start here

start here

The Daily IKN email digest, get all daily posts sent to you next day (& no ads)

12/9/15

The financial joke that is Uranium Energy Corp (UEC) (a.k.a "What Casey Research can do for your portfolio" part 429)

My isn't it strange how Casey Research pumps so many things run by Amir Adnani, it's surely just pure coincidence how they buy into his stocks and then promote them to the world and then suddenly go quiet about them? Just coincidence. Anyway, you remember the Casey Research pump on Uranium Energy Corp (UEC) earlier in the year? How Marin Katusa pumped it to death via his Energy Report thing before jumping ship, then how Louis Lobito Little Wolf James picked it up and called it (and I quote), "UEC is without question my favorite pick in the uranium space"?

Yeah well UEC published its quarter last night and reported yet another loss, which isn't a surprise because it didn't sell anything. But some of the numbers that came along with the quarter make for interesting reading:
  • In one quarter, cash dropped from U$10m to U$5.35m
  • Workings capital is now negative U$2.3m
  • As from July next year, it has to pay back $1.667m per month until its U$20m financial debt is fully paid.
  • And unlike the unsubstantiated and wholly anecdotal claims made by Casey Research early this year, there's no stockpiling of product going on. All you need to do is check the inventories line item (unchanged at U$252k) to know that. 
  • Bottom line: These people aren't doing anything, but they're happy enough to get through $2.5m a quarter in G&A 

So how does UEC plan to fill in the obvious gap in its finances. Well as UEC says itself, they're not about to go profitable anytime soon so they plan to sell paper. Here's a quote from the 10-Q:
"As the Company does not expect to achieve and maintain profitability in the near term, the continuation of the Company as a going concern is dependent upon its ability to obtain adequate additional financing which the Company has successfully secured since its inception, including those from asset divestitures. However, there is no assurance that the Company will be successful in securing any form of additional financing in the future when required and on terms favorable to the Company, therefore substantial doubt exist as to whether the Company’s cash resources and working capital will be sufficient to enable the Company to continue as a going concern for the next twelve months. The continued operations of the Company, including the recoverability of the carrying values of its assets, are dependent ultimately on the Company’s ability to achieve and maintain profitability and positive cash flow from its operations."

At its current share price of U$1.03, UEC has a market cap of U$101.86m. Its book value is $27.5m (give or take the change) which means this company is running a price/book of 3.7X.
  • Price Book at three point seven times.
  • In this market for miners.
  • For a company with dwindling cash.
  • No production.
  • Every intention to dilute the share count and finance.
  • And $20m of real financial debt on board.

This is the type of bovine excrement that Casey Research recommends to people. A more obvious short in the mining space is difficult to envisage.