GoviEx Uranium (GXU) - Why Raise Money in this Market?

GoviEx Uranium Inc. is a Canadian-based uranium development company focused on its projects located in Africa. The company boasts a resource inventory of over 220 million pounds (lbs) of U₃O₈ in measured, indicated and inferred resources. The company’s asset portfolio consists of the Madaouela project, located in Niger, the Mutanga project, located in Zambia and the Falea project, located in Mali.

The company on the 25^th of September 2022, announced that it had concluded with the first tranche of a bought deal private placement financing, which was underwritten by Sprott Capital Partners. The first tranche of the placement consisted of the issuing of 46,213,000 units of the company at CAD$ 0.22 per unit, for a total of approximately CAD$ 10.17 million. The second tranche of the bought deal private placement was announced to have closed on the 27^th of October 2022. The second tranche consisted of the issuing of 1,545,000 units of the company at CAD$ 0.22 providing additional proceeds of approximately CAD$ 0.34 million and bringing the total funds raised to approximately CAD$ 10.5 million.

The raised funds will be implemented by GoviEx Uranium Inc. to advance its uranium projects, enabling the company’s goal of production by 2025. The company aims to advance offtake and debt financing options for the Madaouela project, developing the Mutanga project to a feasibility study by the end of 2023 and the continued exploration of its Falea project.

Projects

The asset portfolio of GoviEx Uranium Inc. consists of the Madaouela uranium project in Niger, the Mutanga uranium project in Zambia and the Falea uranium project in Mali. The Madaouela uranium project is located in north-central Niger close to the town of Arlit. The project is owned by the Nigerien mining company, Compagnie Miniere Madaouela SA (COMIMA) which GoviEx Uranium Inc. owns 80% of, with the remaining 20% of the company owned by the government of Niger. The project has a mineral resource estimate of 11 million pounds of U₃O₈ in the measured and indicated category and 28 million pounds of U₃O₈ in the inferred category. The Madaouela uranium project is envisioned to consist of both underground as well as open-pit operations with open-pit mining planned at the project’s Miriam deposit, and underground room and pillar mining planned at the project’s Marianne-Marilyn, MSNE and Maryvonne mineral deposits.

The Mutanga uranium project of the company is located 200 km south of Lusaka, the capital city of Zambia. The project has a mineral resource estimate of 15.2 million pounds of U₃O₈ in the measured and indicated category and 44.9 million pounds of U₃O₈ in the inferred category. The project consists of five main deposits namely the Mutanga, Dibwe, Dibwe East, Njame, and Gwabe deposits and holds a mining licence for both an open-pit and heap leaching operation.

The Falea project of the company is a 225 km² land package with only 5% thereof having ever undergone exploration initiatives. The project has a mineral resource estimate of 17.4 million pounds of U₃O₈ in the measured and indicated category and 13.4 million pounds of U₃O₈ in the inferred category. The project also hosts copper and silver mineralisation.

Raising funds in a downed market

GoviEx Uranium Inc. on the 25^th of September 2022, announced that it had concluded with the first tranche of a bought deal private placement financing, which was underwritten by Sprott Capital Partners. The first tranche of the placement consisted of the issuing of 46,213,000 units at CAD$ 0.22 per unit, for a total of approximately CAD$ 10.17 million. The second tranche of the bought deal private placement was announced to have closed on the 27^th of October 2022. The second tranche consisted of the issuing of 1,545,000 units of the company at CAD$ 0.22 providing additional proceeds of approximately CAD$ 0.34 million and bringing the total funds raised to approximately CAD$ 10.5 million. Daniel Major, the CEO of GoviEx Uranium Inc., explains that the raised funds are necessitated by the company’s ongoing advancement initiatives.  

“…we have advanced our projects through some key points. We've got our Feasibility Study now out for the Madaouela project. Our Muntanga project is pushing towards Feasibility Study. We hadn't raised any money since January of last year. We've come to the point where we had to raise some and so that's where we are. Obviously, the market had moved around a lot. It was a function of going as long as we could, as far as we could.”

The total amount of funds raised is, according to Major, sufficient to carry GoviEx Uranium Inc. well into 2023, with the amount also providing a buffer for the company should any unexpected expenses occur.

“You don't want to get to a point where you waste just the minimum and then suddenly, something else happens as well. This is a difficult market out there. We felt that the amount that we were raising was the appropriate amount to support us and to take us well into next year.”

GoviEx Uranium Inc. believes that the timing of the private placement financing is justified by the potential of the uranium sector caused in part by the geopolitical unrest in Ukraine having led various utility companies to search for alternative sources of supply.

“I think at the moment, as we look forward, everything we're seeing about the Uranium market is the most bullish that we have ever seen it. Either geopolitically on a supply-demand, what the utilities are telling us about when they need Uranium which is fitting perfectly with our Madaouela development plan, we've got to keep going with that market.”

Advancing the Madaouela project

The raised funds will be implemented by GoviEx Uranium Inc. to advance its entire portfolio of uranium projects, enabling the company’s goal of production by 2025. GoviEx Uranium Inc. aims to finalise debt financing options for the Madaouela project in the future, with Major explaining that the company has been able to advance the project to the point where this is possible.   

“Most of the heavy lifting has already been done at Madaouela from a technical cost point of view. The key area now is getting the debt financing sorted out, which obviously doesn't cost as much money to do. Endeavour is already appointed; they've already sent their teasers out to as many lenders as we can think of. We're gradually pulling together that pool to understand who's interested, who's not interested and how that fits together. And once we get a clarity of where that sits, that's the point we can then become more aggressive.”

The finalisation of the debt financing agreements involves an independent audit of the technical aspects of the Madaouela project. Major explains that the audit focuses on not only the technical risks associated with the project but also its ESG factors.

“We've already appointed the independent engineers for the lenders… So, when the lenders come in, they are being provided a substantive, technical review of our project that says this can work, we've gone through every single part of their Feasibility Study”

The ESG values of an operation are, according to Major, also a factor which influences the formation of an offtake agreement, with utility companies focused on the responsible and ethical procurement of uranium.

“If you look at off-takers themselves, they come at it from a different perspective. Some of them are very practical and have an understanding. Their biggest focus tends to be ESG, not technical. They're not going to tell us how to run a Uranium mine but what they will do, there are a number of them, particularly European ones who audit back on an ESG basis and so the environmental review is important for them.”

Utilities and the uranium sector

The ability to finalise the debt financing aspect of the Madaouela project will enable GoviEx Uranium Inc. to initiate undertaking preliminary offtake agreements with various utility companies, according to Major.

“…with the offtake, we've been kind of courting them. Again, the next step with all of them and we spoke to 20 of them in the NEI was very much okay, when we can see that there's a debt consortium starting to form up here, this is when we will come and have a much more aggressive conversation with you because we can at least show you the money.”

Major explains that the uranium sector does not show signs of slowing down, with the overall sentiment shared by utility companies being positive. UxC LLC, one of the nuclear industry’s leading market research and analysis companies, also has a positive outlook on the industry.

“The feedback for us from some of the utilities is yeah, it's moving up, it's moving very much towards where you guys want to be and in fact, if you look at the number you were used in the FS which was 65 that is in line with where UxC is expecting the price to be, in fact, they are expecting to be actually higher than that. So I think from a market point of view, the momentum is still very much there from a practical perspective of what we need for price.”

The possibility of a uranium deficit may further serve as a catalyst to the uranium sector, with Major explaining that the shortage will be further exacerbated due to various states in the USA having implemented legislation to prohibit the procurement of uranium from sources associated with Russia.

“They realise that there is a deficit in front of them. The message from the majority is that Uranium prices are going higher. The whole Russia embargo issue is a big concern in some cases, while there is no federal block, there are now a number of states who are blocking it. So, utilities now have laws against them buying Uranium from the Russian sphere of influence, New Jersey being one of them which has now changed its law which means you've got to find it from somewhere else.”

Future

GoviEx Uranium Inc. also plans to advance its Mutanga project towards a feasibility study (FS) in the future with the company aiming to publish the study by the end of 2023. The completion of the feasibility study will follow the conclusion of metallurgical testing initiatives which are aimed at confirming previous metallurgical results of the project. The raised funds will also be implemented towards the continued exploration of the company’s Falea project.

“Muntanga obviously, down there we have finished the drilling work this year. Next year, we'll be reverting to the metallurgical test work just to verify the previous metallurgical test work, getting that to an FS level and then we'll push all the engineering out to FS. I mean, if we have to slow a project down for the market, then we'll have to slow that one down.”

The African uranium sector is poised to play a role in the future global uranium market, with Major believing that the geopolitical factors of 2022 necessitate a diverse uranium sector.

“There is an uncomfortableness of only really having two or three people to choose from. Therefore, Africa is very much becoming part of their looks. The other side which continues to be the biggest concern at the moment is, UF6, where is that coming from and we need capacity in those areas. I think, overall, a comfort level that nuclear as a whole is becoming much more mainstream slowly but surely...”

To find out more, go to the GoviEx website