The news on the most significant uranium deal of 2017 was out at the beginning of this month.
I didn't hesitate for a second regarding calling the CEO 30 minutes after the news hit, and it didn't surprise me at all that at 04:46 AM, he took my call—that's what you get when the CEO has a major stake in his own company and is on the same boat as his shareholders.
While fund managers and analysts had to wait for business hours to begin tearing up the pages of the news release to wrap their heads around how this CEO scored big again, I was already familiar with the company, its projects, and the CEO's incredible ability in pulling off the impossible.
The market is beginning to realize that if they want maximum leverage to uranium prices, they must partner with the highest-quality company in the industry and the management team that gets things done.
During our Q&A session early that morning, he told me plain and simple: "Lior, this deal we just announced puts us on a whole new playing field. Texas and Wyoming are the two best regions on U.S. soil for ISR-Situ uranium projects, and we now have a foothold in both. Not only that, Lior, but what will really turn heads here is the fact that the newly acquired project is fully permitted. That leapfrogged the company by a full decade and transformed our company."
This is the exact moment you should be researching this company.
Once I got off the phone with him, I immediately did two things:
1. Ran the numbers myself:
The Pacific Road Resources Fund, the private equity group that sold the Reno Creek project, received 14 million shares, which is equivalent to about $20M. This immediately struck me as a strategic move, a calculated investment decision by the fund, since they had already invested $60M in the project in the last few years.
In other words, by taking a $20M position in this company, the fund managers see a way to not only earn their initial investment back, but also make a fat profit—this means that they see a 300%+ gain in the shares at today's prices.
Dan Wilton, partner at Pacific Road, stated that "We believe the purchaser has the right technical, operating, and financing capabilities to deliver the true value of Reno Creek. The combination of them and Reno Creek creates one of the most attractive portfolios of U.S.-based, low-cost ISR uranium assets and is an important step in the consolidation of the U.S. ISR uranium sector."
This is an aggressive, strategic move on their behalf—they now own 9% of the shares.
2. I dug deep: I contacted my source at Credit Suisse, and what I'm about to share with you is why this company has probably bottomed for the year, and we're getting in before a storm of institutional buyers come in with millions of dollars, bidding up the price.
Take a look at the Russell 3000 market cap requirements for a company to be included, as the annual rebalancing of the components occurs next month: $137,668,200.
This company is safely above that, currently at around US$190M—this is the major catalyst.
The Russell 3000 is part of investors' 401(K) pension plans, and funds will be buying it as part of their clients' portfolios. It gets better: traders will begin taking positions now in anticipation of this decision to include it in the index.
The timing is perfect, as is the game-changing deal that gives the company fully permitted projects in the top two states for low-cost ISR uranium assets and the imminent potential announcement by the Russell 3000 on June 23.
Lior Gantz, an editor of Wealth Research Group, has built and runs numerous successful businesses and has traveled to over 30 countries in the past decade in pursuit of thrills and opportunities, gaining valuable knowledge and experience. He is an advocate of meticulous risk management, balanced asset allocation and proper position sizing. As a deep-value investor, Gantz loves researching businesses that are off the radar and completely unknown to most financial publications.
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Disclosures:
1) Lior Gantz: I, or members of my immediate household or family, own shares of the following companies referred to in this article: None. Wealth Research Group LLC owns shares of Uranium Energy Corp. I personally am, or members of my immediate household or family are, paid by the following companies referred to in this article: Uranium Energy Corp. My company has a financial relationship with the following companies referred to in this article: Uranium Energy Corp. I determined which companies would be included in this article based on my research and understanding of the sector.
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