(Image via Azarga Uranium)
The COVID-19 pandemic has put a lot of markets to the test, but one commodity that has performed quite well since the beginning of last year is uranium – growing more than $7 (USD) or 32% in value to $32.70 (USD) / lb.
According to analysts, this trend is expected to continue upward. A top player in this space -
Azarga Uranium (TSX: AZZ, OTCQB: AZZUF, Forum) released positive results of an independent Preliminary Economic Assessment (PEA) in
late June 2021 on its Gas Hills In-situ recovery (ISR) Uranium Project in Wyoming, following an increased mineral resource estimate announced by the Company in March.
The base case economic assessment results in a pre-income tax internal rate of return (IRR) of 116% and a pre-income tax net present value (NPV) of $120.9 million (USD) when applying an 8% discount rate. Using the same discount rate, the post-income tax IRR is 101% and the post-income tax NPV is $102.6 million (USD).
From the Company:
In a media release on this news for investors, AZZ President and Chief Executive Officer, Blake Steele, explained that the results of this maiden ISR PEA for the Gas Hills Project demonstrates robust economics and expands the future production profile of the Company into the state of Wyoming, which has a long history of successful ISR operations.
“The PEA results further validate our Company's strategy of developing low-cost ISR projects as we continue to progress our flagship Dewey Burdock Project towards construction. With uranium markets in a structural deficit, Azarga Uranium is exceptionally well positioned to capitalize on the anticipated recovery in the uranium price through its two tier one development stage ISR uranium projects in the USA.”
The PEA has been prepared in accordance with the requirements of National Instrument 43-101 (NI 43-101) and upon the release of this news, analysts at
Eight Capital and
Haywood Securities reviewed its contents. The PEA outlines an ISR uranium mine producing 6.5 million pounds (6.5 Mlb) of U3O8 throughout its seven-year production life. This is based on the current Measured and Indicated resource of 10.8 Mlb of U3O8.
Looking at costs, initial capital expenses are calculated to only be about $26 million (USD) and total pre-tax operating expenses to be $28.20 (USD) per pound of production. The forecast project economics include an after-tax NPV of $103 million (USD) and an after-tax IRR of 101%, calculated using a $55 (USD) per pound uranium price.
Both analysts maintained a BUY rating for Azarga Uranium, with Eight Capital increasing its target price to $0.50/sh (CAD) (from $0.45/sh) and Haywood boosting its target price on the uranium company to $0.65 (CAD) per share from $0.50. In comparison, Azarga is currently trading at about $0.275 (CAD) per share.
The bottom line:
According to both research reports, Gas Hills’ PEA “suggests the project is quite robust and potentially attractive, even at current uranium prices,” with Eight Capital’s analysis of the Company’s PEA for the Gas Hills ISR satellite signalling a doubling of production at Dewey Burdock to 2 million lbs pa.
Gas Hills’ projected costs are similar to those of Azarga’s flagship uranium project - Dewey Burdock, which is forecast to produce 14.3 million lbs over its production life with an initial capex hurdle of only $31 million (USD). As Haywood noted, the positive PEA for this project de-risks and matures Azarga providing visibility on additional production from its US portfolio. By adding a second development-stage project like Gas Hills, Azarga Uranium becomes a “two-trick pony” and should generate great interest in its stock for investors.
For more, visit Azarga Uranium's website
www.azargauranium.com.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.