TER: One junior, Australian-based Bannerman Resources Ltd. (TSX:BAN; ASX:BMN; NYSE:BMN), recently completed a $15 million private placement at AUD$0.50/share. That placement was oversubscribed. Is that telling us more about the demand for uranium equities or Bannerman?s prospects for further growth?
ES: I think it?s telling us more about expectations for future uranium prices than anything else. Bannerman is a company with a good management team; however, though its Etango Project is fairly analogous to Rio Tinto?s (NYSE:RIO; ASX:RIO) R?ssing mine, it suffers from a lower grade. In my mind, the oversubscription is an option on high uranium prices. Investors are expecting uranium prices to continue rising; and for Bannerman, based on my estimate, there will be a threshold price at which Etango makes sense. At that point, Bannerman?s share price could reflect the improved project economics.
TER: In a recent research report, you said Bannerman basically needs $70/lb. uranium to show ?appealing economic returns.? However, you also said management could accelerate development if things change. You have a Market Perform rating on Bannerman right now. What do you expect from that junior in the short to medium term?
ES: Bannerman is in the process of finishing its feasibility study. Eventually, it will announce the study?s findings to the market and how it proposes to go about developing the Etango Project. It wouldn?t surprise me, though, if Bannerman accelerates the rate at which it?s doing that work. We could get the results of that feasibility study sooner rather than later, probably around midyear.
TER: Have you visited Etango?
ES: I have, yes.
TER: What were you thoughts after your visit?
ES: From a technical perspective, it?s fundamentally low risk because the style of mineralization is similar to the R?ssing mine, which has been in production since the 1970s. It?s really just the grade that?s the issue. If uranium prices continue rising to the point that grade is no longer the controlling factor, then the project could look pretty appealing.
TER: What sort of grade are we looking at?
ES: The current grade is around 220 parts per million (ppm).
BMN Price at posting:
82.0¢ Sentiment: Buy Disclosure: Held
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