January 27, 2010
Strathmore Minerals is Back!
Investors seem to have rediscovered this stock over the past few months and the company has made major news in its own right. Ironic in its own right as Strathmore (STM.v) was one of the first companies to rediscover uranium just before it began making headlines. Many who follow our articles will remember our thinking early last year that we would know when it was safe to move back into the resource sector across the board from top to bottom when most companies could raise money via equity offerings. Strathmore was a company which we did not recommend buying on dips at that time as we wanted to stick with the companies which either had production or were fully funded through production.
It now seems apparent to us that most companies are able to raise money across the board, a plus for explorers needing to constantly raise cash to continue in their search for resources. Strathmore however simply needed capital flow in the markets to continue to cut deals as this is how we believe they will get to production. Strathmore is playing a game of chess, sacrificing some projects to pave the way for others, much as you would sacrifice your pawns and everything else to keep your king.
Strathmore’s king is Roca Honda, and as recent news shows us they are preparing to move forward in a big way down in New Mexico. On January 20 of this year the company announced that they did an equity financing to raise nearly C$8.4 million. Assuming that Bayswater Uranium is able to raise the money to complete the transaction announced on January 7, Strathmore would have an additional C$17.5 million in cash plus C$2.5 in Bayswater shares. In thirteen days Strathmore effectively added almost C$20.4 million to the treasury. The company currently sports a market cap at around C$52 million (according to the Toronto Stock Exchange website), so the last month has been truly extraordinary from a fundraising standpoint.
The Pine-Tree Reno Creek project was one of Strathmore’s advanced project which would have been an early producer of uranium. One cannot argue with the price STM was able to get, but the question does come to mind regarding where they plan to deploy this cash hoard they will soon find themselves with. We have not had the chance to discuss the recent events with our contacts within the company, but plan to do so in the near future. Our guess is that these funds will be used to advance the company’s interests in New Mexico.
Unlike other companies who get distracted trying to take on more blue sky properties and find resources that have not been discovered yet, Strathmore is doing the correct thing and directing their focus to those projects which merit further investment. They are focusing on the projects that in our opinion will provide shareholders with the highest return, even though that means delaying the date in which they become a producer of uranium. This is a business plan in which we can cheer and investors should take notice, far too often management of companies who have developable projects get sidetracked and distracted yet here we have a company with an extremely talented management team in place making all the right moves. They should be cheered and we think that this is what is taking place in the market right now as the shares have rallied since the beginning of the year.
With uranium stocks showing strength over the past few months which has only grown as of late, Strathmore may have put themselves in that lead group with their recent deals. We feel that Strathmore should join the ranks of the other near-term uranium producers as well as those currently producing based on their ability to manage projects effectively and their strategy of monetizing projects to provide the best return to shareholders.