Peninsula Energy: Hartleys places $0.15 price target, rated "Buy"

Hartleys Research have written a new broker report on Peninsula Energy (ASX: PEN) and have placed a $0.154 share price target, rating the stock a "Buy". Below is an extract of the report.

Company Data

Share Price: $0.067
12mth Price Target: $0.154
Valuation: $0.17
Issued Capital: 2093.4 million
- fully diluted 3173.1 million
Market Cap: 3173.1 million
- fully diluted $212.6m million
Debt (March 31 '11): $0.0
Cash (March 31 '11): $31.3 million

Large Resource Upgrade – DFS Imminent

Peninsula Energy has announced a 25% increase in its total resource from 32.9mlb to 41.4mlb U3O8. The resource is contained with the Company’s 100% owned Lance Project in Wyoming.

11.2mlb of the resource is in the Indicated or Measured category. A resource of this size starts to hint at larger scale potential, which is essential for attracting major players that could form part of the funding mix for project development.

We assume that the Definitive Feasibility Study (expected to be completed shortly) will estimate conversion of a significant amount of the inferred resource as the company has demonstrated a high conversion ratio to date.

This means that the resource figures should not vary greatly from the Pre Feasibility Study, which assumed 15mlb of recoverable U3O8.

Grade and Resource Increase in Key Area at Ross

The Company has 13 sites that are prospective for uranium in Wyoming; however, the most advanced of these is the Ross Area. This has been the focus of much of the resource drilling and will be the first area to be mined.

Ross has a total resource of 26.2mlb, 5.9mlb of this is within the first permit area where grade has now increased from 478ppm to 498ppm as the company drills out the high grade nose of the roll front systems.

The average grade thickness is also impressive at 0.55 (as compared to the cutoff of 0.2).

Vanadium Resource Increase Provides Icing on the Cake

PEN has also increased its Vanadium resource to 2.3mbl V2O5, 1.74mlb within the Ross Permit area. 90 chemical assays measured an estimated 3:1 ratio for U3O8 / V2O5, which is largely consistent with our modelling.

Barber Progressing Well, Large Regional Resource Potential

The company continues to expand the resource at Ross but is also looking to the future, with drilling at Barber beginning to firm up sufficient uranium to support a remote ion exchange plant at the company’s next most advanced site.

The ion exchange plant will provide additional feed into the central processing plant at Ross.

The company has a very large regional acreage position that has been estimated to contain resource potential of 95-145mlb U3O8. This gives Peninsula longevity with scale, providing leverage against the backdrop of our medium-long term bullish outlook for uranium.

Near Term Newsflow on DFS, Permitting, Funding and Karoo

We expect further catalysts in the near term, in particular related to the Definitive Feasibility Study, which is imminent. The Company has a strong balance sheet; however, completion of the DFS may result in advancement of a funding agreement. PEN has a strong track record of astute funding arrangements that have resulted in share price appreciation.

Permitting remains on track; however, now that the key permits have been submitted / accepted the exact timeframe for final approvals is harder to predict.

We are confident that PEN has completed this work to the highest level of quality and feedback from the regulatory bodies has confirmed this.

The company also continues to drill at its Karoo Project in South Africa, where it has achieved outstanding grades from relatively shallow depths over only a small portion of the prospective acreage.

We rate PEN as a Buy with price target of 15cps.