foster stockbroking release today

Not only a little more information on when we can expect the PFS . . . . . but a value comparison with another company you may know highlights our true value.
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Courtesy of Fosters Stockbroking Morning Report 19/04/2012

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Black Range Minerals Limited (IGS.ASX, $0.03/sh, Mkt Cap $21m) – US uranium sector M&A highlights valuation upside.

We recently highlighted the uranium sector was set for M&A activity (19/3/12) and yesterday Energy Fuels Inc (EFR.TSX) in the US announced an acquisition of the US-located uranium and milling assets of Denison Mines Corp (DML.TSX).

The transaction will position Energy Fuels as a 100% US pure play uranium producer and processor and one of the largest holders of undeveloped resources.

Consideration for the DML assets was US$108m (425m EFR shares) and includes 23Mlbs of resources and the White Mesa Mill (8Mlbpa), currently the only operating mill in the US. Strategically, EFR will establish a platform of exploration, development and producing uranium projects as well as the only processing mills located in-country with the EFR’s new Pinon Ridge mill (3Mlbpa) located in Colorado targeting production from 2013. Total milling capacity for the group will be 11Mlba, providing considerable capacity for growth as future development projects come online and a vehicle to lead further consolidation.

The combined resource for EFR going forward will be 68Mlbs, of which 50Mlbs in the Measured & Indicated category, with the enlarged EV for EFR valuing its resources at US$2.30/lb. Prior to the transaction EFR was trading on an implied US$1.15/lb based on 44Mlbs.

The transaction above highlights the consolidation in the US uranium sector we anticipate will continue in a market that consumes 55Mlbs of uranium vs domestic production of 4Mlbs today. For this reason we view now is the time to look at investments across the emerging uranium explorers developers with our key pick being Black Range Minerals (BLR.ASX) with a high grade (600ppm) 90Mlb resource located in the ‘uranium friendly’ state of Colorado. BLR trades on a low A$0.24/lb vs the ASX peer group average at ~A$1.20/lb. BLR holds the 3rd largest resource in the US.

As a comparison, Peninsula Energy (PEN.ASX), also US-based, EV of A$96m, 52Mlb resource (485ppm) and are targeting 2Mlbs production by 2013, BFS is due for completion and advanced with its permitting is trading on a multiple of A$1.85/lb.

We see BLR as our top pick of the explorers at $0.03/sh, and believe the stock can re-rate to our PT of $0.10/sh.

BLR will soon release a new PFS early Q3CY12 that will attract the likes of EFR as another development asset for its portfolio given the excess processing capacity in its portfolio.

Enjoy

SwissB