After a tremendous rebound from the March lows the uranium sector has stabilized and begun to consolidate some of its recent large gains. Even after Cameco’s decision to restart the Cigar Lake Mine the global uranium market remains in a fundamental supply deficit and a further pullback to the golden shaded area in the URA daily chart might offer an attractive entry point in uranium exploration & production equities:
URA (Daily)
Moreover, several producers like Cameco have remained active buyers in the spot market and we can expect that to continue through 2021. We could see this trend accelerate with the recent supply disruption caused by the pandemic which would help drive an even higher spot uranium price.
Skyharbour Resources (TSX-V:SYH), a uranium focused project generator, is busy moving ahead to a 2,500 meter summer diamond drilling program at its flagship Moore Uranium Project in Saskatchewan (7-9 drill holes). Drill targets will include both unconformity and basement-hosted mineralization targets along the Maverick structural corridor. Skyharbour specifically plans to expand the high grade mineralization recently discovered at the Maverick East Zone and to test the Viper target area along strike, with a focus on basement-hosted mineralization. Only about ½ of the 4.7 kilometer long Maverick structural corridor has been systematically drill tested, leaving robust discovery potential along strike, both at the unconformity, as well as at depth in the underlying basement rocks which have seen limited drill testing to date.
Another zone of particular interest for Skyharbour at Moore is the Viper Zone. Historical drilling encountered basement-hosted mineralization in hole ML-161 and was accompanied by significant pathfinder element enrichment, clay alteration and structural disruption approximately 100 meters below the unconformity. Two follow-up holes, ML17-08 and ML20-02 drilled by Skyharbour also encountered significant clay alteration and structural disruption in the basement with localized silicification and pathfinder element enrichment. In addition to the drilling results, a previously conducted UAV-MAGTM survey indicates a prominent magnetic low associated with this target. The mineralization in hole ML-161 has never been followed-up along strike, and thus represents a high-priority target for further drilling.
In recent weeks we have seen the market bid up uranium juniors such as ISO Energy (TSX-V:ISO) and NexGen Energy (TSX:NXE) to fresh 52-week highs. This is evidence that the market is hungry for exploration success and companies that have the potential to deliver the next North American uranium mines.
Strong fundamental trends support uranium sector tailwinds over the coming years – these supporting trends include:
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Cameco stated that if they can restart Cigar Lake it only helps them deliver on existing contracts & provides no spot uranium supply.
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Further delays in uranium mining resumption in Kazakhstan will result in Kazatomprom needing to buy millions of spot market pounds this year on top of what Cameco must also buy, negating any increased global supply from restarting Cigar Lake.
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The gravity of the need to reduce carbon emissions makes nuclear a critical part of any solution. Both India and China are building dozens of new nuclear power plants.
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Uptick in activity by utilities looking to secure term contracts for uranium supply over the coming years with at least two utilities submitting RFPs (request for proposals) in the last couple of weeks (including a large utility RFP due in early August). Engagement from utilities has been lacking for the last few years and any uptick in utility buying activity will result in a sustained move higher in uranium spot pricing.
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Legislation from Sen. John Barrasso (R-Wyo.) would cement a number of Trump administration recommendations to bolster nuclear energy, and, in turn, uranium mining.
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In less than a decade there will be well in excess of 100 million pounds of uncovered annual U3O8 demand
At its recent share price Skyharbour has a roughly C$15 million market cap which is relatively small considering the company’s impressive project portfolio. Not only is Moore the company’s flagship project, but Skyharbour has a portfolio of half a dozen other highly prospective uranium projects in the Athabasca Basin with partner companies like Orano and Azincourt advancing these projects.
We have recently seen a tidal wave of buying sweep across the gold sector after gold rallied from ~$1500 earlier in the year to a recent new all-time high of $1970 per ounce. Imagine what could be possible in the junior uranium exploration sector if the uranium spot price rebounds back to $100/lb over the next few years as the global uranium market moves into a deeper deficit on the back of surging China/India demand and an undersupplied production side of the market that has been neglected after a decade of underinvestment.
It’s hard to overestimate the size of the opportunity that lay before us in the uranium sector:
URA (Monthly)
The Global X Uranium ETF Monthly chart shows a massive failed breakdown followed by a reversal back above previous support. We have seen the culmination of a decade long uranium bear market reverse in spectacular fashion in 2020 – the bull market is just beginning and the monthly-RSI(14) moving above the median line pointing higher offers technical confirmation that a major long term bottom has finally been put in place in the uranium sector.
Junior explorers like Skyharbour stand to benefit tremendously from renewed investment in the global uranium exploration and production industry. At C$.17 per share Skyharbour is an attractive buying opportunity as the shares stand to appreciate before year end on sector tailwinds and drilling success at Moore.
Disclosure: Author owns SYH.V shares at the time of publishing and may choose to buy or sell at any time without notice.
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