URANIUM ROYALTIES ARE PAYING BIG
What & Who You Should Know
Uranium Royalty Corp. (NASDAQ: UROY) is a truly pure-play on uranium, which is 20% owned by Uranium Energy Corp.
Mr. Amir Adnani is the Chairman of uranium Royalty Corp, whose other major shareholders include Altius Resources Inc., Mega Uranium Ltd., Marin Katusa, the KCR Fund, Extract Capital, Rick Rule, Sprott Global, and Commodity Capital.
Eric Sprott, Rick Rule, and Marin Katusa are among the world’s most renowned commodity investors and experts.
Another connection between Uranium Royalty Corp. and Uranium Energy Corp. is the presence of Mr. Scott Melbye, who has been the Chief Executive Officer and President of the company since October 2019.
With over 35 years of experience in the nuclear energy industry and leadership positions in various uranium mining companies and industry organizations, Mr. Melbye is responsible for uranium marketing and sales, as well as strategic growth objectives in his various roles with Uranium Royalty (US: UROY), which only has a market cap of $161M.
Uranium Royalty Corp. is actually the first and only company to apply the successful royalty and streaming business model exclusively to the uranium sector. Therefore, it’s important to understand what makes the royalty and streaming business model so advantageous!
The company is focused on gaining exposure to uranium prices by making strategic investments in uranium interests.
How This Business Model Works
Metal royalty and streaming companies provide funds for mines in exchange for future payoffs. The royalty entitles the holder to a fixed percentage of the revenues less certain expenses (called royalties), generated by the mines, and a stream entitled the holder to a portion of physical metals produced by the mines (streaming).
SEIZING THE OPPORTUNITY
Uranium Royalty Corp (US: UROY) takes advantage of this business framework by making strategic investments in uranium, including royalties, streams, debt, and equity in uranium companies, as well as through potential physical uranium transactions.
The company’s strategy recognizes the inherent cyclicality of valuations, based on uranium prices, including the availability of capital in different pricing environments.
Uranium Royalty Corp.’s portfolio includes interests in development and advanced, permitted, and past-producing uranium projects in multiple jurisdictions.
Technical Analysis
Based on the accompanying chart, we can see that the potential for this stock is extremely high. We have a very strong support level at $2.24/share and have recently broken a major resistance trendline which has been forming since September 2021. There is plenty of room for a clean run into each of the three targets, as well as the analyst target of $5.70/share.
Given the presence of strong, long-lasting confluence across multiple time frames and the strength of the recent bullish divergence into this breakout, there is a great opportunity here for both speculative traders and investors alike.
Strength in a Burgeoning Market
The analyst price target is USD $5.70 and today's price is only $2.55 (as of market close)!
With 1.5M pounds (lbs) of uranium in their inventory, and the securing of future purchase commitments of 500,000lbs at more than $5/lb higher than their acquisition cost, this company is a valuation powerhouse.
Combining this strength with the shifting geopolitical climate and the push for clean energy, the next few years should provide substantial growth for any portfolio. The Biden Administration continues to pursue Bipartisan legislative solutions in the United States House and Senate to revitalize the American domestic nuclear fuel cycle, these investments fit squarely in support of those initiatives.
On top of that, Uranium Royalty Corp. (NASDAQ: UROY) also announced that its wholly-owned subsidiary has entered into an agreement with Anfield Energy Inc. to acquire a portfolio of royalties on U.S. projects, comprised of a number of promising royalties and this is yet another indication management is executing on its mission to lead the uranium royalty industry and dominate it!
15 Million Pounds of U3O8 Anticipated From Operations Beginning in 2024
Uranium Royalty Company Corp. notified Orano Canada Inc. that it wishes to receive royalty proceeds from the recently re-started world-class McArthur River mine through delivery of physical uranium. (NASDAQ: UROY)'s royalty interest applies to Orano's 30.195% ownership interest in the McArthur River Project which currently plans to product 15M pounds of U3O8 (100% basis) per year from the operations starting next year.
Cameco has disclosed that McArthur River is the world’s LARGEST HIGH-GRADE uranium mine, with ore grades that are 100 times the global average, which means it is capable of producing 18M pounds/year, by mining only 200 to 400 tons of ore per day. Cameco has disclosed that McArthur River has a licensed capacity of 25M pounds/year.By electing to receive the royalty proceeds as physical uranium, it allows URC to control the sale of the attributed pounds in a disciplined, yet fully unhedged manner, focusing on providing the maximum value to shareholders. This is a big deal, in my view, showing how undervalued management believes the spot price to be and that it wants to grow its physical storage.
By electing to receive the royalty proceeds as physical uranium, it allows URC to control the sale of the attributed pounds in a disciplined, yet fully unhedged manner, focusing on providing the maximum value to shareholders. This is a big deal, in my view, showing how undervalued management believes the spot price to be and that it wants to grow its physical storage.
Shares are already up 13.33% in 2023
Intelligent Investments, Secure Future
In addition, the company has a strategic investment in Yellow Cake, a company that has a long-term supply agreement with Kazatomprom, the world’s largest uranium producer. This supply agreement enables Yellow Cake to purchase up to $1.07 billion (including existing purchases) of uranium from Kazatomprom over a 10-year period.
Yellow Cake has already completed its initial purchase of uranium, acquiring a significant amount of 8.1M lbs. of U3O8 for a cost of $170 million. Plus, since the initial investment, Yellow Cake has purchased an additional 0.35 million lbs. of U3O8 from Kazatomprom for $8.2 million and 1.175 million lbs. for $30.4 million.
Uranium Royalty Corp. currently has an approximate 9.6% stake in Yellow Cake. This is direct exposure to the rising uranium price and a nice addition to the company’s royalty and streaming revenues.Uranium Royalty Corp. also has the option to acquire up to $31.25 million ($2.5 million to $10 million per year) worth of uranium between January 2019 and January 2028. On top of it all, URC has an option to participate in any and all future uranium royalty and stream transactions Yellow Cake pursues on a 50:50 basis.
Uranium Royalty Corp. also has the option to acquire up to $31.25 million ($2.5 million to $10 million per year) worth of uranium between January 2019 and January 2028. On top of it all, URC has an option to participate in any and all future uranium royalty and stream transactions Yellow Cake pursues on a 50:50 basis.
Not only that, but URC and Yellow Cake have agreed to collaborate on future opportunities involving physical uranium.
Uranium Royalty (NASDAQ: UROY) Utilizes a Disciplined Approach to Manage its Fiscal Profile and Has Stable, Strong Counterparties and Operators.
THE SMART, DISCIPLINED APPROACH
Its royalty portfolio can only be described as world-class. Part of this portfolio is the Cigar Lake mine (located in Saskatchewan, Canada), whose joint venture partners are currently Cameco (50.025%), Orano Canada Inc. (37.1%), Idemitsu Canada Resources Ltd. (7.875%), and TEPCO Resources Inc. (5%)!
Cigar Lake is licensed to produce 18 million pounds of uranium per year. Historical production of 93 million pounds of uranium has been recorded since Cigar Lake went into production in 2014. In our opinion, this is one of the best uranium projects in the world today, based upon numerous valuation metrics.
The McArthur River mine is also an essential component of Uranium Royalty Corp.’s royalty portfolio. This mine is currently owned by a joint venture between Cameco (69.805%) and Orano (30.195%).
Along with the Key Lake Mill, McArthur River is licensed to produce 25 million pounds of uranium per year. In 2018, Cameco disclosed that it was put on care and maintenance. McArthur River is expected to be the first of Cameco’s operations to restart after Cigar Lake, based on market conditions.
Uranium Royalty (US: UROY) has a healthy balance sheet, which positions it to capitalize on accretive uranium royalty and streaming acquisition opportunities.
The company has $38M in cash and listed securities.
The company just recently entered into a definitive agreement to acquire the existing royalty interests on the McArthur River and Cigar Lake mines.
This acquisition represents a transformational transaction for Uranium Royalty Corp. because it provides potential near- to long-term cash-flow opportunities from existing long-life mines operated by Cameco in partnership with Orano Canada Inc., two of the world's most prominent uranium and nuclear fuel companies!
It’s a transaction that will only enhance Uranium Royalty Corp.’s already world-class production profile. The McArthur River and Cigar Lake mines rank as the two largest high-grade uranium mines in the world, with ore grade 100x the world averages as disclosed by Cameco!
Based on disclosed production capacities, the McArthur River and Cigar Lake mines have a combined capacity equal to 21% of global forecasted uranium demand for 2021. Moreover, both operations are believed to be among the lowest operating costs globally, with expected life of mine cash costs of between C$15 to C$16 per pound as disclosed by Cameco.
This is as big as it gets, in our view.
McArthur River and Cigar Lake have a combined total of 557.5 million lbs. of proven and probable mineral reserves as of December 31, 2020!
Altogether, this represents approximately 29% of the Global Reasonably Assured Recoverable Resources as stated by the International Atomic Energy Agency for the lowest-cost category!
Canada’s Athabasca Basin of Northern Saskatchewan is the premier region for high-grade conventional mining. Uranium Royalty Corp.’s growing royalty portfolio in this district, which includes a 1.97% net smelter royalty on Rio Tinto’s nearby Roughrider project, provides URC with exposure to long-life assets with existing infrastructure and exploration upside covering approximately 270,000 hectares of ground.
With major producers as operators, the company has the benefit of counterparties with proven operating track records and best in class environmental, social and corporate governance (ESG) practices.
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