Publisher’s Note: Earlier this month, I started telling you about the Royalty of Uranium. The thinking was that if gold royalty stocks outperformed during gold’s run last year… that uranium royalty stocks would perform similarly if the uranium sector ran this year.
Well, uranium stocks are certainly running. And the stock I told you about — Uranium Royalty Corp. (TSX-V: URC)(OTC: URCCF) — is up as much as 57% in the past two weeks. It could go much higher for multiple reasons, including the fact that it just acquired royalties on the two largest high-grade uranium mines in the world.
We caught up with Uranium Royalty President and CEO Scott Melbye to get a first-hand take on this transformative acquisition. Enjoy the interview, below.
Call it like you see it,
Publisher, Resource Stock Digest
Uranium Royalty Corp. President & CEO Scott Melbye
Discusses the Acquisition of Royalties on the
Best Uranium Mines in the World
Resource Stock Digest: Scott, Congratulations on acquiring royalties on the two largest high-grade uranium mines in the world: McArthur River and Cigar Lake. Together, they have a capacity that is greater than 20% of global forecasted uranium demand. Can you give us the details and fill in the holes on why this is so transformational for Uranium Royalty Corp (TSX-V: URC)(OTC: URCCF)?
Scott Melbye: These acquisitions provide potential near to long-term cash-flow opportunities from two of the world’s largest and most significant mines, operated by Cameco, in partnership with Orano (respected leaders in the global nuclear fuel cycle). Cameco reports the ore grades at these operations to be 100 times the world’s average.
Resource Stock Digest: These are low cost and long life assets. Can you speak to that a little bit?
Scott Melbye: Both operations are believed to have among the lowest operating costs globally, with expected life of mine cash costs of between C$15 to C$16 per pound as disclosed by Cameco.
McArthur River and Cigar Lake have a combined total of 557.5 million pounds of proven and probable mineral reserves as of December 31, 2020, representing approximately 29% of Global Reasonably Assured Recoverable Resources, as stated by the International Atomic Energy Agency for their lowest cost category.
Resource Stock Digest: Can you talk about when you expect to generate cash from the royalties?
Scott Melbye: Both operations are temporarily shut-in.
In the case of McArthur River, Cameco has stated that the restart of the mine is a commercial decision that will be based on Cameco’s ability to commit production from the operation under acceptable long-term contracts.
With regards to Cigar Lake, Cameco and its partners temporarily suspended operations in March and December 2020 to protect the health and safety of their employees and stakeholder communities from the spread of the COVID-19 pandemic, and will resume production when it is safe to do so.
The McArthur (gross revenue) royalty payments will resume as soon as production restarts. As a profit-based interest, the Cigar Lake royalty will begin to generate revenue after cumulative expense accounts, including development costs, are exhausted.
Resource Stock Digest: The deal represents minimal dilution, is being financed with cash on hand, and makes URC a go-to name in the uranium space, which is heating up fast. Any comments on the macro uranium market or recent stock price moves?
Scott Melbye: You are correct, the purchase price of US$11.5 million was payable in $10 million cash and $1.5 million in common shares of URC, representing a very minimal ~1% dilution.
The strength in the uranium sector right now is a confluence of three significant drivers.
1. Strengthening uranium supply and demand fundamentals that have seen an accelerated rebalancing due to the Covid-19 pandemic
2. Growing realization of grid reliability issues during the current polar vortex gripping the U.S.; and
3. The global mega-trend towards green energy and lower-carbon energy solutions (including broad deployment of electric vehicles)
These all bode well for nuclear energy growth and the pending recovery of uranium prices.
On a global scale, there is a structural deficit projected between production and reactor requirements of about 40 million pounds per year for at least the next five years.
Electricity generation from nuclear power has recovered to pre-Fukushima levels and will continue to increase, underpinned by the growing need to have highly reliable, 24-7 clean energy from nuclear power to meet zero-carbon objectives. In turn, that will require more uranium production.
So owning royalties on the two largest high-grade uranium mines in the world isn't a bad place to be.
Nick Hodge is the co-owner and publisher of Resource Stock Digest. He's also the founder and editor of Hodge Family Office, Family Office Advantage, and Foundational Profits . He specializes in private placements and speculations in early stage ventures, and has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world.