Many (but not all) uranium equities worldwide are enjoying a bang-up rebound this January of 2017.
The speculating in small uranium-cos (Canada, USA, Australia) looks based on a small-dollar rise for the element itself. [Please see Cameco Corp. meltdown from the misfiring uranium producer — below.]
Our focus this coming weekend via live panels of “experts” is Athabasca Basin explorers and project developers. The Basin is that same Canada minerals mecca many of us have been hearing about these past 3 years.
Our TCR Network‘s uranium-exec members are convinced recent signs of China demand are the fuel for this year-starting uranium rally. I agree. What China requires is almost always a solid investing choice.
Still, many speculators, including momentum morons, hedge fund wanna-bes and high-school-educated lap-toppers, are banking on spot “indicator” prices.
Free headline: such Internet-fed prices in real-time supply-demand markets are challenging to believe.
Uranium participation certs (U is one: Toronto ticker) also act as a flash indicator of possible coming demand for uranium concentrates. All of these indicators — with the exception of China’s import demands — are mostly of peanut-gallery quality.
The “U” trades at a premium, liked a closed end fund on a stock exchange, when investors expect physical uranium prices to rise or keep rising.Uranium executive Dev Randhawa, who has a master’s degree in international business, calls it “speculative uranium investing without management risk.”
Industrial delivery contracts for uranium (oxide, hexafluoride) are one of the better gauges of price health for radioactive “yellowcake,” but these concentrates contracts are hard to document. Plus, the buyers and sellers of this nuclear fuel can rework their ($42 USD to $50 per pound) delivery deals during long price slumps, such as the one that U3o8 concentrates are experiencing now with prices in the low $20s per pound.
Speculative focus: uranium investors use equity proxies: the stocks of explorers and producers and holding-cos operating in Canada, Australia, Africa, the former Soviet-bloc “Stans” and the USA. (Utilities that purchase uranium concentrates to power their plants also use the U-equities as “hedges” and investments — on and off-balance-sheet .)
At any rate, after getting splonked with data, slide decks (some likely market-moving), telephone calls, videos and e-mails many days of this month of January 2017, I began to query some of the uranium execs and veterans I know. Most of these cats are in Canada.
Please see our TCR Network snap of what we will be addressing at this coming weekend’s two metals investing conferences in Vancouver, British Columbia — in Canada.
Our thrust largely will be Canada’s mostly rich uranium deposits of Athabasca Basin East and Athabasca Basin West.
Jordan Trimble, Leigh Curyer, David Cates, Dev Randhawa -- respectively,
CanAlaska Uranium, Skyharbour Resources, NexGen Energy, Cameco Mines
& Fission Uranium. Printed copies of our slides will go to the fist 30 or 40 takers.
Cameco Corp: some — a lot, actually — of that cash is exiting this week. Cameco, after delivering 31.5 million pounds of uranium in 2016 at an average realized price of $54.46 CAD per pound, is on the ropes this Wednesday January 18, 2017. The damage to CCJ’s stock price and the entire rest of the uranium sector’s stock prices comes in the wake of currency fluctuations, a legal tax disute and the company’s Rabbit Lake (Canada) shuttered mine and mill’s impairment expenses. These all are battering the financial results of one of the largest uranium producers in the world: Cameco is CCJ ticker in USA.
— Peter Dasler: veteran New Zealand metals explorer and claims staker took his CanAlaska Uranium from deathly hallows of a penny-stock swamp to more than a dollar, enticing new partners with geophysical evidence from fresh uranium (and diamond) projects in eastern (and western) basin. CVV is probably one of the best performing equities worldwide (on a percentage basis) in uranium explorers’ landscape for 2016 (CVV ticker in Canada). Says: “High-grade mines make money when the investor (and industrial) markets stink. When you look at average pounds in the ground worldwide (except perhaps Olympic Dam (Namibia), most deposits are 5 million to 20 million pounds in size … vs 200M to 400M+ pounds for the key Athabasca mines. Canada properties tend to be reliable producers. Canadian politics are stable, and the mines have the ability to deliver the uranium needed for the life of a nuclear reactor, which is 40 years to 60 years.”
Says: “It was not possible to economically explore the deeper parts of the Basin before 2000. After this we had the models, computers, airborne and ground geophysical methods that are necessary, and the first pulse of market awareness gave us the money to develop all these tools.”
— David Cates: Canadian exec runs Denison Mines, a developer of what it believes are prime uranium projects. Lukas Lundin, a Canada miner and probably a billionaire, is executive chair of Denison. Mr. Lundin the 2000s merged a USA (Arizona) entity with Denison Mines. Mr. Cates — Says: “Each company (in Canada’s Athabasca Basin) offers a different proposition for exploration in the eastern part. CVV (CanAlaska) looks for partners to fund and take projects forward (project-generator) with minority interests and large, credible partners. SYH (Skyharbour) is focused on being an operator of a prospective exploration property: looking for a discovery that will change its value dramatically. Denison is larger scale a developer, rather than an explorer, with a large land package and a group of select high-quality exploration properties with potential for a discovery. We all believe in the benefit of being focused in the eastern Athabasca Basin for two reasons: (1) geology, as the east is host to the only operating mines in the region and there is lots of exploration left to do, as geological models change; and (2) infrastructure and favorable economics associated with developing a mine in the heart of a mining district.”
— Dev Randhawa: well-traveled and experienced Canadian financier directs his Fission Uranium‘s Patterson Lake South in the western basin; his team includes Ross McElroy, a leading uranium exploration geologist who flies beneath the industry’s radar (and gets high presentation grades in my book). A second company, Fission 3.0, is a small exploration particle of the Fission nucleus and operates 18 properties in and around the Basin — all shallow targets. China Nuclear General owns about 19.9 percent of Fission Uranium’s stock (FCU ticker in Canada). Says: “China has 1.5 percent of its power coming from nuclear and America has 20 percent. You know and I know and China leaders know why that is unacceptable. Just visit any major China city; India, too.” [That references sovereign dynamics, I think. Super-powers and super-power wanna-bes are spreading their uranium exploration bets for “clean” nuclear fuel across several nations, Canada being near the top of their list — for the purposes of our examination here.]
Says: “The east has mills, yes, but there is overcapacity there, too. Plus, at the big deposits, Cigar Lake, McArthur Lake, you have water almost always messing with the unconformities. Where there is water, there are permitting issues. In the west, NexGen‘s Arrow deposit and our Patterson Lake South, well, we think Saskatchewan is a great jurisdiction. The Saudi Arabia of uranium. Ross McElroy flew his plane on the edge of the basin and looked for a shallow deposit at Patterson Lake South and found it. Traditionally, sandstone on top of basement rock in this area … but ours, all the sandstone was pushed away to the basement with just overburden on top. Not to beat all of this into the ground, but you find something with unconformities, as we see in the eastern part of the Basin, you have to spend $300 million or more to keep the water moving the right way. You become a permitting company. We have the best position of shall-target properties anywhere … our airbornes would never have found Cigar Lake (Cameco) or Nexgen’s 500 meters underground.”
Says Ross McElroy: “Then there is expense potential for high-grade that is deep anywhere in the Basin, not just east or west. Open pits are cheaper to operate than underground mines; cheaper to move large amounts of rock and dirt.” Mr. McElroy is writing, or speaking, between the lines here, I think: NexGen’s competing project in the western Basin, Arrow, is 500 meters and more deep.
— Richard Patricio: mid-40s Toronto securities lawyer hails from tattered merchant bank Pinetree Capital. Mega-Uranium‘s holdings include significant equity stakes in basin superstar NexGen Energy and Australia’s Toro Energy. Says: “When uranium price starts to move, this catch-up in the equities will be looked back on as trivial.”
— Craig Parry: This Australian is a contemporary of Mr. Curyer and runs NexGen offshoot ISOEnergy from Vancouver offices. ISO (ticker Canada) controls property for additional high-grade uranium exploration in the western part of the Basin. Says: “We are seeing a 4o percent jump in spot prices in a month. Equities have moved strongly but I think more to come. Imagine if gold jumped $400 an ounce; most gold equities would jump several-x. No reason to think U-equities won’t.”
Rob Chang, a Canada uranium analyst (brokerage Cantor Fitzgerald):
"Sentiment for uranium continues to be positive as Uranium
Participation (U: ticker Canada) trades at a premium to its
net-asset value for a third month. Investors are current implying
a US$23.33/lb spot price, which is an 8% premium to the current
market." This analyst sees a probable buying window as producer Cameco suffers from currency fluctiations. David Talbot of Dundee
is the other Canada brokerage analyst who gets attention these days.
***** The 2014 examination of Athabasca Basin uranium deposits is almost exhaustive and must reading for investors, geologists, execs and writers-researchers.
“Real-World” Economics of the Uranium
Deposits of the Athabasca Basin, Northern
Saskatchewan: Why Grade Is Not Always King
Roger Wallis† (SEG 1984 F), Roger Wallis and Associates, Etobicoke, Ontario, Canada
-- Thom Calandra (None of these companies pays me -- not a one.)