Dundee: Neutral rating and $1.60 target for Uranerz EnergyAccording to Dundee Securities:
Uranerz Submits License Application for Third Powder River Basin Mining Unit
Uranerz Energy
Neutral, High Risk, C$1.60 Target
Impact: Neutral. Permits for next mine unit submitted.
Uranerz Energy announced that it has submitted the SML amendment application for its Jane Dough unit. The permit area is located contiguous and immediately south of its existing Nichols Ranch mining area (see below). While Hank is more advanced, Jane Dough is slated for production next due to proximity and ability to permit via amendment to current licenses, as opposed to start an entirely new permitting process. As such, we have the unit entering production in 2016, uranium prices permitting, ramping up to 500,000 lbs production pa at ~$33/lb total cash costs.
Uranerz is the newest uranium producer. As a reminder, the company announced the start of mining operations on 16-Apr-14 (see note). We view Nichols Ranch as a low risk start up with uranium loaded on to resin at NR with delivery to Smith Ranch for processing. Therefore the back end plant risks are negligible given Cameco's experience. Our model is unchanged at ~425,000 lbs U3O8 production at ~US$37/lb total cash costs for 2014. We expect 600,000 lbs in 2015 and 700,000 lbs thereafter, helping reduce costs to ~US$33/lb. Three contracts should cushion the impact of lower spot prices. We expect ~47% of production to be hedged this year (~$60/lb range), and ~33% next.
Valuation: URZ maintains its premium valuation to peers, hence our Neutral rating.
- $5.97/lb vs. $3.91 for peers
- 1.26x NAV vs. 0.83x for peers
Highlights:
- Will install only well fields at Jane Dough – no satellite plant capital
- Mine plan should enhance economics of Nichols Ranch facility
- Could see considerable permitting time savings given plans to amend permit
- Jane Dough = Doughstick, South Doughstick, and North Jane properties
- Total resource of 2.7 MM lbs grading 0.108% U3O8