Raymond James: Key to Uranium One's Upside is South Inkai

Uranium One Inc.'s (SXRZF.PK) 2008 production guidance doesn't do justice to the expected performance of the company's South Inkai mine in Kazakhstan, says Raymond James analyst Bart Jaworski. And that should be good news for investors in the near term.

After reviewing his short term production assumptions following the announcement of Uranium One's first quarter results recently, Mr. Jaworski now believes South Inkai production will be 124% more than Uranium One's announced guidance.

He wrote:

We encourage investors to buy Uranium One shares on potential for higher-than-expected production from South Inkai, although we caution a lot of this upside may already be priced in.

He maintained his "outperform" rating and C$5.50 price target.

In a note to clients he said:

Keeping current run rates constant, South Inkai would produce 1.6 million pounds (1.1 million lbs attributable to Uranium One) – far exceeding the company's attributable 500,000 pounds guidance.

The analyst added that his outlook includes the potential for sooner than expected industrial production permits.

Overall, Mr. Jaworski told clients the company's production would exceed its guidance by 11% assuming South Inkai beats guidance to the extent that Mr. Jaworski is forecasting. If it doesn't, the company could instead miss guidance, given Mr. Jaworski's prediction that production at Dominion and Kharasan will be 29% and 45% below guidance, respectively.