🕐08.05.14 - 06:54 Uhr

RESOURCE CAPITAL RESEARCH [RCR] - RCR COMPANY UPDATE, ALLIANCE RESOURCES LIMITED (ASX:AGS)





Fortbridge Media Release

Resource Capital Research [RCR] - RCR Company Update, Alliance Resources Limited (ASX:AGS)

Resource Capital Research has released an equity research report on Alliance Resources Limited (ASX:AGS).

Flagship Four Mile uranium project (South Australia, AGS 25 percent) commenced production in April 2014 at a rate of 2-3mlbpa. It is a superior quality ISR project with high grade resource: AGS target price is 50 cents/share based on ISR producer peer comps.

Investment points:

* Flagship Four Mile uranium project (SA, AGS 25 percent) is adjacent to the operating Beverley In Situ Recovery (ISR) uranium mine (Heathgate). Quasar Resources Pty Ltd (Quasar) is 75 percent owner and manager of the project and is affiliated with Heathgate.

* Four Mile production rate 2-3mlbspa; experienced operations team. First uranium sales expected July 2014.

* It is a high grade ISR project with a large resource base

* AGS preferred development model is for a 5mlbpa stand-alone plant (subject to market conditions). An Optimisation Study (2011) indicated capex of Australian dollar 200m, opex Australian dollar 21.53/lb.

* Strategic alliance with ITOCHU Corporation (July 2014): option to acquire a 40 percent stake in AGS to fund the standalone plant, subject to a favourable outcome in litigation with Quasar.

* Litigation with Quasar for restitution of 75 percent of the Four Mile Project due to go to trial 30 June 2014 and run 5 weeks. A positive result for AGS could also drive a significant share price rerating.

* No debt. Cash Australian dollar 20m (April 2014), projected to cover start-up cash calls through 2014. Assuming AGS has cash of Australian dollar 8m in July, a modest capital raising could be required FY15, subject to the uranium price.

* The target price for the company is 50 cents/share based on comparable international ISR peers that are trading at US dollar 10-25/lb (MI resource). AGS is currently trading below these at US dollar 6.34/lb (MI resource).

* The uranium price is US dollar 29.00/lb (spot); US dollar 45/lb (contract). Challenging market conditions are expected to persist short to mid-term, though a turnaround is anticipated as Japanese reactors start to come back online, possibly 2H14. Significantly, uranium fund UPC raised Canadian dollar 57.6m Feb 14 in a sign that investors are looking to a market turnaround. Positive fundamentals longer term are expected to drive the incentive price above US dollar 60/lb.

To view the full report please click on the link below:

For further information please contact:

John Wilson
Analyst
+61 2 9439 1919




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