Zoltan Ban reports that taking the announced proven, measured and half of indicated resources together, EF has about 56.5 million pounds. At current production rate, the reserve base would be sufficient for over 100 years of production. Ban indicates that one cannot expect production to remain at current levels, however, so a more realistic estimate would be about 25-50 years, depending on future production choices. In terms of the EF valuation, EF currently trades at a market cap of just over 200 million Canadian dollars, or about $150 million. Assuming an average realized price of $50 per pound for its resources, the future value of the uranium that is very likely to be extracted is about $2.8 billion.
Subtracting the liabilities of $47 million, and then adding $24 million in cash, this indicates $2.75 billion. Based on the costs applicable to revenue data from the K-10, Ban assumes that the cost of producing a pound of uranium was $31 in 2016. This is based on the sale of 1.15 million pounds of uranium and costs of revenue of $35 million, meaning that it would take about $1.7 billion to produce the reserves currently assumed to be recoverable. Subtracting the $1.7 billion from the $2.75 billion value of the reserves, Ban indicates a net value of $1.05 billion, versus a market cap of about $150 million. A fair value of 0.143 is therefore what Ban concludes, meaning that this stock could be worth a potential market cap of about $1 billion by this measure. Two advantages ban sees for Energy Fuels is the fact that interest costs were 4.2% of revenue, compared with 7% for Ur-Energy.
As Ban pointed out on many previous occasions, this is a measure he regards to be very important when analyzing resource extraction companies. He generally does not like to see an interest/revenue ratio higher than 10%. The other advantage is the sheer size of the resource base, as well as the higher potential production capacity. See: http://www.energyfuels.com/
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