Roth Capital reiterated coverage yesterday on Uranium Resources Inc. (URRE) with a Buy rating and $4.00 price target.
Yesterday, URRE announced a new NI 43-101 compliant resource estimate for its Juan Tafoya project in New Mexico. The resource estimate showed 4.2 million tons of inferred resource with an average grade of 0.145% uranium. This compares to the prior “Mineralized material” estimate of 3.8 million tons grading 0.15% uranium. On a contained pounds basis, the total resource increased from our estimate of 11.4 million pounds to 12.2 million pounds.
Roth’s analyst Joseph Reagor points out that he continue to view URRE as an asset value play as its large portfolio of uranium projects provides significant value.
In the report, the analyst noted, “we base our valuation of URRE on a sum of the parts analysis. We begin by estimating a cash burn of $15.0 million in 2014 as we do not anticipate a return to production during 2014. We note this estimate is slightly above the company’s guidance of a $1 million per month burn rate. To this we add current cash of $1.1 million and subtract current debt of $3.2 million as of year-end 2013. We also add $9.5 million (net of fees) for the announced equity raise in February 2014. For URRE’s physical assets, we assign a value of $24.7 million or a 20% discount to the balance sheet carrying value. We note that in today’s regulatory environment it would take five plus years to permit and construct a uranium processing facility. We also assign a value of $0.664 million or $1.00 per pound for URRE’s Texas resources and $71.3 million or $0.50 per pound for URRE’s non NI 43-101 compliant resources. This nets a total valuation of $99.6 million or $4.06 per share. Therefore, we are maintaining our Buy rating and $4.00 price target”.
According to TipRanks, which measures analysts and bloggers success rate based on how their calls perform, Joseph Reagor, who covers UREE, currently has a one-year average return of 4.8% and a 86% success rate.