Azarga Gets Thumbs Up from Analysts After Favorable Ruling on NRC License

After receiving a favorable ruling on the NRC license, its focus shifts to project economics.

Dewey Burdock

Dewey Burdock

Azarga Uranium Corp. (AZZ:TSX; AZZUF:OTCQB; P8AA:FSE) recently announced that the Atomic Safety and Licensing Board (ASLB) issued its Final Initial Decision, resolving the final remaining contention for the Nuclear Regulatory Commission (NRC) license for the Dewey Burdock In-Situ Recovery Uranium Project in South Dakota in favor of the company.

This decision was lauded by industry analysts. Haywood analyst Colin Healey wrote on December 13, "The positive decision from the ASLB is a huge boost for Azarga and significantly de-risks the Dewey Burdock Project, opening the way for aggressive advancement including pursuing other required permits for future construction and production. . .With a Final Decision rendered, the outlook significantly improves as Azarga can push forward with additional permitting at Dewey Burdock unencumbered."

Haywood has a Buy rating and a target price of CA$0.50 for Azarga. The stock is currently trading at around CA$0.21.

Eight Capital analyst David A. Talbot wrote on December 13, "In a positive move, the Atomic Safety and Licensing Board issued its final decision, resolving the final contention against 100%-owned Dewey Burdock (DB) project's NRC License in favour of Azarga and NRC staff. This means its NRC Source & Byproduct Materials License is in good standing, free and clear of any further contentions."

Eight Capital is maintaining its Buy recommendation for Azarga and a 12-month target price of CA$0.45.

Gerardo Del Real wrote in Junior Mining Trader on December 13 that the decision "is a major milestone for the company. . .The announcement paves the way for the Environmental Protection Agency ("EPA") to issue the final Class III and Class V underground injection control permits which in turn paves the way for Azarga to become a prime takeout target."

"The favorable resolution, announced this morning, of the final issue and the pending Nuclear Fuel Working Group recommendations (which are overdue), which should provide a very favorable tailwind to U.S. based uranium companies with high-margin assets like Azarga's Dewey Burdock project, make Azarga a screaming buy," Del Real added.

Blake Steele, president and CEO of Azarga, stated, "Resolution of the last remaining contention comes more than four years after the ASLB issued its Partial Initial Decision for the Dewey Burdock Project and marks a monumental achievement for the Company. The ASLB proceeding is now terminated and the Dewey Burdock Project NRC License is contention free for the first time since this proceeding commenced. This decision represents a key risk reduction event and a significant step towards realizing the full value of the Dewey Burdock Project."

With the conclusion of the license decision, the analysts' attention turned to Azarga's Preliminary Economic Assessment (PEA), which the company updated on December 4. The company released highlights of the PEA:

  • Post-income tax IRR of 50% and NPV of US$147.5 million (at US$55 per pound uranium sales price and 8% discount rate)
  • 14.3 million pounds of U3O8 production over 16 years; steady state production of approximately 1 million pounds per year achieved in year 3
  • Low initial capital expenditures estimated at US$31.7 million
  • Direct cash operating costs estimated at US$10.46 per pound of production

Colin Healey of Haywood wrote that the recent PEA impact was "muted based on the overhang of this event; robust economics now in focus. . .With all-in pre-tax cost of production of US$29/lb, Dewey Burdock should be a very resilient project capable of generating positive cash-flow even at currently depressed term market prices."

Click here to continue reading...