Editor’s Picks: Top news of the week (February 26, 2007)

Acquisitions within the mid-tier gold and uranium sectors grabbed the headlines in the seventh trading week of 2007.

* On Feb. 12, South Africa’s SXR Uranium One unveiled its friendly, all-share takeover bid for Vancouver-based UrAsia Energy, a move that will create a new, US$5-billion company named Uranium One.

This deal looks like a winner, in that it satisfies a strong demand from large funds for uranium investment vehicles, and nicely spreads out risk by combining UrAsia’s operating and near-operating in situ-leach uranium mines in politically dodgy Kazakhstan with SXR’s advanced uranium projects, the underground Dominion mine in South Africa and Honeymoon ISL project in Australia.

Assuming they survive what will be a gruelling travel regime, Uranium One managers will ramp up production from today’s small base to 11 million lbs. U3O8 by 2012, or roughly half of the current output of the world’s largest uranium producer, Cameco.

* Agnico-Eagle Mines unveiled its friendly, all-share takeover offer of Cumberland Resources, valuing it at $710 million. This is another inspired deal that moves the Meadowbank asset — an open-pit gold mine now under construction in Nunavut — from weak hands to strong. It’s a perfect fit for Agnico and its technical team, who have become experts at building substantial gold mines in the harsh northern climes of First World countries.

In a unique twist, Agnico-Eagle once more showed its gold bug bona fides by spending US$15.9 million the day before the Cumberland bid, effectively closing out Cumberland’s gold hedge position.

* Keeping up the pace, the week ended with South African major Impala Platinum bidding for junior developer African Platinum, valuing the company at around US$579 million.

* Our favourite exploration news came from one of the world’s top sleeper nickel assets: the Kabanga nickel sulphide deposit in northwestern Tanzania. Partners Xstrata and Barrick Gold have substantially expanded the resource there, and the results were so good that operator Xstrata will spend another US$95 million completing a prefeasibility study.

Kabanga now has an indicated resource of 9.7 million tonnes grading 2.4% nickel and byproduct copper, cobalt and precious metals, plus another 36.3 million inferred tonnes grading 2.8% nickel. The previous tally was 26.4 million inferred tonnes at 2.6% nickel.

* At the top of our “People file,” is Diana Flaherty, the principal of Phoenix Metals U.S.A. II, who was sentenced in Las Vegas on Feb. 12 to seven-and-a-half years in federal prison for one count of fraud, one of conspiracy to commit fraud, and one of conspiracy to commit money laundering.

Flaherty and her late husband Robert ran a classic “desert-dirt” scam through Phoenix Metals, which traded on the over-the-counter market in the U.S. in the mid-1990s. Phoenix’s property, they said, held volcanic cinder deposits (dubbed “volcanic refractory ore”) from which platinum group elements, gold and silver could be extracted using proprietary methods.

In 1998, the Securities and Exchange Commission got a judgment against Robert Flaherty enjoining him and his company from making false statements to sell securities.

Nothing daunted, the Flahertys continued their con game even after scientists from the Department of the Interior got an administrative judgment that Phoenix Metals’ mill site property, near Searchlight, Nev., should be returned to the federal government, on the grounds that the operation did not extract precious metals from the “ore.”

Robert died in 2001, but Diana kept up appearances for another year or so, assisted by Michael Gardiner. Federal authorities caught up with the pair in March 2004.

Diana Flaherty has to disgorge US$5.7 million and pay the same amount again in restitution. Gardiner is awaiting sentence.

It’s 18 years since Gord Bacon, Gary Hawthorn and George Poling longed, in a paper published in the CIM Bulletin, for assay scammers to end up behind bars. Here’s a cheer to the U.S. Attorney’s Office in Las Vegas for finally doing it.