Peter Epstein Blog | Skyharbour Resources, Ready For A Perfect Storm In Uranium | Talkmarkets
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Skyharbour Resources, Ready For A Perfect Storm In Uranium

Date: Thursday, February 14, 2019 7:00 PM EDT

I could have written this article in 2016, or 2017, or 2018…. I’m glad I didn’t. Why? The article is partly about uranium fundamentals & pricing. It’s February 2019, spot uranium prices are up from US$17.75/lb. in November, 2016 to ~US$29/lb. today (+63%). But even a 63% move has done nothing for most uranium juniors. Perhaps investors have been fooled one too many times before? Is this time different?

NO REALLY, THIS TIME REALLY COULD BE DIFFERENT

2019 truly could be the year that uranium prices blast through US$30/lb. and perhaps hit US$40/b. Before Japan’s Fukushima Daiichi disaster, the price was ~US$70/lb. Analysts point out that the all-in cost of uranium production is ~US$40/lb. And, the incentive price to get a major uranium project off the ground is closer to US$60/lb.

Over the past 2-3 years, everything on the supply & demand sides of the equation has moved in favor of higher uranium prices. Below is a chart showing supply cuts totaling 30-33 M lbs./yr., and more cuts are coming. Both KazAtomProm’s & Cameco’s cuts extend into 2020 (unless the uranium price rebounds significantly).. 

On the demand side, China is building new reactors at a frenzied pace. Japan is returning, slowly but surely. Cameco is buying in the spot market, 11-15 M lbs./yr. And there are new financial buyers, such as Yellow Cake Plc, which reportedly bought 8 million lbs.

One company I’ve been following has developed a prudent strategy for playing the perfect storm forming in the uranium sector. Skyharbour Resources (TSX-V: SYH) / (OTCQB: SYHBF) / (Frankfurt: SC1P), a uranium + thorium company situated in the single best uranium jurisdiction on the planet — the Athabasca basin in Saskatchewan, Canada. What I love about this story is that Skyharbouris minimizing cash burn with a project generator model, while maintaining 100% ownership of its highest potential asset, the Moore Uranium project.

Skyharbour has 6 properties ranging from early to more advanced-stage exploration, 2 have known high-grade mineralization, 1 has a NI 43-101 resource. Two have been farmed out to partners including giant Orano Canada (formerly Areva Canada). Skyharbour has 3 other properties open for partnerships. Importantly, the 6 properties were acquired at depressed valuations over the past 5 years. Upwards of C$80M = US$61M has been invested into these assets, yet the Company’s market cap is C$22.7M = ~US$17.1M. Uranium equities are underperforming the spot price gain, this trend won’t continue.

FLAGSHIP ASSET — 100% Owned Moore Uranium Project

In June 2016, Skyharbour secured an option to acquire (and now owns 100% ofDenison Mine’s Moore Uranium Project, on the southeastern side of the Athabasca Basin. Moore consists of 12 contiguous claims totaling 35,705 hectares. Over C$40M has been invested and > 140,000 m of diamond drilling has been done (375+ holes). The primary focus is the high-grade and relatively shallow Maverick Zone. {See chart of select Moore project drill holes below}. A Major catalyst for 2019 is a maiden mineral resource estimate at the Mooreproject. 

A series of aggressive exploration programs were carried out including numerous geophysical programs and 322 diamond drill holes totaling 119,697 m. The partners extended the main Maverick structural trend over a total strike length of 3.3 km (now 4.0 km). The main Maverick zone was confirmed to be high-grade with a best result of 4.03% eU3O8 over 10.0 m incl. 19.96% eU3O8 over 1.4 m. in hole ML-61. The NI 43-101 compliant technical report stated, “the exploration programs that have been carried out appear to have been completed tovery high technical and secure standards.”

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