ACB - A-Cap Energy

UraniumLover said:

Anybody holding this?
Seems to be a quiet achiever. Looks on it's way back up now.

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timelord said:

Is anyone following this stock?

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Uranium bounces back in inspired radioactivity
Barry FitzGerald
December 13, 2010

The uranium sector looks set to go from strength to strength.

THE uranium sector was the place to be in the past six months, notwithstanding all the investor hype around the copper, iron ore and precious metals sectors.

A review of the sector by Gresham Advisory Partners found an average 58 per cent share price gain since June 30 for 20 ASX-listed uranium producers and explorers.
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That compares with a 16 per cent gain in the ASX 300 Resources index and was despite the dismal share price performance by sector leader, Energy Resources of Australia (ASX: ERA).

The bounce in uranium spot prices from a post-global financial crisis low of $US40.50 ($A41) a pound to $US60 a pound underpinned the strong share price performance for the uranium stocks.

''The finely balanced supply/demand situation means the market is susceptible to both demand and supply side shocks (such as ERA's woes at the Ranger mine),'' Gresham said.

It said the building of stockpiles for new nuclear reactors by the Chinese was the main factor in uranium's price bounce. ''However, exuberance over the potential for sustained stock-building by China and other nations, as well as the return of speculative demand, has thus far been kept in check,'' Gresham said.

The question now is will 2011 see the return of some or all of the exuberance that drove uranium to $US138 a pound in July 2007? Garimpeiro thinks there is a better than average chance that it will, given uranium's clear role in helping to deal with global warming concerns.

According to Gresham's work, investors pay an average of $A12.80 a pound (enterprise value per pound of uranium) for exposure to local and overseas producers of uranium and an average of $A2.10 a pound for the explorers/developers.

Among Garimpeiro's hunting ground of the explorers, A-Cap Resources (ASX: ACB) is the cheapest at A41 ¢ a pound. But you have got to wonder how much longer that will be the case. A-Cap, which closed on Friday at 41.5 ¢ a share, is already sitting on the world's 11th biggest undeveloped uranium deposit.

The 158 million pound Letlhakane project in mining friendly (and politically stable) Botswana is due for a resource upgrade next year and something north of 200 million pounds, ahead of a further push to 300 million pounds, would not surprise.

It is not the highest grade show in town but doesn't need to be given its access to good infrastructure. Work by A-Cap on ore sorting techniques to upgrade the head grade to the processing plant is also showing promise, as is work on the optimum processing route for the deeper primary mineralisation.

Perhaps more exciting for the group is its discovery at the Southern Pans project, 150 kilometres north-west of Letlhakane. A-Cap reckons it is an important discovery, albeit one in the early stages.

THE wait for the market to re-rate Tassie metals producer Bass Metals (ASX: BSM) has been a long one, not unlike the wait for a taxi outside the casino during Christmas party season. But the re-rating for Bass has finally arrived.

Its shares have motored from the 15.5 ¢ low in May to Friday's closing price of 39.5 ¢ a share, a gain of 154 per cent. Three factors are behind the surge. The first is the general fair wind that all producers of metals have enjoyed on the back of rising prices.

The second is exploration success at the Fossey East property raising the prospect of a mine life extending boost to reserves. Then there is the shot Bass has at becoming a substantial gold producer from the gold locked up in the tailings from the Hellyer mine when it was closed by previous owners in 2000 after being mined out.

As its name suggests, Fossey East is just to the east of the Fossey polymetallic (copper, lead, zinc, silver and gold) mine, which is to provide the feed for a restart of the nearby Hellyer treatment plant in January under Bass ownership. Fossey is good for about two years of supply, so any additional ore positions that can be outlined in Fossey East will be a bonus. Assuming that Fossey East lives up to its early promise and you can see why Bass reckons it is realistic to start thinking about a five-to-10-year mine life for the new-look Hellyer project. Given that, at current metal prices, the project will generate an annual operating surplus of about $35 million that's not bad stuff for a company with an enterprise value of about $55 million.

The gold tailings project could be the game changer for Bass. It is a big resource of 1.35 million gold equivalent ounces (2.6 grams a tonne gold and 104 grams a tonne silver). Unlocking the gold was the subject of a stack of studies in the 1990s.

But with cash costs of more than $A700 an ounce, the incentive to give it a go was not there. Gold's price surge to more than $A1400 an ounce has changed all that. The question now is which gold and silver recovery technique to use.

A $49 million direct cyanidation process would yield about 40,000 ounces of gold equivalent annually at a cash cost of $A743 an ounce. Spend $143 million on Xstrata's ''Albion'' process and you would be looking at annual production of more than 110,000 ounces but at a higher cost of $A877 an ounce. Split the difference and go with a pressure oxidation processing route at a capital cost of about $A116 million and you would be looking at 62,000 ounces of gold equivalent annually at a cost of just under $700 an ounce.

How much of that serious cash-generating potential is factored into Bass's current share price is debatable. But you would have to think there is not much in the share price just yet, particularly when you compare Bass's market cap to the fancy market caps enjoyed by existing 50,000-100,000 ounce gold-only producers.

Bass is dusting off the technical papers on the gold tailings project with a view to be in a position to put some hard numbers - and decisions - on it by April 2011.

bfitzgerald@theage.com.au

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