Peninsula Energy Limited

PEN Details

Peninsula Energy Limited (ASX: PEN) wholly owns the Lance Uranium Projects in Wyoming, USA, transitioning from an alkaline in-situ recovery to a low pH in-situ recovery operation. This transition aims to achieve the operating performance and cost profile as per global uranium production projects.

Results Performance for the Year Ended 30 June 2021 (FY21)

• Of the US$13.3 million cash proceeds from the sale of 275,000 pounds of uranium, only US$9.8 million was generated as revenue for FY21.
• PEN reported a consolidated group loss of US$1.4 million in FY21 after recognition of an income tax expense of US$0.5 million compred to a loss of US$7.6 million in FY20.
• The consolidated cash position, excluding security deposits and performance bonds, as of 30 June 2021 stood at US$6.7 million.

Source: Company Reports, Analysis by Kalkine Group

Quarterly Activities Report for the Period Ended 31 December 2021 (Released on 28 January 2022)

• The available cash balance as of 31 December 2021 stood at US$9.3 million.
• It had 310,000 pounds of uranium in converter accounts at 31 December 2021, with a market value of US$13 million (US$42 per pound U₃O₈).
• PEN completed MU1A Low-pH field demonstration at its flagship, 100% owned Lance Project located in Wyoming, USA at the end of November 2021.

Recent Update

On 17 February 2022, the company provided an an update on key preparatory activities for the flagship 100%-owned Lance Project in Wyoming, USA. The operational activities pertaining to the MU1A low-pH in-situ recovery (ISR) Field Demonstration concluded in late 2021. The company is currently examining the data attained from the demonstration. Additionally, the board has permitted a supplementary budget of US$3.4 million that will be utilised in an early preparatory works programme intended to enable an accelerated re-start of Lance production operations.

Outlook

PEN is advancing a comprehensive technical evaluation of MU1A Field Demonstration performance, which is likely to be complete by the end of Q1 CY2022.

As at 31^st December 2021, the company held portfolio of uranium concentrate sale agreements with major utilities for upto 5 Mn pounds U₃O₈, at the average pricing of US$53 to $55 per pound with 3.65 Mn pounds of firmly committed sales as well as up to 1.35 Mn pounds of sales optional at the election of the customers. The portfolio of uranium concentrate sale and purchase agreements have secured a forecast net cash margin of US$8 million to US$9 million on uranium sales in CY2022.

Key Risks

PEN is exposed to the credit risk, liquidity risk as well as market risk. Liquidity risk arises from the possibility that the company might witness difficulty in settling the debts or otherwise meeting the obligations related to the financial liabilities.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). In addition, a slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average) considering its decent outlook as well as better gross margin in FY 2021.

Considering the factors above, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.160 per share, down 5.883% as of 21^st February 2022.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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