INTRODUCTION
In the news: Peninsula Energy (ASXEN), Burey Gold (ASX:BYR) & Global Petroleum (LON:GBP)
Quarterly reports are out for Peninsula Energy††, Burey Gold†† and Global Petroleum*†; they’re coming thick and fast. The quite excellent Peninsula Energy†† told us that construction at the Lance ISR Uranium Project is on schedule. RFC Ambrian was instrumental in raising A$69m in cash for this, so it’s always heartening to see money being spent well. Gus Simpson is also working towards listing Peninsula on the NYSE in a clear attempt to get some US institutions and retail investors on its shareholder register. Global’s news was not dramatic, as observed by Stuart Amor below.
METALS & MINING EQUITIES Peninsula Energy†† — June Quarterly Report — The ASX-listed company advancing uranium projects in Wyoming and South Africa has released operating and financial reports for the June quarter. The report reflected the progress that the company is making towards bringing its Lance Project in Wyoming into production and the ongoing exploration at its Karoo Project in South Africa.
Key items in the report included the fact that construction of the plant at Lance and the wellfield development remain on schedule, deep disposal well test results were very positive, aquifer pump tests were successful for Mine Unit 1 and the resulting wellfield data package was submitted to the State and Federal regulators for final production authorisation.
Corporately, the company stated that it is continuing to work towards listing on the NYSE and that it is working on securing additional term sales contracts.
The project is being constructed using the A$69m cash raised during 4Q14. A total of A$12m was spent during the quarter on exploration, development and associated capex. Total cash outflows during the quarter were A$13m, which reduced the cash balance to A$36m at the end of June 2015. Debt was limited to A$1m.
It expects development expenditures to increase to A$15m during 3Q15.
RFC Ambrian Comment: As we have commented on the developments noted in the quarterly previously, we are taking this opportunity to recap on the project’s background and its outlook. At 54Mlb U3O8, the resource at Lance is the largest in North America. The company plans to develop the project in three stages to a production rate of 2.3Mlb pa, potentially by 2020.
Stage 1 is based on the development of the Ross Permit Area and is planned to ramp up to a nominal production rate of 0.7Mlb pa. The total development cost of the project was estimated to be US$54m, of which US$43m remained to be spent at the end of 2014.
Construction of Stage 1 commenced at a low level in 4Q13 and ramped up in 4Q14 following the completion of the project funding package. Plant construction is planned to be completed in August and the planned wellfield development should allow production to commence in September 2015 (subject to timely final production approvals from State and Federal authorities). In turn, this would allow first sales of uranium from the project to be made in 1Q16.
We maintain our BUY rating and target price of A$0.04. Our TP is derived from a risked SOTP NAV assuming a long-term realised uranium price of US$60/lb, a discount rate of 8% and a 0.9x multiple of the NAV for the Lance Project to account for the risks associated with project delivery. We also note that the planned completion of a listing on the NYSE in 4Q15 would coincide with the expected commencement of production of Lance, which should help to increase the visibility of the company.
PEN Price at posting:
2.5¢ Sentiment: Buy Disclosure: Held
EN), Burey Gold (ASX:BYR) & Global Petroleum (LON:GBP)
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