Despite Ugly Bottom Line, Uranium One Still Attractive to Analysts

Uranium One Inc. (SXRZF.PK) revealed a long-expected housecleaning on Friday, writing off $2.8-billion on its properties and reporting a third-quarter loss of $2-billion. The biggest hit came on its Dominion mine in South Africa, which was losing money and was finally shut down.

Despite the ugly bottom-line number, analysts said the company's liquidity is in good shape. Raymond James analyst Bart Jaworski noted that Uranium One holds $98.9-million in cash and $142.6-million in working capital while its projected capital expenditures for 2009 are just $38-million.

He wrote in a note to clients:

As long as the company consistently receives its dividends from Kazakhstan [initially expected by year-end], Uranium One should be in adequate financial shape.

However, he also said that Kazakhstan's new tax code and subsoil legislation, to be implemented in January, has negative implications for the company.

Meanwhile, Canaccord Adams resumed coverage of the stock on Monday, with analyst Orest Wowkodaw rating it a "buy" with a price target of C$2 a share. That is down from Canaccord's prior target of C$2.89, but he still likes the stock based on its "compelling valuation, significant planned near-to-medium term production growth, relatively low-cost production base, and healthy balance sheet." The recent uptick in the spot uranium price should help as well, he noted.