5 dec. 2019
Why enCore Energy Corp . $EU, $ENCUF is the opportunity with the most asymmetric risk / reward I've seen?
1. Sector: The intrinsic structure of the uranium sector makes it ultra-cyclical. In the previous cycle the price of the mineral multiplied by more than 10x and the companies multiplied by more than 20x and some by more than 50-100x. Ie. $PDN $CCJ $UUUU $DML
2. Offer/ Demand situation: The current uranium prices doesn't encourage the existence of an offer that covers existing and growing demand, so prices should increase at least 2 to 3 times.
3. Management: Bill Sheriff and Dennis Stover, two of the world's leading uranium experts, head a management previously led Energy Metals Corp. from a $ 1.7 million market capitalization to a $ 1.8 billion market cap in 30 months, before being acquired by Uranium One Inc.
4. Assets: The company has assets in Utah, New Mexico and Arizona. Utah assets will allow them to create quick cash flow to open the rest of the mines. AZ's assets are the Breccia Pipes, one of the world's largest uranium deposits to develop.
5. Cash Burn Ratio: Average cash burn of the last 8 quarters is 140k CAD / Q = 560k CAD / year. Given that its current market cap is 20M CAD, the Cash Burn Ratio / Market Cap is 2.8%. The sector average >15%. Here it influences that enCore management does not receive salaries.
6. Shareholders: Management has 10% of the company, and has other important shareholders: Sachem Cove Special Opportunities Fund, L2 International Opportunities Fund, Energy Fuels Inc ., NZ Uranium, Pat DiCapo, PowerOne.
7. Price: The company is currently trading for less than 20M CAD, with what seems difficult to lose money (low risk) and the potential is huge (great reward). (not to date)
Disclosure: I'm long $UE, $ENCUF.