Powertech Uranium Corp., the company that wants to begin mining near Edgemont, is a Canadian firm that has built more water boilers than uranium mines.

In fact, the company, which used to build boilers, really only began delving into minerals in 2005 and in its current incarnation as Powertech, has never drilled a well or mined anything.

Opponents of the mine also worry that the company has a shaky financial foundation, and has strong foreign ownership interests that may have no reason to protect the land and water in South Dakota.

The company has spent most of its minerals-related life just preparing to open a mine. As Powertech's proposed Dewey-Burdock mine south of Rapid City comes up for its first state permit hearing on Monday, the hearing will culminate years of advance planning by the company.

But this will not be the company's first run at the complex and drawn-out approval process for a uranium mine.

A few years back, the company ran into stiff opposition for its proposed Centennial uranium mine near Ft. Collins, Colo. Protesters there raised money and gathered thousands of signatures against the project. State lawmakers stepped in and wrote more restrictive uranium mining regulations — a stark contract to South Dakota's moves to weaken its oversight of the proposed mine.

On top of that, the company faced an unforeseen, and tragic, complication that hurt its Colorado plans.

On March 11, 2011, a tsunami slammed into the coast of Japan and precipitated the meltdown of the Fukushima reactor. As the first major nuclear reactor disaster since the reactor accident at Chernobyl in 1986, it renewed panic over the safety of using uranium-powered reactors for energy.

The uranium markets chilled immediately.

Shortly before the disaster, uranium prices had reached around $75 per pound, according to a story in the Ft. Collins Coloradoan. Following the tsunami, it dropped to $55.25.

Powertech then announced in April 2011 that it was suspending its efforts on the Centennial project. Subsequently, the company recently sold a 60-percent stake in the project to Azarga Resources Limited, a uranium firm based in Hong Kong.

Evolution of a company

The company began in 1984 as Ararat Oil and Minerals, Inc., changing its name next year to International Powertech Systems, Inc. Little information on the company's early years is accessible. But in the late 1990s and early 2000s, Powertech built and sold water boilers and air-handling equipment through a subsidiary called Gasmaster, according to Canadian securities documents.

The company's sales grew quickly, racking up $1 million in sales in one six-month period in 1998. It even boasted installing an industrial air handling unit in "a major pulp and paper plant in Saskatchewan," according to a Canadian stock report that year.

But, citing undisclosed business difficulties, Gasmaster stopped production of its air-handling equipment by spring of 2001 due to apparent financial problems.

“As discussed in note 1 to the accompanying financial statements and in respect of the company’s working capital deficiency and substantial losses from operators, substantial doubt about the company’s ability to continue as a going concern exists,” reads an auditor’s report on the company in July 2001. A similar report was filed in 2003.

In December 2004, the company was sold, and Powertech's new owners began working on that they wanted the company to do.

Targeting South Dakota

In the summer of 2005, the company “entered into a Letter of Intent to acquire 100% of the issued and outstanding shares of Denver Uranium Corp,” a Colorado-based corporation that was formed to secure lease options for the uranium deposits in South Dakota known as Dewey-Burdock.

Officially becoming Powertech Uranium Corp. in 2006, the company went on to purchase mineral rights on three other projects in Wyoming and Colorado. At the end of 2006, Powertech Uranium Corp. had reserves of nearly $9 million.

Powertech proceeded to announce new prospective projects: the Centennial project in Colorado; four possible projects in Wyoming; and the Dewey-Burdock project, located about 15 miles northwest of Edgemont.

Meanwhile, the company brought on staff members with in situ mining experience. Richard Clement, a uranium industry veteran, became Powertech's president and chief executive officer. John Mays, who worked at Wyoming's Smith Ranch-Highland mine, became vice president of engineering.

And Powertech hired a uranium mining convert who lived as close as possible to the project's geographical heart: Mark Hollenbeck, a local rancher, former Edgemont mayor and state legislator who grew up in Dewey.

Hollenbeck's introduction to Powertech was showing up with concerns at a local Powertech meeting about the proposed project. After learning more about it and subsequently getting a job offer, Hollenbeck came on board. He said his position is mainly to make sure the mine will be safe and that locals are treated fairly.

"I'm going to make sure it's done correctly or I'm not going to play," Hollenbeck said, adding that he pushed Powertech to give water guarantees for landowners. "I approach my job like I'm going to get fired tomorrow."

Long-term plans

Powertech's economic assessment assumes it will lock in long-term uranium contracts at $65 per pound. As of Sept. 13, the spot market price for uranium was about $35, according to TradeTech, a uranium analysis company based in Denver. 

The spot price has sunk because Japanese nuclear reactors are still shut down in the wake of the tsunami, meaning there is a surplus of uranium on the market, according to Hollenbeck.

But Hollenbeck says there’s big difference between the daily market prices and the prices for long-term uranium contracts, which are higher.

"Because a nuclear power plant has a 40-year life, when they contract for fuel, they want a steady supply over a long period of time," he said.

Hollenbeck couldn't speak to what kind of contract price for uranium Powertech will need to be profitable.

Opponents of the proposed Dewey-Burdock project also say Powertech may not even have the funds to build a mining operation. The company's share price — after hitting nearly $4.60 per share on the Toronto stock exchange in 2007 — as of last Thursday was selling for 9 cents a share.

That low stock price has opponents worried that South Dakota may approve a mining deal with a company that has no track record of successful mining, but that also could be sold or go out of business quickly.

"This company is broke," mining opponent Susan Henderson of Hot Springs told the Rapid City Council last month.

Hollenbeck, speaking at a Rapid City Council committee meeting in August, conceded that if the project goes through, the company will need to somehow fund it.

"They will need a larger financier going forward," Hollenbeck said, adding that it could lead to a joint venture or selling more stock, or perhaps selling the company.

"It may be a sell-out of the project," he said. "I don't know that."

Contact Joe O'Sullivan at 394-8414 or joe.osullivan@rapidcityjournal.com

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