Uranium Royalty Corp. (TSX-V: URC)(NASDAQ: UROY) CEO Scott Melbye On Resurgent Uranium Market & Delivery of First Tranche of Physical Uranium from Yellow Cake PLC
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Uranium Royalty Corp. — Mr. Scott Melbye. Scott, how are you today?
Scott Melbye: I'm great! It's good to be with you.
Gerardo Del Real: It's great to have you back on. The last time that you and I chatted a few weeks back, we talked about the royalty model and how URC was leveraging that network that the team has and the expertise to acquire these very, very accretive royalties that, in a better market, are going to do phenomenally well for shareholders.
And it appears that everything is lined up for that better market, including Sprott jumping into the mix with a big announcement yesterday. But you've had a couple of big announcements of your own.
You just commenced trading on the NASDAQ. That's a big milestone. Congratulations on that front!
And then, I want to talk about your 10-year supply agreement to actually acquire US$10 million of physical uranium. A lot going on in the space, Scott.
Scott Melbye: Absolutely, yeah… it’s very exciting times! I think in our last interview, we talked about how just the fundamentals — just the nuts and bolts of fundamentals of uranium supply and demand — were really finally coming together after, as any depressed commodity on a long prolonged bear market would go through, you would see supply and demand react.
And so we were already very, very optimistic going into the market the last year or so. And then COVID hits and cuts more supply from the market, and demand is back to pre-Fukushima levels. So yeah, it's exciting times!
And we've also had some, I would call them more micro factors in the market rather than the broad macro factors… but they've been quite significant. I think a number of players in the market, and particularly junior uranium companies, have all looked at uranium trading at under $30 a pound. And knowing what it costs to explore, develop, and mine uranium globally today — to be able to buy uranium in the drum under $30 a pound is a huge bargain.
And I think you've seen Uranium Energy Corp., Denison, Boss — a number of companies — all jumping in to buy uranium at this stage in the cycle, which is certainly a very bullish indicator. It was something that The Wall Street Journal wrote about this week and has been getting a lot of attention.
But it really does point to the recovery of the uranium market. As utilities now go back to their normal procurement cycles and get back in the market and start buying again, they may find that that pot of material is a lot smaller than maybe they thought it was.
And another big development this week was the announcement that Sprott is going to take over the UPC [Uranium Participation Corporation] fund. And we can only imagine Sprott, of course, having a huge resource investor base — both retail and institutional — talk to people day in, day out who love hard assets and invest in commodities. And I think they'll be telling this uranium story to their networks.
And I think you'll really see the potential for UPC to grow under this new structure. And that means buying more uranium as well. So I think in the coming months, we'll look for that added boost just as we've seen the 10-million-plus pounds bought by juniors over the last couple of weeks. So it's all very bullish.
Gerardo Del Real: I couldn't agree more. I mean, referencing the Sprott announcement, that's an investor base and an institutional base of over 200,000 eager speculators and investors that will now have access to essentially control physical purchases, right? And I think that's something that we just haven't seen in the space at that scale.
And it coincides with companies like URC — companies like other uranium names in the space — that are actually allocating capital to purchasing physical pounds and waiting until those prices go up.
I foresee a scenario — I couldn't help myself… I had to write about it this morning — where the utilities overplay their hand and are going to have to come back in in an expedited fashion but at much higher prices.
Do you share a similar sentiment… or do you see something different?
Scott Melbye: No, I clearly see that. I mean, at the end of the day, we're a commodity like anything else, and these supply and demand factors have to come into play. We're not the most efficient market — like some of the copper, gold, or other commodities — but clearly we see that happening.
This was all kind of a driving factor for us at URC to elect the option that you mentioned under our 10-year supply agreement through the Yellow Cake PLC contract with the Kazakhs. We just took delivery of our first tranche yesterday — just under 350,000 pounds at a US$28.73 price — so it really emphasizes the strategic value of our long-term option agreement with Yellow Cake.
And just to remind your listeners, that was something that we acquired as a foundational shareholder in Yellow Cake when they went public over three and a half years ago; that we retained a $10 million per year option — maximum to $31 million total — out of their $1.2 billion contract with Kazatomprom.
So we felt it was the right time to exercise and take those pounds, and they're now sitting in our account at Cameco's facility in Ontario. So again, we're just adding to that general trend towards non-traditional purchasers in the market right now.
And I think the utilities probably see this and should be a wake up call that they've been enjoying low prices on the spot market and in the near-term carry trade market. But that's only as good as there's abundant spot supplies. I think we're certainly tightening now to where we'll see the price go up.
So again, it was also good timing for us to be listing on the NASDAQ, as you mentioned, to be able to just make it that much easier for shareholders in the United States to buy and sell our shares and trade in US dollars on the NASDAQ. I think we're the only pure uranium company on the NASDAQ presently.
So we're the one and only uranium royalty company in the uranium space. But now we're also the only NASDAQ-listed uranium company as well. And I think it's not to be lost that all of the cutting-edge companies in tech and particularly in green energy and ESG investing and everything — these cutting-edge companies are all on NASDAQ.
And I think, clearly, we're seeing that nuclear energy — with its no carbon emissions and clean energy — really fits the narrative, and investors are looking for those kinds of investments. So we're very happy to be positioned on the NASDAQ and up and trading; so far so good!
Gerardo Del Real: A lot to like! I think your timing is excellent; obviously, years in the making. You mentioned the option agreement to purchase these pounds of uranium wasn't just something that happened last month or last year. This was something that was years ago, right?
Scott Melbye: Yeah.
Gerardo Del Real: And so again, how quality teams behave is they take advantage of bear markets to strike very opportune deals for its shareholders. And congrats to you and the team. I think you did that brilliantly!
Scott Melbye: Thank you! Yeah, it's exciting. I think we have the right model at the right time… and to be bringing this royalty and streaming model has been such a big, big investment story in base and precious metals.
It's also become a big source of alternative mine finance in those other commodities. We're just thrilled to bring it to uranium and give investors one more really pure play in the uranium space with diversified risk… so really positioned well.
Gerardo Del Real: You've had yourself a heck of a run this year. Still early-days, Scott, in your opinion, for those that think they missed out on the run?
Scott Melbye: Yeah. I can't emphasize that more. I mean, if this is a baseball game, we're probably in the first or second inning here because we've had a lot of strength and interest in the uranium equities over the last year.
It's kind of been this recognition of nuclear's role in the clean energy megatrend. But the uranium price really moved over $30, moved towards $31, $32. With this recent purchasing, it fell back a little bit. But I think we're really in the early stages of the uranium spot price movement.
So if we're in a period here where we see prices moving from $30 to $40, then we'll really see the equities catch on fire. So they're off to a good start but I don't think investors have missed it if they're getting in at this stage. It's still much-to-come.
Gerardo Del Real: Agreed. Scott, great update. Thank you so much for your time. Can't wait to have you back on.
Scott Melbye: Alright, thanks. Take care.
Gerardo Del Real: You as well.