Epstein-Research Blog | Uranium Resources Inc., Company Story A Lot Stronger, Yet Valuation 60% Lower? | Talkmarkets - Page 2
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In 2011 Peter Epstein, CFA, left a $3 billion hedge fund where he was a senior natural resources analyst to help increase awareness of a number of natural resource companies in which he's invested in. 


Uranium Resources Inc., Company Story A Lot Stronger, Yet Valuation 60% Lower?

Date: Thursday, January 7, 2016 3:51 PM EDT

Jeffrey L. Vigil, VP & CFO: Appointed VP & CFO in June 2013, responsible for financial & management reporting including tax, compliance, treasury, risk management & capital raising functions. Has served in various financial positions including CFO at Energy Fuels Inc. Mr. Vigil has more than 30 years financial management experience, 8 in the uranium sector, including serving as a mill cost analyst for Energy Fuels’ White Mesa Uranium Processing Facility.

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URI’s market position has strengthened, yet its stock has plunged 

Please look at the exhibit – 14 significant developments, 5 of which highlighted by management as transformational. Since March 2013, CEO Jones has led a new management team & Board in executing a well thought out, forward looking plan. The Company enjoys stronger liquidity, now trading on both the NASDAQ & Australian markets. The Anatolia acquisition closed on November 8th, eliminating deal risk. And, an asset sale was announced the following day. URI’s largest shareholder, Resource Capital Fund V L.P. “RCF” is reported to be, “evaluating project [the Temrezli ISR project] financing options.”

Balance sheet liquidity is solid, supporting a valuation that should be moving higher, not lower. As of September 30, 2015, non-restricted cash was $3.8 million. Since then, the Company signed a Binding Letter of Intent to sell 2 non-core assets for $12.5 million, of which $5.5 million is cash. To be clear, closing this transaction is not a sure thing. However, the buyer, Laramide Resources, recently obtained a $5 million loan and raised $1.5 million of equity. URI has $8 million in convertible debentures held by RCF. In December, URI closed a small equity raise, 2.5 million shares @ $0.40 (with no warrants). Existing warrants & options are well out of the money. 

Therefore, URI’s pro forma Enterprise Value, “EV” is [54 mm shares x $0.53/share (Jan. 4th close) = $28.5 mm market cap, plus $8 mm convertible debt, minus ~ $9.5 mm pro forma cash, (including the prospective $5.5 million from sale of assets) is roughly $27 million (or $32.5 million without $5.5 million of cash proceeds). A pro forma EV of just $27 million for a company that’s produced over 8 million pounds of uranium in Texas, owns a world-class ISR project in Turkey, a standby processing facility in the U.S. and maintains strong exploration upside in Texas, New Mexico & Turkey, seems exceedingly cheap. [Corporate Presentation]

New & improved Uranium Resources Inc, trading at unwarranted discount to peers

The nearest and most valuable asset possibly into production is the Temrezli ISR Project. Temrezli’s post-tax NPV of $126 million is based on upfront capital of $41 million. However, URI is on track to potentially reduce that figure trough synergies and the relocation of its Rosita processing plant to Turkey. If anticipated synergies can be extracted, the capital requirement could be in the low-to-mid $30’s million, which would boost the project’s already impressive IRR of 65%. As per the PFS sensitivities found in this press release, slashing initial cap-ex from $41 million to $35 million, if possible, would generate an after-tax IRR of ~77%.

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