Skyharbour Resources (TSX-V: SYH)(OTC: SYHBF) CEO Jordan Trimble on Executing the Project Generator Model While Drilling Co-Flagships
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the president and CEO of Skyharbour Resources, Mr. Jordan Trimble. Jordan, it's great to have you back on. How are you today?
Jordan Trimble: I'm doing well. It's a pleasure to be back on.
Gerardo Del Real: Let's get right into it. We talked a bit off air about the opportunity in the uranium space. We have the spot price, which continues to slowly but surely make its way north. It's north of 54 right now and meanwhile, the equities, which seasonally get weak right around May, and frankly the last couple of years, right around April as people front run the whole sell in May and then go away approach that everyone tends to take, but the uranium equities are presenting a pretty damn compelling argument that they should be accumulated at these levels. I wanted to start by talking about the disconnect in the space, get your thoughts on that, and then let's talk about the option agreement with North Shore Energy Metals for the South Falcon Uranium property in the Athcabasa Basin.
Jordan Trimble: Sure, yeah, so I feel like I've spoken a lot about this recently, about the disconnect between the uranium price and the uranium mining equities. It's about as extreme as I can remember. Needless to say, I believe there's a deep value opportunity here. I've continued to add to my position in the open market, and I think it's a prudent move for anyone seriously looking at the space. This is a true value proposition and opportunity that you don't see often. We did see this in the mid-2000s where you had the uranium price moving higher, the thesis was playing out, there was a bull market in its call it early to middle stages, and there was this continued grinder move higher at the uranium price, but the equities stalled out. We saw in 2006 and 2007 when the uranium price shot up to over $130 a pound, the equities that had stalled out re-rated significantly higher over a very short period of time playing catch up to that rising uranium price. I think we'll see the same scenario play out in this go round. As you pointed out, we are in a seasonally soft or weak period right now with May and going into the summer, but if we continue to see the uranium price tick higher, there's no question that we'll look back on this as a great opportunity.
Now as far as the uranium market and recent developments and the fundamentals, obviously we've talked a lot about this, so I won't rehash much of the underlying fundamentals. There's a lot we have talked about in the past, but just some kind of recent notable development so far this year, starting with the sizable amount of contracting material and volumes that we've seen to date, well over 100 million pounds contracted by utilities. We're already close to all of the contracting volume that we saw in 2022 of about 125 million pounds. Again, the 180 million pound replacement rate is a key figure when we see the contracting volumes north of that. Typically you do see a much higher move in the price of uranium so I think we're going to reach that number this year and it bodes well for the next few years in the market.
We've also seen progress made on sanctions in the US on Russian uranium and nuclear fuel. I think something we've talked about, that's something the market's been anticipating. It hasn't happened yet, but there's one bill in particular that looks like it's going to be passed and implemented here, and that would ban Russian uranium and nuclear fuel from 2028 on. There are some ways around that if specific utilities absolutely need the material, but I think it's a great first step and obviously that'll have a very positive impact on uranium, Western uranium, explorer coves, developers, and producers.
Coupled with that, we also saw a recent G7 Summit, most of the G7 member nations forming a nuclear alliance to help promote and foster new development in the nuclear industry in the West, but also to forge an alliance to effectively facilitate the carving out of Russia in this market. Again, Russia has a stranglehold on the nuclear fuel cycle. Everything from uranium production, primary mine supply, right through conversion and enrichment. It's going to have a pretty major impact on the market as the Russian supply and Eastern supply is carved out from Western utilities. Again, the Canadian, US, and Australian uranium companies will be the benefactors of this.
One other interesting point here is the recent VC deal flow in the nuclear industry and just some numbers there. From 2015 to 2021, there was a 3,600% increase in the dollar value in venture capital coming in to the nuclear industry and I think that that's a quietly a big talking point just because that's something that obviously has suffered over the last several decades. We haven't seen the kind of innovation and VC money coming into this space, but that's changing. I think that that just shows that there is, there's this improving sentiment, this reversal in sentiment, and we're seeing some of those dollars that are coming in that are helping to develop these new advanced nuclear technologies. We've talked about small modular reactors and other advanced nuclear technologies, but that just gives some numbers there. Seeing that kind of venture capital come into the space is very, very encouraging.
Last but not least, we're seeing new physical holding companies coming to market. Obviously the Sprott Physical Uranium Trust, I'm sure most of your audience is familiar with that and the impact that that's had on the market sequestering tens of millions of pounds, but there's actually several new ones coming to market that will further tighten up the market that should provide further catalysts for a higher uranium price.
Again, this market is very much in a bull market. We're seeing the thesis play out, we're seeing the uranium price move higher at $54, $55 a pound. We're not a far cry off from the highs that we saw in February, March, and April of last year in the, let's call it $60 to $65 range, yet the equities are trading at much lower prices and valuations. There is a notable disconnect, but I do think we will see that disconnect dissipate over the coming months.
Gerardo Del Real: Let's talk about what the best management teams do during softness in the market, which is you go out and you make accretive deals and this option agreement with North Shore Energy Metals I think speaks to how well you've been able to execute on that part of Sky Harbor's business model. You have co-flagships with Russell and more and obviously everyone is excited to get results there. I think 2023 is going to be a pivotal year for both of those projects. But let's talk about the other side of the business, which is the project generator model that allows for shareholders to have exposure and shots on goal for major discoveries while still retaining pretty significant holdings in those properties in exchange for a percentage of the property, cash, and then sometimes obviously share payments as well. I thought this deal was very well structured as have most of your deals, Jordan.
Jordan Trimble: Yeah, no, look, we're very, very pleased with this transaction, this option agreement with North Shore. First and foremost, North Shore is run by a very capable, reputable, strong management group. We've built a good working relationship with them thus far and we're very much looking forward to working with them as they advance this project over the coming years. Just to recap the option agreement, it's pretty standard in that they can earn an initial 80% by spending just over $3.5 million in exploration on the project over a three year period, paying Skyharbour just over half a million in cash and issuing us just over $1.2 million worth of stock over the three year period. Now they do have a buyout option where they can buy the remaining 20% after that three year period by paying us $5 million in cash and issuing us $5 million worth of stock. If they complete the full earn in up to the 100%, that represents just over 15 million in project consideration, combined exploration expenditure, cash, and share issuances. It's a very accretive deal.
Like I said, we're very excited to be working with the team at North Shore. They are completing a qualifying transaction right now into a CPC and once that's complete and they've raised the money, then the deal will close officially. We are expecting that they will be carrying out exploration and potentially drilling at the project later this year. It is permitted right now, which is a key feature of the project and that will just add, continue to add to the ample news flow we have coming out, as you mentioned, from our main projects, Russell and More Lake as well as at some of the other partner funded projects.
Just adjacent to South Falcon is our South Falcon East project that's currently under option to Tisdale. That’s our largest option agreement that we've signed and that is host to the Fraser Lakes Zone B deposit. Tisdale is also planning a drill program later this year as well as their first or inaugural program at South Falcon East. These two companies, we are expecting lots of news flow over the next 12 months from them in addition to Madero Mining at our Yurchison project and Basin Uranium Corp at our Mann Lake projects. No lack of partner funded news and programs. Again, we're very, very pleased and excited with the progress we're making at Russell Lake with the ongoing 10,000 meter drill program fully funded by Sky Harbor. That's going to provide a lot of catalyst and news flow over the coming months. We're just starting our next phase of drilling there and very much pleased with what we're seeing thus far.
Gerardo Del Real: Love it. No, listen, it sounds like we're going to have ourselves a pretty interesting second half of the year in the commodity space. I personally think whether it's uranium, lithium, gold, copper, silver, I think we're going to get on a heck of a commodity bull run here. Look, this is the time to be positioning, for those of you out there that are looking for leverage to rising sentiment in a rising price environment across the board in the commodity space. Jordan, thank you for your time. Anything to add to that?
Jordan Trimble: No, I think we covered it all and looking forward to catching up soon.
Gerardo Del Real: Awesome. Thanks again, Jordan.
Jordan Trimble: Thank you.Click here to see more from Skyharbour Resources Ltd.