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PEA 'Signals Doubling of Production' for Potential Uranium Takeout Target
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An Eight Capital report raises its target price on Azarga Uranium after the company released a preliminary economic assessment on its Gas Hills uranium project.

In a June 30 research note, analyst Mitch Vanderydt reported that Eight Capital increased its target price on Azarga Uranium Corp. (AZZ:TSX; AZZUF:OTCQB) to CA$0.50 per share from CA$0.45 after including the results of the Gas Hills preliminary economic assessment (PEA) in its model on the company. Azarga's share price today is about CA$0.23.

Vanderydt discussed how the PEA links Azarga's Gas Hills and Dewey Burdock in-situ recovery (ISR) projects, treating the former as a satellite of the latter, and why this matters.

First, the PEA has uranium ISR feed, which is mined at Gas Hills in Wyoming, being trucked to Dewey Burdock in South Dakota for processing. Doing this would double annual U3O8 production at Dewey Burdock, taking it to 2 million pounds, Vanderydt noted.

Second, the PEA's "combining" Gas Hills and Dewey Burdock versus keeping Gas Hills an independent secondary project benefits Azarga, Vanderydt highlighted. Instead of Gas Hills getting discounted by investors, which usually happens with secondary projects, it should boost Azarga's stock price given its strong economics. Those Gas Hills economics, according to the PEA, include an after-tax net present value at an 8% discount of US$102.6 million, or US$55 per U3O8 pound. Forecast capex is US$26 million.

To process Gas Hills' feed, Dewey Burdock's plant would need enlarging, to the tune of US$15 million–$20 million, Vanderydt indicated.

That being the case, Azarga's plan is to build Dewey Burdock once it receives a mine permit from South Dakota, the last permit it needs. Azarga could have it in hand as early as the end of this year, Eight Capital purports.

Receipt of this permit could "re-rate the stock and possibly lead to Azarga being taken out by the operators of the neighbouring ISR plants, namely Cameco, Energy Fuels, Peninsula Energy, Uranium 1 or URE," Vanderydt wrote.

Once Dewey Burdock construction is completed, Azarga would bring the project online, around late 2022 or early 2023. Then, roughly three years after the operation start, Eight Capital estimates, the uranium miner would pursue getting the necessary permits amended to allow for a plant expansion.

"This would free up additional plant capacity for [Gas Hills] to be developed," Vanderydt wrote.

Eight Capital has a Buy rating on Azarga Uranium.


1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Azarga Uranium. Click here for important disclosures about sponsor fees.
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Disclosures from Eight Capital, Azarga Uranium Corp., June 30, 2021

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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