Peninsula Energy (ASX:PEN) has started the application process to list its shares on the New York Stock Exchange (NYSE-MKT), giving it access to the world’s largest capital market and institutional fund managers.
The NYSE-MKT was formerly known as the American Stock Exchange or AMEX.
With its Lance In-Situ Recovery Projects in Wyoming expected to start uranium production later this year, this should drive the re-rating of the company’s shares.
The company will maintain its Australian Securities Exchange listing.
Listing on NYSE-MKT, which is expected to be completed in October this year, will provide access to an active market well versed in the benefits of nuclear power generation.
Average daily turnover of uranium peer companies dual listed on a U.S. stock exchange consistently exceed the liquidity levels achieved on their non-U.S. exchange by factor of 4 to 7 times.
Uranium companies with a listing on a U.S. stock exchange benefit from a higher relative valuation than companies that do not have a U.S. listing.
Comparable In-Situ Recovery (ISR) companies with a U.S. listing outperform companies that do not have a U.S. listing by a factor of 2 to 3 times enterprise value per pound of measured and indicated resource.
“Listing on the NYSE-MKT with production starting at the Lance Projects in the near future will allow greater alignment with peer companies, provide a more transparent valuation for Peninsula, greater US retail/institutional shareholder access and will, all things being equal, lead to a substantial valuation re-rating,” executive chairman Gus Simpson said.
The company has submitted initial application information to the NYSE as the first step in the listing process.
US-based advisors have been shortlisted with selection of the preferred advisors to be made in June 2015.
Lance Projects
Peninsula’s Lance Projects in the Powder River Basin of Wyoming have JORC ISR Resources of 53.7 million pounds of U3O8, the largest of its kind in North America.
It also has significant exploration targets estimated at 158 – 217 million pounds of U3O8. The Projects are fully permitted for U3O8 production at the rate of 3 million pounds per year, and in Stage One will produce 500,000 - 700,000 pounds of U3O8 per year, constituting 10% of U.S. U3O8 production.
The Project is scalable and can ramp up production to maximum permitted levels (3,000,000 pounds of U3O8 per year) as demand and pricing for U3O8 increase and maintain a mine life that will span many decades.
Benefits of a US Listing
U.S. investors are more aware of uranium companies - 20% of all electricity generated in the U.S. comes from 99 reactors at 61 sites, the world’s largest fleet of reactors.
Upgrades to this fleet have added capacity equal to approximately 15 new reactors in recent years and a further 5 reactors are currently under construction with an additional 22 reactors planned or proposed for future development.
With the use of nuclear power being widespread across the U.S. the domestic investment community is increasingly aware of the ability of uranium and nuclear power to generate reliable, carbon free electricity.
U.S. nuclear power generators consume approximately 50 million pounds of uranium per annum, however only 10% of this is supplied from domestic uranium mines.
U.S. utilities are increasingly seeking to diversify their source of supply and reduce dependency on uranium produced from the geopolitically unstable areas of Central Asia and Eastern Europe.
Market Liquidity and Valuation
A number of Peninsula’s peer companies are dual listed on their home exchange and on a U.S. exchange.
Trading volumes for these companies listed on a U.S. exchange compared to their home exchange show daily liquidity of 4 to 7 times higher.
Higher liquidity in a stock typically makes it a more attractive investment proposition and provides a better reflection of market value.
Greater liquidity in the U.S. is derived from an investor base that has a more comprehensive understanding of uranium and sees it as a reliable, carbon-free source of electricity generation.
Several of Peninsula’s peer companies in Wyoming commenced uranium production over the past 3 years.
As construction neared completion and production started, the market capitalisation of these companies increased significantly.
This appears to be driven by the greater number of U.S. retail and institutional investors seeking exposure to uranium and companies with U.S. domestic production.
Depth of Capital Market
The U.S. is the largest and most sophisticated debt market in the world and U.S. stock exchanges have a combined market capitalisation of US$27 trillion – by far the largest pool of capital in the world.
Increased access to this pool of capital from fund managers will be instrumental in Peninsula achieving its strategy of becoming a multi-jurisdiction uranium producer.
NYSE-MKT
The NYSE-MKT is a leading equities capital market for high growth companies. It is a fully automated, transparent platform that accepts the majority of home exchange filings from recognised foreign exchanges such as the ASX.
Sarbanes–Oxley compliance is less onerous for non-U.S. companies and listing costs are minimal while still allowing open trading of a company’s securities in the U.S. by both U.S. retail and institutional investors and full access to the world’s largest debt and equity markets.
Peninsula’s existing corporate governance protocols already satisfy Sarbanes-Oxley requirements for an NYSE-MKT listing.
It is important to note that many U.S. fund managers and other investors are unable to or not willing invest in non-U.S. listed companies.
Analysis
The planned listing on the NYSE-MKT will provide Peninsula Energy with increased access to the world’s largest capital market, supporting its strategy of becoming a multi-jurisdiction uranium producer.
Notably, its peers listed on a U.S. stock exchange have increased liquidity compared to their non-U.S. exchange by a factor of 4 to 7 times and outperform their non-U.S. listed companies by 2-3 times enterprise value per pound of measured and indicated resource.
Production from the Lance ISR Projects, which will have a mine life of at least 20 years, is expected to start later this year.
All told, this should power Peninsula to new heights. Proactive maintains its 12-18 month price target of $0.16.
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