Tuesday, September 13, 2011

What Scotia thinks of Hathor (HAT.to)

Right here below, and FWIW  Scotia is calling it right imho (disclosure: your humble scribe is long HAT, smallish trading position)

Preliminary Assessment of HAT’s Roughrider – High Grade + Low Capex = Very Attractive Economics even Before Including the Far East Zone:  This morning, Hathor Exploration (HAT-CN, not covered) released the much anticipated Preliminary Assessment for its Roughrider Uranium Project in the eastern Athabasca Basin of Saskatchewan.  Scotia Mining Sales is eager to see the full study (to be posted on SEDAR within 45 days) but the summary of the results is very encouraging in terms of both the forecasted capital costs (only $468mm pre-production, including $172mm for Processing Facilities and a 25% contingency).  Also, operating costs are very attractive at an estimated $14.44/lb U3O8 which compares very favourably to Cameco’s Athabasca operations and projects (i.e. $23.14/lb U3O8 at Cigar Lake and $19.69/lb at McArthur River ).  The low costs are due to a) the proximity to existing infrastructure, b) the high grade nature of the deposit, which minimizes the mining rate and mill throughput.  Both of these are features that contribute to making the Athabasca Basin the world’s most important uranium producing jurisdiction.  Looking at the reported project economics, Scotia Mining Sales thinks the $60/lb U3O8 case is the most appropriate, which produces a pre-tax NPV7% of $769mm discounted back to the start of construction (or 32% IRR and 1.6 year pay back).  It is important to note that this analysis does not include the Far East Zone which has yet to be included in the resource estimate (but which Scotia Mining Sales thinks adds 13-17mm lbs to the current ~58mm lbs resource).  Scotia Mining Sales assumes a roughly 4 year permitting process with production beginning in 2020 after a 4 year construction period.  Discounting all the way back to beginning of 2012, Scotia Mining Sales estimates a pre-tax NPV7% of ~$570mm, or roughly $4.50/HAT share, and suggesting significant upside beyond CCO’s current $3.75/sh bid for HAT.  Including the Far East Zone in the resource boost Scotia Mining Sales’ 2012 NPV7% to $731mm or $5.85/HAT share.  Conference call to discuss the PA is scheduled for 1pm EDT today: 1-877-353-9586.  http://www.hathor.ca/s/NewsReleases.asp?ReportID=478741