Given the disappointing results and continued turmoil at Uranium One Inc. (OTC:SXRZF), the miner may need to writedown its assets and take a huge charge. It should also sell off one of its major projects. These suggestions from RBC Capital Markets analyst Adam Schatzker come after Uranium One shares plunged 17% to C$5.33 on Thursday after it cut its output forecast, and announced the departure of CEO Neal Froneman.
Not only is the enormous Dominion Mine in South Africa performing much worse than expected, the company’s Honeymoon uranium project in Australia appears to be delayed again – by a year, Mr. Schatzker told clients in a note. Given its small size and the valuable resources it consumes, he recommended Honeymoon be sold.
The analyst also believes Uranium One may have to writedown its assets and could take an impairment charge of up to C$1.9-billion. He cut his price target on the stock to C$6 from C$10 with a “sector perform” rating.
However, some analysts continue to be optimistic on the company’s prospects.
While shaving more than C$5 off his price target, Versant Partners analyst Ian Parkinson still see upside of more than 90% given his new target of C$10.30, along with a “buy” recommendation.
Bart Jaworski at Raymond James is another analyst on the more conservative side. He maintained a “market perform” rating and C$6.40 price target on Uranium One.
“The company’s ability to cover its capital requirements will be a leading question over the next 6-12 months,” he said in a note, adding that management will likely defer and/or sell non-core uranium assets such as its 68% stake in Aflease Gold Ltd. And despite Uranium One’s cheap valuation, Mr. Jaworski does not consider it a takeover candidate given operational uncertainties.
UBS analyst Brian MacArthur cut his target by C$2 to C$8 and left his "buy" rating unchanged.