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Uranium Energy Corp is a uranium mining, development and exploration company operating the newest in situ recovery (ISR) uranium mine in the U.S. The company, which has $26 million in cash and no debt, is one of only 5 U.S. uranium producers. Compared to conventional uranium mining, ISR is a less costly and environmentally unobtrusive method of mining that poses virtually no risk to human life.
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June 15, 2012
Uranium Energy CorpOverviewUranium Energy Corp is a uranium mining,development and exploration companyoperating the newest in situ recovery (ISR)uranium mine in the U.S. The company, whichhas $26 million in cash and no debt, is one ofonly 5 U.S. uranium producers. Compared toconventional uranium mining, ISR is a lesscostly and environmentally unobtrusivemethod of mining that poses virtually no riskto human life.
Uranium Energy’s cumulative production, asof April 30, 2012, was 273,000 pounds ofuranium at an average cash cost of $18 perpound. The company has sold 120,000 poundsof uranium at an average price of $52 perpound, generating $6.2 million in revenueswhile retaining 153,000 pounds of uraniumwith a current spot market value ofapproximately $8 million. The company’sproduction is un-hedged. The company plansto reach an annual production rate of 1 millionpounds of uranium per year.
The company’s currently operating Hobsonuranium processing plant is central to its ISRprojects in the South Texas Uranium Belt,which include the producing Palanganaproject, the much larger Goliad project, thedevelopment and exploration stage Salvoproject, and the exploration stage Nichols,Burke Hollow and Channen projects. Thecompany’s six South Texas projects span45,965 acres and contain approximately 13.2million pounds of NI 43-101 complianturanium resources.
In addition to achieving production status in
Company Type MiningResources UraniumCompany Stage Junior ProducerSymbol NYSE:UECShare Price (USD) $1.8852-week High/Low $4.44 / $1.76
Market Cap. $159,414,976Shares Out. 84,795,200Fully Diluted 96,222,190Insider Ownership 20%Major Shareholders 30% total for Blackrock,
Oppenheimer Funds, CIBCGlobal Assets, EncompassFund and State Street Global
HeadquartersAddress
500 North ShorelineSuite 800NCorpus Christi, TX 784711 (361) 888-8235 phone1 (866) 748-1030 toll free1 (361) 888-5041 [email protected]
Board of Directors Amir Adnani, Harry L. Anthony,Alan Lindsay, KatharineArmstrong, Ivan Obolensky,Vincent Della Volpe, DavidKong
CEO Amir AdnaniOperating Region(s) United States (Arizona,
Colorado, New Mexico, Texasand Wyoming), Paraguay
Working Capital $26.4 million (4/30/2012)Burn Rate N/ADebt $0Revenues $0.0 million (FQ3 2012)Profit/Loss -$8.2 million (FQ3 2012)Net Assets $88.2 million (4/30/2012)
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Texas, the company has capitalized on lower uranium prices to aggressively expand its projectportfolio.
Outside of the company’s hub-and-spoke operation in Texas, the company has an additional 19projects in the U.S. with total NI 43-101 compliant resources of approximately 47.8 millionpounds of uranium, not including historical resources. The company controls one of the largesthistorical uranium exploration databases in the U.S.
ManagementUranium Energy is led by its founder, Director, President and Chief Executive Officer AmirAdnani. Mr. Adnani is a serial entrepreneur with a background in business development andstrategic marketing. Prior to Uranium Energy, Mr. Adnani founded Blender Media Inc. where heserved as the President and a director until 2006. Mr. Adnani has also co-founded BrazilResources Inc. (TSX-V: BRI) and serves as the company’s chairman of the board.
The company’s Chief Financial Officer, Mark Katsumata is a Certified General Accountant with20 years of experience related to the mining industry. Mr. Katsumata served as a CFO and VP-Finance for a number of NYSE AMEX, TSX and TSX-V mining companies with operationsworldwide, including two years as CFO/VP-Finance of Denison Mines Corp. Previously, Mr.Katsumata audited publicly-traded mining companies for Chartered Accountants in Vancouver,British Columbia.
The company’s Chief Operating Officer, Harry Anthony, is an internationally recognized expertin the uranium industry who has been a professional engineer for more than 40 years at theforefront of the uranium industry. Specifically, Mr. Anthony is a pioneer of ISR extractiontechnology in the uranium mining sector. Mr. Anthony previously served as a senior officer anddirector of Uranium Resources Inc., where he was responsible for all technical aspects of minedevelopment.
The company’s operations are run by seasoned professionals in the uranium industry who havedecades of hands-on experience in all aspects of uranium exploration, development and mining.
Operating MinesUranium Energy developed its first ISR mine at the Palangana project in South Texas and,utilizing the Hobson ISR uranium processing plant, began production in November 2010. Thecompany’s largest ISR project, Goliad, is currently in the early stages of mine construction. TheGoliad project is the second in a planned series of ISR facilities in the South Texas Uranium Beltcomprising a hub-and-spoke production model centered on the Hobson processing plant. Thecompany’s currently operating Hobson ISR uranium processing plant has a maximum processingcapability of 3M lbs per year.
Palangana – The currently producing Palangana ISR mine is an 8,796 acre (3,560hectares) property located approximately 100 miles (160 kilometers) south of the Hobsonprocessing plant. Union Carbide Corp. had previously produced uranium at the project inthe 1970’s using ISR technology. The project has a NI 43-101 compliant resource of2.2M lbs U3O8. The Palangana project currently has two producing production areas andfour additional production areas in the pipeline. A third production area is scheduled to
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begin development in the second half of 2012. As of January 1, 2012, with thecompletion of its first full year of production, production area 1 produced 236,000 lbsU3O8 at an average cash cost of $16 per pound. Production area 2 began operating inMarch 2012. From the commencement of production to April 30, 2012, a total of273,000 lbs U3O8 at an average cash cost of $18 per pound have been processed.
Goliad – The Goliad ISR project consists of 13 ISR uranium mining leases on a 2,574acre (1,042 hectares) property in north-central Goliad County, Texas, approximately 43miles (69 kilometers) south of the Hobson processing plant. The project had a historicalresource drilled off by Moore Energy Corp. in the 1980’s of approximately 5.2M lbsU3O8 at an average grade of 0.05%. Uranium Energy drilled roughly 600 confirmationand delineation holes to develop a NI 43-101 compliant resource of 6.9M lbs U3O8.Metallurgical recoveries are between 86% and 89%. Cash costs per pound of uraniumproduced are expected to be in the same range as the Palangana mine.
Reserves and ResourcesThe company has NI 43-101 compliant resources in the South Texas Uranium Belt totalingapproximately 13.2M lbs U3O8 in all categories. With the Palangana ISR mine in production andthe Goliad ISR mine under construction, the company has one additional development stage andfour exploration stage projects in South Texas, all within reach of the Hobson processing plant.
Project M&I (lbs) Grade Cut-off GT Inferred (lbs) Grade Cut-off GTPalangana 1,057,000 0.135% 0.50 1,154,000 0.176% 0.50Goliad 5,475,200 0.050% 0.30 1,501,400 0.050% 0.30Salvo - - - 2,839,000 0.091% 0.30Burke Hollow - - - - - -Channen - - - - - -Nichols - - - 1,307,000 0.070% -
Total 6,532,200 0.064% 0.40 6,801,400 0.092% 0.37
Beyond Texas, the company has 19 additional ISR and conventional uranium projects located inArizona, Colorado, New Mexico and Wyoming. Including its Texas resources, the company’stotal NI 43-101 compliant resources in the U.S. are approximately 47.8M lbs U3O8, not includinghistorical resources.
Project Location Type M&I (lbs) Grade Inf. (lbs) Grade Hist. (lbs) GradeAnderson (open pit) AZ, US Conv. 15,500,000 0.028% 2,500,000 0.024% - -Anderson (underground) AZ, US Conv. 1,500,000 0.049% 9,500,000 0.052% - -Dry Mountain AZ, US Conv. - - - - - -Los Cuatros AZ, US Conv. - - - - 12,000,000 0.020%Workman Creek AZ, US Conv. - - 5,542,000 0.086% - -Bull Canyon CO, US Conv. - - - - 265,000 0.210%Carnotite CO, US Conv. - - - - 1,600,000 0.080%Long Park CO, US Conv. - - - - 165,000 0.280%Radium Mountain CO, US Conv. - - - - 181,250 0.290%Raven CO, US Conv. - - - - 215,500 0.230%Squaw Point CO, US Conv. - - - - 185,000 0.130%Grants Ridge NM, US Conv. - - - - - -West Ranch NM, US Conv. - - - - 2,600,000 0.172%Burnt Wagon WY, US ISR - - - - 500,000 0.050%DL WY, US ISR - - - - - -East Poison Spider WY, US ISR - - - - - -Granite Mountain WY, US Conv. - - - - - -Lo-Herma WY, US ISR - - - - - -
Total 17,000,000 0.030% 17,542,000 0.059% 19,711,750 0.060%
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With NI 43-101 resource estimates expected for the Burke Hollow and Channen projects, whichare in proximity to the Hobson uranium processing plant, the company’s NI 43-101 compliantresources in the U.S. are likely to increase substantially in coming months.
The company recently acquired two additional projects, Yuty and Coronel Oviedo, located inCaazapá and Caaguazú, Paraguay, respectively. At the Yuty project, the company has an NI 43-101 compliant 11.1M lbs U3O8 resource and a new NI 43-101 resource estimate is expected forthe Coronel Oviedo project in 2012.
Project Location Type M&I (lbs) Grade Inf. (lbs) Grade Hist. (lbs) GradeCoronel Oviedo CGZ, PY ISR - - - - - -Yuty CZP, PY ISR 8,914,000 0.055% 2,226,000 0.047% - -
Total 8,914,000 0.055% 2,226,000 0.047%
Altogether, the company has 27 projects: 25 in the U.S. and 2 in Paraguay. Excluding historicalresources, the company has total NI 43-101 compliant resources of approximately 59M lbs U3O8
in all categories and over all projects globally.
Exploration PlansThe company is currently working towards NI 43-101 resource estimates at its 17,510 acre(7,086 hectares) Burke Hollow and 10,704 acre (4,332 hectares) Channen projects in Texas andat its 247,000 acre (99,957 hectares) Coronel Oviedo project in Caaguazú, Paraguay. BurkeHollow, in particular, promises to become a new mine in the company’s hub-and-spokeproduction model in South Texas. The company is also engaged in additional drilling at itsSalvo project in South Texas, which is expected to become the company’s 3rd producing ISRmine. Additionally, a 10,000 m drill program is currently under way at the Coronel Oviedoproject, which is geologically similar to the South Texas Uranium Belt.
The company’s large portfolio of ISR and conventional uranium exploration projects provide thecompany with optionality. Properties with high quality resources and past producing mines,such as the Anderson project in Arizona, which has a large 29M lbs U3O8 resource, can beoptioned, joint ventured, put into production or sold for cash. Historical resources at thecompany’s projects in Arizona, Colorado and New Mexico can be upgraded to NI 43-101standards for near term value creation and several of the company’s projects have strongexploration potential. Additionally, the company’s defined resources and exploration projectscontain significant vanadium byproducts.
Growth StrategyIn terms of production, the company is ramping up production at the Palangana mine by bringinga second production area online while developing three additional production areas. At theGoliad project, the company is beginning construction of a second ISR mine with initialproduction expected to begin in 2013. At the same time, the company is working to consolidateassets along the South Texas Uranium Belt and to make opportunistic acquisitions. CEO AmirAdnani explained that “We are ramping up our low-cost production in Texas while building aworld class project pipeline. Our first priority is to grow our resources and production in SouthTexas by developing satellite ISR facilities near the Hobson uranium processing plant. This willallow us to leverage our growing cash flow to make opportunistic acquisitions. Our ISR and
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conventional project pipeline is already substantial. Our strategic position is unique in theindustry. In the long run, that will translate into shareholder value.”
Near-term CatalystsWith two new NI 43-101 resource estimates expected in 2012 for the Burke Hollow andChannen projects and with additional drilling at the Salvo project, the company’s U.S. resourcesare likely to increase substantially with direct implications for production in Texas. Thecompany is also working toward a NI 43-101 compliant resource estimate at its Coronel Oviedoproject located in Caazapá, Paraguay. The company plans to achieve an annual production rateof 1M lbs U3O8 in Texas, which would, all other things being equal, make the companyprofitable at current uranium prices.
Investment ThesisAs a practical matter, the world needs nuclear energy. Despite the 2011 nuclear disaster inFukushima, Japan, approximately 433 nuclear reactors remain online in 30 countries worldwide.In recent years, crude oil prices have risen, substantially because of China’s growing demand forenergy. There are 63 new nuclear reactors are currently under construction and 26 of them arelocated in China. Uranium is a strategic resource in North America. Over 100 nuclear reactorsare currently operating in the United States. There are more than 150 nuclear powered navalvessels worldwide.
Uranium mine supply is inadequate to meet existing demand. The Megatons to Megawattsuranium recycling program, resulting from the 1993 Highly Enriched Uranium (HEU) treatybetween the U.S. and Russia, increased uranium supply to the market for roughly 2 decades, butthe program will end in 2013. A uranium supply gap is developing that will become evident in2014. Higher uranium prices will be necessary for uranium mine supply to increase.
Low uranium prices and the Fukushima disaster led to an indiscriminate sell off in uraniummining shares in 2011. In response to the depressed share market, Uranium Energy began anaggressive series of acquisitions, increased the scope of its exploration activities and more thandoubled its resources without losing focus on its expanding operations in South Texas. Thecompany has been successful in developing a very large project pipeline with enormous resourceexpansion potential without excessive share dilution. Having sacrificed near term profitability inexchange for long term resource growth, the company’s share price, which recently fell to a new52-week low, has suffered heavily. Nonetheless, Uranium Energy has a strong balance sheetwith no debt and has shown consistent operational and business execution, while greatlyexpanding its resources and increasing its production.
ISR is a low cost, low risk, environmentally friendly method of uranium mining that isoperationally profitable at or below current uranium prices. Uranium Energy is well positionedas a fast growing, low-cost producer in the U.S. with a strong production growth profile and alarge project pipeline. Uranium Energy is a strategic resource play. Over the next two years, thecompany will be in a winning position vis-à-vis uranium supply and demand fundamentals andhigher uranium prices. As its production and revenues continue to ramp up, the company islikely to be revalued in the next 12 to 18 months.
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Major RisksIn addition to risks related to general economic and stock market conditions, ongoing concernsrelated to the Fukushima nuclear disaster or policy changes related to nuclear power generationcould result in persistent low prices for the shares of uranium producers. Mining companies aresubject to geopolitical, permitting, execution and operating risks, as well as to risks associatedwith exogenous events.
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