I caught up with Jordan Trimble, CEO of Skyharbour Resources, to talk about his plans for Skyharbour Resources, if the bottom is in for Uranium, and what other markets he is bullish on.
Hi Jordan, welcome back to The Next Bull Market Move. It’s been over a year since we got together and discussed your company Skyharbour Resources and the Uranium market. So let’s start with what you’re seeing within the Uranium market. Do you feel that we may have reached a bottom of some kind, especially in the context of the recent supply cuts that were announced from Cameco and other suppliers?
I believe the uranium market bottomed in November 2016 when the spot price ticked under $18 / lb U3O8. The market has shown notable signs of recovery in both the commodity price and in investor sentiment. This trend appears to be accelerating with the recent news from Cameco shutting down the McArthur River Mine for an indeterminant amount of time and planning to buy between 11 – 15 million lbs of uranium in the spot market through 2019 (approx. 20-25% of that market). Put in other terms, the largest publicly traded producer of uranium is effectively doing an NCIB (normal course issuer bid AKA a share buyback) on the commodity it mines because it is more profitable for them to buy in the spot market at approx. $25 / lb U3O8 than it is to mine it and sell it into their existing contracts.
Bottom line, prices are still unsustainably low in the mid-$20’s / lb but they have been moving higher throughout 2018. Uranium trading activity has been at higher levels in terms of both number of transactions and volume with the month of May being the third most active ever in the spot market. Analysts that cover the sector have stated that this could be a sustained upswing as we are currently seeing some of the best fundamentals since pre-Fukushima which should be supportive of even higher uranium prices as a major supply-side response is playing out while the sticky demand-side continues to improve.
Primary mine supply is on the decline and expected to be approx. 135 million lbs U3O8 in 2018 given recent closures and project deferrals while demand continues to rise and is expected to be approx. 190 million lbs in 2018.
Mine closures and production curtailment continue to dominate headlines while US lawmakers are starting to take notice of external pressures on what is deemed a strategic industry. The USA imports approx. 95% of its required uranium for its nuclear power plants and as a result the Trump Administration has recently instructed the US Department of Energy to halt uranium sales to fund decommissioning projects and has also placed a two-year moratorium on nuclear plant closures. Outside of the USA, major production cuts and depleting mine reserves appear to be working their way into the uranium market and driving prices higher.
The two largest producers, Cameco and KazAtomProm, have announced large supply cuts in 2017 and 2018 including Cameco’s McArthur River as well as KazAtomProm’s announcement that it will cut 20% of planned production over the next three years and produce 60.1 million lbs in 2018. More recently, the Kazakh Energy Minister suggested there would be another 6% production cut over previous expectations to 56.2 million lbs.
Additionally, a new uranium holding company run by Peter Bacchus out of London has emerged called “Yellow Cake” which recently raised US$200 million in a London-based, oversubscribed IPO to buy 8.1 million lbs of uranium from KazAtomProm representing a significant portion of the uranium spot market which will take further spot supply from circulation. Yellow Cake has the option to buy $100 million worth of uranium each year for the next 9 years from KazAtomProm.
On the demand side, there are 452 operating nuclear reactors and 56 new reactors under construction globally, with construction of five new units commencing in 2018 to-date. China continues to be at the forefront of demand growth and has the largest reactor pipeline by far, including 41 operating reactors, 17 under construction, and over 180 more planned or proposed.
Lastly, the situation in Japan finally seems to be improving with nine reactors at full commercial operation with several more slated to come back online shortly, up from just three halfway through 2017. Japan has reiterated a long term nuclear commitment of 20-22% of its power mix by 2030.
The simple truth is with the electrification of the world - whether it be the rapid growth and adoption of electric vehicles, the advent of cryptocurrencies and the underlying blockchain technology, or just good old-fashioned economic growth in the developing world where billions (not hundreds of millions) are working there way into new middle classes – nuclear as the only baseload source of clean, cheap and reliable electricity generation, is going to play an important role in making this all possible going forward.
So within this long downturn for the spot price of Uranium and the associated equities, what has your company Skyharbour Resources been up to? Recent news releases suggest to me that you are following the prospect generator model as part of your business strategy?
Skyharbour first and foremost is a uranium exploration and development company and is focused on making new high-grade discoveries in the Athabasca Basin. Our efforts here are at our flagship, high-grade Moore Project where we are actively exploring and drilling with a summer drill program about to commence. However, as you point out we do employ a dual-pronged strategy which also includes prospect generation given we have five properties covering approx. 200,000 hectares of prospective land in the Athabasca Basin.
We have been opportunistic over the past several years acquiring highly prospective properties in the Basin, at attractive valuations, taking advantage of the downturn in the uranium market. Our head geologist Rick Kusmirski did this effectively with his previous company JNR Resources in the early 2000’s and benefited from the inevitable turnaround in the uranium market resulting in a notable share price increase from $0.05 to over $4 in 2007.
Over the last several years, we have acquired projects through cash and stock totaling approx. $4 million while over $75 million has been invested in the projects in historical exploration while Moore and Falcon Point (two of the five projects we own) constituted the flagship projects for JNR Resources in the mid-2000’s boasting a +$300 million market cap.
But even in a stagnant uranium price environment, the Athabasca Basin provides the opportunity to generate significant returns for shareholders as exemplified by NexGen Energy, Fission Uranium, Alpha Minerals and Hathor over the last eight years which have combined for billions of dollars in value creation on the back of new uranium discoveries (Hathor was acquired by Rio Tinto in 2012 for over $650 million and NexGen has risen from a $30 million market cap to $1 billion).
We are looking to emulate these discovery successes by carrying out exploration programs over the coming years including drill programs at our flagship Moore Uranium Project. This will generate consistent news flow for the company and will serve as a catalyst for the share price going forward.
Our technical team is doing an excellent job exploring and advancing our flagship Moore project on the east side of the Athabasca Basin. Recent drilling has intersected high-grade uranium mineralization including 21% U3O8 over 1.5 metres within 6% U3O8 over 6 metres at the unconformity at relatively shallow depths of approx. 260 metres in what’s called the Maverick Zone. We are now planning for a minimum 3,000 metre 2018 summer diamond drilling program slated to commence in late August. What’s exciting about this upcoming program is that we have used innovative exploration techniques, including drone geophysical surveys, to refine and identify drill targets.
As a result of this, the majority of this drilling will test the high-grade Maverick corridor in the basement rocks below the known high grade mineralization. The underlying basement feeder zones for the unconformity-hosted, high grade uranium at the Maverick corridor have yet to be discovered and have seen limited drill testing. It’s worth noting that recent basement hosted discoveries include NexGen’s Arrow Deposit, Fission’s Triple R Deposit and Denison’s Gryphon Deposit.
Furthermore, Skyharbour has been able to advance its other properties through partnerships with other companies like at Preston with the new strategic partnership with Orano (formerly AREVA) and will continue to employ this prospect generator strategy on its other properties which will allow for additional exploration financed by other companies, stock/cash payments made to Skyharbour, and more news flow going forward with Skyharbour retaining a carried interest and upside exposure in these projects.
The two aforementioned deals we have consummated involve Orano and Azincourt spending a combined $9.8 million in exploration expenditures and $1.7 million in cash payments to earn up to 70% in the respective properties we are optioning to them.
Are there any other commodities that currently interest you at the moment?
I remain a bull in the mid to long term on gold as that’s where I cut my teeth doing Corporate Development for a gold company called Bayfield Ventures which was eventually acquired by a larger gold mining company. Very similar to what our goal is at Skyharbour, we had success making a new high grade gold discovery in the Rainy River District of Ontario and went on to delineate a resource before being acquired by New Gold. I do believe gold will have another notable move higher given the unprecedented rate of quantitative easing globally as well as the low interest rate environment we have been in.
I see inflation ramping up eventually, along with the price of gold, as we head towards the latter part of this globally synchronized economic expansion we have seen in the last number of years. However, I believe we could see the precious metal continue to trade range bound in the near term as the US dollar remains strong and interest rates in the US continue to rise.
Outside of uranium, the metal that I am most bullish on is copper. Copper is truly the common denominator in several new major trends as well as in continued economic growth globally. We all know the typical positive correlation between economic growth, especially in the developing world, and copper prices but what I think will really start moving the copper price higher is the electrification of the world.
For every new electric vehicle on the road, you need more copper. For any new clean electricity-generating facility (whether nuclear or renewable), you need lots of copper to bring the electricity to where it is needed. Copper really is the ultimate “battery metal” and I think with the strong push for clean energy and electric vehicles, copper stands to benefit tremendously. You couple that with a lack of new notable copper discoveries and supply concerns, and I believe we are poised for a bull run in copper.
We briefly talked before about how you are in the process of beginning another new company, can you give us any details about this?
Skyharbour is my focus and will remain my focus going forward as I want to see it through to the end having built it from scratch with our team. I have listed a new public vehicle called Rockridge Resources (TSX.V: ROCK) but it is still in its early, formative days with a bit of cash and tight share structure with only 13 million issued and outstanding.
I will note that Skyharbour does share office space with several other junior mining companies including a gold company called Aben Resources (TSX.V: ABN) and a lithium company called Cypress Development (TSX.V: CYP), both of which I am a shareholder of.
Many thanks Jordan.
The Next Bull Market Move
For more information on Skyharbour Resources go to http://skyharbourltd.com
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