Broker Cantor Fitzgerald is suitably impressed with recent developments at Energy Fuels (NYSE:UUUU, TSE:EFR) and its Nichols Ranch project, in Wyoming.
Energy Fuels, which recently decided to take processing ‘in-house’ at Nichols Ranch, should now as a result achieve operating cost savings which can further improve a low-cost profile for the ISR uranium mine, according to Rob Chang, Cantor’s head of metals & mining Canada.
Chang added that the company is also making a “solid financial move” by capitalising on exchange rate fluctuations to reduce its debt load – the group made arrangements to repurchase up to C$2.2mln of convertible debentures over the next twelve months.
If exercised in full the company can reduce the number of outstanding debentures by 10%.
“We view this decision favourably as the debentures are currently trading on the TSX at a substantial discount to both their redemption amount and the amount due on maturity,” Chang said in a note.
“Moreover, the CAD-USD exchange rate has moved favourably to support this move as the debentures are denominated in CAD and EFR’s operations are in the US.”
Cantor rates Energy Fuels as a ‘buy’, and the broker’s target price of C$13.65 suggests nearly 300% upside to the current share price of C$3.72 in Toronto.
Last month, Energy Fuels revealed a US$10.02mln gross profit from its mining and milling operations in the second quarter of 2015. It told investors it continued to have a strong balance sheet and was well positioned for a significant increase in production once uranium markets rebounded.
It reported a net loss of US$2.31mln on US$23.7mln of revenue, though the loss stemmed from US$6mln of one time expenditure related to the acquisition of Uranerz Energy Corporation, which completed in June.
Some 416,667 pounds of uranium was produced and sold by the company, during the three months to June 30, at an average price of US56.74 per pound.