Recent events suggest that a Presidential decision on Section 232 investigation into Uranium is coming soon, which in our view should be a catalyst for the entire uranium space. We have summarized our thoughts below.
Impact: Mildly Positive Chalice announced the acquisition of the Ruins Project which expands its King Leopold Nickel Project holdings in Western Australia’s Kimberley region to ~1,800km2. As recently noted in our exploration update we view this acquisition as an inexpensive option on making a major discovery and additive to Chalice’s Pyramid Hill gold project, also in Australia. The news reinforces our thesis that Chalice is poised to rerate on the first hint of drilling success at either of its projects.
Impact: Very Positive Standard Lithium has announced excellent PEA results for its Southern Arkansas Lithium Brine Project, which highlights a high-margin and economically robust project in Arkansas, which we visited last month (site visit note here). Standard Lithium’s unconventional approach continues to create significant value for investors, which is not reflected in the company’s share price.
Introducing our inaugural Exploration Preview, which focuses on names within our coverage universe with drill bit torque. We review the exploration potential and try and quantify the potential impact on the share price should the company be successful in delivering results. We believe that exceptional drill results can create value regardless of where we are in the commodity cycle. Our top ideas are highlighted in Figure 1 below and will be presented in a similar alphabetical order within this document, bifurcated for precious and base metals focus.
Impact: Mildly Positive Recent news confirms that Coro’s ongoing drill campaign has defined high-grade copper oxide zones within a broader oxide footprint that has more than doubled in size. In addition, the company continues to intersect intervals of primary copper which bodes well for a larger sulphide deposit beneath the oxides. We are increasing our fair market value estimate for Coro from C$0.21/sh to C$0.30/sh, based on a larger 175Mt oxide resource, driving a 40Ktpd mining operation averaging ~116Mlbs of copper annually. We believe Marimaca is a compelling copper heap leach story that keeps getting better with the drill bit.
Impact: Positive Gran Colombia has released May 2019 operating results which were ahead of our expectations and have caused us to increase our Q2 production estimate to 58koz (was 55koz). In our view, this puts the company on-track to beat annual guidance and we now model Gran Colombia producing 232koz (was 227koz) in 2019. We maintain our fair value estimate of C$6.00/sh and expect operating execution, exploration updates from Segovia and the Marmato PEA to drive a progressive re-rating towards our fair value estimate.
Impact: Mildly Positive Seabridge has announced a comprehensive plan to test the district scale potential of its KSM property providing several positive catalysts for the near term. We believe that a significant discovery nearby could be additive to Seabridge’s inventory at KSM as it seeks a potential JV partner to develop the project.
Impact: Mildly Positive Appia has provided drill results from its Loranger property in the Athabasca Basin of northern Saskatchewan. This technical success provides important data on uranium mineralization in two target areas, which could allow the company to close in on a potential discovery. We believe Appia provides leverage to the uranium market with its Loranger property and large uranium resource at Elliot Lake Camp in addition to providing significant exposure to rare earth price momentum at its high-grade Alces Lake project.
Earlier this week, Red Cloud hosted a pair of conferences in New York and Toronto featuring presentations from seven uranium developers and explorers and other industry experts. Both conferences were kicked off by a presentation from Philip Johnson, Vice President – Fuel Cycle, of the UxC, which is one of the nuclear industry’s leading market research and analysis companies. Philip presented an overview of the uranium market, which included the UxC’s outlook on global nuclear demand and uranium supply. Seven presentations followed from Anfield Energy (TSXV:AEC), Appia Energy (CSE:API), Blue Sky Uranium (TSXV:BSK), CanAlaska Uranium (TSXV:CVV), Fission 3.0 (TSXV:FUU), Fission Uranium (TSX:FCU) and Laramide Resources (TSX:LAM). The New York conference ended with a Q&A with Arthur Hyde, Partner & Co-Portfolio Manager at Segra Capital Management, which consisted of a discussion on recent macroeconomic trends and the outlook on the uranium sector.
Impact: Mildly Positive De Grey has announced strong recoveries from metallurgical testing at Toweranna, indicating the deposit is free milling and conventional CIL processing can be used. As De Grey continues to de-risk and demonstrate the exploration upside of the Pilbara Gold Project it should re-rate to our fair value estimate of A$0.35/sh.