GLOBAL URANIUM MARKET

Transcription

1 PC WONG

2 DISCLAIMER The views by the author are his alone. All opinions expressed by the author are subject to change. The viewer is not to assume the performance of any company shares will equal its past performance. Use of information contained in this presentation does not constitute any contractual relationship between the viewer and the author. The author hereby disclaims all responsibilities and liabilities for any use of information contained in this presentation. The author s risk assessment may differ from the viewer's. Risks are subject to economic uncertainties and market conditions. Viewers are advised to exercise due diligence and do their own assessment of the risks involved when investing in any company. Viewers shall not hold the author liable for investments which have gone sour. You are encouraged to seek the opinion of a financial advisor.

3 Image Source: Wikipedia GLOBAL URANIUM MARKET

4 URANIUM PRICE CHART Image Source:

5 GLOBAL DEMAND FOR URANIUM (SOURCE: FORBES) After the Fukushima incident in 2011, nuclear plants became very unpopular and uranium price began trending lower from its peak at US$70/lb Uranium price hit a low in 2014 at US$30/lb, having fell by almost 60% from its peak in 2011, mainly due to closure of plants in Switzerland, Germany and Japan However burning fossil fuel is too expensive for Japan and does not meet Germany s clean energy policy About 40 of 54 Japan s nuclear plants are expected to resume operations China s has 26 nuclear plants with 25 under construction. Plans are afoot to build another 100 plants by 2030 India too is expanding its nuclear power plants by growing its capacity from 5.7GW to 10.0GW by 2020 Licensing in US will expand the production of plants for another years

6 SUPPLY AND DEMAND (SOURCE: CAMECO) Global population will grow from 7B to 9B over the next 2 decades Demand for energy will grow especially from Non OECD (Organisation for Economic and Development) countries Demand for uranium will grow from 160M lbs today to 220M lbs by 2025 Image Source: Cameco website

7 IFS ASSESSMENT: WHY URANIUM Price has been in a multiyear bear market, resulting in production cuts, delays in exploration and bankruptcies With Japan planning to restart its reactors and China building even more reactors, demand is envisioned to pick up Best time invest in uranium based producers as their share prices have been pummelled to multiyear lows Producers with existing facilities will be first to benefit which those in the exploration and pre-planning stage will see extreme price appreciation in the event uranium gains in price Will focus on 3 companies at different levels

8 Image Source: Energy Fuels website ENERGY FUELS

9 ENERGY FUELS Listed on the TSX under code EFR. 100 units Listed on the NYSE under code UUUU. Singular unit The only conventional uranium mining producer in the US (junior producer) Runs 2 types of production: Conventional and In-Situ Recovery (ISR) Operating the White Mesa conventional uranium mill, which is the only fullylicensed and operating conventional uranium mill in the US 8M lbs capacity Operates 2 IRSs: The Nichols Ranch ISR plant and mine, located in Wyoming s productive Powder River Basin, and the Alta Mesa ISR plant and mine, located in South Texas. Capacity is 2.5M lbs and 1.5M lbs respectively Assets include some of the largest and highest-grade uranium mines and projects in the US, including the Canyon mine and the Roca Honda, Sheep Mountain and Henry Mountains projects

10 RESOURCES Roca Honda, Sheep Mountain and Henry Mountains projects, EACH has between 20M 30M lbs of uranium resources in the ground The Powder River Basin is where 2/3 of the US production comes from. UUUU has a land area of 70,000 acres in this area alone Its recently acquired Alta Mesa ISR plant in Texas includes a mining and exploration area of 200,000 acres

11 LOCATIONS Image Source: Energy Fuels website

12 Image Source: Energy Fuels website

13 SUMMARY OF FINANCIALS H Revenue US$25.002M in 2016 vs US$31.305M in 2015 Net Loss -US$19.306M in 2016 vs -US$5.263M in 2015 Current Assets US$40.082M Non Current Assets US$ M Total Assets US$ M Current Liabilities US$15.482M Non Current Liabilities US$41.542M Total Liabilities US$57.024M Total Equity US$ M

14 BENCHMARK AGAINST KPIs Actual KPI Revenue Growth -20.1% +5% Net Profit Growth % +10% Current Ratio 2.56 >1.0 Debt to Equity Ratio 0.39 <1.5 Payback Period NA <5.0 yrs Dividend Yield (based on US$1.41) 0.0% 7.5% NAVPS US$2.50 SP/NAVPS 0.56x <3x

15 KEY TAKEWAYS 1 Revenue fell and Loss widened due continual pressure on the price of Uranium Cash at hand stands at US$14.416M While Balance Sheet looks good, UUUU has a debt of US$25.745M including a recently concluded financial deal worth US$15M which immediately put pressure on the share price How the financing is put to use: To complete the shaft and resource evaluation at Canyon Mine, which is expected to have the highest-grade uranium resources in the US To complete the current wellfield at Nichols Ranch To keep key asset portfolio and production profile intact Planning to sell 2non-core assets, Gas Hills and Juniper Ridge for cash

16 SHARE PRICE PERFORMANCE (10 YR) Chart Source: Morningstar 52 Week Low of US$1.36 and 52 Week High of US$3.28 and 10 Yr High of US$64.47 Current price of US$1.41 is 57.0% off its 52 Week High and 97.8% off its 10 Yr High

17 EVENTS WHICH COULD IMPACT THE STOCK NEGATIVELY Continued suppression in uranium price Shares dilution or extensive debt to continue sustaining the company while awaiting uranium price to pick up

18 IFS ASSESSMENT: US URANIUM CONSUMPTION US is largest uranium consumer According to cantor Fitzgerald, an renowned analyst, utilities need to cover for a 15%-20% shortfall in uranium expected at the end of in 5 homes and businesses is powered by nuclear energy. It consumes 50M lbs in 2015 but its domestic production is only 3.5M lbs UUUU has the capacity to ramp up production to take advantage of the shortfall and meet a larger slice of US demand

19 EX- US URANIUM CONSUMPTION China currently consumes 16M lbs a year. Would require 70M lbs a year by by 2030 France is 75% nuclear energy dependent Sweden, Switzerland, Finland, South Korea, Bulgaria, Ukraine, Slovakia, Slovenia, and the Czech Republic, is around 30% - 50% nuclear dependent and they do not produce any uranium Russia, Kazakhstan, and Uzbekistan account for over 50% of world uranium production. Russia controls around half of the World s uranium enrichment capacity Over 50% of the world s uranium production comes from just 10 mines The current tension between US and Russia could spark a Uranium Crisis Source: FutureMoneyTrends.com

20 IFS ASSESSMENT BUY. The share price has been so depressed that it is below its book value. But only if you could stomach a months holding period in order to realise tremendous gains Not recommended to buy above US$1.75 (CAD2.28) due to the inherent risks with the uranium market, while keeping the buy 30% below its book value However, any upswing in the price of uranium can be massive. UUUU will be a big benefactor Major stakeholders include Rick Rule of Sprott, Global X Management, KEPCO, Blackrock, Canell Capital, etc. insiders own 4% of the company High risk. Due to the current suppressed price of uranium Syariah compliant as at 19 October, 2016

21 Image Source: Cameco website CAMECO

22 CAMECO Listed on the TSX (Toronto Exchange) under code CCO. 100 shares per order Listed on the NYSE under code CCJ. Singular unit One of the world largest uranium producers (major producer) accounting for 18% of global production from the mines in Canada, the US and Kazakhstan Total land area for mining and exploration covers 1.6M hectares Its annual production in 2015 totalled 28.4M lbs Leading supplier of uranium refining, conversion and fuel manufacturing services Proven and probable reserves of 410M lbs

23 URANIUM PROJECTS Canada Kazakhstan US The Athabasca Basin in northern Saskatchewan is home to highgrade uranium reserves with ore grades up to 100 times the world average. Cameco's low-cost operations here include three mines and two mills. Cigar Lake, McArthur River/Key Lake Aand Rabbit Lake 60% share in JV at Inkai's ISR in South Central Kazakhstan Smith Ranch-Highland and Crow Butte operations are ISR plants. Combined output makes Cameco the largest uranium producer in the US. Crow Butte and Smith Ranch-Highland

24 PROJECT LOCATIONS Image Source: Cameco website

25 SUMMARY OF FINANCIALS H Revenue CAD M in 2016 vs CAD1, M in 2015 Net Loss -CAD57.483M in 2016 vs Net Profit CAD78.196M in 2015 Current Assets CAD2, M Non Current Assets CAD6, M Total Assets CAD8, M Current Liabilities CAD M Non Current Liabilities CAD2, M Total Liabilities CAD3, M Total Equity CAD5, M

26 BENCHMARK AGAINST KPIs Actual KPI Revenue Growth 22.6% +5% Net Profit Growth % +10% Current Ratio 3.15 >1.0 Debt to Equity Ratio 0.61 <1.5 Payback Period 0 <5.0 years Distribution Yield (based on CAD10.62) 3.8% 7.5% NAVPS CAD13.43 SP/NAVPS 0.79x <3x

27 KEY TAKEWAYS 1 Revenue fell 22.6% and suffered a heavy Net Loss Lower revenue due to the delivery of 10M lbs of uranium in H1 vs 30M 32M in a year. According to the CEO, majority of the delivery will take part in H Net Loss due to Impairment Charge of CAD M in H vs CAD5.688M in This is an equivalent of an increase of 2,086.5% The Impairment Charge was due to the suspension of the Rabbit Lake operations This is a one time charge. Following quarters should reflect a better result Although the ratios look good, need to be mindful that CCO still has CAD1, M in short and long term debt Cash at hand stands at CAD M

28 Management strategies for H KEY TAKEWAYS 2 Ensure continued safe, reliable, low-cost production from their tier-one assets McArthur River/Key Lake, Cigar Lake and Inkai Complete ramp up of production at Cigar Lake Continue to evaluate the position and retain the flexibility to respond to market signals Take advantage of value adding opportunities, including expanded production capacity at McArthur River/Key Lake and at Inkai Maintain their low-cost advantage by focusing on execution and operational excellence

29 DIVIDEND 2010 CAD CAD CAD CAD CAD CAD CAD0.40 TD

30 SHARE PRICE PERFORMANCE (10 YR) Chart Source: Morningstar 52 Week Low of CAD9.88 and 52 Week High of CAD19.11 and 10 Yr High of CAD55.43 Current price of CAD10.62 is 44.4% off its 52 Week High and 80.8% off its 10 Yr High

31 EVENTS WHICH COULD IMPACT THE STOCK NEGATIVELY Continued suppression in uranium price Possibility of additional financing to sustain the business if the suppression in price continue to for a longer period

32 IFS ASSESSMENT BUY. Accumulative strategy - buying on dips. Need to adopt long term view As management is confident that H will deliver the desired results, you can also exit upon confirmation of improvement in Revenue and Net Profit A number of strategies in place to reduce costs during this downturn in uranium price Not recommended to buy above CAD12.00 (US9.23) due to the inherent risks with the uranium market, while keeping the buy below its book value Medium risk. Although there is risk of uranium price suppression but balance sheet remains strong Syariah compliant as at 19 October, 2016

33 Image Source: Summit Resources website SUMMIT RESOURCES

34 SUMMIT RESOURCES Listed on the ASX under code SMM. Singular unit Listed on the OTCMKTS under code SRCSF. Singular unit Australia based uranium exploration company Main project is 'Isa North which covers approximately 935 square km and hosts a number of uranium prospects including the Valhalla, Skal and Bikini deposits Paladin Energy Ltd (Paladin) owns 82.08% of the equity in Summit

35 LOCATIONS Total land area of 2190 sq km 3 major projects centre around Mt Isa with land area of 935 sq km Measured and Indicated Mineral Resources of 104.6M lb of uranium and Inferred Mineral Resources of 37.5M lb of uranium 53.7% of the Mineral Resources are located at Valhalla; the rest are distributed over the Bikini, Skal, Odin, Andersons, Mirrioola, Watta and Warwai deposits Image Source: Summit Resources website

36 SUMMARY OF FINANCIALS FY 2016 Revenue A$64,00 in 2016 vs A$98,000 in 2015 Net Loss A$1.271M in 2016 vs A$0.210M in 2015 Current Assets A$1.660M Non Current Assets A$46.686M Total Assets A$48.346M Current Liabilities A$0.050M Non Current Liabilities Total Liabilities A$0.050M Total Equity A$48.296M

37 BENCHMARK AGAINST KPIs Actual KPI Revenue Growth -34.7% +5% Net Profit Growth % +10% Current Ratio 33.2 >1.0 Debt to Equity Ratio 0.00 <1.5 Payback Period 0 <5.0 years Distribution Yield (based on A$0.115) 0.0% 7.5% NAVPS A$0.22 SP/NAVPS 0.52x <3x

38 KEY TAKEWAYS Revenue is negligible as there is no revenue from production. Current source of Revenue is through investment income Net Loss widen due to Impairment Charge of A$1.096M Balance Sheet is strong with no long term debt Cash at hand at A$0.772M The only work performed during the year was continuation of the ongoing environmental monitoring and metallurgical testwork (radiometric sorting and alkaline leach) by ANSTO in Sydney Continue to conserve cash as much as is practicable whilst maintaining all of the tenements (licences) in good standing

39 SHARE PRICE PERFORMANCE (10 YR) Chart Source: Morningstar 52 Week Low of A$0.07 and 52 Week High of A$0.19 and 10 Yr High of A$5.97 Current price of A$0.115 is 39.5% off its 52 Week High and 98.1% off its 10 Yr High

40 EVENTS WHICH COULD IMPACT THE STOCK NEGATIVELY Continued suppression in uranium price Possibility of additional financing to sustain the business if the suppression in price continue to for a longer period

41 IFS ASSESSMENT TRADING BUY. To exit on positive news of the company such as an increased uranium resource or increase in Uranium price Not recommended to buy above A$0.15 (US$0.11) due to the inherent risks with the uranium market, while keeping the buy below its book value Extremely high risk. Junior exploration company Non Syariah compliant

42 MY DISCLOSURE I do not own shares of UUUU, CCO or SMM

43 Q & A All rights reserved by Jupiter Consultancy Sdn Bhd. Any unauthorised copying is deemed an infringement under the Malaysian Copyright Act 1987

44 HAPPY INVESTING! THANK YOU All rights reserved by Jupiter Consultancy Sdn Bhd. Any unauthorised copying is deemed an infringement under the Malaysian Copyright Act 1987