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Growth Portfolio: Peninsular Energy Ltd (ASX: PEN)


Published 13-JAN-2017 00:00 A.M.


2 minute read

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Overview: Peninsular Energy Ltd ("PEN", "the Company") is an Australian minerals company focused on uranium with operations in the USA and Sth Africa. Its most advanced asset is the Lance ISR Project in Wyoming, USA. Resources of 51 Million tonnes (Mt) grading 476ppm U3O8, classified as Measured, Indicated, and Inferred, have been delineated at the Lance ISR Project. After completing a Feasibility Study in 2012, and subsequent Optimisation Studies in 2013-14, the Lance ISR Project commenced uranium production in late 2015.

Catalysts: PEN is positioned to benefit from a structural recovery in uranium markets. The Company has demonstrated its ability to deliver the premium-priced products in a suppressed market and has the financial support of existing institutional shareholders whilst operating conditions remain challenging. Planned Stage 2 and 3 expansions of the Lance ISR Project can increase production over 4x from current levels and over 80% of its resource base remains uncontracted.

Hurdles: There is no guarantee existing resources at the Lance ISR Project can be converted into reserves or economically extracted. Current operations have yet to reach cash flow positive territory, leaving PEN reliant on external capital. There is no guarantee further funding will be available to sustain operations or deliver planned production expansions. Uranium spot and term contract prices are presently significantly below PEN’s sales contracts and further market weakness may impair the Company’s ability to sustain these premiums.

Investment View: PEN offers speculative exposure to the uranium mining industry. We are attracted to the Company's established, expandable production profile and the strength of its share register. PEN is well-positioned to benefit from potential structural changes in global uranium markets as the world’s largest producer flags a strategic shift away from spot market sales. Amid a limited universe of investible producer stage securities, we initiate coverage with a ‘speculative buy‘.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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