Deep Yellow set to ride next uranium price cycle
With a world that is crying out for non-fossil fuels and the uranium supply and demand curves predicted by the World Nuclear Association to cross over soon, Deep Yellow is sitting on a veritable powerhouse of uranium assets in Namibia that are moving rapidly towards being production ready ahead of an expected uranium price hike.
In recent drilling at Deep Yellow’s Tumas 3 deposit, 85% of all drill holes returned a result greater than 100 parts per million eU3O8 over one metre with an average result of 364ppm eU3O8 over an average thickness of 4.5m.
Results included a 15-metre zone grading 2087ppm eU3O8 from 7m. Importantly, 64% of all holes drilled returned an average eU3O8 grade of 568ppm at an average thickness of 5.9m.
Other solid numbers from the latest drill campaign include 14m grading 2461ppm eU3O8 from just 5m downhole and 11m grading 1370ppm eU3O8from 10m.
Assays from this round of drilling are determined from gamma data measured using a down hole tool. This data is converted into equivalent uranite values and samples will be submitted to a lab with confirmed assay values expected around May this year.
There are two broad uranium ore deposit types that Deep Yellow is focused on in Namibia - sandstone hosted, paleochannel related and alaskite, or granite related.
Deep Yellow has defined a current resource of 50.1M pounds U3O8, or “uranite”, grading 245ppm in the paleochannel related category and 45.1M pounds of uranite grading 420ppm in the alaskite related category.
The Perth-based company has been focused on upgrading its paleochannel-hosted Tumas 3 deposit in preparation for a resource update in support of its inclusion in a pre-feasibility study.
The company said this week that recent drilling has potentially resulted in enough mineralisation being updated from inferred status to the higher confidence, “indicated” status to get a pre-feasibility study away.
Tumas 3 is around 7km long and the company has now verified continuous uranium mineralisation over an impressive distance of 2.5km. Only about 60% of the known paleochannel system has been drilled to-date, providing an element of blue sky for the deposit.
Deep Yellow has a definitive strategy to take advantage of what it says will be a looming uranium supply and demand mismatch and it is powering ahead with its strategy of getting the company set to ride the next uranium wave.
In fact, Deep Yellow’s strategy is twofold - get its own uranium assets in Namibia shovel ready and sweep up smaller companies and assets in a consolidation strategy that will place it at the forefront of any price driven uranium boom.
If the World Nuclear Association is any guide - that boom just might happen too. In September 2019 it produced a report modelling a predicted divergence in the supply and demand curve globally for uranium that shows demand outstripping supply from 2023 and by 2040, the gap is wide enough to drive a truck through it.
Deep Yellow is hanging its hat on this modelling and is preparing for a price driven uranium boom sometime after 2023.
The back story to this curious West Australian company that seems to have no trouble raising money, even with uranium prices where they are today - is interesting.
Borshoff, a Geologist, cut his teeth with uber-successful German mining house Uranerz, during a time when the science of uranium exploration was just emerging.
Paladin shot from a relatively unknown gold explorer in 1996 into a mega uranium producer worth well over USD$4 billion by 2007, just as it was gearing up for its first shipment of yellowcake from the Langer Heinrich mine in Namibia. The spot price for uranium at the time shot above USD$100 per pound.
Paladin’s shares peaked at nearly $11 as the Borshoff led company dominated a large corner of the uranium market in the first decade of this century.
That was a far cry from when its shares were scratching around at about $0.007 a share only a few years prior in the early 2000s.
However, the GFC and mother nature conspired together as a 15-metre tsunami hit the north-eastern coast of Japan, killing about 19,000 people.
The tsunami triggered the Fukushima nuclear disaster and left the uranium sector in tatters.
Fukushima, which accounted for about 13% of uranium demand back then, completely reshaped global energy dynamics, as Japan shut down its nuclear reactors.
With no major nuclear disasters or issues for some years now and several existing supplies rapidly diminishing, some, like the World Nuclear Association, think the uranium industry is only a couple of years away from firing again.
According to them, nuclear power will play a significant role in the decarbonisation of the world with over 80% of primary energy consumption currently sourced from the burning of carbon, a figure that has remained unchanged since the 1990s.
The Intergovernmental Panel on Climate Change said that over 80% of the world’s electricity will have to go “low carbon” if global warming is to be kept below the 2℃ Paris agreement target, set by the UNFCCC in 2018.
Interestingly, if China adopts the emissions reduction targets set in Paris, that country alone will require between 65,000 and 90,000 tonnes of uranium annually by 2050.
This is pretty much the equivalent of the entire global nuclear fleet consumption today.
With 20 new nuclear reactors scheduled to come online now and over ten reactors expected to be constructed per year between 2020 and 2030, the uranium sector looks set to ride again.
Enter Deep Yellow.
The company’s foundation ground is nestled in Namibia’s ‘open for uranium mining’ region just 20km south of the Husab/Rössing deposits and 40km southwest of the Langer Heinrich deposit. The company has an impressive total of eight separate deposits that comprise its total resource.
The region in which Deep Yellow’s project lies has produced a whopping 300M pounds of yellowcake over the last four decades.
In simple economic terms, like most commodities, the uranium industry is highly cyclical. After nearly ten years of decline in price, there has been little investment in new supply.
Uranium reactors, by design, are often slated to run upwards of 60 years and require utilities to secure downstream yellowcake for many years in advance.
Recent data from the US Energy Information Administration shows that utility inventories are in decline and teetering at levels that could put security of supply and indeed security of essential services, at risk.
Global production is tipped to take a dive between 2035 and 2040 as a quarter of all mines in the World Nuclear Association’s modelling come offline.
The fact remains that supply will dwindle without being replaced and the gap will need filling, ideally through the development of new projects, the ramping back up mothballed mines and the scrounging of old stockpiles.
The World Nuclear Association says that the industry needs to double projected primary uranium production by 2040 to meet demand, an astonishing ask.
One thing that sets uranium apart from other run of the mill minerals such as gold, nickel, copper and others, is that uranium takes deep knowledge and serious intellectual property to mine.
Deep Yellow’s Borshoff is one industry character that has that requisite knowledge given that Deep Yellow is not his first rodeo. His uranium mining experience at Paladin sets him and Deep Yellow apart and there is nothing quite like being able to say you have done it before when it comes to the tricky business of uranium mining.
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