Ur Energy (TSX: URE) – Positioned for Success in Wyoming

Malcolm Bucholtz B.Sc, MBA Analyst

Trading Note

2007 started out on a euphoric note for Uranium companies, but the euphoria soon changed to anguish as Uranium prices corrected hard to the downside. Investors were left feeling angered and slighted at the nasty turn of events.

But, at the Market Traders, we have been pointing out to investors that this correction has been seen before in other commodities, namely Oil and Natural Gas. The fact that it has now occurred too in Uranium, is not unexpected. Commodities after all are cyclical entities and can sometimes get too far ahead of themselves due to speculative excess. As the following chart shows, in 2006 Crude Oil took a nasty 37% decline. No doubt at the time, many investors in oil related equities were left feeling bruised.

A similar fate also befell Natural Gas in 2006 when it swooned to a 73% decline.

But, look at where Natural Gas and Crude Oil are trading today. Investors who had the foresight to buy when the chips were down so to speak have now been handsomely rewarded. And so it shall go with Uranium and Uranium related equities. Oil prices have now reached the point where they pose a risk to economic growth in Asian nations. This past week alone has brought news of cuts to petrol subsidies in India, Malaysia and the Phillipines. Efforts to counter the growing demand for Oil by subsidizing production of grain based ethanol are now also hitting severe resistance. The global economy is slowly figuring out that society cannot use food for fuel without serious price repercussions and social backlash. And the issue of greenhouse CO2 emissions is only growing bigger and louder. All indicators are pointing to the need for some immediate change in energy policy.

At The Market Traders, we say that this change will come from Uranium. China was very quick several years ago to recognize that it could not rely on hydrocarbon based energy and today has a number of nuclear reactors under development. In fact there are some 31 nuclear power plants under development around the globe today. Even in the USA, permit applications have now been submitted for new nuclear projects. Stop for a moment and consider that according to the Nuclear Energy Institute, a single 1000MW reactor can generate enough power for 740,000 households. This reactor will consume about 200 tonnes per year of Uranium. At current spot Uranium prices, this equates to $26 million of Uranium. This same amount of power could also be generated from 13.7 million barrels of oil or 3.4 million tonnes of coal. At current Crude Oil prices, this equates to $1850 million. At current coal prices, this equates to $289 million. Plus, Oil and Coal contribute to global warming whereas a nuclear reactor will not. We may well be witnessing the bottom of the Uranium market here and a major turning point in global energy policy. Take advantage and make moves now to position yourself into good quality Uranium stories with near term production potential.

Ur Energy (TSX:URE) – The Time to Buy is Now

One excellent opportunity to take a hard look at is Ur Energy. Ur Energy is a Colorado headquartered company with shares listed on the Toronto Stock Exchange under the ticker URE. Efforts are currently underway to also obtain a duel Amex listing. Consider the following facts:

• Wyoming hosts the largest Uranium resource in the USA and is a leader in the in-situ recovery process style of extraction.
• Uranium was discovered at Lost Creek, Wyoming in the 1970’s.
• When Ur-Energy acquired the Lost Creek project, it also obtained historical data which has now been converted into a 43-101 compliant indicated resource of 9.8 million pounds and an inferred resource of 1.1 million pounds.
• Ur Energy right now is focused on mine planning and permitting so as to be able to entertain the scenario of production starting late 2009 at an expected annual rate of 1 million pounds. The Wyoming Department of Environmental Quality has now advised that the Lost Creek Permit to Mine application is complete. This is the first permit application to advance past the completeness review stage in years. Now, Ur Energy will be setting up for the Public Notice portion of the permitting process.
• Anticipated cost of building the extraction & processing plant is pegged at $35 million. Operating costs are estimated to be $25 per pound.
• Once Lost Creek is up and running, attention will turn to getting Lost Soldier into production which contains a 43-101 compliant measured & indicated resource of 12.2 million pounds plus an inferred quantity of 1.9 million pounds.
• Ur-Energy has 14 Uranium projects in Wyoming and the business model calls for ongoing development of these projects once Lost Creek and Lost Soldier are up and running.
• 2008 will see approximately 300 delineation holes and 85 wells drilled on the Lost Creek property. The delineation holes are designed to further assess the extent of mineable uranium resources and potential extensions to the known resource. The 85 well holes will be used to test the hydrologic characteristics of the uranium formation. These holes will eventually be used when production commences.
• If I do some rough, back of the envelope, valuations I see that with 93.2 million shares outstanding, Ur Energy sports a market cap of about $192 million. With 25 million pounds of resource in the ground, this means if I were to buy Ur Energy lock, stock and barrel right here I would be paying a little over $7.60 per pound of Uranium in-situ. This is downright cheap for a uranium story advancing towards production.

At The Market Traders, we shall be watching the Ur Energy story very closely. We are initiating coverage with an accumulate rating. Use any market volatility or weakness to acquire shares to build a position. For further information be sure to visit the Ur Energy website at www.ur-energy.com.

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