🕐15.12.14 - 04:54 Uhr

RESOURCE CAPITAL RESEARCH [RCR] - RCR COMPANY UPDATE, ALLIANCE RESOURCES LIMITED
(ASX:AGS), 12 DECEMBER 2014





Fortbridge Media Release

Resource Capital Research [RCR] - RCR Company Update, Alliance Resources Limited (ASX:AGS), 12 December 2014

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

The Four Mile uranium project (25/15 per cent AGS) has achieved stellar operating performance since commissioning April 2014 with estimated production of 1.5Mlbs Triuranium Octoxide and September quarter C2 cash costs of 33 Australian dollars per pound; a period that coincided with a 40 per cent uplift in the uranium price to 45 Australian dollars per pound currently. This should be a boom time for AGS, but withheld JV sales has put the company under pressure and forced it to return to the equity markets. With anticipated ongoing support from cornerstone shareholder Abbotsleigh, we think the recent share price rout has been overdone: 12 month target price 0.25 dollars per share.

Investment points:

* Flagship Four Mile uranium project (SA, AGS 25/15 per cent) is adjacent to the operating Beverley In Situ Recovery (ISR) uranium mine (Heathgate). Quasar is 75/85 per cent owner and manager of the project and is affiliated with Heathgate.

* High grade ISR project with a large resource base: 70mlbs at 0.33 per cent Triuranium Octoxide (11mlb AGS share at 15 per cent) plus Exploration Target upside of 41-78mlbs.

* Four Mile production commenced April 2014; first uranium shipments September 2014. September quarter production was 717klb Triuranium Octoxide at a cash cost of 24.48 Australian dollars per pound (C1, 32.99 Australian dollars per pound C2). Budgeted production for 2015: 2.6Mlbs Triuranium Octoxide.

* All production has been stockpiled to date; 510klb Triuranium Octoxide has been shipped to a converter in Canada though Quasar has declined to sell into the market. This has put financial pressure on AGS which must meet JV cash calls, and as a result, has elected to make no JV payment for 2015, diluting its interest to 15 per cent.

* AGS is currently trading near its 12 month low in contrast with other ISR uranium producers that are trading well above this at around 50 per cent off 12 month highs. The current uncertainty for AGS concerning the sales and marketing rights dispute with Quasar, the forestalled project revenue flows and associated capital raising, in our view, has led to an overly cautious market reaction.

* Rights issue announced (2 Dec) to raise 5M dollars at 0.08 per share (closes 22 Dec). AGS may secure further debt funding with support expected from major shareholder Abbotsleigh (1.3M dollars already provided by Abbotsleigh 8 Dec).

* We expect AGS to trade back to around 0.15 dollars per share on the assumption funding is secured over the next month or so. 12 month target price is 0.25 dollars per share.

* The spot uranium price is 37.75 US dollars per pound - a strong turnaround from midyear when the spot price reached 28 US dollars per pound (30 June). Positive sector fundamentals longer term are expected to drive the incentive price above 60 US dollars per pound from 2H16.

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

For further information please contact:

John Wilson
Analyst
T: +61 2 9439 1919
W:




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