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July 24, 2024

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Uranium microplays: Can TCEC, ASHL, AAZ, MARV, and SCLT level up in 2024?

Uranium has been the ‘next big thing’ on the public markets in Canada for a few years now, and though sectors like lithium and even oil and gas have had interesting times, and gold is threatening to have a long awaited comeback, the big dollars are happy to stay with the glowing rocks that make spectrometers go ding.

Here’s why:

  1. Growing Demand for Clean Energy: As the world increasingly seeks sustainable and low-carbon energy solutions to combat climate change, and the flow of scary Netflix documentaries about how nuclear power will kill us all have rolled to a trickle, nuclear is finally gaining attention as a reliable, inexpensive, and above all else SAFE source of clean energy. Uranium, as a key fuel for nuclear reactors, is positioned to see increased demand as more reactors are commissioned, making investments in the sector attractive.
  2. Expansion of Nuclear Power Infrastructure: Several countries are either constructing new nuclear power plants or planning significant expansions to their existing nuclear energy capabilities as we speak. This expansion is in line with global efforts to reduce reliance on fossil fuels and increase energy security, thereby driving up the demand for uranium.
  3. Supply Constraints: The uranium market has experienced significant supply challenges of late, including mine closures and production cuts, and the occasional war, which have tightened supply. Geopolitical tensions and trade policies can further impact uranium supply chains, potentially leading to price increases that will benefit producers and investors in the sector.
  4. Technological Advances in Nuclear Energy: Innovations in tech, including small modular reactors (SMRs) and advanced nuclear reactors, promise to make nuclear energy more efficient, safer, and cost-effective than it has been historically. We’re already seeing small nuclear reactors on military ships, and companies with small truck-sized reactors that can be moved to places where a lot of energy is needed remotely. These developments could lower the barriers to nuclear energy adoption from nation states to states, cities, even companies, further boosting demand for uranium down the line.
  5. Long-term Contracts and Rising Prices: Uranium producers often enter into long-term contracts with utilities, providing stable and predictable revenue streams. With the anticipated increase in demand and potential supply constraints, uranium prices may rise, offering attractive returns for investors who enter the market at a strategic time

So, okay, uranium is the hip move. Now what? How do we make money on that shift?

All that demand has seen share prices of large uranium producers rise markedly over the past year, so the investor with a low tolerance for risk might jump in on one of several larger players and look for 40% annual gains.

But some investors like the idea of putting their money into the lower market cap side of town, where companies are less focused on production and more on rolling the dice on exploration.

These small explorers might be just a handful of dudes at a rented desk in an office park, or a couple of dusty fellas on the tundra flying in equipment and tents and workers as needed. They might make their money buying and selling properties, or advancing properties just enough to attract bigger players, or be hardtack long term operators looking to grind it out, one drill hole at a time. They can be dyed-in-the-wool radiation hunters or entirely new to uranium having made the jump from other minerals or even industries.

Betting on that end of things obviously brings about risk for investors, as the properties in question are not nearly as far along and may never be (if things go wrong), but getting in earlier in the process does allow bigger wins when wins are had.

A small explorer at the beginning of their drill program might only be worth a few million dollars on the exchange, but if they hit good results, or bring in bigger partners to help explore, or find themselves wanted by aquirers, that value can spike hard, delivering multiples to Joe Investor.

We figured it might be worth running through the players on that small side, where the promise is potential riches for a small buy-in, if you can stomach the other side, which can be nothing at all if they miss and go home.

THE HUNTER GATHER:

Karim Rayani had a small shell a few years back by the name of International Montoro that had not a lot of coin in the bank. We helped Karim by getting his story out with the stingiest marketing program on the street, but since that time he has goine out and found project after project, far more than I could ever reasonably talk about here, and along the way he ventured outside gold and into uranium.  Rayani is an all you can eat buffet of resource properties, and an odd duck in that he doesn’t just collect them, he actually works them.

He spun his uranium deal out into a company called Marvel Discovery (MARV.V) and though it’s at a 52 week low, it’s been collecting multi-metal properties, spinning others out into newcos (Power One Resources, PWRO.V), bringing strategic investment from bigger players like Denison Mines, flipping other properties, and advancing their uranium projects with 1800 metres of drilling that is ongoing.

All that for a $4.2 million market cap.

I don’t know if Marvel will ever pull metal out of the ground in a meaningful way or if Riyani will keep wheeler-dealing like a Turkish street merchant and slapping cash in the bank on the regular, but that valuation seems cheap.

THE RARE EARTHLING:

Searchlight Resources (SCLT.V) put out an NI 43-101 resource estimate on their Kulyk Lake rare earths/uranium property in mid-2023 that could be summarized as basically, “yeah, there’s some ore there.” It wasn’t establishing a massive target or a huge drill propgram or numbers that will have bankers beating a path to your door, rather, it was bookkeeping to point out what historic drilling had been done, where there might be some targets, and that more drilling was required. It was a table setter.

But sometimes the boring work is the work needed.

The Searchlight team are small and dogged. They’ve been in the game for a long time, have plenty of runs on the board and names in the rolodex, and reputation earned, so nobody complained about the 43-101 that wasn’t, rather, the markets set SCLT aside and let them do their work unbothered.

They’ve raised a little dough here and there. They’ve done sample work and surveys. Progress, if slow going.

But they also have a rare earths property with uranium all over it, a couple of rare earths properties, and gold projects, so at any time they can either flip those assets for dough, or work them as they come en vogue, or just hold them unti the time is right to work them.

Considering what Searchlight has, the $4 million market cap is insanely cheap, and for a brief period in January it went on a run, nearly doubling before setting back down, all on no news.

THE LOADED SPRING:

A couple of years ago, Azincourt Energy (AAZ.V) was a $40 million company with a uranium property it hadn’t worked much. A rollback was necessary to bring some tightness to the share structure and the market just went bananas overreacting to that, bringing the stock back to a $4 million market cap today, even though the underlying property has been advanced in the meantime AND the sector is hot – and the company picked up a lithium project as insurance.

Azincourt controls a 90% majority interest in the 25,000 hectare East Preston uranium exploration project in the western Athabasca Basin of Saskatchewan, the world’s premier location for uranium mining. It has a large inventory of priority drill targets identified within 30km of prospective exploration corridors delineated through multiple geophysics, ground evaluation programs and drilling. And it sites smackl dab in the middle of an area containing over $20 billion in market cap among other players.

The property wants to be explored, and that exploration has kicked off.

If it was worth $40 milion two years back without that exploration and the lithium property, my thinking is it’s a steal today at $8 million.

THE PILOT FISH:

Tisdale Clean Energy (TCEC.V) has one project – count em – one project that it sourced from a far bigger player in Skyharbour Resources (SYH.V). To keep it, Tisdale will need to send $11 million to SYH over five years AND do $10 million in exploration work, but they’re already off and running on that.

  • Historical drilling consisting of 25 holes totaling 4,603 metres has defined a zone of moderately dipping, multiple-stacked uranium and thorium mineralized horizons down to 175 metres that is open to the southwest and east-northeast as well as at depth.

In 2015, Skyharbour rattled off an NI 43-101 on the property that found 6,960,681 pounds U3O8 inferred at average grade of 0.03% U3O8 and 5,339,219 pounds ThO2 inferred at average grade of 0.023% ThO2 within 10,354,926 tonnes (cutoff grade of 0.01% U3O8), and shows distinct similarities to high grade, basement-hosted deposits in the Athabasca Basin such as Eagle Point, Millennium, P-Patch and Roughrider.

In short, it’s a beauty. All that’s needed to get it there is the work.

And two weeks ago they moved equipment in to start that work.

Working under Skyharbour’s glorious belly isn’t a bad place for this pilot fish of a play to be. It gives them added exposure to institutional investors, presumably liberal use of SYH’s rolodex, and a litany of previous work done well by that outfit.

The next few months will be key for TCEC. If they can get the story out, and the share price growing, there’s every reason to believe these good bones will lead to something bigger than the $2.6 million market cap currently.

THE OPPORTUNIST:

Ashley Gold (ASHL.C) boss Darcy Christian is an oil and gas guy, who found himself at the helm of a small gold deal, and while grinding away on that deal one of his investors came to him with a passion project of his own.. a uranium deal.

Not just a uranium deal, but an advanced deal, that had been on the way to being a producing mine in the ’80’s when the floor fell out from under the price of uranium, effectively killing the project. It fell into his investor’s hands, and he’d sat on it for a while and, trusting Christian to properly run it, has vended it into ASHL.

There’s a slope been built, plenty of drilling, and a neighbour has a large mill in the planning stages that will require feeding in 2025. Between now and then, Darcy would need to de-water the mine, clear away a load of scrub, and get new permits but… not a lot more than that.

He estimates $10 million to $15 million would need to be spent to get to the point the project is at now if it was starting from scratch, not to mention the three to five years in development time, so though Darc’ concedes he spent more than some would have to lock the project down, being able to start from halfway down the track is a pretty good advantage – especially when uranium prices are up NOW and may not be in ten years, when a lot of other deals might be hitting their stride.

The kicker? You get the whole damn company right now, including the gold project, for a $1.8 million market cap.

Christ on a bike.

THE KICKER:

On current valuations, you could have every single company mentioned abover for a grand total of $20.6 million. The whole bundle. Every project, every side bet, every operator.

You can tell me uranium is a hot sector til you go blue in the face, but with that grab bag of good, hard working mining guys, all showing that they’re intent on doing the work to move things forward, all priced at just over $20 million, I’ll tell you there’s a lot of value yet to be had.

Go forth and multiply.

— Chris Parry

FULL DISCLOSURE: Every company mentioned above, from Skyharbour, Tisdale, Azincourt, Falcon Gold, Searchlight, Ashley Gold, Marvel Discovery, and more besides, are Quity.Guru marketing clients. So I guess you could say we’re all in on U.

 

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