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DISCLAIMER: Any written content contained herein should be viewed strictly as observation, analysis & opinion and not in any way as investment advice. No compensation was received for this report. Visitors to this site are encouraged to conduct their own due diligence.

Leveraging our preference for relatively low-cost (C1), long-lived copper projects located in mining friendly jurisdictions, Taseko Mines Ltd. (TKO-CN, TKO-LN, TGB) fits the bill on all fronts. With current mining operations in British Columbia (Gibraltar), the production portfolio is expected to be supplemented in the near term with a second operation located in Arizona (Florence). Though both cornerstone copper assets are polar opposites (Gibraltar being Canada’s second largest open-pit copper mine and Florence being an in-situ recovery operation), low costs and environmentally friendly mining methods are hallmarks for both. Further in the pipeline, British Columbia based assets such as Yellowhead and New Prosperity add meaningful Proven & Probable reserves for future optionality – with both of those assets currently being carried seemingly for free at current valuations.

Underpinned by a LT $4.35 per lb copper price and using a weighted valuation methodology incorporating a 1.10x NAV7%-8% target coupled with a 6.5x 2024 EV/EBITDA multiple, we establish a C$3.80 per share, 12-month price objective. This represents upside of +110% from the most recent, intra-day TSX quote. Recent weakness among copper miners has been brough upon by debt ceiling concerns, a strengthening dollar, LME inventories reaching the highest level since March and increasing talk of deflation spurred by recent US and Chinese CPI and PPI figures. As such, shares of Taseko Mines have declined by -20% since the start of the month. That said, shares currently trade at a hard-to-justify 0.53x discount to NAV. This is territory often reserved for non-producing exploration/development companies and not a company such as Taseko which has demonstrated a historic record of positive EBITDA, successful project development and the building of a copper reserve which now outclasses larger peers such as HudBay Mining (HBM), Capstone Mining (CS) and Ero Copper (ERO).

Gibraltar: Earlier this year Taseko increased its ownership stake (from 75.0% to the current 87.5%) in the Gibraltar mine for a total consideration (including contingent payments) capped at $117.0M and to be paid over a 5 year period. Since re-starting the south-central BC mine in 2004, Taseko has invested nearly $700M since 2007 to build a state of the art facility capable of reaching a design capacity of 85,000 tpd (from an initial 36,000 tpd) which at peak may lead to production levels of up to 130M lbs of copper (100%) per year. These upgrades were completed in late 2012. Additionally, due to the reliance of hydro power, Gibraltar has been quantified as a low-carbon operation following independent verification and analysis. Gibraltar has been ranked in the lowest quartile compared to other copper miners throughout the world with Scope 1 GHG emissions of 1.66 t CO2e/t Cu eq. per pound of copper produced. Annual production since 2017 has averaged just below 125M lb however production levels have dipped during the pandemic years and due to a primary recovery shift from the Granite pit into the Pollyanna and Gibraltar pits. That said, mill production is expected to exceed design capacity over the course of FY/2023 as management has guided for 115M lbs of copper production (100%). Over the currently remaining 20-year LOM, we forecast annual production to average an attributable 106M lbs with an the average C1 and AISC being $2.33 and $2.56 per lb. With the major upgrades and refurbishments out of the way, we see Gibraltar as a low maintenance mine which should run consistently near operating capacity while generating stable EBITDA margins in the high 30% level.

Florence: Located south-east of Phoenix, the Florence copper project was acquired in 2014 via acquisition od Curis Resources (the name Curis implying Cu Copper RIS recovery in situ). Following $135M+ invested by the likes of Conoco, Magma copper and BHP Copper, Taseko has since acquisition invested $165M in Florence, including $25M to build a production test facility (PTF) which was inaugurated in 2018. Located near all needed power, transport and rail infrastructure, the current economics envision a 21 year LOM ISR operation capable of producing an average of 85M lbs of high grade copper cathode per year. Much like the ISR recovery methods currently used for uranium recovery in Wyoming or Texas, much of the same process involving injection wells (weak sulfuric acid) and corresponding recovery wells would be used for Florence. Between 2018-2020, the PTF demonstrated smaller scale ISR proof of concept (we visited the site back in 2018). The PTF facilities consisted of an ISR wellfield, a SX/EW processing plant, an acidic reverse-osmosis water treatment plant, a water impoundment, run-off pond, and associated infrastructure. The PTF wellfield was comprised of four injection wells, nine recovery wells, seven observation wells, and four multilevel sampling wells. The purpose of the PTF was to demonstrate hydraulic control and confirm the oxide ore zone behaves hydrologically as an equivalent porous media thereby ensuring protection of underground sources of drinking water. The pictures below are of the various injection/recovery wells and the PTF itself from our visit to site in late 2018:

Today, all that is needed is the final Underground Injection Control Permit which is expected to be issued by the EPA in the months ahead. Once in-hand, a 12-18 month construction period will commence (orders for long lead items have already been placed). We assume production start come 2025. A revised technical report (issued on March 31, 2023) confirmed the production of 1.50B lbs of copper over the total 21 year LOM. Being more conservative, we model the operations to be slightly below the report parameters. We envision an average of 80M lbs of copper produced annually at a C1 cash cost averaging $1.33 per lb (compared to $1.10 in the report). We see grades equating to approximately 1.7 g/L with recoveries increasing to above 70% over time. The total remaining initial capex is seen at approximately $230M, all of which is covered given current cash on hand and a US$400M debt package closed in February. Additionally, keep in mid that in early May a $50M ATM offering was announced (effective until May 26, 2025). In terms of partnerships, recall that in late 2022, Mitsui announced a strategic $50M partnership deal for the development of Florence. The deal itself involves a copper stream on 2.67% of the copper produced (at a delivery price equal to 25% of the copper market price). Moreover, an offtake agreement was signed between both parties for 81% of the copper cathode produced at Florence during the initial years. Mitsui also has the option for an additional $50M investment in return for a 10% equity interest in Florence. Taseko retains a buy-back option on the copper stream. Our production estimates for Gibraltar and Florence are presented below:

Other assets further in the pipeline include the Yellowhead and New Prosperity copper projects which both currently boast billion lb reserves in British Columbia. Aley, also located in in British Columbia is the world’s largest undeveloped niobium deposit (outside of the two operating niobium mines located in Brazil). The total reserves include 84M tonnes in the Proven & Probable category, grading 0.50% Nb205. All of the above mentioned pipeline projects have Preliminary Economic Assessments demonstrating robust economics and long LOMs for the given commodities. Given that that immediate focus is solely on Florence, New Prosperity, Yellowhead and Aley present attractive upside optionality which may either be monetized or developed in the future should pricing remain elevated. For the sake of valuation, these three pipeline projects are hardly given any market value (and for the time being, minimal value in our books as well).

Long-lived mining operations are built on back of quality Proven & Probable reserves (note: pure copper reserves, not a polymetallic mixture of copper equivalent, CuEq). Which is what makes the heavily discounted pipeline projects that more significant. Emphasizing this point, when compared to much larger peers such as (among others) HudBay Mining (HBM), Capstone Mining (CS) and Ero Copper (ERO). The resulting P&P lb. per Mcap is displayed below and emphasizes the severely discounted values currently ascribed to Taseko’s entire project portfolio:

When looking solely at Taseko within the lens of Gibraltar and Florence, our conservative estimates lead us to a waterfall equity valuation of $1.15B representing a marked discount of -52% when compared to the current market capitalization of $545.5M

Underpinned by a LT $4.35 per lb copper price and using a weighted valuation methodology incorporating a 1.10x NAV7%-8% target (75%) coupled with a 6.5x 2024 EV/EBITDA multiple (25%), we establish a C$3.80 per share, 12-month price objective. This represents upside of +110% from the most recent, intra-day TSX quote. Select items from our near-term financial projections along with our valuation methodology and sensitivities are below:

Ultimately, the Taseko Mines story is one of consistent copper production from Gibraltar, meaningful, near term ISR production upside from Florence (fully financed) along with longer term (heavily discounted) optionality from the billion+ copper reserve projects such as Yellowhead and New Prosperity. All assets are located in the mining friendly jurisdictions of British Columbia or Arizona (Florence). Including the longer term portfolio pipeline which is currently being entirely discounted by the market, the Proven & Probable reserve base exceeds that of numerous much larger copper producing TSX listed peers.

DISCLAIMER: Any written content contained herein should be viewed strictly as observation, analysis & opinion and not in any way as investment advice. No compensation was received for this report. Visitors to this site are encouraged to conduct their own due diligence.

Earlier today, enCore Energy (EU-NYSE, EU-TSXV) provided an update concerning developments with the Alta Mesa ISR production restart. Ultimately, the bottom line is that the plant processing upgrades and refurbishments are progressing ahead of schedule and just as importantly, under budget. Following the March 15, 2023 formal production re-start decision, management has re-iterated its target to attain production in early 2024. Given the continued de-risking efforts at Alta-Mesa, coupled with the reaffirmed production restart timeline, we maintain our outlook on the stock while increasing our target NAV multiple from a previous 1.05x (target $3.55) to the current 1.10x, resulting in a new 12-month target of $3.70 per share. This represents upside of +72% from this afternoon’s intra-day quote. With a string of asset acquisitions now well in the past, the enCore Energy story is no longer driven by ever-evolving asset acquisitions but is now characterized as a focused story with a clear pathway to production over a well defined timeframe.

As per progress report, the specific work underway at Alta Mesa includes minor renovations, equipment upgrades and refurbishments. It has been estimated 90% of the piping and valves remain operational with minimal maintenance required. Of the 40 pumps and motors needed for operation, 30 are being rebuilt and refurbished on site (as opposed to placing brand new order which would surely trigger supply chain risks and timing delays for delivery). Given a current global resource of just over 20.1M lbs U3O8 (of which 3.4M lbs are exclusively in the Measured & Indicated category and the balance in the Inferred category), we currently model a 10-year LOM averaging 1.10M lbs per year at an average cash cost and AISC of $21.00/lb and $38.00/lb respectively. Recall that the Alta Mesa Central Processing Plant (CPP) is currently licensed for an annual production capacity of 1.50M lbs per year. In addition to the Dewey Burdock Project, our company wide production estimates remain as follows:

A large part of our positive inclination towards the Alta Mesa project is due to the fact that the CPP is located on 200,000+ acres of private land in South Texas. As opposed to the other Texas properties (Rosita South, Butler Ranch and Upper Spring Creek), we continue to believe that there is ample room for considerable Alta Mesa exploration upside given the sheer size and under-exploration of the property. Exploration drilling will be undertaken in due time as targets have already been identified. As part of the announced progress report, it was specified that there are currently 6 drill rigs currently on site at Alta Mesa, with a 7th drill rig expected to be added shortly. The drilling program has uncovered significant grades in the Middle C unit underlying Production Authorization Area 7 (PAA7). With 81 drill holes drilled to date, some of the new highlight results delineating PAA7 include:

Note that as uncovered from the recent drilling, the Middle C unit was not previously known to contain any uranium mineralization. There will be some additional focus in that area going forward. Elsewhere, a total of 14 drill holes are being cased as injection wells and 14 as recovery wells as the delineation program continues to refine the exact pattern for injection and recovery wells in order to maximize production efficiency.

Though Rosita production is expected by late 2023, Alta Mesa with its estimated 10 year LOM followed by Dewey Burdock (located in South Dakota, estimated to commence production in 2025) represent much more of the corporate value drivers. Our largest concerns with the enCore Energy story have been with the ever-changing production asset base and time frames, given the fast paced level of acquisitions since 2020 (Westwater Resources, Azarga, Alta Mesa). For context, we highlighted these acquisitions and concerns in our previous note from January (link here).

Given that the corporate story is now well defined and that the flagship Alta Mesa asset is well known to management (current CEO Paul Goranson was directly involved with AM’s planning and operations when previously owned by Mestena Uranium LLC) we see the asset as advancing on pace and on budget, and as such, substantially de-risking. While maintaining our $70/lb LT uranium price forecast, we now ascribe a higher NAV multiple for enCore Energy, increasing from 1.05x to 1.10x which bumps our 12-month target higher to $3.70 per share.

DISCLAIMER: Any written content contained herein should be viewed strictly as analysis & opinion and not in any way as investment advice. No compensation was received for this report. Visitors to this site are encouraged to conduct their own due diligence.

Peninsula Energy (PENMF) provided an operational update for its flagship ISR Lance Project, located in Wyoming. As the company ramps up the pre-production wellfield conditioning flow rates, final site construction has been rapidly advancing as delivery of several long lead-time items was received in April. That said, management remains confident for a production restart in mid-2023. Given out LT uranium price forecast of $70/lb, we maintain our 1.3x Premium to NAV8% valuation equating to +147% upside from the current level. We continue to see Peninsula Energy as the most compelling risk/reward story in the entire US ISR uranium sector.

Following a tough winter season, the construction milestones have started to add up this spring. At the existing production plant, the installation of the concrete foundations and pedestals for the high-capacity sulfuric acid and hydrogen peroxide storage and delivery systems is progressing well. A second acid tank has been received and will be installed shortly. Though the delivery of a high-capacity peroxide storage tank has been delayed (due to inclement weather), the plant possesses a smaller capacity peroxide addition system which will be able to support production in the interim. The overall plant upgrade work (in order to be low-pH compatible) is expected to be completed in June 2023. Just as importantly, the capex thus far has been tracking the projections ($8.4M) from the August 2022 Definitive Feasibility Study (DFS).

In terms of wellfield preconditioning at Mine Unit 1 (MU1), well patterns are being acidified and ahead of the production operations. Currently, flow rates of 500 gallons per minute (GPM) have been established and are expected to increase in the months ahead. Wellfield transformation activities have also advanced to Mine Unit 2 along with several drilling rigs preparing Mine Unit 3.

There are currently three US focused ISR developers in the process of re-launching commercial production activities: Both Peninsula Energy and Ur-Energy (URG) have set sights on mid-2023 production while enCore Energy (EU) looks to re-start Rosita before the end of the year, followed by re-starting Alta Mesa production sometime in 2024. Our current projections are as follow:

Though Energy Fuels (UUUU) has a portfolio of conventional uranium and ISR assets (Nichols Ranch), its current focus is on the production of Rare Earth Elements and not on uranium. Meanwhile, with Uranium Energy Corp. (UEC), a concerted commitment to restart or develop operations (whether at Hobson or Irigaray) has yet to be made. Peninsula Energy is singularly focused on its flagship Lance Project – strictly speaking, we see the most upside with Lance owing to the fact that the DFS restart plan was derived from a mere 21.8M lbs (with ~14.3M lbs produced, given an estimated 65.8% recovery) encompassing only the Ross and Kendrick production areas. If one were to expand the resource acreage to encompass the entire 8km x 37km area (now including Barber, highlighted in green in the map below), an additional 31.8M estimated lbs can more than double the project LOM. That said, additional delineation drilling to upgrade the Barber resource from Inferred to Indicated will be needed, but the point is that resource expansion risk is well on the upside. Both the LOM and corresponding LOM economics can potentially improve greatly.

In addition to the fact that the company is still perceived to be an Australian company with some historic assets located in South Africa (luckily since divested), the valuation disconnect (underperformance) to North American peers has been pronounced over the years, and still is to this day. A secondary listing following a much needed share consolidation in North America would go a long way towards pushing for a new investor base outside of Australia and into North America and Europe instead. A certain level of re-branding, marketing and investor engagement in order to create awareness and to pivot from a perceived Australian company to an American one instead would be beneficial in more ways than one.

That said, since an investment into a near-term uranium producer is an investment into that specific asset which will next provide for sustainable cash flow, strictly on a per flagship uranium asset basis, Peninsula’s Lance project exhibits a profound discount to peers. We see this discount when looking at Lance in its entirety (global resource of 53.6M lbs) or even when looking at the very same DFS project metrics (21.8M lbs without Barber - exclusively from Kendrick and Ross). As a caveat to the comp tables below, recall that Uranium Energy Corp. has not committed to any re-start timeframe while Energy Fuels is currently a play on Rare Earth Elements, making its uranium portfolio less of a priority. Lance at an EV/lb of $1.9 (or $4.7/lb using the lower DFS resource figures) is trading at a much lower EV/lb multiple to the Ur-Energy's Lost Creek Project ($12.3/lb) and enCore Energy's Alta Mesa ($9.9/lb) or Dewey Burdock ($13.9/lb).

Given the significant potential for further resource expansion, note that the Ross Processing Facility (refurbished in 2015) has one of the highest presently licensed capacities among peers at 3.0M lbs U3O8 per year (ranking only below Smith Ranch-Highland's 5.5M lb capacity and Hobson's 4.0M lb capacity). Moreover, the introduction of a low pH ISR method used for extraction will generate a higher overall resource recovery factor accomplished at a faster pace (more uranium extracted over less time). Note that Peninsula Energy is the only fully licensed company for low pH ISR production. We feel that these are key points which are more often than not ignored when presenting any form of economic analysis. This is what leads us to our conclusion that Peninsula offers the highest risk/reward ratio per current valuation among domestic ISR peers. Recall as well that that the LT committed sales portfolio is one of the largest among peers - it currently includes 5.25M lbs of firm U3O8 extending until 2033.

Valuation: We continue to target a 1.30x NAV8% multiple based on a LT uranium price of $70/lb. This results in a 12 month target which would imply +146% upside from the most recent close. Shares of Peninsula Energy currently trade at a 0.53x discount to our calculated NAV8% estimate. Our calculated price sensitivities are presented below. Keep in mind that the company discloses financials as per Australian regulations. We continue to forecast a 10 year LOM extending until 2034 (inclusive of production from Ross and Kendrick only) averaging ~1.3M lbs per annum at a cash cost of $19.70 per lb (or AISC of $42.71 per lb).

Peninsula Energy's current 0.53x P/NAV discount is by far the largest discount within the US ISR peer group. This includes enCore Energy (currently trading at a P/NAV of 0.68x) and Ur-Energy (P/NAV of 0.70x). We feel that a 1.30x NAV multiple is justified on 2 fronts: Management has a successful track record (multiple decades) of developing ISR assets into production. Peninsula Energy’s current CEO was brought on board after having successfully de-risked, developed and put into production the ISR resource at Ur-Energy’s Lost Creek operation. Secondly, the upside from the large resource at Barber is essentially carried for free, but will very likely extend the Lance LOM and annual production rate to the licensed 3.0M lbs per year. If licensed capacity production is achieved, Lance would thus become one of the largest uranium producing properties located in the US.

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