The following are some suggestions that were made by a financial advisor in August of 2011 regarding certain mining stocks.
In regards to Cameco Corp. they expect that during the quarter 4.8Mlbs of attributable production and 6.0Mlbs of sales volume, yielding C $492 mln in revenue. They estimated adjusted earnings of C $77 mln and cash flow from operations of C $124. Although annual revenue guidance was provided, it was difficult to predict sales volumes on a quarterly basis for investors with a high interest savings account given their lumpy nature.
Regarding Denison Mines they lowered their target to $2.00. Their target was based on a NAVPS of C $1.98 and a P/NAV multiple of 1.0x (from 1.3x). Their compressed multiple reflected lackluster results from exploration drilling at Wheeler River and the fact that DML’s production base was high cost. They said that if future exploration at Wheeler failed to identify significant new mineralization, DML would likely not deserve to trade at a premium to NAV. For the quarter, they expected production of 206klb U3O8 at cash costs of US$43.18/lb and sales volume of 273klb. They forecasted net earnings of –US$10 mln and cash flow of –US$8 mln.
For First Uranium, their target stayed unchanged at $0.70, however, their NAVPS increased 23% to $2.44 reflecting a stronger gold price deck. They maintained caution on FIU, however, given continued operational and financial uncertainty, as well as, uncertainty at the time over BEE compliance stemming from Simmer and Jack’s sale of FIU shares to Anglogold Ashanti (they most likely did not issue a guaranteed investment certificate for this stock). For the quarter, they expected production of 40koz at cash costs of approximately US $990/oz. Given high opex and SG&A expenses, they projected FIU to continue to lose money during the quarter, yielding net earnings of –US $12.7 mln.
