Peninsula Energy (PEN) - Solid Quarterlies & Positive Pilot Tests

February 11 2021, 14:28 GMT

Peninsula Energy

  • ASX: PEN
  • Shares Outstanding: 891.7M
  • Share price AUD$0.15 (10.02.2021)
  • Market Cap: AUD$130M

Peninsula Energy is an ASX listed company that owns the Lance Uranium Projects in Wyoming, the USA which is in the transition from an alkaline to a low pH in-situ recovery operation, with the aim of achieving the operating performance and cost profile of the industry-leading uranium projects.

We caught up with Wayne Heili, CEO of Peninsula Energy which has had a good month since Christmas as investors have been positioning themselves for an upcoming run in Uranium which has resulted in an increase in the company’s share price.  

Excitement Growing for Uranium

There is a lot of enthusiasm for Uranium currently as people are thinking about Uranium supply and demand fundamentals. There is a lack of inventory in the market and there is a certainty that utilities will be picking up additional Uranium probably through contracts.  The demand side of Uranium is really strong, and the supply side is weak so people are looking at Uranium now for all the right reasons. 

Peninsula Energy (PEN) - Solid Quarterlies & Positive Pilot Tests

Announcements & Progress: Quarterly Numbers & QTC Listing 

Peninsula Energy had a good quarter ending in December. They had a net cash burn for the quarter of only USD$1M and revenues from contract sales of about USD$1.4M net revenue. They accomplished a great deal in the 4th quarter and the company is sitting comfortably with a game plan to advance their next project ready for production which they can do within their means. They have cash, USD$8.4M at the end of the year, and will have revenues in 2021 from contract sales of USD$6M-8M. 

Peninsula is listed on the Australia Stock Exchange, (ASX: PEN) and recently decided to upgrade the access for US investors in moving from the OTC Greys to the OTC Pink market. They have also applied for the OTCQB markets which is a transparent marketplace where US investors can acquire foreign shares or shares that are listed in foreign countries and trade them with transparency. It takes a little while for OTC to process the application to qualify for the OTCQB markets but they hope to be listed there soon.

Peninsula now has a market maker trading their shares on the Pink and they have gone from trading about 40,000 shares per day when they were with the Grey to about 700,000 - 800,000 shares per day trading on the Pink. When they move to the OTCQB, they hope to see double that. It’s a cost-effective way to gain access for potential US investors trading in the US Dollar.

Field Demonstration Process: What to Expect for 2021 

The field demonstration process has been included as part of the quarterly company announcement.  They started a field demonstration in August with 3 full-scale patterns and the progress has been very satisfactory but it is a 12 to 18-month endeavour, so the news flow is going to come slower than investors would like.  There will be continuous news flow throughout the year of 2021 for the field demonstration. 

The process of the field trial is to deliver water and chemistry into the formation to dissolve the Uranium and the Uranium recovery curve will develop over the course of the coming months. They have been able to maintain the flow rate of 75 gallons a minute which means the Uranium solubility will be good. The acidification of the field brings the pH down and they are getting close to target pH which is close to on schedule with results as expected so the field demo is on track.

Peninsula Energy (PEN) - Solid Quarterlies & Positive Pilot Tests

US Uranium Reserve: What's Next?

The Department of Energy is likely to request information from stakeholders like Peninsula and other stakeholders in a request for public information on how they should go about acquiring Uranium and what criteria they should use. The process will take time but the government is moving forward and the Biden Administration is very supportive. The government has got a very clear, clean energy agenda and we believe that Uranium and nuclear power fits into that very well. From what we’ve seen so far from the Biden Administration, it is positive and good news for minerals and mining and good news for nuclear energy and the importance of clean carbon-free energy. 

Kazatomprom & Cameco at Standstill; What Impact Will it Have on Price & Other Producers?

Companies like Kazatomprom and Cameco are currently having to buy product in the open market due to production being curtailed by Covid. Peninsula Energy has been using the spot market and acquiring material in the markets to fulfil contracts because the price of Uranium today in the spot market is still below their expected cost of production. For 2021, the company has secured contractually all of the material that they need to satisfy their contractual requirements so there’s no impact. Peninsula has fixed the purchase price and will be guiding towards a USD$6M-8M net revenue on their contractual deliveries this year. 

Peninsula soaked up a lot of material last year in 2020 and there is a big question mark as to how much additional material is available for spot purchases.  Will it be a big quantity or will the demand in the spot coming from producers to delivering their contracts finally drive the price a bit higher.  The spot price leads the long-term price so rising spot prices mean long-term contract prices will also rise. We are currently losing primary producers that produced material and sold into the spot so that less and less material is becoming available for the spot and more and more materials being drawn out of the spot. The industry is consuming surface inventory and moving towards a higher price environment surely seems inevitable.

Spot Price & Contracts: Convincing Buyers 

Peninsula is talking to fuel buyers and looking at their options to sell into the market at prices that are favourable for their restart.  They are preparing their project for restart and the field demonstration is part of that preparation by learning from tests at a field scale, to improve their commercial production. 

The company is evaluating the timeframes and their requirements and contracts to look at when to go back into production. It is inevitable that Peninsula will be producing soon, maybe not in 2021, as they have their contracts satisfied for 2021, but possibly in 2022. 

Ultimately, the company wants to talk to their utility buyers to assure them they have the correct formula and the production capability to be able to meet their contracts. Once the spot market starts to rise, the utilities will quickly move towards securing mid and longer-term supplies contractually.

Reliability, Timing, & Assurance: Why Will Peninsula Succeed? 

Peninsula is interested in more contracts because the more contracts they have, the better they can secure the cashflow and the more motivation they have to increase production. The company aims to be producing at a higher volume for additional contracts and to get back in production sooner. 

The price has to be right and the price isn’t right in the current situation, so they will wait for the market to evolve and when it does, they will be ready with a proven project and a quick time frame to go back into production. The company thinks they are in a good position to negotiate contracts with field buyers, utilities and the US Government when they come to market to look for inventory or materials for the US utiliies. 

Peninsula Energy (PEN) - Solid Quarterlies & Positive Pilot Tests

The reason for Peninsula to complete the field demonstration, is to show the market that this technology works at this site to produce Uranium successfully in a commercial operation. Peninsula has the people, projects, permits, everything in place to be a successful producer.  People are buying into the company’s assets and ability to produce Uranium and sell it into the market and fuel buyers should have the confidence that Peninsula will be a reliable supplier of produced Uranium in the future.

The company is in a good cash situation and has more cash coming in this year from their contracts. Company overheads seem low and they’re proving the case for their technology, showing the market it will work, that it’s inevitable, it’s just a question of time. 

The quarterly results had some good numbers which were very encouraging and the field demo seems to be heading the right way. We stay in touch to find out how the field demo proceeds because that's obviously the key to significant future growth for the company.

To find out more, go to Peninsula Energy's Website.

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