PEA on US uranium companies’ Wyoming project
The contents of the preliminary economic assessment of Azarga Uranium’s Gas Hills asset and uranium prices are discussed in a report by Fundamental Research Corp.
In an August 24 research note, analyst Sid Rajeev reported that Fundamental Research Corp. increased its fair target price on Azarga Uranium Corp. “Robust” Preliminary Economic Assessment (PEA) for its Gas Hills project in Wyoming.
“The PEA has confirmed our hypothesis that Gas Hills may be a satellite project of the Dewey Burdock Company’s flagship project in South Dakota,” Rajeev wrote.
The analyst reviewed the PEA. It describes a satellite model operation producing 1 million pounds of uranium per year over a lifespan of seven years. Processing will take place at a facility on the Dewey Burdock property.
As for the costs of Gas Hills, the initial investment required is estimated at US $ 26 million ($ 26 million), a small amount according to Rajeev. Cash operating costs are expected to be US $ 11.52 per pound and sustaining costs US $ 9.07 per pound. All PEA figures are based on a U3O8 price of $ 55 per pound.
The PEA reflects an after-tax net present value of US $ 102.6 million discounted at 8% and an after-tax internal rate of return of 101%.
Now, Rajeev noted, Azarga will begin the process of obtaining the necessary permits to proceed at Gas Hills while continuing to expand its global uranium resources.
Rajeev also commented on uranium prices, noting that they have been rising since the start of 2020, by up to 62% year-on-year, according to the Global X Uranium Exchange-Traded Fund, which tracks stock prices of uranium and nuclear related companies. Rajeev stressed that uranium prices must be at least US $ 50 per pound in the long run for existing and new uranium projects to be economically viable.
The outlook for Basic Research on uranium prices is positive in the long term, Rajeev said, due to several factors. Among them are a forecasted supply shortfall over time, the current global push towards clean energy, and the inclusion of initiatives to revive uranium production in the United States in the $ 2 trillion plan. dollars from President Joe Biden.
As for Azarga’s market valuation, Rajeev wrote, it is lower than it should be. The combined 8% after-tax NPV of Dewey Burdock and Gas Hills is US $ 250 million, implying that Azarga shares are trading at 26% of that amount. Compared to Fundamental’s fair share price of C $ 1.11 on Azarga, its actual price is about one-third of that, at C $ 0.35.
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