(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long BU.TO, TGL.TO, PLU.V, USO.V).
Just a quick update this morning on a couple of recent news items...
Something Old (PLU.V)
With tax loss selling season upon us, I wanted to highlight our old friend Plateau Uranium (PLU.V) for those who are still holding a candle for it (myself included). You can link to Plateau's most recent press release here regarding an upcoming drill program at the Macusani project in Peru along with some good news regarding settlement of the company's outstanding debt with an engineering firm in the U.K. Look, I get it, uranium is in the doghouse, but that's exactly why Plateau has a ~$10 million market cap again (well, that combined with the fact that PLU is going to need more money at some point). I will say this though... at some point utilities are going to come back to the term market to start looking for material to fill their reactor needs for 2020 and beyond and China is building reactors like they are going out of style. Overhang in the spot market persists and Japanese restarts are taking longer than pretty much everyone predicted, but the looming supply shortfall is still out there and one of these days someone is going to have to start building new uranium mines. So while PLU's chart is far from exciting at the moment, I still believe this is a very interesting long term speculation in the sector. There have been some great addtions to the board of directors recently and the company continues to move the Macusani project along. The next big step for PLU in my mind is the securing of surface rights for the project. The project's scale (>100 million pounds and ~4-5 mmlbs/yr), metallurgy (easy-leaching autinite), projected low production costs (sub-$20/pound), modest capex (couple/few hundred million) and location (Peru, with highway access and power lines right there) make this my favourite uranium development project on the planet.
Something New (TGL.TO)
Transglobe has found something new to focus its energy on this morning in Canada. The company has purchased some Cardium and Manville assets in Alberta. You can read all about it in the company's press release here. It's probably a good/okay deal for the assets they are buying, but I much perferred TGL as an Egypt pure-play, so I can't say that I love this deal. I'm not really sure what TGL's competitive advantage is in Alberta Cardium/Manville, so other than the fact that TGL just got bigger and appears to have purchased Canadian assets just as an uptrend is establishing itself in the sector, this deal feels "flat" to me. Sure it diversifies geographical risk, but I can do that by selecting my own assets across different jurisdictions of my choosing without a company doing it for me. I'll keep an eye out for news from the company's Egyptian operations (I still really like South Alamein for 2017), but this news complicates the TGL story in my mind. When TGL hits the road to talk about their asset base and starts talking about Alberta Cardium, Alberta Manville, and, ummm, Egypt, it feels like one of those "one of these kids is doing its own thing" stories that can lead to a perpetually discounted valuation. Needless to say, I remain to be convinced that this deal is a good one, but I'll try to keep an open mind.
Something Borrowed (USO.V)
U.S. Oilsands put out the often-dreaded "Friday after market close" press release last week. You can link to it here. In a nutshell, it looks like USO has done exactly what I thought it was going to do, which is go to ACMO for a secured debt line. ACMO's timing here is excellent as they are catching oil on the upswing and USO had little choice in my mind than to hitch themselves to their largest shareholder via this proposed US$7.5 million secrued debt piece. ACMO is indeed setting up to extract their pound (or kilogram, or tonne) of flesh as they will get 1.2 billion (yes, billion) 1.5c warrants in exchange for saving USO's bacon should the financing be completed. The target date for completion of the proposed financing is mid-December. Proforma, USO will have some 3 billion shares out on a fully diluted basis which will inevitably lead to the implementation of the share roll back approved earlier this year. I have mixed feelings about the scale of the dilution associated with the proposed financing package, but it is what it is (i.e., there aren't any other options that I can see) and USO is up a penny on the news to 3c, so I'll take it. At 3c, USO's implied valuation is roughly equal to what the company has spent to date on the PR Spring Project. At this point it's probably wise for me to step to the sidelines and watch how this plays out, but I will most definitely keep this on the radar because of the appeal (pun intended) of the orange-extract-based oil recovery technology.
Something "BU" (BU.TO)
As for BU (in keeping with the title, at least it rhymes with "blue"), Burcon has completed a $5mm rights offering that had the stock under some pressure during November. With ADM's first CLARISOY plant now fully operational, Burcon (BU.TO) should start seeing royatly payments in 2017. I think that could result in a step-change in Burcon's valuation. Some investors have waited YEARS for Burcon to get to this point, and almost all of them would have higher cost bases than this, so I think this is a pretty attractive entry point. The trend towards higher protein content in foods is a major theme in the industry and Burcon's CLARISOY formulation seems to be right on target and it's being pushed by one of the largest food ingredient suppliers on the planet. Speculative to be sure, but this is on the list of stocks I'm going to continue to own for 2017.