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Late last week, Premier American Uranium (PUR) announced the receipt of an additional Part 3 drilling permit for the Cebolleta Project, located in New Mexico. The permit allows for drilling of up to 25 boreholes utilizing 25 drill pad surface areas for further exploration on the property. As the project continues to de-risk, additional drilling this year will lead to an update to the MRE along with a project PEA targeted for mid-2025. We maintain our C$3.00 per share target which equates to upside of +104% from the most recent close.
CEBOLLETA PEA TARGETED FOR MID-2025
The newly received permit (application submitted in March 2024) was initially designed to aide with the additional confirmation drilling anticipated to be required to validate the historic drilling for inclusion into a Mineral Resource Estimate (MRE). Recall that in June 2024, the company completed a MRE relying on confirmation drilling completed in 2023. As such, the company expects to realize cost savings over its original confirmation drilling budget. Up to five technical confirmation drilling holes in Area 3 are being considered, as are permit amendments, possibly for expansion drilling. Goals for 2025 include the continuation of cultural, archeological and biological studies to support a Part 4 permit application, drill work under the newly issued Part 3 permit, and update to the Cebolleta MRE and eventually materially de-risk the project with the completion of a Preliminary Economic Assessment (PEA) in mid-2025.
The aggressive timeline for the year comprises the following:
Continuation of cultural, archeological and biological studies to support a Part 4 permit application.
Drill work under the newly issued Part 3 permit.
Update to the MRE and a Preliminary Economic Assessment targeted for mid-2025.
Included in the portfolio given the acquisition of American Future Fuel (AMPS) in June 2024, the announced MRE from last summer was built upon nearly 3,600 historical holes (569,000m) and $75.0M in historical expenditure. Relatively shallow sandstone hosted uranium deposits are seen as amenable to both underground and open-pit scenarios. The MRE estimated 18.6M lbs contained in the Indicated category (6.6M tons at 0.14% U3O8), along with 4.9M lbs in the Inferred category (2.6M tons at 0.10% U3O8). Mineralization remains open on trend with certain prospective areas (Willie P) not included yet in the current MRE.
Uranium mineralization at the Project are the northern extension of the Jackpile-Paguate trend of uranium deposits, which is one of the largest sandstone-hosted uranium endowments in the world. Collectively, the mines of the Laguna mining district produced more than 100M lbs of U3O8 from the Jackpile-Paguate trend during the period from 1951-1983, as documented by geologists of the New Mexico Bureau of Geology and Mineral Resources and the US Department of Energy. The northern continuation of the Jackpile-Paguate trend of uranium deposits onto the southern part of the Project property is well established, however the extent of mineralization has not yet been fully defined. Herein lies the identified growth opportunity for the company. The current resource is as follows:
VALUATION
Given the work expected to be undertaking this year at Cebolleta along with a second drill campaign at the Cyclone ISR Project (Wyoming), we continue to see compelling, exploration based potential. This multiple is on par with peers in Wyoming, despite having an exploration target at Cyclone (7.9M-12.6M lbs U3O8) and the established resource at Cebolleta.
Factoring corporate adjustments and using a per lb valuation for both Cyclone and Cebolleta, we derive a C$4.95 per share valuation. Applying a 0.60x NAV multiple, we maintain our C$3.00 per share (rounded), 12-month price objective. This equates to upside of +104% from the most recent close. Shares of Premier American Uranium currently trade at a P/NAV of 0.30x.