On Monday March 11, 2011 the Fukushima nuclear plant was severely damaged by a 15-metre tsunami which disabled the power supply and cooling of three Fukushima Daiichi reactors. All three cores largely melted in the first three days.
The uranium market went into a tailspin. Before the accident uranium futures were selling above $68, after the accident those prices fell to $35. Six years later, in 2017, the spot price for uranium touched lows of less than $20 a pound.
Fresh from a successfully acquired gold company Jordan Trimble, CEO of Skyharbour Resources (V.SYH) decided to look at uranium in 2013. “We wanted to build a portfolio of high-quality uranium projects with a top-tier management team,” said Trimble. “In a tough uranium market, we saw an opportunity as contrarians.”
People who know uranium agree that one of the most prospective areas in the world is the Athabasca Basin in Northern Saskatchewan. Companies like Cameco, Denison Mines, Nexgen Energy and others have been successfully mining and exploring in the Basin. Saskatchewan is a mining friendly jurisdiction, ranked number two globally by the Fraser Institute, and there is considerable infrastructure in the Basin.
“We started acquiring properties,” said Trimble. “In a depressed market, we were able to buy properties which had had over 70 million dollars worth of historical work and exploration on them for a total of approx. 4 million dollars.”
While Skyharbour carries out its own exploration and development at its flagship Moore Uranium Project, the company also uses the prospect generator model to ensure work is done on its secondary properties. “On our Preston property, a large 74,965 hectare (185,164 acre) land position strategically located to the south of and adjacent to NexGen Energy’s (TSX: NXE) Rook 1 project host to the high-grade Arrow deposit, we entered into an agreement with Orano bringing them in as a strategic partner,” said Trimble. “This agreement allows Orano to earn up to a 70% interest in the property through $8,000,000 of total project consideration over six years, including up to $7,300,000 of exploration and $700,000 of cash payments.”
Skyharbour made a similar arrangement for its Preston East property with Azincourt. Here, again, Azincourt can earn a 70% interest in the property through the issuance of shares and the completion of exploration work and cash payments.
But the focus for the company and its shareholders is the flagship property, Moore, where Skyharbour is financing and doing the exploration work itself. The Moore project was originally owned by Denison Mines and Skyharbour has an option to acquire a 100% interest in the 35,705 hectare (88,191 acre) project. Denison is a strategic partner and shareholder owning approx. 10% of Skyharbour’s shares and David Cates, President and CEO of Denison, is on Skyharbour’s Board of Directors.
“There was a lot of work done in the late 1990s and early 2000’s at Moore and there is high-grade uranium on the main conductive corridor called the Maverick Corridor. However, only 2 kilometres out of 4 have been systematically drilled and we want to keep discovering more high-grade along strike as well as at depth.”
“The high-grade uranium mineralization is like pearls on a string,” said Trimble. “And we are finding more pearls and lenses.”
At the same time, the understanding of the nature of Athabasca Basin deposits has improved in the last decade.
“We have been finding high-grade uranium, up to 21% U3O8, at what’s called the unconformity,” said Trimble. “That is about 270 metres down. However, our other companies like NexGen and Fission have been finding significant mineralization in the underlying basement rocks where the feeder zones are, and these will be high priority drill targets for us going forward.”
For Skyharbour the application of new exploration techniques and a better understanding of the geology at the Moore property opens up the potential for new high-grade discoveries and value creation for shareholders.
“We’re finding prospective targets on a regional basis,” said Trimble. “But we are also very interested in drilling down to test the basement rock targets below 300 metres where more recent discoveries in the Basin have been made.”
Skyharbour completed its winter/spring drill program and reported encouraging results on June 14, 2018. In that release, the company stated, “Drillhole ML18-08 intersected high-grade uranium mineralization within the Main Maverick Zone consisting of 5.39% U3O8 over 1.0 metre within an interval containing 2.07% U3O8 over 3.5 metres. This mineralization occurs at the unconformity from 265.8 to 269.3 metres downhole. Also of note is hole ML18-09 which intersected uranium mineralization at the unconformity in the Maverick East Zone, a new high-grade lens discovered by Skyharbour last year. This hole returned a grade equivalent of 3.07% U3O8 over 1.8 metres from an interval containing a grade equivalent of 1.01% U3O8 over 6.3 metres.”
Those results reflect the strong mineralization at the unconformity level. In that same release, Skyharbour outlined its objective for this year’s summer drill program, “The majority of this drilling will test the high-grade Maverick corridor both above the unconformity and below it in the basement rocks. Skyharbour’s technical team has recently reinterpreted historical drill results and has identified new high-priority drill targets in the basement rock at the Maverick corridor below the known high-grade mineralization. The underlying basement feeder zones for the unconformity-hosted high-grade uranium at the Maverick corridor have yet to be discovered and have seen limited drill testing.”
There is very little doubt that Skyharbour, like other companies in the Basin, has achieved excellent drill results with the strong potential for more to come. But will the price of uranium co-operate?
Trimble is optimistic. “The demand side is fairly stable. Japan is restarting reactors after Fukushima and there are a lot of new reactors being built”, said Trimble. “Many of those reactors are bigger and need more uranium as fuel. On the supply side, we have seen the two largest and lowest cost producers Cameco and Kazatomprom shut down production in the face of low prices.”
The contrarian position Skyharbour and Trimble took back in 2013 looks as if it may pay off as world demand for uranium increases and production is curtailed. As Skyharbour discovers more high-grade uranium at Moore, and as its partners explore its non-core properties, there will be ample news flow and potential for share price appreciation. A combination of strong company fundamentals, discovery potential and an improving uranium market should put Skyharbour on any uranium investor’s radar screen and ultimately could make Skyharbour an attractive takeover candidate.