The recommendation follows the recent granting of a Permit to Mine for the Ross Production Unit, the second of three licences required for the advancement of the Lance Projects to production, which is targeted for the second half of 2013.
The following is an extract from the report.
Lance ISR Uranium Project Gaining Momentum
The Company has announced receipt of one of two key outstanding approvals, the Permit to Mine. Approval of the final permit, the Source Material Licence, is also progressing well with a draft Source Material Licence recently released for comment.
PEN also recently announced unanimous support from the Crook County Commission for the issuance of $70m in bonds which, if approved by the State, could partially fund the Lance Project.
Approvals Coming Thick and Fast
The granting of the Permit to Mine (NYSEARCA:PTM) is a significant step towards the development of the Lance Project.
Previously, grant of the PTM was contingent on the posting of a ~$9m bond however PEN have negotiated that this be replaced by an incremental bond attached to the Source Material Licence (SML).
The Company has lodged a $1.4m bond that will allow the start of pre-SML construction at Ross (Stage 1).
The SML is scheduled for grant prior to 12th November 2013; however, the process appears to be ahead of schedule with a draft licence recently issued for comment.
The draft SML is a key step toward finalisation of the Safety Evaluation Report (SER) for the Ross application, targeted for completion by the end of February 2013.
Once the SER is finalised, PEN can focus exclusively on completing the environmental review which is the final stage of the SML process.
Funding Progressing Well
Crook County Wyoming Industrial Development Revenue Bond funding is allocated under the Industrial Development Projects Act (IDPA) (Wyoming Statute 15-1-7), which allows cities and counties in Wyoming to issue Bonds to promote economic growth within the state, and to create jobs for in-state residents.
The issuance of the Bonds is subject to due diligence review by the Wyoming Business Council. Upon successful review the application will proceed to approval by the State Attorney General, State Treasurer and Governor.
If successful the $70m in Bonds could fund 47% of the $148.1m required for initial development of the Lance Project. PEN is also actively engaged in advancing several other debt funding opportunities.
Transition to Development and Production Underway
PEN updated the Lance Feasibility Study ("FS") earlier in the year. The FS indicates Net Present Value (8%) of US$252m, assuming initial capital cost of US$78m, 2.2mlb U3O8 steady state production, and recovery of 29mlb at total costs of US$36.60 per lb (excluding Vanadium credits).
At the core area of its Lance Projects, the Company has evolved from the exploration to pre-development, with completion of feasibility, Decision to Mine and appointment of senior management with ISR experience.
PEN's share price has ticked up in recent weeks and we expect this to continue, with more positive catalysts to come as well as a positive shift in industry sentiment, in our view.
We rate PEN as a Buy with a price target of 8.6cps.
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