Uranium Energy Corp

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Uranium Energy Corp

  • Profile photo of Matt Anderson
    Matt Anderson

    Back over on the Beginners Guide to Fundmental Analysis, Maurice proposed some valuations on a couple of UEC’s properties. I figured it would be much easier to start a group and have multiple company studies going on with multiple threads rather than trying to cram them all onto one thread.

    Maurice, if you want to propose your starting valuations here, I’ll be happy to participate and maybe we could get others to join in as well.

    Thanks

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  • Profile photo of Maurice Jackson
    Maurice Jackson

    Matt, thank you for the opportunity.  I would like to begin with stating the following presents an optionality opportunity.  What is optionality?  In simple terms, it is buying something on a discount that isn’t productive or lucrative at current prices of a said resource.  For example, a fiscally sound company with proven management may have excess capital in the treasury. The said company seeks investment opportunities on properties from less successful companies that may have large deposit but average grade or even high grades but the depth to extract from the ground wouldn’t allow the company to continue to pursue the endeavor because its revenues could not exceed all in sustaining costs (produce a profit) forcing the company to default or liquidated its assets.  TBut wait there’s more!  The gaining company may acquire more than just the ore deposit, but the intellectual capital and permitting process, 43-101 reporting,  massive capital expenditures all because the spot price needed to be 30% higher.  This is germane to the events today because we are coming out of bear cycle during a secular bull market for the last 4-5 years.  So what we are attempting to identify are the proven management that can procure these deposits/opportunities at a significant discount (like a foreclosed home in a great neighborhood) and just sit idle and when the market conditions return favorable deploy the assets full steam ahead resulting in massive profits for shareholders! ! !

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    Matt Anderson

    That’s a great definition you gave on optionality plays, Maurice. It makes perfect sense for a company with the means, like UEC, to acquire uneconomic deposits for pennies on the dollar with the anticipation of exploiting them at a later date when the uranium price rises sufficiently to make them economic again.

    I believe the market is usually forward-looking in that it will value the net present value of these projects based on the prevailing commodity price at the time. This is why it’s so important to understand things like supply-demand fundamentals and inventory levels in whatever commodity we are discussing.

    In the case of the Anderson project, you stated that using a 10% discount rate, the after tax NPV with a $65 uranium price would be $101 million. If we were to look at the spot price of uranium today at around $26 per pound, the project would have a negative net present value. Knowing that the Anderson project could potentially generate a NPV of $101 million with a $65 price of uranium leads me to believe that, based on the market cap of the company which is currently $110 million, the market is placing only a fractional value on their multiple in situ deposits, processing facility, Anderson Project, Slick Rock Project, and their excellent management team. So if you were to purchase the shares now, you would get all of those assets and management team for a fraction of what they would be worth if the uranium price went form $26 to $65, which is what it costs the industry to make the stuff.

    From a balance sheet point of view, they do have some debt of $20 million to deal with however they do not have to make principle payments on this debt until 2019.

    It also appears that they’ve been diluting shareholders on a yearly basis as they wait for a rebound in the uranium price. This dilution doesn’t seem to be excessive but it is something to watch, since we don’t know exactly when and for how long it will take the uranium price to recover.

    Overall I think the whole company of UEC could be looked at like a leveraged call option on the price of uranium that only expires when you either lose the patience or have a better time value investment presented to you now rather than later. All in all, it’s a great company and it would be very interesting to break down the value of each and every in situ deposit, processing facility, and the couple of deposits they have PEA’s on to come up with some future valuations based on a higher uranium price.

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      Rick Rule

      UEC will be very tricky from a valuation standpoint.

      Traditionally, in jinior cases like this, we create an asset valuation matrix, one property model using the current commodity price to establish net present value, and another at te ” incentive price” ( the global industry median cost per unit of production, including amortization, depreciation, and cost of capital).

      Intangibles to consider here will include liquidity and the very low cost of capital.

       

      I must lead from a distance on this one, we are the senior , secured  creditor.

       

      Perhaps we want to do a ” shark tank” styled public workshop with them?

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    Profile photo of Alan Lynch
    Alan Lynch

    I was a shareholder in UEC for a while and luckily got out at a profit. After looking into uranium further I found Energy Fuels Inc. Highly recommended by Brien Lundin, Brent Cook, Steve Saville. Trades for less than book and has both kinds of production.

    I found UEC had too much debt and less assets. However I like Amir heading up the company.

    I think Uranium is going to a big one over the next few years and with the precious metals up and mining stocks, I consider uranium the best buy in terms of value. Maybe oil is a close second!

     

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