indexes Drop All But Two Small-Cap Uranium Companies
Russell indices are widely used by investors for index funds and around $4-trillion in institutional assets are currently benchmarked to them. For small-caps, the most widely followed Russell index is the Russell 2000. As the Russell membership lists change, index investors are usually bound to add or drop company holdings accordingly.
Last year we wrote about how being inducted to the Russell Indexes can have a material impact on the share volumes and prices of many listed companies. See our May 24, 2011 newsletter, "Will Uranerz Be Inducted To The Russell 2000 Index Next Month?", and June 20, 2011 newsletter, "Uranerz To Be Added To Russell Indexes".
Some of these companies rally or sell-off early in June, in anticipation going into the Russell Indexes annual reconstitution; others react after Russell's reconstitution has been finalized going into July. This is especially so for newly inducted small-cap companies, which we generally define as having a market capitalization of less than $500 million.
This time last year, the small-cap uranium companies that we could identify that were being newly added, or already part of, the Russell Family of Indexes were: Uranerz Energy (AMEX: URZ), Uranium Energy Corp (AMEX: UEC), Ur-Energy (AMEX: URG) and Uranium Resources (NASDAQ: URRE).
Russell Indexes has just completed the 2012 reconstitution and finalized its additions and deletions. On the Russell Global Indexes you can still find large-cap uranium producers under their country of origin, such as: Cameco Corp (NYSE: CCJ)(TSX: CCO) and Uranium One (TSX: UUU) under Canada, or BHP Billiton (NYSE: BHP) and Rio Tinto (NYSE: RIO) under Australia, for example.
However, the only small-cap uranium companies that I can find remaining on the Russell 2000, Russell 3000, Russell Microcap, Russell Global, or any Russell Indexes for that matter, are our featured stock Uranerz Energy URZ, and UEC.
Uranerz Energy Discovers New Uranium Trend
Our last newsletter mentioned that Uranerz Energy (AMEX: URZ)(TSX: URZ)(FF: U9E) is particularly interesting because it is both a high-growth exploration story and because it will soon be entering the production stage. URZ' Nichols Ranch ISR mine is targeted to commence uranium production this year!
Uranerz holds one of the largest land packages in the (PRB) Powder River Basin of Wyoming. Two major miners already produce uranium in the PRB, including the world's largest public uranium company, Cameco, who operates the largest U.S. uranium mine just south of URZ' projects.
Uranerz' Resource & Technical Reports page show attributable NI 43-101 resources of over 19-million pounds of U3O8 uranium in the measured, indicated and inferred categories. This is from only 7 uranium properties explored so far, out of over 30 uranium projects covering over 80,000 acres in the PRB.
Uranerz has several projects they plan to produce uranium from. These include their Nichols Ranch, Hank, Jane Dough, Reno Creek, West North-Butte, and North Rolling Pin Properties. The first two of these are already permitted for construction and the third is being permitted. The extracted uranium loaded solution can be either piped or trucked to URZ' nearby Nichols Ranch ISR mine for processing.
This property map shows Uranerz' projects explored so far, plus the new Monument area project, and their relation to Cameco Corp and Uranium One's properties in the PRB.
On June 21, URZ announced results from its exploration-drilling program that began in April 2012. The news release, entitled "Uranerz Discovers New Uranium Trend in the Powder River Basin", reports drill results from the company's Monument project located approximately 15 miles southeast of the Nichols Ranch project where Uranerz is building its first ISR uranium mine.
The monument project is on the Arkose Mining Venture property, a joint venture between Uranerz Energy (81%) and United Nuclear, LLC (19%). From the news release, here's the part that caught my eye, "The Monument project is proximal to the Company's other projects in the Powder River Basin. A total of 30 new uranium trend and delineation holes were drilled in a single section of the Monument project area. The 30 new holes followed up on the 48 widely spaced exploration holes drilled last year throughout the Monument area. A total of 120 exploration holes are planned for 2012."
Obviously last year's 48 widely spaced holes in the Monument area warranted follow-up drilling. This spring they focused 30 holes in a single section. From this, URZ announced the discovery of a new uranium trend. This year Uranerz plans around 100,000 feet of drilling, each hole over 800 feet deep, including and focused on the new Monument area.
Redox Boundaries Clearly Seen On Uranerz' Properties
Uranium deposits in the Powder River Basin occur along reduction-oxidation boundaries. These "redox boundaries" weave and look like worms on a map. The topographical map below shows the outline of the uranium deposits for Uranerz Energy's Nichols Ranch, Hank and Jane Dough projects, which occur along redox boundaries.
Uranerz Energy's first ISR uranium mine is being built in the middle of the A-shaped redox boundary that you can easily see inside the red Nichols Ranch Unit area. Leached uranium can be piped to the mine from redox boundaries at Nichols Ranch and from the nearby Jane Dough Unit. The redox boundary on the Hank Unit may also be close enough to have its uranium piped, or if too far a satellite plant may be required to do initial processing and then the uranium loaded resins can be trucked to Cameco's processing plant.
The Monument project area is 15 miles from Uranerz' ISR mine site, so its uranium would likely be trucked to Nichols Ranch. There may even be a better option. Uranerz already has an agreement in place, signed last November with Cameco, for final uranium-loaded resin processing at the Smith Ranch Highland mine.
Cameco's mine might be closer than Uranerz' mine, to do both the initial and final processing of Monument's uranium. This assumes that Uranerz doesn't expand the Nichols Ranch mine to do its own final processing, and that Monument doesn't become big enough to justify its own mine. Uranerz has many options; it's just too early to know at this point.
As Uranerz fully defines the scope of its new Monument uranium trend discovery, investors should be able to look forward to more drilling news this year. Hopefully this will also lead to an update of URZ' uranium resources at some point. The Monument area would then have to be permitted, however Uranerz should be able to save years by adding this new project under the amendment provisions of their existing permits.
This new uranium trend discovery, the Monument area, is just another example of the high-growth exploration story that I indicated URZ could be... on top of Uranerz Energy becoming the next uranium producer.
URZ Outperforming Other Uranium Stocks Again
Uranium stocks, like all stocks, can be affected by any number of external factors. Market moves in general can affect uranium miners, to even oil price swings as nuclear power is a competing source of energy and uranium is the fuel for nuclear reactors.
Considering all the market noise out of Europe lately, the market has shown surprising strength over the past couple of weeks. Perhaps this is just a bounce off the June lows, or perhaps it's the early signs of a rare summer rally. Summer rallies have been scarce over the past decade, but then again this is a U.S. election year.
In any event the DJIA bottomed on June 4th at 12,101 and has rallied around 7% since. On that date oil was just under $84 and is now over $87, up around 4%. Uranium stocks, which have been beaten up for a while now, have shown mixed returns lately. From worst to first since June 4th, here is the performance of the uranium stocks mentioned above:
URG -12 %, URRE -9 %, UEC +8 %, BHP +9 %, RIO +15 %, UUU +17 %, CCJ +21 %. URZ is now $1.58, up +27 % since June 4th, making Uranerz Energy the best uranium performer since the market bottomed last month. Visit Uranerz.com and put URZ on your radar screen!
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