UEX Corp T.UEX

Raymond James comments on UEX Corporation

[shakerman640]

According to Raymond James:

https://personal.crocodoc.com/yGj926w

UEX Corp.

UEX-TSX

Outperform 2

C$0.80 target price

First Pass Regional Drilling Confirms Strong Hydrothermal System at Hidden Bay

Recommendation

UEX released initial drill results from the on-going winter exploration program at its 100%-owned Hidden Bay uranium project located on the eastern side of the Athabasca Basin. The program aims to test the mineralized potential down-dip of encouraging drilling conducted by previous operators. No mineralization has yet been encountered, but results suggest strong hydrothermal and fault systems – key ‘ingredients’ of Basin uranium deposits – are present at the Dwyer Lake target. We look forward to additional results in the coming weeks and encourage investors to build positions on strong discovery potential within close proximity to some of the world’s best mill infrastructure.

Analysis

- Strong Alteration in Most Holes. UEX reports 14 of the 19 holes drilled thus far (all at Dwyer Lake) have intersected ‘moderate to strong’ hydrothermal alteration in Athabasca sandstones, while 13 holes cut ‘intense’ hydrothermal clay alteration in underlying crystalline basement rocks, with many holes encountering desirable rock types (e.g. pelitic gneisses) and faulting. Clays have been characterized as ‘toothpaste-like’ in texture. We view these results positively as they suggest the presence of a very strong heat and fluid system as well as a favourable host environment – key pathfinders for unconformity-type deposits in the Basin. The only missing component here is uranium itself, but the company should be able to use the data from these 19 holes to vector towards the hydrothermal (and potential uranium) source over the next phase of the program. Roughly 40% of the budgeted 10,000 m program, which has a total cost of C$2.5 mln, has been completed.

- Refining Targets. Intense clay alteration has been defined over a 175 m x 75 m area and importantly consists of kaolinite and illite in both sandstone and basement rocks, suggesting alteration occurred after deposition of the Athabasca sandstones and not before – key attributes typical of the major Basin deposits. The area sits at the intersection of an E-W trending graphitic fault (EM anomaly) and a major N-S trending structure which appears to have offset the anomaly by some ~0.5 km. The confluence of two major structures (plus the unconformity) often provides a critical dilatational zone for mineralizing fluid flow in the formation of high-grade deposits. Clay alteration is also constrained to a shallow 110 m vertical depth from surface, implying a lateral orientation of fluid flow. With this in mind, UEX will drill the next phase (some half dozen) of holes at Dwyer as large step-outs 100-200 m to the south along the inferred structure. A second rig is turning at the Wolf Lake prospect, ~10 km to the north, while a further 10 targets on the property are in the pipeline.

Valuation

We are maintaining our Outperform rating and $0.80 target, which is based on a sum-of-the-parts valuation including an in-situ value for Shea Creek, plus a 0.5x P/NAV multiple applied to our DCF-derived value for Hidden Bay (8% discount rate).