Uranium explorer Kivalliq Energy Corp. released drill results from a new discovery at its Nunavut property earlier this week, and CEO Jim Paterson and president Jeff Ward stopped by the CEO.CA office in Vancouver to talk about it.
Through a terrible market for junior mining companies generally and uranium plays specifically, Kivalliq has managed to secure financing and dramatically grow its resource.
The company has a 43.3-million-pound inferred resource, at average grades of .69% uranium, at its Lac 50 deposit at its 260,000-acre Angilak property. The latest discovery is Dipole, about 25 kilometres southwest of the Lac 50 deposits, where each of 9 diamond drill holes (958 metres total) hit uranium mineralization.
– 2.34% U3O8 over 1.3 metres (m) from 28.3 m to 29.6 m in 15-DP-009;
– 0.21% U3O8 over 6.7 m from 46.4 m to 53.1 m in 15-DP-009;
– 0.17% U3O8 over 8.0 m from 27.9 m to 35.9 m in 15-DP-005;
– 0.18% U3O8 over 6.7 m from 35.5 m to 42.2 m in 15-DP-006;
– 0.14% U3O8 over 2.1 m from 75.5 m to 77.6 m in 15-DP-002.
The Dipole zone remains open in all directions.
Ward, a geologist, told James Fraser and I that Dipole has a very similar geophysical and geochemical profile as Lac 50, as well as stacked conductors and mineralized boulders at surface. That translates to plenty of exploration upside and district potential at Angilak, he said.
Kivalliq has also diversified in recent years by acquiring two properties just east of the Athabasca Basin: Hatchet Lake (acquired from Rio Tinto earlier this year) and Genesis, which the company staked. Kivalliq has optioned an 85% interest in Genesis to Roughrider Exploration.
Hatchet Lake and Genesis offer Kivalliq optionality in a higher-price environment, Paterson said, not to mention leverage to uranium prices. During the last uranium price spike, in early 2011 to above $70, Kivalliq shares shot up faster than the metal.
“When the spot price moves back, which we believe it will, there are lots of different ways we’ll be able to monetize these assets.”
It all adds up to an interesting call option on uranium, especially in the event of a price increase. The spot price, US$36.50/lb, has been flat in the past year after a brief spike up to US$44 last November. Uranium briefly peaked above $130/lb in 2007.
That was before Fukushima, and Kivalliq got “Fukushima’d” along with the rest of the uranium complex when the March 11, 2011 tsunami caused nuclear meltdowns in Japan.
The shuttered nuclear reactors are firing up again, but the shares of uranium companies have not responded in kind.
A slide on Kivalliq’s October 2015 corporate presentation outlines it starkly. Before the nuclear meltdown, Kivalliq was being valued at $6.12/lb, compared to 30 cents a pound now.
Kivalliq was well-funded through 2011 and 2012 and grew its uranium resource from 14M lbs to 43M lbs before scaling back on exploration in recent years.
But while the resource grew 206%, Kivalliq’s equity value was slashed by 82%. It didn’t help that uranium prices also slumped by almost 40% over the same time period.
Another shadow for any Canadian uranium play are the freak-of-nature grades being discovered in the Athabasca Basin by the likes of NexGen Energy and Fission Uranium.
Paterson made the point that 85% of the world’s uranium is produced outside the Basin at much lower grades than Kivalliq’s Angilak.
“I would liken it to hitting a bunch of singles instead of a home run like NexGen,” he said.
The company also has Basin exposure with Hatchet Lake and Genesis, located along the trend that runs northeast into the Basin and hosts the Eagle Point uranium mine and the Rabbit Lake mill.
“Because of proximity, anything we find at Hatchet Lake obviously has a lower threshold as far as size,” Paterson said.
Kivalliq was spun out of Kaminak Gold (Paterson is still on the Kaminak board) in 2008. The company has about $700,000 in the till and will need to raise money to further advance its projects.
Financing hasn’t been a problem in the past, and having mining entrepreneur Ross Beaty as a major shareholder helps. Beaty owns about 13.6% of the stock and participated in the last financing, done at 12 cents/unit and 15 cents/flow-through unit.
Shares outstanding: 217 million
Market cap: $17.4 million
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Author has no position in Kivalliq. This is not investment advice, and all facts are to be checked and verified by reader. As always please do your own due diligence.