Terra Uranium: Prescient predictions and ‘pounds in the ground’

A common investment disclaimer warns investors that past success does not guarantee future performance.

In mining, previous achievements often form the blueprint to replicate success at another company during one’s career.

Terra Uranium’s (ASX:T92) board and management have 100-plus years of combined uranium experience covering exploration, development, and production. Past success with the likes of Alligator Energy (ASX:AGE) and Cameco (NYSE:CCJ) are being used to guide future growth. 

Terra’s Executive Chairman Andrew Vigar was cofounder of Alligator. In October 2020 Alligator Energy acquired the Samphire project in South Australia, effectively transforming the minnow from “being a wannabe explorer to somebody with a significant resource”. 

When Mining.com.au sat down with Vigar in early December 2023, it became clear previous experiences led to his correct prediction that uranium spot prices would hit US$100 per pound by Christmas. 

The mining stalwart’s prophecy was precise – albeit just a few short weeks off. 

As Vigar explains: “The previous high was early 2011 and it had hit a peak just prior to that of around $75, maybe $80, it was in that sort of mark. The (December) price was higher than that so it’s been taking over 12 years for that recovery. It’s been a slow turn for it.”

Considering uranium’s record high was US$140 back in 2007, the Executive Chairman’s correct forecast is somewhat remarkable. To put into perspective how long ago 2007 is – it’s pre-GFC. The Global Financial Crisis hadn’t yet crumbled world economies and Google had just launched Google Street View. 

It’s timely then Vigar again sits down with Mining.com.au for another wide-ranging interview. In the short time since December, the exec now predicts prices will reach US$100 within the next month or two where it will remain for the next 5 to 7 years. At that point, the silvery-grey metal is poised to breach US$150 and possibly hit a crescendo of US$200 per pound.

Armed with this outlook, Terra Uranium has begun expanding its portfolio.

‘Pounds in the ground’

The company last week executed a binding letter of intent to acquire the Amer Lake Uranium Deposit in Nunavut, Canada, as reported by Mining.com.au. The Amer Lake claims contain a historical foreign non-JORC compliant resource estimate of 17.827 million tonnes averaging 380ppm U3O8, containing 15.3 million pounds U3O8 using a cut-off grade of 100ppm.

Upon closing of the deal, a review of the complete historical geological data will be undertaken, while plans to undertake verification drilling over parts of the Main Zone deposit only covered by historic 1977 diamond drillholes will be rolled out. Additionally, Terra will focus on a re-estimate of the Amer Lake Main zone resource and seek to report in accordance with JORC Code (2012).

Amer Lake is ‘truly game-changing’ and provides the junior explorer with “pounds in the ground”.

“(Amer Lake) is a significant acquisition – it doesn’t change our Athabasca portfolio but rather it adds an advanced exploration project to our grassroots exploration project. So, the focus won’t change – the focus is still on the deep Athabasca, which is what we’re looking to joint venture. But it brings another project in, as we’ve been saying for quite a while that we were looking around for a project that was shallower that’s within our capacity to spend, if you like,” Vigar reiterates.

Amer Lake follows the company’s Yurkowski Lake and Engler Lake projects acquisition in the prolific Athabasca Basin on 1 March 2024 in another deal bolstering its Canadian portfolio. Encompassing 4,438.49-hectares, Yurkowski is contiguous with Terra’s Pasfield Lake Project and forms an extension to its northeast border. 

The company will continue reviewing all available data on the project to design an exploration and evaluation program that will move towards reporting a JORC 2012 compliant Mineral Resource Estimate (MRE).

Vigar adds: “The important thing is we don’t want to take the focus off our deep Athabasca projects, which is still our main target. 

Our belief is still that deep, large, high-grade deposits in the Athabasca offer value, but there are other types of deposits that do make money, and we’ve said this all along, these are shallow, bulk, low-grade deposits. We’ve managed to get ourselves one of those. It’s not an Athabasca-style deposit, it’s what we call sandstone-hosted – it’s got more similarities to some assets in Africa, Namibia, and Botswana. It’s a different style of deposit.

We don’t want investors to think that we’ve given up on our main target, we haven’t but we’ve stopped spending shareholders’ money on it. We’re now looking for larger partners who will fund that type of exploration work, whilst we go off and fund new projects. 

We’ve pegged some more ground recently in the Athabasca, so we’re still there. As I said, we were looking to fund that deep work with a partner.” 

A fortuitous find, Terra Uranium actively began pursuing deposits like Amer Lake – shallow and therefore cost effective to drill – since mid-2023. Its Canadian team soon identified Amer Lake as an extremely value-accretive opportunity so they pounced on obtaining the 6 claims that overlie the near-surface portion of the deposit. 

Several other acquisition targets piqued interest, but rapidly rising prices meant talks stymied when term sheets were being discussed as vendors began asking 3x more than initial valuations. 

The pricing environment seems it’s already at an inflection point before doubling to US$200 … possibly, as Vigar predicts. It is hard to grasp how such precise predictions were made given just a few short years ago (when spot prices eventually started trending upward) uranium was dwindling at US$20. And it lingered there for a long time. 

Then the tides started turning. This was largely driven by the nuclear non-proliferation treaty – basically downgrading of weapons grade uranium – an agreement between Russia and the US. Essentially, the US began fuelling its large fleet of nuclear power stations.

“Things started to change a couple of years ago when the war in Europe kicked off in the Ukraine and sanctions started out of that

“Things started to change a couple of years ago when the war in Europe kicked off in the Ukraine and sanctions started out of that. And that supply of uranium, people said, ‘Well, that’s not that certain’,” Vigar explains.

“The sanctions affected Kazakhstan because Kazakhstan is the world’s largest producer of uranium at the moment. They produce about 40% of uranium and they couldn’t export. They weren’t sanctioned themselves, but they couldn’t export. 

At the same time, you had Sprott come into the market with the Sprott Physical Uranium Trust and they’re buying physical uranium and storing it at a facility. Any loose uranium that was on the market that people were used to getting their hands on just wasn’t there anymore because Sprott was soaking it all up. 

The price started to move, which we saw and then it gradually edged up to $30, then around $40 and there was a little bit of interest coming into the market up to around $50 per pound.”

As Vigar reflects, the $50 trading price in early 2023 coincided with the US announcing this maiden uranium reserve fund. The US has critical minerals reserves but surprisingly not one for atomic number 92. 

“So, the US Congress passed a bill that they would underwrite acquisitions in the US, physical uranium at $50 a pound. That pretty much put a floor under the price in North America at around that $50 mark.”

Pricing, spot-on!

As a geologist and investor with 40-plus years covering exploration to mining, finance, and corporate including in the uranium industry, what becomes apparent as Vigar enunciates his market views is his wealth of sector experience. With candour reassuring as it is refreshing.

Vigar previously co-founded several publicly listed companies with a combined market capitalisation in excess of $2 billion. These include DGO Gold (ASX:DGO) in 2007, Alligator Energy in 2010, and K92 Mining (TSX:KNT) in 2014. 

With this in mind, he cautions not to get too caught up in the current spot market, as it forms an exceedingly small part of the broader sector. Uranium is heavily controlled and regulated with ‘very little’ traded on the open market – about 80% to 90% is traded via long-term contracts. 

But what is marking a significant shift in the market is now long-term and spot prices are converging with both trading at about US$85 a pound.

“That’s going to trigger a bit more activity in the spot market because the long-term and the spot are now together,” Terra’s Executive Chairman says.

“The long-term price lags because it’s for delivery in 7 to 10 years’ time – it’s way, way out. Nobody really knows what the long-term price is because it’s secret – it’s between a producer and a utility. There are various people who say they know what it is, but they don’t really know what it is.”

Pricing is just one (albeit important) aspect of this complex global landscape. Since 2007, ‘very low’ sustained prices meant exploration was almost non-existent. A lack of access to financing to get mines off the ground, in Vigar’s view, compounded this.

“So, when people say, ‘Oh, we need to bring on new uranium supply’, you have to say, ‘Well, where? No one’s been doing exploration’.”

These challenges are exacerbated by one fundamental and ever-present attribute – uranium mines have long lead times. 

The most recent large-scale mine built, the Executive Chairman ponders, was probably Cigar Lake some 30 years ago. Cigar Lake is a large high-grade underground mine, located in the Athabasca Basin of northern Saskatchewan at the south-west corner of Waterbury Lake. The deposit was discovered in 1981 and is second in size of high-grade deposits only to the nearby McArthur River mine. 

Terra’s exploration strategy in the eastern Athabasca Basin is based on discovery of such tier-one deposits like Cigar Lake and that of McArthur River in unconformity or sediment-hosted settings under deep cover. 

Regulation and reactors 

Its strategy is also formed from an inherent understanding of other drivers in the market such as nuclear power capacity. At COP28 in late 2023, some 20 of the world’s leading countries (not including Australia) all took a firm undertaking to triple their nuclear power station capacity by 2050.

“Not double but triple, right. But there’s no supply that’s been factored in for that,” Vigar laments.

“We’re talking big reactors mostly, but also SMRS (small modular reactors) within that timeframe they will come in – we’re talking 20 years. So, all the governments – including the UK, USA, most of the major companies in Europe, Japan, South Korea – they’ve all agreed to do that. The Chinese are already doing it, they’re building a reactor a month at the moment.”

COP28 is a UN Climate Change Conference in Dubai, the United Arab Emirates, hosting some 85,000 participants, including more than 150 Heads of State and Government. 

On this basis, Vigar declares “small modular reactors are the future” – and virtually none are operating today. 

“Where’s that (nuclear power station capacity) going to come from? Because there are no long-term contracts for small modular reactors. There’s no supply for them, there’s no uranium for them.”

This inherent need for supply and likely emergence of more SMRS coming online are some of the main drivers leading the expansion of Terra’s portfolio by adding more ‘pounds in the ground’.

“Where’s that (nuclear power station capacity) going to come from? Because there are no long-term contracts for small modular reactors. There’s no supply for them, there’s no uranium for them”

In the 2023 edition of the Nuclear Power Reactors in the World report, the International Atomic Energy Agency (IAEA) says as of 31 December 2022, more than 393.8 GW(e) of operational nuclear power capacity was available through 438 reactors across 32 countries. 

Information and data received by the IAEA through 31 May 2023 is included in the publication.

Overall, nuclear power capacity growth has been steady over the past decade, with a 20.3 GW(e) increase between 2012 and 2022. As reported by IAEA, the nuclear power fleet generated about 2486.8 TWh of low-emission, dispatchable electricity throughout 2022.

The IAEA reports over 7.4 GW(e) of new capacity connected to the grid in 2022, including 5.8 GW(e) of additional operational capacity in Asia and 1.6 GW(e) in Europe. In China, 2 reactors began supplying electricity to the grid that year.

In South Korea, a 1,340 MW(e) PWR (APR-1400) at the Hanul nuclear power plant (NPP) was connected in June 2022. As was the ACP1000 reactor, KANUPP-3 (1014 MW(e)), supplied by China, in March at Karachi NPP in the Sindh province of southern Pakistan. 

Unit 3 at Barakah NPP in the United Arab Emirates started operations in October 2022, adding 1345 MW(e) of nuclear capacity. The Olkiluoto-3 1600 MW(e) EPR reactor in Finland connected to the grid in March.

A reason for the forthcoming growth in nuclear capacity is the costs saved by many of the countries utilising it as a power source. Vigar scoffs at remarks from some politicians declaring nuclear power in Australia will be cripplingly expensive. 

As a source of green energy, the cost of the metal per kilowatt produced is about 2%. He says the main costs lie in the distribution – the wires, power stations, environmental controls, and the whole network involved. 

“It’s the same with wind or solar. A lot of the cost is actually in the transmission lines as well as the solar power stations and everything else. The sun’s free and the wind’s free, but it’s not a large component of the cost anyway. It’s the same with nuclear – the actual nuclear fuel is a very small percentage, few percent”.

Prime position

Terra Uranium is building on a strategic position in the premier Athabasca Basin, Canada, which contains the world’s largest and highest-grade uranium deposits. It is targeting greenfield discovery and brownfield developments close to existing production infrastructure to play a role in decarbonised energy. 

The company is now seeking to expand its presence in Nunavut, Canada.

As a politically stable jurisdiction with established access to global markets, Canada is an attractive mining and investment proposition. In-country, Terra’s newly acquired Amer Lake asset is situated 20km north of the operational Amaruq gold project, which hosts extensive infrastructure, including trafficable roads facilitating access to the local town of Baker Lake.

Other prospects along strike from the Main Zone with similar uranium mineralisation exposed at surface include Main East, Faucon, Split, and Horned Lake, all of which have been identified but had little work to date.

So, can past performance be an indicator of future success? 

Vigar puts it succinctly: “I’m a bit older, I remember the old anti-nuclear movement, all the marches in the streets and ‘ban the bomb’ slogans and all that sort of stuff, which is fair enough because you can make weapons out of it. 

But what people really should realise today is the peaceful use of nuclear for power generation, for industrial purposes, and it has other uses as well, including medicine. 

Australia is actually the biggest producer of nuclear medicine in the world from our own nuclear power station in Sydney.”

About 75% to 80% of nuclear medicine isotopes used in Australia come from ANSTO’s Lucas Heights campus in Sydney. Through ANSTO, Australia is a world leader in the advanced manufacturing of diagnostic and therapeutic nuclear medicines.

Write to Adam Orlando at Mining.com.au

Images: IAEA & Terra Uranium
Author Image
Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.