Azarga Uranium, which hopes to receive permission to mine for uranium near Edgemont, has been required by a Canadian regulatory agency to clarify some of its optimistic assessments of the prospects for the Edgemont project.
After the company complied and issued its clarification, Azarga's stock price fell and has not fully recovered.
The developments come while Azarga awaits a much anticipated federal licensing decision from the Nuclear Regulatory Commission for uranium mining near Edgemont, an operation known as the Dewey-Burdock project.
Azarga in January issued what was called a "preliminary economic assessment of the Dewey-Burdock project and the Centennial project," a mining operation proposed in Colorado.
The clarification says, in part, that the preliminary assessments of the two projects included language that was "considered too speculative geologically."
In another part of the clarification, Azarga wrote: "There is no certainty that the preliminary economic assessments will be realized."
In a press release, Azarga, which is publicly traded in Canada, acknowledged certain "deficiencies" in its filings relating to projects, including Dewey-Burdock.
The British Columbia Securities Commission ordered the clarification.
Canada has strict rules to protect investors and restrict what companies like Azarga can say and communicate to the markets. Companies are required to put in cautionary language if they're making statements about a project for which there has been insufficient data, drilling or analysis.
"It's hard to put a good spin on this type of story," said Jim Woodward, a certified public accountant in Wellington, Colo. Woodward said that for 10 years, he has followed Powertech, which is part of Azarga. He lives near the company's proposed Centennial project, which is similar to the proposed Dewey-Burdock operation.
Azarga, a mineral exploration and development company, assumed ownership of Powertech Uranium in 2014. Powertech was the initial developer of the Dewey-Burdock Uranium project in Custer and Fall River counties. The developers intend to use in situ leach recovery mining, also known as ISL, which uses oxygenated ground water to free uranium and bring it to the surface.
Mark Hollenbeck of Edgemont, manager of the Dewey-Burdock project, downplayed the significance of the clarifications.
"There were details that the Canadian board of trade wanted us to clarify and make certain were worded perfectly," Hollenbeck said. "We copied some other ones that were in line ahead of us, and they decided that wasn't quite what they wanted this time."
Hollenbeck said that opponents of the project are "turning us in to every agency in the country. I think we probably got a little more scrutiny because of that."
The British Columbia Securities Commission has not responded to a Journal inquiry.
Azarga admitted that statements in its economic assessment of the Dewey-Burdock project and the Centennial project did not include the required cautionary language.
The full clarification issued by Azarga:
"The preliminary economic assessment of the Dewey-Burdock project and the Centennial project are preliminary in nature and include inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary economic assessments will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability."
In complaints he made to the securities commission, Woodward has focused not only on the preliminary economic assessment Azarga issued in January, but also its financial reports and statements made by Azarga's chairman, Alexander Molyneux. Molyneux has been quoted as saying that the permitting with NRC for Dewey-Burdock project is completed.
"They have never mined uranium or anything else," Woodward said. "They've never brought a project to the point of being fully permitted."
Although the preliminary NRC license was issued last April, the Atomic Licensing and Regulation Board was tasked with reviewing the application after several opponents to the project filed interventions.
A decision by the licensing board is expected by the end of the month. Whatever the outcome, the intervenors have other options they can pursue to contest the project. It could ultimately end up in federal court.
Hollenbeck is confident that the license will receive final approval.
"We do not see any significant issues coming," Hollenbeck said. He predicts that there could be a few minor amendments to the license.
For the Dewey-Burdock operation, Azarga still needs permits from the U.S. Environmental Protection Agency and permits from the U.S. Bureau of Land Management and Army Corps of Engineers.
The South Dakota Department of Environment and Natural Resources suspended hearings on state permits until the NRC process is completed.
Azarga last week did admit for the first time that it is still in the process of obtaining those permits, Woodward said.
Meanwhile, Azarga's stock, which had hovered at or just below 40 cents a share, dipped into the low 30s last week. After closing Tuesday at 34 cents a share, the stock ended the day Wednesday at 33 cents.
The clarification "probably had something to do with" the fall of the stock price, Woodward said. The company issued the clarification on April 14. On April 15, the stock price was 38 cents, and by April 17, it had fallen to 32 cents.
"The stock is also sensitive to the uranium price, which is not doing very good," Woodward said, because of a significant oversupply of uranium.