Zacks Small Cap Analysis – DYLLF: Deep Yellow Makes Vital Progress in Elevating Capital; Continued progress towards the graduation of manufacturing at Tumas Undertaking in Namibia in 2H 2026. Evaluation of Latest Actions. – Melissas Meals Freedom

By Steven Ralston, CFA

OTCQX:DYLLF | ASX:DYL

READ THE FULL DYLLF RESEARCH REPORT

Deep Yellow Ltd. (OTCQX:DYLLF) (ASX:DYL) is exclusive amongst junior mining firms: administration has positioned the corporate to offer a leveraged alternative to take part in an anticipated upswing in uranium costs. Administration’s Twin Pillar technique is designed to ship each natural and inorganic development by advancing the corporate’s Namibian and Australian initiatives by means of the manufacturing stage and when engaging alternatives come up, by buying extra initiatives because the business consolidates. Administration is targeted on changing into a low-cost, Tier I uranium producer, outlined as a multi-project producer of uranium with the capability to ship 5-10 million lbs. of uranium yearly.

Along with developments on the Tumas Undertaking, together with the Mulga Rock and Alligator River Initiatives, in the course of the first half of fiscal 2024 (see HALF YEAR INTERIM REPORT part under), the corporate benefitted from a vital inflow of capital over the past three months that totaled nearly AUD$250 million in gross proceeds. The online proceeds shall be used:

1) to proceed to advance the Tumas Undertaking towards manufacturing

2) to permit for additional growth actions on the Mulga Rock Undertaking, together with a revised DFS

3) to fund different useful resource enlargement actions by means of exploration at Alligator River & Omahola

4)to reinforce working capital

Deep Yellow is poised to enter a vital stage within the firm’s lifecycle, particularly, the transition to the mine building part, which would require financings or capital raises. This preliminary vital fairness financing gives the required capital to maneuver ahead to the Last Funding Determination (FID) for the Tumas Undertaking.

The AUD$250 million in capital was raised by means of a non-public placement (AUD$220 million) that was accomplished in two tranches (one in mid-March and the opposite in early-Might), which in complete consisted of the issuance of 179,591,836 shares at a difficulty value of AUD$1.225 per share. Moreover, 24,489,795 shares have been issued to present shareholders by means of a Share Buy Plan, additionally at a difficulty value of AUD$1.225 per share. The Share Buy Plan was oversubscribed by 50%, requiring a pro-rata scale-back of the purposes for shares.

Of word, throughout 2024, a number of entities have been required to file that their possession of Deep Yellow exceeded 5% of the corporate’s excellent shares, most due to participation within the non-public placement. The entities have been Macquarie Group Restricted (March thirteenth), State Road Company (March fifteenth) MM Asset Administration of Toronto (April twenty ninth) and Citigroup World Markets Australia Pty Restricted (January 4th and March twenty fifth).

Moreover, by means of discussions with financiers, the corporate is progressing towards securing debt financing that can assist fund building prices of the Tumas uranium mine as soon as the FID is made to proceed, which is anticipated to be introduced close to the tip of the third calendar quarter of 2024. Usually, debt issued for mine building is secured by the belongings and/or future money flows of the venture.

QUARTERLY ACTIVITIES REPORT

In mid-April, Deep Yellow filed its Quarterly Actions Report for the interval ending March 31, 2024.

Tumas Undertaking (100%) Replace

Present Tumas Drilling Marketing campaign

On February 29, 2024, an RC and diamond core drilling marketing campaign commenced at Tumas 3 with the aims to each improve and enhance the Undertaking’s MRE, whereas concurrently bolstering the corporate’s financing effort to deliver the Tumas mine to manufacturing. The aim is to outline satisfactory Confirmed Reserves throughout the pit places outlined throughout the Tumas DFS for the mine to function for preliminary six (6) years of operation.

The diamond drill spacing in elements of Tumas 3 shall be lowered to 50m x 50m, which ought to help the upgrading roughly 20 Mlbs U308 from the JORC Indicated to Measured class. The 650-hole (13,000m) RC useful resource drilling program additionally commenced on the finish of February, and as of the tip of March, six (6) diamond drill holes (144m) and 189 RC holes (4,221m) had been accomplished. Your entire drilling marketing campaign is anticipated to be accomplished in June 2024.

As a reminder, within the earlier drill program between late March and mid-August 2023, Deep Yellow accomplished 235 RD drill holes (8,017m) that focused areas west of Tumas 3 East and Tumas Central. 109 holes explored for extra sources (spaced traces between 200m to 1,000m) and 126 holes targeted on increasing the present useful resource, alongside line and holes spacing of 100m. Primarily based on the outcomes of the drill program, the Indicated MRE elevated 10.4% from 54.9 Mlbs at 320 ppm eU308 to 60.6 Mlbs at 325ppm eU308. The Inferred MRE elevated 24.0% from 5.0 Mlbs at 219 ppm eU308 to six.2 Mlbs at 170ppm eU308. The overall Tumas 3 MRE elevated 11% to 66.8 Mlbs at 300 ppm eU308. The overall ML 237 Indicated Mineral Useful resource elevated to 108.5 Mlbs at 265 ppm eU308.

Metallurgical Testing for the Tumas Undertaking

Metallurgical take a look at work for the Tumas Undertaking continues. Optimization of the beneficiation course of has resulted in a fabric discount in power necessities, which is anticipated to cut back working prices. Extra take a look at work on the membrane part has considerably bettering efficiency over the assumptions within the DFS, significantly by growing the permeate yield and reaching the next selectivity, which leads to increased throughput of uranium, vanadium and reagents. These efficiency enhancements ought to enhance the Undertaking’s NPV.

Tumas Definitive Feasibility Examine Re-Costing Examine

In December 2023, the Tumas Definitive Feasibility Examine Re-Costing Examine was accomplished, which up to date the base case value of uranium to US$75/lb. from US$65/lb. U308 (a conservative enhance contemplating the spot value has exceeded US$100/lb.) and adjusted the preliminary price estimates to mirror the moderating fee of inflation and an abatement of the provision chain pressures. The bottom case IRR elevated from 19.2% to 27.0%.The Re-Costing Examine continues to validate the industrial viability of the Undertaking.

Different Close to-Time period Tumas Actions

Throughout the third fiscal quarter, the method of choosing an Engineering, Procurement, and Building Administration (EPCM) service supplier commenced. The EPCM supplier is anticipated to be chosen in the course of the fourth fiscal quarter. The detailed engineering part ought to start nearly instantly thereafter and require about six (6) months to finish. It’s anticipated that the Undertaking shall be additional optimized when drilling outcomes and subsequent re-estimation of reserves are acquired. The timeline for the Last Funding Determination is being maintained with the FID anticipated to be made in the course of the third calendar quarter of 2024.

Mulga Rock Undertaking Replace

On February 26, 2024, Deep Yellow launched an up to date MRE for the Ambassador and Princess deposits on the Mulga Rock Undertaking. The overall Measured, Indicated & Inferred U308 Mineral Assets elevated 25.6% from 56.7 Mlbs to 71.2 Mlbs with Measured growing 15.9%, Indicated growing 57.1%, and Inferred reducing 30.3%, all at a 100 ppm U308 cut-off. The lower within the Inferred useful resource was a results of an general improve of beforehand lower-grade materials into the Indicated class. The up to date MRE included drilling outcomes from the 656-hole (36,647m) air core drill program accomplished in August 2023.

As well as, the up to date MRE contains estimates for essential minerals (Cu, Ni, Co, Zn & Uncommon Earth Oxides) as eU308. Together with the essential minerals, the overall up to date Measured, Indicated & Inferred eU308 Mineral Assets elevated 85.7% from 56.7 Mlbs to105.3 Mlbs with Measured growing 77.8%, Indicated growing 140.2% and Inferred reducing 18.6%.

A metallurgical take a look at work program performed for the Mulga Rock Undertaking (Western Australia) was accomplished in the course of the third fiscal quarter. The outcomes established the potential industrial viability of recovering essential minerals (base metals and uncommon earth parts) together with uranium useful resource.

The metallurgical take a look at work for Mulga Rock signifies that:

• an general uranium restoration fee above 90% is possible

• general recoveries for base metals (copper, nickel, cobalt and zinc) and uncommon earth parts (neodymium, praseodymium, terbium and dysprosium) are above 70% and

The 2018 DFS had uranium restoration charges within the 85.9%-to-89.6% vary with no restoration assumed for essential minerals and solely round 20% for base metals.

A revised DFS that can optimize the mining technique, which can probably embrace the restoration of essential minerals, is being undertaken with a completion date anticipated to be within the third calendar quarter of 2025.

Alligator River Undertaking Replace

For the reason that announcement of the 27% enhance of the MRE for the Angularli Deposit at Alligator River Undertaking in mid-2023, a heritage survey on EL5893 was performed within the fourth calendar quarter of 2023, which resulted in conditional approval to discover areas north of Angularli. Throughout the third fiscal quarter, desktop research proceed to delineate potential corridors, together with combining and merging radiometric, magnetic, and gravity knowledge to supply geophysical photos that can assist determine potential corridors. A drone-borne high-resolution magnetic and radiometric survey is being deliberate.

Monetary

The corporate is properly funded with a money stability of AUD$155.6 million as of March 31, 2024. As well as, roughly AUD$100 million was added to the corporate’s coffers from the oversubscribed Share Buy Plan in April and from the 2nd tranche of the non-public placement in Might.

ANTICIPATED MILESTONES

Tumas Undertaking

• Last Funding Determination (FID) anticipated to be made in the course of the latter a part of the third calendar quarter of 2024

• If administration’s plans proceed as anticipated, manufacturing is anticipated to start in the course of the second half of calendar 2026

Mulga Rock Undertaking

• A revised DFS for the Mulga Rock Undertaking, together with base metals and uncommon earth parts (REE) along with uranium, is anticipated to start in 2024 with expectations of being accomplished within the third calendar quarter of 2025.

Alligator River Undertaking

• Desktop prospectivity value determinations to outline precedence exploration corridors throughout 2024.

UPDATE ON THE URANIUM INDUSTRY

For the reason that World Nuclear Affiliation’s Symposium held in early September 2023, the spot value of uranium oxide has elevated 48.5%. The shares of just about all uranium junior mining firms have adopted go well with. The driving power has been the popularity of the tightening provide/demand construction of uranium market with the projected demand by nuclear energy vegetation growing and the sequestration of uranium by bodily funds (such because the Sprott Bodily Uranium Belief and Yellow Cake Plc) persevering with. The change in sentiment of utility patrons of long-term contracted uranium has resulted in the amount of contracted quantity growing to the very best degree in over a decade. Moreover, at COP28 (twenty eighth Convention of the Events of the United Nations Framework Conference on Local weather Change), which happened in Dubai between November 30 to December 12, 2023, 22 nations pledged to triple the nuclear capability by 2050.

In 2023, the spot uranium value elevated 90.9% from US$47.68/lb. to US$91.00/lb. On January 17, 2024, the spot uranium value spiked as much as US$106.50/lb., a 17-year excessive. In the meantime, Deep Yellow’s inventory (OTCQX: DYLLF) rallied over 57.4% from $0.465 to $0.732 in 2023, and an extra 53.0% to $1.12 so far in 2024. The outlook for uranium market continues to be robust with demand exceeding provide for the foreseeable future.

Main market analysis corporations on the nuclear business forecast that the deficit between main provide (from mines) and the demand by nuclear reactors will proceed to develop by means of 2040. In its reference situation, the World Nuclear Affiliation calculates that the annual main provide deficit for uranium will exceed 140 million kilos by 2030. Moreover, in its Base case, UxC estimates that between 2023 and 2040, the wants of working nuclear reactors will enhance by 35%. Each eventualities point out that new main manufacturing shall be wanted with the value of uranium being the important thing determent that can incentivize the event of recent mines.

Sentiment noticeably shifted on the World Nuclear Affiliation’s Symposium (held in early September 2023), sparking a stronger tone within the long-term contracting course of. Not solely are contract costs rising, but in addition the phrases of recent collared contracts mirror a tightening market with rising ground and ceiling costs. Lengthy-term contract quantity continues to extend from its nadir in 2020.

VALUATION

Broadly talking, the general public uranium firms will be grouped into three segments: producers, growth firms and exploration firms. Producers are actively mining and producing revenues. Exploration firms are prospecting and/or drilling to ascertain mineral sources. In between these two segments are the event firms that have already got established sources and are advancing by means of the method to deliver a mine in operation, usually from the purpose of initiating a Pre-Feasibility Examine to the precise building of a mine. The comparable firms to Deep Yellow fall into this class.

Additional, the comparable firms have been narrowed by means of quantitative elements, significantly these with a market capitalization over $500 million and buying and selling above $1.00 per share. This course of captures a variety of well-funded junior uranium growth firms, that are listed within the desk above. Presently, the P/B valuation vary of those comparable firms is between 4.64 and 6.53. With the expectation that Deep Yellow’s inventory will attain an business common quartile P/B ratio of 5.9, our comparable evaluation valuation value goal is US$2.50.

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