Blue Sky Uranium capitalizes on a hot market trend
- Nuclear energy is at the heart of the re-equipment of the global electricity grid to reduce its carbon footprint
- Prices for the uranium that powers nuclear power plants have jumped as the Sprott Physical Uranium Trust bought massive amounts of uranium on the spot market.
- With a significant uranium resource in Argentina, Blue Sky Uranium is about to enjoy uranium day in the sun
As the world searches for more climate-friendly solutions for power generation, nuclear power is increasingly part of the discussion.
The world’s uranium nuclear reactors produce reliable base power but have a very low carbon footprint. Microsoft founder Bill Gates said of the industry: “Nuclear is ideal for tackling climate change because it is the only scalable, carbon-free energy source available around the clock.”
It’s a sentiment you’ll find Niko Cacos, CEO of Blue Sky Uranium Corp. (TSXV: BSK | FSE: MAL2 | OTC: BKUCF) okay.
“You cannot meet the targets set for the climate change protocols without having a substantial nuclear power base ensuring reliability,” he says.
Cacos should know. As the name of the company suggests, Blue Sky Uranium is a metal explorer used to power uranium factories around the world. Blue Sky is focusing on its Amarillo Grande uranium project in Argentina, which has a small but growing nuclear power park and may well be an end user of the project’s mineable surface uranium deposit.
“You cannot meet the targets set for the climate change protocols without having a significant nuclear power base ensuring reliability. »- Niko Cacos, CEO, Blue Sky Uranium
Uranium is on a tear
After languishing for many years, uranium prices have rebounded in recent times. Uranium stocks jumped in 2021, driven by a big move in the spot uranium market by the new Sprott Physical Uranium Trust (“SPUT”).
Since mid-August, the investment vehicle has bought more than 25 million pounds of uranium on the spot market. This has accelerated the upward trend in uranium prices in 2021, from a low of around US $ 28 / lb. in February at US $ 43 / lb. today.
With uranium on a tear, Amarillo Grande gives Blue Sky Uranium a project in a nuclear-friendly country that covers a 145 km uranium trend. The project’s Ivana deposit contains 22.7 million pounds of uranium oxide and 11.5 million pounds of vanadium oxide. (Vanadium is a specialty metal used in alloys and glass coatings and as catalysts.)
A 2019 preliminary economic assessment gave the project an after-tax net present value, discounted at 8%, of US $ 135.2 million and an IRR of 29.3%. These strong economic figures reflect Ivana’s potential as a low-cost business. Cacos notes from the study: “We wanted to see if we could have an economical deposit below the then prevailing market prices, which were between $ 20 and $ 30 a pound.”
Because Ivana is a near-surface deposit and its uranium is easily leachable, Blue Sky has been able to maintain costs well below the global average for uranium production. All-inclusive sustaining costs for the project are expected to be US $ 18.27 / lb. U3O8, net of vanadium credits. If uranium continues to trade at current levels of around US $ 40, Ivana’s potential profitability would increase accordingly.
A buyer made in Argentina
Selling uranium at these prices would certainly benefit Argentina, which started its first nuclear reactor in 1974 and is currently importing all of its uranium to produce nuclear fuel. The country has three reactors in operation and three others under construction.
Argentina has all the other industrial capacity needed to process this uranium, but since it imports the energetic metal, it “pays around US $ 65 to US $ 70 a pound,” according to Cacos.
Ivana’s inferred 22 million pound uranium resource would provide plentiful raw material for Argentina’s nuclear industry and do so at an attractive price.
Growth through drilling, progress towards development
In addition, the Ivana, Amarillo Grande deposit as a whole has vast exploration potential.
As Blue Sky moves Ivana forward towards a pre-feasibility study, it is also drilling for satellite deposits within the company’s district-wide land position. So far this year, the company has completed approximately 1,600m of a planned 4,500m drilling program on Amarillo Grande to test late stage targets. He also recently started a second 3,500m program that will test regional targets.
This initial 1,600m work tested the Ivana North target, where Blue Sky’s vice president of exploration, Guillermo Pensado, sees “all the markers from another Ivana-type deposit.” The good news for Blue Sky is that the near-surface nature of the mineralization at Amarillo Grande means it can explore new ‘Ivanas’ quickly and easily.
The current plan is to continue drilling on the project over the next six months while continuing work on this pre-feasibility study, which is expected to be released in 2022.
Blue Sky Uranium well positioned
The amount of physical SPUT uranium withdrawn from the spot market could have a significant impact on the long-term contract, where prices are typically negotiated. By limiting the availability of one-off equipment, nuclear energy buyers will have to start buying again on long-term contracts.
This will likely set prices at a level that can get enough uranium production to come back online. Because Blue Sky’s Ivana deposit is already profitable even between $ 20-30 / lb. higher level, higher long-term contract prices would provide a significant boost to the project’s cash flow.
Ivana’s location in Argentina makes it a plug-and-play source for that country’s nuclear fuel needs. The deposit gives Blue Sky Uranium a great chance to become Argentina’s leading domestic supplier of low-cost uranium, and exploration of Amarillo Grande also opens up the possibility of new discoveries.
This is a situation that allows Blue Sky Uranium to succeed.
Watch Blue Sky’s Investor Update video to hear the company’s President and CEO, Nikolaos Cacos, explain how his company further defines its flagship Amarillo Grande project as it moves towards a pre-feasibility study.
To learn more about Blue Sky Uranium, visit their website here.
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