Valuations out of synch...

The good news:
U308 spot price up about 30% since year-end, now at $24/lb (spot), with room to run further. Kazakstan cutting back on about 10% of production.
Toro Energy (TOE.AX) secures environmental approval for Wiluna (up 33% since beginning of the year)
Deep Yellow (DYL.AX) continues to rip on all sorts of excitement about a recovery in uranium, and the recent managerial changes.

Valuations out of synch:
But look, if you like DYL, how could you ignore MEY, which stands to gain 25% of any upside from production eventually commencing at DYL's Tumas project, following the signing of a licensing agreement in Sep 2016. With DYL's end-of-day market cap of approaching A$75MM, a quick back-of-the-envelope calculation would mean that MEY should carry a market cap of around A$25MM. Agreed that would be simplistic, because it would imply that all value in DYL comes from just Tumas alone - and this is clearly not the case, although the majority arguably does. But at least we can agree that MEY's end-of-day market cap of A$4.7MM is also way off the mark!!

Let's look at this a bit closer.

Consider the size of their respective resources and guessed potential project incentive prices (in parentheses below - assumed long-term U3O8 price required to comfortably get a project off the ground) if Upgrade is used to lower project costs for each of them. As, to the best of my knowledge, Bannerman has not approached MEY about using Upgrade, I have just used the incentive price contained in BMN's last optimisation review. So following today's market we have:

TOE mkt cap A$120 m Wiluna resource 75mlbs ($60/lb) = A$1.60/lb
DYL mkt cap A$75 m Tumas resource 23 mlbs ($55/lb) = A$3.26/lb
BMN mkt cap A$35m Etango Project 130 mlbs ($75/lb) = A$0.27/lb
MEY mkt cap A$5m Marenica resource 60mlbs ($65/lb) = A$0.08/lb

Conclusion:
1) Marenica's resource should not be valued lower than Bannerman's as it can likely bring its project to production at a lower price! Assuming BMN's valuation, MEY's Marenica project would be worth A$16MM alone.
2) One can accept that Marenica's project is inferior to both Tumas and Wiluna in terms of head grade and likely project incentive price. But by how much? OK, being conservative let's assume Marenica's project is worth A$1.0/lb, then this alone would value it at A$60MM!
3) And on top of that, MEY's valuation should accrue some value from its licensing arrangement split with DYL. If not A$25MM, how much? Would A$15-20MM make sense? Logically, it doesn't look too strange to me.

With a basic sense of relative value, Marenica should be valued at A$75-80MM based on where TOE/DYL are currently trading in the market. That is about 15-20x MEY's current valuation.

OK, so liquidity isn't great yet. But as a share price approaches valuation, liquidity frees up.

Trade Idea:
After witnessing a 5x run on the stock since November, the screaming trade to do is switch out of DYL frothiness into MEY. Even if it is with just a small portion of the DYL holding.

G