Speaking of running around with one's eyes closed, did you see the recent article in Forbes about Uranium Energy Corp. (UEC: AMEX)? The title of the article is, "Energy's Latest Battleground: Fracking for Uranium."
I won't link the Forbes article here, because it's not worth reading. Don't waste your time. It's shoddy, mendacious, cheap-shot journalism. Still, I feel obliged to mention the Forbes article because -- as with the effect of the Super Bowl power outage on team Baltimore -- it was enough to take the edge off of UEC's share price last week. Well, bargains are where you find them.
Just to give you some flavor, the Forbes article begins with a cheap, tin-plated specimen of hyperbolic journalism. There's a brief intro to UEC, along with a photo of CEO Amir Adnani standing next to a drum filled with uranium oxide (U3O8), otherwise known as yellowcake.
Then comes the rusty knife. "This is the stuff," states the Forbes article, "that atomic bombs and nuclear reactor fuel are made from."
Pu-leeease! Yes, yellowcake goes into reactor fuel, which is why people recover it from the ground. But atomic bombs? C'mon. Spare us the emotion. Not the yellowcake from UEC. Don't Forbes writers and editors know better? Really, grow up.
No U.S. user -- meaning the U.S. government -- is building atomic bombs these days, out of yellowcake or anything else. Indeed, the U.S. is dismantling nuclear weapons, not buying fresh yellowcake and building new ones. But why let accuracy get in the way of a cheap, upfront titillation in a poison-pen story, right?
Missing the Fracking Boat
Of course, the atomic bombs thing is just a snide throwaway for the Forbes writer. His true agenda becomes clearer when he grossly misstates the process by which UEC recovers yellowcake. Specifically, the article describes the UEC process as "fracking" and then goes on to accuse UEC of "contaminating" groundwater.
Let's start with the first whopper. "Fracking for uranium," states Forbes, "isn’t vastly different from fracking for natural gas."
The Forbes writer is entirely wrong. This story is entirely wrong. Apparently, the writer wants to stir up a scandal, unless he's just crack-smoking stupid. (Well? Which is it!?)
The UEC Process
In fact, UEC doesn't "frack for uranium." The UEC recovery process for uranium bears virtually no relationship to "fracking for natural gas."
Let's back up and define the terms. In the oil patch, "fracking" is shorthand for hydraulic fracturing. Fracking involves drilling a deep well, several thousand or more feet down and oft-times horizontally, into an oil or gas-bearing formation. Then a series of pumps applies immense pressure -- thousands, if not tens of thousands, of pounds per square inch (psi) -- to a series of zones within the rocks down-hole.
Within the deep formation, fracking -- meaning, high-psi pressure pumping -- shatters the rock. That's followed by a hydraulic flow of sand (called "proppant") to prop the broken zones open. This creates surface area down within the rocks from which oil and/or gas can drain and flow to a well bore for recovery.
The UEC methodology is quite different, because U3O8 minerals do not "flow" out of the rocks under their own pressure, as with oil or gas. Indeed, UEC has to dissolve and "pull" uranium from the ground with a process called in situ recovery (ISR).
ISR involves drilling water-injection wells into shallow sandstone formations -- well within about 1,000 feet or so of the surface. The groundwater in the area is already nonpotable, due to high concentrations of salt, uranium, radon, arsenic, sulfides, molybdenum and a host of other things. That is, this nasty stuff is already down there. If you live nearby, you're not going to drink this water nor feed it to your cattle.
Then UEC injects oxygen-rich water into the sandstones. Another term for the fluid is hydrogen peroxide (H2O2), like what you buy at the drugstore. You can gargle with peroxide; it's hardly a dangerous substance.
UEC adds carbon dioxide (CO2) to the mix, as well -- sometimes called sparkling soda. Carbonated water is the basis of soda pop, except the UEC fluid lacks the typical sugary flavoring of drinks you buy in the store, so in that sense, the UEC product is safer for you.
UEC uses very low injection pressures, always under 100 psi. The process is specifically designed not to shatter the rocks down-hole, which is prohibited under Texas law. Then the hydrogen peroxide and carbon dioxide-laced fluid moves through the rock formation at low pressure, dissolving the U3O8 that's already down there.
Due to the design and layout of wells, the fluid eventually saturates with uranium and channels its way to recovery wells, using natural permeability pathways within the rock. UEC is not, somehow, "contaminating" the groundwater, as Forbes states. In fact, there are monitoring wells surrounding the entire ISR well field to alert management and regulators in the event of any rogue channeling.
When UEC is finished dissolving the U3O8 out of the sandstone formation, the water quality in the rock formations conforms to a naturally existing baseline that existed before UEC drilled its first well. The key difference is that the sandstone holds significantly less uranium mineralization -- which is the idea.
The assertion by Forbes that UEC is somehow "contaminating" groundwater is contrary to the evidence. For example, the Texas Railroad Commission and its Surface Mining and Reclamation Division (SMRD) have studied the process. Here's what one SMRD study found:
"The mobility of uranium in aquifer environments such as [where UEC is operating] is extremely slow... [The] uranium must be oxidized from its normal, insoluble… form to a sizable (and, hence, mobile)… form by oxygen-rich… waters. Therefore, transport of uranium within the aquifer occurs at extremely slow rates on the order of tens of feet over a period of thousands of years, not [a] few months... It is not plausible that the mobility of any uranium materials has been substantively affected by drilling activities conducted by UEC."
Overall, the UEC uranium-recovery process is about as different from "fracking" as you can get, considering that both processes involve drilling holes in rocks.
UEC drills shallow wells. It uses low pressure to inject fluids. It doesn't "frack" rocks. UEC uses benign chemicals that target already nonpotable water zones. The process leaves the groundwater at a natural background level of chemistry. Oh, and UEC workers have Texas regulators looking over their shoulder at every stage.
All in all, this doesn't sound like an "energy battleground" to me. It seems more like a valid, workable business plan.
Then again, if you haven't followed UEC and don't have a clue about what the company does and are mostly ignorant of geology and hydrology, then the Forbes article might make some sense.
The bottom line, however, is that the Forbes article is a gratuitous hatchet job. One is left to wonder what's going on over at Forbes. Are the monkeys running the zoo?
Meanwhile, UEC shares took a hit last week. They're a better buy than they used to be. As for Forbes and its silly article, this too shall pass. Indeed, to cite an old Arab saying, "The dogs bark, the caravan moves on."