Uranium Resources Takeover Looms as Price Drop Exposes Deposits
By Kelly Riddell
Sept. 3 (Bloomberg) -- Uranium Resources Inc. is sitting on as much as $7 billion worth of the radioactive mineral and may become a takeover target after the shares plunged 83 percent this year, along with the fuel's price.
The Lewisville, Texas-based company has proven uranium reserves in the state of about 800,000 pounds, plus an estimated 101.4 million pounds of the material in New Mexico, according to a regulatory filing. The deposits could power the world's 438 active nuclear-generating plants for a year.
David Dreman, 72, who oversees $13.7 billion as chairman of Jersey City, New Jersey-based Dreman Value Management LLC, bought 51,060 shares this year, boosting his stake to 4.5 percent. The company's biggest investor, Zesiger Capital Group LLC, also increased holdings, according to regulatory filings.
``Uranium Resources is one of the cheapest uranium stocks out there right now, given its assets,'' said Mark Roach, who runs Dreman's $1.8 billion DWS Dreman Small Cap Value Fund. An increase in nuclear power's appeal as a clean-energy source may raise the company's profile as an acquisition target, he said.
The shares, which reached a record closing price of $14.02 on Nov. 6, closed at $2.18 in Nasdaq Stock Market composite trading yesterday. They may be worth $20 each, based on past acquisitions of companies with similar reserves, said Peter Homans, a hedge-fund manager with Parkman LP in Boston. The fund owns the shares, he said.
``From my perspective, the company has 100 million pounds of proven reserves, which is more than any other American company,'' Homans said. ``The contract price for uranium is somewhere around $70. Multiply that by 100 million and you have a present value of $7 billion. For a stock whose market cap is $100 million, there's meaningful upside.''
Calls and e-mails to Bobby Winters, a managing director at Zesiger in New York, weren't returned. The firm owned 14.2 percent of the shares as of June 30, according to data compiled by Bloomberg.
Uranium Resources trades at half the price of Canadian competitors based on the value of its reserves, analyst Paul Stouse at Rice Voelker LLC of Covington, Louisiana, said in an interview.
Saskatoon, Canada-based Cameco Corp. might acquire the company to strengthen its position as the world's biggest uranium miner, Roach said.
Cameco doesn't comment on acquisition targets before investors are informed, spokesman Gord Struthers said.
``However, we are looking for ways to expand our production and have said we're in a growth mode,'' he said. ``It's a small industry; we've probably talked with every company out there.''
Uranium Resources produced 417,000 pounds of the mineral in 2007 and 196,900 through the first half of this year, the company said. By 2014, new and existing mines in Texas may yield as much as 2 million pounds annually, Chief Executive Officer David Clark, 53, said in a presentation June 4.
As much as 9 million pounds may be mined in New Mexico, Clark said