ENCUF - enCore Energy Corp. (ENCUF)(EU:CA) - enCore Signs Uranium Sales Agreement

enCore Energy executed a 5-year sales agreement with UG USA, Inc. The agreement covers 2 million pounds of U3O8, or 400,000 lbs annually. On July 30, enCore announced commencement of refurbishment and upgrade of the Rosita processing plant in southern Texas for completion in 2022-2Q. On April 6, it announced the acquisition of 200,000 lbs. of U3O8. We expect enCore to fulfill its sales agreement with production at the Rosita plant and through the sale of inventory.The agreement represents about half of Rosita's production capacity. The Rosita plant has the capacity and licensing to process 800,000 lbs. of uranium per year, perhaps more if the plant is expanded during renovation. As such, the agreement covers about half of the plant's capacity. The area surrounding Rosita has more than 600,000 lbs. of proven uranium, an amount that will expand with recent acquisitions and land development.Terms of agreement are not disclosed. The company did not disclose terms of the agreement but indicated that the Agreement has "significant delivery flexibility for market related pricing." We believe pricing may be tied to prevailing market prices. We would note that uranium spot prices have been rising in recent months and are currently around $32 per lb. Longer-term contracts typically are priced at a premium to spot prices. We believe the Rosita plant needs uranium prices in the mid forties to break even and believe uranium prices will rise to the level in the next few years.The sales agreement was one of the catalysts we identified for the stock to move forward. The agreement is further proof that the company is executing on the game plan it put forth when it agreed to buy uranium assets from Westwater Resources in September 2020. Our rating on the shares of enCore remains Outperform as does our twelve-month price target of $1.50 per share. Read More >>