Think what you like regarding nuclear power, but according to the IEA, the current active reactors number 434 in 30 countries. That number is expected to rise to 609 in 41 countries by 2030, a mere 15 years. 243 reactors within that number are currently under construction or planned, up 12% since Fukushima in 2011.
Interesting to note that as other commodities bounce around lower prices; Oil at US$82, Nat Gas at US$3.75 and coal at US$52, uranium has moved from US$28 to US$35.65, a level last seen in March 2014.
That said the constituent stocks have not moved in tandem, presenting a significant potential investment opportunity. In March, when the uranium price was at the lower end of that range, Cameco ($CCO:CA) (CCJ) traded at C$21, Denison ($DML:CA) ($DNN) at C$1.50 and junior Skyharbour ($SYH:CA) (SYHBF) (SC1N.F) at C$0.12. Now, even though the Uranium price has moved up nicely, those same stocks have declined to C$18.62, C$1.11 and C$0.045, respectively.
“In the face of challenging markets and an oversold commodities sector, we have been opportunistic and focused on strategically building the company through accretive acquisitions and extensive fieldwork,” states Jordan Trimble, CEO and President of Skyharbour Resources. “The current state of the uranium market has presented excellent opportunities for us to purchase high-quality uranium projects in the Basin with the objective of optimizing discovery potential and capitalizing on a future uranium market turnaround. Management believes that our current share price does not reflect our progress this year nor the company’s intrinsic value and discovery prospects moving forward. The recent rise in the uranium spot price coupled with the latest corporate developments and our plans over the next 6 months leave us confident that SYH represents a compelling investment opportunity.”
Skyharbour’s market cap is a modest C$2.56 million with insiders owning over 20% of the 57 million shares outstanding.
Investors Should Have Exposure to Uranium and the Athabasca Basin
The Athabasca Basin produces almost 20% of the world’s uranium and boasts the highest deposit grades of any jurisdiction.
Industry veteran Canon Bryan, CFO of Uranium Standard Resources states “The global nuclear power industry is in a very strange predicament at present. Existing production is all contracted. Global utility companies, which are dangerously low on fuel supplies, are required to place new orders at least 24 to 36 months in advance of when their fuel is needed. However, there is no new production from which to draw this supply.”
Skyharbour has become one of the largest landholders in the Basin with interest in over 385,000 hectares of prospective uranium properties. The company is the operator of the Western Athabasca Syndicate, which controls one of the most dominant land packages surrounding Fission’s Patterson Lake South discovery and Nexgen’s Arrow discovery. Skyharbour also owns a 60% interest in the Mann Lake Uranium Project on the east side of the Basin and recently acquired 100% of the 100,000-hectare Way Lake and Yurchison Projects, purchased in June 2014.
Transformational Deal: The Acquisition of the Way Lake Uranium Project
A few months back, Skyharbour consummated a deal with Denison Mines to acquire the Way Lake Uranium Project for 2 million shares and $20,000 in cash, making Denison a large Skyharbour shareholder. Way Lake boasts a near surface, NI 43-101 inferred resource of 7 million lbs. uranium at .03% and 5.3 million lbs. thorium at .023%. While other acquisitions by peers have averaged price-per-pound valuation metrics ranging from $0.25-$1.00 per lb., Skyharbour picked up the property for an “in situ” equivalent of approx. $0.03 per lb. uranium. This doesn’t even factor in the thorium resource or any of the exploration upside potential at the property.
Over $12 million has been invested in previous exploration on the project which has identified numerous other target areas including the Hook Lake target where high grade uranium mineralization has been discovered at surface (up to 48% U3O8 in historic grab samples) yet the source has yet to be discovered. It’s easy to see how Way Lake could well become Skyharbour’s flagship property with a drill program planned for early 2015.
No one knows the property area better than Rick Kusmirski, Skyharbour’s head geologist and a Director of the company. Rick was a former Exploration Manager for uranium giant Cameco Corp., and from 1999 to 2012, Kusmirski was VP of exploration and later President and CEO of JNR Resources. During his tenure with JNR, the uranium firm’s share price went from 10 cents a share to over $4 a share and one of the main assets was Way Lake. Ultimately Denison Mines acquired JNR. The Way Lake project has come full circle with Skyharbour buying the project from Denison.
Unparalleled Management Depth and Property Knowledge
Under Rick Kusmirski, JNR spent well over $12 million in exploration at Way Lake, completing several campaigns of geophysics and groundwork, as well as drilling over 100 holes for a total of 24,000 metres. The Fraser and Hook Lake areas of the property will likely be the focus of SYH’s future drilling programs.
Further industry leading expertise is brought to Skyharbour by Technical Advisor Thomas Drolet, the former President of Ontario Hydro International. Tom believes that several factors – including the 72 nuclear power plants expected to come online by 2022 in China, Russia, India and other countries – will help increase share prices for senior, intermediate and junior uranium companies going forward.
Canon Bryan continues: “The uranium mining industry requires several years to put new mines into production. At present, there are no uranium mine development projects that are profitable at either spot or the long-term price. This is all leading up to a supply crisis that will have no respite for a period of two or three years. There is no telling what will happen to the commodity price when this crisis begins – and likely before it begins. In my opinion, it would not be clever to be short uranium.”
Skyharbour’s Mann Lake Project
Skyharbour’s Mann Lake Project is completely surrounded by claims held by Denison and Cameco making Skyharbour the only sub $500 million market cap company with a majority interest in a property in this area of the east side of the Basin. The Mann Lake property is also adjacent to the Mann Lake Joint Venture operated by Cameco in which Denison acquired International Enexco and its 30% interest in the project for $15 million after the 2014 winter drill program discovered high-grade, basement-hosted uranium mineralization.
Skyharbour recently completed a field program, a ground based EM survey, at Mann Lake with results pending. The Mann Lake Uranium Project consists of one mineral claim covering 3,473 hectares located in the eastern Athabasca Basin in northern Saskatchewan. The property is under a joint venture agreement with Aben Resources ($ABN:CA) owning 40% and Skyharbour owning the other 60% interest in the property. It occurs within a structural/conductor corridor that contains the richest uranium deposits in the world including Cameco’s McArthur River Mine.
The Bottom Line
While still a junior, Skyharbour has positioned itself to advance to the next level with its impressive suite of properties, opportunistic acquisitions and aggressive exploration initiatives over the last year; flying in the face of lousy markets, a challenging financing environment and volatile global commodities prices.
Skyharbour is now the operator of the Western Athabasca Syndicate, which owns one of the largest land packages and proprietary geological databases in the Patterson Lake district. The company will be a 25% partner, but only has to contribute 10% of the exploration costs, which represents exceptional leverage for SYH and its shareholders.
Instead of pulling in its horns and waiting out the lower prices and challenging market, the Company has moved ahead on all fronts and added significant fertile ground with Way Lake, Yurchison and Mann Lake.
Further exploration is planned for all properties and any successes in the surrounding areas, such as Denison’s recent extension of its Gryphon Zone within its Wheeler River property, simply ups the area’s profile further. All of these activities help keep the Basin in the forefront of investor’s minds and have resulted in several analyst buy recommendations on numerous companies focused in the Basin.
As usual, the leverage is in the juniors such as Skyharbour. Timing is also a driver as the supply/demand curve continues to tilt toward the need for new primary mine supply. SYH is in that hunt as it maximizes shareholder value through new mineral discoveries, committed long-term partnerships, and the advancement of exploration projects in the geopolitically favourable jurisdiction of Saskatchewan.
With beaten up share prices measured against global nuclear reactor growth, stronger spot prices and looming shortages coupled with strong management, a position in Skyharbour seems a good bet as the world repowers and continues to eschew traditional climate changing fossil fuels.
Bob Beaty for The Bottom Line Report.
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