In a March 25 research note, H.C. Wainwright & Co. analyst Heiko Ihle reported that Uranium Energy Corp. (UEC:NYSE AMERICAN) generated $30.5 million from a now closed offering and bought 1.4 million pounds (1.4 Mlb) of physical, warehoused U.S. uranium for $10.9 million.
Ihle also reported that H.C. Wainwright raised its target price on Uranium Energy to $5 per share from $3.60 to account for the investment bank increasing its per-pound valuation of the uranium company's ex-Texas resources to $7 per pound from $3.50. Uranium Energy's current share price is about $2.92.
The analyst discussed the Texas-based energy firm's various news items.
Regarding the financing, Uranium Energy plans to use the proceeds, garnered from issuing 10 million common shares a $3.05 per share, to buy physical uranium at low spot prices and stockpile it, and also for general corporate expenses and working capital, Ihle wrote.
He relayed the company already acquired 1.4 Mlb of uranium from Illinois-based ConverDyn for $10.9 million. Of that order, Uranium Energy is scheduled to receive 1 Mlb in May and the rest, 0.4 Mlb, in March 2022. The benefits of amassing such an inventory, according to management, are threefold. It will boost its balance sheet when uranium prices appreciate, it will assist the company with marketing efforts and it will free up its facilities to focus solely on producing uranium for U.S. initiatives, such as the U.S. Uranium Reserve for which the federal government intends to purchase $1.5 billion worth of newly mined domestic uranium over 10 years.
"We now expect the new physical uranium purchasing initiative to add incremental value through the potential for higher future uranium prices," wrote Ihle.
"We note that advancing and expanding resources is a critical step to supporting the company's plan to participate in supplying the U.S. UR [Uranium Reserve]," Ihle noted. Thus, earlier this year, it began developing a production area at its Burke Hollow in situ recovery project in Texas.
"The UR includes purchases of newly mined domestic uranium over a 10-year period for an aggregate value of $1.5B," the analyst stated. "Additionally, the FY21 bipartisan omnibus spending bill currently includes $75M for domestically produced uranium."
"We highlight that Burke Hollow already maintains all four major permits for uranium extraction," Ihle wrote.
In other news, Ihle pointed out, Uranium Energy reported Q2/21 results. It recorded a net loss of $3.5 million, greater than that of $1.9 million in Q2/20, driven by reduced income from equity-accounted investments and mineral property expenses. However, a $0.3 million gain on loan elimination partially offset these losses.
"These results are largely irrelevant given Uranium Energy's nonproducing nature, and we instead focus on the bright outlook for the firm and domestically sourced uranium in general," commented Ihle.
Looking forward for the company, he added, "we maintain our longer-term expectation that current global developments should drive higher future uranium prices that could eventually support favorable production decisions at one or more properties in Uranium Energy's portfolio of assets."
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Disclosures from H.C. Wainwright & Co., Uranium Energy Corp., Target Price Revision, March 25, 2021
I, Heiko F. Ihle, CFA, Tyler Bisset and Marcus Giannini, certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
None of the research analysts or the research analyst's household has a financial interest in the securities of Uranium Energy Corp. (including, without limitation, any option, right, warrant, future, long or short position).
As of February 28, 2021, neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Uranium Energy Corp.
Neither the research analyst nor the Firm has any material conflict of interest in of which the research analyst knows or has reason to know at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
The Firm or its affiliates did receive compensation from Uranium Energy Corp. for investment banking services within twelve months before, and will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
H.C. Wainwright & Co., LLC managed or co-managed a public offering of securities for Uranium Energy Corp. during the past 12 months.
The Firm does not make a market in Uranium Energy Corp. as of the date of this research report.
H.C. Wainwright & Co., LLC and its affiliates, officers, directors, and employees, excluding its analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered companies referred to in this research report.
