New uranium bull market underway

by Peter Kennedy

AFTER YEARS OF NOT DOING too much, a rebound in the price of uranium from about US $23 per pound has triggered a bull market in uranium stocks. On April 15, uranium was US $31.30 per pound, up over 32% in the past month. So what is driving the higher uranium prices?

Craig Parry, CEO of IsoEnergy Ltd., told Resource World that “the market has been dramatically under-supplied for the past few years. The annual global demand for uranium is about 190 million pounds and up until about four weeks ago, global production was about 120 million pounds a year. There were stockpiles out there that put a cap on the price. The situation worsened with temporary but indeterminate production curtailments at Cameco’s Cigar Lake, the biggest uranium mine in the world, and the McArthur River/Key Lake mines as well as a 20% reduction by Kazatomprom that will be in effect until 2021.” Parry added, “I think that we will see much higher uranium prices as that product disappears from the market and utilities can’t get their hands on nuclear fuel. Both Cameco and Kazatomprom have been looking to reduce production for some time because they were losing money and I think the COVID-19 pandemic was the trigger. Uranium companies want the price to rise to a level where they can make a profit.”

When production resumes, will the uranium price fall back? “First, the industry has to work through the stockpiles. The bulk of uranium sales are by long term contracts and producers want contracts of not less than US $50 per pound. I don’t think the uranium price will fall back because the 120 pounds of production per year is not nearly enough to satisfy demand, said Parry.”

Another factor is the buildout of nuclear reactors – there are currently 54 under construction around the world – that will require long term supplies of uranium once they are up and running. There is a growing consensus that nuclear energy, generated by large and small reactors, can help many regions of the world, including Canada, to reduce carbon emissions and move away from non-renewable energy sources like coal. (see sidebar on floating nuclear power plant).

“It is why industry officials, including CanAlaska Uranium Ltd. [CVV-TSXV, CVVUF-OTCQB, DH7N-Frankfurt] President, Peter Dasler remain optimistic about the future.

The uranium industry has been struggling since a 2011 earthquake and tsunami in Japan disabled three reactors at the Fukushima nuclear plant, causing their cores to melt down, forcing Japan to shut down 50 nuclear reactors that remained intact.

The devastating repercussions in Japan sent uranium prices tumbling from US $72.63 a pound, and convinced some countries to decommission their nuclear reactors and switch to other fuels.

That prompted major producers like Cameco Corp. [CCO-TSX; CCJ-NYSE] and Kazakh state-owned KazAtomProm, to shut down production and announce indefinite layoffs as long-term contracts that pay huge premiums to the current spot price expire. Cameco has suspended their Cigar Lake Mine until April 23 when the company will determine whether to restart operations.

“Things have to change,” said Dasler, during an interview with Resource World Magazine. “With new nuclear power plants coming on board we are going to need another 200 million pounds per year of production.”

With an eye to the expected growth in demand, CanAlaska is among a handful of companies that are working to develop uranium discoveries in Saskatchewan’s Athabasca Basin, an area best known as the world’s leading source of high-grade uranium and contributor of 20% of the world’s supply.

CanAlaska’s flagship property is the West McArthur Project, which lies on the eastern side of the Athabasca Basin, adjacent to Cameco’s McArthur River mine.

“We started off as operator with 70% of the project and we are slowly diluting Cameco’s 30% interest because they haven’t contributed to exploration program’s last summer or this winter,” said Dasler. “Cameco has pulled back on a lot of its exploration spending, but they are still our partner,” he said. Cameco and Orano Canada Inc. (formerly Areva Canada Inc.) own the adjacent Fox Lake deposit (68.1 million pounds grading 7.99% U3O8) which is immediately to the east. “[Cameco’s] mill at Key Lake will be running out of ore because the McArthur River uranium mine has only has about 15 years of life,” said Dasler. “We have the haulage road to the Key Lake mill, which will be looking for ore in about 15 years which will be good timing for us.”

What follows is a list of other companies that are currently engaged in the exploration and development of uranium projects.

ALX Resources Corp. [AL-TSXV; ALXEF-OTC; 6LLN-FSE], previously ALX Uranium Corp., recently changed its name to ALX Resources Corp. to better describe the nature of ALX’s portfolio of exploration properties that consist of various mineral commodities, including nickel-copper-cobalt, uranium and gold. ALX has the option to earn a 51% participating interest in the Close Lake uranium project located in the eastern Athabasca area of northern Saskatchewan. Orano Canada, as operator, holds a 74% stake in the joint venture with Cameco holding a 14.9% stake and JCU (Canada) Exploration Company Ltd. holding the remaining 10.6%.

Azarga Uranium Corp. [AZZ-TSX; PWURF-OTC; P8AA-FSE] is positioning itself to be America’s next uranium developer. In keeping with that plan, the company has been working to gain the approvals it needs to commence construction at its flagship Dewey Burdock Project in South Dakota, using low-cost insitu recovery methods.

Dewey Burdock received its Nuclear Regulatory Commission license in April 2014, and its revised draft Class 111 and Class V Underground Injection Control permits from the Environmental Protection Agency in August, 2019. The company also owns the Gas Hills, and Juniper Ridge projects in Wyoming, the Centennial Project in Colorado, the Aladdin deposit in Wyoming, and five exploration projects in the United States.

Azincourt Energy Corp. [AAZ-TSXV; AZURF-OTC] recently launched a Phase One drilling program at its East Preston uranium project in the western Athabasca Basin. The company is currently earning a 70% interest in the 25,000-hectare eastern portion of the Preston project as part of a joint venture agreement with Skyharbour Resources Ltd. [SYH-TSXV; SYHBF-OTCQB] and Clean Commodities Corp. [CLE-TSXV]. East Preston is near the southern edge of the western Athabasca Basin, where targets are in a near surface environment without Athabasca sandstone cover. Therefore, they are relatively shallow targets but can have great depth extent when discovered.

Overall, the Preston Project is one of the largest tenure land positions in the Paterson Lake region and is strategically located near NexGen Energy Ltd.’s high-grade Arrow deposit, Fission Uranium’s Triple R deposit and the Spitfire high-grade discovery on the Hook Lake Project, which is owned jointly by Cameco, Orano Canada Inc. and Purepoint Uranium Group Inc. [PTU-TSXV]. Orano recently 70%-optioned 49,635 hectares of the Preston Project for up to $7.3 million in exploration spending. Orano has begun exploration at Preston.

Blue Sky Uranium Corp. [BSK-TSXV; BKUCF-OTCQB; MAL2-FSE] is a leader in the field of uranium discovery in Argentina. The company’s objective is to rapidly advance a portfolio of uranium-vanadium projects into low-cost producers. The company’s flagship Amarillo Grande Project was an in-house discovery of a new district that hosts the largest NI 43-101 uranium resource in the country with an initial preliminary economic assessment.

Denison Mines Corp. [DML-TSX] is a uranium exploration and development company with interests focused in the Athabasca Basin region, including its 90%-owned Wheeler River Project, which holds the high-grade Phoenix and Gryphon uranium deposits (on the Wheeler River property). The Environmental Assessment at Wheeler River has been temporarily suspended.

Denison also owns a 22.5% interest in the McClean Lake joint venture, which includes several uranium deposits and the McClean Lake uranium mill. The mill, which has a capacity of about 24 million lbs of uranium per year, is currently processing ore from the Cigar Lake mine under a toll mining agreement.

A NI 43-101 compliant pre-feasibility study was completed for Wheeler River in September, 2018. It is highlighted by the selection of the insitu recovery mining method for the development of the Phoenix deposit, with an estimated average operating cost of US $3.33 per pound of U3O8.

Dixie Gold Inc. [DG-TSXV] is focused on exploration at its Preston Uranium Project in the Western Athabasca Basin near Fission Uranium’s Triple R deposit, and NexGen Energy’s high grade Arrow deposit. Dixie Gold’s partner on the project is Orano Canada Inc.

Under an agreement with Dixie and Skyharbour Resources, Orano can earn a 70% project interest by spending up to $8 million over six years. The deal was announced on March 9, 2017.

Energy Fuels Inc. [EFR-TSX; UUUU-NYSE American] has been the number one uranium producer in the US for the past several years. It holds three of America’s three uranium production facilities, including the currently producing White Mesa Mill in Utah and Nicholas Ranch in situ recovery (ISR) facility in Wyoming, along with the recently producing Alta Mesa ISR Facility in Texas, which is currently on standby. The company has said it sees multiple other unique opportunities in critical minerals offered by the White Mesa mill, including vanadium production and the potential for rare earth element processing.

Fission Uranium Corp. [FCU-TSX; FCUUF-OTCQX; 2FU-FSE] recently released the results of a pre-feasibility study (PFS) for an underground-only mining scenario at its flagship Patterson Lake South uranium property in the Athabasca basin.

The company said the underground PFS follows the results of an earlier PFS report, which outlined a hybrid mine approach using both open pit and underground techniques.

Highlights from the earlier PFS report, which was released in April, 2019, envisaged average production of 15 million pounds of U3O8 annually during the first five years of production from mineral reserves of 90.5 million pounds of U3O8.

That scenario was based on initial Capex of $1.5 billion and operating expenditure of US $6.77 per pound. It envisaged a four-year construction period and 8.2-year mine life. Fission. has closed a US $10 million senior secured credit facility with Sprott Resource Lending II (Collector) LP.

Forum Energy Metals Corp. [FMC-TSXV; FDCFF-OTC; F3E-FSE] recently commenced diamond drilling on its Fir Island uranium project located on the north rim of the Athabasca Basin. Forum is the operator of the project and all exploration is funded by Orano Canada Inc. as part of an option agreement to earn up to a 70% interest by spending up to $6 million by December, 2023. The 2020 program is budgeted at $1 million with 8.0 to 10 drills planned.

IsoEnergy Ltd. [ISO-TSXV] recently released chemical assay results from a discovery of high-grade uranium mineralization on the company’s 100%-owned Larocque East property in the Eastern Athabasca Basin. In a news release on February 25, 2020, IsoEnergy reported chemical assays from two drill holes that intersected strong radioactivity early in the winter drilling program at the new discovery, which is known as the Hurricane zone. The company said drill hole LE20-34 intersected 8.5 metres of uranium mineralization averaging 33.9% U3O8 from 326.0 to 334.5 metres, including 5.0 metres averaging 57.1% U3O8 from 328.0 to 333.0 metres. Hole LE20-51 returned 14.5% U3O8 over 7.5 metres, including 30.9% over 3.6 metres. The most recent holes include LE20-52 that averaged 22.7% over 7.5 metres from 318.5 to 326.0 metres, including 67.2% over 2.5 metres from 322.5 to 325.0 metres. Hole LE20-53 returned 11.7% over 10.5 metres from 317.5 to 328.0 metres, including 40.4% U3O8 over 3.0 metres from 324.5 to 327.5 metres.

The deposit is open is most directions. A summer drilling program is being considered to test the extent of the Hurricane Zone.

IsoEnergy shareholders include NexGen Energy (52%), Cameco (4%), Orano (2%), and institutional investors (19%).

NexGen Energy Ltd. [NXE-TSX; NYSE AMERICAN] is developing one of the world’s largest uranium deposits on its Rook 1 property in the Athabasca Basin and is currently in process of feasibility and environmental assessment under the Canadian Environmental Assessment Act 2012 (CEAA).

Rook 1 is estimated to contain an Indicated Resource of 256.6 million pounds of uranium oxide contained in 2.89 million tonnes of 4.03% uranium oxide, according to a resource update and prefeasibility study announced on November 5, 2018. The latest estimate includes a high-grade core of 181 million pounds, contained in 0.46 million tonnes, of grade 17.85% uranium oxide. On top of that is an Inferred Resource of 91.7 million pounds of uranium oxide contained in 4.84 million tonnes, grading 0.86% uranium oxide, the company has said.

The Indicated Resource outlined so far could support annual production of 24.5 million pounds of uranium over a projected mine life-of-nine of years. The prefeasibility study foresees an initial capital cost of $1.25 billion. NexGen has postponed the Feasibility Study and the Environmental Assessment due to the COVID-19 pandemic.

Plateau Energy Metals Inc. [PLU-TSXV] is a uranium exploration and development company, which also offers exposure to lithium. The company has a growing lithium and uranium resource at its Falchani Project in Peru, which is located within a huge and relatively unexplored tenement package, covering 910 km2. The lithium resource is unusual as it is hosted in a volcanic tuff, making potential lithium extraction much quicker than brine. Grade is also much higher than average brine grades.

Purepoint Uranium Group Inc. [PTU-TSXV] is focused on the exploration of its nine projects in the Canadian Athabasca Basin. Its flagship Hook Lake Project is owned jointly by Cameco (39.5%), Orano Canada (39.5%) and Purepoint (21%) as operator. It consists of nine claims, covering 28,598 hectares and is situated in the southwestern Athabasca Basin. The Hook Lake joint venture is considered one of the highest quality uranium exploration projects in the Athabasca Basin due to its location along the prospective Patterson Lake trend and the relatively shallow depth to the unconformity.

Tisdale Resources Corp. [TRC-TSXV], formerly Senator Minerals, controls the Patterson North East (PNE) and Carter Lake uranium projects, both of which are located on the west side of the Athabasca Basin. The PNE project covers approximately 531 hectares, directly adjoining the easternmost boundary of Fission 3.0’s Patterson Lake North (PLN) project. Fission 3.0 is a subsidiary of Fission Uranium Corp.

Uranium Energy Corp. [UEC-NYSE] sees itself as having an infrastructure advantage with its state-of-the art fully licensed Hobson processing facility in South Texas, which is central to the Palangana, Burke Hollow, Goliad and ISR projects. In Wyoming, Uranium Energy controls the Reno Creek Project, which ranks as the largest permitted, pre-construction ISR uranium project in the United States.

Additionally, the company controls a pipeline of uranium projects in Arizona, New Mexico and Paraguay, a uranium/vanadium project in Colorado and one of the highest-grade, and largest undeveloped Ferro-Titanium deposits in the world, located in Paraguay.

Previous plans to resume last year’s successful drilling program at the Burke Hollow ISR Project will be postponed along with the associated capital outlays until market conditions normalize. In the meantime, the UEC team will continue to advance its ISR projects with engineering and geologic evaluations that support the company’s production readiness strategy.