Peninsula Energy: Broker forecasts 40% share price increase over six months
Peninsula Energy’s (ASX: PEN) recent resource upgrade at the Lance In-Situ Recovery Uranium Projects is the key to a new broker report which places a six month price target of $0.081 on the company.
The company announced earlier this week that the total JORC Resource at Lance has increased by 24.3% to 51.5 million pounds of uranium, including a 30.7% boost in the Measured and Indicated Resource to 14.7 million pounds of uranium. The vanadium Resource increased to 4.9 million pounds.
The six month price target placed on the company is a 40% increase on the company’s current share price.
The following is an excerpt from the report.
Major Increase in Size, Category and Grade at Lance
Peninsula Energy Limited (“Peninsula”, “PEN”, “Company”) has announced a large resource upgrade at its 100% owned In Situ Recovery (“ISR”) uranium projects located in Wyoming, USA. The projects, known as the Lance Projects, consist of three adjacent areas Ross, Kendrick and Barber. The total resource has now increased to 51.5mlb U3O8 (from 41.4mlb) and overall grade has increased from 412ppm to 485ppm. Measured and indicated categories now total 14.7mlb, up from 11.4mlb U3O8. The Vanadium resource has also increased from 2.2mlb to 4.9mlb V2O5.
The increased resource highlights the success that the company has been having at its core area in Wyoming (see map on Page 3). More significantly, it underpins the case for the Expended Economic Study (“EES”) that PEN released with its Definitive Feasibility Study (“DFS”). We viewed the DFS as not representative of the ultimate development scenario as it was based on the resource at the time, which we know will continue to be expanded.
Decision to Mine Approved
The company has also announced that the Board has approved a Decision to Mine. The decision was accompanied with an update on an independent owner’s review and optimisation study on the DFS and EES, which indicated significantly enhanced economics. This will be combined with the new resource and become the base for an updated DFS that will form the basis of a debt funding proposal “to several leading institutions that are currently reviewing the Lance Projects database”. Peninsula is likely to be able to commence construction in H2 2012, with production 6-9 months later.
World Class Executive Appointed as CEO
In line with the advances in resource definition, permitting and feasibility, the company has appointed Ralph Knode as CEO of US subsidiary, Strata Energy, to manage Peninsula’s transition to developer and producer over the next 18-24 months. Mr Knode has an outstanding pedigree in ISR projects, having managed start-up developments in North America, Kazakhstan and Australia. His appointment further underpins the quality of Peninsula’s project.
Permitting this Year, Production Next Year
Only two key permit remains to be granted before Peninsula can begin uranium extraction. The most crucial is the Source Materials License that is granted by the Nuclear Regulatory Commission (“NRC”). The company has made progress on this front with few Requests for Additional Information and response to these have been submitted recently. The NRC will progress the license to a public comment period after which, if there are no significant objections, approval will be given. The timeline for this process is not highly visible; however, we believe the licence will be granted this year, with our best guess being October. We believe it is only a matter of timing and there is little doubt that the licence will be granted. We assume that production commences in mid 2013.
Strong Newsflow to Continue
The company will have strong newsflow over 2012 with drilling updates at Lance and also its South African Karoo Project, release of an upgraded DFS, securing of funding for Lance, grant of Permit to Mine, possible corporate activity, commencement of construction and final permitting approvals for Lance. Sentiment towards the sector has improved and should continue to do so, in our view. We rate PEN as a Buy with a price target of 8.1cps (prev 7cps).
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