De-Risking Story Continues for Uranium and Vanadium Developer

Source:

Michael Ballanger

Vanadium and uranium are two of the few commodities whose prices have advanced recently, and Michael Ballanger discusses one company that is developing projects for both elements.

Western Uranium Corp.
Symbol: WUC.CNX / WSTRF.US
Industry: Developer, U.S.-based uranium and vanadium
Primary Asset: Sunday Mine, Colorado, U.S.A.

Western Uranium and Vanadium Corp. (WUC:CSE; WSTRF:OTCQX) was first introduced to me by a colleague back in the spring of 2016 after which I determined that this was a classic valuation story where the fundamentals greatly dwarfed the share price and market capitalization. At the 2016 prices for uranium ($22/lb) and vanadium ($3/lb), I determined that WUC at CA$1.70 was undervalued by a factor of around 70% and set a $5.25 target price. After a number of corporate mis-starts and two years of poor pricing, the share price hit an all-time low this past summer at $0.54 despite a substantial recovery in uranium and vanadium prices. Accordingly, I decided to look more intensely at the factors inhibiting the share price and at the outlook for both commodities in light of trade wars, sentiment, demand and macroeconomic changes. As a result of this, I advised followers to consider acquiring a CA$0.68 unit financing being offered last June and later published a report entitled: “Western Uranium and Vanadium Corp.: Undervaluation Woes are Ending” (link) and set target prices at six months US$3.40 and twelve months at US$6.80.

Since then, the shares have advanced from CA$1.40 to CA$2.44, hitting a new 52-week high today. The shares appear poised for a technical breakout and continued ascent as the undervaluation continues to dissipate.

Why so bullish?

One glance at the charts of gold, silver, uranium and vanadium and you are immediately struck with the stark contrast in performance and trend between these four commodities. I view silver as gold’s high-octane little brother while vanadium is uranium’s twin counterpart. Not only do both pairs frequently occur in nature side by side, they usually have correlated price movements with silver outperforming (and underperforming) gold, and vanadium outperforming uranium. Now, if you are an investor covering gold and silver (as I am), you are considerably more inclined to take a position in uranium and/or vanadium than you are in gold and/or silver. Regardless of the fundamentals for the precious metals, they have acted horribly since April while uranium vastly outperforms gold, and vanadium absolutely smokes silver with a 600% move since the lows of 2016.

At current prices for uranium and vanadium, WUC controls approximately US$2.475 billion worth of inventory and at the current $37.5 million market cap, it is valued at a mere 1.5% of in-ground metal value with both commodities in uptrends.

Keeping the Sage: The company recently issued a press release updating its corporate affairs profile in which it terminated its LOI with Australia-based Battery Metals Resources Ltd. whereby BMR was attempting to purchase the vanadium-rich Sage Mine from WUC with cash payment. At the time, it was deemed a solid move because WUC had not yet closed its financing and the sale of the Sage was a well-thought-out fallback position in the event the funding came up short. As it turned out, the funding ended up oversubscribed and the urgency of the backstop facility was eliminated. As a result, WUC retains ownership of the Sage (and 5,000,000 lb of vanadium) with the proviso that something could still be on the horizon but at far more favorable terms given the outstanding performance of vanadium.

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