Categories: Energy
Topics: General Energy

Skyharbour Resources (TSX-V: SYH) CEO Jordan Trimble Talks Uranium Supply Cuts, Latest High-Grade Results at Moore Uranium Project, and Flurry of Upcoming Catalysts in 2018

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?

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

Gerardo Del Real: Well, the last time we spoke we talked about the closure of the McArthur Mine with Cameco. And we mentioned back then that we didn't believe that cut, those closures, would happen in isolation, and sure enough, we got some big news out of Kazakhstan. I want to touch on the very, very positive news that you released this morning, but before that, you're one of the more insightful people in the space, and I would love your feedback and commentary on the news from Kazatomprom and out of Kazakhstan.

Jordan Trimble: Yeah I know, it's too funny. Not long ago we had this very discussion, and there was speculation in the industry. We talked about it on the last call that there'd be additional cuts in particular from Kazakhstan and Kazatomprom. To be honest, I'd like to say I had a crystal ball there, but the reality of it is this cut announced on Monday from Kazatomprom, of 20%, came sooner than I think most of us thought.

It's a very positive development for the companies in the space. I really do believe that the largest producers now, Cameco, Kazatomprom, I mean, we're talking two thirds almost of primary global supply between those two producers alone. I really do think now they are making a concerted effort to force this price higher, right? This is exciting for the other companies in the space, because you're seeing the lowest cost producing mines, right? You're seeing the lowest quartile of that cost curve being curtailed.

This is not high-cost marginal production. McArthur River, as we discussed on the last call, being the largest, richest uranium deposit and mine in the world, one of the lowest cost producing mines. Kazakhstan and the mines that Kazatomprom operate there are the lowest cost producers, so we're seeing the bottom quartile being curtailed. That's quite telling, right?

So, what that leads me to believe, you could even see more additional cuts, especially as these higher priced contracts expire in the next few years. A lot of them expiring over the course of the next 4-5 years, on mines that are more marginal, that are higher cost. When those contracts expire, they will have no option. If they can't get a higher price in a new contract, they'll have no option but to shut down production and you'll see additional cuts which, again, will be positive for the spot price. We've already seen the spot price tick up this week on the news out of Kazakhstan on Monday. And just to highlight some of the numbers there, a 20% cut and Kazakhstan being the largest producer of uranium in the world, that's a significant amount.

It's over the next three years, so it amounts to just over 42 million pounds of production being removed from the market. In 2018 alone, that's over 10 million pounds of production, just under 8% of global primary mine supply that will be coming off next year. When you add that all up, when you look at the Kazakh cuts, this recent one, the one earlier this year as well as Cameco at McArthur, we're over 20% in terms of production curtailment starting in 2018. That is a massive amount.

I mean, just to put this in perspective, it would be like waking up and both the US and Saudi Arabia announcing they're no longer producing oil in 2018. You can imagine the kind of impact that would have in the market, so those are the same kind of numbers that we're dealing with in terms of percentages. It's quite exciting. I really do think that as we've talked many times before, that the bottom has been put in place for the uranium space, that we're now entering into recovery mode, we are in a recovery mode, and we're going to be entering into a new bull market. It's an exciting time to be an investor in this space, running uranium companies, and building companies. I think we're in for a good few years here.

Gerardo Del Real: You know, it was interesting to me, and you mentioned the cost curve there. Two things. The first thing that was really interesting to me is how quick after the Cameco news these cuts were announced. Almost as if there was a rush to get it out before the New Year, which leads me to speculate that there will absolutely be further cuts in 2018, and the second point is that as you mentioned and you touched on this earlier as well, these are the low-cost, high-grade mines, right? These aren't marginal operations, and I've got to believe that boards of directors are huddling right now. Companies that have marginal assets that are losing $30-$40 a pound, and trying to make it up on volume, as Rick Rule likes to say. I have to believe that they're facing a lot more pressure now to make similar cuts.

Jordan Trimble: Absolutely.  Another thing to note is, and we've talked about this in the past, too, yes, the high end of the cost curve, those mines, those producers, I think you're right, are having those discussions. Look at Cameco's share price performance since announcing that cut it's done at McArthur. They've shut down their largest mine, or shutting it down next year, and the share price is up quite significantly, right?

So that I think gives the green light. We talked exactly about this in the last conversation that that shutdown by Cameco at McArthur I think has given the green light to other producers, especially publicly traded companies that exhibiting production discipline, making the hard decisions, short-term pain if you will at the project level, long-term gain, to make sure we come back into a normal market. That's the right thing to do, I really do believe you'll see more.

I also think that again, the Kazakh cuts, as well as Cameco cuts, it's sending a strong message to the utilities, the fuel buyers, the end consumer for the uranium, saying, “Look we're not going to continuously pump this stuff out and be loss making. We will cut production where we need to. We will make sure that this market is not over supplied." That goes back in the balance and actually after this Kazakh cut, we're now looking at several years of a supply deficit.

So, that will I think force the utilities to come back. They'll have to start contracting. We've seen a nascent contracting market the last few years. Not only will they be contracting again which will spur I think a significant price rally in the uranium price, but they'll also be jumping into the spot market as well. That will obviously help with the spot price, so it's really a perfect storm. I think we're going to look back at this, in particular this last quarter here as a real turning point, and a lot of momentum starting to be built behind this space. It's exciting times. We'll see what happens in the New Year, but as I said before and I'll say again, I really do think the bottom's in, we're now going to see the move up.

Gerardo Del Real: Well, that bodes very well for Skyharbour. You had news this morning, very good news from the flagship, right? The Moore Uranium Project. It was interesting to me because you're now hitting high-grade shallow uranium, both above and below the unconformity, and you've highlighted that in the past, that this was something that was important for you to latch on.

The second part that I'd love for you to elaborate on is you're getting the smoke that's typically associated with a discovery many, many kilometers away. So, I'd love for you to provide a brief summary of the discovery area, and then of course, the main part of the corridor there.

Jordan Trimble: Yeah, absolutely. We announced at the main Maverick Zone some additional high-grade mineralization, about 7.5% over just under 2 meters within a broader zone. We've also hit higher grade mineralization in the basement rock below the Maverick Zone. We've talked about this before. That's a key area that we're going to be drill testing going forward.

A lot of the recent discoveries like NexGen, like Fission, like the Gryphon deposit at Denison's project, are all basement hosted. This property, the Moore Project, our flagship, really has not seen a whole lot of historical drilling into the basement rock. We know there's high-grade mineralization. We hit 21% over a meter and a half earlier this year, as you recall, at the unconformity.

But in the basement rock, there's still a lot of upside. We drilled one of the holes at the Maverick Zone in this recent drill program, hit some higher grade mineralization. So going into the winter, we'll follow-up on that, but we also have a new area that really hasn't seen much of any historical drilling called the Venice East Target, that we drilled a couple holes on, exploratory holes on in this past program.

We had some uranium mineralization there, lower grader, but in a brand new area. That definitely needs some more follow-up. It's about nine kilometers northeast of the main high-grade zone, so a brand new area, regional target. This project is, we've said this before. It's exciting because there's a lot of smoke on it. It's not just high-grade shallow mineralization we're finding at Maverick, and the potential along strike, and in the basement rock there, but there's a lot of other targets on this project that have been drill tested with just a few holes, exploratory drilling, that have yielded low-grade uranium, anomalous uranium, which is usually not the case.

A lot of times in the Athabasca Basin, you go and you drill, you find absolutely nothing. There's a lot of smoke on this property, there's obviously a very strong, robust, geological setting there that is exactly what you want to see, because that shows us there's the potential for a much larger deposit, higher grade mineralization to be found, and that's the value we're looking to unlock on this project going forward.

So, great results from the summer program to complement the winter program earlier this year. We're going to be starting right back up in January and February with our winter drilling program, as well.

Gerardo Del Real: Can you tell me a bit about the winter drilling program? I understand it's 4,000 meters. Is that the plan?

Jordan Trimble: Yeah, minimum 4,000 meters. It'll likely be a little bit more than that, but that's what we're going to go with right now, and we're going to get all the permits and everything. That's actually pretty much all done now. We're good to go. It'll likely commence in the first or second week of February, once everything's set up. This winter program, much like last winter program, will focus almost exclusively at the main Maverick corridor. We might do a few holes on some of these regional targets for follow-up, but it's in the winter, your costs come way down, because everything's frozen.

It's easy to get around on the property, your drill costs on an all-in basis per meter are quite a bit lower, not having to fly into the regional targets on the project, or fly into any of the targets on the project. We can get there via ice road, which is great. Much like we did earlier this year in the winter program, we're going to keep it focused at that high-grade Maverick corridor. Continue to drill along strike, look for additional high-grade pods like we've been finding, but also again, continue testing for higher grade mineralization and new discoveries in the basement rock.

The current high-grade mineralization's quite shallow which is great, about 250-260 meters vertical depth, which is about half the depth of most of these high-grade deposits in the Athabasca Basin. But there's still a lot of upside potential deeper down in the basement rocks, but also along strike. It's a four kilometer long corridor, and really only a kilometer and a half of it has been drill tested, so a lot of room to move there.

Then, we also have our partner companies that'll be working. Preston over on the west side of the Athabasca Basin in particular. AREVA, large company out of France as you know, one of the largest uranium producers globally, that has a $2 million dollar budget at the beginning part of next year for drilling at the Preston project, just south of NexGen and Fission. Their work program is already underway, and then the drilling will commence in January, so excited to see what they can pull out there.

That's within a larger $7.3 million dollar exploration program, or expenditure is planned in the next several years. Then also, Azincourt, at East Preston, is going to be working and exploring at that project in the New Year as well. That'll generate a lot of news flow to augment what we have coming out in the upcoming winter drill program at Moore.

So perfect timing for all these catalysts, right? To have this kind of news flow coming out, continuing to have exploration success and delivering on that discovery potential and upside. No better time, I think, than what we're seeing right now with all the news that's coming out of Kazakhstan and Cameco, and the price of uranium starting to recover.

I really do think it's the early days in this recovery and bull market, and we're going to be active, and we'll continue value adding these projects through the drilling. We're also looking at other opportunities, right? There's always opportunities to find new partners to come in, as we deliver on that prospect generator model with some of the secondary projects. And keeping an eye out for other projects that are out there, as well.

Gerardo Del Real: That's a lot of near term catalysts for a company with a $25 million dollar Canadian market cap.

Jordan Trimble: Yeah, exactly.

Gerardo Del Real: Jordan, thank you so much for your time. I look forward to having you back on soon.

Jordan Trimble: All right, Gerardo. I appreciate it. We'll talk soon.

Gerardo Del Real: Thank you.

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