rcr research report out now dated 7 dec

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CHEERS MMM


Comments
Overview: Formerly Peninsula Minerals (name change Nov ’10), PEN is listed on the ASX and has operated under the current management team since 2007 when key US projects were vended into the company. Lance Uranium Project (USA, WY): Located in the northeast part of the Powder River Basin comprises 13 project areas (12,000 ha) including the Ross and Barber prospects - targeting roll front style uranium. The project area was discovered in the ‘70’s by JV partners Nuclear Dynamics and Bethlehem Steel (NuBeth) and drilled between 1970 and 1979. NuBeth drilled 5000 holes (912,000m). PEN acquired the project 2H07 with a database of drilling and pilot plant data (from Ur-Energy). 22 roll fronts have been defined over a combined strike length of 305km (190 miles). Initial forward sales contract (Feb '11): 1.15mlbs U3O8, priced at ~US$70/lb, 7 year term.
PFS (Lyntek) July 2010 confirms development potential for satellite production and a centralised processing plant at Ross from 4Q12 with capacity to produce up to 3mlbspa U3O8, commencing at 1.5mlbpa. Initial production is targeted from Ross and Barber. The PFS vanadium circuit is subject to further confirmation testwork. Lance project resource target is 95 to 145mlbs U3O8 – in addition to current JORC resource. PEN drilling 2H11 is aimed at uplifting resources at Barber to support feed to the processing plant, extension drilling to the north of Ross (Emerson, Berger Hill, Area 05) and establishing additional resource areas outside Ross- Barber. The Expanded DFS (announced Sep ’11) will incorporate the full Ross-Barber resource (41.4mlbs U3O8) compared to the initial DFS resource at Ross (8.95mlbs (M&I)) and is expected to be released 1H12 in conjunction with anticipated receipt of final permits. Extending the scope of the DFS will enable PEN to optimize project design, LOM and economic value prior to raising development capital.
The outlook for permitting in Wyoming is positive: Uranium One (TSX:UUU) received its NRC operating license (Oct ’10) for Moore Ranch; and 2 other companies received final NRC permits recently: Uranerz (TSX:URZ, July ’11) and Ur-Energy (TSX:URE, Aug ‘11). URZ has commenced construction of its Nichols Ranch ISR project in Wyoming and expects first production 2H12.
Karoo Project (South Africa): Located in the Karoo Basin of the Western, Eastern and Northern Cape Provinces; tenements comprise 6 project areas (198,000ha) with defined U-Mo mineralisation across stacked sandstone units identified from surface to 40m. The region hosts Areva’s historic Ryst Kuil uranium mine (est. 40mlbs @ 0.1% U3O8). Three of PEN’s project areas host historic resources drilled by JCI and Union Carbide (~1,300 holes) in 1970-80’s. PEN has an exploration target of 90 – 150mlbs U3O8 grading 0.07 to 0.14%. Drill results (1H11) confirm high grade uranium and molybdenum from surface to ~75m depth: intercepts include 6.6ft @ 0.36% U3O8 and 0.26% Mo; and 6.6ft @ 0.31% U3O8 and 0.25% Mo. Results being assessed 2H11. Interim resource target 30mlbs grading 0.07 to 0.14% U3O8 expected late 2012.
Investment Comment: PEN base case NPV, with full de-risking of Lance post commissioning is ~A$0.09/share fully diluted (see adjacent table; assumes US$60/lb realised uranium price, AUD/USD 0.84 and 10% discount rate). Base case sensitivities: AUD/USD 1.00: NPV ~A$0.08/share; No vanadium credit: NPV ~A$0.07/share. PEN remains well positioned to receive Lance Project permits near term with production visibility 2012/13.