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April 25, 2024

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Atco Mining (ATCM.C): The guys behind the guys behind the Atlantic uranium project

Yesterday, we pointed out the guys at Standard Uranium (STND.V) had been hired to do the technical exploration work at The Atlentic Project, an Athabasca Basin-based uranium play that optionee Atco Mining gets a 75% piece of on the completion of three years of exploration milestones.

That’s a great deal for Standard, who stand to earn a good paycheque on the work being done, plus a 2.5% NSR at the end, but it also bears looking into the optionee because the other 97.5% of that NSR – or 75% of it anyway – is still in Atco’s hands, assuming that work reaches completion.

On the technical side, the Standard crew have no peer, which is why we noted that company has had to work hard to keep their team together in the face of headhunting from bigger players in 2023, so Atco earn points from us in calling their shot and hiring the right team to get the work done properly and quickly.

But how did Atco get to this place? What’s their origin story? And what do they bring to the party?

I decided to dig in so we can really understand the Atlantic Project and found, if you roll back six months ago, uranium wasn’t in the business model at all. Back then, Atco was making its run on a road less traveled:

Salt Domes: Sell the salt and store the hydrogen

In western Newfoundland, the growing hydrogen sector has taken hold in a fashion that goes far beyond simple opportunity, and the government is greasing the gears with hard dollars.

Newfoundland wants this industry to happen, and soonish, and has been prepared to put big doughbucks on the table to get there.

But while getting hydrogen out of the ground is a laudable goal, the bigger question must be answered.. where are you going to put it when you have it?

Over the past year, Atco placed a series of bets in this regard in grabbing ‘salt projects’ across that region that deliver potential in two ways.

  1. Sell the salt – there’s a $14 billion salt market out there annually, and North America’s need for salt – road salt in particular – faces a large scale yearly shortfall of as much as 10 million tonnes.
  2. Use the salt domes for storage – hydrogen can’t just be parked in any old gas tank. It has specific pressure and depth needs, and salt domes – underground caverns formed over many years as salt leeches up into the overbearing rock – are perfect places to store hydrogen safely and inexpensively.

When you let hydrogen mix with the air, bad things happen.

Saltdome storage comes with 1% leakage, as the salt-infused rock is thick, dense, and can take the pressure. It’s often a place where oil and gas gathers over a long period, for those very reasons.

Atco’s pitch was simple: We got the saltdomes youneed to store your hydrogen, and if this sector in this place does as is expected and blows up into a giant firothy financial thing, we’ll be a part of just about everyone’s business model.

Picks and shovels, and margarita garnish.

And we’re not talking about little salt domes here. The Blue Moon South Salt Project is a 37-meter-wide salt dome located at just the right 500 metre to 1500 metre depth that is perfect for hydrogen storage. This project, alongside others like the Lunar North and Apollo Salt Projects, represent a starting point for the strategic exploration of the St. Georges basin for additional salt domes suitable for hydrogen storage.

The Lunar North, for example, has 16 clams totalling 400 hectares, and an inferred resource of 908 million tonnes of 96.9% NaCl.

The Apollo has 93 claims over 2300 hectares. The Adonis has 90 claims over 4500 hectares.

From the Atco investor deck:

Salt caverns offer flexibility regarding their injection and withdrawal cycles to respond to the needs of the hydrogen market. Depending on their depth, salt caverns may be operated at pressures up to 200 bars and allowing for large-volume hydrogen storage (from 9 to 6,000 tons). Due to their tightness, salt caverns allow for safe storage of large quantities of hydrogen under pressure. The first hydrogen storage cavern, which was built in the United Kingdom in 1972, is still in service.

With today’s news of a 9-figure loan to a hydrogen company in NL, it’s clear Atco’s original business could become VERY important at any time.

But that model is long term and would require a little capital raising that, at today’s share price, would be expensive.

So Atco made a baller move that stays in their lane of green energy, without being stuck in place while a whole new industry pops up:

URANIUM

Atco Mining’s venture into uranium exploration in the Athabasca Basin, known for the world’s richest uranium deposits, is a strategic move towards supporting the immediate needs of the clean energy sector. The Athabasca Basin’s historical significance as a producer of approximately 20% of the world’s primary uranium supply underscores the region’s potential for further high-grade discoveries, and Atco’s partnership with Standard Uranium is clearly aimed at proving out the project NOW, not sitting on the story forever like many at the bottom end of the market cap scale.

Atco wants the work done tomorrow, and brought in the A-crew to get it done.

The strategic acquisition of the Atlantic Uranium Project, with its high-resolution gravity surveys and identified high-priority drill targets, underscores Atco’s commitment to uncovering new uranium deposits. The project’s proximity to historical drill holes and underexplored conductive corridors presents a ripe opportunity for groundbreaking discoveries.

Of course, a lot of companies have dipped a toe in uranium’s warm waters of late, but most are either grabbing at property with low exploration potential, or decent property but with no expertise at proving it out.

Atco falls in that latter category BUT, in doing a deal for the property that demands exploration be done to complete the transaction AND bringing in bona fide uranium technical guys, Atco has made clear this isn’t a treading water situation. They’re not bringing on the kickers, they’re bringing on the QB and a proven offensive line.

The Opportunity for Investors

For investors, Atco Mining presents a compelling opportunity to be part of two critical components of the clean energy transition: uranium and hydrogen. The company’s strategic positioning in the uranium-rich Athabasca Basin and its pioneering approach to hydrogen storage using salt domes offer a unique investment proposition.

The demand for uranium, driven by its role as a clean fuel for nuclear energy, is on an upward trajectory as countries worldwide aim to reduce carbon emissions. Atco’s exploration activities in this sector position it to potentially benefit from the increasing uranium demand, offering investors a chance to contribute to a sustainable energy future.

Simultaneously, the exploration of salt domes for hydrogen storage taps into the nascent but rapidly growing hydrogen economy. As the world seeks to diversify its energy storage solutions, Atco’s innovative approach could pave the way for large-scale, secure, and flexible hydrogen storage, marking a significant advancement in renewable energy technologies.

To be clear, the uranium space is mature with many large players, and Atco’s opportunity there is in progressing a property and an opportunity they genuinely believe they fell ass backwards into and, by rights, should have been snapped up long before it crossed their desk.

But, for mine, the hydrogen opportunity is a real undiscovered gem in the financial markets. This is a small play, admittedly, mostly because nobody has noticed them as they’ve snapped up project after project. As hydrogen goes, so too does hydrogen storage, like plopping a gold mill in the middle of a gold district.

Conclusion

Atco Mining stands at the intersection of opportunity and innovation in the clean energy sector. With its dual focus on uranium exploration and salt-dome hydrogen storage, the company not only contributes to the global energy transition but also offers investors a unique entry point into the future of energy in tweo places; the well worn path of uranium, and the undisocovered trail leading to hydrogen.

I give them credit for splitting a pair of kings, because when the gods of exploration drop a good hand in your lap, you don’t say ‘sorry, it’s a bit out of my comfort zone,’ you play it for all it’s worth.

— Chris Parry

FULL DISCLOSURE: Atco Mining is not an Equity.Guru marketing client, but Standard Uranium is, and we hold stock in that company.

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