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GoviEx valuation 20 CAD/share : UraniumSqueeze (reddit.com)
I did not write this. It's from https://mikaelsyding.com/finanskursen4/ a Swedish hedgefund manager.
GoviEx is currently a micro cap (150m USD) uranium mine developer, with a handful of promising assets in Africa (Niger, Zambia and Mali).
Early 2025, GoviEx’s Madaouela mine in Niger should be producing its first commercial batches of uranium, at a low all-in cost of 25-30$/lb, including capex costs. By then supply/demand dynamics in the vastly undersupplied uranium market should have pushed prices to (at least) 75$/lb, to get all the marginal uranium mines to profitability and thus willing to re-start production. The previous peak was 137$/lb, so a new peak, considering how unbalanced the uranium market is, of let’s say 150$/lb would not be at all that surprising, not to mention 75-100$.
The time line for GoviEx, and thus forming a list of likely share price triggers, is approximately the following:
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Feasibility study Niger Madaouela finishes around May-June 2022
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=> takeoff agreement with a utility company Q3-Q4 2022
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=> H2 2022: loan financing $180m, and around
* Madaouela will probably according to the coming Feasibility Study be able to produce 2.5m lbs a year in 25 years. Assuming 25$ margin per lb in the initial offtake contract (a uranium price of 50-55$), the annual profit in Madaouela will be approx. 60m$, which should be worth 15x that in a share issue (considering rising prices and additional assets in other mines) = 900m$ (USD)
GoviEx has 3 other sites (in Niger, Zambia and Mali) with possibly similar potential as the Madaouela mine, but significantly lower capex need (could be self-financed). Simply taking the 900m$ times four brings GoviEx’s future market cap to 3.6 billion USD or 4.5B CAD = 6.67 CAD/share.
However, the share price value of 6.67 CAD is calculated based on just 50-55$/lb uranium price, and a 25$ margin for GoviEx. That margin could easily double to 50$ or reasonably triple to 75$ at a long term equlibrium uranium price of 100$/lb. At that price level, new mines and new nuclear power plants might find a more stable supply/demand equilibrium. Priced at 15x GoviEx would then be worth 20 CAD/share, or 13 CAD at 10x.
Subtract taxes, unexpected capex, less available uranium, or add more available molybdenum/silver/gold/copper, higher uranium panic buying price spike, a favorable exit etc.; and you should still arrive at a warranted share price in 2025 of around 10-20 CAD/share, with a spike going even higher than that. My target is 20 CAD/share in mid 2025, which at a 100% annual discount rate over 4 years translates to 20/(2^4)= 1.25 CAD/share today (+230%).
Please note that this post is only meant as an entertaining and possibly educational example, and is in no way, shape or form to be construed as a recommendation to buy or sell any financial instruments, whether related to GoviEx or otherwise