Interestingly for investors - this valuation is more than four times the last traded price of $0.017.
The following is an extract from the report.
- We initiate coverage on BLR with a SPECULATIVE BUY recommendation and a price target of $0.07/share.
- We see BLR as a quality investment opportunity that offers exposure to the growing domestic uranium demand of the US market. We believe the company has significant upside and will re-rate on the back of positive PEA expected in 3QCY12 and commencement of permitting applications.
- Given recent corporate activity in the US evidenced by Denison Mines & Energy Fuels, we believe consolidation will be a common theme in the US uranium sector and highlight BLR as a target for corporate activity.
High tonnage high grade deposit, 3rd largest in USA. BLR Is a uranium exploration company, its flagship project is the Hansen/Taylor project located in Colorado USA. The total portfolio contains JORC Resource of 90.9Mlbs U3O8 at a high grade of 600ppm, making it the third largest uranium resource in the USA.
The advanced Hansen deposit is the focus of studies and development with a 19.8Mlbs JORC resource at an exceptionally high grade of 1,270ppm (750ppm cut off). Located in Uranium friendly mining jurisdiction BLR benefits from being located in the pro uranium mining state of Colorado.
Scoping study highlights low cost, streamlined development approach. Recent Scoping Study confirms Underground Bore Hole Mining ("UBHM"), ablation and off site milling as the prefered development approach given it is the most cost effective (capex ~US$80m, opex US$29/lb) and more environmentally acceptable solution.
Removal of on-site milling of uranium may shorten the permitting timeline and create a significant advantage in the permitting process and timetable to production.
Indicative economics highly compelling. Our indicative economics using the scoping study results, based on a 2Mlb/pa production profile using UBHM/Ablation and off-site milling, highlights potential annualised EBITDA of $67m and a short payback period of <2 years.
We have assumed C1 cash costs of $29/lb and a L/T realised price for the concentrate of $63/lb.
Experienced in country management. The recent appointment of managing director Tony Simpson is also another positive development given he was formerly Chief Operations Officer at Peninsula Energy (PEN.ASX) and directly responsible for the successful exploration and permitting activities at Peninsula's Lance Uranium Project in Wyoming, USA.
Undervalued relative to peers. BLR is trading at $0.29/lb, a significant discount well below the ASX and TSX peer group for uranium explorers/developers average of $1.14/lb.
We believe this discount is unwarranted given size and grade of the deposit, location in a pro-uranium jurisdiction and highly experienced management team.
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