The uranium sector had a very challenging 2019 with many of the largest explorers/producers in the space seeing their share prices decline by double-digit percentages. This poor share price performance offers an intriguing opportunity as we enter a new decade, a decade which begins with the global uranium market significantly undersupplied.
In investing, oftentimes the biggest opportunities are presented at the point of maximum pessimism. If we aren’t already there in the uranium sector, we must be getting really close. Cameco is due to purchase more than 10 million pounds of uranium in the spot market between late-2019 and early 2020. These purchases are occurring against a backdrop of an increasingly undersupplied global uranium market which has seen significant supply curtailments over the last couple of years:
If we are indeed heading for a turn in the uranium market (from oversupply to undersupply) the biggest torque is likely to come from micro-cap uranium explorers that could experience the largest percentage share price increases. After a challenging 2019, one company in particular offers multiple ways that shareholders can win in 2020 and this company’s CEO has been aggressively accumulating shares in the last few months.
Skyharbour Resources (TSX-V:SYH) has been conducting geophysics (drone geophysical surveys) on its flagship Moore Project in the Athabasca Basin of Saskatchewan. The objective of this work has been to further refine its target identification. In its Q1 2020 drill program, Skyharbour will be looking for basement hosted high-grade feeder zones below the unconformity at the Maverick Zone at Moore:
When asked about his torrent of recent insider buying (Mr. Trimble has purchased nearly 1,000,000 SYH shares since the beginning of September) Skyharbour CEO Jordan Trimble offered the following:
“I’ve bought a lot of stock recently, both in the open market and in the latest financing. Obviously I’m a believer and I don’t think it will take a lot to get the stock trading higher. When you look at our situation in terms of 3 different exploration programs on our projects starting up soon including 2 drill programs, and then you look at the macro backdrop and the uranium market heading into 2020, there are a number of key catalysts that could help drive a higher share price. I believe the value proposition for Skyharbour is actually the strongest it has ever been.”
While Skyharbour will be focused on its flagship Moore Project in early 2020, its partners (Orano and Azincourt) will be working hard early in the new year at two of Skyharbour’s other projects (Preston and East Preston). Orano Canada has an option on Skyharbour’s Preston Project which allows it to earn up to 70% of the project through spending C$8 million on exploration programs over six years. Meanwhile, Azincourt Energy will be paying Skyharbour $200,000 in cash and carrying out a C$1.2 million drill program (2,000-2,500 meters) early in the new year at Skyharbour’s East Preston Project, located 50 kilometers southeast of Patterson Lake in order to complete its 70% earn-in on the project.
The situation is clear. Skyharbour, along with the entire uranium sector, has had a rough 2019. However, 2019 is about to be in the rearview mirror and a great deal of news flow and potential catalysts await in 2020. Here are some of the potential catalysts that could generate upside in the SYH share price in 2020:
A ~2,500 meter drill program at Skyharbour’s flagship Moore Project will begin in early Q1 2020. This drill program will target underlying basement feeder zones in the high-grade Maverick Corridor – these targets have seen limited historical drill testing.
Exploration and field work at Skyharbour’s Preston Project by partner Orano Canada is set to commence in January – Orano has the option to earn up to 70% of Preston through C$8 million of cash and exploration spend over six years.
A C$1.2 million drill program (2,000-2,500 meters over 15 holes) by Skyharbour’s partner Azincourt at the East Preston Project as part of an option agreement is slated to begin at the end of January – Azincourt is currently earning towards a 70% interest in the 25,000+ hectare East Preston project as part of a joint venture agreement.
A rebound in the uranium spot price as Cameco buys more than 10 million pounds on the spot market amid an increasingly undersupplied global uranium market.
Skyharbour was selected as one of my six year end 2019 tax loss buying opportunity picks and I have been a buyer of SYH shares on the open market over the last month. Technically speaking, SYH has strong support near C$.16 and I can envision SYH rising up to the C$.25 area (~56% above today’s share price) in early 2020 as drilling news flow and renewed optimism in the uranium sector stimulates some fresh buying. Former support near C$.35 (nearly 120% above today’s share price) offers a longer term upside target that could be reached later in the year.
SYH.V (Daily – One Year)
I believe it’s worth noting that Skyharbour just raised C$1.8 million and the company is fully funded for 2020; the bulk of the latest financing was placed with institutional investors including several uranium centric funds. With the financing overhang gone and tax loss selling season drawing to a close next week, Skharbour shares are poised to rally early in 2020.
The author is long SYH.V shares at the time of publishing and may choose to buy or sell at any time without notice. Skyharbour Resources Ltd. is an Energy & Gold sponsor.
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