Buying Opportunity In The Uranium Exploration Sector

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:

  • Cameco stated that if they can restart Cigar Lake it only helps them deliver on existing contracts & provides no spot uranium supply.

  • 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.

  • 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.

  • 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.

  • Legislation from Sen. John Barrasso (R-Wyo.) would cement a number of Trump administration recommendations to bolster nuclear energy, and, in turn, uranium mining.

  • 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. 

 

 

Disclaimer:

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.

EnergyandGold has been compensated for marketing & promotional services by Skyharbour Resources Ltd. so some of EnergyandGold.com’s coverage could be biased. EnergyandGold.com, EnergyandGold Publishing LTD, its writers and principals are not registered investment advisors and advice you to do your own due diligence with a licensed investment advisor prior to making any investment decisions.

This article contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively “forward-looking statements”). Certain information contained herein constitutes “forward-looking information” under Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “expects”, “believes”, “aims to”, “plans to” or “intends to” or variations of such words and phrases or statements that certain actions, events or results “will” occur. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed by such forward-looking statements or forward-looking information, standard transaction risks; impact of the transaction on the parties; and risks relating to financings; regulatory approvals; foreign country operations and volatile share prices. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. Accordingly, readers should not place undue reliance on forward-looking statements and forward looking information. The Company does not undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except as required by applicable securities laws. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.