February was a pretty awful month for the uranium sector, with many uranium explorers and producers falling more than 10% during the month. However, the good news is that the uranium sector has a tendency to put in place a tradeable low during the month of March.
In fact, last year, Skyharbour Resources (TSX-V:SYH) made an important low at C$.35 during the month of March before proceeding to rally ~63% over the next seven months before peaking at C$.57 per share in October 2018 (as global market turmoil erupted):
Junior exploration stocks have a strong tendency to follow seasonal patterns; often falling after exploration results are released during the winter, then bottoming in the spring, before rallying from the spring into the summer as the next exploration season gets underway.
In the case of Skyharbour resources, investors won’t have to wait long as 3 different drilling programs have recently gotten underway at the company’s Athabasca Basin (Saskatchewan, Canada) uranium projects.
Three recent SYH news releases lay out the beginning of drilling at the company’s Preston and East Preston projects, as well as the company’s flagship Moore Project:
At Preston, Skyharbour’s option partner, Orano, has commenced a planned 3,600 meter winter diamond drill program at the Preston Uranium Project. The project is located in the western Athabasca Basin near NexGen Energy Ltd.’s high-grade Arrow deposit, hosted on its Rook-1 property and Fission Uranium Corp.’s Triple R deposit that is located within their PLS Project area.
Under the option agreement with Orano, Canada will contribute cash and exploration program considerations totaling up to CAD $8,000,000 in exchange for up to 70% of the project area over six years.
Skyharbour’s main focus is its flagship Moore Project, thus a strategy of optioning off SYH’s non-core projects is value accretive and makes sense.The option partners pay Skyharbour cash while funding drilling, and other forms of exploration, on the projects. Exploration programs that would not be carried at this time without these option agreements.
Skyharbour President and CEO Jordan Trimble added the following:
“Skyharbour continues to execute on its key objectives by adding value to its project base in the Basin through ongoing mineral exploration at its flagship, high-grade Moore Uranium Project while utilizing the prospect generator model to advance its other projects with strategic partners.”
At its flagship Moore Project, Skyharbour is planning to carry out a minimum of 3,000 meters of drilling in eight to ten diamond drill holes to follow up on the success of the drill programs completed last year. This drill program will test both unconformity and basement-hosted targets, along the high grade Maverick structural corridor, and essentially untested prospective conductive corridors identified by Skyharbour’s technical team. Of particular interest are potential underlying basement feeder zones to the unconformity-hosted high grade uranium present along the Maverick corridor. These targets have seen limited historical drill testing.
Mr. Trimble stated:
“We are excited to get the next phase of drilling started at our flagship Moore uranium project which will serve as an important near term catalyst for the company. The high grade uranium mineralization discovered during the two drill programs completed last year illustrates the strong discovery potential at the project. We will be drill testing the Maverick corridor with a focus on basement-hosted targets as well as testing other shallow, regional exploration targets that offer the potential to generate additional discoveries.”
Skyharbour has also optioned its East Preston Project to Azincourt Energy. Azincourt recently announced that it had received all drill permits for its 2019 drill program at East Preston, and drill crews have been mobilized. Azincourt’s 2019 drill program, with 10-15 holes (2,000-2,500 meters) planned, will test high priority targets within prospective conductor corridors defined by recent airborne geophysical surveys. The program’s primary drill target, in the Five Island Lake region, is considered to be one of the most prospective geological targets on the property.
The targets at East Preston are basement-hosted unconformity related uranium deposits, similar to NexGen’s Arrow deposit and Cameco’s Eagle Point mine. 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.
Meanwhile, the outlook for the uranium market appears to be turning the corner despite the current spot price of ~US$28.50 for U3O8 still being well below the global all-in cost of production. Major production cuts and depleting mine reserves appear to be working their way into the uranium market and driving prices higher. Meanwhile, on the demand side there are 453 operating nuclear reactors globally and 55 new reactors currently under construction globally.
A wise man once said, “the best cure for low prices are low prices.” Essentially, this means that low prices help a commodity to work through excess supply and rebalance, potentially leading to a future dynamic of undersupply in the commodity due to under-investment in new sources of production – this is exactly what we’re seeing in the uranium market today:
Skyharbour is perfectly positioned to capture the sweet spot in the uranium cycle that is forecast to begin in 2021, the year when uncovered demand (future demand not covered by long term supply contracts) is set to rise to 20% of total demand (eventually forecast to rise to 50% of total demand by 2025).
SYH shares are sitting at major chart price support (C$.35) as we enter a month that has a tendency to mark a seasonal low in uranium stocks. If those two factors aren’t enough, Skyharbour will also have steady exploration news flow over the next few months as the results of the aforementioned exploration programs on 3 of its Athabasca Basin properties steadily flow in.
The article is for informational purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. Readers of the article are expressly cautioned to seek the advice of a registered investment advisor and other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Skyharbour Resources Ltd. is a high-risk venture stock and not suitable for most investors. Consult Skyharbour Resources Ltd.’s SEDAR profile for important risk disclosures.
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