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Old 07-29-2014, 07:10 AM
Sparty Sparty is offline
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Default Aura Energy Update RCR confirms 5x upside recommendation

Summary:

Scoping Study confirms viability of Reguibat at the contract uranium price: capex US$45m, opex US$30/lb.

The market appears to have overlooked Reguibat as a rapidly emerging and economically viable uranium project with high beneficiation grade (0.25% U
O), large resource (49mlbs UO), easy mining and expected streamlined permitting - trading at a large discount to peers.

AEE 12 month target price $0.15/share.


Longer term, the large Haggan project represents a free option.


Investment points:


  • Reguibat Project, Mauritania (AEE 100/70%): Exciting new calcrete uranium province. AEE resource 49mlbs at 0.033% UO at or near surface. Exploration Target indicates potential for global resource to exceed 100mlbs.

  • Reguibat Scoping Study (July '14) confirms economic viability with project breakeven NPV uranium price O from shallow open pits. Feasibility Study possible 2H15; production potential 1H17.

  • Reguibat Project - RCR after tax NPV₁₀ A$71m ($0.27/share or US$1.28/lb resource; assuming uranium price US$60/lb, AUD/USD 0.90). AEE is trading at a steep discount to ISR peers with similar project economics: less than US$0.20/lb resource for AEE Vs ~US$1.50/lb (AEK, PEN).

  • Highly amenable to beneficiation - a defining and distinctive element of the Reguibat Project: Initial testwork indicates 5-9X grade uplift achievable. This could see the 66mt resource concentrated to around 15mt at +2500ppm UO (0.25%).

  • Haggan Project (Sweden) is a world class uranium project, large capacity, long life, easy to mine, in a stable mining friendly jurisdiction, proximal key infrastructure, staged low capital development, and low opex in the bottom 2 quartiles of the WNA 2010 cost curve. The project represents a long term value driver for AEE.

  • Sweden and Mauritania are pro uranium jurisdictions with strong mining sectors. Global miners active in Mauritania include Glencore (building the US$900m Askaf North iron ore project), Kinross (Tasiast), and First Quantum (Guelb Moghrein).

  • AEE equity funding facility for $3.8m in place through 1Q16.

  • We (RCR) expect AEE to be rerated as key technical and permitting milestones at Reguibat are achieved: 12 month target price $0.14/share (mkt cap $28m).

  • The uranium price is US$28.50/lb (spot); US$44.50/lb (contract). Challenging market conditions are expected to persist short to mid-term, though a rebound is anticipated as Japanese reactors start to come back online, possibly 2H14. Positive fundamentals are expected to drive the incentive price >US$60/lb later this decade.
Get the full RCR report here

Note at this price Haggan is a free carry.... not bad for the world's second/third largest undeveloped uranium resource
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