enCore Energy: CEO Departure & Q4 Operating Metrics Weigh Heavily on the Stock

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On March 3rd enCore Energy (EU) announced financial and operational results for the full year ended December 31, 2024. Overshadowing the results was the fact that it was announced that Mr. Paul Goranson was no longer serving as the company's CEO and no longer a member of the Board. Mr. Robert Willette was named as the acting CEO, effective immediately. As evidenced by the nearly 50% decline in the share price, Mr. Goranson's departure was unexpected and comes at a critical time as the company begins to navigate the slow production ramp-up at Alta Mesa. Knowing how crucial and intertwined Mr. Goranson was with Alta Mesa (from original design, operation and ultimately acquisition by enCore in 2022), we view his sudden departure as negative. That said, we reduce out 1.20x NAV8% multiple to 1.15x. Our resulting price objective equates to +105% upside from the most recent selloff yesterday.

On the operational front, given the start up of Alta Mesa in June 2024, consolidated uranium amounted to 288,589 lbs (combined from Alta Mesa and Rosita) captured on ion exchange resin. FY/2024 sales amounted to 720,000 lbs at an average sales price of $81.02 per lb (excluding converter and transaction costs). The company used 580,000 lbs sourced from purchased uranium (at $100.75 per lb), and 140,000 lbs sourced from operations (at a cash cost of $35.99 per lb). In terms of developments at Alta Mesa, uranium extraction from Wellfield 7 progressed faster than planned, outpacing wellfield replacement due to a limited number of drilling rigs in operation at the time. Towards the end of 2024, the company increased its drilling rig count from 6 in Q1/2024 to 17, while also implementing organizational changes to enhance coordination and improve efficiency in wellfield extraction. We have brought down our FY/2025 production expectation from 800,000 lbs to 700,000 lbs and remain cautious to any bottlenecks or rig availability.

We note that work continues to advance other projects such as Dewey Terrace, Upper Spring Creek, Dewey-Burdock and the Gas Hills projects. Following a near 50% selloff given the news of Mr. Goranson's departure, shares currently trade at a 0.56x P/NAV multiple.

We highlight that enCore Energy maintains (as of December 31, 2024) 8.30M lbs U3O8 in committed uranium sales from 2025 through 2033. A total of 6 of the current contracts provide the optionality to add an additional 2.2M lb U3O8 through 2033. As of the end of the year, uranium inventory amounted to 358,408 lbs. We remain constructive on the outlook for the company however acknowledge the CEO's abrupt departure will cause unease in this critical ramp-up phase at Alta Mesa. Our 1.15x NAV8% multiple (lowered from 1.20x previously) equates to a price objective of $2.75 per share, or upside of ~105% from the most recent, post-selloff close.