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PEA on US Uranium Firm's Wyoming Project Robust, Outlines Satellite Model
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The contents of the preliminary economic assessment on Azarga Uranium's Gas Hills asset and uranium prices are discussed in a Fundamental Research Corp. report.

In an Aug. 24 research note, analyst Sid Rajeev reported that Fundamental Research Corp. increased its fair target price on Azarga Uranium Corp. (AZZ:TSX; AZZUF:OTCQB) to CA$1.11 per share from CA$1.03 after the uranium firm released a "robust" preliminary economic assessment (PEA) for its Gas Hills project in Wyoming.

"The PEA confirmed our assumption that Gas Hills can be a satellite project of the company's flagship Dewey Burdock project in South Dakota," Rajeev wrote.

The analyst reviewed the PEA. It outlined a satellite-model operation producing 1 million pounds of uranium per year over a seven-year mine life. Processing will take place at a facility on the Dewey Burdock property.

As for Gas Hills costs, initial capex required is an estimated US$26 million ($26M), a low amount according to Rajeev. Cash operating costs are forecasted to be US$11.52 per pound and sustaining costs, US$9.07 per pound. All PEA figures are based on a $55 per pound U3O8 price.

The PEA reflects a US$102.6M after-tax net present value discounted at 8% and a 101% after-tax internal rate of return.

Now, Rajeev noted, Azarga will start the process of obtaining the necessary permits to proceed at Gas Hills while continuing to expand its overall uranium resources.

Rajeev also commented on uranium prices, noting they are up since the start of 2020, as much as 62% year over year, according to the Global X Uranium Exchange-Traded Fund, which tracks the share prices of uranium and nuclear-related companies. Rajeev did point out that uranium prices must be at least US$50 per pound over the long term for existing and new uranium projects to be economically viable.

Fundamental Research's outlook on uranium prices is positive for the long term, Rajeev affirmed, because of several factors. Among them are a projected supply deficit over time, the current global push toward clean energy, and the inclusion of initiatives to revive U.S. uranium production in President Joe Biden's US$2-trillion plan.

As for Azarga's market valuation, Rajeev wrote, it is lower than it should be. The after-tax NPV8% of Dewey Burdock and Gas Hills combined is US$250M, implying that Azarga's stock is trading at 26% of that amount. Compared to Fundamental's CA$1.11 fair share price on Azarga, its actual share price is about one-third of that, at CA$0.35.


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 Corp. Click here for important disclosures about sponsor fees. 
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5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Azarga Uranium Corp., a company mentioned in this article.

Disclosures for Fundamental Research Corp., Azarga Uranium Corp., August 24, 2021

Disclaimers and Disclosure. The opinions expressed in this report are the true opinions of the analyst about this company and industry.

The analyst and Fundamental Research Corp. “FRC” does not own any shares of the subject company, does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company. Fees were paid by AZZ to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, AZZ has agreed to a minimum coverage term including an initial report and three updates. Coverage cannot be unilaterally terminated.

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