Categories: Energy
Topics: General Energy

Skyharbour Resources (TSX-V: SYH) CEO Jordan Trimble Announces Significant Exploration Program with Partner AREVA at Preston Lake Uranium Project

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. Mr. Trimble, how are you?

Jordan Trimble: I'm doing well thanks. How are you doing?

Gerardo Del Real: Fantastic. Fantastic. Thank you very much. It was a very interesting last week. A lot of news. I want to start by highlighting the fact that you had some pretty important news on the 9th. The headline reads, "Skyharbour option partner AREVA Resources Canada announces upcoming exploration programs at Preston Uranium property." And that joint venture is a testament, and it speaks to how well you've executed the project generator model.

I want to talk about the details of the exploration program that's coming up in 2018, at Preston. However, I want to start with the news out of Cameco, and I want to get your thoughts, because I think you're one of the more insightful people in the uranium space. I'd love to get your thoughts on the announcement that the McArthur River mine was going to be shut down, and what Bloomberg calls the biggest catalyst since Fukushima.

Jordan Trimble: Sure. Yeah, it's a pretty significant announcement out of the largest publicly traded uranium company in the world. That's their marquee project in deposit producing mine and asset, and it's a big part of their NAV. As we saw Wednesday last week, they're planning to shut it down for at least 10 months next year. That will take a significant amount primary mine supply off the market, about 14 million pounds, almost 10% of global supply.

So, it's a big cut. I really do think looking past that, looking past the numbers, it's really a message to the market, and if you read the news, if you read in between the lines, and you're talking with people familiar with what Cameco's planning to do going forward, and I think, quite honestly, what a lot of these larger producers are planning to do going forward. They're showing the market that they're not willing to continue producing at these unsustainably low cost and prices, right?

So, they're going in and they're curtailing production, they're shutting down production now, bringing it in off the market. They need to see the price recover. $20-$22 a pound uranium in the spot market still where we're at today just isn't sustainable. As we saw with Cameco's recent financials, their costs are in the mid $30s, right? Keep in mind these are some of the lowest cost producing uranium mines in the world. We're not talking at the high end of the cost curve here.

There are not marginal deposits and producing mines. These are at the low end of the cost curve. These are some of the best mines in the world, and you look at McArthur River in particular. That's the case there, right? This isn't marginal production coming offline. These are the best mines in the world now coming offline, and I think that sends a strong signal to the market that they're not going to burn through reserves and resources, high quality resources, while the price of uranium is still very low.

They will wait it out if need be, and that'll be the interesting thing here to see what happens next year. My guess on it, my outlook on it is that if you don't see the price move back above $35-$40 a pound, you'll see that mine remain offline. Yet to be seen obviously, but we need to see this price move up significantly from where it is, and we're not talking 10, 20, 30%. We're talking a doubling. And obviously, a doubling of the underlying commodity price for all the companies, the few that are still left in the space, that'll be very positive for the share prices going forward.

So, that's what I see happening, but it is a big news and a big development for the space. We saw Kazakhstan earlier this year announce a 10% production cut amounting to about 3.5, 4%, or call it five million pounds annually. That puts it in perspective, right? This cut here, about 14 million pounds, it's much larger and I think it's going to go a lot further in the market, going forward, to help that uranium price recover from the current low price it's at.

Gerardo Del Real: Just to be clear, these are painful cuts for the company. I mean, people are losing their jobs, and this is something that, the human element of it is tough, but it's something that's necessary, and frankly, I think Cameco's got to be commended for making the tough decision. Do you think this happens in isolation? I mean, in my experience, these cuts rarely happen in isolation. They usually require someone to take the lead, which makes it a whole lot easier for other companies to follow suit.

Jordan Trimble: Yeah, and that's a great point. I do think this will incentivize additional cuts across the globe. We've seen Cameco be quite proactive. Obviously last year, with Rabbit Lake and the US operations, and now with the largest, richest uranium mine in the world at McArthur, but I do think you will see additional cuts now being made by other producers out there globally.

The one big one being Kazakhstan, and Kazatomprom. Again, they announced that initial cut earlier this year. Really just a drop in the bucket, though. If we see additional cuts out of Kazatomprom, I think that'll just go that much further in the marketplace. And now, again, I think Cameco has sent that message that it's okay to do that. I mean, we look at how the market reacted last week. Cameco's share price was actually up on this announcement. Here they are announcing hundreds of people being laid off, an 80% dividend cut, and the stock actually traded up.

I think that will send a message, certainly to the other producers out there publicly traded that this actually may be the best course of action. We'll see what happens, but this is the shot in the arm that this sector needed, and I do think that this could be the turning point going forward. We'll see how the spot price responds, but it also is sending a strong message to the utilities companies, and the fuel buyers, right? That the producers out there need to make money.

They need to be profitable and in the low $20 a pound range, there simply isn't any asset out there that can turn a healthy profit, and so now what we're seeing are these significant cuts and based off of just the numbers from Cameco shutting down McArthur, what was an oversupplied market or would have been an oversupplied market for 2018 will likely now be a market where supply/demand is equal. It's come back into balance, and that's obviously quite positive going forward as well.

Gerardo Del Real: That bodes well for Skyharbour Resources. Obviously you've done a brilliant job executing the project generator model. The news last week speaks to that. I read the headline, let me read it again. "Skyharbour option partner AREVA Resources Canada announces upcoming exploration programs at Preston Uranium property." These are not insignificant exploration programs. These are budgets of $2 million dollars plus to begin with, and in a joint venture that has considerations totaling up to I believe $8 million dollars Canadian, for up to 70% of the project area, over a six year term. Can you go over the details of that announcement, Jordan?

Jordan Trimble: Yeah. So it's a big announcement for us. It's the first program that AREVA's going to be carrying out on that project. We're thrilled to have them getting to work here, doing the geophysics initially, followed by a pretty significant drill program. 4500 meters in 15 to 20 holes, starting early in 2018, a winter program. That's a significant initial drill program, since acquiring or doing the option deal with them last year.

This is what this project needs. It really needs a good amount of work done. We did a fair bit of work with our partner companies over the last few years, just under $5 million in exploration and drilling, yielding over a dozen high priority targets. This project, keep in mind, too, is in the vicinity of NexGen and Fission on the western side of the basin, and a lot of exploration upside potential still remains in this area.

So, now that we have a strategic partner in AREVA coming in, as you mentioned, up to $8 million in project consideration earn, and 70% on this project, this initial $2 million dollars budgeted for this next year, the bulk of that being in this drill program, slated to commence early next year, will really give us a good indication early on in this option earn in that AREVA has, as to what they're seeing, what we're seeing on the project, and what targets we want to focus on going forward, what targets AREVA and us feel are the targets to go into going forward, and continue to drill and explore, and hopefully, hopefully yield a high-grade discovery, much like we've seen at Fission's and NexGen's properties in that area.

Gerardo Del Real: Excellent. Now, in late August, Skyharbour commenced a summer diamond drilling program at the flagship, the Moore Uranium Project. How are things coming along on that front, Jordan?

Jordan Trimble: Yeah, so we're just wrapping up. We're just waiting for the final geochemical assay results, and we actually should have them back here shortly. We'll have some news out on the summer drill program at our flagship Moore Project. Very, very happy with what we were seeing. You may recall we did a fair bit of drilling in this program on regional targets, as well as going back into the high grade and main Maverick zone, so we will have results out shortly on that. You'll be able to see that.

That project has really exceeded our expectations since doing the deal with Denison mid-2016. Earn in option we have there. We're almost done that earn in option once we complete this upcoming winter program. We'll be very close to earning in 100%. As you know, Denison's our largest strategic shareholder. Dave Cates, President and CEO of Denison, is on our board, so very close working relationship with them, corporately and geologically on that project.

But it's been a big success for us thus far, with the winter drill program, and just wrapping up the summer drill program. Then, we'll gear up for our 2018 winter drill program, which will likely commence in January. Again, plans for a larger 4500 to 5500 meter drill program. Most of that will likely be back at that main high-grade Maverick zone. We're just going through the plans right now and some of those plans and drill targets will depend on the final results that we get back from the summer program as well.

But it's moving along very quickly. We have on that project a number of areas really yet to be tested. Especially on that main Maverick corridor. It's a big, long four kilometer corridor. Only about a kilometer and a half of it's been systematically drilled. Most of that drilling's relatively shallow, right? The known high grade there that was discovered historically and that we've been drilling into, it's only about 200 to 300 meters at most in depth, at the end conformity, so a lot of room, a lot of upside further down in the basement rock, but as well along strike on that four kilometer long trend.

So, we're going to go back in, continue drill testing that, and we will also continue testing some of these regional targets. It's a big 36,000 hectare project, right in the thick of things, in the East side of the basin, where the infrastructure, the mining infrastructure is actually just to the southwest of McArthur River. In fact, the road that goes up to McArthur River straddles the western side of our property. So, we're right in the thick of things on the east side of the basin, which actually brings your drill costs down quite a bit, having it road accessible in the winter.

So, look forward to the news coming out on results on the summer drill program, as well as commencement of drilling starting in all likelihood in January. Still we feel a lot of value to unlock on that project through the drilling.

Gerardo Del Real: That's a lot of catalysts, Jordan. You mentioned David Cates, the CEO and President of Denison Mines, and you'll actually be on the Uranium Investment Panel, if I'm not mistaken, with Rick Rule and Amir Adnani, Dave Cates, Dev Randhawa from Fission, and yourself. Where can people catch you? I know the conference is in San Francisco, on November 20th, and the 21st. Will you be there throughout the conference, Jordan?

Jordan Trimble: Yeah, we will. We have a booth there, and we'll be at the booth. As you mentioned, there's the uranium panel that I'm on with Dave and a few others. That'll be a good panel to come check out, especially given the recent news out of Cameco. All of those companies obviously represented at that panel, quite active, and as I mentioned earlier, there's not many of us left. There's not many uranium companies that have survived through this downturn. You see most of the truly active companies present at this conference.

If you want investment exposure to the space, this is a good way to come do the due diligence to do that. So, we'll be there. We'll be present. Have the team coming down, and we'll be on the panel with those other guys, as well.

Gerardo Del Real: Well, it makes my contrarian nature smile when you say there's not many of us left, and it's clear as day who's been doing the work behind the scenes, during the bear market, Jordan.

Jordan Trimble: Yeah, absolutely. We're hoping that this news out of Cameco will help move things in the right direction. As I said, I do think this will spur additional cuts and we already saw the spot price pick up a little bit late last week, so we'll see what happens over the next 6 to 12 months, but we've positioned Skyharbour really over the last three and a half, four years, to have it poised ready to take advantage of an improving uranium market. I think we're coming into one now.

We're one of the few companies out there that's funded for the drill programs that we have planned. Lots of catalysts on the horizon, our own drilling at Moore, as well as our partner companies, AREVA and Azincourt, working at Preston. So, lots of news forthcoming, and hopefully some more good news, macro news out of the uranium sector.

Gerardo Del Real: Excellent. Jordan, thank you so much for your insights. I really appreciate it.

Jordan Trimble: Thanks, Gerardo.

Gerardo Del Real: See you in San Francisco.

Jordan Trimble: See ya.

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