The following is a guest post from The Northern Miner, one of the best known
mining newspapers in North America. The feature company is Blue Sky
Uranium Corp. (BSK:TSX.V; BKUCF:OTC). This article by Trish Saywell nicely articulates why the
company could be a big winner if long-term uranium prices, currently around
US$32/lb, climb to US$40/lb or more in the next two to three years. That's
not a big move in the grand scheme of things.
At US$40/lb, Blue Sky's main project has an after-tax IRR of 20%. But, if
uranium prices spike higher, as they frequently have in the past, we could
certainly see US$50, US$60, US$70, US$80lb. And, if Blue Sky could double or
triple the size of its uranium and vanadium deposit, it could be sitting on a
truly world-class project. Please see disclosures at the bottom of the page.
- Peter Epstein
Blue Sky Uranium Advances Amarillo in Argentina
Argentina has three nuclear reactors and plans for more, yet the country
has no domestic uranium production. Blue Sky Uranium (TSXV: BSK; US-OTC:
BKUCF) hopes to fill that void.
"They import uranium from Kazakhstan and Canada, so having a domestic
source would be a preference, and they're potentially our first
customer," Nikolaos Cacos, the company's president and CEO, tells The
Northern Miner.
The country exports small nuclear reactors, too, which are built by INVAP,
a manufacturer in the province of Rio Negro, home of Blue Sky Uranium's
Amarillo Grande project.
"The province is a majority owner of INVAP Â it's like a crown
corporation  and we've collaborated with this organization doing some
metallurgical studies, so they're very supportive of what we're doing,"
says Cacos. "They even have a pilot nuclear enrichment plant in Rio
Negro Â
If we had to pick a province to do uranium mining in, there couldn't
be a better one."
In February, the company completed a preliminary economic assessment (PEA)
of its main Ivana deposit at Amarillo Grande. The study outlines an open-pit
operation that would produce uranium and vanadium over a mine life of 13
years.
Initial capex is estimated at US$128 million, including a US$28 million
contingency, and would be paid back, after-tax, in just under two and a half
years. Life of mine sustaining capital costs are forecast at US$35 million.
"The overall capex is very low for any type of mining project, and
for a uranium project, too, especially compared with projects in
Canada," Cacos says, adding that sustaining capex is also quite low, as
"it's almost like a gravel operation."
The majority of the near-surface mineralization found so far is in the
form of the leach-amenable mineral carnotite as coatings on pebbles, and
beneficiation test work on samples indicates that simple wet scrubbing and
screening techniques could be used onsite to concentrate and upgrade the material,
which could reduce transport and processing costs.
"The large pebbles are completely un-mineralized so you scoop up a
tonne of dirt, you do a wet scrubbing and remove the large pebbles and rock,
and you've increased the grade by a factor of four and removed 75% of the
mass, and the rest is done with a simple alkaline leaching process where you
extract the uranium and vanadium out," he says. "This process is
used worldwide and is well-proven."
A drill rig at Blue Sky Uranium's Amarillo Grande project in Argentina.
Credit: Blue Sky Uranium.
Blue Sky has also hired Chuck Edwards, a technical advisor who specializes
in uranium processing for both alkaline and acid leach plants. Edwards was
involved in the engineering design of all the current uranium facilities in
Saskatchewan's Athabasca Basin, and has worked on uranium projects in five
continents, including as principal metallurgist at Cameco (TSX: CCO).
"He recently retired from Cameco and then starting working on this
project," Cacos says. "The more work he did, the more he liked the
project."
Other estimates in the PEA put total cash costs net of credits over the
life of mine at US$16.24 per lb. U3O8 with all-in sustaining costs net of
credits of US$18.27 per lb. U3O8.
At a uranium price of US$50 per lb. and a vanadium price of US$15 per lb.,
the project would yield an after-tax net present value at an 8% discount rate
of US$135 million and an after-tax internal rate of return of 29.3%, the
study concludes.
"This is a low-cost deposit. It's surficial, and has very positive
economic indicators that can make it viable, even in the uranium environment
we're in right now," Cacos says, noting that the deposit, an in-house
discovery, occurs within a depth of 20 to 25 metres.
"There is no drill hole that goes deeper than 50 metres, so drilling
has been very low cost," he says.
This year, Blue Sky will explore three high priority target areas with
significant anomalies of uranium and vanadium, and the work program over the
next six months includes up to 4,500 metres of reverse circulation drilling,
auger drilling and down-hole radiometric measurements, as well as a
six-kilometre induced polarization (IP) geophysical survey.
The program is designed to identify and delineate mineralization between
the main Ivana deposit and the Ivana West target, about 1 km away, and also
test targets in two other key areas to the north  Ivana Central and Ivana
North  all of which are within 25 km of the main deposit.
Cacos is particularly interested in the prospects at Ivana Central, where
its former partner, Areva, drilled holes in 2010 and 2011, but never assayed
them.
"They very abruptly ended the partnership because I guess they had
some restructuring issues to deal with  nothing to do with our project Â
and so we assayed them," he says. "The edges of our Ivana main
deposit have certain characteristics, and those drill holes on either side,
that are about six kilometres apart, seem to mimic those edges. Areva may
have just stepped over an underlying deposit." Five to ten kilometres
further north of Ivana Central, at Ivana North, Blue Sky is also seeing
"attractive geology" and "surface expression,"
Cacos notes.
On May 27 the Company announced a non-brokered private placement financing
of up to 9.3 million units at a price of 15¢ per unit for gross proceeds of
$1.4 million.
Those funds should "get this exploration program going," and
"will get us into the fall, when the cycle begins to pick up when it
traditionally does, [and] we can raise additional funds."
"This whole drill program is estimated to cost about US$3 million and
has the potential to dramatically change the project," he says.
Carnotite mineralization from the Anit deposit at Blue Sky Uranium's
Amarillo Grande project in Argentina. Credit: Blue Sky Uranium.
As for the uranium price, which is languishing at less than US$25 per lb,
Cacos says he's "optimistic."
"There are a few things that give me comfort that the uranium price
will pick up," he says. "We're seeing a lot of interest and a lot
more in the mainstream press about the International Atomic Energy Agency,
which says developed countries need to look at nuclear power as a viable
option in order to reduce greenhouse gases, and we're seeing a lot more
acceptance of that, and I'm reading about that more and more often."
"We're also getting a lot more interest from institutional investors
and private equity groups in the uranium space Â
It's smart money and
usually smart money moves first and then retail follows, so those are all
positive signs," he continues. "And we're seeing nuclear reactors
being built around the world. China is investing US$10.5 billion to build a
nuclear reactor in Argentina."
Blue Sky has defined mineralization at Amarillo Grande in three key areas,
Ivana, Anit and Santa Barbara, along a 145-km trend.
The Ivana deposit is 25 km north of the city of Valcheta, where Blue Sky
has its exploration camp and office. Valcheta is at the junction of
Provincial Road 4 and National Road 23, where the latter connects to the
deep-ocean port of San Antonio Oeste, 120 km to the east. A railway runs
parallel to National Road 23 and two high-power lines crosscut the project
from east to west.
At press time, Blue Sky Uranium (TSXV: BSK; US-OTC: BKUCF) is
trading at 14¢ per share in a 52-week range of 12.5¢ to 23¢. The junior has
110 million common shares outstanding for a $15.4-million market
capitalization.
--Trish Saywell
Peter Epstein is the founder of Epstein Research. His
background is in company and financial analysis. He holds an MBA degree in
financial analysis from New York University's Stern School of Business.
[NLINSERT]
Disclosures: Blue Sky Uranium is an advertiser on Epstein Research. At the
time of this guest post, June 16th, 2019, Peter Epstein of Epstein Research
did not own shares in Blue Sky Uranium.
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