Clock - Uranium Supply Crunch and Critical ... - Andrew Johns

Uranium Canada Research | Page 21 of 87Our EV/lb production provides some insight on current market valuation of futureproduction. Cameco’s premium reflects, in part, significant steady output andcontribution of other business arms. Paladin and Uranium One are fairly close, withPaladin receiving a slight discount over each of the next four years. Meanwhile Ur-Energy trades at only US$42/lb 2015E production – lowest of the group. On EV/EBITDA,Cameco’s reliable cash flows and dominant market position justify a premium.Exhibit 32: EV/lb Production (2011A-2015E)1,4001,2001,000800600500 400400US$/lb30020010001,140EV/lb production('11-'15)404415400376322277229196183183254233209194179866CCO DML PDN UUU URE2011 2012 2013 2014 2015Source: Raymond James Ltd., Company Reports5342Exhibit 33: EV/EBITDA (2011A-2015E)350x340x330x320x 15x310x 13x300x 10x8x5x3x0x11.4x12.4x9.8x9.7x9.5xEV/EBITDA('11-'15)nm339.3x10.9x6.5x5.2x8.5x7.9x5.6x4.1x3.6xCCO DML PDN UUU URE2011 2012 2013 2014 2015Source: Raymond James Ltd., Company Reports1.9x1.2xProfitability MetricsUranium One’s ramping ROE is a function of its earnings growth and increasing leverage.Paladin’s rising margins stem from our view of improving cost control at Langer andKayelekera – one of the main hurdles for the company moving forward. Uranium Onemaintains consistently high margins at its low cost ISL projects.Exhibit 34: Return on Equity (2011A-2015E)25%23%20%18%15%13%10%8%5%3%0%9%9%ROE('11-'15)12%10%9%nm3%6%4%5%7%10%12%CCO DML PDN UUU URE2011 2012 2013 2014 2015Source: Raymond James Ltd., Company Reports16%23%Exhibit 35: Operating Margins (2011A-2015E)80%70%60%50%Operating Margins40%('11-'15)30%20%to add10%0%CCO DML PDN UUU URE2011 2012 2013 2014 2015Source: Raymond James Ltd., Company Reports44%42%44%42%41%74%73%69%68%72%74%31%34%44%53%58%48%64%67%Financial Risk MetricsWe view Cameco as having the best balance sheet amongst our producers, with C$1.8bln in working capital and zero future capital shortfalls. Paladin has significant debt (seebelow), and on Uranium One we model US$410 mln in additional debt to fund thepurchase and development of Mkuju River project. We believe fund UPC can last ~3years without an influx of new capital (assuming no other transactions), while we modela modest funding shortfall for Ur-Energy (C$14 mln) in 2013E. We also project a shortfallfor Denison in 2013E – a more vulnerable position, given no significant near-termRaymond James Ltd. | 2200 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2