UEC, one of only 12 uranium producers in the world and only 6 here in the U.S., reported today that they started their drilling campaign on the Burke Hollow ISR Project (initial inferred estimate of 2.89M lbs eU3O8 grading 0.047% on average), with two rigs on site, five holes in, and another 75 holes on the docket for coming weeks, all designed to further delineate the site’s significant exploration potential (additional exploration target estimate in the 1.8 to 7.2M lbs range at 0.03% to 0.06% eU3O8). One of the drilled holes has already been cased and is being used for regional baseline studies.
The premium economics of ISR, or in-situ recovery (a process where water is injected and recovered bearing the target minerals), make the 17.51k-acre Burke Hollow project especially attractive from a long-term recovery standpoint and the geographical location is very close to UEC’s existing processing plant and other ISR projects. On-trend with the company’s Goliad Project (now fully permitted for production) in the heart of South Texas’ uranium belt, as well as on-trend with two active ISR mines and numerous historical mines, Burke is just 50 miles away from the company’s Hobson ISR Processing Plant (physical capacity of 2M lbs/year) and represents a key facet of UEC’s logistically optimized regional strategy.
Rick Rule, Chairman of leading independent asset management firm, Sprott Asset Management, commenting on the end of the Highly Enriched Uranium (HEU) Purchase Agreement coming up here as 2013 draws to a close (signed between the Russian Federation and the U.S. in 1993, typically referred to the Megatons to Megawatts program), recently noted that, “at current uranium spot prices ($34.50/lb, Nov 4), the global uranium industry doesn’t earn its cost of capital.” If this condition lasts much longer, the supply of uranium, which has seen a glut in the months and years immediately following Fukushima, will diminish to a point where either the price goes up or the lights go off (which of those do you think will happen).
It could take two to three years to go from the low $30 range to what Rule pegs as the market clearing price of $75, but considering domestic fuel demand from the nation’s 104 or so reactors, which produced 19% of the nation’s total electrical output in 2012 (projected to hold as much as 17% of the total still by 2040), the immediacy of the underlying price metrics emanating from the U.S. alone should be very clear. Of course the HEU-LEU supply from the Russian Federation won’t end even when the program does (which has generated around 10% of all electricity in the U.S. through its duration), and Russia will simply be acting as a full-cycle vendor moving forward. The U.S. is still the world’s top producer of nuclear power and accounts for a whopping 30% of global production, a trend likely to continue for the foreseeable future, with only China and OECD Europe as a whole starting to nip at our heels.
President and CEO of UEC, Amir Adnani, is lining up his shot with Burke nicely, placing UEC shareholders in a position to benefit from the company’s maximized output pipeline once higher uranium prices are realized. The company has more than doubled their in-ground resource in the past few years (16.1M lbs with six projects in Texas alone) and has amassed a considerable project portfolio. Adnani is widely hailed throughout the industry as a major leader and is recognized by renowned investment advisory publisher, Casey Research, as one of the top-ten executives/entrepreneurs in the in the mining industry today.
Adnani also explained that the new drilling program for Burke, accelerated by the Oct 25 equity financing deal with three institutional investors (just over 3.38M shares at $2.10/share), which brought in gross proceeds of some $7.1M, would allow UEC to simultaneously explore for additional resources via the program and super-charge production application permitting besides. Easy to see how Adnani earned his reputation in the mining industry here and UEC really does look well positioned to capitalize on their full production pipeline via Hobson between just Burke, Goliad, and the Palangana in-situ mine.
More info on Uranium Energy Corp. is available at www.UraniumEnergy.com
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