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Investment thesis
Executive Summary
Uranium Energy Corp ("UEC") is a leading North American uranium mining and exploration company. It controls one of the most significant uranium resource portfolios in the Western Hemisphere. UEC has other diversified holdings of uranium assets, including one of the largest physical uranium portfolios of U.S. warehoused U3O8; and a major equity stake in the only royalty company in the sector, Uranium Royalty Corp. Uranium Energy Corp is well positioned to capitalise on the world’s increasing demand for uranium to fuel low-cost, safe and reliable clean baseload energy.
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WHAT THE PRO’S ARE ASKING
Here are the questions that professional investors are asking before making an investment decision.
The key risk points to the fact that UEC has never actually produced uranium. It went public in 2007 at the height of the last uranium bull market and since the subsequent crash, the uranium market has been inactive. With plans to restart some production in August 2024, it will be relying on the skills and leadership of its management team to facilitate this transition. Thankfully the UEC management and Board of Directors have hundreds of years collective experience in the uranium industry and at some of the more senior miners.
No, there is no debt on the balance sheet and all acquisitions of uranium assets have historically been financed with cash/equity.
UEC and its management team made very strategic acquisitions of uranium assets ("mines/sites") at the bottom of the uranium cycle, the majority made since 2017 at uranium prices ranging from $20 to $45/ lb, equivalent to $564m of accretive acquisitions. It has total resources of 226.2 million lbs of 'measured and indicated' U3O8 and 102.7 million lbs of 'inferred' U3O8 within its portfolio of mining and exploration sites. This is the largest and most diversified resource base in the Western Hemisphere. UEC has a physical uranium portfolio with 1,166,000 lbs of Inventory on hand (as at Jan 31 2024) and 1,000,000 lbs to be purchased through December 2025 at average cost of ~$39/ lb. It has total resources of 226.2 million lbs of 'measured and indicated' U3O8 and 102.7 million lbs of 'inferred' U3O8 within its portfolio of mining and exploration sites. This is the largest, fully permitted, low-cost ISR projects resource base of any U.S. based producer. UEC has licensed U.S. capacity to produce 8.5m lbs of U308 per year from its sites.
Small Modular Reactors or "SMRs" are seen as a key innovation due to their lower capital costs, modularity, and enhanced safety features. They are expected to drive the future growth of nuclear power and, consequently, uranium demand. 300 SMRs are expected to be added to the U.S. grid over the next 25 years which would double today’s U.S. nuclear output according to the National Energy Institute.
Unhedged means that a uranium producer or miner sells its uranium at the prevailing market price at the time of sale, rather than locking in prices through long-term contracts or hedging strategies. The upside potential of being unhedged is that during periods of rising uranium prices, unhedged companies can realise higher returns compared to hedged companies, which have locked in lower prices through contracts. However the flip-side is that unhedged companies are more exposed to the volatility of uranium prices. If prices fall, companies may suffer lower revenues and profitability. That UEC is 100% unhedged to uranium spot price indicates that it believes the combination of future demand for nuclear power and a structurally tight uranium market will continue to drive up the uranium spot price which will be of benefit to the company.
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