Exploration Commences for U308

ERIC ZAUNSCHERB, Canaccord Genuity (08/06/2009)
Event

U3O8 Corporation provided on Wednesday an update of 2009 exploration plans for its 1.3 million hectare project in Guyana. A C$3 million exploration program, including 6,000 meters of drilling, is to commence shortly. The program is largely targeted at testing albitite-hosted uranium targets around known zones in the Kurupung Batholith. A small portion of the program will advance investigation of the property's potential for Roraima Basin unconformity-related uranium mineralization akin to that in the Athabasca Basin.

Impact – neutral

U3O8 We view the exploration potential of U3O8's project in Guyana highly, as we do the capability of management to realize that potential. Balancing this positive view is the reality of dwindling working capital and low expenditures on investor relations.

Valuation and action

U3O8 We apply a mean peer EV/lb multiple of C$2.59 to the known 7.1 million pound U3O8 Aricheng global resource to generate a C$18.5 million project NAV. We attribute nil value to unconformity targets despite significant 'blue sky' potential. We apply a 0.7x target multiple to generate a C$0.90 per-share target, decreased from C$1.00, as working capital declines. We are maintaining a SPECULATIVE BUY rating given a 137% projected return. U3O8 is trading at 0.1x project NAV and 0.5x corporate NAV.

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