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Monday
Jul092007

Strateco Resources Inc: BUY

Due to the seasonal behaviour of the stock market, the summer is often a good time to acquire some great stocks selling for a considerable discount.

Strateco Resources Logo

Uranium stocks have been hit by quite a sell off in recent months, and this pullback could be a good time to buy some cheap uranium stocks. We having been watching Strateco since August 2006 but we now think Strateco Resources is at a great discount and so we are signalling a BUY on this uranium stock at $2.30 and we are adding it to our uranium stocks portfolio as a BUY.

Strateco does not currently have any uranium mines in production so this is more of an exploration play. A key component of a successful exploration company is a good management team. Strateco has a good management team with the President and CEO, Guy Hébert, who has been a good track record having raised over $250 million for mining projects over the last 30 years and he has occupied the role of President and CEO of successful exploration companies, such as Audrey Resources and Cambior, which was a BUY on our gold portfolio until it was taken over by Iamgold. Jean-Pierre Lachance is the Vice President and also has over 30 years experience in the international mining industry. So will do not see any great holes in the management team.

Strateco Resources Focus

When looking to gain a significant return on ones investment, one must consider the size of the company. A company too large can be slow to move compared with the industry whereas a company too small may prove to be too volatile to trade in, or the lack of liquidity may mean that although your stock may have doubled, you cannot cash in your profits due to the lack of volume. Strateco Resources does not have either of these problems with 106.9 million shares outstanding and a market cap of 245.77M. Over the last 30 days, the average volume has been about 750,000 shares each day, which is enough to get in and out without moving the stock price up or down too much. Also with a company this size, it could easily be an acquisition target for any of the larger uranium stocks. Strateco is well financed with over $25,000,000 in cash raised in February.

As for their projects, Strateco holds the Matoush, Eclat, Matoush Extension and Mont-Laurier properties shown on the map below.

Strateco Resources Map

The Matoush Project covers an area of 164 km and Strateco has drilled holes showing some high grade intersections of 2.00% U3O8. Cameco and Uranerz are also involved in this area of operation and it looks like an emerging uranium district that Strateco has been fortunate enough to get a foot on early on in the game. There could be a case of Strateco and Uranerz merging or one buying the other out. Or indeed we could see Cameco buying one or both of them as they also have a position in the area.

This year, Strateco has a budget of $16 million and they are going to drill over 80 holes totalling 30,000 metres. The aim of this is to get a definition of their resources, preferably to a NI 43-101 standard. They also plan to build a camp to house 45 people and also construct a winter road into the area.

Strateco Resources Camp

A good aspect of there projects is that they are in a politically stable country as they are in Quebec, Canada. Canada is the world's largest uranium mining country and the government is pro mining and exploration and the resources business is a great part of the Canadian economy. In today's world as resources become more and more scarce, any resources in politically stable countries are even more valuable. This particularly applies to uranium where uranium supply is seen as a politically stable fuel compared to for example oil. With trouble brewing in Niger and possibley other countries with uranium, projects like Strateco has in politically stable countries become more and more precious.


As this is primarily an exploration play, technical analysis is not always as useful as it is with larger companies but nonetheless it sould be taken into consideration.

Strateco Resources Inc Chart

From its high of $4.00 Strateco Resources has fallen 42.5% so it is one of the most discounted uranium stocks on the market today. If one was going to buy this uranium stock, it seems much more sensible to buy now, than on the top of a precarious spike. The STO, MACD and RSI are all on the floor, giving us a bullish signal.

We made a small purchase today at $2.32 and Strateco Resources is now on our uranium stocks portfolio as a BUY.

Strateco Resources Inc. trades as RSC on the Toronto Stock Exchange.




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Reader Comments (1)

Nice coverage! I really do think you need to initiate coverage on Santoy soon though. Big shots have started to accumulate this one again.

matcha18

July 9, 2007 | Unregistered Commentermatcha18

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