UEX Corp (UEX) - Why This Uranium Portfolio Is Good for Investors

UEX Corporation is one of the largest junior Uranium developers in the Athabasca Basin. The company has various projects that will be entering production in the foreseeable future and a large portfolio of grass-roots exploration projects. The company proudly states that it is different to other uranium juniors, as it offers its shareholders exposure to various projects at various stages instead of one. UEX Corporation further boasts a combined mineral resource of more than 150 million pounds of U3O8 and aims to supply the uranium market shortly.

Matthew Gordon spoke to Roger Lemaitre, President and CEO of UEX Corporation (TSX:UEX) to discuss the company’s most recent activities.

Company Overview

The company recently announced that its 50% owned company JCU Exploration Company Ltd. was informed by the operator of its Waterfound River Joint Venture, Orano Canada Inc., that three of its exploration holes intercepted high-grade uranium approximately 700 m west and along strike of the project’s Alligator Zone. The high-grade mineralisation includes 092% eU3O8 over 1.6 m, 1.03% eU3O8 over 3.0 m and 5.91% U3O8 over 3.9 m.

UEX Corporation also recently announced that it had concluded its winter exploration program for its Christie Lake and Hidden Bay projects, which are located in the Athabasca Basin in northern Saskatchewan. The winter exploration program at the Christie Lake project consisted of 5,653 m of exploration drilling in 10 drill holes. The exploration drilling was aimed at the initial testing of the project’s three 2022 exploration targets. The drill samples of the Christie Lake exploration program have been sent to the SRC Geoanalytical Laboratory for geochemical analysis.

The winter exploration program at the company’s Hidden Bay project consisted of 3,072 m in 19 drill holes. The exploration drilling was aimed at testing the two parallel conductive trends along 1,800 m of strike length within the project’s Uranium-Nickel Sands deposit.

Uranium Market

The global uranium market has seen drastic changes since the beginning of 2022. The effect of various geopolitical factors such as the invasion of Ukraine by Russia as well as the global initiative to build more nuclear reactor power plants and the supply constraints caused by the Covid-19 pandemic have all added to the sector’s volatility. Roger Lemaitre, the president and CEO of UEX Corporation believes that similar to the price fluctuations of uranium experienced in 2005 and 2006, certain events have caused utility buyers to start buying larger quantities, in order to secure supply, he states:

“…it's the kind of thing when you look at utility buyers, they're very comfortable but it takes a couple of these events to make them go, oh, I better make sure we got what we need and it starts the panic.”

Lemaitre believes that the events that have affected the uranium price can be broken down into two time frames, before Christmas 2021 and after Christmas 2021. Lemaitre believes that before Christmas 2021, the uranium sector saw supply interruptions with mid-term supply contracts starting to dwindle and replaced by long-term supply agreements. The long-term supply agreements caused a decline in supply availability which was exacerbated by the Sprott Physical Uranium Trust (SPUT) buying up any further available uranium supply.

The events which occurred after Christmas, namely the invasion of Ukraine by Russia have seen the market starting to de-risk its uranium supply, Lemaitre explains:

“…if you look at the last few quarters of price movements, maybe going back 6, 7-months, they're all moving this quarter at the same time and that's really unusual. That usually indicates to me or suggests to me that your buyers, utility buyers are starting to panic. It's only in the early days that they're starting to panic. They are starting to get concerned, panic might not be the right word but trying to spread the risk out. And so it should be interesting to see whether we end up back with what's happening in Russia and how the west continues to respond.”

Lemaitre believes that planned sanctions against Russia and how the west will view Kazakhstan, as either an ally of Russia or not, will further add to the market volatility but also create opportunities for uranium producers. Lemaitre states:

“…if you have UF6 or conversion, it's probably a really good time for you because they're going to need those limited supplies, they're going to be pretty tight. ...I think the other one is what happens in Kazakhstan and what happens to guys and how's Kazakhstan seen outside of the near beyond, or whatever, if Vladimir likes to call his former Soviet Union by name.”

Lemaitre believes that the coming year should prove eventful for uranium and promising for uranium producers and juniors, one of which being UEX Corporation.

Monetizing assets

UEX Corporation announced in middle 2021, that it had acquired 100% of the Canadian company JCU Exploration Company Ltd. from Overseas Uranium Resources Development Co. Ltd. (OURD), for cash considerations of USD$ 41 million. JCU exploration Ltd. held at the time, a portfolio of twelve uranium projects in Canada, which included a 10% stake in the Wheeler River Project. The company announced that the JCU Exploration company Ltd. acquisition would become a 50% joint venture with Denison Mines Corp. Lemaitre states that after the JCU Exploration Company Ltd. acquisition UEX Corporation has tried to formally split the company asset portfolio into three segments, namely production visible projects, low-risk exploration projects, and grassroots projects. He explains:

“The first segment is that production visibility and we have those 5 projects that will have production visibility; some in the short-term, some longer-term. The first couple that are on our docket, we don't have to work those because there's major companies moving them forward for us. So we let them do their thing. We'll grow the company and our second tier, which is that low-risk exploration. These are the flagship type exploration projects with mineralized resources on them that are not closed off yet and move those projects forward through new discoveries, and grow the pie in the interim. And then when it comes to the low-end part of the portfolio, the grassroots stuff, that's really three options: explore, partner, monetize.”

The current Uranium Sector creates the ideal opportunity for the company to monetize its asset portfolio, due to in a large sense the renewed interest in grassroots uranium projects.

Production visible projects

UEX Corporation has three projects which it believes will see production in the near future, the projects are the Wheeler River project, the Millennium project and the Horseshoe-Raven project.

The Wheeler River project is the largest undeveloped uranium project in the eastern portion of the Athabasca Basin.  The project hosts two high-grade uranium deposits, namely the Phoenix and Gryphon deposits. The Wheeler River project saw the completion of a Pre-feasibility study in 2018, which envisioned an In-Situ Recovery (ISR) mining operation with an average operating cost of USD$ 3.33 per pound of U3O8. UEX Corporation owns 10% of the project through JCU Exploration Company Ltd., with Lemaitre stating:

“Denison is the operator. They're the ones going to be moving that one forward and they're doing all the technical work. We just watch them, we give them some feedback, and check up on what they're doing. And I'm very happy with the progress and in fact, I'm even happier with the project since we bought in.”

The second production visible project of the company is the Millennium project, in which UEX Corporation holds an approximate 30% interest, with the remainder held by Cameco Corporation. Lemaitre states that it is not a question of if, but when the Millennium project will be developed further, he states:

“That's going to be Cameco’s very next global exploration project. Not a question of if it's going to be developed, it's a question of when it will be developed and that's a Cigar Lake replacement for sure.”

The Horseshoe-Raven project of the company is a 100% owned asset, which Lemaitre believes will be advanced in the near future, he states:

“We've always said since I've been here at UEX, that when the market signals a need for more Uranium and the price is supportive, we’ll start to move that project forward. I think we've hit those two things now; you're going to see us start to move that project forward towards the development pipeline.”

Exploration activities

UEX corporation announced in early 2022 that it would conduct a winter exploration program at its Christie Lake and Hidden Bay project, two exploration projects of the company which hold great potential. The company announced in April 2022, that it had concluded with the winter exploration program. UEX Corporation was able to drill seven exploration holes between the Orora and Paul Bay deposits at the Christie Lake project. A highlight of the exploration drilling was hole CB-164 which tested for basement mineralisation, the drill hole averaged 0.11% eU3O8 over 1.0 m from 471.9 to 472.9 m.

The winter exploration drilling at the Hidden Bay project consisted of 3,072 m of exploration drilling through 19 holes. The exploration drilling was aimed at extending the mineralisation of the Uranium-Nickel Sands deposit of the project. The exploration drilling also identified similar mineralisation as at the Horseshoe and Raven deposits which are located approximately 2.5 km south of the U-Ni Sands deposit. The Horseshoe-Raven project contains 37,426,400 pounds of U3O8 at a 0.05% cut-off grade.

Cobalt Assets

UEX Corporation also holds three cobalt exploration projects in its asset portfolio. The 100% owned West Bear project of the company hosts the West Bear cobalt-nickel deposit, the Michael Lake cobalt-nickel zone, and the West Bear uranium deposit. The company also holds 100% interest in two early-stage cobalt exploration projects, namely the Axis Lake and Key West projects.

Lemaitre explains that the company needs to first finalise its plans regarding its cobalt assets, he states:

“…as a board, we're going to have to come back and say, do we want to put money in Cobalt? Or are we happy to do the spin out at a little less than what we were hoping to see?”

Should the company decide to advance its cobalt assets, it will also need to decide whether to bring in partners or finance the project’s advancement themselves, Lemaitre explains:

“…I'd love to tell you that we're going to do it tomorrow but I need to find that partner that wants to come in with us. Or we have to invest more money in the ground and we've been told pretty firmly by investors no, that money is going into Uranium.”

Future

UEX Corporation will advance various of its assets in the coming year with the company planning a summer exploration program at the Christie Lake project as well as at its Waterfound project. The company will raise funds as and when required, with it focused on including a larger amount of retail investors in future raises. UEX Corporation will also announce developments at its various grassroots projects in the coming year as well as at its cobalt assets. The company further plans to publish a Feasibility Study of the Wheeler River project before the end of 2022.

To find out more, go to the UEX Corp. website