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'Leading Uranium Developer in the USA' Gets Upgraded to 'Buy'
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An Eight Capital report discussed the company's flagship assets following a recent visit.

In a research note dated July 16, 2018, analyst David Talbot reported that Eight Capital upgraded its rating on Azarga Uranium Corp. (AZZ:TSX) to Buy from Neutral and raised its target price to CA$0.40 per share from CA$0.30. The stock price is currently CA$0.27 per share.

These changes came following Eight Capital's visit to Azarga's flagship Dewey Burdock and Dewey Terrace properties in South Dakota and Wyoming, from which Talbot came away "quite impressed."

As for Dewey Burdock, Talbot wrote, "we affirm [it] is one of the best undeveloped in situ recovery (ISR) projects in the U.S." There, Azarga plans to produce up to 9.7 million pounds (9.7 Mlb) of uranium over 11 years at a cash cost of US$18.86 per pound. Projections show a pretax 8% net present value of US$149 million (US$149M) and a 67% internal rate of return based on US$65 per pound uranium. Capex would be "low" initially, at US$27M, as toll milling would take place at a nearby ISR plant.

The uranium mineralization at Dewey Burdock is associated with vanadium, and a 2015 PEA leachability test suggested vanadium recoveries of 705%, relayed Talbot. Thus, the potential to mine vanadium from the project exists.

An updated preliminary economic assessment (PEA) on Dewey Burdock is expected in Q4/18, following a resource update in Q3/18. "Dewey Burdock is robust, with a mineralized footprint likely having doubled since the initial resource and PEA was completed in 2015," Talbot wrote. "Uranium prices permitting, we could see wellfield deployment as early as 2019."

Talbot indicated that in the interim, Azarga continues to work toward obtaining its final Environmental Protection Agency Permit. First, it must resolve the issue of its application for a Nuclear Regulatory License (NRC) being in contention. The NRC indicated it will respond by July 23, 2018. The Oglala Sioux tribe has until Aug 17, 2018, to do the same. The Atomic Safety and Licensing Board, the ultimate arbiter on the NRC, could make its final decision in mid-September, at the earliest. The analyst relayed that the "worst case is this drags out to May 2019, but this might better align with Dewey Burdock development plans."

As for Azarga's other property, Dewey Terrace, it "may be a potential satellite operation to complement a central processing facility at Dewey Burdock," said Talbot.

He reiterated that Azarga's recent acquisition of URZ Energy bolstered the company's project pipeline, as it gained the Gas Hills and Juniper Ridge assets. On the roughly 13 million pounds of uranium resources gotten from URZ, Eight Capital revalued it in situ at CA$0.50 per pound, up from CA$0.25. Via the acquisition, Azarga also gained "financing, marketing, development and production experience," which, Talbot suggested, "should be useful in the advancement of Dewey Burdock and its nearby satellite deposits."

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Disclosures from Eight Capital, Azarga Uranium Corp., Rating Change, July 16, 2018

Conflicts of Interest: Eight Capital has written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research and other businesses. The compensation of each Research Analyst/Associate involved in the preparation of this research report is based competitively upon several criteria, including performance assessment criteria, the quality of research and the value of the services they provide to clients of Eight Capital. The Research Analyst compensation pool includes revenues from several sources, including sales, trading and investment banking. Research analysts and associates do not receive compensation based upon revenues from specific investment banking transactions.

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the views and recommendations expressed herein accurately reflect his/her personal views about any and all of the securities or issuers that are the subject matter of this research report;
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