what's our t/o price tag?

Have been doing some research into how utilities and miners might value our U308 in a t/o scenario. Saw this article which has led me to consider some prospective valuations.

What are miners/utilities prepared to pay?
http://www.safehaven.com/article/7900/how-close-to-the-end-is-the-uranium-boom

Let us look at the recent M&A activity in the uranium sector. The total value of the four biggest deals in 2007 is $8.1 billion.

In February, UrAsia Energy gets acquired by Uranium One (SXR.TO) for $3.1B. Based on the acquisition price, UrAsia's U3O8 resources are valued at about $11/lb or around 13% of the uranium price at the time

In April, Summit Resources receives a final takeover offer of over $1.0B from Paladin Resources (PDN.TO), effectively valuing its resources at $14/lb or 12-13% of the uranium price at the time

In June, Energy Metals (EMU) is acquired by Uranium One for $1.5B. The deal values EMU's uranium resources at $7/lb, or just 5% of the uranium price. EMU has a large number of small projects/deposits, which explains a lower takeover price per pound

Also in June, UraMin Inc. (UMN.TO) entered into a $2.5B friendly cash deal with Areva, placing a value $13/lb for its resources, or about 10% of the uranium price

The value placed by Uranium One, Paladin and Areva on the purchased projects varies based on a number of factors including: resource quality, proximity to production, size of production, geographical location, permitting and environmental issues, required capital expenditures, and other economic factors and synergies.

Based on these factors, the underground uranium resources are valued between 5% and 15% of the uranium spot price.

It appears that they are using a very conservative long term U3O8 price of around $75/lb in their internal calculations.


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Interesting, eh. When those acquisitions were made at $7-14/lb, the spot price was three times what it is today, BUT the LT U308 price that was used in their calculations was $75/lb.

This is only 20% higher than todays LT U308 guide price of $60/lb.

And as we are repeatedly told, when it comes to miners or utilities acquiring resources, it is the LT price and NOT the prevailing spot price that is used to value resources.

In other words, using todays LT price of $60/lb, the above valuations for UraMin (Trekkopje), Summit, Emu and SXR would be $5.6/lb - $11.2/lb.

MEY is currently 90c/lb. Which shows you how potentially
undervalued we are (+500% would only get us to the lower end of the 2007 acquisitions).

Of course, the markets have been suitably chastened in the crash, but the long term supply deficit in uranium has NOT changed. If anything, there is a greater requirement now with increasing news of new reactors and countries seeking U308 supplies since 2007.

But suppose we use spot price and not LT price to value our U308. In 2007, we are told that the acquisitions valued the underground uranium resources at between 5% and 15% of the uranium spot price.

Using current $42/lb spot price, that suggests we could value our U308 anywhere between $2.1/lb and $6.3/lb. Coincidentally, the widely accepted mean right now is somewhere between $4 and $4.5/lb so slap bang in the middle of that range.

But you can see that even at rock bottom $2.1/lb, its no wonder BGF described us as cheap at twice the price.

In the case of Areva, they paid 10% of the prevailing spot price in 2007 for Trekkopje ($13/lb). If they valued MEY in a similar fashion and we have better grades than Trekkopje and a likely lower CAPEX/OPEX to Areva, given that theyve already invested billions on infrastructure on our doorstep then wed be looking at $4.2/lb and a 300%+ premium on our current SP.

This premium will only increase as our resource increases. For example, 130Mlbs would give us a prospective +450% at $4.2/lb

Naturally, like in 2007, The value placed by Uranium One, Paladin and Areva on projects varies based on a number of factors including: resource quality, proximity to production, size of production, geographical location, permitting and environmental issues, required capital expenditures, and other economic factors and synergies.

With so many eyes reportedly looking at acquisitions in Africa/Namibia, you can see how our imminent scoping study really could be the game-changer that prompts the French, Russians, Koreans, Canadians or Chinese to open their cheque books.