UEX Corporation (UEX) - Increased Exploration Budget for Scale

UEX Corporation is one of Canada’s largest Uranium exploration and development companies with probably the only sustainable wide portfolio in the Uranium space over the next couple of cycles. We spoke recently with Roger Lemaitre, President and CEO of UEX Corporation, a large junior uranium company focused on the Athabasca Basin in Western Canada. He shared with us an updated investor overview of the company.

Company Overview

UEX Corporation has made significant advancements in the discovery and development of existing and new uranium and cobalt deposits in the Athabasca Basin, northern Saskatchewan, Canada. Up until June 2021, the company had four main projects: The Christie Lake property, The Horseshoe and Raven deposits, The Shea Creek property, and the West Bear cobalt-nickel project. Recent corporate action in June 2021 had given UEX additional project exposure. 

UEX was incorporated in 2001 and is headquartered in North Vancouver, Canada. It is listed on the TSX, the OTC, and the Frankfurt exchange. The company has over 499,000,000 fully diluted shares outstanding.

Leadership at UEX

A two-person team manages UEX: In addition to Lemaitre, there is Evelyn Abbott, CFO. A seven-person board of directors assists management with the company’s direction and activity. Graham Thody is the chairman of the board.

UEX’s Shift of Focus

In June of 2021, UEX announced the purchase of 100% of the shares of JCU (Canada) Exploration Company. UEX also signed a deal to sell half the shares of JCU to Denison Mining. The two corporate actions are referred to as the JCU Transaction and UEX Denison Transaction, respectively.  The deals enable UEX to participate in additional projects in the Athabasca Basin, including the Wheeler River project, Cameco’s Millennium project, and Orano’s Kiggavik project. 

Because of this, there has been a real shift in focus at UEX. The Wheeler River and Millennium additions, in particular, have positioned the company to be able to participate in production over the next few uranium price cycles. UEX is not the majority owner of these projects, so currently, the company’s resources are free to continue to pursue growth opportunities as well. Specifically, it has given them the ability to tailor the remainder of their portfolio to grow their higher-end or more well-developed projects such as Christie Lake and Shea Creek towards long-term production. They also intend to make partnership deals with some of their other earlier-stage projects. 

Production Plans

Lemaitre believes that the onset of actual production at UEX holdings is highly dependent on market forces.  Wheeler River is potentially one of the lower-cost projects out there, so it could come on but most investors like that capital return, and they probably need to see a higher price before they put substantial investments in the ground. During the next price movement that spurs on the next level of production, UEX will have a piece of the ownership at Wheeler River. Additionally, he foresees that Kiggavik, Shea Creek, or Horseshoe-Raven will be able to replace uranium production at existing producers such as Cigar Lake and McArthur. 

Exactly when the next cycle kicks off is not crystal clear, although uranium cycles tend to run in decade-long wavelengths. Lemaitre believes that the next cycle will be sooner than ten years from a supply point of view. Monster projects like McArthur River and Cigar Lake may be at the end of their lives at the time of the next ramp-up in demand. Because those big projects are going to be on their downslope, Lemaitre thinks that there will be a shorter window of time when replacement pounds will need to get into the market. UEX now has a small but sure part of those uranium pounds with their current holdings. 

The Growth Component

UEX has a number of projects that fall into the growth category, including Shea Creek and Christie Lake. Lemaitre wants to be more focused on them and some of the other growth assets that they have. In the past, he believes that UEX has been a bit too methodical and scientific. He would like to accelerate the exploration of those key projects and invest a little bit more than they have in the past. They will be focusing largely on the 3 or 4 top growth projects in the portfolio.

Shea Creek is the number 1 growth project in the UEX portfolio. The company has a plan that would spend probably $10M over a three- to four-year window to test the ten high-priority targets where they’ve identified mineralization, structure, and alterations that together haven’t been adequately tested in the basement rock. The basement component is important because uranium deposits in the Athabasca tend to occur where two basement faults cross one another. The only reason that they are not raising money right now to test these targets is because they do not control the Shea Creek project, their partner Orano does. UEX has been talking to them about a number of options to advance the asset. It’s just a question of getting to a point where both sides agree. 

Other UEX growth projects include Christie Lake, Hidden Bay, and Raven-Horseshoe. The company plans on picking up the operational tempo and drilling some targets at these because Lemaitre thinks that the market is ready for the pace to accelerate. 

Lemaitre is not worried that it may take a little bit of time to get these projects moving forward, especially Shea Creek.  It’s the nature of Athabasca Basin uranium projects. For example, Cigar Lake sat undeveloped for many years because people had to figure out how to mine it. 

Having said that, the CEO believes that there are going to be development projects in the Athabasca and UEX will be a part of that story and part of the decision-making that’s going on there. And, even though they are a junior miner, they have some options to play. 

UEX’s Financial Summary

Because of the JCU deal, UEX has become the fifth-largest uranium resource holder in the junior space on the globe and the third-largest in the Athabasca Basin. Because of that, Lemaitre believes that it will be easier for UEX to raise capital. He certainly thinks that it broadens out the company’s appeal to a wider investor audience. 

In a broader sense, financing is becoming a bit easier for uranium concerns because of the push toward environmental, social, and governance (ESG) trends. Funding is coming into uranium because, particularly in Canada, uranium companies have a strong ESG component. Now, people are calling up out of the blue saying they’d like to know more.

UEX has about $5.5M in the bank right now. Lemaitre is comfortable with that for now. Much of that will go toward the funding of their previously announced drilling programs at Christie Lake. 

Going forward, the CEO would like to raise some $25M to $30M. After paying down some Denison expenses, they would like about $10M to $15M in the bank so they can do more. 

Plans for the Remainder of 2021

After the Denison deal, the market didn’t react in as positive a way as Lemaitre would have liked.  The CEO will work on getting people to understand that even without doing anything, there’s value here in UEX’s assets. As a management team, they must do a better job to help people understand the quality of their current portfolio. 

Lemaitre emphasizes that pound for pound, some of UEX’s growth assets stack up quite well against those of their larger Athabasca competitors. Take the Raven-Horseshoe asset, for example: The Preliminary Economic Assessment (PEA) indicates that on a pound-to-pound basis, the uranium there makes just as much money as the uranium at McArthur River. The PEA also states that with a break-even price of $45/lb., the NPV is $160 M. Even though Raven-Horseshoe is smaller than some of the big-name Athabasca projects, it will cost a fraction of the amount to develop. It’s not going to be the company maker but it’s certainly going to be something that’s going to help sustain UEX when it looks at the nearby much-bigger Wheeler River deposit coming to the end of its life. 

Comments About Cobalt

Lemaitre intends to spin out several cobalt assets before the end of 2021. Given their focus on their uranium projects, the CEO believes that he can’t justify spending much on their cobalt assets. There are clearly players in the cobalt space that know what they’re doing, and they don’t need UEX’s help. On the other hand, there are companies that want to get into cobalt that don’t know where they’re going and don’t know how to get there. UEX may have something to offer to them. Cobalt price has gone in the right direction, and there are deals to be made. 

Closing Thoughts

Lemaitre firmly believes that UEX is not just an exploration outfit and that it is poised to enter into the producer club.  Nevertheless, they are still exploring, and that’s where they’ll focus a considerable amount of the company effort. In addition, they’ll be developing their financial position and making sure that they meet their commitments within their development portfolio.

To find out more, go to the UEX Corporation Website