Categories: Energy
Topics: General Energy

Skyharbour Resources (TSX-V: SYH) Breaks Out to New Highs on Improved Uranium Sentiment, Starts Drilling at Moore Lake

Feb. 13, 2017

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is president and CEO of Skyharbour Resources (TSX-V: SYH)(OTC: SYHBF), Mr. Jordan Trimble. Jordan, how are you this morning?

Jordan Trimble: Good, thank you. It's nighttime for me, but I'm losing track of the time of day, but doing well. Just got here into Frankfurt, actually.

Gerardo Del Real: Excellent. I know you've done a lot of traveling, and I definitely want to touch on that, because I understand that the road show you've been on has been very well received. Just judging by the share price and the interest and the volume picking up, it appears you were absolutely correct in saying that uranium appeared to be bottoming a month or two ago. I definitely want to touch on that.

Just as exciting is the fact that you have now commenced drilling at your Moore Lake flagship uranium project, obviously in eastern Athabasca. Can you talk a little bit about that? It's a long time coming, and I know it's a milestone for the company. Can you share the details of the drilling program?

Jordan Trimble: Yeah, absolutely. That news came out last week. Last week, we commenced our 3,500 meter drill program, really our first kick at the can at Moore Lake, a project that we did a deal with Denison on about six months ago, acquiring 100% of Moore Lake from them, a really, as I've said before, transformational deal for the company. A project that's had a lot of historical work, has a known high grade zone at the Maverick Zone, 4% eU308 over 10 meters and some other nice high grade results. Relatively shallow, about 250, 260 meters at the unconformity at that known high grade zone, and the entry there being with my head geologist, Radioactive Risk as we call him. As you know, him and his company, JNR, did that previous drilling and made that discovery, so he knows that project best. He knows what to go back in there and look for.

Yeah, very exciting. We've started this drill program, winter drill program. It's road-accessible in the winter, ice roads in there. We're very close to Denison's flagship Wheeler Project, which is key. There's a lot of operational synergies, and we'll be drilling about 12 or 13 holes depending on depth. We're going between 200 to 400 meters on each hole. We are going right back into that high grade zone, confirmation drilling in that zone, along strike, but also testing the basement potential. I talked about this before, but it's important to note that a lot of the previous drilling was done at the unconformity testing for unconformity-style mineralization in the sandstone. There's still a lot of upside at that Maverick Zone, in the basement rock and a long strike from the known high grade zone. We want to go back in there, continue to prove it up.

The other exciting part of this project is it's a large project, 36,000 hectares on the eastern side of the basin. There's a number of other key targets that we're going to go and we're going to test, not just in this drill program but other upcoming drill programs as well. In this drill program, we're going to do a few step-out holes, a couple in the 567 zone and a few in the 525 zone. Those are 500 and 1500 meters, respectively, from that main Maverick mineralized lens. Untested potential there, both in the unconformity and in the basement rocks. We've got a pretty strong program planned for this program. It's underway now.

We'll start to see news flow generated from this program over the coming months. It's mid-February right now. This program will likely last a month and a half, probably end in late March, early April, and then you'll have some updates during that, but then you'll have the final geochem assay coming out afterwards.

Gerardo Del Real: Excellent. You mentioned being familiar with the property. The team is very, very familiar with the property, and I think that's important, because if understand it correctly, the second part to this drill program will include some exploration holes on targets that you've defined and that haven't been drilled. Is that accurate?

Jordan Trimble: Yeah. There's a lot of upside potential on this project. We've had a lot of historical exploration, but there's still a lot of areas that we want to go back into that we feel offer significant upside discovery potential. As I mentioned, Rick and his team at JNR did a lot of that drilling back in the early and mid 2000s. You've got to remember, back then, a lot of that drilling was just focused in and around the unconformity. They did drill a few holes in the basement rock, but the prevailing notion back then, and strategy, was drilling for unconformity deposits.

Less so now, where you've had major discoveries made in the basement rock, like NexGen, like Fission, like Denison's Gryphon zone just up to the north of where we are, these are all basement-hosted in some of these high grade feeder zones. This is where you get high concentrations of mineralization. This is where you get those barnburner holes. That's what we'll be looking to go after, not just at Maverick but in some of the other key targets on the project as well.

Gerardo Del Real: Excellent. It seems that the market is excited about the drill program. I know there was a point in time where there seemed to be a little bit of an overhang. You had some 40 cent warrants that were beginning to exercise. I believe that brought in approximately C$1.3 million in cash, if I'm not mistaken. Is that correct, Jordan?

Jordan Trimble: Yeah, that's a good point. We had warrants at 40 cents that were actually expiring the end of January. We had the share price, it was trading in the mid 30s, high 30s. It broke out into the low 40s and mid 40s, and we had a ceiling there for a while. A lot of that was from the 40 cent warrants that were expiring, that were five-year warrants that were expiring at the end of January. They were exercised. There was the volume there. We raised another C$1.3 million, so we've got C$2.7 million in the treasury.

That needless to say covers us for this C$1 million, 3500 meter drill program upcoming, but it also finances a small summer program so we can look to get right back to work at Moore Lake. We're funded for that summer program. It's important to note, too, that the Maverick Zone and most of the zones in the project, we can drill them pretty much all year round. Despite it being called Moore Lake, most of these are ground-based projects.

That's a good point. Some overhang there obviously in the market. Whatever wasn't exercised now expired, and so that warrant overhang at 40 cents is gone. We've obviously seen the market respond positively to that.

Gerardo Del Real: Absolutely. I know the stock is hitting 52-week highs today, but the market cap relative to the upside is still ... There's still obviously a lot of potential there. From the sounds of it, Jordan, it appears you're going to be drilling definitely Moore Lake. That's commenced. You also have you're earning into the 70% of the Preston project, or I should say the strategic partner is earning into the 70% of your Preston project. Will you have simultaneous drill programs happening over the spring and the summertime?

Jordan Trimble: Yeah, it's a great point. Just to summarize on our other projects, we do have those four other projects. We own 100% of three of them, 50% of Preston with our partner company. We have a binding term sheet that we signed in December, as you recall, with a new strategic partner to earn in 70%. They would have to spend C$8 million over a six year period. The definitive agreement will be forthcoming. Obviously the name of the strategic partner forthcoming. Assuming that that all gets done and they start working this year on the project, absolutely you'll have news flow coming from that project as well, the partner company funding it, which is key, less equity dilution for us.

This is all part of the prospect generator model. First and foremost, we are an exploration discovery-driven company. Our flagship, Moore Lake, where you'll see most of the drilling, and our exploration dollars going towards over the next few years. That's a key catalyst for the company, but we also have the benefit of having these other projects, big property package scattered throughout the basin, claims in good standing for many years, because there's been lots of historical work done on these properties. We can look to employ the prospect generator model and have other companies come in, strategic partners come and fund the exploration, pay us some cash in stocks that we can subsidize the drilling costs at Moore Lake, which is what we'll do.

The Preston project with its new partner coming in is a perfect example of that, but look out for additional deals that we consummate on some of the other projects as well. You've got Falcon Point, 100%, which has a small 43-101 compliance deposit in a high grade surface showing. We've got Yurchison and we've got Mann Lake. Mann Lake is strategically located on the main mine trend on the east side of the basin.

Gerardo Del Real: Excellent. We mentioned earlier that it's nighttime where you're at, and I know you've been traveling a lot. The execution in 2017, and frankly prior to, but I think we're starting to see the fruits of your labor, but the execution in 2017 has been absolutely excellent. It's come as a result of a lot of hard work. Could you provide us just a tad bit of context as to your travels here in the past couple of weeks, and just what the sentiment is out there in regards to the uranium market, because it appears that we're bottoming and turning back up. That's exciting, of course. It's been a painful few years for those of us that have been dabbling in the uranium sector.

Jordan Trimble: Yeah, believe me, I know where you're coming from. I've been on the road pretty much for the last few months, to be honest. We spent a few weeks marketing in the U.S., hit up a number of cities, a couple of road shows and stuff down there. Very positive reception, obviously. As you know, we got our OTCQB listing set up. We're DTC-eligible. A large shareholder base now in the States.

I'm in Europe this week for some meetings and marketing. I'm back in the U.S. basically all through March and April. We're going up and doing a site visit at the end of February, joint site visit with us and Denison. That's coming up. A lot of travel on the road. It's the right time to do it. The story has really blossomed, obviously, a lot with starting with the deal with Denison last year, this new deal being done at Preston, and then the drilling that's forthcoming. Lots of news flow, so it's absolutely the right time to be on the road and marketing the story, which we're doing.

The sentiment clearly, it's done a complete 180. We were talking even six or seven months ago, even two or three months ago, you had a market that had basically capitulated. You had uranium trading at near all-time lows in inflation-adjusted terms. $18, $19, $20 uranium back in November and December. There isn't one single mine that makes money in the world at those prices. Even at $26, this is I think an important point. Even at $26 a pound, where it's ticked up to today, you're still well below the average all-in cost of production globally, below the marginal cost of production globally. It's still much higher. To incentivize new mine builds, you need an even higher price. In fact, a lot of analysts are estimating that price between $55 and $65 uranium. Long-term price for uranium for a lot of analysts is that, $55 to $60 uranium, so there's still I think a lot of upside.

Obviously the big thing is sentiment has changed. We are seeing money flow back into the space, into uranium companies. As I like to say, the uranium space, publicly traded, is relatively small. Combined market cap is relatively insignificant. A little bit of money, capital flowing back into the space, will move these companies, and that's what we're starting to see here. It's exciting. I think there's still a lot of upside potential, even for Skyharbour. We're trading at a C$26, C$27 million market cap Canadian, so call it $20 million U.S. It's still small cap, and I still think both the commodity price and the equity valuations have room to move to the upside.

Gerardo Del Real: Excellent. Just to provide some context there, you mentioned the market cap. You're absolutely right. You're sub-30 right now. Can you provide a little bit of context as to how much has been spent historically on the flagship Moore Lake, just to provide listeners a little bit of perspective there?

Jordan Trimble: Yeah. More than that has been spent historically at Moore Lake, about $35, almost $40 million. Collectively, over the five projects we have, it's almost about 70 million in historical exploration. Keep in mind that's 70 million in 2000 to 2005 dollars, not current dollars, so even more in inflation-adjusted terms. The interesting thing is if you look at the previous cycle, in 2004 to 2007 when we had the big run-up and previous bull market in uranium, and JNR, my head geologist’s company, had 25% of Moore Lake and 100% of Falcon Point. J and R at the time was trading at a $350 million cap, in obviously a much, much better uranium market.

This is the cyclicality of the uranium space. It's hyper-cyclical, and really our mandate at Skyharbour over the last three and a half, four years has been to acquire projects at attractive valuations, get exploring them, forge strategic partnerships to help fund exploration on some of the other projects, and we're executing on that business plan. Like I said, I still think there is more upside here with the commodity prices moving in the right direction, but still trading in inflation-adjusted terms near all-time lows.

Gerardo Del Real: Absolutely. Jordan, you have a solid cash position. You obviously have some exciting projects that are going to be seeing a lot of drilling this year. You have a ton of upside, you have a world-class team, and it's great to see the market respond a little bit. I think it's just the beginning. I think you're absolutely right. I want to thank you so much for your time. Is there anything that you'd like to add that maybe I missed?

Jordan Trimble: No, I think that covers it all. Really appreciate you taking the time, Gerardo.

Gerardo Del Real: Thank you very much, Jordan. Hopefully we have you back on soon as we start to get some of those results in from Moore Lake.

Jordan Trimble: Absolutely. We'll talk soon.

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