ENCUF - enCore Energy Corp. (ENCUF)(EU:CA) - We are raising our price target to reflect the Azarga acquisition
We are raising our twelve-month price target on the shares of ENCUF to US$2.50 per share from US$1.50 per share. The increase in our price target reflects adjustments to our financial and valuation models to account for the proposed acquisition of Azarga Uranium. We see the acquisition as a transformative event for enCore that brings the company low cost uranium production that will fill a gap between enCore's near-term Texas production and long-term New Mexico production. Our price target increase comes on the heels of recent strength in uranium prices.We have modeled in Azarga's Dewey Burdock (2025) and Gas Hill (2026) projects. Both projects are low-cost, high-return projects with ample resources and projected production capacity near 1 million annually. We assume the projects will operate at 25% capacity in year one rising to 75% by year three. Recent preliminary economic assessments estimate Dewy Burdock operating costs and royalties near $10.50/lb. and $5.15/lb. while Gas Hill operating costs and royalties are estimated at $11.52/lb. and $0.10/lb.We have also added enCore's Kingsville plant to our models with an expected start date of 2023. Our recent conversations with management have led us to believe the company is increasingly interested in bringing the mill back on line. It will only cost a few million to bring Kingsville back on line, and its operations will give enCore increased optionality.In addition to adding costs associated with new projects; we have raised enCore's share count to reflect an assumed close of the Azarga transaction in 2022. Our multiple-stage discounted cash flow valuation model now estimates a fair value for the shares of enCore of US$996 million or $2.50 per share including the shares to be issued to Azarga shareholders. We view the Azarga transaction favorably and believe it is a key step towards enCore becoming the leading uranium in-situ recovery producer in the U.S. enCore management is aggressive, but has also demonstrated an ability to achieve the goals it has set. Read More >>