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Jim Letourneau's Blog

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Strathmore Email

Hi Jim,

I read your blog a lot. I have a question about reserve valuations and I was thinking you might be able to give me an answer.

So I really like Strathmore a lot and their strategy. I hear they have 3.4 lbs of Ur per fully diluted share. With the Ur price at 21, their valuation is only at 50 cents US$ I calculate.

So with a Uranium price of $42 (double) what kind of valuation do they get? I assume it takes $25-$30 for the properties to be "economic." Obviously they probably dont get the full difference (42-25). What percentage of that difference would STM get or a similar company that isnt producing. My guess is anywhere frim $4-$7/lb. Any thoughts?

So I figure that if UR doubles then Strathmore can probably get to $20.

Thanks,
Jordan


Thanks for your thoughts on Strathmore. Their strategy is to be highly levered to uranium prices. Comparative valuations for uranium companies are difficult as the pond is pretty small with only 1 or 2 examples of each kind of fish.

The chart below illustrates how speculative names with no production have been outperforming Cameco (CCO.TO) and Denison Mines (DEN.TO). Many of the exploration companies have big discoveries factored into their prices. Bad news could send the explorers back to earth faster than a Les Nessman turkey drop. Strathmore has more upside than Denison or Cameco but they aren't expected to have a major discovery up their sleave. As long as the uranium price is rising, Strathmore will do well.



Uranium Stock Comparison


Not Advice
I currently own STM.V
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