Uranium spot prices at US$24.35/lb are still well below the cost of production for most of the uranium mines. State subsidies resulting in cheap product from Kazakhstan and others, is keeping spot prices artificially low. The reason the uranium sector continues to grind along is that most producers are selling at profitable long term contract prices which are significantly higher than spot prices. This can only go on for so long, until true supply and demand dynamics result in higher uranium prices. It is just a matter of when this will happen?
As of February 2018, global uranium inventory is said to be around 1.79 billion pounds. Most of this inventory is not for sale and held for strategic purposes. In fact, less than 10% (~179 million) is available to the market. Given the current 55 million pounds per annum deficit, the world may have a uranium shortage by about 2022.
Argentina also seeks to develop its own uranium source
Meanwhile, in Argentina, it has been made public that the Argentine Federal Government will support the development of domestic uranium supply, to help the plans for local expansion of nuclear energy capacity. This support provides an excellent first customer potential for any new supplier in the country. The current problem is that all the uranium used in the Argentine nuclear industry is currently sourced from outside the country. The demand from nuclear energy is expected to increase 2.5 times by 2025. So like in the USA, Argentina is very focused to build up their own uranium deposits to production.
Blue Sky Uranium Corp. (TSXV: BSK | OTCQB: BKUCF) is a leader in uranium discovery in Argentina and is one of Argentina’s best positioned uranium exploration companies with 100% control of more than 450,000 hectares of mining tenements. The Company’s flagship project is the Amarillo Grande Uranium-Vanadium Project in Rio Negro, Argentina.
The Amarillo Grande Project covers a 145 km prospective trend. Work so far has identified three high-priority target areas with significant anomalies of uranium and vanadium. The key deposit, the Ivana property, hosts an inferred near-surface deposit containing 22.7 million pounds of U308 at 0.037% U308, and 11.5 million pounds of V2O5 at 0.019% V2O5.
The February 2019 Preliminary Economic Assessment for Ivana demonstrated robust economics including a post-tax NPV8% of US$135 million, and a post-tax 29.3% IRR. Mine life is 13 years with an initial CapEx estimated at $128 million. Naturally, as the resource grows there is a good chance for the NPV to grow with a longer mine life. The PEA was based on a uranium price of US$50/lb and a vanadium price of US$15/lb. Based on these assumptions the project has a low cost of production (AISC) of $18.27/lb U3O8 net of by-product credits.
Nikolaos Cacos, Blue Sky President & CEO stated: “Following on the heels of our successful PEA for the Ivana deposit, we are continuing exploration with confidence. Our CAPEX costs are estimated under $130 million, that’s a very very low cost for construction to go into production for a type of mine as large as Ivana will be. Second of all is the production cost, the All-In-Sustaining-Cost is just over $18 a pound of uranium. It basically (if it was in production today), it would rank it amongst the absolute lowest cost producers on the planet.”
The Ivana deposit remains an excellent candidate to be the first low cost, near term uranium producer in Argentina. For the next 6 months, exploration will include RC drilling designed to identify the mineralization potential extending the Ivana deposit to the west (the Ivana West target).
The global uranium industry is taking a wait and see approach on the July decision on Petition 232 from the US. Although not directly affected by the P232 in the near term, Blue Sky Uranium Corp. could see its value climb on the back of a positive decision from the US President, as that would be viewed favorably by the uranium sector, resulting in other countries to follow. Furthermore, with ~76 nuclear reactors currently under construction, and 165 in planning, demand for uranium is set to increase significantly in future years. Added to this Blue Sky also has significant amounts of vanadium, another in-demand element.
Blue Sky Uranium Corp. is based in Vancouver Canada; and has a market cap of C$ 15.7 million.
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