Readers of my Blog should know that I, for the most part, bring facts to the board, with the understanding that I have invested long term in the stocks that I outline. Energy Fuels has been a long term hold of mine, almost a year now and the key reasons are the management and technical team and the outlook for the commodity in the short to medium term. I believe EFR is the best value in the sector as a near term producer with a market cap of less than CDN$200MM.
Some of the key points for consideration are:
- 80% of the original Energy Fuels Nuclear team, the largest US producer of U308 in the 1980's has been reassembled. They have a huge database dating from the 70's-90's in the US and select properties that are economic immediately or near term.
- The company has atleast 4 past producing mines, a minimum of two of which will be brought in to production this year. Their production will be unhedged, allowing them to beneift from market prices.
- Despite being the best performing Uranium stock in 2006, insider sales are almost non-existant.
- There are only 5 or 6 public companies that will begin mining in 2007 and yellowcake production in 2008.
- A lot of money will be flowing into the sector, however for the most part big money will be going into near term producers. A new fund from Middlefield Capital has $195MM to invest, 75% of which will flow into near term producers and the fund manager Mr. Lauzon visits EFR's properties in the US this month. Companies like Cameco are already fully valued by many analysts.
- EFR moved from the TSX Venture to the TSX 3 weeks a go, and with a share price of $4.27 and a market cap less than $200MM, will be on many investor's radar. The CEO will be on BNNtv on April 13th.
In addition to all this, Resource Investor writer David DesLauriers today released a follow-up article to his Nov 7, 2006 write-up about EFR. He believes a 10 bagger from today's price is obtainable at C$40.00 in 18 months, when EFR can sell their yellowcake to market. Also, EFR is in the design stages for their own mill in Colorado, quite possibly in 2009. EFR will be a fully integrated Uranium company - exploration, mining, milling, sales and currently trades at a fraction of companies like Denison, Energy Metals or a half dozen of pure exploration plays.
Resource Investor article April 9, 2007: http://www.resourceinvestor.com/pebble.asp?relid=30720
From David's article:
...This is some serious cash flow, and given not only current peer cash flow multiples, but also our belief that the market will begin to value producers in a league of their own, we see a potential C$40 handle on Energy Fuels within 18 months
Conclusion
Since our last piece Energy Fuels has not run as hard as some other near-production names. They key is the deal with Denison, and we believe that it is an inevitability. Given that, and the caliber of the team at EFR, it is entirely possible that the scale of gains in this stock over the next 12-18 months could become geometric.
Uranium is the hot commodity and in all likelihood will continue to be. Energy Fuels is one of the handful of listed companies (you can count them on one hand) that has the wherewithal to be a uranium producer in the near-term.
This bodes extremely well for shareholders as institutions will have so few names to turn to for uranium production and pounds in the ground that will actually be produced, that names like EFR will be elevated above other listed companies, to a new level.
If the Denison deal is signed this quarter, and we understand that good progress is being made there, investors will have an instant double. Beyond that, as the company enters production, and if uranium prices hang around these levels or go higher, it is possible that we may witness a 10-fold increase in share price over the next 18 months.
