As uranium prices slowly rebound, Azarga Uranium Corp. (AZZ:TSX; AZZUF:OTCQB) is proactively developing its portfolio of low-cost uranium projects in the Western United States. If, in July 2019, the White House adopts the remedies suggested in the Section 232 Petition, the nation's utilities will need to turn to domestic uranium producers to purchase approximately 12.5 million pounds of uranium a year, which will be used to provide carbon free electricity.
Azarga Uranium CEO Blake Steele told Streetwise Reports, "White House adoption of the proposed Section 232 Petition remedies would be a very exciting catalyst for the United States uranium industry. The Section 232 Petition effectively requests that 25% of the U.S. uranium market be reserved for domestic producers and a "Buy American" policy be implemented for United States Government entities that use uranium."
"Dewey Burdock ISR uranium project. . .is one of the highest-grade undeveloped ISR projects in the country."
-Colin Healey, Haywood
Steele further noted, "The United States is forecast to produce less than 1% of its annual uranium consumption for 2019, while nuclear energy accounts for approximately 20% of the U.S. electrical grid and 60% of its carbon free energy. If the Section 232 Petition is successful, a uranium market with two prices could be realized: a uranium price for the global market and a uranium price for U.S. domestic production, which will likely be meaningfully higher. Azarga's asset suite is well positioned to take advantage of this.”
Azarga's pipeline of uranium projects in the United States contains 40 million pounds of Measured and Indicated uranium resources plus 6 million pounds of Inferred uranium resources. The company is focused on developing low-cost in-situ recovery (ISR) projects in the U.S. ISR projects typically operate at two thirds the cost of conventional operations and capital expenditures to construct ISR mines are less than 15% of conventional mines, Steele noted, adding that ISR operations are responsible for 50% of the global uranium production today.
"Further, ISR mines provide greater operational flexibility and are environmentally friendly, as no waste rock tailings are generated and dust is minimal," Steele stated.
Azarga Uranium's Dewey Burdock ISR uranium project in South Dakota is the company's initial development priority. The project has received its Nuclear Regulatory Commission (NRC) license and draft Class III and Class V Underground Injection Control permits from the Environmental Protection Agency.
Steele explained that Azarga Uranium has an opportunity to resolve the final NRC license contention, which pertains to historic and cultural resources, in an upcoming evidentiary hearing. "We view this process favorably, as it provides clarity around timing and provides the opportunity to have the final contention resolved in the fourth quarter of 2019."
The company is aggressively moving toward production at Dewey Burdock. We asked Steele about the recent resource update for Dewey Burdock.
"Dewey Burdock's Measured and Indicated resources have nearly doubled to 16.9 million pounds, with Measured resources representing 13.8 of the 16.9 million pounds. We're extremely pleased with the results of the resource update," Steele remarked.
What does the resource update mean for the future?
"The update highlights Dewey Burdock as one of the leading undeveloped in situ recovery uranium deposits in the United States, offering a sector leading combination of grade and scale." Steele said. "The entire resource estimate falls within the existing Nuclear Regulatory Commission license boundary and several miles of mineralized trends remain to be further delineated. Off the back of this resource update, we are preparing an updated preliminary economic assessment, which we expect to have completed by the middle of this year. The larger and more contiguous resource is likely to achieve improved project economics compared to our previous preliminary economic assessment."
While Dewey Burdock is Azarga's priority, the company has other projects in the U.S.
"At Dewey Terrace, which is adjacent to Dewey Burdock on the Wyoming side of the border, we've identified significant uranium mineralization. Dewey Terrace has the potential to become a satellite project to Dewey Burdock and supplement its existing resources," Steele noted. "At Dewey Terrace, we are continuing the evaluation of historical data with the goal of identifying further uranium mineralization and quantifying this mineralization."
"At our Gas Hills project in Wyoming, we have completed hydrological studies that indicate hydraulic head and permeability are suitable for in situ recovery mining," Steele commented. "We are excited with these results and continue to evaluate future development options at Gas Hills."
Company financials reveal that Azarga Uranium is debt free and has substantial cash on hand. In March 2019, the company closed a non-brokered private placement for gross proceeds of C$3.0 million through the issuance of 13,106,046 units at a price of C$0.23 per unit. Each unit consisted of one common share and one-half of one share purchase warrant. Each whole warrant entitles the holder thereof to purchase one common share at a price of C$0.31 per share until March 20, 2022.
Steele remarked, "The March capital raise received significant support from institutional investors who subscribed for the vast majority of the financing. Institutional support is an important signal, both validating our business strategy and endorsing the broader uranium market. Institutional investors recognize the opportunity that exists in the uranium sector and they are building equity positions in companies with high quality assets, such as Azarga Uranium."
Steele further noted, "Consistent with the company's initiatives, proceeds from the capital raise are expected to continue the advancement of the Dewey Burdock Project, including the update of its preliminary economic assessment. We are also focused on advancing our Gas Hills and Dewey Terrace projects. In short, the capital injection has strengthened our financial position and improved our shareholder register."
Haywood initiated coverage of Azarga Uranium on June 24 with a Buy rating and a target price of CA$0.50 per share. Shares are currently trading at around CA$0.25 per share. Analyst Colin Healey wrote, "Azarga is a development stage company with a significant U.S. asset base including the advanced-stage Dewey Burdock ISR uranium project in South Dakota, which is one of the highest-grade undeveloped ISR projects in the country."
The report also noted, "The resource update is a prelude to the anticipated update to the Preliminary Economic Assessment (PEA) of the project expected this summer. We expect the additional resources to contribute favorably to project economics and act as a catalyst for the stock."
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