A Leading Contrarian Voice on Uranium

Gerardo Del Real:  This is Gerardo Del Real with Resource Stock Digest. Joining me today is a friend and contrarian speculator and one of the most successful voices in the resource space — Mr. Jeff Phillips. Jeff, how are you today?

Jeff Phillips: I'm great, Gerardo. Thanks for having me.

Gerardo Del Real:  Listen, it's great to have you back on. Right near the end of 2021, we went for a month or so, and I called it a Master Class in Contrarian Speculating in the Resource Space! And we talked on everything from the gold space and the copper space, and I believe the last time we spoke we talked about the opportunity at-hand in the uranium space. 

For speculators that have been waiting on the sidelines, they've missed tenfold runs in several companies. I know, and correct me if I'm mistaken, but I know that you personally just closed out a tenbagger here with Azarga Uranium, which was recently taken out by enCore Energy in a merger of low-cost ISR assets with a lot of leverage here in the US. 

So I want to get your take, first off, on the uranium space and if you feel there's still upside there. And then, let's get into some specific names and how to play it.

Jeff Phillips: Yes, you are correct in your assessment. My initial investment in Azarga Uranium — which was probably four or five years ago — returned a tenfold return on the recent takeout by enCore. I did finance Azarga at successive financings so some of those weren't tenfold returns; they were four-fold returns. But either way, I'll take them!

So again, as you said, uranium has bounced off the bottom and is building a base here in the US$40 to US$45 per pound range. You've got several new funds in the market that are buying physical uranium. I think this is the beginning of a powerful bull market for uranium. I think you're going to see uranium go to somewhere probably between US$70 and US$100 per pound. 

US$60 per pound is really what it takes to get more North American production back online. And that'll translate to more uranium gains — particularly on the exploration side — along with greater speculation in general in the broader uranium space. We reached some pretty good share price appreciation in the juniors at the onset. A lot of the uranium stocks have backed off some here… so there's definitely some compelling ideas out there.

Gerardo Del Real: I mentioned that Azarga ran and that the other uranium companies ran pretty drastically from just 12 months ago. You just mentioned the pullback. Are there other types of companies or other opportunities in the uranium space and companies that you like that you think have that kind of leverage, like in Azarga, that could provide that tenfold return in the right market? 

I think anyone that's been in this space for quite some time frames it as not an if question but a when we're going to get that uranium mania that happens every decade or so. It looks like we're primed for another one of those runs. Anything out there sticking out to you that may be an opportunity for those looking to gain exposure to the exploration side of things? 

Jeff Phillips: Absolutely. I still like Azarga's primary asset — the Dewey Burdock Project — now with enCore. It’s an advanced-stage non-producing asset with pounds in the ground. And it meshes neatly with enCore’s US assets, which are also pounds in the ground. So I think enCore Energy is a very interesting speculation. I still own some shares in enCore. 

But if I had to pick something that has a lot of torque right now, I'd probably go with junior explorer Skyharbour Resources. The symbol is SYH on the Toronto Venture Exchange and SYHBF on the OTC. 

Skyharbour holds an extensive portfolio of 100%-owned and partner-funded uranium exploration projects in Canada's Athabasca Basin, which, as you know, is one of the premier producing regions in the world and very high grade. They have nine projects that are drill-ready; 14 projects altogether. Their portfolio covers 950,000 acres, which is one of the larger land positions in northern Saskatchewan.

Their flagship is the Moore Uranium Project. It's an advanced-stage uranium exploration project that Skyharbour maintains a 100% interest in. Through drilling, they’ve identified high-grade uranium mineralization in one of the primary zones there. They have a winter drill program starting up. 

Another one of their 100%-owned projects that I think is quite interesting is the South Falcon Point Uranium Project. They have 7 million pounds of lower-grade uranium already defined in that project. So it's not all just exploration. And they have several partner-funded projects in the same area. 

Gerardo Del Real: You mentioned the portfolio of projects… and they do this brilliantly. I've got to give credit to CEO Jordan Trimble who, I’ve got to say, is one of the hardest working and smartest voices in the uranium space right now. 

The Skyharbour team does a phenomenal job deploying the joint venture model. That’s where partner companies come in and, in exchange for a percentage of the project, spend their own money to develop and advance the project, and in a perfect world, find a company-maker. Can you explain that model for people that may be new to it?

Jeff Phillips: Sure, the prospect generator model is basically generating prospects and then joint venturing those properties out to other companies. The partner company typically gains a majority interest and advances the project on their own dime. This decreases the risk for a company like Skyharbour who then maintains a minority interest in the project and doesn't need to allocate time, money, or other resources toward the project’s advancement. 

Essentially, Skyharbour runs a hybrid model of 100%-owned and joint-ventured projects. I prefer this model over the straight JV model as it produces more torque. In a bull market, I want drilling. And Skyharbour has drilling of its own plus drilling through its partner-funded projects. So it’s the best of both worlds. 

One of those partner-funded projects with drilling is through Azincourt Energy on the East Preston Uranium Project in the Athabasca. Azincourt owns 70%; Skyharbour now owns 30%. Skyharbour also has a JV with France's largest uranium mining and nuclear fuel cycle company, Orano, on the neighboring Preston Project. Orano owns 51% of the project — having spent approximately C$5 million — with Skyharbour retaining a minority interest. 

Again, you're having other people spend money on projects that you maintain an interest in. I like that! 

Gerardo Del Real: I agree! Skyharbour provides that same type of torque and leverage that a company like an Azarga provides, in part, because it's not a major, right? It's not one of those companies that has a multi-billion dollar valuation. 

Are there any companies perhaps in the mid-tiers or majors, or maybe even a fund out there, that you like for speculators that may be looking for a company with a larger market cap, more established, maybe producing or close to production?

Jeff Phillips: Sure, Cameco (NYSE: CCJ) has always been a go-to name in the space in terms of the majors. You also have ETFs such as the North Shore Global Uranium Mining ETF (NYSE: URNM), which, coincidentally, has Skyharbour in their basket. 

For me, I like the smaller exploration companies like Skyharbour and enCore that can really run in a bull market. I like shooting for those tenfold returns we were talking about earlier. But that’s just me. Everyone has their own risk tolerance. It's all about timing. And I think we're heading in the direction of a uranium bull run with legs that can produce a lot more of those types of spectacular gains. Again, it’s all about the level of risk you’re willing to take on. 

Denison Mines (NYSE: DNN) is a well-known uranium producer; they’re the largest shareholder of Skyharbour. Their president and CEO, David Cates, is on Skyharbour’s board. He just recently bought 600,000 shares of Skyharbour at current prices. So again, that's the sort of stuff I look for. SYH is currently trading around C$0.55 which is down from a recent high of around C$0.90. I think there’s opportunity there. 

Gerardo Del Real: Correct me if I’m wrong, Jeff, but sounds like you are very bullish on the uranium sector and the price action that we should be expecting here in the next several months and coming years.

Jeff Phillips: Yes, I absolutely am. Yet, keep in mind that, as with any small-cap speculation, some caution is warranted. Speculating in small-cap exploration in ANY commodity is high risk. The bigger players are going to be around no matter what happens in the short-term gyrations of the uranium market. 

The smaller companies carry more risk but they also provide that torque where tenfold gains and more are possible as commodity prices rise. Many junior explorers only have one project. If they drill and miss… well, you get the picture. They either have to raise more money and dilute the shareholder base or they go away altogether. 

That’s why I prefer companies like Skyharbour and enCore that have lots of irons in the fire so to speak. Skyharbour, particularly, offers lots of opportunities for newsflow from both their own projects and those being advanced by partners. That’s where I want to be… because I know a company like Skyharbour is going to be around and can weather the next downturn in the space — wherever and whenever that may be. 

But again, I think the uranium market is ripe to continue this bull market that started in earnest last year. 

Gerardo Del Real: Well said. Again, informative and insightful as always. Anything else you want to add, Jeff?

Jeff Phillips: Well, I'm bullish on a number of commodities right now. I'm actually bullish on the equity side of some of these copper explorers and producers as well as some of the electric battery metals explorers in the lithium and graphite space. But we can talk about those next time. 

Gerardo Del Real: Jeff, the response to this series that we've been hosting here the past month or two has been very, very favorable. I would love to have you back on either next week or the week after… and let's talk battery metals, and maybe even a few names that you like in the space… maybe some smaller cap names, and then maybe some mid-tiers and perhaps even some majors.

Gerardo Del Real: Well said, Jeff. With that being said, I'll say this: If you're able to make four, five, or tenfold gains in what was mostly a bear market for a company like Azarga, I’m very excited to see what can be done in a bull market that’s not only here now but in the mania portion of it where everything just kind of goes parabolic. 

Let's see if that works out. I'd love to revisit the conversation as it relates to uranium in 6 or 12 months and see where we're at. Again, Jeff, thank you so much for your time today. I appreciate it!

Jeff Phillips: Thank you, Gerardo!