Epstein-Research Blog | Uranium Resources Inc., Company Story A Lot Stronger, Yet Valuation 60% Lower? | Talkmarkets - Page 3
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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. 

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

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

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URI’s entire pro forma EV is trading at roughly a quarter of Temrezli’s NPV alone! An investor at $0.53/share effectively gets Temrezli for FREE. That’s if one believes as I do that the valuation of the Company’s standby processing mill (2 mills, but Rosita mill headed to Turkey), plus advanced & earlier-stage exploration / development assets in Turkey, New Mexico & Texas, is worth at least $27 million. Hardly a stretch given that URI had an EV of $45 million the day before the Anatolia transaction was announced. Notably, in the months preceding Japan’s Fukushima incident, URI (without Anatolia) had a market cap as high as $300 million, 10x that of today’s market cap (including Anatolia). 

Proactive corporate initiatives de-risk world-class Temrezli Project

More detail on the Company’s non-Temrezli assets — URI holds a 100% interest in 9 licenses covering over 44,479 acres, including several advanced exploration opportunities in the central Anatolian region of the country. URI controls three production properties and several exploration targets in South Texas. The Company also has substantial historical, non-reserve mineralized material and a NRC license to produce up to 3 million pounds per year. URI controls mineral rights encompassing approximately 190,000 acres in the prolific Grants Mineral Belt of New Mexico, one of the foremost sandstone-hosted uranium basins in the world. Finally, the Company has expanded its feeder pipeline of high-potential ISR projects in Texas, near its processing infrastructure. 

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Enhanced liquidity would deliver more than a comfortable margin for error, it would be used to partially fund URI’s low-cost, world-class Temrezli ISR Project. Anatolia’s Pre‐Feasibility Study indicated an after-tax NPV(8%) of $126 million based on a uranium price of $65/lb. At a long-term uranium price of $55/lb., (currently $44/lb.) the after-tax NPV is roughly $85 million, still 3x that of the entire Company’s pro forma EV! Recall that the Temrezli project is squarely in the lowest cost quartile in the industry, making it solidly profitable at a price as low as $40/lb. I believe that an upfront capital call in the $30’s of millions, for a top-tier ISR project, is achievable even in this challenging funding environment.

Conclusion

I strongly believe that the new Uranium Resources Inc. (Nasdaq:URRE) (URI:ASX) is demonstrably undervalued. URI is without question in a stronger position today then it was six months ago. Importantly, URI’s lower risk profile should facilitate project financing. URI’s stock is ~ 70% below its 52-week high. Compared to ISR peers Energy Fuels, UR-Energy, Uranium Energy Corp. & Peninsula Energy, URI is trading at close to a 55% discount on an EV/lb. basis (giving zero credit to historical non-reserve mineralized, “lbs. in the ground”). In my opinion the sell off is unwarranted, offering a compelling risk-adjusted opportunity to buy shares. [Please see my prior article on URI] 

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