AGS - Alliance Resources

[Damo79]

I think it might be just me interested in this these days, but my timing for bumping the thread was fortuitous. It's moved up about 25% in the last couple of weeks on higher than average volume, so this could be the start of a little momentum. Lots of things happening fundamentally this coming few months as well.

[CAM]

You are not alone Damo. I have half an eye on them.
Made some good money back in 06/07 on these when the last uranium cycle was on the rise.
Got in at 18c and out again around $2ish if I recall.
Appreciate your updates

[SCHUMACHER]

You are not alone Damo. I have half an eye on them.
Made some good money back in 06/07 on these when the last uranium cycle was on the rise.
Got in at 18c and out again around $2ish if I recall.
Appreciate your updates

Hi Damo and CAM- A lot of time has passed since talking about AGS but even though i had sold out in the high 20s i had a watchful eye on this one - and as of last week i decided to re enter at 15.5c mainly due to believing that things are about to change.
I think the fundamentals for AGS have now shifts and interest is coming back into this stock- we all know how undervalued this is and to see it close at 16.5c ON FRIDAY could, be the beginning of the re-rating IMO

Heathcote heading towards mining and AGS along for the ride with 25% - may earn more but lets assume we only hold 25% of B4M post court case (if we ever get to that stage) GA may not want the dirt - and as you say may want to settle out of court ) thats enough for me and eventually for a share value in excess of $1.00

good luck all for next week as i expect we may see some figures on the project as per announcement in 3rd December announcement-

"Quasar also advised that the updated schedule of activities and cash flow projections to reflect the delays in securing government approvals to enable construction at Four Mile will be provided to ACE shortly."


SCHUMACHER

[SCHUMACHER]

The perfect storm- Quasar/ACE timing is perfect.
Production to commence next month (February 2014 and ramp up so they will time the 2015-2020 uranium demand expected to increase due to growing needs by the utilities - think AGS volume could increase tomorrow when markets reopen.


"Suddenly, long-suffering uranium stocks are taking flight.

Shares of Cameco, the world’s top producer, touched the $25 mark for the first time in two years on Monday. Since Jan. 1, the stock has gained nearly $3, or more than 13 per cent.

Smaller players like Denison Mines, Fission Uranium and Paladin Energy have also posted double-digit gains since the year began. The biggest reason is Japan’s plan to finally restart some of its 50 shuttered nuclear reactors later this year. The reactors were taken off-line in 2011, after a devastating earthquake and tsunami obliterated the Fukushima power plant, which is still reportedly leaking radioactive water.

That led to a uranium supply glut, sending prices crashing. The spot price for the nuclear fuel sagged to just $34.50 US a pound by the end of 2013, half the level before the Fukushima disaster, and 75 per cent below the 2007 peak of $136.

At the current spot price of $36, it has barely budged since. But bullish analysts like David Sadowski of Vancouver’s Raymond James Ltd. say brighter days lie ahead, as market conditions tighten. Sadowski currently carries an “outperform” rating on Cameco and Denison and a “strong buy” recommendation on Fission.

Of the 50 halted Japanese reactors, 16 have applied for restarts, he notes in a recent report, and half a dozen are expected to return to service by year’s end.

A series of operating problems that triggered recent uranium mine closures in Australia, Namibia and Niger — affecting about 15 per cent of global supplies — have also underlined the growing risk of a future supply crunch, he says.

In addition, an accord between the U.S. and Russia allowing the Russians to recycle uranium from Soviet-era nuclear weapons is set to expire this year, removing about 24 million pounds of uranium from western markets.

Add it all up, and the picture that emerges is one of a looming supply crunch in the second half of the decade.

“Demand continues to rise at about three per cent a year,” Sadowski said in an interview. “Down the road, we’re looking at a supply shortfall because supply just can’t rise at that rate. So that’s really been our underlying thesis.”

Of course, many analysts said similar things a year ago, when it looked like the restart of Japan’s reactors might proceed more quickly. That didn’t pan out, and uranium prices continued to slide.

But Sadowski and a growing chorus of bullish analysts are convinced that a turn is finally at hand. Several investment dealers in the U.S. and Canada — including TD Securities, Scotiabank and Bank of America — have upgraded their ratings and target prices on Cameco over the past couple of weeks.

Power utilities, which need to lock in supplies years in advance and have typically contracted for about 160 million pounds of uranium annually over the past decade, purchased just 20 million pounds last year, Sadowski notes.

As a result, he expects the big nuclear fuel buyers — about 80 per cent of which are located in China, India, Russia and South Korea, and all of which have active expansion programs — to be forced back into the market soon to cover their future needs.


Sadowski’s analysis, using data from U.S.-based Ux Consulting Co., shows that future uncontracted annual uranium needs among utilities will soar between 2015 and 2020, from 18.1 million pounds to more than 102 million pounds.

“Utilities that are not fully covered may have to rush for what is available,” he said in his report. “And, as utilities have historically contracted three to four years in advance of their needs (largely depending on the region, with Asian utilities being the most conservative), we are now in the window of when this rush may occur.”

Cantor Fitzgerald analyst Rob Chang is also upbeat on the uranium outlook.

“We have long pointed to 2014 as the kick off year for uranium prices to return and for the commodity to retake its position in the spotlight,” he says, in recent report.

“While uranium equities have shown some strength over the last quarter of 2013, we believe there is significant upside remaining as the spot price of $34.50 per pound is below the current marginal cost of production of $40 per pound, and significantly below the minimum incentive price for future supply to match future uranium demand ($70 per pound),” he adds.

“We believe prices are set for a violent move higher as Japan is set to restart some reactors this year. We forecast 12 to restart in 2014. Moreover, despite the negative headlines of anti-uranium sentiment ... there are more reactors under construction, planned, and proposed now (556) than since before Fukushima (541). "

[SCHUMACHER]

Check this out - makes sense to me. Uranium sector is one to watch NOW!!!

http://uraniuminvestingnews.com/17294/where-investors-should-focus-in-todays-uranium-market-marin-katusa.html

cheers SCHU

[SCHUMACHER]

Best time to buy uranium ISR stocks is NOW!! - MORE IMPORTANTLY THE ONES GOING INTO PRODUCTION !!

hERE IS ANOTHER ARTICLE FOR YOU ALL TO READ- AGS GOT A MENTION IN THIS ARTICLE- AGS IN VERY GOOD POSITION

http://www.mining.com/web/climate-change-polar-vortexs-and-nuclear-energy/
From the World Nuclear Association (WNA) we take the following numbers as updated January 3rd, 2014. An important point to remember is I’m only going to use demand numbers from ‘future reactors envisaged in specific plans and proposals and expected to be operating by 2030.’

Facts:

Currently there are 435 reactors operating worldwide producing 375,264MWe. Operable already means connected to the grid.
Currently there are 71 reactors under construction. Under construction means first concrete for the reactor has been poured, or a major refurbishment under way.
There are 172 reactors on order or planned. Planned means approvals, funding or major commitment in place, mostly expected in operation within 8-10 years.
There are 312 reactors proposed. Proposed means specific program or site proposals, expected operation mostly within 16 years.
Tonnes uranium required for reactors in 2013 = 64,978t
71 reactors under construction + 172 reactors on order or planned + 312 reactors proposed = 555 NEW reactors expected to be connected and supplying power to the grid WITHIN 16 YEARS!

Tonnes uranium required in 2013 was 64,978t, 64,978/435 = 150t uranium per reactor.

555 new reactors times 150t = 83,250t new uranium per year in 16 years.

Adding to that number an industry standard 900 MW LWR typically needs around 350 tons of low enriched uranium fuel on start-up, and about 150t per year after that.

These numbers are driven even higher by the increased demand from the industry for future bigger reactor sizes of up to 1200 MW per power plant.

In 16 years, in 2030, we could be using as much as 148,228t (326,101,600 lb) uranium per year – if all the new reactors are built and no reactors are taken-offline.

Demand forecasts for uranium depend largely on installed and operable capacity. Once nuclear reactors are commissioned its very cost effective to keep them running at a high capacity. When demand load changes, utilities can burn more, or less fossil fuel to meet the changing requirements.

Nuclear Saves New England…

“In New England, natural gas electricity generation faltered so much

that regional grid administrator ISO New England had to bring up dirtier coal and oil plants to try to make up the difference. Nuclear energy didn’t have many problems at all and actually became the primary provider of electricity in New England, just edging out gas 29% to 27% (Hartford Business). Oil generation made up 15% while coal accounted for 14%… coal stacks were frozen or diesel generators simply couldn’t function in such low temperatures. Gas choked up – its pipelines couldn’t keep up with demand – and prices skyrocketed. Nuclear did quite well throughout the vortex period. The entire fleet operated at 95% capacity, a ridiculously high value (NEI).” James Conca, Polar Vortex – Nuclear Saves the Day, Forbes

The latest forecast from the World Nuclear Association (WNA) has a base case demand of 205 million pounds of U3O8 for reactors in 2020 and 255 million lb for 2030.

UxC pegs its base case at 275 million lb with a high of 355 million pounds for 2030.

Current annual global uranium consumption is 190 million pounds, annual global mine production is 140 million pounds, resulting in a current 50-million pound deficit.

That’s today’s deficit. In 16 years time we’re suppose to ramp up uranium production (according to the WNA & UxC base cases), anywhere from 65,000 million lb all the way up to 135 million lbs new mined uranium? Two base case scenarios are telling us we need to at least double, maybe even triple, mined uranium production in just 16 years.

In 2010, 22% of uranium came from secondary sources (uranium stocks held by miners, power plant builders and plant operators, as well as government stockpiles) this number had shrunk to 14% by 2012.

The HEU agreement governing the sale of decommissioned Russian warheads expired the end of 2013 - 20 million lb’s of annual supply removed from the market.

The last time excess uranium supply was this low (8% as a percentage of demand) was just before Fukushima when the spot price was US$70/lb U3O8.

Considering it takes over 11 years to find, develop, permit and build a mine we better get busy.



Uranium mine production, also known as primary supply, met 86% of nuclear power generation needs in 2012. While this is up from 65% in 2005, the absolute gap has been rising – from 7,480t uranium in 2005 to 10,470t in 2012.

In 2012, eight companies marketed 88% of the world's uranium mine production and a net combined total of nearly 99% of world uranium consumption was being imported into user countries.

Governments play a huge role in regards to uranium supply:

The Kazakhstan government controls 60% of domestic production through Kazatomprom.

JSC Atomredmetzoloto (ARMZ) and Uranium One are controlled by Russia.
Navoi Mining and Metallurgical Combinat (Navoi) is controlled by Uzbekistan.
The French government holds a 10% stake in AREVA.

Some of the new mines counted on to reach substantial production are:

Four Mile, Australia
Cigar lake, Canada
Talvivaara, Finland
Imouraren, Niger
Husab, Namibia
Some key deferrals and shutdowns include:

BHP Billiton Ltd.’s (BHP) Olympic Dam expansion in Australia has been postponed indefinitely.
Uranium One’s halted its Willow Creek mine expansion. Uranium One also mothballed its Honeymoon project in South Australia due to low uranium prices and high operating costs. The company’s Mkuju River project’s commissioning date of 2017 might be pushed back as the company needs to optimize the feasibility of the mine.
Postponement of development at Rosatom Mine #6 (Priargunsky) and shutdown of Mine #2
Capacity reduction at JSC Atomredmetzoloto’s Khiagda mine.
Delayed Imouranen startup to mid-2016.
Cameco’s Kintyre project in Australia is not economically viable at current uranium prices.
Production from Energy Resources of Australia Ltd. Ranger 3
Deeps underground mine was anticipated to begin in 2017. Two recent leach tank spills at the company’s existing Rössing (Namibia) and Ranger (Australia) open-pit mines has resulted in the Australian government suspending all mining activity. The Australian government is currently conducting an audit to assess the impact.

Talvivaara Mining announced in the fall of 2013 that a weakened liquidity position was forcing the company to explore various funding options. Production at the companies Sotkamo nickel/uranium mine may be halted indefinitely.
"Cigar Lake is among the most technically challenging mining projects in the world…" Tim Gitzel, Cameco's president and CEO

KazAtomProm’s CEO announced Kazakhstan’s uranium output in 2014 was going to be similar to 2013 at 21,000 tU. This might signal Kazakhstan, the world’s number one uranium producer, is reaching peak uranium production levels of 50 Mlb/y.

Expect 2014 to be a rebound year for uranium spot prices for many reasons:

Japan – The Fukushima disaster in March 2011 destroyed four of Japan’s 54 nuclear power reactors – 16 of the remaining 50 have already applied to restart operations. With six of the 16 applications being prioritized for government review there could be as many as 6 Japanese reactors online by the end of 2014.

Japan has enough uranium (an estimated 100 million pounds) to last up to 10 years – that’s the overhang that’s driven down spot prices and the reason utilities have been holding off buying long term. But if Japan’s utilities are restarting their reactors it means that the threat of them dumping their inventory stockpile has been removed from the market. This could jump start buying as global utilities recognize the growing risk to future supply availability.

And of course it means Japan itself would be returning to a nuclear reactor demand of >10 Mlbs/year in less than half a decade as they would need to secure long term uranium deals well before their stockpiles ran out.

UUR – Cumulative uncovered uranium requirements (UUR). UUR represents what utilities have to buy to meet their needs in future years, while maintaining strategic inventory levels. Utilities contracted for 160 Mlbs (average) of uranium per year over the last decade yet utilities only contracted for 20 Mlbs in 2013.

According to UxC, in 2003, the 12-year forward uncovered requirements were 130 million lb U3O8. Today, the 12-year forward uncovered requirements are just short of 200 million lb.

UPC – Uranium Participation Corp. TSX – U, the world’s only physical uranium fund is raising $50 million, most of the $50m will be used to buy uranium.

The effect of a massive uranium purchase by UPC would be threefold:

Reduction in current excess supply
Upward pressure on the uranium price
Another spark to ignite utility buying
A one million pound UPC uranium purchase would represent 2.3% of total 2013 spot market volume.

Shale gas - The key to the U.S. natural gas boom is the use of new technology. Hydraulic fracturing, fracking, and horizontal drilling have tapped huge resources previously thought unrecoverable.

However the decline rate of shale gas wells is very steep. A year after coming on-stream production can drop to 20-40 percent of the original level.

Here’s James Howard Kunstler, author of "The Long Emergency" and his take on the situation;

“In order to keep production up, the number of wells will have to continue increasing at a faster rate than previously. This is referred to as "the Red Queen syndrome" which alludes to the character in Alice in Wonderland who famously declared that she had to run faster and faster just to stay where she is.”

Here’s something else, it’s a link to an Energy Report interview with energy expert Bill Powers.

The shale gas energy boom is not sustainable, will be shorter lived than most anticipate and its global potential is vastly overstated.

Consider also

Germany – the loss of 17 reactors will occur at approximately the same time as India’s rapid growth in nuclear energy – by 2030 India should have seven more reactors online than Germany will have taken offline.

AREVA has signed a €1.25 billion deal to build a new Angra 3 reactor in Brazil by 2016.

Canada and the European Union (EU) have reached a nuclear technology free-trade agreement.

China is going to help Pakistan build a US$9.6 billion nuclear power complex in Karachi.

The Russian federal government has approved plans (construction has already begun on several), to build 21 new reactors in nine different power stations by 2030.

China is currently building 29 reactors, India 6, Russia 10 and South Korea 5. The number of proposed nuclear reactors has been declining since 2010 but the number of facilities under construction, and planned, has increased every year. Projects are getting built and becoming operational.

BP projects that global energy consumption will rise by 41% by 2035, with 95% of that growth coming from rapidly growing emerging economies.

The United Kingdom has offered EDF Energy a power price guarantee for 35 years for a plant that the French utility plans to build in southwest England.

In the U.S. the Watts Bar Unit 2 nuclear plant in Tennessee remains on budget and schedule, commissioning is expected in late 2015.

Also in the U.S. construction of the Southern Company Unit 3 and Unit 4 reactors in Georgia is underway. These units are expected to be completed by late 2017 and 2018, respectively.

Opportunities

On May 31st, 2013 I published ‘Civil Nuclear Energy Renaissance Restart’ in which I highlighted several uranium companies I liked.

Cameco: closed @ CDN $22.54, May 31st 2013.

Uranium One: May 31st 2013 closed @ $2.77, last trade $2.85 defunct (taken private)

Uranerz: May 31st 2013 closed @ CDN $1.33.

Uranium One has been taken private, Cameco and Uranerz are still on my list and TSX-U is a new addition.

Cameco Corp. TSX: CCO, is the largest publicly traded uranium company and the world’s third-largest uranium producer.

Cameco Highlights:

Vertically integrated
Engaged in fuel conversion services and nuclear power generation
Top-producer status
High-grade deposits
Low cash costs
Organic growth in stable jurisdictions
Healthy balance sheet
Cameco Corp. is the bellwether uranium mining company. The company is planning to increase its U.S. production in the Powder River Basin, Wyoming.

Uranium Participation Corp. TSX – U, UPC is a Canadian investment fund that purchases and holds both uranium oxide concentrate (U3O8) and uranium hexafluoride (UF6). The fund’s primary objective is to achieve capital appreciation through the value of its uranium holdings.

UPC would seem to offer investors all the upside of a potential uranium market rebound yet isn’t saddled with the exploration and operational risks other equities in the sector have.

Uranerz Energy Corp. NYSE – MKY, TSX.V – URZ, Uranerz Energy Corp. (NYSE: MKT, TSX: URZ) is a U.S. mining company operating in Wyoming’s Powder River Basin where it controls a large strategic land position. URZ is expected to be in production (annual recovery targeted for 600,000 to 800,000 pounds after ramp-up) in early 2014.

Uranerz has a processing deal with Cameco and long term sales contracts for a portion of their production with Exelon (operator of the largest nuclear fleet in the U.S.) and an undisclosed U.S. utility. The Company’s Nichols Ranch ISR uranium project, in Wyoming’s Powder River Basin, is licensed for a capacity of two million pounds per year of uranium yellowcake.

Conclusion

There’s a significant uncovered long term uranium requirement. With so many projects being deferred or cancelled outright, with existing mines being shutdown, with Japan restarting and with continued demand growth from other regions of the world it’s going to become increasingly difficult for utilities to meet uncovered uranium needs.

Facts are:

Globally mined uranium is far from abundant.
It can take 11 or more years to develop, permit and build a mine.
Uranium demand could more than double over the next 16 years.
The here today (but unrecognized by most) uranium supply pinch is not going to go away for a very long time.

[Damo79]

There's definitely a lot of press concerning uranium in general lately. I think Alliance is just completely off the radar of most investors, and all funds, because of uncertainty around their legal case. However, since the case is all about them trying to reclaim the whole if the Four-mile mine, there really isn't any downside because if they lose they still have 25%.

To put it in perspective, Four-mile is as big as Paladin's Langer-Heinrich mine and with lower costs, and going into production in the next few months. Paladin just sold 25% of LH for $215 million. That price would value AGS at over 60 cents a share. If they are actually successful in their legal action, it would put them at around $2.40 a share fair value. With a current share price of 16.5 cents, those figures feel like pipe dreams, but I can't come up with a good reason why I shouldn't be parking a great deal of my life savings in AGS shares... And so I have.

[SCHUMACHER]

There's definitely a lot of press concerning uranium in general lately. I think Alliance is just completely off the radar of most investors, and all funds, because of uncertainty around their legal case. However, since the case is all about them trying to reclaim the whole if the Four-mile mine, there really isn't any downside because if they lose they still have 25%.

To put it in perspective, Four-mile is as big as Paladin's Langer-Heinrich mine and with lower costs, and going into production in the next few months. Paladin just sold 25% of LH for $215 million. That price would value AGS at over 60 cents a share. If they are actually successful in their legal action, it would put them at around $2.40 a share fair value. With a current share price of 16.5 cents, those figures feel like pipe dreams, but I can't come up with a good reason why I shouldn't be parking a great deal of my life savings in AGS shares... And so I have.

Good comments Damo- 6-12 months ago i was convinced Uranium was still on the scrap heap and taken my eye off the ball based on all the previous bad publicity post Fukushima) Pre Fukushima i had invested a serious amount of cash in uranium sector
post- aftermath of Fukushima I lost 50% of my investment value due to being heavily invested in Uranium and AGS-

its taken this long for me to wet my feet again and now am 100% convinced we are headed back up - With Japan and China still with skin in the game and the growing supply shortage with end of U supply from decommissioned nuclear warheads and iNDIA filling the gap that Germany will have left with their turning off 7 reactors and so on…. i believe while its under the radar - Some top bankers and investors saying while there is blood on the streets its time to get in before it becomes very popular agin which should be this year - Think it was Morgan Stanley that said in 2 years there will be major supply issues and this will put the U price per pound back around $90 l/b -

NOW IS THE TIME TO BUY TO MAKE SOME REAL MONEY !! AGS is undervalued and its that simple and with a sector beaten down to a pulp the U sector is going to surge in 2014

Needless to say I'm back in and especially AGS which could easily double in price in the next 2 -3 months even with 25% B4M which will net them around $30 million per annum and if we use a PE multiple of 5 then thats 50c share minimum in first 12 months of production


Question? notice you live in Adelaide- are you aware of any news floating around regarding B4M and what is the general BUZZ within the u market over there?

Cheers SCHU

[Damo79]

Question? notice you live in Adelaide- are you aware of any news floating around regarding B4M and what is the general BUZZ within the u market over there?

Cheers SCHU

I might live in Adelaide but I'm afraid I'm not in the right field to hear any local news. Of a general nature though, we have a state election coming up in a couple of months, and our budget isn't looking good lately with the Olympic dam expansion cancelled. There's been some speculation on another forum that the minister for mining has been poking parties (i.e. AGS and Heathgate) towards trying to reach some sort of agreement - and there was a news story a few months back with a quote from the minister to that effect - so that the state gov has some good business investment news in the lead up.

[Damo79]

Up to date mine plan and budget released. Production will begin in April with first sales in July at $48 per lb. initial rate of production of 2.5m lbs pa. Easily fully funded out of cash in bank until positive cash flow in 2015. It is truly amazing that AGSs market cap is still only around 50m. I consider the latest report a significant derisking. The court case coming up only has an upside and most people seem to agree that there's also a good chance uranium prices will rise from this year due to increasing demand. I'm expecting the share price to continue it's steady uptrend as the market digests the significance of their near future production.

[SCHUMACHER]

Well, now i know the numbers I'm not happy we finally have a start date of april 2014 for commencement of production.

Not overly happy with the terms and the loss we will make in the first 9 months of production - so it will cost us 19 million as our 25% toward production costs and we will lose a further 3.5 million and won't be cash-flow positive until june 2015 (1.1/2 years from now) uranium price still in the doldrums - we need $70 l/b long term contract prices to obtain good stable EPS (earnings per share). Numbers are what its all about and they are just not there yet

this won't be a good investment until mid 2015 - it is quite simple to me that Heatgate still control the ship and they won't make it pleasant for us even with the court case coming up in June

my plan i to sell out today while there is plenty of hype and buy back later - don't thnk this announcement will work for me right now- AGS are going to shelve out a lot of cash to loose a further 3 1/2 million over the 9 months of production- I'm not happy about that . Thats 23 million spent for no return - think the smart ones will see this beyond all the hype -

i will be out at the bell for time being while there has been a great move upwards- kind of makes you think why the share price didn't take off when they announced that they were commencing construction in their december 3rd announcement- we also need the sale price to be higher and now is not the time for me - i will be back in around 14c - thats my pick

Disappointed at the numbers going forward- we would have been better to build our own processing plant as we will be paying a premium for processing considering we don't even own any of it!

Be careful as i think traders will take profit on this one

[Damo79]

Hi Schumacher. Thanks for explaining your take on the report. It helps explain to me the reason the share price didn't jump today as I thought it might. I have a slightly different take on things as you probably gather from my previous upbeat post.

To me, the latest announcement was written in a very negative light (it seems to happen a lot with AGS and I'm not sure why). But I think, reading through the figures, that it's actually quite good. Maybe this is all relative to my expectations. Before the new budget, I was quite worried that Heathgate would up the development and production costs, start at a slower rate, and delay sales - with the result that AGS might risk running out of cash and need to dilute. It's now clear this won't happen, which is my main positive.

But here's what I think is the most poorly described thing from the budget. They give the costs of production as the costs accumulated for the period November 2012 through December 2014. That's 26 months, of which the first 17 months are pre-production mine development.

Even based on this assumption though, uranium is being mined at cash operating costs of $31 per lb, which includes mining, processing, shipping, marketing and royalties. And that's in the start up phase, which will be more expensive than when mining is well underway. Their selling price for this year is $49 per lb, so excluding the mine development costs, of which most have already been paid, and looking through the slightly delayed timing of sales, Four-Mile is very profitable even at the current low uranium price.

By the end of 2014, my estimate is that AGS will have about $18m cash on hand (and no debt). That comes from $22m current minus $3m admin expenses, minus $19m budgeted costs, plus $18m revenue for the period (1.5m lbs x $49 25%). As of December 2014 they will also own 25% of 386000 lbs uranium in stockpile (worth about $4.7m). At this point, they will be the 25% owner of one of the largest ISR uranium mines in the world producing at one of the lowest costs, with no debt, and already turning a profit.

Compare this to Paladin, which is unprofitable at current prices and has hundreds of millions of dollars of debt. Despite how much better a proposition Four Mile seeems to be than Paladin's Langer Heinrich mine, an equivalent enterprise value for each would makes AGSs 25% share of Four Mile worth upwards of 70 cps.

Although the legal case (AGS trying to reclaim 100% of Four Mile based due to misleading and deceptive conduct from Heathgate during the negotiation of the JV) only has an upside possibility, even losing it and just getting it out of the way should enable the true value of Four Mile to be realised. If they were to win and be the 100% owners... well $3 per share wouldn't be out of the question.

[SCHUMACHER]

Hi Schumacher. Thanks for explaining your take on the report. It helps explain to me the reason the share price didn't jump today as I thought it might. I have a slightly different take on things as you probably gather from my previous upbeat post.

To me, the latest announcement was written in a very negative light (it seems to happen a lot with AGS and I'm not sure why). But I think, reading through the figures, that it's actually quite good. Maybe this is all relative to my expectations. Before the new budget, I was quite worried that Heathgate would up the development and production costs, start at a slower rate, and delay sales - with the result that AGS might risk running out of cash and need to dilute. It's now clear this won't happen, which is my main positive.

But here's what I think is the most poorly described thing from the budget. They give the costs of production as the costs accumulated for the period November 2012 through December 2014. That's 26 months, of which the first 17 months are pre-production mine development.

Even based on this assumption though, uranium is being mined at cash operating costs of $31 per lb, which includes mining, processing, shipping, marketing and royalties. And that's in the start up phase, which will be more expensive than when mining is well underway. Their selling price for this year is $49 per lb, so excluding the mine development costs, of which most have already been paid, and looking through the slightly delayed timing of sales, Four-Mile is very profitable even at the current low uranium price.

By the end of 2014, my estimate is that AGS will have about $18m cash on hand (and no debt). That comes from $22m current minus $3m admin expenses, minus $19m budgeted costs, plus $18m revenue for the period (1.5m lbs x $49 25%). As of December 2014 they will also own 25% of 386000 lbs uranium in stockpile (worth about $4.7m). At this point, they will be the 25% owner of one of the largest ISR uranium mines in the world producing at one of the lowest costs, with no debt, and already turning a profit.

Compare this to Paladin, which is unprofitable at current prices and has hundreds of millions of dollars of debt. Despite how much better a proposition Four Mile seeems to be than Paladin's Langer Heinrich mine, an equivalent enterprise value for each would makes AGSs 25% share of Four Mile worth upwards of 70 cps.

Although the legal case (AGS trying to reclaim 100% of Four Mile based due to misleading and deceptive conduct from Heathgate during the negotiation of the JV) only has an upside possibility, even losing it and just getting it out of the way should enable the true value of Four Mile to be realised. If they were to win and be the 100% owners... well $3 per share wouldn't be out of the question.


Damo Congratulations on your ability to see through all this - your correct in what you say- they will be in a good position even with a 3.5 million loss and most importantly no debt- well done for your clear observations
Opportunity here for some shares around 14-15c while the US market loses its momentum- lost 2 % overnight due to Fed tapering program me which will adversely affect investor sentiment as they are wanting to show that the US economy can stand up without all the money printing- this will definitely scare investors to the sidelines once again

Schumacher

[SCHUMACHER]

Damo Congratulations on your ability to see through all this - your correct in what you say- they will be in a good position even with a 3.5 million loss and most importantly no debt- well done for your clear observations
Opportunity here for some shares around 14-15c while the US market loses its momentum- lost 2 % overnight due to Fed tapering program me which will adversely affect investor sentiment as they are wanting to show that the US economy can stand up without all the money printing- this will definitely scare investors to the sidelines once again

Schumacher


Well if we stab at a guess we may come up with substantially more than our last traded price of 16c

26 million in the bank
341 million on issue
25% of B4M valued at in situ of known U 308 Approx 20 million l/b's @ average $25 l/b operating profit so lets say $20/lb NPAT

= $500,000,000 NPAT/ 341m shares = $1.40 VALUATION Per share

So really what are people quibbling about 16c when they should be quibbling about it being $1.00 share today….this has to be the most undervalued stock of any sector in the entire ASX stock market



Guess when the market wakes up this will catapult into the 30'sc again within a few days


I will continue to buy as money becomes available
LOL

Excellent

[SCHUMACHER]

AGS looking like its going to break upwards again -buyers building at 15.5c and not much available up to 18c
before the DOW dropped we were up at 18c so i think its now a good entry point at 16c
AGS is back on the radar and will please investors who buy in at 16 c -20c range- I expect in 12 months it could be sitting at 50c share
good luck to all patient holders
Schu

[SCHUMACHER]

Hi all- new announcement just out- excellent results doubles strike!!!!!!!!! UP SHE GOES 20C HERE WE COME!!!!!


Alliance Resources Ltd is pleased to announce further uranium intercepts from drilling at the recently discovered Four Mile Northeast prospect, which have increased the strike length of uranium mineralisation to approximately 2200 metres, an increase of 1100 metres over the previous announcement.
The results support the Four Mile region as one of Australia’s great uranium provinces.
Selected high grade uranium intersections >0.5m% (GT-PFN) at Four Mile Northeast:
Hole ID
FMD0039 FMD0039 FMD0039 FMD0040 FMD0040 FMD0040 FMD0043 FMD0044 FMD0044 FMD0045 FMD0045 FMD0045 FMD0046 FMD0049 FMD0049 FMD0054 FMD0064
m@%pU3O8
3.8m @ 0.30% 1.5m @ 0.53% 1.5m @ 0.35% 15.3m @ 0.13% 2.3m @ 0.31% 4.9m @ 1.83% 3.3m @ 0.45% 5.8m @ 0.55% 4.6m @ 0.46% 7.7m @ 0.19% 1.3m @ 0.60% 0.9m @ 0.61% 4.3m @ 0.30% 2.3m @ 0.89% 2.0m @ 0.87% 1.4m @ 0.68% 1.0m @ 0.53%
m%pU3O8
GT 1.14 GT 0.80 GT 0.53 GT 1.99 GT 0.71 GT 8.97 GT 1.49 GT 3.19 GT 2.12 GT 1.46 GT 0.78 GT 0.55 GT 1.29 GT 2.05 GT 1.74 GT 0.95 GT 0.53
pU3O8 is the equivalent grade as estimated from Prompt Fission Neutron (PFN) logging. GT = grade (%pU3O8) x thickness (m).
High grade uranium mineralisation has been intersected over a strike length of approximately 2200 metres (an increase of 1100 metres over the previously reported strike length). The maximum width of mineralisation is approximately 800 metres and the average width of mineralisation within ML6402 is approximately 450 metres. Mineralisation remains open to the northeast. Depth to the top of mineralisation varies from 152.1 to 279.3 metres. Thickness of individual intersections varies from 0.5 to 15.3 metres. The average cumulative thickness of intercepts in holes reporting mineralisation varies from 0.6 to 26.3 metres and averages 6.0 metres.

[Damo79]

Coming along very nicely and starting a beautiful uptrend for the chart minded. As I thought, leading into the court case there's a lot of interest building with increasing volumes. Market cap now about 70 mil for an in ground resource of 1 billion plus (currently 18 million pounds at $50/lb with new discoveries potentially doubling that). Imagine if they win the court case; that would give them 4-8 billion dollars worth of uranium. I'll consider taking some profit at 60-70 cents, but there would still be a lot of upside potential from there.

[corporateraider]

Coming along very nicely and starting a beautiful uptrend for the chart minded. As I thought, leading into the court case there's a lot of interest building with increasing volumes. Market cap now about 70 mil for an in ground resource of 1 billion plus (currently 18 million pounds at $50/lb with new discoveries potentially doubling that). Imagine if they win the court case; that would give them 4-8 billion dollars worth of uranium. I'll consider taking some profit at 60-70 cents, but there would still be a lot of upside potential from there.

The uptrend looks even better now.
Mining is due to start in April and further drilling results are expected soon. In fact plenty of news is due. I still have Phaedrus words ringing in my ears, "the trend is your friend".

[SCHUMACHER]

The uptrend looks even better now.
Mining is due to start in April and further drilling results are expected soon. In fact plenty of news is due. I still have Phaedrus words ringing in my ears, "the trend is your friend".

IS THUS TRUE?? - from another australian forum
Interesting indeed- I'm been speaking to some people who believe the sale/share number will be .90c share so lets see if this is correct. Time to inform shareholder if this is the case however i Understand Deloites are working on the sale process. ITOCHU and shareholders would have to agree so the question is will IG who has 87 million be satisfied with such a result if true???

Surely we have interested parties lined up to buy our 25% so if 90c is true then the market cap will be at $225million and we would receive $225 million CASH IN BANK
-wow that would be ok with me and we are currently trading at 19c today - EXPECT A SHARE PRICE RALLY TO AT LEAST 30c-40c IN NEXT MONTH if 90c is correct !! Also makes sense why last week people were stumping up with money to buy 200,000 share parcels at 21 and 22c

mY NEXT QUESTION IS WHO HAS THAT KIND OF MONEY TO SPEND???????

What do others think??

[JBmurc]

Sounds bloody brilliant if your right ?? but is it just pure speculation and hard to believe with SP @ 19c usually always insider trading of some size if there is a T/O in the wings ....worth keeping an eye on

[moimoi]

90 cents Schu...??? (or in excess of $300M market cap when as @ today its market cap is $59M)

Pure Fantasy!!

If you actually hold AGS and are trying to get a handle on potential sale pricing, you might want to take a close look @ the deal that PDN recently settled with CNNC for a 25% share of the Langer Heinrich mine.

That 25% cost US$190M and includes a share in the near new AND substancial processing plant AND access to 25% of the mines product.

AGS is unable to offer either to a buyer of the 25% interest in 4 Mile...

[Damo79]

Well a lot has happened, most of it bad, in the last 6 months.

Mining has gone well. Exploration has gone well. The working relationship between AGS and their majority partner Quasar has gone atrociously. Quasar has decided to 'stockpile' uranium instead of selling it. AGS ran out of cash and needed an emergency capital raising that sent the share price into a death spiral. AGS initiated yet another court case against Quasar, this time trying to cancel there 'sales agency' agreement. I.e. trying to gain the rights to market and sell their own share of the uranium (currently about $25 million worth and growing rapidly). Meanwhile, due to the cap raise and terrible position, AGS dropped as low as 5.8 cents before being less than a cent more than that at close of trade on Friday.

And then this morning, long over due, Quasar offered $58 million for AGS's share of the Four Mile uranium mine, which the board immediately rejected. This equates to about 15 cents per share, which is what the AGS share price hit intraday. It ended the day at 10 cents, possibly based on the fact that the offer was rejected and may not be repeated, but more likely based on the fact that most people have no idea about the facts around this company.

Personally, I think the 15 cps offer is a start, and should represent a base from which to try to value AGS's asset. I also think that fact that Quasar, after all these years, finally made an offer, is an indication that they're worried they're in the losing seat in the current court case.