January 25th, 2023 | 14:02 CET
Fission Uranium, GoviEx, Cameco - Uranium: New supercycle on the horizon
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Cameco with a strong signal
The tragedy in Fukushima, Japan, changed everything. The global shift away from nuclear power and a shutdown of many reactors after 2011 caused many uranium producers to shut down or close their mines altogether due to profitability. The result was a landslide in the price of uranium from USD 140 per pound in 2008 to below USD 18 per pound in early 2018. Since then, the price has formed a bottom, more than tripling to USD 64 per pound in the interim due to the escalating conflict in Ukraine and currently hovering around the USD 50 range. Since Russia's invasion, the Western world has been warned not to slide into a new dependency, as was the case with oil and natural gas.
However, this cannot be done overnight. The United States alone, the world's largest uranium oxide (U3O8) consumer at 45 million pounds, obtains nearly 50% from Kazakhstan or Russia. By contrast, US production is a modest 21,000 pounds. Thus, a revitalization of the domestic uranium industry with the help of multi-billion dollar programs by policymakers is elementary and has implications for both national and energy security.
Cameco, a uranium producer based in Saskatchewan, Canada, sent a strong signal. With a market capitalization of CAD 15.53 billion, the Company is one of the largest global uranium producers. It resumed production at its major McArthur mine and Key Lake mill after a hiatus of more than four years. McArthur River/Key Lake is expected to produce up to 2 million pounds of uranium concentrate in 2022. Beginning in 2024, Cameco plans to produce 15 million pounds of U3O8 per year from these operations, which is 40% below the annual licensed capacity.
GoviEx - Taking big steps towards production
On its way to becoming an African producer is the exploration company GoviEx Uranium. The Canadians have a substantial resource inventory with over 130 million pounds of U3O8 in the Measured and Indicated categories and 89.3 million pounds in the Inferred category. GoviEx holds two prospective properties, the Madaouela project in Niger and the Muntanga project in Zambia, which have all major mining permits. In this regard, Niger, where the flagship Madaouela project is located, is considered the fifth largest uranium producer in the world and was also the largest supplier of uranium oxide to the European continent in 2021. The project hosts one of the largest uranium resources in the world, with 100 million pounds of uranium oxide in measured and indicated mineral resources, plus inferred resources of 20 million pounds. In this regard, the government's support is enormous. For example, it owns 20% of Madaouela. In addition, the existing infrastructure is first class with road access, skilled miners, groundwater and grid power. Production is scheduled to start at the end of 2025.
The results of the feasibility study last September once again underlined the outstanding potential. The study is based on a self-sustaining operation including a processing plant and renewable power supply with no reliance on third-party facilities. After taxes of 8%, the net present value is USD 140 million at an internal rate of return of 13.3%. With a mining rate of 2.60 million pounds per year and an expected mine life of 19 years, there is potential to produce 50.8 million pounds of uranium oxide.
GoviEx also owns another prospective deposit, the Muntanga project in Zambia, which is also fully permitted and located 200km from Lusaka, north of Lake Kariba. Here, the feasibility study is underway and is expected to be completed this year. Additional exploration potential is provided by the fact that three mining concessions and two prospecting permits are adjacent, with a total strike length of approximately 140km. A 2017 pre-feasibility study indicated a net present value of USD 177 million, net of 8% tax. The initial mine life was put at 11 years.
GoviEx's market capitalization is CAD 140.95 million. With respect to the peer group, there is still significant upside potential. For example, uranium producers are valued at around USD 6.86 per pound, while developers are valued at only USD 2.28 per pound. Given the experienced management team, strong shareholder base and significant exploration potential with multiple drill-ready targets defined on each property, GoviEx could become an outperformer in the expected rising uranium market.
Fission Uranium - Successful Feasibility Study
With a market capitalization of CAD 612.08 million, Fission Uranium's focus is on the Patterson Lake South project, located in the renowned Athabasca Basin uranium district. The results of the feasibility study by Tetra Tech Canada Inc. were convincing.
For example, the results significantly improved the economics compared to the pre-feasibility study conducted in 2019. Highlights include a longer mine life of 10 years, a considerably higher after-tax NPV of CAD 1.204 billion at an 8% discount, and a higher after-tax internal rate of return of 27.2% while maintaining very low operating costs of CAD 13.02 per pound.
Ross McElroy, President and CEO of Fission, commented, "With greatly improved economics, including a 42% extension in mine life, an incredible 71.5% increase in after-tax NPV and a 10.2% increase in after-tax IRR, this feasibility study confirms the Tier 1 PLS project as one of the most economically significant and best uranium development projects in the world."
Due to climate change, the need for CO2-free energy is enormous. Nuclear energy is becoming an integral part of the global energy mix alongside the expansion of renewables. GoviEx has enormous potential with its two promising projects. Cameco is considered a blue chip among uranium producers and, like Fission Uranium, should also have opportunities for a strong rebound after the bear market of the past year.
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