Rodman & Renshaw Research - Kaufempfehlung für UEC
On April 5, 2017, Uranium Energy Corp. announced the receipt of a permit for the firm’s Burke Hollow ISR Project. The Environmental Protection Agency (EPA) has issued an Aquifer Exemption for the project, which was one of the few remaining permits UEC required for advancing Burke Hollow. Given that the Aquifer Exemption, Mine Area Permit, and disposal well permits have all been issued now, the only remaining major permit at Burke Hollow is the Radioactive Material License. We note that this permit has already been submitted to the Texas Commission on Environmental Quality (TCEQ) and is currently under technical review. We expect Burke Hollow to be the third project to provide feed for the Hobson central processing plant following Palangana and Goliad. In short, we remain supporters of management’s strategy to permit its projects during a period of low uranium prices in order to be production-ready once prices improve as it typically takes approximately 7-10 years to fully permit and develop a new uranium project. We believe UEC is well positioned in the current uranium market. In our opinion, being a developer in a period of low uranium prices has several advantages over being a producing company. To this end, given that UEC does not have long-term higher priced contracts like some of its peers, we believe it is prudent for the firm to restrict production until prices warrant. While the firm is not currently producing, progress on permitting continues to be made as seen at Burke Hollow, which we think should ultimately bear fruit once uranium prices rebound. Further, this allows the firm to protect its uranium reserves. Given that a successful and upsized $26.0 million capital raise was completed in 1Q17, we believe the firm is well funded to execute on its strategy of evaluating the purchase of neglected assets while placing its existing project portfolio in prime position to take advantage of the next increase in uranium prices. Political headwinds facing the uranium sector could be set to subside. The new White House administration has made it clear that domestic energy sources are of paramount importance—a development we believe should bode well for UEC due to the fact the firm’s operating strategy is centered around future uranium production from its South Texas operations. Given that the United States imports approximately 95% of its uranium, we believe there is ample room for domestic producers to step in. In our view, the regulatory headwinds that plagued the uranium industry in the United States during the previous administration could be eased under the new administration and believe a nuclear renaissance in the United States could be in the works, ultimately benefitting producers or prospective producers in the United States, such as UEC. We are reiterating our Buy rating and $4.20 per share price target on UEC.
Our valuation remains predicated on a DCF of future operations utilizing an 8.0% discount rate. To this, we add in-situ value for the firm’s significant resources in the ground, coupled with a flat $25.0 million valuation for the firm’s exploration-stage assets. We continue to view UEC as a leveraged play on increasing uranium prices and remain supporters of management’s decision to preserve its resource base for higher future uranium prices.