First Equity published a new note on Neo Energy (NEO). It said that following the Beisa projects acquisition announcement by Neo Energy Metals earlier this month for consideration of ZAR381m (c. £16.5m), this updated research note examined this impact upon the Group’s estimated valuation to determine a revised share price target.
Beisa’s acquisition adds a substantial SAMREC resource to the Group with 90.2m lbs of uranium and 4.2m ounces of gold in South Africa’s primary uranium-producing region, where uranium has been mined continuously for over 70 years. Beisa’s combined in-situ resource value is $17bn at current spot prices. It continues to rate the shares as a ‘Buy’ with a target price of 20p per share.
Background
The company is a uranium developer and mining firm. It owns up to a 70% interest in the Henkries Uranium Project, an advanced and cost-effective mine located in South Africa’s Northern Cape Province.
The Henkries deposit is situated near the border with Namibia, a region known for its active uranium mines such as Rossing and Langer Heinrich.
With over $30 million invested historically in exploration and feasibility studies, NEO is focused on enhancing the project’s mineral resources and completing an updated feasibility study. This will pave the way for a development schedule by the end of the year, aiming to advance Henkries to production.
The company is guided by an experienced board and management team with expertise in uranium and mineral project development across Southern Africa. Their strategy emphasizes an accelerated development and production plan for Henkries, while also planning for long-term exploration and growth within South Africa’s promising uranium district.
NEO, with a market capitalization of £14.3 million, has its shares listed on the A2X Markets (A2X: NEO), an independent South African exchange. This listing aims to broaden its investor base and support strategic acquisitions, particularly in South Africa.
The Henkries Uranium Project
Covering nearly 743 square kilometers, the Henkries project is an advanced, near-term uranium initiative with a low-cost profile and a potential for rapid development. It has seen over $30 million in historical investment.
The uranium mineralization is found in soft, shallow paleochannel sediments, primarily within 5-10 meters of the surface. The project allows for straightforward shallow open-pit mining and features favorable processing technology, with historical pilot tests showing good recovery rates.
NEO anticipates low capital and operating costs for the Henkries development, which benefits from excellent infrastructure. The most recent Mineral Resource Estimate from 2022 suggests potential for expanding the resource, presenting significant exploration upside.
An updated Feasibility Study, previously completed by former owner Anglo American, is currently underway. The Board believes there is a clear path to achieving low-cost production.
Recent Proposed Acquisition
This month, the company announced an agreement to acquire the Beisa uranium project from Sunshine Mineral Reserve for £16.5 million. The Beisa project is one of South Africa’s largest undeveloped uranium resources, with ‘Inferred’ resources of 90.24 million pounds of U3O8 and an additional 4.17 million ounces of gold within the Beisa Reef and adjacent Beatrix Reef.
The Beisa North Uranium Project encompasses the Beisa Reef, which extends from a depth of 350 meters to the north of the Beisa Uranium Mine. The shallow depths and steep configuration of the Beisa Reef are well-suited for narrow underground mining methods typical of the Witwatersrand Basin, which minimizes uranium-gold ore dilution.
CEO Sean Heathcote commented:
“This acquisition marks a significant milestone for Neo Energy Metals, greatly expanding our presence in one of the world’s richest and longest-standing uranium-producing regions. It reinforces our goal of becoming a major player in the global uranium market and South Africa’s leading uranium company. We plan to finalize the acquisition documentation and regulatory approvals with Sunshine Mineral Reserves in the coming weeks and secure the necessary debt funding.”
The deal is expected to close by Monday, September 30th.
Analyst View
Jason Robertson, an analyst at First Equity, has issued a Buy rating on the company. He highlights potential valuation increases due to rising uranium and gold prices, an expanded resource base, and progress toward production at both Henkries and Beisa. Robertson estimates that Beisa adds 17 to 20 pence to the current valuation of 3.33 pence, and he continues to rate the shares as a ‘Buy’ with an optimistic target price.
Zak Mir Comment: NEO delivered one of the most transformational acquisitions of the year to date earlier this month, and First Equity’s 20p share price target off the back of Beisa certainly gives investors something to shoot for, especially given that it is 20x up on where the shares are now.
If First Equity’s predictions hold true, the shares, currently priced at just 1.40p, past 5 days, could experience a significant increase in value.
