C29 Metals [ASX:C29]
Metals & Mining
ASX’s most undervalued Uranium play
We initiate coverage on C29 Metals with a Target Share Price of $0.20, representing a 142% return upside from the current share price of $0.083 (the eventual upside, as we explain on page 28, is likely a multiple of this, leading to C29 arguably being the most undervalued uranium play on the ASX). C29 is a West Australian head-quartered miner that has successfully transformed its strategy from copper /gold assets in Australia to a more lucrative investment play within the uranium exploration space in Kazakhstan.
Within 7 months (unprecedented pace) of announcing its strategy pivot by acquiring its first uranium lease (Ulytau), C29 has shown remarkable progress by being granted 2 additional tenements, securing exploration and drilling approvals on Ulytau and conducting early-stage geological works on Ulytau. Within this time, C29 has also showcased its strong ability to collaborate with key stakeholders in Kazakhstan, including the local community, and as seen with the recent MoU announcement, it is developing a commercial partnership with Kazakhstan’s main uranium driller, Volkov Geology (a 100% owned subsidiary of Kazatomprom - the national & only uranium producer in Kazakhstan). Pivotal to its success has been a revamped leadership team that now has uranium sector experience, allowing the company to present a very credible strategic road map aimed at achieving tier 1 scale.
High-quality portfolio of uranium assets in Kazakhstan
C29 presents strong exploration upside potential. The Ulytau tenement is already associated with a prospective uranium exploration asset. The goal of C29’s initial drilling programs will be to conduct confirmatory drillings on historical holes with the aim of achieving JORC-compliant drilling results. C29’s other two tenements are also highly prospective because all three intersect an interpreted mineralised trend that also hosts one of the Soviet Union era’s largest uranium mines. Based on several geological and strategic factors, we are of the view that C29’s eventual uranium resource will eventually be even higher than the prospective uranium exploration asset’s at Ulytau. In line with this view, it should be noted that the sellers of Ulytau took an equity stake in C29 as consideration for the lease transfer. Additionally, Kazakhstan has a supportive environment for foreign uranium players, with the country having advantages over Australia, Canada and Africa.
Leveraged to a uranium market that has strong tailwinds
Adding to C29’s prospects, based on strong tailwinds across both the supply and demand side, the uranium market is set to remain amidst a structural supply deficit across our investment horizon (~103% price increase over the last 2 years)
Valuation indicates scope for large investment upside
Based on a conservative approach, we derive a Target Share Price of $0.20 per share. The eventual upside could be many times this because, based on Ulytau’s prospective uranium exploration asset, C29 is trading at ~$1.37 EV/uranium lb, whilst a Co. such as Alligator Energy (ASX: AGE) this multiple is ~$8.80. C29’s management has done a good job derisking the Company’s exploration strategy, leading to the strong likelihood of this differential narrowing with time.