Looking for a way to play the Global Uranium market? Think Power Metal Resources
“…the company’s current focus is on extending its growing cluster of uranium interests. Demand for ‘yellow cake’ is being driven by renewed interest in nuclear as a source of clean energy…”
Uranium is yet another commodity entangled in the energy crisis, global supply dependent on a handful of key players currently producing less than the world needs. Metals exploration company Power Metal Resources (AIM:POW) is seeking to take advantage.
POW is focused on precious, base and strategic metal exploration in North America, Africa and Australia, with interests encompassing projects at greenfield and drilling stages. The company develops prospects internally or through joint ventures until ready for disposal through outright sale or IPO. POW’s extensive portfolio covers gold, silver, nickel, copper, rare earths and base-metals: the company’s latest interim results offer a useful overview of its current holdings. Prospect investors should also make sure to follow POW’s fast moving news stream.
POW shifts towards nuclear
But the company’s current focus is on extending its growing cluster of uranium interests. Demand for ‘yellow cake’ is being driven by renewed interest in nuclear as a source of clean energy, and supply issues supercharged this year by political unrest in Kazakhstan, which supplies two-fifths of the world’s uranium, a nation under the shadow of Putin’s Russia.
In POW’s most recent interims, published just a few days ago, CEO Paul Johnson said the company ‘is at a key point’, pursuing ‘accelerated value crystallisation by preparing parts of our business for spin-out/disposals’, and focusing ‘on a smaller group of retained projects.’ Going forward ‘acquisitions will be principally targeting additional uranium opportunities where we do see the value of continued growth of the uranium portfolio within our company.’
Last September POW began building a wholly-owned set of uranium prospects around the Athabasca Basin in Saskatchewan, Canada. By November the company held seven properties covering more than 400km2, and had launched an inaugural exploration sampling programme across three of them. The results, published late last year, confirmed high-grade uranium in rock samples with highlight results up to 3.86pc U308, or 38,600ppm (parts per million).
Early this year POW opened data so far compiled to third parties interested in the properties, and commissioned a National Instrument 43-101 technical report to assist the commercialisation process. A June update reported that the company was ‘currently finalising next stage exploration plans’ across all of its Athabasca properties, and expects to release the findings from the technical report ‘in the near term’.
POW has two further uranium interests. A review of the rare-earth element and uranium potential at the Selta Project in Australia’s Northern Territory, acquired last November, confirmed multiple targets. Historical geological, geophysical and geochemical datasets identified four high-priority areas with potential for uranium mineralisation, and three with promise for rare earth element mineralisation. The review also identified the potential for lithium, gold, and base-metal mineralisation as well as the possibility of tin-tantalum-tungsten-rich pegmatites: hard rock pegmatite fields elsewhere in Australia have proved to yield significant lithium. Further work is underway to evaluate the findings and plan further exploration.
POW has also taken its first steps to explore Africa’s uranium potential, commissioning specialist geologists to oversee the evaluation, acquisition and exploration of uranium prospects in Togo. The company said ‘existing project targets have been established’, and is working with the team onsite to plan next stages of exploration as well as to secure new opportunities as soon as possible.
POW’s shift of focus towards nuclear fuels comes as uranium’s value has risen by more than 30pc over the past year. Nuclear is increasingly accepted as a critical element of the global decarbonisation process and an important part of the global energy mix for the foreseeable future. Governments are seeking to renew their nuclear fleets, which are achieving official recognition as sources of sustainable energy, notably through inclusion in the EU’s revised Green Taxonomy.
As with so many of the world’s other commodities, there is also a supply deficit. A fall in the price of uranium several years choked mining incentives: approximately 130 million pounds is being currently being produced each year – the world’s 440 nuclear power stations together use about 180 million annually. Stockpiles and secondary supplies such as military warheads are being used to fill the gap. And the world is worryingly dependent on a handful of key suppliers, a fact highlighted by political turbulence in Kazakhstan earlier this year – the OPEC of uranium – which meets about 40pc of global demand through mines operated by state-controlled Kazatomprom. Russia’s aggression against Ukraine has highlighted vulnerabilities further: Russian troops were invited into Kazakhstan to help authorities quash protests.
Not surprisingly there has been a rush of investor interest in nuclear fuels. One fund, Sprott Asset Management, which runs the Sprott Physical Uranium Trust (SPUT), began stockpiling so much uranium there were fears it could corner the market and choke off supplies to power stations. SPUT’s assets under management have quickly grown from $600m to more than $3bn, and Sprott continues to expand, recently acquiring the $1bn North Shore Global Uranium Mining ETF (URNM), which returned a spectacular 79pc last year. The first two European-listed uranium ETFs launched earlier this summer.
Other natural resource interests
Though POW is recalibrating its portfolio towards nuclear fuels, the company retains an interest in a wide range of natural resource projects. There are too many for us to cover in detail here, but POW’s most recent interims offer a useful summary, and highlight significant activity at a number of flagship projects.
The company, for example, has recorded promising indications of gold and nickel at its wholly owned Tati Greenstone Project in Botswana. A drilling programme last autumn identified several gold anomalies, including 5.17g/t gold over a three to nine metre intersection downhole, spurring the acquisition of additional prospecting licences over ground covering the historical Cherished Hope Gold Mine, increasing the Project’s total footprint to 140km2.
POW has a 50pc interest in another Botswana prospect, the Kanye Resources Joint Venture, which includes prospecting licences over 4,257km2 of ground within the Kalahari Copper Belt, and the Ditau Camp Project, prospective for rare-earth element and base-metal mineralisation. Drilling at Ditau has so far identified several targets prospective for nickel, copper, and platinum group element mineralisation, and demonstrated highly elevated magnetic susceptibility readings between 293 and 321 metres, with extracted core sent for rush assay.
The company has a 49.9pc stake in the Victoria Goldfields Joint Venture in Australia, where nine exploration licences were granted late last year, subsequently increased to 14, covering a total area of 1,832km2. The licences cover the historical Ajax gold mine which historically produced 312,789oz Au at an average grade of 14.8g/t Au in the 1920s. Drilling so far has demonstrated high-grade gold at two prospects.
POW has a 30pc interest in the Silver Peak Project located in British Columbia, Canada, where assay results from a drilling campaign last summer highlighted bonanza grade silver (a grade of more than 1,000g/t) in 10 of the 19 holes drilled, including a top intercept of 0.76m of 8,692.2g/t Ag (279.5 oz/t). Assays also indicate high-grade copper, antimony, and lead, with the highlight result increasing to 0.76m of 10,131g/t Ag-Equivalent.
The company recently acquired the Pilot Mountain Project in Nevada by taking a 83.3pc interest in Golden Metal Resources, currently preparing for London-listing. The Project hosts a promising tungsten-dominated Mineral Resource Estimate, and various copper anomalies have been identified.
Outlook
POW’s most recent fundraise, undertaken last November, raised over £1m. The company’s latest interims, to 31 March, recorded total assets of £9.24m (30 September 2021: £6.28m), and net assets of £8.01m (30 September 2021: £5.97m). POW’s loss for the period was £1.69m (2021: £0.59m), and cash was £1.435m (2021: £1.967m).
By reorienting towards uranium POW is betting on a long-term turn to the nuclear industry as the world seeks to somehow meet climate change goals. It can be a volatile trade. Investor interest in uranium last peaked in the 2000s, when the price shot from $20 a pound to a record high of $136 in June 2007. It came crashing back down to earth after the financial crisis and the Fukushima nuclear disaster in 2011. Most of the 13 funds with a uranium/nuclear focus launched between 2006 and 2012 had closed by the end of 2014.
But, barring another significant incident, it does seem that the industry is due for a long period of sustained growth. The present energy crisis has highlighted the world’s ongoing dependence on fossil fuel infrastructures, which renewables alone will not be able to replace for decades. Nuclear offers a clean alternative, now. In addition to uranium, of course, POW continues to offer exposure to a wide range of strategic metals that will be critical for the energy transition.
The company’s share price, riding at more than 2p a year ago, has drifted to around 0.86p at the time of writing, taking its market cap to £12.48m. POW’s battery of interests offers several catalysts to spark a reversal: we continue to recommend this as a stock to watch.
