$URG : Ur-Energy — Independent Economic Analysis

Long-Term Price Case$65/lb. U308$65/lb. U308
ProjectLost CreekShirley Basin
Mineral Resources13,252,000 lbs.8,816,000 lbs.
Shares Outstanding143,400,000143,400,000
Market Cap$131,928,000$131,928,000
Average Annual Production1M lbs.500,000 lbs.
Recovery92%80%
LoM12 Years14 Years
Payable Product12,191,840 lbs.7,052,800 lbs.
True All-in Cost (TAIC) $35.61/lb.$38.29/lb.
Gross Revenue$792,469,600$458,432,000
Royalties($31,698,784)($18,337,280)
Gross Income$760,770,816$440,094,720
Total Operating Cost($177,757,027)($102,547,712)
Operating Profit$583,013,789$337,547,008
Wellfield Development($118,504,685)($55,152,896)
Sweetwater Property Tax($1,584,939)
Wyoming Severance Tax($10,226,560)
Carbon County Ad Valorem Tax($16,362,496)
County Property Tax($1,128,448)
Income Taxes($89,244,269)($40,130,432)
Total Capital Costs ($15,400,000)($26,200,000)
Net Income$358,279,896$204,708,672
Net Profit Margin45%45%
Absolute Cost Structure (ACS)55%59%
True Value$3.92/sh.
Cash Flow Multiple10x
Annual Cash Flow$29,390,000$13,355,000
Future Market Cap$427,450,000
Future Market Cap Growth224%
Target$2.98/sh.

Notes: All Values in U.S. Dollars

There is a great deal of value in Ur-Energy that hasn’t been baked into price. Were shares to trade between 30-40% lower in a general market decline, we would be buyers.

Rationale

At $65/lb., Ur-Energy will achieve excellent Net Profit Margins and enjoy an Absolute Cost Structure that will elude peers (On its worst day, the company’s TAIC won’t rise much above $36/lb.).

Update, 13 July ’19

We do not presently have exposure to the uranium sector in the U.S., and in light of recent developments, the likelihood of our future participation has dropped. Any consideration of a U.S. issue will necessitate a substantial discount to our estimate of True Value. In the case of Ur-Energy, an additional 20% discount to the 12 July close will be essential before a small initial stake is considered.

More likely, future exposure to the U.S. uranium sector will be gained via exposure to Cameco’s Crow Butte and Smith Ranch-Highland Projects, though at that time, we believe Cameco shares will be available to us up to 30% cheaper following a general market decline.

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