if pen could produce by june 2010...

In the "potential funding arrangements" thread it was suggested by HangSeng that PEN may be able to start producing before building a plant, by using the excess plant capacity of nearby Uranium producers. Such a scenario would mean PEN could start generating some serious cash and solve the small problem of finding funding to build a plant. So I decided to look at the numbers and came up with the following:

PEN'S LATEST SCOPING STUDY (RELEASED TO MARKET ON 6 MAY)

Production commences: 2012
Annual Production: 1.5 million pounds
Uranium Long Term Price: $65 USD
Production costs per pound (including CAPEX amortisation): $28.3 USD
Gross Margin (after depreciation): $55 million USD
Net Profit (after Tax): $42 million USD per annum

MY UPDATE TO THE SCOPING STUDY:

Production commences: June 2010
Annual Production: 750 000 pounds
Uranium Long Term Price: $65 USD
Costs per pound: $22 USD (I subtracted $7 to reflect operating costs halving for half the amount of Uranium)
Gross Margin (after depreciation): $28.25 million USD
Net Profit (after Tax): $19.78 million USD

Earnings per share AUD: $0.017

Share Price Boost (Assuming P/E of 10): $0.17

This is back of the envelope stuff intended to start some discussion and get a few different perspectives. The current long term contract rate is actually $70 USD, and I've also halved the production rate from 1.5 million pounds even though HangSeng found two companies each with 1 million+ pounds of spare capacity located nearby to the Lance project. If PEN could produce 1 million pounds starting next year then the Share Price could be lifted as much as 22 cents per share using all the same assumptions.

So, even though I think I've been pretty conservative with the numbers, the end result is still pretty impressive and actually a bit of a shock for me. If it happens this way it'll definitely be a shock for the market too I'm guessing.

A net profit of $19-25 million USD per annum would go down well with the banks I expect and allow PEN to simultaneously finance building of a plant at Lance, as well as ramp up the drilling program at Karoo, South Africa. It's a total game changer if management can pull it off.

dt