Monday, August 9, 2010

Sell on fact: Northern Uranium

I blogged about Northern Uranium (NTU) late last week after trading volumes suggested that something was up.  Today the company came out of trading halt and announced that it has signed a letter of intent with Jiangsu Eastern China Non-Ferrous Metals Investment Holding Co., Ltd, an affiliate of East China Exploration and Development Bureau (“ECE”).  The deal will result in ECE emerging with a 51% stake to raise approximately $15.7million at $0.145 per share.

The market hasn't reacted all that well which I would believe is a combination of the dilution of existing shareholders, the stake is a controlling one at 51% and that short term traders that bought stock in the lead up to the news are now exiting their positions.  I am interested to see what will be the response (if any) from uranium French giant and large shareholder Areva.

There is a bit of discussion on internet forums as to whether the FIRB will approve the investment especially considering how tight the supply is on Rare Earths and the fact that an investment recently in Lynas Corporation (LYC) was knocked back not too long ago.

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