rcr valuation dec 2012

Great to have a "strategic partner" - AREVA! Cant believe that it's one of the giants. Just like BLR recently with a cornerstone investors.

all the best holders!

http://www.rcresearch.com.au/


Overview: Aura Energy listed on the ASX May ‘ 06. It has advanced exploration projects for uranium in Sweden and Mauritania, as well as a calcrete resource and exploration assets in WA.

Alum Shale Projects (Sweden): AEE holds 100% of 147km
2 over the Alum Shale uranium province in northern Sweden. The shale-hosted deposits are alsoenriched in vanadium, molybdenum, zinc and nickel. Häggån is proximal to key infrastructure and is situated in commercial forestry areas.

Updated Scoping Study(May ’12, RMDSTEM Ltd). The project development route is open cut, bacterial heap leach. The pit shell contains 1bt of mineralisation, low strip ratio of 0.75:1, production rate of 30mtpa, and initial LOM of 25 years. Pre-production capex US$537m. Production rate of 7.8mlbspa U3O8, 14.8mlbspa Ni, and 4.3mlbspa Mo. Modelled heap recoveries are 75% U3O8, 68% Ni, and 25% Mo. Zinc
and vanadium were excluded from the modelling and zinc, in particular, represents upside potential. Stage 2 bioheap leach testwork with scale up of column tests from 0.5m to 2m height (Jul ’12) indicates U3O8 recovery of 85%, Ni 58% and Mo 18%. Resource is 800mlbs U3O8 (includes 60mlbs from nearby Marby deposit; H&SC) with Exploration Target indicating additional upside of 440 to 840mlbs U3O8, potentially making it the largest uranium deposit in the world.Development potential 2018. Mining: The deposits are
flat lying, near surface and average 108m thick, wh ich support relatively low cost open pit mining at ~US$2.50-$3.00/t ore. The Scoping Study indicates opex of US$13.50/t (US$26/lb U3O8co- product Ni and Mo; or US$13/lb with by-product Ni and Mo). Pre-Feasibility: expected to commence 2013. There is potential to lift revenues and lower project costs by improvements to metal extractions, production ofZn, reduction of crushing and mining costs, and optimiz ation of project scale. A comparable project is Talvivaara (LSE:TALV) which is a successful bacterial heap leach project in Finland. Guidance for ore stacking in 2012 is 18mt (nameplate design 24mtpa),recovering Ni-Co-Cu. A deal with Cameco should see production of 0.8mlbspa U3O8from 17ppm head grade from 2H12. Costs are US$2.60/t mining and US$10-11/t for bioleach, i.e. combined ~$13/t (expected to fall to ~US$12/t at full production). It is a smaller scale, higher strip ratio project (>1:1) providing confidence in Häggån’s projected opex US$13.50/t). Another opex comp is Barrick’s Zaldivar bioheap leach copper project in Chile with opex of US$8-9/t, giving an operating margin of US$12/t – similar to the margin expected at Häggån.

Reguibat Project (Mauritania): AEE is one of the largest uranium landowners in a new uranium field. Mineralisation is single, flat lying sheets within 1m of surface and 1m -10m thick calcrete. There is high potential to expand the existing resource and define new targets. Preliminary processing upgrades plant feed grade by a factor of 3, and is anticipated to lead to lower plant capex and opex. Establishing economic infrastructure options in this remote area will be a key aspect of the Scoping Study, expected 1H13.

Investment Comment: AEE achieved a significant technical breakthrough (1H12) in confirming metal recoveries via the bioheap leach process at Häggån. While there are still project hurdles to overcome, the economic importance of this key achievement, in our view, has not been fully appreciated by the market in what is a very large, strategicresource. RCR values AEE at A$0.52/share ($98m; US$0.11/lb U3O8), including a factored, early stage A$0.39/share for Häggån (see adjacent valuation table); after tax, de-risked NPV10for Häggån increases to ~US$700m (at US$60/lb U 3O8). While talks are still at an early stage, securing a major strategic partner for Häggån wouldlikely lead to a significant re-rating of AEE; and in our view, given the strategic potential of the opportunity, securing a partner is only a question of time