Back in April 2021 uranium was trading at less than $30 USD per pound. What a difference a year makes. Uranium is up to $64.50 a pound and in relatively short supply. The quick rise in the price of uranium has brought the uranium explorers and developers to the sharp attention of the market.
For Blue Sky Uranium (BSK.V), the rapidly advancing price of uranium is a huge incentive to fully explore what it believes is a district-scale uranium deposit in the Argentinian Rio Negro Province. In a press release on April 11th, Blue Sky announced the resumption of drilling at its Amarillo Grande Uranium-Vanadium Project. The area to be drilled is referred to as the Ivana Central.
In this release, Nikolaos Cacos, Blue Sky President & CEO, stated, “Ivana Central is the next area we are evaluating in our continued push to identify and delineate new mineralization and deposits at the district-scale Amarillo Grande project. We look forward to completing this tranche of drilling so that we can plan detailed follow-up and advance to testing other targets in the Ivana area.”
Uranium deposits vary significantly as to grade and depth. Which is reflected in the cost of production and the CAPEX of particular projects. In Saskatchewan’s Athabasca Basin, for example, there are runs of high-grade uranium which are hundreds, and sometimes thousands of meters below ground. By contrast, Kazakhstan, which is the world’s largest uranium producer, has low and ultra low-grade deposits relatively close to surface.
As Cacos put it in a phone interview, “We have an entirely new uranium district at Amarillo Grande. 145 kilometers by 50 kilometers. The district is very similar geologically to Kazakhstan meaning that we potentially have very low costs.”
“Right now we have a 43-101 resource estimate of 23 million pounds of uranium,” said Cacos. “We did a Preliminary Economic Analysis which indicated a production cash cost of just over $16 per pound.”
Even at the 2021 low of $30, a $16 per pound cost leaves a good margin. At today’s prices, it’s a bonanza.
“Last year we did two drill programs,” said Cacos. “At Ivana we drilled to tighten the spacing between holes and better define the deposit. But we also did a step out program, 1.5 km away. There we are seeing good grades and we’re seeing vanadium.”
“We have identified four targets within 30 kilometers,” said Cacos. “We’re looking at a hub and spoke structure with an estimated potential infrastructure cost of around 100 million dollars.”
For this to work, Blue Sky needs to find out what each of its targets contains. “We’re just beginning to drill,” said Cacos. “These are short holes, 25 meters from surface. Reverse circulation drilling because the ground is loosely consolidated. It is like gravel.”
“We have a very low drilling cost,” said Cacos. “3000 meters of drilling will be over 100 holes. The RC holes give us samples and we also use a radioactivity probe. These holes guide the team in the field.”
“Our deposit runs about .037% U3O8 which is similar to the grades in Kazakhstan,” said Cacos. “We use chemical assays for certainty. We’ve proven that we have a super low cost deposit now we need to prove scale.”
“We are also finding vanadium,” said Cacos. “Vanadium is a battery metal but the batteries it is used in are the size of a house. Its current main use is for steel hardening. When we are producing uranium the vanadium precipitates out on its own. It adds 5-10% value to the deposit.”
Blue Sky is doing what can be described as exploration drilling. Looking to see if the targets it has identified as prospective contain the uranium it is looking for. However, that drilling will swing over to definition drilling in anticipation of a Pre-Feasibility study expected to be completed over the next 12 to 18 months.
Working in any South American country presents its challenges but Cacos is not worried. “Argentina is a nuclear country with operating reactors. Right now, it imports 100% of its nuclear fuel,” said Cacos. “There is a legal framework in place for mining and the government is very encouraging.”
“Yes, there is exploration risk,” said Cacos when I asked about potential downsides. “But we have studied this piece of land for 15 years.”
Overall, however, Cacos was upbeat. The fact is that the price of uranium could drop 50% and Blue Sky’s uranium could still be very profitable.
There will be more drill results and assays over the next few months and investors will be able to see if the deposits at Amarillo Grande do, in fact, scale. It’s very clear that Cacos thinks the current drilling is just the beginning of a district scale, Argentinian, uranium deposit.