(MENAFN- ProactiveInvestors) () is undervalued; set to become a major U.S. uranium producer and is months from production.
ASX Code: PEN
Speculative Buy
12-18 month Price Target: $0.06
36 month Price Target: $0.16
Capital Structure:
Sector Materials
Share Price (A$): 0.019
Fully Paid Ordinary Shares (m): 6.912B
Options (m): 2.798B
Market Cap (A$m)*: $131.
Approx Cash (A$m)*
*incl funding and new issue: $69.4M
Ltd (ASX: PEN) is six months away from becoming a major U.S. producer of U3O8 from the Lance Projects in the Powder River Basin of Wyoming and is in Pre-Feasibility Studies at the Karoo U3O8 Projects in South Africa.
The Powder River Basin contains large volumes of U3O8 deposited in sandstone. These sandstone based U3O8 resources are accessible via In-Situ Recovery (ISR) methodology that exhibit very low CAPEX and OPEX and are more profitable producers of yellowcake than their hard rock peers.
Proactive Investors believes that the proven ISR methodology has the same positive economic effect on the mining of U3O8 as fracking has on the oil and gas industry.
Peninsula currently controls the largest JORC code compliant ISR resources of U3O8 in North America at 53.7 million pounds along with significant exploration targets estimated at 158 – 217 million pounds of U3O8.
The Lance Projects are fully permitted for U3O8 production at the rate of 3 million pounds per year and in Stage One will produce 500000 - 700000 pounds of U3O8 per year constituting 10% of U.S. U3O8 production. The Project is highly scalable and can ramp up production to maximum permitted levels (3000000 pounds of U3O8 per year) as demand and pricing for U3O8 increase and maintain a mine life that will span many decades.
Peninsula has gained major institutional investor support that includes Resource Capital Funds Pala and JP Morgan. A U.S. stock exchange listing would not surprise given project geographical location and this should attract additional institutional support and buying.
U.S. uranium producer has announced it will acquire for US$150M creating more immediate potential further upside from M&A activity in the sector which could lift the current valuation of Peninsula earlier than production commencement.
Proactive Investors has calculated an Enterprise Value/Pound attributable to Lance and Karoo of $392.1 million or $0.06 per share (see Estimate of Value and Summary). We believe that Karoo has potential to rival Langer Heinrich and that potential will play out over the next 3-18 months. Lance provides the near term potential as production and further development work are underway. We believe these provide a path toward creating a global major U3O8 house and business valued in excess of $1 billion or $0.16 per share (undiluted) - dependent on higher U3O8 prices.
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