RFC Ambrian 09:37 25 Feb 2016 Peninsula Energy†† ASX:PEN| A$0.81...

RFC Ambrian
09:37 25 Feb 2016

Peninsula Energy††
ASXEN| A$0.81 | US$102m | Buy | TP : A$1.60
High-grade Uranium Intercepts at Karoo
Peninsula Energy has announced high-grade surface intercepts from radiometric relogging of existing UCEX drill holes in the southern block of the Karoo Project area. Results from the relogging programme will be used to provide a resource update for Karoo, where the current JORC-compliant estimate stands at 22Mlb eU3O8 in the M&I category grading 1,038ppm, and 35Mlb Inferred at 1,108ppm, for total resources of 57Mlb eU3O8. Highlights include:
• 9.5ft at 2,408ppm eU3O8 from 38ft
• 8.9ft at 2,422ppm eU3O8 from 28ft
• 4.1ft at 3,896ppm eU3O8 from 39ft
• 3.9ft at 5,453ppm eU3O8 from 33ft

The company has advised that it is continuing to progress the permitting process at Karoo, having recently submitted an EIA and EMP to the Western Cape Department of Mineral Resources, whilst continuing with community and stakeholder engagement within the Karoo Basin.

COMMENT: As per the September 2013 scoping study, Karoo has the potential to be developed as a 3Mlb pa operation, recovering 28.5Mlb over life-of-mine, for AISC of below US$35/lb U3O8. A PFS work programme was initiated following this, and the company has been targeting a BFS (at an estimated cost of ~US$18m, for which the company is seeking a funding partner), with AISC of under US$30/lb. The incorporation of an updated resource, including the new high-grade, near-surface intercepts from Rietkuil has the potential to prove accretive to project economics, and we look forward to the publication of a revised resource statement in due course.

With regard to the permitting process, we understand that the political backdrop appears supportive, with six reactors planned to be built in South Africa and Eskom reportedly seeking to source 50% of the reactor feed domestically. Hence, we also anticipate news on permitting milestones following on from the EIA and EMP submission. We retain our Buy recommendation, with a target price of A$1.60.