UEX Corporation (UEX) – Monetising a Large Uranium Portfolio

Uranium is still hovering around $31/lbs, with Uranium explorers like UEX Corporation attempting to manoeuvre smartly into a prime position ahead of the imminent next Uranium cycle. What is the latest news around this Uranium mining player with a large portfolio of Uranium assets in the renowned Athabasca Basin?

UEX Corporation had announced a measly USD$700,000 private placement at the start of May, which eventually closed as a USD$2M oversubscribed private towards the end of May. Such a small quantity of capital was raised as part of a “hard-dollar financing” strategy. It was intended to be used as a small working capital boost to enable UEX Corporation to do some more work at the Christie Lake Uranium project. On August 4th, UEX Corporation commenced drilling at Ōrora North within the wider Christie Lake project. The first phase of this summer drilling program will consist of 3 holes, resulting in 1,800m of drilling. UEX consider that a possible 2nd phase will hinge on the results of the first, with anomalies being hunted enthusiastically with the potential for high-grade, low-cost Uranium on the horizon.

As the most active Uranium explorer in the Athabasca Basin, how will Lemaitre and his team systematically decide which average Uranium assets to offload and which to develop?

0:00 - Introduction

1:40 - Company Overview

2:50 - Roger's Track Record and Experience

4:03 - Why Raise So Little? Strategy and Outlook

6:28 - The Complex Uranium Market and its Impact on Company Decision-Making

11:16 - 2/10 Assets: Update and Plans for Christie Lake & Shea Creek

14:58 - 8/10 Assets: Plans & Timeline

20:35 - No One Sells the Good Stuff Cheap: Offloading Philosophies & M&A Red Flags

28:22 - Future Raises: Market, Sums, & Future for UEX

Athabasca Basin

The UEX Corporation are one of the older Uranium junior mining companies.  As one of the first companies in the Athabasca Basin in the last cycle, they have 10 Uranium deposits that are poised to move forward into the next cycle. In the mid to short-term, they are keen to work on their portfolio for new discoveries as that is what their shareholders want. They currently have a low risk portfolio of opportunities in the Athabasca Basin, so if investors are looking for a portfolio with a lower risk of exploration, upside potential, but backed up by Uranium that could be moved when the time is right then UEX is one of the companies that can do both.

Shareholders also have the chance of extra value when the cobalt market comes back, although it is not their core focus.

Background and Track record

Roger Lemaitre at UEX has worked for many major and junior mining companies for the last 30-years, with the last 20-years spent working in the Uranium sector. He spent 12-years at Cameco where he was on the exploration team that helped extend the Rabbi Lake Eagle Point operation with new discoveries in basement rocks. He was on their mergers and acquisitions teams for a few years and then managed their global portfolio of operating projects before moving on and moved back into the junior sector. 

Christie Lake & Shea Creek

UEX needed to raise some capital to do a little bit more work at the Christie Lake project which is now nearing completion but money came in slowly and more was required to keep going through to the end of next year. They have also been doing a deep dive into the Shea Creek project as well, to look at the ex-pat potential that they always thought has been there.  They are very excited about the potential there which is much larger than predicted.

Roger Lemaitre is all too aware of shareholder delusion and when the market starts to move in the right direction and the funding going to larger programmes and development programmes. The company had to decide what exactly they wanted to do and looked at their targets within the portfolio and decided where best to spend their money. USD$2M was raised to be fair to the current company shareholders.

Three years ago, USD$6M was raised for drilling off deposit and it just depends on what was urgent for the company, what is best for shareholders. They have turned away USD$6M or $USD7M in the last couple of weeks because it was not the right time.  Now, when planning for 2021 they need to consider the size of the projects and so to work out how much to raise as they understand that raising more money does not necessarily benefit the current shareholders.

Exploration capability and the level of investment in the market are not necessarily always matched. Roger stated that the market is confusing and not as transparent as it could be; the spot price is a great short-term trigger but pretty much every pound the spot purchases, eventually works its way into a utility contract somewhere in the future. He thinks that the vendor’s always going to be driven by utilities and utilities have been sitting on the sidelines waiting for things to work through and that they always believe that there is endless supply of cheap Uranium to be had out there and in many years they are correct. 

Roger intimated that when the market changes, it changes quickly and until they see what happens post-COVID with the big players, they will wait and see whether the market is tight. There are utilities saying the market’s not tight and you have suppliers saying the market’s tight.  The reality will show up in the next few months and to where these Uranium companies are going to be comfortable bringing new production on and supported by investors and future contracts.

The RSA decision will help the American utilities make decisions about what they can do about procurement.  The next step is, if you are out contracting, can you find it if you are a utility?  And then it will come down to what the volume is. 

Roger thinks that the Junior sector can be optimistic for sure. ‘It will change someday, whether that is October or is that a year from October, or is that beyond? There is a real cashflow problem for companies that are selling, and they need cashflow.  It depends how desperate they are and how desperate are the utilities.  So, it is going to be a tug of war’. 

At Christie Lake, UEX were working along with a trend of known mineralisation out of our three known deposits, Aurora, Ken Pen and Paul Bay and they realised last year that the trend was offset potentially because they knew there was mineralisation across the property boundary from their neighbour Cameco, who drilled a hole that was of interest out there.  They looked at the offset and sorted out some geophysical imaging over the last 12-months that told them where they should be. They have a 1.5km trend that has got all the right signs which makes them ask the question whether it is the right place to focus the next big programme.

Over the last 8 to 9-months at Shea Creek, they have been in the field looking at the old core, and asking why the bulk of the resource at Shea Creek is in the basement and whether there is a chance to expand things?

The chief geologist did a deep dive into the records, the core itself and 3D modelling and they’ve actually been able to identify 10 really high core areas, but particularly 2 that they think really jump out as to why they should be looking for Kianna deposits at Shea Creek. 

Looking ahead

Looking forward to 2021, UEX have tens of millions of dollars’ worth of exploration targets, drill-ready exploration targets that they can tackle.  They don’t think that it is responsible for them to go out there and drill at all costs, at any cost. So, a proposal will be put together and the 2021 programme, from the exploration, execution point of view, will need some sort of funding and they need to decide whether that’s USD$1M or USD$10M or somewhere in-between. Although the company have been offered funds from several sources, they are aware that those transactions might not be beneficial to shareholders today.

The keyword to UEX from a finance point of view is sustainability. They need partners that can absolutely sustain and answer the next one or two key questions on each of those projects that need to be answered. The Uranium industry has changed and there is now money being raised. One advantage of the UEX portfolio is that they think that discovery potential in the Athabasca is still high and that there is still a lot of potential for new discoveries and those new discoveries tend to fit in the low cost halfway curve, which is where you need to be as a Uranium Investor. 

Selling Assets

The biggest question is which assets do UEX sell first? Roger thinks that it comes down to the appetite of the people who want to participate and if you are a Uranium investor but do not have the technical expertise, UEX can help as they have the capacity to operate for the investor. The core four assets are probably not ones they are looking to sell.

Mergers and Acquisitions

Roger Lemaitre is worried about how much money can be made from M&A announcements within the Uranium space. He thinks projects that have been around and been through two or three cycles, are hard wins. The cost of being able to bring in something that is small is higher, as you run across the same permitting costs, the same environmental costs and ESG costs. 

The UEX strategy is that to be successful means you do have to be involved in low cost options and you can build assets and buy them cheaply. You need to have a very different strategy if you are hoping to buy a portfolio that will be of interest to many others. 

They have concerns about investors and funds being able to discriminate between types of investors and which ones are good quality. There was a lot of money poured into space and investors can become disillusioned when they do not get what they expect out of their investments.

There is a worry from Uranium companies that they get valued in a similar way to the Gold companies. This next cycle will be following a ‘hot’ Gold market as it did before. UEX hope that the Uranium sector will be valued not only on the amount of resources in the ground but the quality of resources in the ground.

Capital changes

The market has been changing in its demands and recently UEX were offering a half-unit deal as they wanted to bring in quality investors who want to be in Uranium for the long term. The market varies day to day and month to month and week to week so it could turn around 5-months from now. 

Link to Company Website: https://www.uexcorp.com/