*edit* I wrote this very early in the morning so I've revised it a little to better reflect the thoughts of someone who is awake and might better catch typos that could be missed looking at the phone screen through one half opened eye.
Reverse pitch:
They are a small cap miner: Although they have funding in place for stage one of the lance project with a little left over if something unexpected and problematic came up they would not be able to work throughout it as well as a larger company. If there was suddenly a major shift against ISR uranium mining by US regulators or local people came out against the project then they couldn't throw money at the problem or wait it out for a decade like BHP could. They are in a position to work through problems on that scale but because they have no cash flow from other projects at the moment they could get beaten down pretty hard price wise if it looked like they would have no cashflow for another 12+ months.
You can't know exactly what's in the ground until you've mined it: PEN has solid drill results that have been assessed using industry standard methods with strong inductions. It's also a benefit that a lot of the original drilling was done by another US company 40 years ago which makes it much harder for PEN to skew the results to make it look like they have a better claim than they do. That's all very positive, but, and it's a big but, you don't know what you have until you've mined it and it's on it's way to the customer. The ore body might be of an odd shape or less concentrated than they thought, there might be geological formations that make it hard to get the uranium out using their ISR method, they have lots of big good looking eggs, but they haven't hatched yet.
The uranium price continues to stay low: PEN has about 2.5 years of contacts (at the state one production level) negotiated well above the spot price but they will be negotiating future contacts that will draw their baseline price from the low spot. A lot of people seem to think the last couple years of low prices are creating a moderate supply short fall but for the moment at least the U308 spot is very low. PEN can be profitable at the current prices with an expected all in cost of under $30usd an lb thanks to the efficiency of their ISR set up but it's a fairly low margin while prices remain well below $40usd. A lot of the future short fall is predicted because of the couple of hundred new reactors being planned across Asia. However, only about 80 of those are actually under construction and a lot of the planned ones are in China and India, if their economies fall over or there's another fukashima then you could see that planned number significantly cut. I think with the lack of new uranium mines coming on stream since fukashima and the fact that both India and China will have booming energy needs even in a recession that this isn't a big problem, but a major disruption could definitely hit their bottom line, potentially turning a great company into just a good one in terms of return.
Alternative energy: while I personally think that nuclear power should be the starting point for a cheap clean energy solution to our carbon problem many people don't feel that way. In Europe in particular you are seeing plans for nuclear plants to be shut down in favor of solar and wind. This doesn't concern me so much but the now very cheap coal, oil and gas prices are going to influence people's decisions on new reactors everywhere. Lance and Karoo are mines that could both be operating in 2040 so if you like the company for the long haul then you have to think a little about the energy picture in 5 years and 15 years and beyond. With the reactors under construction and the Chinese and Russian fondness for nuclear I wouldn't be concerned that there will be new and ongoing uranium demand but it's not at all certain that the potential global rush to split atoms to save the atmosphere will come to fruition.
Then there's fusion :Lockheed Martin say that they will have a modular fusion reactor working in a couple years and other companies are working on small scale confinement reactors as well, some with major backing from big silicon valley companies or the US Navy. There's also a handful of big fusion projects, though their progress is much slower. This is a big wild card, if practical fusion reactors are built it's completely game over for oil, gas, coal, uranium, solar and wind. All you can do is buy tesla stock and lithium miners to get in to the battery market because everything is going to be electric. This is a massive what if though, LM are a big serious company as is tri-alpha the other big fusion start up, but the idea that they will have working fusion reactors in 5 years has found no outside support on technical/practical ground beyond people pointing out that they are big serious companies so we should take them seriously if they say they can do something. Kind of like if lockheed said they were sending people to mars you wouldn't say they could do it but you wouldn't bet your house that they couldn't either. In any case this is several years away at least and possibly several decades.
Mostly they are problems generic to small start up miners/energy companies. I think most of their big pre production hurdles have been jumped. They have the deep disposal well in place and working well over spec (basically the biggest and financially riskiest part of the mine construction), funding is already sorted, they have a good team and contacts in place that will allow them to be comfortably profitable for a couple years until the market improves. They're in this for the long haul with 2 projects with 20-30 year mine lives. They are a possible target for acquisition though, this is good for a short term profit but in the current uranium market this isn't so likely this year. Further, a takeover bid when there's been a recovery in the spot price will be better for shareholders, projected ratios being much more favorable, though that is one reason that a company might target them for M&A activity now. I don't particularly like this idea in the short term because I think the company is fundamentally undervalued, they are operating a lean and focused operation and I'd rather have a couple hundred thousand shares of PEN than a few thousand of a similar value of some other company I know nothing about. It might possibly be an all cash offer but I'm not sure I'd want 4.5c for PEN now when I think it could be with 30c in 2015 constant dollars in 2020.
Now really is the last chance to get them at this price though assuming nothing goes wrong. When they list on the NYSE-MKT they will get a big bump and when they announce their first mined lb the price will jump and probably again when they can announce their first cash flow on a quarterly report. The first 2 of those things are supposed to happen in the next 4.5 months. The price will likely continue to fluctuate and you might be able to pick some up in the 0.022 to 0.024 range still for a while if you put in a standing order and can be at the front of the queue if and when prices go there (there's a lot of buy depth at the moment) and almost certainly at 0.025/6. Unless there's a big issue in the company or another fukashima I don't think you'll see 0.02 again and I was confident enough that we'll be at 0.03c a share by the end of the year to buy some penoc options.
