The last few months have been turbulent to say the least in this dawn of the uranium bull market. Equities across the board have risen substantially and the question that lingers is… what is next? One might reasonably expect a pullback to come soon, after all nothing ever goes up in a straight line, but with the uranium spot price feeling like a coiled spring that could go off any minute now, it would be foolish to suggest this run is over. Personally I expect another run up in equity prices, before we settle down a bit and consolidate or correct. This would be a welcome sight, as the charts are stretched as of this moment. Having said that, the macro bull thesis has gotten even better. With the closure of the COMINAK uranium mine at the end of this month and possible spot buying by Cameco and Kazatomprom, we are only in phase 2 of a bull run that has 4 more phases to go. .——-
As a result of the aforementioned run up in share prices of uranium miners, lots of people have asked me where to allocate their capital. While I have briefly mentioned a few of the bigger names in the sector before, a lower cap exploration and project generator company has not been mentioned. To make sure all parts of this market is covered, I want to cover the exploration part as well, as I believe that is where one can find the most leverage to a rising uranium price. Below you will find an analysis of one such uranium exploration company. This analysis was written in collaboration with the company in question, CanAlaska Uranium (CVE: CVV), to make sure the most accurate and high quality information was added. If people like the coverage of the smaller cap side of the sector, I will more than likely cover more companies in the future. Before we get to the analysis however, I want to preface this by urging everyone to do their own due diligence and only use what I write as a foundation for further research. Conviction and knowledge are best built by putting in your own time and effort and it will serve you well. .——-
CanAlaska Uranium is a 40 million dollar market cap exploration and project generator out of Canada. They are focused on finding high grade tier 1 uranium discoveries and liken their prospects to that of industry giant NexGen Energy, that are the owners of the tier 1 Arrow deposit on the western side of the Athabasca Basin. CanAlaska has a little over 2 million dollars on the balance sheet and have a planned budget of around 3 million dollars in exploration planned for 2021. To ensure exploration targets are met and enough capital is available, issuance of new shares is a possibility this year, but management has repeatedly stated that they want to make sure dilution is minimized. Their share structure is as follows:
Shares Outstanding 69.79M Float 59.3M % Held by Insiders 4.52% % Held by Institutions 5.61%
The company itself is mostly focused on uranium exploration, but has a drilling program that also includes other important commodities like copper and high grade nickel, both of which I am very bullish on for the coming decade. CanAlaksa also a diamond ground exploration program planned in north-western Saskatchewan. Below you can find a brief overview of what they are currently focused on:
Drilling program: Quesnel, British Columbia, copper Waterbury, Saskatchewan, uranium Thompson, Manitoba, Nickel high grade West McArthur, Saskatchewan, uranium
Ground exploration planned: Wollaston, Saskatchewan NE, uranium Saskatchewan NW, diamonds The exploration has been taking place on 500,000 acres of land and across 12 projects. They are partnered with Cameco, Denison and Northern Uranium on three of those. Their flagship exploration project is the West McArthur project. McArthur River is owned by Cameco and is one of the very best uranium projects on the planet. CanAlaska believes they have found the signature of another tier 1 deposit sitting close to the McArthur River mine. Drill results have shown drilling grade of 5% and even up to 8% uranium. 25 million dollars in capital have already been allocated across 7 target areas and it is a joint venture with Cameco. CanAlaska owns 70% of this project. .——-
Two other interesting projects of the company are the Cree East Project and the North Thompson Nickel project. Cree East has 19 million dollars invested and spans 56,000 acres. It is 100% owned and has shown uranium with additional gold intersects of between 4 and up to 13.3 g/t, which are not insignificant intersect. North Thompson meanwhile is a high grade nickel project, which also is 100% owned. The Thompson Nickel Belt is the fifth largest sulphide nickel belt in the world based on contained nickel endowment, containing over 18 nickel deposits and over 5 billion lbs of nickel production since 1959. The largest deposit is the main Thompson Mine at an estimated 150Mt at an average grade of 2.3% nickel. The North Thompson Project covers much of the north and north-western extension of this belt. With prices of both Nickel and Gold sitting at or close to multi year highs, these projects can give the company further leverage in a commodities bull market. .——-
Other than projects, there are two more things one should pay attention to when investing in uranium companies. These two things are management and institutional backing, which can both be make or break factors in a bull market. Let’s start with management, who have been through the previous bull market and are experienced geologists. Their team consists of the geologist who helped discover the Cigar Lake mine, another tier 1 uranium deposit owned by Cameco and Orano. As for backing, their projects have received Sovereign financing from Japan and Korea, and they are now backed by resource investing legend Rick Rule and Sprott USA. The joint venture with Cameco also means that they have the backing on their main project of the biggest western uranium company.——-
In conclusion, CanAlaska Uranium can be a very good option for people who want to add an exploration play to their portfolio. Even though they will need to raise capital (which is common with junior miners and should be expected when investing in this part of the market) and exploration is always a risky business, they have shown to be successful explorers and have several promising projects in their portfolio. Depending on what they find and how the bull market goes, they could be an attractive buy out target or move a project into the development stage, but only time will tell what will happen. .——-
TLDR: The uranium bull market has dawned and even though it ran hard in the past few months and a correction of some sort can be expected, it is still early days with spot price sitting below 30 dollars a pound. One way to play this uranium bull market is via an exploration company and CanAlaska, with a varied portfolio of projects and good fundamentals, presents a compelling, high leverage option in my opinion. Remember to always do your own due diligence and make sure to be aware of the risks involved with investing. Best of luck and have a great rest of your day.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.