jimsioi,
The bottom line with all these near- term ISR producers for me is that the present value of the expected cash flows is many times their MV. URZ is noted for being very tight lipped about their business, but with a bit of research you can find that they almost certainly have over 20 MM lbs U3O8 (with more to come as a result of exploration programs).
To keep the math simple, you don't have to do any discounting if you assume that the rate of growth in the selling price of U3O8 and in the cost of producing same is equal to the discount rate. Let us assume that they will be able to sell their production for $100 per lb and it costs $25 to produce it. Also assume that they can recover , say 80% of the U in the ground. Let us also assume they have 20MM lbs U3O8. Then, a very crude first order guesstimate of the PV of cash earnings once production starts in a couple or so years is:
20 * 0.8 * {$100- $25}MM = $1.2 Bn
This is four times the current MV!
Once they start producing in a couple of years, their P/E ratio is going to look very small -- say 1 or 2 unless their stock price increases very rapidly in the interim. I expect to see the URZ stock price go up by a factor of at least 4 times over the next , say, three years.
Numbers aside, URZ has top people, who have been around the UR business for decades. These guys put their own money and reputations into this starting several years ago, because they could see what was going to happen to the price of U3O8 and they knew they would be able to make money. The same is true of URE and PWE. I have substantial positions in all three.
Cheers
Energy_Investor
PS I would highly recommend that you also take a close look at the URE website, because that has a lot more information that you can digest.
PPS: At the Casey Conference, one of the Investment Analysts stated that the correct way to value producers/near term producers is NPV (net present value -- which is basically the approach taken above).
PPPS: I was told by one of the mining execs that the cost of producing U3O8 by ISR is about $25 Lb for everything (permits/physical production and reclamation combined). So, you can safely use this figure in your calcs. |
