If you tell Jordan Trimble that uranium prices are bouncing around the basement at around US$22 per pound, he’ll smile. As director, president and CEO of uranium exploration company Skyharbour Resources Ltd. (TSX.V: SYH) (OTCQB: SYHBF) he’s assembled a rare trifecta of topography, timing and talent to unlock the full potential of an extensive portfolio of uranium exploration projects in Saskatchewan’s uranium-rich Athabasca Basin.
The jewel in the Skyharbour crown is the Moore Uranium Project. In July 2016, Skyharbour acquired an option from Denison Mines, the largest strategic shareholder of the company, to acquire 100 per cent of Moore, located approximately 15 kilometres east of Denison’s Wheeler River project and 39 kilometres south of Cameco’s McArthur River uranium mine, the world’s largest high-grade uranium mine.
Moore is an advanced-stage uranium exploration property with known shallow, high-grade uranium mineralization, robust discovery potential, and all in an area that is home to the largest and richest deposits globally.
“Our specialty is advancing mineral exploration companies through to early-stage development, and then looking for a larger company to acquire them,” says Trimble. “Our goal is to maximize shareholder value through new mineral discoveries, committed long-term partnerships, and the advancement of exploration projects in geopolitically favourable jurisdictions.”
It’s been a successful model for members of the Skyharbour team. In 2014, Trimble and Skyharbour’s chairman, Jim Pettit, sold Bayfield Ventures Corp. to Canadian miner New Gold Inc. after making a high-grade gold discovery and delineating a resource on a gold property in Ontario. Furthermore, Paul Matysek, who sits on Skyharbour’s Advisory Board, was the founder, president and CEO of Energy Metals Corporation, a uranium company founded in 2004 at a valuation of $10 million. It was sold to Uranium One in 2007 for $1.8 billion.
Skyharbour’s director and head geologist, Rick Kusmirski, has explored for high-grade uranium in the Athabasca Basin for more than 40 years and was Cameco’s exploration manager for a decade. He then took his own junior uranium company JNR from a $5 million market cap in 2000 to over $300 million in 2007.
However, uranium has had a rough decade. The 2008 financial crisis saw spot prices tumbling from just under US$140 to US$50. The Fukushima nuclear power plant disaster in 2011 initiated a wave of knee-jerk nuclear power plant shutdowns thereafter that further eroded prices. The result: even lower prices.
In response, Cameco has recently suspended production at its McArthur River mine, the largest mine globally, cutting global supply by as much as 10 per cent. At the same time, Kazakhstan’s state-owned Kazatomprom announced it will reduce uranium output by 20 per cent over the next three years — on top of a 10 per cent cut announced in early 2017. Long-term, higher-priced contracts are also expiring, which will likely result in additional production cutbacks, as higher cost mines are forced to shut down, in addition to several mines with depleting reserves nearing the end of their lives.
And that’s good news for Skyharbour.
“The Fukushima disaster has a lot of people convinced that nuclear power plants are headed for extinction,” says Trimble. “We founded Skyharbour looking through a contrarian lens and knew that nothing could be farther from the truth. The world continues to increase its baseload, emissions-free nuclear power generating capacity with substantial growth coming from countries like China and India.”
The September 2017 edition of The Nuclear Fuel Report produced by the World Nuclear Association, notes that closure of nuclear power plants has been leapfrogged by the opening of new facilities. From 1996 to 2016, 80 reactors were retired and 96 began operation. That trend is accelerating after 2017. The report sees 140 reactors closing by 2035 — and 224 new ones coming online.
It’s no wonder that uranium consulting group Ux Consulting has changed its uranium market forecast from surplus to deficit, beginning in 2018.
“We believe the uranium bear market has bottomed out,” says Trimble. “I tell investors that existing and new reactors will need uranium for many years to come and there is a notable lack of new mine supply slated to come online in the current low-price environment. The supply-demand fundamentals are very compelling, and Skyharbour is looking to capitalize on this for its investors by offering exposure to rising uranium prices, as well as to company-specific catalysts like high-grade discoveries and resource delineation.”
He notes that nuclear utilities aren’t price sensitive, which can exacerbate the rise in the uranium price. The cost of fuel represents less than five per cent of a reactor’s operating costs — and they can’t switch to alternative fuels.
Major Skyharbour investor and founder of Katusa Research, Marin Katusa, says he likes the company’s business model and dual strategy of creating shareholder value through new uranium discoveries as well as prospect generation — partnering with other companies to advance additional properties.
“The company has been able to attract one of the world’s largest uranium producers, Orano (formerly Areva) to farm into one of their projects,” he says. “Not only is Skyharbour directly exploring their own projects such as the Moore Uranium project, where they have found significant intersections of +20 per cent U3O8 [yellowcake, the unrefined form of uranium], but they’re also a prospect generator, where they attract other companies to advance and earn into their projects, using other people’s money to advance their own assets.”
A devil’s advocate might ask Dave Cates, president and CEO of Denison Mines, why Denison would step so far back from a promising stake like Moore. Truth is, Cates sits on Skyharbour’s board of directors and Denison retains back-in rights to reacquire a 51 per cent interest.
“Over the last few years, Denison has turned its flagship Wheeler River project into the largest undeveloped uranium project in the eastern Athabasca Basin,” Cates says. “Naturally, we’ve focused our resources and capital to advance Wheeler River towards a development decision, and certain projects in our portfolio — including Moore — were basically parked for future exploration. It was actually a very difficult decision to option Moore to Skyharbour, particularly since our team was not done with the property. The deal structure is really what opened our mind to things, giving us visibility to buy back into the project. With both of our exploration teams having history on the project, it just made a lot of sense to put our minds together.”
Kusmirski is currently overseeing exploration and diamond drilling on the property following a novel low-altitude survey featuring a drone-carried magnetometer.
“We’re looking for certain types of anomalous geological structures that indicate a rock fault that provides a signature for possible uranium deposits,” he says. “We’re finding plenty of them. When I was with Cameco and I drilled 150 to 200 holes and found four or five with anomalous geochemistry, I’d be happy. On Moore, I’m finding just three or four that don’t have that anomalous characteristic.”
Kusmirski says he’s looking forward to potentially mining uranium using the latest high-tech extraction technologies, but he’s currently enjoying the rush of exploration and staying focused on Skyharbour’s main objective — making new discoveries and delineating uranium resources.
“I could tell when I met Jordan there was serious conviction in building a world-class uranium exploration and development company going into the next bull market,” he says. “We have come a long way in the last few years acquiring five projects in the Basin, and I want to see these projects through to handover. It’s been a good ride so far, and it’s only the beginning.”
Source: Financial Post