Categories: Energy
Topics: General Energy

Skyharbour Resources (TSX-V: SYH) CEO Jordan Trimble on Drilling Progress at the Moore Uranium Project, What ISR Mining Could Mean for the Athabasca Basin, & Improving Supply/Demand Dynamics in the Uranium Market

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

Jordan Trimble: I'm good, Gerardo. Thanks for having me.

Gerardo Del Real: Thanks for coming back on. It's been a month or two. We spoke in late August, when you announced plans for a summer drill program at the Moore Uranium Project. Haven't had much news from Moore. I wanted to check in and see how things are coming along, Jordan.

Jordan Trimble: Absolutely. Drilling is going very well. We're about two-thirds of the way done. It's going smoothly, the drill program at Moore. We talked about a month and a half, two months ago when we were just getting set up for it. The plan was for 3,000 meters, with a focus on testing basement hosted targets. Right?

We've talked a lot about this in the past, the different type of target types that we're testing. A lot of the historical drilling and work that was done at this project was focused at more traditional unconformity-in-sandstone-hosted targets. Not a lot of drilling in the underlying basement rocks, where you can find these feeder zones. We, earlier this year, did some work to refine these deeper feeder zone potential targets. So, that's what we're going into drill test with this drill program.

We like what we're seeing. We're likely going to be bumping the program up from 3,000 to close to 4,000 meters. So, we will have some news flow coming out over the next couple of months as results trickle in and as we finish the program and get the full interpretation and analysis back from all the drilling. That will determine what we do early in the new year.

We'll likely go back there for another winter drill program, starting in January or February. As you know, it's basically two seasons to drill in winter and summer, but very happy with what we're seeing in the drilling thus far. So, more to come there. Again, focus on the basement rock. We're going to do, as well, some expansion drilling at the unconformity in sandstone. We have these high-grade pods, or lenses, that have been discovered. We've found a few more along strike. It's a big 4 kilometer long corridor, that's the main Maverick corridor and it's really only been tested for about 2 kilometers northeast to southwest. And like I said, very little drill testing in the basement rock.

Gerardo Del Real: Fantastic. Jordan, let me ask you this. You have your finger on the pulse as far as the uranium market goes. Denison had some news that could have implications for everybody in the basin, the basin of course having the world’s highest grade uranium deposits. They decided to select ISR mining for the high-grade Phoenix deposit and this could be transformational if it works.

What are your thoughts on the news? I know you're in touch obviously with the group at Denison. They're a very, very talented technical team, very accomplished. I'd love to hear your take on that announcements.

Jordan Trimble: It's potentially transformational really for the basin going forward, right? This news release that came out a few weeks back. Very, very impressive pre-feasibility study numbers, very low cost. You're talking an estimated production cost of $3.33 per pound U308. And like we've just mentioned, looking at using ISR – in situ recovery – mining method to mine at the Phoenix deposit. It's big because a lot of geologists right now are going back – in the Athabasca Basin – are going back to the drawing board on the target types that they like to drill test, that they like to find deposits in. As you well know we've, in the last five or six years, seen a trend towards looking for basement-hosted deposits and high-grade mineralization.

That will continue, but with this potential for ISR to be used for sandstone-hosted deposits, high-grade deposits in the Athabasca Basin, that can change things significantly. Obviously ISR brings your cost down. It's never been used in the basin before but that doesn't mean it doesn't necessarily work, right? It just hasn't really been tested and so what Denison's done is kind of turned things on their head a little bit in the basin with the potential for ISR to be used for these high-grade pods or deposits right at the unconformity, above the unconformity in the sandstone rock.

Now this could potentially have implications for Skyharbour at Moore because the high-grade uranium that we have there at the Maverick Zone, these high-grade lenses along strike at the corridor, a lot of that mineralization is hosted in the sandstone right at the unconformity. So previously uneconomic deposits, these smaller high-grade zones of mineralization in the sandstone that would likely not be a standalone mine, there's the potential now where you could look at them from the lens using ISR as the mining method there may be something there.

So that is something that I think, well we certainly are going to be looking into a bit more and I think a lot of other companies, exploration and development companies in the Athabasca Basin, have to pay attention to. This ISR does work, that changes target priorities when you're going into projects in the basin looking for more high grade. It's not just, right now, all about looking for these bigger, deeper high-grade deposits in the basement rock. It brings these smaller high-grade deposits in the sandstone potentially back into play.

Gerardo Del Real: Well you have to also believe that that would create a good platform for consolidation for a lot of these higher grade, smaller deposits that maybe don't make sense as you said as standalone deposits. But, if you bring five or six together all of a sudden you have very, very attractive economics if the ISR method actually plays out.

Jordan Trimble: Exactly. Another point to note here, you're not building a big conventional underground mine. This is ISR, it's low-impact mining. It's low development CapEx. It's low OpEx. Yeah, it's a transformational thing for the basin if indeed it does work.

Gerardo Del Real: Fascinating. And another thing that's fascinating to me, along with Cameco's ongoing spot purchase program, you got Kazatomprom, the prospectus is out. I read that over the other day and there was also news out of Spain that Salamanca is on the rocks, I read a report. All of this means more buying and less supply.

I'd love to get your thoughts there on the macro in the uranium space. I know we've been kind of range bound trying to break out of that $27 range. You and I spoke before and I said once we get to $30 we're going to shoot to $40. I see a good bottoming happening right here at the $27 a pound range. Thoughts on all those points, Jordan?

Jordan Trimble: Yeah look, it's been a solid year thus far. Especially for the spot price uranium. We've even seen the contract price pick up a little bit. It's been a very busy year in the spot market. Over 70 million pounds transacted on the spot market year to date. The busiest, most active year ever. So it's not just about the price action. We're seeing the volume pick up as well in the spot market. In September, I was at the World Nuclear Association Symposium, the big marquee conference each year for the nuclear industry. A noticeably more positive tone sentiment for the mining companies compared to the previous few years.

As you just pointed out we are seeing continued supply cuts and curtailments, not just from the big producers like Kazatomprom and Cameco choosing to shut down production. We obviously saw MacArthur shut down for an indeterminate amount of time. That was announced just a few months ago. Kazatomprom at this conference at the WNA reaffirmed that they are going to continue to focus on and optimize their core asset base, which could mean additional cuts at marginal mines in Kazakhstan. We've seen, as you just pointed out, in Spain some of the development projects taking a little bit longer or having some issues there. Husab is a good example of that in Africa.

We're also seeing some big mines coming to the end of their mine life, right? Rossing, we're seeing Ranger. These are multi-million pound producers annually that are simply running out of reserves, right? So it's not just the large producers choosing to shut down production. It's current operating mines and producers that are running out of reserves and resources that can be mined.

On the demand side I'd say a key takeaway from the WNA Conference was the Chinese reaffirming their commitment to nuclear. Nuclear still is the second lowest cost source of electricity in China, levelized cost of electricity. Second behind thermal coal and we know air quality is a big issue in China. If they have to choose between burning coal or nuclear power, they're going to choose nuclear power.

So we're seeing a continued push in China for nuclear, that's really the growth story. China, India other parts of the developing world. China has 42 operating reactors, 15 under construction. But the numbers are staggering there. By 2020 they're going to have 58 gigawatts installed and plans for 30 under construction reactors in 2020. And by 2035 they are planning to have 155 gigawatts installed. Most of these being these new Gen III reactors.

So, continued big rollout of nuclear in China. But there's other countries in the world, too that have a rising middle class that need that cheap, clean electricity that are going nuclear. So it's an exciting time. Again, I really do think it's just the initial recovery phase for uranium. We've seen a move in the last, call it six or seven months from the low $20s to $27.50. You said it's consolidating here. But some of the key drivers that will push the price higher in the coming year, you have the new demand coming from some of these new funds that have been set up. Financial demand, from Yellowcake, from Tribeca, a couple of new funds that have been set up that are buying material.

You look at Yellow Cake out of London which is up almost 20% since listing. It's done well. They have the option to buy $100 million worth of yellowcake directly from Kazatomprom each year for the next 9 years. So that's a lot of potential new demand coming into the market. I think you'll see more and more of these funds set up as the price continues to move up. We're still at relatively low prices, right? I think that's an important thing to note as well.

The average global cost, all in at production, is above $40 a pound. The price needed to incentivize any real new meaningful production come online is $50 to $60 uranium. So we're still kind of treading along the bottom in terms of historical price, a normalized price if you will. So Cameco also having shut down MacArthur, having to fulfill their contract, planning to buy 11 to 15 million pounds between now and the end of 2019.

So there's a lot of good things happening in the space right now, both on the supply side, there's a significant supply deficit for 2018 in terms of primary mine supply and annual demand. So the demand side we see continuing to be robust, the supply side finally having responded to a low price environment.

Gerardo Del Real: Good stuff, Jordan. What else can we expect from Skyharbour? Obviously, we're awaiting assays at Moore. You're far from a one trick pony, you have a lot of irons in the fire. Can we talk about some of the other projects?

Jordan Trimble: Sure, absolutely. We have the assays and the drilling that we're currently carrying out at Moore. Plans for a winter program. So I'll have lots of news flow from our flagship project over the next 6 to 12 months. As you’re well aware, we also employ the prospect generator model to make sure our other projects are being advanced, funded by other companies.

Orano, which has the option to earn up to 70% at our Preston project by Fission and NexGen. They just finished a summer drill program, planning for a winter drill program. There will be more news coming out on that and as well. Our other partner company Azincourt, they came out with news about a month ago, they're also planning for a winter drill program at East Preston.

So there's a lot going on, a lot of irons in the fire. The whole idea with Skyharbour is to have the company positioned for that turnaround in the uranium market. I think we're at that inflection point. It's going to be an exciting 12 months ahead of us.

Gerardo Del Real: Fantastic. Jordan, great catching up. Appreciate the update. I know you're going to be hitting the conference circuit as you have all year. Where can people see you here in the coming weeks and months?

Jordan Trimble: Yeah, busy, busy few weeks coming up. We're going to be in San Francisco at the Silver and Gold Summit, a Cambridge and Katusa conference. And then after that we'll be at the New Orleans Investment Conference and then following that we're going to be in Munich at the Gold Show there, at the mining conference there. So a lot on the go in terms of conferences and road shows and marketing.

Gerardo Del Real: Good stuff. Jordan, thanks again for your time, we'll chat again soon.

Jordan Trimble: All right, Gerardo. Thanks.

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