Late last week dealing volumes in the main market listed Neo Energy Metals (LON:NEO) were almost doubled following news that it had signed formal documentation for its South African 90Mlb Uranium Acquisition at Beisa North and Beisa South. 

The Business 

The shares of this Uranium developer and mining company are also quoted in South Africa on the independent stock exchange A2X. 

It holds up to a 70% stake in the Henkries Uranium Project, an advanced, low-cost mine located in South Africa’s Northern Cape Province, which has been estimated by some that the historical investment in the project was over $30m in exploration and feasibility studies. 

The company aims to increase the project’s mineral resources and complete an updated feasibility study with the aim of bringing Henkries into production in the shortest possible timeframe. 

It also holds a 100% interest in the Beisa North and Beisa South Uranium and Gold Projects in the Witwatersrand Basin, located in the Free State Province of South Africa.  

The combined projects record a total SAMREC Code compliant resources of 90.24Mlb of U₃O₈ and 4.17Mozs of gold. 

The SAMREC Code sets out minimum standards, recommendations and guidelines for Public Reporting for solid minerals of Exploration Results, Mineral Resources and Mineral Reserves in South Africa, giving conformity in project promotion. 

Neo Energy’s strategy focuses on an accelerated development and production approach to generate cash flow from Henkries while planning for long-term exploration and portfolio growth in the highly prospective Uranium district of Africa. 

Transformative Acquisitions 

CEO Sean Heathcote stated that: 

“The Beisa North and Beisa South Uranium Project acquisitions are transformative for the Company. 

The Beisa Projects contains over 90 million pounds of uranium resources and over 4 million ounces of gold resources and are located on two granted Prospecting Rights, over an area of approximately 80km² in South Africa’s primary uranium producing region.  

Importantly this is a region where uranium has been mined continuously for over 70 years and where at its peak there were over 40 uranium mines in production.  

It is also historically one of the richest gold-producing regions in the world, having produced about 2 billion ounces of gold over more than a century.  

It truly is a great place for Neo Energy to strategically consolidate its position in South Africa’s uranium sector. 

We will now look to progress the regulatory process with the South Africa authorities and commence work at the Beisa North and South Projects.   

In parallel with this, we will look to finalise some of the additional acquisitions, that I believe will further strengthen our position in the region and demonstrate our intent in South Africa’s uranium sector. 

As we move forward, our commitment to innovation, operational excellence, and responsible resource management remains steadfast and we look forward to working closely with all our stakeholders to ensure the successful advancement of Beisa North and Beisa South, setting a strong foundation for future growth and value creation.” 

Broker’s View 

Jason Robertson, at First Equity, rates the expanding group’s shares as a Buy, while upping his Price Objective by 15% to 23p a share. 

He notes the group’s ambitious strategy to establish itself as South Africa’s leading Uranium mining company and one of Africa’s major uranium mine operators and developers, and the plan to consolidate itself with additional acquisitions.   

With the deal to acquire the Beisa projects now signed and secured we have removed our 10% project sign off risk, therefore lifting the share price valuation from 20p to 23p, representing a risked value of $763.1m for the combined Beisa and Henkries projects for both uranium and gold assets.  

In My View 

I was impressed to see that various of the group’s Directors have opted to take shares at 1.25p each in lieu of their fees and salaries – which is surely an act of financial faith by its ‘insiders’ – that is well worth following. 

With Robertson’s upped Price Objective being over 19 times the current market price of 1.18p – they appear to have some significant upside. 

The FTSE 100 was comfortably higher on Friday as European stocks tracked US stocks higher after the S&P 500 closed at record highs.

A strong US tech sector built on a general optimism around the global economy to help fuel a broad equity rally that was felt on both sides of the pond.

As major Western banks started to cut rates, there was a feeling that China was the missing piece in the global growth story. The US is slowing, but not dramatically. Europe is softer, although there are no major concerns.

China has been the nagging doubt, and the decision to hold off on major stimulus until now had elevated these doubts to real concerns about how the property slowdown in China would play out and ramifications for the global economy.

With China now acting to help the ailing property sector – which China’s wealth effect is reliant on – global investor sentiment has rocketed higher this week.

The S&P 500 hit fresh record highs overnight, and if it weren’t for BP and Shell shares falling through the floor with oil prices, the FTSE 100 would likely have tested record highs this week as well.

Strong economic data from the US and a resurgent semiconductor sector helped propel US stocks amid wider optimism.

“A better than expected read out for weekly jobless claims helped allay fears of cracks in the labour market. There was also some relief that the final print for second quarter GDP growth was held firm at 3%,” said Derren Nathan, head of equity research, Hargreaves Lansdown.

“Semiconductor stocks also rallied led by memory chip maker Micron’s surge of 14.7%. after it released revenue guidance above market forecasts. This saw the optimism spread eastwards with Korean rivals Samsung and SK Hynix also seeing strong gains, topping off a strong week for Asian equities where a stimulus blitz unveiled by China’s government and central bank has seen Chinese equities enjoy their best week in over 15 years.”

Prudential was again the riser in London as the China trade continued in Friday’s session.

UK retailers were also enjoying the feel-good factor with Frasers Group and Sainsbury’s joining the rally.