Energy Fuels (NYSE:UUUU) -3.9% in Wednesday’s trading as Roth MKM downgrades shares to Neutral from Buy with a $6.25 price target, trimmed from $6.50, citing increased risks as the company diversifies into the rare earths sector through its joint venture deal to earn a 49% interest in the Donald rare earth project in Australia.
Roth’s Joe Reagor regards the deal as “another step on the road to diversifying the company away from a primary uranium producer and that there may be some uranium-focused investors who prefer alternative uranium investments that are pure plays.”
The rare earths sector is highly competitive in part due to significant control by China, according to Reagor, who also notes rare earths companies lacking ties to China “have found it difficult to compete economically with Chinese-controlled entities due to a range of reasons.”
The diversification also lowers the potential value of Energy Fuels’ (UUUU) uranium assets as it removes a pure play premium, Reagor writes.