Citron Research Updates Uranium Energy (AMEX:UEC)


Banned Stock Promoters, Secret Offshore Accounts, and Foreign Management with a history of frauds and failures …Yellowcake Anyone??

In 2007, Citron introduced the wild tale of Uranium Energy, while it traded on the OTCBB under the symbols URME with a series of articles.

The stock subsequently went from $7 to under .30 cents.  Yet, recently with uranium back in the spotlight as investors look at the increase China demand, even the “sketchiest” of uranium stocks seemed to have caught a bid…with that we re- introduce Uranium Energy.  (AMEX:UEC)

As mentioned in the previous articles, management is associated with a history of companies that have promised the sky and delivered …. nothing!

Who is Behind This Uranium “Deal”?

Alan Lindsay – Chairman of the Board.  Mr Lindsay is a career “deal guy” who has left behind nothing but companies that have promised high hopes and left investors with empty pockets.  Mr. Lindsay’s ties extend to some of the more notorious stock promoters in Vancouver.  A most noteworthy association was Genemax – the supposed cancer vaccine stock, and its CEO James Dale Davidson.

In recent SEC filings, Alan Lindsay is involved with the following companies:

Company Ticker Recent


Annual Revenues
Strategic American Oil SGCA .15 Director, member audit, governance and nominating and compensation committees.

Son Jonathan is Secy, CFO, director and CAO (07/2010 10-K)

Phyto-medical PYTO .02 Director, recent reverse merger with “Standard Gold”, at least 6 family members in the deal  (10/28/2010 8-K) 0
Tap-immune TPIV .20 Major shareholder / Director (04/2010 10-K) 0

Or, our favorite is MIV Therapeutics in which Mr. Lindsay just resigned as President, CEO, and Chairman in March of this year.  For years the company billed itself as “a leading developer of next-generation biocompatible coatings and advanced drug delivery systems”.  Now the company is on the pink sheets with a skull and crossbones warning for either unethical promotional activity or fraud.

So who is really running The Show?

What makes MIV interesting is much like UEC, it is dual listed on the Frankfurt Exchange. Why would a Texas Uranium company need to be listed in Frankfurt?  More disturbing is why was the investor contact in Frankfurt “International Market Trend” which belongs to none other than G Brent Pierce a man who was a consultant to UEC who holds the unique distinction of being one of the few people fined and sanctioned by securities regulators in both Canada and the United States.

Notice Grant Atkins, Brent Pierce’s sidekick on the above link.  He was also a founder, CFO and director of UEC.

Then we have Amir Adnani, age 32, running the company as CEO and the mouthpiece.  He is board chairman Alan Lindsay’s son-in-law.  His credentials for running this firm are:  … he once ran a Vancouver based investor relations firm called Blender Media- that is it.

Obviously a team of Canadian stock promoters cannot make a real business mining uranium in Texas.  While they might be the ultimate decision makers, the man on the ground is Harry Anthony.  Mr. Anthony is the face of the company to Texans.  While we do not discredit Mr. Anthony’s expertise in uranium and do not believe he personally was responsible for any wrongdoing, we just simply pull up his resume to see if he is capable of being at the helm of a $400 million company.

The last projects in which we see his involvement are from 1988-1990, over 20 years ago:  both turned out to be “environmentally challenged” and never turned any revenue or profits for the company.  This is not to say that Mr. Anthony is a “bad man”, it is just saying…where is his track record of success?

Bending the Truth for Fun and Profit

The company is still indulging in misleading PR’s to promote its stock.  Most recently, it issued this piece, boasting a “Major Advance” in its 3 ½ year battle to get permits approved to mine uranium in Goliad County, South Texas.

Soon after the company released this promotional piece, they raised $27.5 mil in a private placement.  But is this release even accurate?

The stock was about $3 on September 30th, and rose all through October, when the company issued a dilutive $27.5 million private placement at $3.40 per unit, including a share of stock and a half a warrant exercisable at $3.95.

The problem is, this PR is materially misleading.  Read the judge’s own words from the conclusion (p. 148), of his ruling, in which he clearly states that the applications for mining be remanded for further evidence, or

“[i]f the Commission determines that such remand is not feasible or desirable then the [Judge] recommends that the [Applications] be denied.”

The Judge also makes clear that the applicant failed to satisfy its burden of proof on multiple issues:  F, G, H, R and T.   For example, the Judge states (p. 49 of PFD) that:

“[t]he Commission’s action on the application should not be completed until these questions are resolved within the record.”

Apparently, the analysts knew there were potential problems.  Even RBC admitted as much in their November 17 note, where they put an underperform on the stock with the caveat “Additionally, we believe Uranium Energy could encounter permitting issues at its Goliad Project which, in turn, could delay initial production beyond 2011.”

(Sorry we can’t reprint the note for copyright reasons)

The other analyst who covers this issue, CIBC, sees an eventual favorable ruling for the Goliad project but still has a price target of $4.75, and that is assuming management executes on all cylinders.

So what does the future look like for UEC????

Without Goliad- it is a quick death.  With Goliad it can be a slow bleed — you decide.

In recent PR’s UEC proudly touts how it has begun production at its Palangana site, and concentration operations at its Hobson Processing plant.  Note there are no financial figures published with these announcements.  The reason is the revenue from this tiny operation is inconsequential – a bus token relative to UEC’s $400 million market cap.  UEC’s Goliad property, which has over 3 times more estimated uranium than Palangana and represents over half of UEC’s purported resource, has been tied up in legal and environmental objections to permitting for the last 3 ½ years.  (SEC regulations do not allow these types of resources to be claimed as “reserves”.)

Both analyst firms that cover UEC disclose intent to perform investment banking for the company, so they have no incentive to be pessimistic.   Nevertheless, they maintain twelve month $4.75 and $5.00 price targets.  Neither project has any possibility of meaningful revenues before 2012.   The most realistic way to estimate valuation is to use a factor of $6 to $8 per lb of in-ground resource.  This would yield a market valuation for UEC of around $96 million, or around $1.50 per share. You could add back 40c per share of cash to a round $2 per share valuation estimate.  The difference between that value and the company’s current $400 million + market cap is stuff that nuclear dreams are made of.

For investors wanting to speculate on uranium resources, compare UEC to URRE – which controls a purported 100 million pounds of uranium resource — over 8 times UEC’s uranium resources, yet trades for $100 million less market cap than UEC!

The only analyst positive on this stock, Haywood Securities, is located in Vancouver and doesn’t even have an office in the US.  What do you think?

Keep in mind though, that there is no pending or expected shortage of uranium.  It is mined using a variety of methods in dozens of countries all over the world, with Australia, Kazakhstan and Canada sourcing 60% of the world’s supply.

And just today, Russia announces establishing a new, heavily stocked uranium fuel bank with 120 tons of fuel-grade stockpiles.   This further offsets the likelihood of a squeeze in uranium.

Despite speculation in various commodity markets, there is simply no evidence for a supply shortage in uranium…that is, unless you talk with a stock promoter with lots of shares of a uranium story stock to move.

Something to ponder- A Thought from Citron

The case of UEC is troubling for shareholders and should be more troubling for citizens of Texas for the following reason.  As we learned a lesson this year from the recent BP drilling disaster, it is never a problem until it is a problem. The consultants and engineers have been compensated with stock, to pave the way for a US municipality to put its groundwater at risk.  When potentially serious environmental consequences arise, the responsibility will lie in the hands of Canadian citizens with a serious history of stock promotion. When doing resource drilling of this nature, management is at risk of being caught in the crosshairs of doing the right thing for the environment vs doing the right thing for insiders.  When this issue ripens for UEC – which is inevitable  – will this self-promotional team, with its offshore accounts and 40c per share cash in the company, be accountable ?  How far would BP have gotten with $24 million to face its environmental responsibilities ?

Like everything else about this deal, the 3 ½ year battle for permitting in Goliad has been paid for …. with stock.

“Bennett admitted he was not present when the wells were drilled, did not personally inspect the wells, or participate in any sampling of the wells. Nor did he perform his own subsurface examination of the site. Instead, he said he “assumed” the reports he relied on from fellow UEC consultant Craig Holmes were a “professional product.”

Holmes testified on Tuesday was invested in UEC stock until he divested himself last week.”

The Hype Machine

If anything signals a top to this stock, it has to be this week’s newsletter piece promising “Huge Returns in Uranium Stocks” which hit the Nasdaq site.

The article was written by one Ian Wyatt.   While we don’t doubt Ian’s intentions, we simply would like to call attention to three other battleground stocks between Citron and Ian.  Citron Research points out the following stocks were previously covered by Citron and promoted by Ian:

YPNT at 4.95 – Stock crashed to pennies, CEO criminally indicted and convicted. (was at one time Ian’s favorite recommendation)

IIG — Stock and business model imploded

AMED – Federal investigation of billing practices, stock halved.

See you around!


This recycled stock promotion is what it always was – a heavily overhyped story stock that fell into a commodity bubble — with no real prospects of “growing into” its valuation.  It is the opinion of Citron that at the end of the day when you look past all the well written pr’s you will nothing more than another hype company in the dossier of Alan Lindsay.

Cautious Investing to All