Orion (OEC) offers highly leveraged exposure to uranium, particularly US uranium but also carries potential execution risks given its ambitious and expansive plans, RBC Capital Markets said in a Thursday note.

According to the note, the company seeks to become vertically integrated through uranium hexafluoride, with ramping uranium production in Wyoming and Texas, the developing Roughrider project in Saskatchewan, and plans to build new uranium conversion capacity in the US.

RBC models approximately 10 million pounds of annual production by 2032 at about $45 per pound in all-in costs, which could generate significant cash flow at an estimated long-term uranium price of $110 per pound.

Orion also expects future US government purchases at a potential premium for US-origin uranium to satisfy defense needs and domestic security of supply, RBC said.

However, this strategy exposes Orion to spot market volatility while cash flow from uranium sales may be deferred in anticipation of future government purchases, the brokerage added.

RBC initiated coverage of Orion with a sector perform speculative risk rating and a price target of $10.

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