Maurice Jackson: Joining us for a conversation is Jordan Trimble,
the president, director, and CEO of Skyharbour
Resources Ltd. (SYH:TSX.V; SYHBF:OTCQB), a preeminent uranium explorer in
Canada's Athabasca Basin. Sir, please introduce us to Skyharbour Resources,
and the opportunity you present to the market.
Jordan Trimble: Skyharbour is a high-grade uranium exploration and
early stage development company with six
projects scattered throughout the Athabasca Basin, which is in northern
Saskatchewan in Canada. For those of you not familiar with the Athabasca
Basin, it's the highest grade depository of uranium in the world.
Saskatchewan is ranked as the number three mining jurisdiction in the world
by the Fraser InstituteÂso, really, it'sthe best place in the world to be
looking for and developing uranium deposits.
We started the company about six years ago, and what we saw was the
contrarian opportunity in the uranium space to go out and really build a
foundation, build a company up that would allow investors to get exposure to
a couple of things.
[First, we saw] an improving uranium market, so as a uranium-focused
company, when the uranium price moves up, we'll see our share price respond
positively. Post-Fukushima, when we started the company, we saw an
opportunity to go out and basically build an asset base, put a team together
to take advantage of that.
And then secondly, we are an exploration company. We're out there looking
for the next big, high-grade deposit in the Athabasca Basin. If you look at
recent discoveries in the Athabasca Basin, some notable companies like NexGen
Energy Ltd. (NXE:TSX; NXE:NYSE.MKT), Fission Uranium Corp. (FCU:TSX;
FCUUF:OTCQX; 2FU:FSE), and Hathor Exploration Ltd. previously, which was
acquired by Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) for $650
million. These companies went from small cap, $20 to $30 million valuations,
to hundreds of millions on the back of high-grade uranium discoveries in the
Basin. At Skyharbour, that is our main focus. We are an exploration,
discovery-driven company. We're out there looking for more high-grade uranium
mineralization.
In addition to that we act as a prospect generator, so we do have a dual
prong strategy at the company. We have our main flagship project, called the
Moore Lake Project, which is situated in the eastern part of the Athabasca
Basin, near the infrastructure, near mills and roads, and power. That is
where we're drilling and exploring, and that's where we feel we have the best
shot of finding more high-grade mineralization. It's important to note that
we do have high grade at the project already, at what's called the Maverick
Zone. We've found, and previous operators have found, high-grade uranium
mineralization. We reported results as high as 21% U3O8over a meter and a
half, 6% U3O8over six meters.
We have five other projects that we've acquired over the last five and a
half, six years, in addition to our flagship, Moore. Those five other
projects we look to option or joint venture out. We look to bring in partner
companies, strategic partners if we can, and those partners come in and fund
the exploration and development at those projects. We also get some cash and
stock payments, typically, as well, and then they earn in, and thereafter, a
joint venture partnership is formed.
So, that really allows us to have multiple irons in the fire. It allows us
to have potentially exposure to multiple discoveries and successful
exploration programs. As a shareholder, exposure to high grade discovery in
the Athabasca Basin, which we've seen with other notable companies, has
yielded significant returns for shareholders in recent years.
Maurice Jackson: The company employs a simple, efficient business
model, known as PTP. What is PTP?
Jordan Trimble: It's an acronym we like to use to simplify the
three real, key pillars of the business. It's the peopleÂand within that you
have the management team, the board, you have the technical and geological
team, you have two notable strategic partners, one of which is our largest
shareholder, Denison Mines Corp. (DML:TSX; DNN:NYSE.MKT). They're listed in
New York. They're one of the larger publicly traded uranium companies out
there. Their president and CO, Dave Cates, is on our board, so [we have] a
very close working relationship with them. And another strategic partner at
the project level is a company called Orano, which is France's largest
uranium mining company, headquartered in ParisÂa state-run, big,
multinational company. They're earning in 70% at one of our projects called
the Preston Project, and to earn up to 70%, they have to spend $8 million,
the bulk of which being spent in exploration and development activities over
a six year period.
And then last but not least, within the people involved in the company,
running the company, and helping us grow this company, are our shareholders, and
there's some notable, large shareholders, that are a part of Skyharbour
Resources.
The next letter stands for timing, and timing has everything to do with
where we're at in the uranium cycle, where we're at in the uranium market
right now. As I said earlier, we started this company in a depressed uranium
market. We saw an opportunity to go in there and acquire projects at
attractive valuations, and build a project portfolio, which we've been doing
over the last five and a half, six years. We're starting to see a recovery.
It appeared to have bottomed out in late 2016, traded down to $17.75, which
is one of the lowest it's traded at, and that's on a per pound basis. It's
one of the lowest it's traded at, in inflation adjusted terms, ever. And
since then it's been ticking up.
It's been somewhat volatile, but we've seen it trade in between the low
$20s and high $20s, but clearly the trend has reversed. So, timing with the
uranium market, I think especially right now, is very important, and a key
talking point for us as a uranium company.
And then last but not least, the projectsÂthe asset base. As I talked
about earlier, we have two strategies. One, we're focused on drilling and
advancing our flagship Moore Project. You'll see a news flow out of that over
the coming years. We just announced recent drill results from a winter spring
program, and planning an upcoming summer program. And then secondly, prospect
generation at the other properties, bringing in partner companies to fund and
advance those projects, so that we can focus our time, money and effort at
our flagship Moore Project.
Maurice Jackson: With regards to PTP, let's begin with the letter
T. Jordan, I believe it's paramount for audience members to have a full
comprehension on the supply and demand fundamentals of uranium, to truly
appreciate the opportunity that Skyharbour Resources presents to the market.
Mr. Trimble, what is the current and future demand for energy, and how does
uranium fit into this narrative?
Jordan Trimble: Uranium is predominantly used for nuclear power.
Globally right now, you are seeing a number of countries leading the charge,
in particular in the developing world, specifically China, India, other parts
of the developing world, which are pushing forward their nuclear power plant
agendas. Nuclear energy provides base load, CO2 emissions-free, low-cost
energy, right? So, it really is the only source of 24/7 clean electricity. It
generates electricity to over 90% capacity factor, unlike renewables, [where]
you need the wind blowing, you need the sun shining for wind and solar; you
need rivers for hydro.
So, nuclear can generate clean electricity 24/7. It's effective. It's
cost-effective, and it's quite safe, as well, despite what we may see in the
media. Nuclear is reliable, it's low cost, and it's quite safe. It also
provides grid and price stability, and anchors local community with jobs and
a tax base, so it's a very important part of the global energy mix. It
actually accounts for about 11% of global electricity generation. In the
United States, it's about 20%, one in five homes, and if you look at
countries like France, for example: France gets over 70% of its electricity
from nuclear, so it's a very important part of the global energy mix.
It is unmatched electricity generation in a megawatt-per-square-kilometer
basis. If you look at the largest offshore wind farm in the world, the Walney
[Wind Farm in the Irish] Sea, it generates less than 2 megawatts per square
kilometer, whereas the largest nuclear power plant in the world generates
just under 2,000 megawatts per square kilometer, so it's also important to
note that you can get a lot of clean electricity in a very small area.
So nuclear, as it pertains to the global energy mix, is important, but
it's also going to be very important going forward combating climate change.
So, if you look at the Paris Climate Agreement from a few years back, trying
to limit the rising global temperatures to two degrees by the end of the
century, if you run the models, nuclear has to play an important role. You
have some major and well-known investors and thought leaders globally that
are pro-nuclear, in particular a couple well known people in the U.S.,
including Bill Gates and Peter Thiel. These are perfect examples of
individuals, thought leaders, successful entrepreneurs that have done their
research and understand the importance of nuclear as a part of a clean energy
grid and generation going forward.
Bottom line is you have global demand for electricity expected to grow by
almost 80% by 2030, a big part of that being the advent of electric vehicles,
and this is where uranium as the fuel for nuclear power is going to play a
very important role. We need to find more of it. We need to see more
investment in projects going forward, in new mines that can deliver that
uranium, that fuel to the next wave of clean nuclear reactors.
Maurice Jackson: Multilayered question: How many operable reactors
in the world, how many are under construction, and how many more are being
planned and or proposed?
Jordan Trimble: It's a great question. Currently you have 447
operable reactors globally. You have 56 reactors under construction, and you
have about another 450 reactors ordered, planned and proposed. The growth
centers for nuclear are in the developing world, where you have billions of people
coming up into new middle classes, and these are the places that need a lot
of clean electricity. They need base load power. China, India, even parts of
Africa, are looking to build nuclear power plants. One good example also is
Saudi Arabia, which is planning on developing about 16 nuclear reactorsÂ$100
billion that they're planning to invest in nuclear, and that's quite
interesting, given that it's the oil and the solar capital of the world. That
says something about nuclear going forward.
So, you see a pretty steady growth in nuclear reactors, and uranium demand
going forward. Just to give you some numbers there: In 2019 we're expecting
over 196 million pounds of demand of uranium, and over the last several
years, we've seen major supply curtailments, project deferrals and mine
closures. You've seen, in 2016, where the primary mine supply amounted to
about 163 million pounds of uranium. That's fallen to less than 138 million
pounds here, and we expect that number could continue to decrease with new
projects that are being deferred. . .mines that have been producing uranium
that are coming to the end of their mine lives, and simply underinvestment in
new projects. So there is a major supply deficit looming here, with primary
mine supply well below the average consumption of uranium. That supply
deficit has had to be met by secondary supply, so we've been eating into
inventories and secondary supplies to meet the annual demand and annual
reactor requirements.
Maurice Jackson: What does the current cost of capital for uranium
producers, versus the current spot price, suggest?
Jordan Trimble: Yeah, so this is a big talking point right now,
where you have the current spot price at about just under $25 a pound. The
contract, long-term contract price is about $32 a pound. The average all-in
cost, globally, is between $40Â45 a pound, and the price needed to
incentivize new production to come online, new builds, new project
development, a lot of analysts are estimating that between $50 to $60 a
pound, so you are trading at a significant discount to the average, all-in
cost of production, as well as the price needed to incentivize new
development, and that's where it gets exciting in terms of the potential
upside.
We've seen the price of this commodity over a 50-, 60-year period go
through these boom and bust periods. It's a very cyclical commodity. We've
seen it go through long periods of low prices, and it's like a coiled spring.
It goes through these long bear markets, and then we see the supply side respond,
which is what we're seeing right now. We see demand continuing to grow, and
all of a sudden, we see the price shoot up, and we saw this a couple times in
the last 15 years. In 2006Â2007, we saw the price move from $15Â20 a pound
in the early 2000s, to a high of over $130 a pound, and needless to say,
uranium equities did very well during that period of time. A lot of money was
made.
And then again, after 2008, the price got down to $40 a pound, and we saw
it almost double back up to $70 a pound in 2011, right before the Fukushima
accident happened. So, now we're back down to $24Â25 a pound, and I think
we're gearing up for a big move over the coming years.
Maurice Jackson: With uranium, the spot price is only part of the
story. What gets overlooked in the discussion is the contract price. Where is
the supply going to come from, and at what cost?
Jordan Trimble: You see two prices for it. The spot price, which
again is in the mid-$20s, seems to be what equity market participants look
at. But the reality of it is most uranium historically has traded through
these long-term contracts, and the current contract, long-term contract price
is about $32 a pound. And what we see happen in this sector is the largest
buyer of uraniumÂbeing utility companies, nuclear utility companies
globallyÂtypically get their uranium through these long-term contracts with
mining companies, and so you don't see it like the spot market, moving as
much on a daily basis. . .It's a little stickier, and it's based off of
recent contract prices, but that's really the price that, again, most of the
material is traded at, is bought at. So that's really the price that needs to
be looked at.
Nonetheless, people still focus in on the spot price. We have seen quite a
bit of spot market activity in the last several years, and I think this is a
bullish indicator. In 2018, we saw over 88 million pounds transacted on the
spot market, which is one of the highest, I believe, level of spot market
activity in volume ever. So, when we talk about the price of the uranium, we
look at 2016, and the spot market, as a bottom being put in. We are now
seeing the volume indicate, along with the rising price, indicate a real
recovery underway, and I think it's all gearing up for a breakout. There are
a couple of key catalysts on the near term horizon that we'll talk about, but
this is all bullish for the price, and it is, again, important to distinguish
the contract long-term price, and the spot price.
Maurice Jackson: Does Section 232 in the United States factor into
this discussion?
Jordan Trimble: That's a great question, and I'll get to that, but
just before I do, and this ties in with that question, as well, I'd like to
just talk briefly about what I think will be the biggest catalyst for the
price, both in the spot and the contract price going forwardÂ[which] is a
new contracting cycle. And we've seen this in the past, 2006, 2007, 2009 to
2011: What really drove the price were new long-term contracts, big contracts
being signed between the mining companies and the utility companies. If you
look at the next five to ten years, there are a lot of uncovered
requirements. That means uncovered fuel requirements at the current,
operating nuclear reactors.
So, that's current contracts that will be expiring, and have to either be
renegotiated. That material will then have to be bought somewhere else. So,
if you look at the numbers here, about 20% of demand for 2021, 2022 is
uncovered, 50% by 2025, and almost two thirds by 2030. And the U.S. nuclear
utilities: In the next several years, their uncovered requirements go up
quite a bit, so they're going to have to come back to the market here
shortly, and that's important when we talk about this Section 232.
So, for those that aren't familiar with Section 232: It's a petition. A
group of U.S. nuclear or uranium mining companies lobbied the Department of
Commerce to open up an investigation into where the U.S. is importing its
uranium from, and the effects of that on the domestic uranium mining
industry. So, just a couple of stats here: As I said, nuclear power accounts
for about 20% of electricity in the United States. It's the majority of clean
electricity that's generated in the United States, but a lot of people don't
know this. The U.S. actually has to import over 95% of its annual uranium
demand now, and that is what they deem to be a national security issue,
especially given that 40% of that comes from three, as they call them,
adversarial nations: Kazakhstan, Russia, and Uzbekistan.
The U.S. only produces a very small amount of uranium domestically. In
fact, in 2019, it's expected to be less than one million pounds. They consume
almost 50 million pounds with the nuclear reactor fleet. And you've got to
remember, the U.S. is still the largest consumer of uranium, they have the
largest nuclear reactor fleet, so it's a big part of annual demand, yet they
are reliant on foreign supply, in particular from those three nations, to get
it.
The Section 232 investigation looked into this. A report announcing and
reporting on the final findings of that investigation has been submitted as
of mid-April, and there's a 90-day review period, which is currently
underway, which ends in the middle of July, in which the Trump Administration
will review this investigation and the report, and they will come out with a
ruling.
Now, what this has created, and I don't think this was the intention of
it, is a bit of a lull. It's created uncertainty in the market. U.S. nuclear
utilities don't know what the findings are, and don't know what the ruling is
going to be. What they're pushing for, and this was a part of the
investigation, is pushing for a 25% quota system, so U.S. nuclear utilities
would have to buy 25% of their uranium requirements from domestic sources of
uranium. Now, the issue there is that the U.S., as I said, is not producing
anywhere near that amount right now. For them to get to that levelÂof about
12 to 13 million pounds, up from less than one million pounds currentlyÂis
going to take probably five to seven years, and you're going to need to see a
much, much higher uranium price, probably close to a doubling of where the
spot price is right now. So, you need to see a two-tiered price system.
Even if that 25% quota is implemented, it's going to take a while to get
there, and you're going to need to see a much higher price paid, because U.S.
producers can't make a profit at the current spot price. What I think you'll
see happen in the short period of time right after 232 [is] a number of
positive things happen in the space. One, it'll take the uncertainty away
from the utility companies. This cloud that's been hanging over the whole
sectorÂthat's put downward pressure, I believe, on the price recently. You
will now see, I think, utility companies, especially in the U.S., come back
to the market. As we talked about earlier, there's a lot of uncovered
requirements in the next few years, so they'll have to come back to the
market, but they'll have some clarity on where they have to get their uranium
from.
So, you'll see these utilities coming back. They have not been
contracting. There's been very little contracting over the last few years,
and in particular in the last year, where you've had this uncertainty
surrounding 232. I think you'll see utilities, the main buyer, coming back, [with]
the largest buyer being U.S. nuclear utilities. That, I think will spur a
price rally in the coming months, but also, it could benefit Canadian
companies, and Australian companies, allies of the U.S., because where is the
U.S. going to get supply of uranium over the next few years, if mining
companies cannot supply what they need to meet that quota? It's likely that
U.S. nuclear utilities will look north to Canada, and that will benefit
Canadian uranium companies.
Maurice Jackson: What's going on on the demand side for uranium?
Jordan Trimble: Yeah, so we've talked about what's happening in the
United States. That's really dominated headlines with 232, and it'll be good
to have that out of the way. But globally, nuclear is growing, as I said, in
the developing world. China's really leading the charge: Currently, [it has]
45 operating reactors, 13 under construction, and over 200 more planned and
ordered. They're planning to triple their nuclear capacity by 2030. Air
quality is a big problem in China. Millions of people a year are dying from
poor air qualityÂpollution generated from coal plants, from gas and oil
plantsÂo that's where nuclear and nuclear power comes in.
And if you look at what China's been doing over the last five or six
years, they've made strategic investments into uranium companies, and in
particular, into Athabasca Basin, high-grade uranium companies. In 2015, CGN
[China General Nuclear Power Group] invested $82 million into Fission
Uranium, becoming the largest shareholder, CGN being one of China's largest
nuclear utility companies. And then also in 2016 and 2017, CEF Holdings Ltd.ÂLi
Ka-ShingÂhas invested close to $200 million into NexGen Energy, so you are
seeing Chinese money coming into Canadian Athabasca Basin stories.
And then if we move over to India, again, [we find] another growth center
for nuclear power, [with] 22 reactors operating, 7 under construction, 42
reactors planned and proposed. Canada and India recently announced a $350
million deal whereby Cameco Corp. (CCO:TSX; CCJ:NYSE), the largest publicly
traded uranium mining company based here in Canada, [will] supply India with
uranium and nuclear fuel over a five-year period. And more recently, India's
just approved the construction of 12 new nuclear reactors, so China and India
are really leading the charge on new nuclear reactors. As I said, new nuclear
reactors also being built in the Middle East, in Russia, in other parts of
the developing world.
And then last but not least, Japan. And Japan really has been the elephant
in the room. We all know what happened at Fukushima. Japan was one of the
largest consumers of uranium, had one of the largest nuclear power plant
fleets. They shut almost all of those down after Fukushima. We have started
to see an acceleration in Japanese nuclear restarts. We now have nine
reactors up and running, up from three in 2016. There are 26 reactor restart
applications in Japan that the NRA (Nuclear Regulatory Authority) is looking
at. And last but not least, you have a leading government there, the Abe
Administration, that has stated they are pro nuclear. They want to bring
nuclear back up to over 20% of Japan's electricity generation by 2030, so
they'll need about 30 reactors online to do that, up from the current nine.
Maurice Jackson: Can you address some of the concerns on the supply
side?
Jordan Trimble: This is really what has started this initial
recovery, is we've seen the supply side respond to the low-price environment
we've been in. It really started in 2016 and 2017. You had Cameco shut down a
few of its mines. Orano, previously known as Areva, shut down some of its
production. And then the big news came in 2017, when Kazatomprom, which is
Kazakhstan's state-run uranium mining company, Kazakhstan's largest producer
of uranium globally, they announced initial production cuts at some of their
mines. And it's important to note that these are some of the lower cost mines
in the world.
We're not talking about higher-cost, marginal production being shut down
because of a low uranium price. We're talking about lower-cost producers
shutting down production; a wave of curtailment and reduced production from
several mining companies. Cameco followed suit by shutting down the world's
largest uranium mine, at McArthur River. This accounts for about 12% of
global annual production. It simply is more profitable right now for Cameco
to buy material in the spot market in the mid-$20s, and then sell it into
their higher price, longer-term contracts, than it is to be producing from
the highest-grade uranium mine in the world at McArthur River.
So, that production has been shut down. It's going to take time for that
to come back online. They're going to need to see a much higher price. We've
seen a number of notable production curtailment, and we've also seen projects
deferred, and we're now starting to see some big projects, some bigger mines
that are coming to the end of their mine lives. . .a few in Africa, Rossing
being one. We're seeing a few, [like] Akdala in Australia, as well, that are
simply coming to the end of their mine lives, so millions of pounds will be
coming offline over the coming years. Again, the supply side is starting to respond.
I think that's what started this recovery that we're in, and I think you'll
see that continue.
And then we've also now seen some funds, some new financial buyers, over
the last couple years that have come in. They've recognized this structural
mispricing in the uranium market. Most notably, about a year ago, a group of
London called Yellow Cake Plc (YCA:LON), which is listed in London, raised
over $200 million to buy just over eight million pounds of uranium directly
from Kazatomprom, effectively taking that material out of the spot market,
which has strengthened the market. Now, they have an option to raise and buy
$100 million worth of uranium each year for the next nine years. So you've
seen new funds, new financial buyers, coming into the market to take
advantage of this structural mispricing. And then last but not least, again,
I talked about Cameco shutting down McArthur River.
Cameco still has to deliver into these long-term contracts that they have,
and it's more profitable for them right now to buy in the spot market, at the
low price in the mid-$20s, and then sell into those contracts. Now, 2018 was
the first year they started doing this. They helped drive the price this time
last year from the low mid-$20s to the high $20s. We saw the uranium mining
companies move up with that. We've seen that kind of stall out and pull back
a little bit, and a big reason for that is that Cameco has been less active
in the spot market recently.
I think we will see them coming back in, in a more meaningful way, between
now and the end of the year. We know that they have to buy millions and more
pounds before year-end to deliver into their contracts, so I think that's
going to be yet another big near-term catalyst that will drive a higher
price.
Maurice Jackson: Boy, what an opportunity we have before us in
uranium. Let's discuss the value proposition before us in Skyharbour
Resources. Now, Skyharbour is an exploration company, and prospect generator,
in the Athabasca Basin. Strategically, why did the company invest most of its
project portfolio in the Athabasca Basin?
Jordan Trimble: There are a couple of reasons that we were
interested in building a project portfolio in the Athabasca Basin. We'll
start with the fact that is the highest-grade depository of uranium in the
world. It's unparalleled. The average grade in the Athabasca Basin is about
2% U3O8, whereas the global average is about 0.1% U3O8.So, a combination of
unique geological qualities and characteristics create the environment for
these super-rich uranium deposits, and as an exploration and early-stage
development company, that's exciting for us. Because even in a low uranium
price environment, as we've been in, you can still generate significant
returns for shareholders through new high-grade discoveries.
And perfect examples of that, as I mentioned earlier, are NexGen, Fission,
Hathor, Denison at the Gryphon Deposit recently, and previously at Phoenix.
There's been a number of notable high-grade discoveries in the last 10 years
in particular.
And secondly, when we started the company, we saw an opportunity to go
into projects, acquire projects in the Basin, with a new look, using some new
techniques, some new ideas, some new methodologies that have been used
effectively to make these recent high-grade discoveries. [These include] some
new geophysical techniques, understanding the geology and the geochemistry
better, using some new drilling techniques, and then a big one has actually
been looking for uranium deposits in what's called the basement rock.
I won't get in the weeds on the geological lingo, but there are a couple
types of deposits in the Basin. You have the sedimentary sandstone above, and
then below that, you have what's called the basement rock, and the contact
between these two types of rock is what's called the unconformity. You
typically find the uranium deposits above, in the sandstone, at the
unconformity, or in the basement rock. More recently, exploration drilling
has been focused on finding these new high-grade deposits in the underlying
basement rock. That's where NexGen's deposit is, that's where Fission's
deposit is. There's a lot of potential in the Basin on projects that have
high-grade uranium in the sandstone or at the unconformity, but haven't been
properly tested for the feeder zones, the source of that high-grade
mineralization in the underlying basement rock. That is one of the key themes
that we're going on, the key strategies that we're employing at our flagship
project right now. We know we have high grade at the unconformity, and in the
sandstone, but very little historical drilling [has been done] in the
underlying basement rock. And just recently, we've started hitting our first
high-grade zones of mineralization in the underlying basement rock, which is
quite exciting for the company.
Maurice Jackson: I like the business acumen in the use of
optionality. Skyharbour has six projects in the Athabasca, encompassing over
200,000 hectares, that have approximately $80 million worth of historical
exploration, and was purchased at over four and a half million. Let's discuss
the exploration projects first, and then cover the project generator second.
Skyharbour has two deposits. Let's go to the
Moore Lake flagship project. What makes Skyharbour Resources confident
that you have the next big, great discovery here?
Jordan Trimble: We'll start with a quick overview of the project
base before getting into a deeper dive on the specific project. So, six
projects, about half a million acres worth of land scattered through the
Athabasca Basin, both on the east and the west side of the Athabasca Basin.
The flagship [is] our Moore
ProjectÂthat's where we're drilling, that's where we're exploring, but
we also have the five other projects, where we are looking to bring partner
companies in as a part of our prospect generator model.
As far as valuation's concerned, we've acquired these projects at really
pennies on the dollar, as you mentionedÂabout four and a half million in
stock cash, and over a period of the last five and a half, six years. To shed
some light on valuation, these projects have had over 80 million in
historical exploration and development work on them. At one point in time,
two of the projects, Moore Lake and Falcon Point, were in a company that was
valued at over $350 million in the previous uranium boom in 2006-2007, so
there's a strong rerating potential with the current asset base in the
company right now.
If you go and look at our flagship project, Moore
Lake, this is really what is going to be providing us and our
shareholders the most catalyst coming up. We own 100% of it, and this is the
most advanced stage project of all of them. There's a high-grade zone there
called the Maverick Zone. There's actually several high-grade lenses, and as
I said previously, we're just starting to drill a little bit deeper, looking
for the source of that high-grade mineralization in the basement rock.
But in addition to the Maverick ZoneÂwhich is hosted on a four-kilometer
corridor, so it's only a few hundred meters long for this Maverick Zone, or
multiple lensesÂthere's other zones along strike that have yet to be fully
drill tested. About two kilometers of that four-kilometer-long corridor has
yet to be properly drill tested, as well as systematically drill tested.
There's still a lot of room to move along strike, and as I said, also at
depth in the basement rocks. We do have about a dozen other regional targets
on the property, and in our most recent round of drilling, we actually made a
new discovery about seven kilometers away from the Maverick Zone, at what's
called the Otter Zone. This is a brand-new zone that we just finished a
couple drill holes at, and we hit, in one of the holes, uranium
mineralization, so there will be some follow-up work regionally, as well as
at the Maverick Zone, and the Maverick corridor, in our upcoming drill
programs.
[In terms of] recent success at the Maverick Zone, some of our recent
drill holes returned very high-grade mineralization, up to 21% U3O8 over a
meter and a half. Just to put some perspective on that, 1% U3O8 is equivalent
to about 20 grams per ton of gold, 1,400 per grams per ton of silver, almost
14% copper. So that just gives you an idea of how valuable that
mineralization is on a per ton basis.
Maurice Jackson: To your second deposit, Falcon
Point, which has an NI 43-101 published in 2015 demonstrating high-grade
in the inferred category. Why are uranium investors excited about this
project?
Jordan Trimble: Falcon Point is a very important project in our
portfolio. It has an NI 43-101 inferred resource, both uranium and thorium
credit, as well. We own 100% of it.
Now, Falcon Point plays in with our prospect generator strategy. We are
currently looking to bring partner companies in there, when we can option off
or joint venture off a part of the property. We have the deposit area on the
south end of the project, but interestingly, we have a very high-grade
surface showing that runs up to 68% U3O8at surface. We have plans to bring in
a partner company that can then go and further test that high-grade surface
showing. Some more geophysics can be done there, and then [we] ultimately
look to drill test that.
With the NI 43-101 resource on the south end, high-grade surface showing at
the north end of the property, and ties into our broader prospect generator
strategy, our Preston Project and our East Preston Project are important part
of our portfolio. These are perfect examples of where we've actually brought
in partner companies to fund the exploration and development work going
forward, starting with a strategic partner in Orano. Orano, as I mentioned,
is France's largest uranium mining and fuel processing company. It is based
in Paris. They have mines and projects all over the world. They have a big
geological team. They know the Basin quite well, so we get to leverage that
technical expertise as they fund the exploration and work at our Preston
Project.
The deal is structured as such: [Orano] can earn up to 70% of the property
by spending a total of $8 million over a six-year period. They're about
halfway through thatÂ$7.3 million of that in exploration, $700,000 in cash
payments. At that point, a joint venture partnership will be formed, and
Orano will become the majority owner of the project. They, this year, have a
$2.2 million budget. They just completed a winter-spring drill program, with
results to follow. They are planning for additional exploration and drilling
programs going forward, so that's an important part of our story.
Just beside that project, on a property we have called the East Preston
Project, we structured a similar deal with a company called Azincourt Uranium
Inc. (AAZ:TSX.V), and Azincourt can earn up to 70%, as well, by spending just
under $4 million in exploration and cash payments. They have $1.4 million
that needs to be spent by March 2020, and then a couple hundred thousand
dollars in cash payments that come in, as well. They've just announced recent
drill resultsÂthe first drill program that they've carried out at East
PrestonÂ[and are] seeing all the right things. They are planning for a much
larger program soon. They will get the drill rig back there to drill over a
dozen undrilled targets that they have, and follow up on the first few holes
that they drilled earlier this year.
So, collectively those two companies have made a big spend over a six-year
periodÂabout $11.5 million in project consideration, $9.8 million of that
combined in exploration, $1.7 million in cash payments, and those companies
can earn up to 70%.
Maurice Jackson: Is the ultimate goal for Skyharbour Resources to
build a mine, or arbitrage?
Jordan Trimble: My history, and my management team and board of
directors, we have a history of selling companies, selling projectsÂthat is
the ultimate goal here. We would like a larger company to come in and buy the
projects, and or buy the company. We are looking for an ultimate acquisition
of the company upon making new discoveries and advancing the projects, and
hopefully we see that in a rising uranium market, and that will help get us a
much higher valuation.
Maurice Jackson: Good. Let's address the bad. What can go wrong,
and what is your action plan to mitigate that wrong?
Jordan Trimble: So, I think one of the things that does keep me up at
night is we are in the business of exploration. It's high risk, high
potential return, so you can't guarantee exploration or drilling success.
What we do, though, as I mentioned, is we are using some innovative
techniques. We are going through all of the, and have gone through all of the
historical data, and adding the recent data from all the work that we've
done, to really give us and our shareholders the best shot, the best
potential of being a part of a new, big discovery. And so, that to us is a big
part of what we do on a daily basis, when we go out there and we carry out
these drill programs, or our partner companies carry out these drill programs
and exploration programs, we want to know we have the best targets selected.
And there's a lot more tools at our disposal: geophysical techniques,
certain types of drilling, directional drilling, more targeted drilling, some
new geochemical analysis and understanding that we've done at our flagship
Moore Project, that really give us the best chance at finding additional
zones of high-grade mineralization, so you can never guarantee exploration
success, but you can certainly increase your odds of finding more.
Maurice Jackson: Switching gears, let's discuss the people
responsible for increasing shareholder value. Mr. Trimble, please introduce
us to your board of directors.
Jordan Trimble: Getting back to the acronym PTP, this is the first
P, and this could be one of the more important parts of the business, the
people running it, the strategic partners, and as I said, the larger
shareholders. So, I teamed up with my head geologist, a gentleman named Rick
Kusmirski. We like to call him Radioactive Rick. He's been working in the
Athabasca Basin for over 40 years. He's made multiple high-grade uranium
discoveries in the Basin. He was previously the exploration manager at
Cameco, and then he left Cameco and started his own company, JNR, in the late
'90s, early 2000s. He had success there. He took the company from a $4 or $5
million valuation, and was trading at over $300 million in 2006Â2007. He
ultimately sold the company to Denison Mines. As I mentioned earlier, Denison
is a strategic partner of ours. They're our largest shareholder, and Dave
Cates, who's the president and CO of Denison Mines, is on our board of
directors.
David Cates is an important part of the team. Again, a very close working
relationship with Denison, and Dave's team there. And then the chairman of
the company, who I've worked with for a number of years now, is Jim Pettit.
Jim has over 30 years of experience in the industry. Previously, he ran a
gold company called Bayfield Ventures. That's where I started my career in
the industry. I was working with Jim at Bayfield, and what we did at Bayfield
was we made a high-grade gold discovery in Ontario in 2010, we had success
there, and then ultimately, the company was acquired by New Gold Inc.
(NGD:TSX; NGD:NYSE.MKT) in 2013 and 2014. That's when I started Skyharbour,
so Jim is the chairman. He and I work together here in Vancouver. My
geological team, led by Rick, is in Saskatoon.
And then some other notable names on the board and advisory board. Paul
Matysek is a strategic advisor, very well-known individual in the mining
space. He's built and sold a number of companies in the last 12 years, most
recently Lithium-X, as well as Goldrock Mines, but his biggest win was a
company called Energy Metals Corp., which he started in 2004 at a $10 million
valuation, and sold it three years later for $1.8 billion, to Uranium One
Inc. (UUU:TSX). Paul knows a thing or two about building companies, about
selling these companies; an important advisor to our team.
And then we also have Simon Dyakowski, who runs corporate development.
He's a 10-year veteran, worked as a stockbroker and, as well, worked at a few
larger banks, including RBC and Bank of Tokyo-Mitsubishi. And then [there is]
Christine McKechnie, who's a consulting geologist, one of the head field
geologists for us. She actually wrote her thesis on the deposit that we have
at the Falcon Point project, so she knows our project base well. She
previously worked at Eagle Point uranium mine in the Basin with Cameco. Dave
Billard, who works directly with Rick, is one of our geologists as well. Nick
Findler handles the investor relations, and then Don Huston, who's an
industry veteran as well, is a director of the company.
So, [our] very well-rounded team [brings] capital markets experience, and
management experience, as well as a geological and technical team with
focused expertise on uranium exploration in the Basin. It's important to have
people that know how to find specific types of deposits, and we have that
with Rick, Christine and Dave leading the charge on the properties.
Maurice Jackson: Who is Jordan Trimble, and what makes him qualified
for the task at hand?
Jordan Trimble: Yeah, so I started the company, like I said, about
six years ago. I saw an opportunity to build a uranium company, to ride this
next wave upÂspecifically, high-grade uranium exploration in the Athabasca
Basin. As I said, previously I was working at a gold company with Jim called
Bayfield Ventures. We had exploration success, and were ultimately acquired
by a larger gold mining company. Again, this is what we're trying to
accomplish here at Skyharbour.
I come from more of an entrepreneurial background. I've worked with
several companies in the past, specializing in corporate finance and
strategy, shareholder communications, deal structuring, capital raising and
management. And I'm a CFA charterholder, I currently serve as a director on
the board of the CFA Society, Vancouver. Been working in the industry for
about 10 years now, so again, looking to have success here with Skyharbour,
in the field, on our projects, with our partners, but also in the backdrop of
a rising uranium market.
Maurice Jackson: Please provide the capital structure for
Skyharbour Resources.
Jordan Trimble: Skyharbour has 64 million shares issued and
outstanding. We trade on the TSX Venture at about CA$0.33Â0.34, so [we have]
about a CA$21 million market capÂstill small cap, with a lot of room to
move. We do have a U.S. OTCQB listing, SYHBF in the U.S., and the ticker
symbol in Canada on the TSX Venture is SYH.
The structure? It's a very well-structured company, as I said, with 64
million shares issued and outstanding. The public float on that, I would say
is about 50%, and just to cover some of the notable and strategic
shareholders, we have management and insiders, we own a large position in the
company. We believe in what we're doing. Denison Mines is our largest
strategic shareholder. Marin Katusa and the KCR Fund: Marin's been a
cornerstone investor, really from day one. He and his fund are two of our
larger shareholders.
OTP Fund Management, which is OTP Bank, the largest bank in HungaryÂthey
have a resource fund that is a large shareholder of the company. Extract
Capital out of New York and Toronto [as well]. Sachem Cove Partners, run by
Mike Alkin, is a new uranium fund that's taken a large position in the
company. And then a couple of other notable names: Paul Matysek, who's a
strategic advisor, and Jeff Phillips, down in California, are very large
shareholders of the company.
Maurice Jackson: Multilayered question: What is the next unanswered
question for Skyharbour Resources? when can we expect a response? And what
determines success?
Jordan Trimble: The biggest one has to do with our exploration and
drilling. So we just announced results from our winter and spring program.
You can see those results. Again, the new zone, East Maverick zone, our first
drill hole into it we've intersected high-grade uranium in the basement rock,
so a big success for us there. Also, we found new zones of uranium
mineralization regionally, new discoveries, so we want to follow up on all of
this with our upcoming summer program, which will commence in the coming
months. We will have news flow from that through the summer and into the
fall.
Drilling and exploration really is the main catalyst for Skyharbour.
Again, you look at recent discovery stories, like NexGen and Fission, and
Hathor, previously: This is really what drives a higher share price with
exploration drilling success. But secondly, as a uranium company, we do offer
exposure to the underlying commodity, and as I've highlighted in this
interview, there's some notable upcoming catalysts in the near termÂagain,
the resolution of Section 232, Cameco spot market purchasing, supply cuts,
and a supply side response. That's, I think, helping to drive higher uranium
prices.
We will benefit from a rising uranium price. It's important to note that
there's very few uranium companies left. We've seen a major contraction in
the industry, and the combined market caps of all publicly traded uranium, of
all publicly traded uranium companies, is less than CA$15 billion. We've seen
a major contraction from hundreds of publicly listed uranium companies back
in 2006Â2007, to really less than 40 active companies.
So, what that means is that when money comes back into the space, and is
looking to get investment exposure to the space, it only has a few names to
go to, and Skyharbour is one of the few companies that's stuck around, that's
been able to take advantage of these depressed market conditions. We'll be
one of the first companies to benefit as we see this continued recovery, and
I think break out in the next year or two with uranium price.
Maurice Jackson: Last question. What did I forget to ask?
Jordan Trimble: Everything. Again, getting back to the people, the
timing, the projects, we have the right team in place to execute on our
business plan, and our dual prong strategy going forward. The right
management team, technical geological team, and strategic partners in Denison
and Orano. Timing with the uranium market, I think that's vital right now.
We're seeing a recovery play out. I think we'll see continued momentum,
especially as new, longer-term contracts are signed, as 232 comes to a head.
And last but not least, the asset base, the projects, right? We're
exploring them, we're advancing them. These projects were worth a lot of
money in a previous company back in 2006Â2007. I think there's strong
rerating potential, and Skyharbour offers investors exposure, again, not only
to high grade discovery potential at our project base, and with our partner
companies, but also to a rising uranium price.
Maurice Jackson: The website is www.skyharbourltd.com. For direct
inquiries, contact Nick Findler at (604) 639-3850 or you may e-mail [email protected]
Skyharbour Resources trades on the TSX.V: SYH |OTCQB:SYHBF. Skyharbour
Resources is a sponsor of Proven and Probable.
As a reminder, I'm a licensed representative for provenandprobable.com for Mining Insights and
Bullion Sales.
Jordan Trimble of Skyharbour Resources, thank you for joining us today on
Proven and Probable.
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