Forte Energy NL

Symbol: AIM:FTE / ASX:FTE
Market Cap: £51m
Current Share Price: 9.0p
52 week range: 2p – 12.5p

Company website: http://www.murchisonunited.com.au/

Forte Energy NL is an Australian-based minerals company focused on the exploration, evaluation and development of uranium and energy-related projects worldwide.

The Company changed its name from Murchison United NL on 25 November 2008.

Forte Energy has secured an extensive portfolio of uranium projects in the Republics of Guinea and Mauritania in West Africa, where it is pursuing intensive exploration programs. The Company also holds copper and cobalt interests in Queensland and Western Australia, Australia.

I selected Forte Energy back in November (after the CFM takeover completed) to see off the end of the 2009 Share Competition and painfully watched it slide lower and lower over those 2 months. Thankfully it recovered just enough over the last few days of the year to give me a lucky first place finish.

News regarding a JORC resource update was expected before the end of the year but unfortunately that news did not come as planned. Instead of a JORC update, the only RNS released was one about the directors converting their existing options and granting themselves some more options (as agreed during the AGM).

Anyway, there was some news released today which has brought the price back up to 9p. The JORC resource update is now expected in the first quarter of this year and they are still targeting the required 60mlbs to meet the requirements for the joint venture with Areva.

http://www.londonstockexchange.com/exchange/prices-and-news/...

There have also been a couple articles today on proactive investor and growth company.
http://proactiveinvestors.co.uk/companies/news/11746/forte-e...

http://www.growthcompany.co.uk/news/1106543/forte-cites-expl...

The following is from my original post back in November.

I came across this particular share back in late March 2009 after reading some news about some rather large director buying in the company. See news between 18th of March 2009 – 30th of March. http://www.murchisonunited.com.au/news---investor-relations/...

I had been looking at various uranium companies as nuclear power has become more and more popular lately. With China significantly increasing their nuclear capacity in the next few years and with the UK looking to also build more nuclear plants, the price of uranium will definitely rise from their current levels.

(http://www.bloomberg.com/apps/news?pid=20601101&sid=a2lU...
http://www.telegraph.co.uk/finance/newsbysector/energy/65336... )

The main driver with FTE at the moment is a potential joint venture opportunity with Areva NC if they are able to prove ~60mlbs of Uranium in the Mauritania region. The following is taken from the Quarterly Activities and Cashflow Report (January 2009) - http://www.murchisonunited.com.au/media/9623/asx-q-dec_2008....

Cooperation Agreement with Areva NC – Mauritania

As announced on 25 June 2008, Forte Energy has entered into a wide-ranging
Cooperation Agreement with the French-based multinational industrial and nuclear
energy company, Areva NC, in relation to its uranium tenements in Mauritania.

The first stage of the agreement was completed in July 2008 with the issue of
approximately 20 million shares at A$0.135 per share to Areva, representing a 5%
stake in Forte Energy, providing additional funding of around A$2.7 million.

In accordance with the Cooperation Agreement and shareholder approval obtained
at Forte Energy’s AGM, shares equivalent to a further 10% stake in Forte Energy
were issued to Areva in December 2008. This takes Areva’s holdings to more than
64 millions shares, or 14.5%. The second share issue was in return for providing
access to Areva’s extensive Mauritanian database developed from previous
exploration undertaken by its corporate predecessors and for the provision of
technical services, equipment and personnel.

Work to combine the Mauritanian geological databases of the two companies has
been completed and plans are currently being finalised for the next round of
exploration drilling.

The aim of the initial 2-year exploration phase of the agreement is to identify a
minimum JORC inferred resource of 60 million pounds of calcrete-type uranium
deposits or 80 million pounds for other types of uranium deposits.

If the exploration phase is successful, Forte Energy and Areva may enter into a joint
venture agreement on commercial terms prevailing at the time based on internal and
market valuations. Areva would be able to increase its stake in the joint venture
during the pre-feasibility phase with the opportunity to eventually increase its
interest to 100% at exploitation time on prevailing commercial terms.

Under the proposed joint venture arrangements, it is envisaged that Areva will
conduct the pre-feasibility and feasibility studies and become the operator of any
future mining operation.

Forte Energy has commenced a drilling programme in the Mauritania region on the 1st of September with the intention of proving there is enough uranium to satisfy the joint venture agreement. http://www.murchisonunited.com.au/media/10264/birennardrilli...

- Follow-up drilling is commencing today at the Bir En Nar Uranium
Prospect in Mauritania, following on from the maiden drilling undertaken
in December 2007.
- Current programme to comprise approximately 60 holes of diamond core
drilling of up to 180m in length for 6,000m in total.
- Drilling designed to delineate a JORC-Code compliant resource, following
previously reported radiometric logging results of up to 18,280ppm
eU3O8.
- RC drilling programme of around 2,000m is being planned for later this
year at several identified targets at Bir Moghrein.

International uranium company Forte Energy NL (ASX: FTE, AIM: FTE; “Forte” or
“the Company”) is pleased to announce that a program of follow-up resource drilling is
scheduled to commence today at its 100%-owned Bir En Nar uranium prospect in
Mauritania, West Africa.

The current drilling programme follows on from the Company’s initial 4,000m drilling
campaign completed at Bir En Nar in December 2007. This drilling programme is
expected to take approximately two months to complete and will comprise up to 60
holes of diamond core drilling of up to 180m in length for a planned total of 6,000m of
drilling. It is expected that the additional results from the current drilling
programme will enable calculation of an initial JORC Code compliant uranium
resource for the Bir En Nar prospect.

Forte Energy also holds licenses for other regions including Firiwa in the Republic of Guinea where they have announced a maiden find of 11.6mlbs at 296ppm on the 1st of July. http://www.murchisonunited.com.au/media/10141/firawa_resourc...

While the Company is delighted with this substantial maiden resource for the Firawa Project, it is also encouraged by the significant scope for increases to this figure from bulk density testing currently underway and from further drilling which has been recommended to test for extensions to the deposit – which remains open
along strike and down dip. The Company is awaiting the results of density and
metallurgical testing and in any event, no further exploration work can be
undertaken until after the end of the wet season in October.

Results from bulk density testing carried out on five samples returned an average of
3.5t/m³. A more conservative figure of 2.2t/m³ was used in the resource calculation
pending results from the additional testwork currently underway. If these results
support the use of a higher density figure, the estimated U3O8 resource would
increase.

This 11.6mlb equates to around (11.6mlbs * $5US) = £37m. ($5 is the going rate for uranium which is still in the ground although there has been a recent broker update which used $4 a pound so I am not sure which is the most accurate). This figure roughly equated with the companies market cap at the time which gave me some confidence that they were fairly priced. It appeared that some investors were not happy with the 11.6mlbs which were found and were hoping for more and the share price dropped around 14% over the next couple of weeks after the announcement.

Since then, the share price has risen quite high (12.5p at one point) off the back of no real news. The company was forced to post a response to the price rise but they had no response as to why the share price has increased. http://www.iii.co.uk/investment/detail/?display=news&cod...

I was reminded of a similar occurrence with their share price from back in March. After all the director buying many small investors (including myself) started to take notice and the price rose sharply and the company had to issue a response to the price rise at that point as well. http://www.iii.co.uk/investment/detail/?display=news&cod... After a couple of months they issued the maiden resource find which justified the increase.

A recent broker update (October 30th 2009) gives a short term price target of 12.7p (38% increase from today’s closing price) and a medium term target of 24p if the resource proves to be extensive enough.

Firawa currently has a JORC compliant resource estimate of 17.7 million tonnes at 296 part per million triuranium octoxide for 11.6 million pounds of contained U308 at a 100 ppm cut-off.

Matrix Corporate Capital issued a note on Forte Energy following the latest announcements. It expects the Firawa resource to be increased in the short term and views it as a 20 million lbs project now with upside next year. It applies a US$5/lb valuation to arrive at its short-term price target of 12.7pence per share.

The drilling program about to start at the Mauritania project is designed to define another JORC resource, and Matrix see potential for the company to have 40 million lbs of resource by the year’s end, “in which case a 24p per share target could be justified.”

“The recent lull in the share price was perhaps our last buying opportunity for a while and we would expect interest in the stock to increase toward expectation of the Mauritania resource around the end of the year,“ the broker said.
http://www.proactiveinvestors.com.au/companies/news/3078/for...

Disclaimer: I do currently have a holding in FTE.