Categories: Energy
Topics: General Energy

Skyharbour Resources (TSX-V: SYH) CEO Jordan Trimble Begins Summer Drill Program at Moore Uranium Project, Following Up on Successful Winter Campaign

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)(OYC: SYHBF), Mr. Jordan Trimble. Jordan, how are you?

Jordan Trimble: I'm doing well. Thanks for having me.

Gerardo Del Real: Well, it's been a bit since we chatted, but you had some news this morning that's pretty significant. Skyharbour commenced the 2,500m diamond drill program at the flagship, the Moore Uranium Project. Can you give me the details, Jordan?

Jordan Trimble: Yeah, sure. So, as you saw on the news release, we just started drilling today, 2,500 meter minimum. We'll see how the drilling goes over the next few weeks. This will take us well into September, likely even into October. We'll start to see the news flow pick up as the results start to trickle in, both with the radioactivity and then the final geochem coming in.

It's exciting to get back to the project after a very successful winter program, where we hit high-grade uranium mineralization in a number of areas, mostly focused in and around that main high-grade Maverick corridor. With this program, we're going to actually test a couple regional targets as well as the main Maverick high-grade corridor. We have a couple holes planned in a few areas, actually, just northeast of that main Maverick corridor that were high-priority targets when we acquired this project from Denison. Denison had done a lot of work refining these regional targets. They had plans to go and drill them.

So, now that we're up there this summer and we have a few holes planned, we can see what is below the surface. We are going to continue defining and drilling up the main zone, that Maverick corridor. This is the big, long 4 kilometer corridor that runs up on the southwest side of the property. Really, only a kilometer and a half of it has been systematically drilled, and, as you saw with the previous drill program earlier this year, some high-grade shallow mineralization. There's still a lot of upside there, though, both along strike and at depth. A lot of room in the basement rock where recent discoveries like NexGen, like Fission, and others in the basin have found their high-grade uranium mineralization. So, 7 to 9 holes, 2,500 meters starts today.

Gerardo Del Real: Fantastic. And I imagine that you're funded for that entire program, correct? You have what $3, $3.5 million in the bank?

Jordan Trimble: Yeah, absolutely. Just over $3.5 million. This program will likely come in around $800,000 to $900,000. And then we're fully funded as well, actually, for our winter program, which will commence in December or January. That'll be about $1.1, $1.2 million. So a total of about $2 million of the $3.5 that we currently have in the treasury will go towards drilling in the next, call it 6 or 7 months. So fully funded there. We'll have some cash left over. See what the market's doing. But we don't want to, obviously, drain the treasury. We're cognizant of the market conditions and of the programs we'd like to carry out going forward.

Gerardo Del Real: Excellent. Now, you also had done a wonderful job of executing that project generator model, and to that point, you have some partner funded drilling with some pretty significant partners that should be coming up. Can we talk a bit about that? How are things coming along with the other projects there?

Jordan Trimble: Yeah. So, as you know, we do employ the prospect generator model on our other projects outside of the Moore project, which is the flagship. It’s the most advanced stage one, that's the one we're drilling. Going forward, we have 4 other projects that we are looking to bring partners in on, or have brought partners in on, the main one being the Preston Project over by NexGen and Fission on the west side of the basin. As you're well aware, earlier this year, we completed two deals with two partners, strategic partner companies, one of which, AREVA out of France, very large company, state-run company out of France, deep pockets. That was an $8 million deal over 6 years, the bulk of that $8 million being spent in exploration for them to earn in 70%. We then completed a second deal with a company called Azincourt run here in Vancouver. They'll be earning in on the remaining portion of the Preston project. Again, the bulk of the money being spent in exploration over the next few years and some cash in stock payments as well.

We're expecting both companies will commence exploration this fall, AREVA in particular. We expect some work in the fields, geophysics, groundwork, which will lead into a drill program next winter. Times perfectly with the drilling we're planning at carrying out at Moore in the winter, as well, so lots of news flow not just our drilling at the Moore Uranium Project, but from Preston from AREVA and Azincourt there, and then with the other projects, Falcon Point, Mann Lake, both of which we own 100% of. We're in talks right now with a few other companies, hoping to get option earn-in deals on those projects, as well. All of this contributes to the news flow, to catalysts for the company over the next 6 to 12 months. It's important to note that you'll have multiple drill programs underway in the next 6 to 12 months, all of which can yield high-grade discoveries, key catalysts for Skyharbour and its shareholders going forward.

Gerardo Del Real: Excellent, excellent. Now, Jordan, you mentioned the tough market in the uranium space. I happen to believe that this is probably going to be the worst of it. There's some pretty significant catalysts in 2018 that I think will be game changers. Can you talk a bit about general sentiment and what you're seeing? You're obviously speaking with partners on the projects that you've partnered up on, but you're also speaking with potential new partners. What are you getting out there? What are you hearing?

Jordan Trimble: Yeah. Look, it's been a tough market. We have seen the price stabilize. We did see, earlier this year, a bit of a move up. It gave people hope. It showed how ready the market was to move on even a small price increase. We've seen the price stabilize in kind of the low $20 per pound range. You know, I've emphasized this point before, and I'll emphasize it again. It's not sustainable, right? At $20 a pound, there isn't one mine in the world that makes money. The lowest cost producing mine in Kazakhstan, all in costs break even around $21.50, $22 a pound. The average global cost of production all ends about $41, $42 a pound. And the price needed to incentivize any real, new, meaningful production to come on globally, any new mines to come on, is higher than $55 a pound. So, it's not sustainable at these prices.

Every month that goes by, we consume more uranium, right? The current 448 operating reactors are burning through fuel. We're coming into a new contracting cycle. This is an important point. We saw this in the mid-2000s, mid- and late-2000s when we had the price of uranium move up significantly. One of the main drivers there were the fuel buyers for the nuclear utilities coming in and entering into new long-term contracts. The vast majority of these contracts are expiring over the next 5 or 6 years. They have to come back to the market. They can't let the reactors run dry. And then you have the new reactors that have been coming on, and they've been coming on, steady stream of them in China, in other parts of the developing world. We've seen a handful of reactors now come back on in Japan. That will remain a key catalyst in the near-term on the demand side.

But we are seeing a rapid expansion globally of nuclear capacity. More nuclear energy came on the grid in 2016 than any year in the last 25 years. So, the demand side continues to grow, and with each passing month, we're chewing through that secondary supply glut. That has put pressure on the price. The big one is Kazakhstan, right? And I've talked about this before. We saw an initial 10% production cut out of Kazakhstan earlier this year. That was a key catalyst, macro catalyst for the space. There's a lot of speculation out there right now that you could see additional supply cuts, production cuts, from Kazakhstan. They are looking at going public, or at least floating a portion of their state run uranium company, Kazatomprom, and to go and do that they'll need to see higher uranium prices. They are the swing producer. They're about 41% of primary mined supply globally. So they're a very important part of the equation, and to take even a portion of Kazatomprom public, you're going to want to see a higher uranium price. So, I think that'll be an important near-term catalyst if we see an additional production cut. But going forward, still very, very strong, compelling mid to long term fundamentals for this commodity. And I believe we'll see a higher price over the next few years.

Gerardo Del Real: I agree with you. I think contrarian investors and the so called smart money is probably positioning pretty aggressively right now. I know that I'm adding to my positions and initiating new ones after years and years of shying away from the market. So it should be an exciting 2018. A lot of news flow between now and then, though, for Skyharbour. Jordan, I hope to have you back here as those events materialize and develop.

Jordan Trimble: Yeah, absolutely. We'll have lots of news flow, so I'm sure I'll be back on sooner than later.

Gerardo Del Real: Thank you very much, Jordan. We'll chat soon.

Jordan Trimble: Alright, appreciate it, thanks.

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