Analyst's are creaming BRAVO, Laramide for Conceptulizing
and executing a plan, that could easily make LAM a $100MM capitalization in very short order. We are upgrading Laramide to Buy and increasing our target price to C$0.80 from C$0.60/sh upon purchase of the Churchrock and Crownpoint ISR projects. Given Westmoreland's Queensland political risk, we see potential for low cost ISR production in the US as a significant de-risking event. LAM would rank second in resource size of its US ISR peers. The deal is cheap at US$0.21/lb U3O8, but not without risk. LAM must cover C$5 M debt by YE and the initial US$5.25 MM cash cost in Q1/16, the NRC must transferring the licenses, and Laramide and the Navajo Nation (off to a fresh start) must settle land access arrangements. Acquisition of New Mexico ISR properties. A binding LOI with Uranium Resources Inc. (URRE-US, Not Rated) to acquire 100%-interest in Churchrock and Crownpoint was signed. Management suggests this won't shift focus from Westmoreland, we see this as a good move as a re-instated Queensland U3O8 mining ban makes it challenging to advance that world-class project. An update to its 2010 Preliminary Assessment expected by YE2015 may invigorate interest. Meanwhile, Churchrock is a large, world-class ISR project, located close to ample infrastructure and existing LAM projects, and appears to have opened a path towards near-term CF. Two advanced partially permitted projects with nearby infrastructure. Sections 8 and 17 at Churchrock are permitted for production (including NRC and State UIC licenses). An ISR plant at Crownpoint with 3 MM lbs U3O8 pa capacity is also approved for construction. M&I resources total 45.2 MM lbs grading 0.13% U3O8; and historical resources total an additional 15.4 MM lbs for 60.5 MM lbs. Churchrock Feasibility Study completed. A 2012 study suggests six year LOM with peak ISR production of 1 MM lbs. Capex is estimated at US$35 MM; Opex at $US20-23/lb, excluding royalties. Current plans, which we have incorporated into our 10% DCF model, suggest an initial toll mill arrangement at Churchrock (US$33 MM Capex) by 2018; then building a 2 MM lb ISR Plant at Crownpoint (US$33 MM); adding two more satellite deposits upon permitting (US$25 MM Capex). Our total cash cost assumption is ~US$26/lb U3O8 at a LOM run rate of 1.6 MM lbs pa. Eliminates royalty overhang. LAM already owns a sliding scale royalty on Churchrock (between 5%-25% based on U3O8 price), rendering it uneconomic in someone else's hands. Churchrock becomes a highly prospective once nullified. US$12.5 MM consideration. US$5.25 MM is due at close (Mar-16). US$7.25 MM in secured debt is payable to URI over three years. Interest of 5% (10% on positive production decision) is due quarterly. URI has option to 1) accept first payment in shares; 2) purchase LAM's 3 MM lbs La Sal project for US$4 MM. Next steps. The deal is subject to TSX and ASX approval. Due diligence and a definitive agreement is expected by mid-December; transfer of NRC license by 31-Mar-16. Plans are to upgrade, consolidate and estimate resources, and complete a feasibility study for the entire area. We expect equity financing is required.