🕐16.12.10 - 16:27 Uhr

Uranium Resources (URA) - Optiva BUY note - URA, a Mantra Resources in the making?



Optiva Securities – BUY recommendation: Uranium Resources Full note attached. URA, a Mantra Resources in the making? Following the recent exploration success of Uranium Resources’ (URA) neighbour Mantra Resources and the A$1.16 billion cash offer made by ARMZ Uranium on 15 December 2010, Tanzania is now emerging as a significant uranium province that is attracting the interest of uranium producers.

Although at an earlier stage of exploration than Mantra, URA is well placed to develop a pipeline of prospects within its strategically positioned licence package covering 12,700 sq km under the guidance of an experienced resources management team and supportive institutional investors.
KEY POINTS  URA is exploring in a target rich uranium environment in East Africa.

Only 50km from the Group’s licence lies the mammoth Nyota discovery deposit held by Mantra Resources, which has a Measured and Indicated resource of 67.7m tonnes at a uranium grade of 439 parts per million (ppm), giving 65.5m lbs of contained uranium.  ASX listed Mantra is in the process of being acquired by Russian resources company ARMZ Uranium for A$1.16 billion (£735m), which values each pound of its uranium at US$10.26.  Mantra’s takeover value is 58 times the market cap of URA and underlines the value investors are attaching to advanced stage uranium plays in the region and the interest being taken by uranium majors in Tanzania.  URA has strong institutional investor backing including Estes Limited which invested a significant sum of £3.3m during 2010 to gain a 33.7% stake.  Tanzania provides an attractive African destination for mining companies with a stable government, attractive fiscal regime and established mining culture.  The Group has reported that initial results from first phase drilling in the 2010 campaign are encouraging and indicate the potential of the strata to host large‐scale uranium mineralisation.

A greater understanding of the geology at Mtonya could be gained once all the assay results and associated data have been processed in Q1 2011.  Uranium prices have risen by around 50% over the last six months to US$61.75/lb in response to Chinas’ plans to substantially increase its nuclear power station capacity by 2020 to meet future economic growth and improve nuclear use from the current 1.9% of electricity generated, compared to developed countries such as the USA at 20.2%. RECOMMENDATION We initiate full coverage of Uranium Resources with a BUY recommendation.

When the complete results from the 2010 programme are known in Q1 2011 we should be able to understand more about the geological setting of URA’s Mtonya permit.

It may also give investors an early indication about whether its licences have the potential to host not just one but multiple Nyota style deposits.

In addition Uranium Resources provides an attractive play for investors to gain exposure to a uranium stock that has yet to move higher with rising uranium prices over the last six months or the interest being shown in the region by uranium majors such as ARMZ Uranium.



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