Athabasca: More Land, More Uranium, More Profit
15 Maio 2014 - 1:58PM
Nuclear power generation is approximately 12% of total world
generation. There are currently 434 operable reactors in the world
in over 30 countries (including 50 in Japan) with an additional 71
reactors under construction, 173 planned and 314 proposed.
The overall demand for uranium to feed those reactors in 2013
was ~170m pounds. However, uranium, as a commodity, has
under-performed for the last 10 years.
There are two major reasons for this. First, the Russian Highly
Enriched Uranium (HEU) Agreement to use old missile fuel to feed
reactors was extended to 2014, adding 24m pounds per year to
supply. Second, the events at Fukushima in Japan led to 50 reactors
being taken offline and approximately 12% of fuel demand being
pushed onto the market as supply.
There are three major events that occurred or will occur in 2014
that will radically alter the current paradigm. First, Japan is
restarting its reactors. Japan's rapid switch to gas, post
Fukushima, has destroyed its balance of payments and is bankrupting
the government as it is paying $14 per Mcf for gas. In February the
Japanese government issued a draft energy plan that categorically
stated that uranium will be a part of their future. Three reactors
are expected go back online by year end at the latest, with at
least 28 more coming back online over the next 3 years. Second, HEU
is officially over with 24m pounds of supply from decommissioned
warheads disappearing with no plans to be replaced. Third, there
are 71 reactors under construction, following decades of
inactivity, which will increase uranium demand by 4% every year
until 2020.
Uranium investors over the last five years have been seriously
disappointed with the plunging prices. Over the next year, that
should change as the pendulum of demand and supply swings from
oversupply to deficit. The negative sentiment in both mining and
uranium has combined to create a situation where traditional mining
investing institutions are ignoring the uranium world right as a
result of the historic losses in the sector. It is likely they will
not 'buy back-in' until the price has recovered. Interestingly, the
average price most analysts are using is $65 a pound compared to
the 'current' price of $30. Analysts have also identified a supply
deficit in 2016, which could mean prices potentially skyrocket past
$65.
To gain exposure to uranium, investors should be in the place
most likely to recover first when the prices do change. Arguably,
that would be in Canada's Athabasca Basin in Saskatchewan,
responsible for 15% percent of global production and the highest
grades in the world. Average grades of 1-15%, vs. the global
average grade of 0.2-0.3%. Investors should as well look to
management with a track record of creating significant shareholder
value. Also junior exploration uranium plays are more exposed to
the long-term positive fundamentals of the uranium market driven by
strong Chinese demand and the continued deferral of production on
the supply side.
The company that checks all those boxes is Declan Resources
(TSX-V:LAN). In 2011 Fission paid back handsomely despite a
declining uranium market. Declan could well do the same.
To explain how Declan will do that, investors need to understand
a bit about its model. It's a prospect generator in the uranium
space. A Prospect Generator is a team of people who exhibit
substantial geological, political and/or commercial expertise in a
given value proposition (like uranium in the Athabasca, or Gold in
West Africa), and target geological concepts and targets rather
than projects.
Rather than financing and drilling those targets
themselves, they farm in or bring in JV partners to finance the
drilling. Exploration is really a knowledge business and a
risky one at that. Project generators maintain an interest in the
knowledge base by farming out an interest in the project base.
Statistically project generators are the best way to invest in
exploration and have the best discovery and takeover
probabilities. As Rick Rule the mining investment guru is
quoted as saying. "Project generators are unassailably the best
form of exploration investment." A good project generator has a few
necessary components: multiple projects with a willingness to farm
them out. As well, a management team with good enough ideas and
reputations to make the industry a willing participant in
their exploration activities. The important part is a 3rd party
willing to make expenditures on your behalf minus generative costs
and general administrative expenditures. The Company spends 1 or 2
million for every 5 or 7 spent on your behalf; giving you leverage
in the market and maximizing your ability to find major
discoveries. Not only having multiple projects, but also by using
experienced successful teams to source and generate those targets.
It's about maximizing your chances of exploration success while
minimizing and mitigating possible exploration risks. Exploration
is the only way that significant multiples are made in the
resources sector.
Over the past six months Declan has secured an impressive
strategic land position in the Athabasca Basin including 14
properties and over 340,000 hectares. These areas include drill
ready properties that have already benefitted from significant
exploration activities and have a completed VTEM survey. The team
at Declan has a primary goal of having the largest landholdings in
the basin by year-end.
Results of exploration work completed is already extremely
encouraging with the Radonex survey at their Gibbons Creek property
recording a peak of 9.93 picocuries/square metre/second (believed
to be one of the highest reported Radonex values recorded to date
for the Athabasca basin).
Proven management is lead by David Miller, the former CEO of
Strathmore Resources, which spun out Fission and was later taken
out by Energy Fuels. David is no stranger to completing large deals
with 3 Joint Ventures with massive Asian partners to his
credit: He has a knack for creating shareholder value.
To complement David, Declan has Dr. Hikmet Akin who some
refer to as the godfather of Athabasca Uranium. He was CEO of
the original URANERZ, which was the 3rd largest uranium
producer in the world as well as the largest landowner in the
Athabasca before being taken out by Cameco. These two industry and
mining veterans are a formidable duo that likely create compelling
shareholder value once again.
Declan trades at $0.10 with a market cap of $13 million.
Legal Disclaimer/Disclosure: A fee has been
paid for the production and distribution of this Report. This
document is not and should not be construed as an offer to sell or
the solicitation of an offer to purchase or subscribe for any
investment. No information in this article should be construed as
individualized investment advice. A licensed financial advisor
should be consulted prior to making any investment decision.
Financial Press makes no guarantee, representation or warranty and
accepts no responsibility or liability as to its accuracy or
completeness. Expressions of opinion are those of the author's only
and are subject to change without notice. Financial Press assumes
no warranty, liability or guarantee for the current relevance,
correctness or completeness of any information provided within this
article and will not be held liable for the consequence of reliance
upon any opinion or statement contained herein or any omission.
Furthermore, we assume no liability for any direct or indirect loss
or damage or, in particular, for lost profit, which you may incur
as a result of the use and existence of the information, provided
within this article.
Also, please note that republishing of this article in its
entirety is permitted as long as attribution and a back link to
FinancialPress.com are provided. Thank you.
CONTACT: Declan Resources
Suite 302, 1620 West 8th Avenue
Vancouver British Columbia
V6J 1V4 Canada
+1-604-639-4450
Lancer (AMEX:LAN)
Gráfico Histórico do Ativo
De Mai 2024 até Jun 2024
Lancer (AMEX:LAN)
Gráfico Histórico do Ativo
De Jun 2023 até Jun 2024