ASX - Paladin Energy up over 20 per cent - ending the week at 42 cents:

After lying dormant for nearly four years two of Japan's nuclear reactors have been approved to reopen as soon as next year, triggering a surge in the uranium spot price.

The reactors at the Sendai Nuclear Power Plant are just two of the 48 reactors in Japan that went offline in the period following the 2011 Fukushima nuclear disaster.

Positive sentiment in the spot market led to a sharp increase of $US5.75/lb to $US42.00 last week, however there has been little change to futures price, which industry sources say may suggest the movements are more closely related to sentiment than an actual pick-up in uranium demand.

Stocks of local uranium miners have nonetheless jumped this week, with Paladin Energy up 20 per cent to 38.5 cents since Friday, ERA gaining 11.5 per cent to $1.355 and Toro Energy rising 8 per cent to 9 cents since since Monday.

On Wednesday uranium traded at $US41.90 per pound, still well below the $US80 per pound believed to be required for most uranium producers that have shut down production to restart.

Uranium One's Honeymoon mine is just one that was shut down in late 2013 due to the slump in uranium prices.

Along with the approval to restart the reactors at Kyushu Electric Power Co.'s Sendai station, UBS analysts noted the Sentient Group's $10 million investment in Toro Energy Limited as another key influence on the uranium industry in the past week.

The Sentient Group will also provide an additional $10 million in funding for Toro's advanced Wiluna uranium project in Western Australia.

Since the Fukushima disaster, nuclear power electricity generation in OECD countries has dropped by 16 per cent, however a moderate rebound is expected to continue as Japan reopens its dormant reactors.

According to the Bureau of Resources and Energy Economics (BREE) prices for uranium in 2015 are expected to rebound in response to expected higher consumption not only in Japan but also in China.

In their September Resources and Energy Quarterly BREE analysts forecast a uranium spot price average of US$39.50 in 2015, which is 23 per cent higher than in 2014.

Looking further into the outlook period BREE's report said "uranium prices are projected to increase in response to tighter market supply conditions to around US$62 a pound in 2019 (in 2014 dollars)."

In Australia export volumes are estimated to have dropped 35 per cent in 2013-14 to around 5400 tonnes, however Australia's recently signed bilateral nuclear cooperation agreement with India is expected to contribute to a gradual 10 per cent increase over the next five years.

Read more: http://www.smh.com.au/business/mining-and-resources/japan-causes-uranium-spot-price-surge-20141112-11l8c4.html#ixzz3JBPhgjGT

We've taken a long position in NovaCopper (NCQ). At current prices, NCQ is an exceptionally timely, high-impact long. The trade should deliver a 60-240% upside with significant catalysts - the first of which will occur any day now, starting next week.

NCQ is an exploration stage mining company that owns the Ambler and Ruby Creek districts in Alaska. In our analysis, we will focus on the Ambler Project only and value the Ruby Creek Project at $0 as it has not yet been evaluated for economic feasibility.

Mining samples from the Ambler deposit show an indicated 6 billion pounds in copper equivalent under the ground. Management's inferred mineral target is 10 billion pounds. This makes NCQ a sizeable opportunity, as we will later discuss in our valuation.

Spinning Away:

NovaGold (NG) purchased Kennecott's [1] entire land stake in 2010 and created NovaCopper, a wholly-owned subsidiary, to further evaluate the property. NovaGold completed the spin-off of NovaCopper in 2011.

Bright-eyed gold only investors rushed to sell off the much smaller copper exploration stock. Institutions, unwilling to own a position in the micro-cap stock, started dumping NCQ in droves. NCQ crashed from a high of $4.76 to an all-time-low of $1.70 by August 2012.

While many institutional investors are turning up their noses, savvy guns are smelling opportunity and clamoring to get in on the feast.

John Paulson (Paulson & Co.) and Seth Klarman (Baupost) are each large stakeholders, holding 11.2% and 8.7% respectively. Both are prominent value investors known to be exceptional small-cap pickers and investing with a significant margin of error. Stock charts show that Baupost initiated a large buy causing a price run up to $2.84. A timely investment at today's price of $1.9 has a nearly 60% upside to these levels.

Management seems to think NovaCopper is a better opportunity than NovaGold. Former CEO and Founder of NovaGold, Rick Van Nieuwenheyse is leading the charge as CEO of NovaCopper. The rest of his management team includes Elaine Sanders as CFO (formerly CFO at NG), and Joseph Piekenbrock as SVP of Exploration (formerly VP of Exploration at NG).

More importantly, management is unambiguously aligned with investor interests. A quick glance at the 10K/A SEC filing shows that management is loaded up on warrants, which are out of the money, at a minimum a strike price of $3.11. The officers themselves have over 70% of their compensation package in long term and annual incentives. The NEOs as a group hold a total of 2.7M stock options, or 5.7% of shares outstanding.

Valuation:

A Preliminary Economic Assessment (PEA) was done by an external consultant to evaluate the economic feasibility of the Ambler project [2]. The PEA assumes a pre-production period of four years. Assuming a $2.50 per pound price of copper (a 25% bargain to today's current price of $3.34) and an 8% discount rate, the consultant group places a post-tax mine NPV of $1bn.

However, based on conversations with IR we believe that a 2020 production is more reasonable. Applying the same conservative price of copper to the extended timeframe of 7 years yields an NPV of $778m, roughly $750m with a haircut.

The market's take on NCQ is comparatively paltry. Currently, the company sits on $22M in cash and no debt, for a TEV of $71M.

Based on a March 18th investor presentation, the company trades at a dramatic discount to its exploration stage mining peers on an EV/lb of copper basis [3]. Peers trade in the range of $.01 to $.04 per pound of copper, averaging about $.03 per pound. NCQ trades at $.01 per pound, despite a dramatically higher grade of copper and lower extraction costs than its peers.

If we take the 10bn pound inferred copper estimate instead of the conservative 6bn pound figure, and assume that NCQ attains a comparable valuation to its peers at $.03 per pound, we arrive at a present EV of $300M. This implies a market cap of $322M and upside of 242%.

Stocks are always discounted for a reason, and mining stocks have considerable risk. With NCQ in particular, the largest short-term risk is the access road. For the project to be undertaken (at all), Alaska Industrial Development and Export Authority (AIDEA) must approve a $300M access road to the property. NCQ would cover the cost of the road through royalties from the mining.

What many investors may not realize is that Alaska has an exceptionally favorable political climate towards mining. NCQ already has community buy-in through a profit share with Northwest Arctic Native Association (NANA), and political buy-in through the state of Alaska. Governor Parnell is the significant champion of Alaska's Road to Resources [4] program, and has already authorized $8.5M of the 2013 budget to permit the road this year. From our conversations with IR and assessment, the MOU is therefore more of a formality than a meaningful market risk.

Additional risks include environmental permits, operational risk, and copper market risk (note that all exploration-stage mining companies have such risks).

Risks aside, there are some very nice catalysts that could happen here:

MOU approval from AIDIA for Ambler deposit.

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  PEA for the Ruby Creek (Bornite) deposit.

  
  


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  Environmental permits for the Ambler project.

  
  


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  Growth in estimates to closer match the inferred vs. indicated copper content.

  
  

Conclusion:

At KPC, we like to be on the same side as supply and demand. And both trends are looking overwhelmingly positive for NCQ:

China is the biggest consumer of copper, and continues to grow its copper demand annually. As its per-capita copper consumption is peanuts compared to western countries, there is significant growth potential still on the table. From NCQ's estimate, as urbanization continues China and India will compose half of world copper demand by 2020 [5].

Meanwhile, supply of worldwide copper has been held roughly constant. Current supply for copper is dwindling. Due to mine closures, supply of 1.5Mt of copper will be lost from 2013-2016 [5]. New deposits of copper are becoming both harder to find and drill for. To match world demand, copper mining companies should be investing in exploration now.

For savvy investors who want to capture as much of this positive trend as possible, NCQ provides very attractive amplification. As of today, we are placing a price target per share of $4.58, a 160% upside from here.

http://seekingalpha.com/article/1340951-novacopper-an-extremely-rare-opportunity-with-minimal-risk?source=email_the_daily_dispatch&ifp=0

⁴

The potential for the next McArthur River or Cigar Lake⁵ uranium discovery has ignited a competitive staking rush outside the southern boundary of Saskatchewan’s prolific Athabasca Basin⁶. In recent weeks, the Patterson Lake region has been the target of a land package grab that has seen several juniors and individuals staking claims following a series⁷ of excellent⁸ drill⁹ results¹⁰ on the Patterson Lake South (PLS) property reported by 50/50 joint venture partners Alpha Minerals¹¹ (TSXV:AMW¹²) and Fission Energy (TSXV:FIS¹³).

The Patterson Lake region hosts two significant structural elements: the Patterson Lake Conductor Corridor and the Dirksen Corridor, said Alpha Minerals President and CEO Bill Ainsworth in a phone interview with Uranium Investing News. The Patterson Lake Conductor Corridor runs northeast from the PLS property up to the west side of Alpha’s wholly-owned claims and through Hook Lake, a joint venture project between Purepoint Uranium (TSXV:PTU¹⁴), Cameco (TSX:CCO¹⁵,NYSE:CCJ) and Areva (EPA:AREVA¹⁶). The Dirksen Corridor is a fertile series of conductors that head from the Forest Lake area on the PLS ground through to the Purepoint JV ground to what’s known as the Dirksen showing.

Purepoint, which signed²⁸ the joint venture agreement with Cameco and Areva late last year, operates the Hook Lake project for which a NI 43-101 compliant technical report was filed²⁹ in November. The joint venture has also acquired some additional claims following the discovery at PLS. Some of those claims are adjacent to the PLS property up ice of the boulder train to the northeast.

http://resourceinvestingnews.com/52838-emerging-uranium-district-in-saskatchewans-patterson-lake-region.html

The uranium rush is on

The uranium rush is on

Resource Clips reported that the uranium rush is on at the Athabasca Basin in Saskatchewan. Companies like Fission Energy, Alpha Minerals, and Skyharbour Resources have made great discoveries in the area after some July 2011 field samples obtained assays as high as 39.6% triuranium octoxide.

At the end of February Yellowjacket Resources TSXV:YJK picked up over 133,000 hectares, about 90% of it in the PLS region. On March 18 the Eagle Plains Resources TSXV:EPL spinout came back boasting more acquisitions. Now with over 158,000 hectares, Yellowjacket is “the largest mineral claim holder in the Patterson Lake area,” the company stated.

http://uraniuminvestingnews.com/14008/athabasca-basin-hosts-uranium-staking-stampede.html

The uranium rush is on