There’s little doubt that uranium stocks have turned around recently, with Cameco Corporation (NYSE: CCJ) jumping more than 30% over the past three months. The move is being driven by Japan’s new leadership – perhaps more likely to embrace nuclear power – and sharp production cuts expected from Russia with the expiration of a 24 million pound per year agreement. Analysts expect these trends and others – like new plants coming online in China – to culminate in a 13% rise in global uranium demand by 2013, but production will have a hard time keeping up at current levels.
Investors looking to capitalize on these trends have a few options. Purchasing stock in uranium producers like Cameco Corporation or Denison Mines Corp (NYSE AMEX: DNN) is a conservative option that enables investors to capitalize on the likely higher pricing environment. But, junior mining companies holding uranium reserves could have greater upside potential, given their smaller starting market capitalizations and the potential for M&A – a trend that may have started with ARMZ’s $1.3 billion bid to buy the rest of Uranium One (TSX: UUU).
Junior Miner with Hidden Exposure
Liberty Star Uranium & Metals Corp. (OTCQB: LBSR) may have made recent headlines with its copper and rare earth metal opportunities, but its North Pipes Super Project could offer large exposure to uranium. According to the U.S. Geological Survey, the breccia pipes in the region are of high grade compared to sediment hosted roll front deposits mined throughout the Western U.S., with an estimated potential average grade for ore bearing pipes of about 0.7% to 0.8% uranium – or about 14 to 16 pounds or more of uranium per ton.
The company owns 417 Federal Lode Mining Claims in numerous targeted breccia pipes covering 13.45 square miles. And perhaps more significantly, these claims are 100% owned by the firm without any royalties attached, and have already had a drilling program completed in December 2007 through January of 2008. Mines in the region have produced some 26 million pounds of uranium, with some known ore bodies having contained 55% uranium (1,100 pounds per ton), signaling potentially enormous opportunities within the company’s property.
“We have one pipe target, as yet untested, about 2,400 feet from the Arizona #1 Mine [Dennison Mine], which has been announced will be put back into production and we have 13 more pipe targets covered by approximately six square miles of mining claims surrounding the entire mine area,” said CEO James Briscoe in a 2007 press release. A subsequent November 2011 press release, Mr. Briscoe added, “we have outstanding targets indicated by geology, geochemistry and VTEM geophysics.”
Additional Catalysts
Aside from its uranium exposure, Liberty Star also has exposure to porphyry copper and rare earth metals. With the company’s Tombstone Super Project in Arizona, the company expects there to be significant copper given its proximity to the Bisbee open pit and underground copper mine. Recent geochemical surveys also showed the presence of four rare earth metals, including scandium, yttrium, lanthanum and cerium within a nine square mile anomaly. Notably, these were the only four of REEs surveyed for and the company will re-assay these samples for the 13 other REEs to determine if they are present. The presence of these REEs could prove significant given global supply/demand dynamics and the fact that this would be a domestic source.
The company’s Big Chunk Super Project remains a second major opportunity for investors with 229 mining claims covering 55 square miles in Alaska, as well as 184 additional claims within its North Block. In August 2012, the company began its scout exploration plan, with intentions to conduct additional activity in late spring and early summer of 2013. Positive results from these exploratory surveys could result in an eventual joint venture agreement with a commercialization partner.
Great Opportunity for Investors
Liberty Star represents a great opportunity for investors at its current levels, trading at market capitalization of just $8.7 million. With uranium prices on the rise, the company’s North Pipes Super Project could become a highly desirable U.S. property, especially given the region’s rich history of uranium mining. Investors could also benefit from additional upside in the firm’s porphyry copper and potential rare earth metal exposure, which both provide potential catalysts for the stock moving into 2013 and beyond.
For more information about Liberty Star, please see the following:
Disclosure: The subject security is a client of Emerging Growth, LLC. For full financial disclosures for all Emerging Growth, LLC clients, please visit http://secfilings.com/Disclaimer.aspx