GoviEx Uranium Inc (TSX-V:GXU, OTCQX:GVXXF) is poised to deliver investors a greater than 300% return as it ramps up its Madaouela mine in Niger and the market realizes the value of its Muntanga asset in Zambia, Eight Capital analysts believe.
The analysts initiated coverage on the Africa-focused uranium developer with a ‘Buy’ rating and a C$0.70 price target, implying a 324% upside from its current share price of C$0.17.
They wrote in a note to clients that GoviEx was known for its Madaouela project in Niger which totals about 116.5 million pounds at 0.13% U3O8. The project is 80% owned by the company.
“The draw of Madaouela is its large resource and thus, it has a longer mine life. Our model envisions a 19.5-year open pit/underground life of mine producing 2.6 million pounds per annum at $43 per pound all-in sustaining cost,” they wrote.
“Once ramped up, we estimate the mine could produce $57 million in free cash flow annually on average. Our after-tax net present value 11% for the project returns C$96 million.”
However, the analysts highlighted that GoviEx’s 100% owned Muntanga project in Zambia has been long overlooked and that this was about to change.
Their model of the project envisions an 11-year open pit life of mine producing 2.5 million pounds per annum at $42 per pound all-in sustaining cost.
“We believe the market thinks of GoviEx as just a Niger story and the Zambian Muntanga angle is essentially forgotten,” they wrote. “As a feasibility study is tabled for Muntanga in the second half of 2024, we would expect this narrative to change.”
The analysts wrote that, purely on an internal rate of return basis, Muntanga screens better than Madaouela.
“At our price deck, Muntanga generated an aftertax internal rate of return of 60% versus Madaouela at 15%,” they wrote. “Thus, we model in production from Zambia/Muntanga first (2027), with Niger/Madaouela being brought online afterwards.”