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Source: Streetwise Reports 09/10/2024

One of the most important elements for the energy transition is uranium. Find out why the head of a company with an extensive project portfolio searching for the commodity in Canada's Athabasca Basin thinks we are still in the early days of an sustained bull market.

One of the most important elements for the energy transition is the fuel for nuclear power — uranium. It rose to US$106 per pound in February, but the market has seen some volatility since, with prices hovering in the US$90s and US$80s. It was about US$80 on Monday.

But a U.S. ban on Russian uranium has left some utilities uncertain about where to source their fuel in the future, and the largest producer in the world recently slashed its planned production for next year.

Add to that a dwindling supply of secondary sources, which include uranium in stockpiles and decommissioned nuclear weapons, and higher prices could still be on the way.

"Some people, especially speculators in the market with uranium stocks, have commented that we're in a bull market that may be getting long in the tooth" said President and Chief Executive Officer Jordan Trimble of Skyharbour Resources Ltd., an explorer and prospect generator with a large portfolio of uranium projects in Canada's Athabasca Basin. "But I would disagree with that wholeheartedly . . . I think we're still very much in the early innings of a bull market."

He sat down with Streetwise Reports recently to talk about the state of the uranium sector, where he sees it going from here, and why.

EVs + AI = Major Demand for Electricity

Experts agree that the world will need a lot more energy soon, and nuclear will have to be a part of it. The electricity needed for artificial intelligence (AI) and electric vehicles (EVs) alone will add 290 terawatt hours (TWh) of new demand to utility systems by 2030, according to Rystad Energy.

"Overall, the combined expansion of traditional and AI data centers, along with chip foundries, will increase demand cumulatively by 177 TWh from 2023 to 2030, reaching a total of 307 TWh" noted Rystad, an independent research and energy intelligence company. "Despite data centers currently representing a relatively modest portion of total electricity demand in the U.S., this marks a more than two-fold increase compared to 2023 levels, which stood at 130 TWh, highlighting the efforts of the U.S. to position itself as a global data center hub."

Rystad said the reliance on coal in the U.S. has diminished. This is expected to continue while overall power generation is expected to rise, including nuclear.

IG Bank noted that Morgan Stanley has estimated a nuclear renaissance could be worth US$1.5 trillion through 2050 in the form of capital investment.

According to the World Nuclear Association, about 60 new reactors are under construction worldwide — 30 in China alone — and a further 110 are planned.

John Ciampaglia, chief executive officer of Sprott Asset Management, told MarketWatch's Myra P. Saefong that there has been "a steady increase for uranium through 'nuclear-power-plant life extensions, 'power uprates,' and new-build programs."

Power uprates refers to the process of increasing the maximum power level at which a commercial nuclear-power plant may operate.

The supply deficit for 2025 is looking to be around 20 million pounds, he said, as supply has been "slow and new production keeps being delayed." Sprott Asset Management "doesn't expect any meaningful new mine production for at least four years" he said.

The Catalyst: A Major Announcement

The largest major catalyst in the present is the recent announcement made by Kazakhstan's National Atomic Company Kazatomprom NATKY, or KAP, which is the largest uranium producer in the world, with Kazakhstan accounting for 40% of the global supply.

Between the increasing need for new supply and the dwindling of secondary supplies, Trimble said, "there are a lot of reasons to be optimistic" about the trajectory of the uranium market going forward.

"This is the first time ever that we haven't been in an era of abundant secondary supply" Trimble said. "We're going to see continued upward pressure on the uranium price. We simply do not have enough new supply coming on quickly within the next few years to meet the growing demand."

Seasonality in the Market

Trimble said there is also traditionally a seasonality to the uranium market in that August can often be a low point, while prices can move higher during the fall months. He also said the volume of uranium bought this year through long-term contracting has been somewhat stagnant, but that could change quickly and force the market higher.

One of the reasons for the subdued contracting is that in August, the U.S. implemented a ban on the import of Russian uranium products, but the law allows utilities to apply for waivers through January 1, 2028.

"The years of cheap and substantial supply coming to the West from Russia and Central Asia are coming to an end" Trimble said. "There has been a lack of utility contracting so far this year, in particular with western and U.S. utilities. But that can change very quickly, and I expect there'll be a flurry of pent up contracting over the course of the next six months."

Trimble said he believes uranium mining and nuclear energy will continue to be strong markets well into the future.

"It's the only source of emissions-free, affordable, scalable, reliable electricity generation" he said. "It's, it's our only option for 24/7, clean electricity. Period."

Here are some options for gaining exposure to that market, including Trimble's company, Skyharbour Resources Ltd.

Skyharbour Resources Ltd.

Skyharbour Resources Ltd. SYHBF has an extensive portfolio of uranium exploration projects in Canada's Athabasca Basin, with 29 projects, 10 of which are drill-ready, covering over 1.4 million acres of mineral claims. In addition to being a high-grade uranium exploration company, Skyharbour utilizes a prospect generator strategy by bringing in partner companies to advance its secondary assets.

In an updated research note on July 24, Analyst Sid Rajeev of Fundamental Research Corp. wrote that Skyharbour "owns one of the largest portfolios among uranium juniors in the Athabasca Basin."

Adjacent to the Moore Uranium Project is Skyharbour's Russell Lake Uranium Project optioned from Rio Tinto, which hosts historical high-grade drill intercepts over a large property area with robust exploration upside potential. The 73,294 ha Russell Lake Uranium Property is strategically located in the central core of the Eastern Athabasca Basin of northern Saskatchewan. Skyharbour has recently discovered high-grade uranium mineralization in a new zone at Russell and is carrying out a 7-8,000m drill campaign across both Russell and Moore.

Skyharbour also has an additional twenty 100%-owned projects that it is actively seeking to option out to potential new partners in the future to add to its growing prospect generator business.

"The demand for nuclear power is expected to grow faster than previously anticipated as data centers for AI applications experience exponential growth in energy needs" Rajeev continued.

Trimble noted, "We're very well positioned as a one-stop shop for investors to get exposure to high-grade uranium exploration. … (We are) well positioned to take advantage of this rising tide we're seeing. And again, I think still very early, early on in the cycle."

Management, insiders, and close business associates own approximately 5% of Skyharbour.

According to Reuters, President and Trimble owns 1.6%, and Director David Cates owns 0.70%.

Institutional, corporate, and strategic investors own approximately 55% of the company. Denison Mines owns 6.3%, Rio Tinto owns 2.0%, Extract Advisors LLC owns 9%, Alps Advisors Inc. owns 9.91%, Mirae Asset Global Investments (U.S.A) L.L.C. owns 6.29%, Sprott Asset Management L.P. owns 1.5%, and Incrementum AG owns 1.18%, Reuters reported.

Tisdale Clean Energy Corp.

Tisdale Clean Energy Corp. TCEFF is a uranium exploration company that is advancing the South Falcon East uranium project just outside the southeastern part of the Athabasca Basin as part of an earn-in agreement with Skyharbour.

The 12,234-hectare property encompasses the near-surface Fraser Lakes Zone B deposit, which has a historical inferred resource of about 7 million pounds of U3O8 at 0.03% and 5.3 million pounds of thorium dioxide at 0.023% within 10,354,926 tons using a U3O8 cutoff grade of 0.01%. It's also in a great neighborhood, with Cameco Corp., Denison Mines Corp., NexGen Energy Ltd., and Rio Tinto Plc operating nearby.

On Tuesday, Tisdale announced it had amended its option agreement with Skyharbour to earn up to a 75% interest in the project by extending cash and work commitments for the project for the remainder of 2024 into 2025.

*Technical analyst Clive Maund recommended Tisdale as a Strong Buy for all time horizons in June. He noted that although the stock had been declining in price since last spring, it was showing signs on its one-and-two-year charts that it was "set to reverse to the upside soon." With a market cap of slightly below US$2 million, Tisdale represents a very cheap call option on the uranium space and the ultimate recovery in uranium juniors.

North Shore Uranium Ltd.

North Shore Uranium Ltd. is gearing up for a follow-up drill program at its Falcon project and a maiden drilling campaign at its West Bear project, both located in the Athabasca Basin.

President and CEO Brooke Clements highlighted that the initial results at Falcon suggested significant potential, warranting further exploration. "We think we've just scratched the surface at Falcon" Clements told RCTV. "More work is clearly warranted on the discoveries we made this winter. We have a lot of untested, high-priority targets that we want to evaluate."

The Falcon project, spanning 55,000 hectares, saw its maiden drill program completed earlier this year. Key targets were identified using historical data and results from airborne geophysical surveys conducted in 2006, 2007, and 2022. Analyst David Talbot of Red Cloud Securities noted that the initial drill program identified structures and alteration typical of basement-hosted uranium mineralization, calling the results a positive first step.

Clements expressed optimism about North Shore's prospects, highlighting the company's strategic position in the growing uranium market. "We offer good value for exposure to grassroots uranium exploration. It looks like we're at the beginning of a major bull cycle in uranium, and excitement is building in the exploration sector."

*Technical analyst Clive Maund also recommended North Shore as a Strong Speculative Buy in May, viewing the stock's potential positively.

Analyst David Talbot of Red Cloud Securities echoed this sentiment, stating that as North Shore continued to execute its exploration strategy at Falcon and West Bear, the stock had the potential to rerate.

Most of the rest is with retail, as the institutional holdings are minor.

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