Purepoint Uranium (TSX-V: PTU) - Exploration Drilling Funded for 2023

Purepoint Uranium Group Inc. is a uranium exploration company focused on the precision exploration of its projects in the Canadian Athabasca Basin, the world’s richest uranium region. Driven by an aggressive, systematic approach to identifying key projects with solid indicators and historic significance in the Athabasca Basin, the company’s objective is to enhance stakeholder value through the advancement of properties with well-defined targets of strong, high-grade uranium potential. Established in the Athabasca Basin since 2002, Purepoint’s leadership team comprises of independent, highly qualified group of experts with deep provincial and regulatory ties, as well as decades of experience in the Basin. The company proudly maintains project ventures in the Basin with two of the largest uranium producers in the world, Cameco Corporation and Orano Resources Canada Inc. (formerly Areva Canada Inc.)

Matt Gordon caught up with Chris Frostad, President and CEO, Purepoint Uranium. Mr. Frostad is a founding partner bringing over 40 years of expertise to his position as President and CEO. He has led public companies in both the technology and mining & metals industries. Throughout his career, Mr. Frostad has been instrumental in the development and building of a variety of high-growth, early-stage, public, and private companies and served as Director for several mining and technology companies. Prior to Purepoint, he held numerous senior positions in the technology industry including CEO in Residence of a Toronto-based venture capital firm. Mr. Frostad is a Chartered Accountant and a Chartered Professional Accountant who began his career in International Taxation with Deloitte.

Company Overview

Purepoint Uranium Group Inc. is dedicated to the pursuit of building partnerships with industry influencers, meeting its mandate to go beyond compliance with the law and strike meaningful relations that will not only leverage knowledge for profit but will create a balance between the financial and socioeconomic needs of all its stakeholders, in a world where the demand for nuclear power generation continues to grow. The company was founded in 2002 and is headquartered in Toronto, Canada. It is listed on the Toronto Stock Exchange (TSX-V: PTU), and the OTC Markets (OTCQB: PTUUF).

Purepoint Uranium is a uranium exploration company operating in northern Canada. The company is fully-funded and is currently drilling three projects.

The company’s representatives were in London, having discussions with various investors. The conversations so far have been interesting. A lot of people are trying to understand the prolonged excitement around uranium. Over the last 6-12 months, there has been a major shift in the market sentiment towards nuclear energy and uranium. Australia is finally showing interest in nuclear energy after decades of avoidance. Ontario, Canada is also pushing toward nuclear energy initiatives.

Purepoint Uranium has been operating in Northern Saskatchewan for 10-15 years now. The province has a specific region where all of Canada’s uranium comes from. This area is known for its incredibly high-grade ore. The two mines that are currently operating in the region have ore grades of over 20%, which is an oddity on a global scale.

The company has 12 projects in the region, right across the Athabasca Basin. Most of these projects are sitting adjacent to or on-trend to other major discoveries in the area. The primary project of focus is the Hook Lake asset, which is a joint venture between Purepoint Uranium, Cameco Corp., and Orano Resources Canada Inc. Notably, Cameco and Orano are two of the largest uranium suppliers in the world. Both companies have been highly supportive of the project. The project holds a lot of importance for the JV (Joint Venture) partners, further validating the project’s potential. This company wouldn’t be successful in budgeting for the asset unless it was capable of producing big pounds.

Both Cameco and Orano have a five to ten-year outlook trying to find feed for their mills that have a five to ten week outlook. Both companies have been reacting according to the market conditions. Purepoint Uranium is following the companies on budget size. Cameco and Orano have allocated as much as $5M in one year or as little as $1.5M-$2M in another. The discussions on the upcoming budget are expected to commence in the summer. As a project operator, it’s Purepoint’s responsibility to come forward with a plan. Both companies have supported Purepoint Uranium financially every year since the operations commenced.

The Uranium Market

Purepoint Uranium is cognizant that uranium is a relatively small market. The explorers, developers, and producers are in three completely different businesses. The company anticipates that there’s won’t be a lot of M&A (Mergers and Acquisitions) activity on the exploration side because merging two $25M companies leads to a single $25M company. This largely comes down to a project-by-project basis. As a result, any transactions seen in the explorers' space is based on identifying a prospect, taking it to a resource size, and either exiting or transacting.

The company anticipates that out of the 12 assets, an interested party might acquire one asset that is of interest. It is highly unlikely that someone comes in and acquires all 12 projects.

The company’s strategy is to have as many projects of interest as possible as finding high-prospect uranium assets is challenging. None of the uranium discoveries made in the last 10-15 years weren’t an overnight success. There’s a lot of work that goes into these assets in order to find something truly substantial.

When Purepoint Uranium started operations 10-12 years ago, it had 12 projects at various stages of advancement across the entire basin. If a company was looking to step in for a basin play, Purepoint’s assets could serve as a good starting point. Back in the day, the company had discussions with Rio Tinto as well. It is challenging to determine the next move for uranium companies, especially because there are a limited number of players in the market.

The company anticipates that there’s a lot of ongoing M&A, which is highly specific in nature. It is quite unlikely that someone would come in and create a brand-new uranium asset at this point. New entrants in the uranium space have been featured quite a bit in the ongoing news flow, which takes the focus away from existing companies. Purepoint Uranium has been in the uranium space for a long time. The market often focuses on the newer uranium stories, which are new but may not necessarily be worth looking into.

Due to the company’s experience in handling the drill core from across the province, it is cognizant that the findings in the east are different from the west. The deposits have different characteristics and features and require different methods for mining and extraction. The mining techniques used in the west do not work in the east. The company’s team has been working on these deposits for decades now, collaborating with Cameco and Orano.

Based on stock prices, it is evident that Purpoint Uranium’s shares move together with the 11 public uranium companies that are currently operating in North America. The stock for the uranium companies has gone up by 50%-75% in recent times. It is important to note that these assets took years of extensive work and due diligence to reach their current standing. The uranium companies had to drill at a lot of places across different projects before finding the deposit that paid off. A lot of capital expenditure was needed along with a highly-experienced team to achieve the desired results. Purepoint Uranium is focused on maximizing the likelihood of being the next big discovery where it will earn back the expended capital.

Due to the Fukushima Nuclear disaster, the uranium market was in a 10-year lull. For the past 2 years, the interest in uranium and nuclear energy has once again started to grow. Some companies are highly promotional, making extraordinary claims about discoveries after just one hole. Meanwhile, other groups are trying to emulate the majors, which doesn’t necessarily excite the market.

Purepoint Uranium came into the current uranium cycle 2 years ago. This was at a time when the world had started to recognize the importance of nuclear energy and how it would cause a substantial jump in supply and demand. During this cycle, a number of companies came out with extraordinary claims, however, none of them amounted to anything notable.

Ongoing Operations

Purepoint Uranium has $8M in current cash flow. It has 12 projects in its portfolio which are well understood. The company has boiled down the projects into much larger project packages and it is cognizant of which projects offer the most potential. The company can potentially drill all 12 projects by bringing in a partner.

In its current position, the company is focused on drilling the Hook Lake asset. Based on the knowledge from the partners and the other two deposits in the region, the company is drilling a large area at Hook Lake which is believed to be one of the best untested areas in the Athabasca Basin. These claims are based on the geology maps and the type of rock present at the deposit along with its proximity to the heat source that is responsible for mobilizing the uranium. The assumptions are based on the structure of the basement rocks found in the area along with the results from past drilling operations.

Notably, the company had one program in the area 14 years ago. This was at a time when no other discoveries were made in the region. At the time, Fission Uranium’s asset next door made a major discovery and Purepoint moved its attention over to the area. The company is now revisiting the drilled zone equipped with 10 years of learning, drilling, and understanding of the area’s geology.

The company is also drilling two other projects, namely Turner Lake and Red Willow, out of which, one was drilled 10 years ago. The company followed the past drilling operations, leading it to an expansive area. It is chasing the source of the uranium and the direction it is heading. This has led to the conclusion that the mineralization spans over a much larger area. At some point in the earth’s history, there was a mineralization event that caused uranium to move around in the area.

So far, the company has chased the source of the uranium up to a mile. Once it determines the boundaries, it will focus on defining the deposit. The company is also looking to find the structure and rock type that would be conducive to the deposit.

Purepoint Uranium is also drilling the Turner Lake asset, which is based just off the claim line where Iso Energy found a 35% orebody. The trend and geology are heading in that direction and the company intends to drill holes in this area. The findings from current drill programs will help the company determine the January 2023 drilling strategy.

Fission Uranium has as many projects as Purpoint Uranium and is currently drilling extensively. Both companies are pushing to determine the heat source that mobilized the uranium and pushed it out. Since both companies’ assets are based on opposite ends, the drilling information from one side can be utilized to better understand the other side. Utilizing this strategy will help understand the worthiness of a deposit upon a discovery.

Financing Considerations

Purepoint Uranium is interested in flow-through funding in Canada to carry out drill operations. This type of funding enables the company to raise money while availing tax benefits. While flow-through funding is easy to access, it can only be utilized on the ground. This type of funding cannot be used for paying salaries or building an office. The company is looking for hard dollars, which are much more difficult to raise. The company currently has $2M-$2.5M in hard dollars that can be applied against overhead. Notably, the company’s yearly overhead expenses are between $500,000-$600,000. This cash flow will keep the company going regardless of the market conditions.

From here, the company plans to simply budget for the next 6-12 months and raise funds accordingly. For the Hook Lake asset, the company will get its budget out of Cameco and Orano. Purepoint Uranium has 21% ownership of the Hook Lake Asset. Both Cameco and Orano pay Purepoint Uranium a 10% management fee for the project.

For instance, if the company has a $2M budget for the year, it has to come up with $420,000, out of which it would get paid back $200,000. As a result, it would only cost the company $220,000 for the program.

Due to the nature of the asset, Purepoint Uranium does not measure drilling in meters. The company’s monthly drilling costs amount to $1M. Currently, it is prioritizing drilling at Hook Lake, Turner, and Red Willow assets.

The drill operations are highly dependent on the weather conditions. This is because some areas can become inaccessible, requiring a helicopter, which is quite expensive. A helicopter cannot be used during the winter months because the days are shorter. As a result, the company intends to drill for 3-4 months, which is expected to cost around $3M-$4M in flow-through funds. Overall, the company is looking to spend about $5M in drill operations next year. To carry out the drill program, the company would need to raise additional capital before the summer.

The drilling operations at the Hook Lake asset are expected to conclude within the next 2 weeks. The company will start drilling again by January 1 or 2 next year. It can only drill til about March-April as the snow would start to melt. Once the weather conditions are more favorable, the company has plans to drill from the summer season through the fall. For the second drill program, the company would need to raise an additional $2M-$3M.

As an exploration company, the drill programs are on a month-by-month basis. The January drill program is dependent on the ongoing work. The results from this month’s drill program will dictate which area of the Red Willow asset will be drilled. The company currently has six other targets to drill at the Red Willow asset. If something of interest is found, the company will shift its focus. It plans to test all the targets as it presents an opportunity to turn the assets into potential deposits.

To find out more, go to the Purepoint Uranium website