Azarga Uranium (TSX: AZZ)(OTC: AZZUF) – currently trading just below C$0.25 per share – has now received final EPA permits for its flagship Dewey Burdock Uranium Project, South Dakota, marking a crucial milestone for the company.
This long-awaited development puts Azarga Uranium which controls no less than ten US uranium projects and is the only pure play ISR (In-Situ Recovery) focused developer in America – on the fast-track to producer status.
Azarga president & CEO, Blake Steele, whom you’ll be hearing more from in a moment, commented via press release:
“This critical milestone significantly de-risks our flagship asset, the advanced stage, low-cost Dewey Burdock Project, and moves the Company substantially closer to becoming the next uranium producer in the USA … ”
And the timing could not be any better, with the US government finally displaying bipartisan support for the domestic uranium sector by way of last month’s $150 million funding measure for the establishment of a US Uranium Reserve.
Fundamentally, the uranium sector is in a deficit position, which means we could start seeing significant uranium price appreciation beginning as early as Q1 2021.
In recent years, uranium mine supply has been substantially curtailed due to low uranium prices.
Plus, COVID-related disruptions this year alone have resulted in an additional 20 million pounds U3O8 being removed from the marketplace — all while annual demand continues to grow.
With the barriers-to-entry being what they are in the US uranium space, Azarga is now a critical step ahead of its peers with final EPA permits in-hand for Dewey Burdock.
Our own Gerardo Del Real of Junior Resource Monthly sat down with Azarga CEO, Blake Steele, for an in-depth discussion on the newly received permits, the case for higher uranium prices… plus a look at the company’s impressive pipeline of US uranium assets totaling some 40MM lbs U3O8 Measured & Indicated.
Azarga Uranium (TSX: AZZ)(OTC: AZZUF) CEO, Blake Steele, on Granting of Final EPA Permits for Dewey Burdock Uranium Project — South Dakota, USA
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the president and CEO of Azarga Uranium — Mr. Blake Steele. Blake, congratulations. How are you today?
Blake Steele: Thanks, Gerardo. I'm doing great. And how about yourself?
GDR: I am well… thank you so much for asking. I, of course, am congratulating you because Azarga has finally received the final EPA permits for the flagship Dewey Burdock Project. It's obviously a significant milestone for you. How are you feeling about it?
BS: Thanks, Gerardo. You're right. You hit the nail on the head there. This is a huge milestone for our business, and it took over a decade to receive our final underground injection control permits from the EPA.
This gives you an idea of the barriers-to-entry faced in this industry and why this milestone significantly derisks our flagship, low-cost Dewey Burdock Project.
We are the only pure play ISR focused developer in the USA, and we are now substantially closer to becoming the next US uranium producer. In other words, we are very well positioned to take advantage of a market that has not been this fundamentally strong in a decade.
Now, prior to the EPA permits being issued, an extensive review of the project was completed by the agency, and this review reaffirmed the sound technical and environmental aspects of the project.
And I also want to reiterate for your listeners that the Dewey Burdock Project has already received its Nuclear Regulatory Commission (NRC) license — the other key federal permit required to move this project into construction.
So with both key federal permits in-hand, we're in a very strong position to finalize the state permitting process. And more importantly, the state permits have actually already been recommended for approval pending completion of board hearings that were previously put on hold until the federal permits were issued.
So in short, we are now focused on finalizing the state permitting process as quickly as possible and moving Dewey Burdock into development.
GDR: You mentioned that this is the flagship, and rightfully so. I believe the project is going to be a project of interest to many, many producers that would love a permitted project that's low cost, high margin. I have to believe that you're going to get phone calls if you're not already fielding them.
However, with that said, Blake, Azarga is far from a one trick pony. You have a pretty impressive portfolio of projects. I would love for you to provide a brief overview of all of the other initiatives outside of Dewey Burdock. Because there's a lot to like if you believe that 2021 is going to be the year that the uranium bull cycle finally kicks into high gear, right?
BS: No, I agree one hundred percent with you, Gerardo. And Dewey Burdock is one of the best undeveloped ISR (In-Situ Recovery) uranium projects in the United States – but we are focused on developing our pipeline of uranium assets.
In total, we have 40 million pounds of Measured & Indicated (M&I) uranium resources and 6 million pounds of Inferred uranium resources — all located in the United States.
At our Gas Hills Project in Wyoming, we have completed multiple hydrological studies that indicate conditions are suitable for In-Situ Recovery (ISR) mining on the majority of the current resource estimate. Also, earlier in the year, you may recall that we identified significant uranium mineralization not included in the current resource estimate that indicates widespread potential to increase the existing resource.
Most importantly, this additional mineralization is located below the water table in sandstone hosted roll fronts — meaning it has the potential to be ISR amenable.
So… where are we at?
We are currently updating our resource estimate for Gas Hills, and that resource estimate will incorporate this additional mineralization. We're very excited with the progress that we're making at Gas Hills and its potential to become a significant ISR satellite project to Dewey Burdock.
And at Dewey Terrace, which is directly adjacent to Dewey Burdock on the Wyoming side of the border, we've also identified significant uranium mineralization. Again, we're continuing the review of the historical dataset that we acquired there with the goal of further identifying uranium mineralization and quantifying a maiden resource estimate at Dewey Terrace.
So in short, Gerardo — we expect 2021 to be a very exciting year for us.
GDR: Absolutely. Let's talk 2021. Many of the smartest minds in the space have called for a uranium bull market for the past four or five, six years. I thought I was smart by calling for it in 2020. I was wrong. But the bottom line is this… look, we know that uranium bull markets are extremely profitable. And one of the reasons is there's just not that many quality companies and assets out there.
Azarga has got a very impressive suite of projects. If 2021 plays out the way I thought 2020 would — obviously you're headed much higher. What's your take on the uranium space? Is 2021 going to be the year, Blake? Everything seems like it's lined up.
BS: Yeah, look… it's been a bit of a slow burn. But globally right now, the supply and demand fundamentals of the uranium market are stronger than they have been in a decade and continue to improve.
Unsustainably low uranium prices have forced mine supply to be cut back, capital investment to be reduced and deferred, and new projects to be postponed — resulting in reduced inventories all when annual demand is growing.
Further, COVID-19 has resulted in an additional 20 million pounds of uranium production being removed in 2020. These pounds can not be made up.
Though uranium prices have recovered from their lows, we do believe this is just the beginning. The uranium market is in a deficit position, which requires new production to come online, and a much higher uranium incentive price is needed for that new production.
So looking at the US specifically, the government has taken significant steps to support the uranium and nuclear industries. In April 2020, the US Nuclear Fuel Working Group released its report detailing a strategy to restore America's nuclear energy leadership.
And this report stated that the US government should take immediate and bold action to revive and strengthen the uranium mining industry. And in November 2020, the Senate Committee on Appropriations draft fiscal year 2021 funding measures included $150 million for US uranium reserves — part of $1.5 billion requested over 10 years.
Earlier in the year – you've probably seen all of this as well – the US government amended the Russian suspension agreement, extending it to 2040, and reducing imports of uranium from Russia. And possibly, most significantly, lastly, for the first time in 48 years – the Democratic Party platform supports nuclear… and we have bipartisan support for nuclear energy in the USA.
All of these are absolutely crucial drivers for a US uranium renaissance.
Now, while the support of the US government provides significant benefits, Gerardo, I want to emphasize that our Dewey Burdock Project is already economically robust and internationally competitive.
And just to reiterate again for your listeners, the project has lowest-quartile Life of Mine C1 cash cost of $10.46 and only requires $31.7 million of capital to get into initial production.
At $55 uranium, the project has an NPV of $171 million and an IRR of 55%. Even at $40 uranium, the project has an IRR of 28%. So I think that's something that's very special and unique and further sets Dewey apart from its peers.
GDR: A lot to like, Blake. Well put. Is there anything else that you'd like to add?
BS: No, I think that sums it up in a nutshell there for everybody.
GDR: Agreed. Well, thanks again for your time. And again, congratulations. Well deserved!
BS: Thanks very much. Much appreciated, Gerardo, and appreciate your time as always.
GDR: Chat soon.
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Resource Stock Digest, Junior Resource Monthly, and Junior Resource Trader. For more about Gerardo, check out his editor page.