(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long PLU.V)
Still the Cheapest 124 Million Pounds of Low Cost Uranium on the Planet: Updated PEA Due in Q3 2015
With Japan expected to rejoin the global nuclear power club later this week with the restart of its first reactor since 2011, it seems like a good time for a refresher on one of the largest low-cost uranium resources on the planet. Plateau Uranium (PLU on the TSX Venture, or MCYWF in the U.S.) has a tight share structure with ~40.6 million shares outstanding and has a market cap of about $14 million based on today's closing price of C$0.33; which means that PLU is valued at a little over 10 cents per pound of U3O8 resource in the ground. The company is working on an updated PEA for release in September/October, which is expected to cement PLU's status as the owner of what may be one of the most economic projects in the industry. As a reminder, Plateau has a uranium resource of 52 million pounds indicated and 72 million pounds inferred at an average grade of roughly 250 ppm U3O8 using a 75 ppm cutoff. At a higher cutoff of 200 ppm, the resource is nearly 80 million pounds at an average of grade of roughly 475 ppm U3O8 (see the detailed breakdown of the resources in the company's press release linked here). For those who have been following the story for some time, none of this is news to you, but I think it's important to remember the fact that Plateau is basically a total unknown to most uranium market participants at this point. It's a unique asset that appears to have the potential for best-in-class cost structure… so when the market finally clues in to what Plateau is sitting on, I think the re-rate could be significant.
In a commodity market as brutal as this, "unique" might not seem that interesting as pretty much everything is universally hated, which makes it hard to mentally distinguish between assets… after all, at this point anything commodity related just feels like an anchor in my portfolio. Thinking further about Plateau's project however, I think that it's important to remember that there is very little doubt that additional supplies will be needed globally to fill a supply hole that opens up in 2020-2022, particularly in light of the active (and publicly announced) nuclear power expansion plans of Saudi Arabia, UAE, China, India, and Russia to name a few. When the world goes looking for that supply, the projects that show the potential for the combination of large-scale and low-cost are going to garner attention first… and while 2020-2022 might seem like a long way away, it's really not when you consider the long lead times involved in the nuclear industry. The hunt for supply and planning for production has to start well ahead of time.
I'm not about to rehash whole the Plateau story here, though anyone looking to learn about the project can read through my initial commentary that is linked here. I'm raising the issue of Plateau now because I think it's timely within the context of the imminent Japanese restart and the expected release of Plateau's updated PEA in September/October 2015. I typically watch Cameco (CCO on the TSX or CCJ in the U.S.) and Uranium Participation Corporation (U on the TSX) as barometers of uranium market sentiment and have noticed that both appear to have a pulse after bouncing off of lows in late July. As we head into the end of the year, I'll be watching for signs that the winds of change are finally starting to blow for the sector because they just might fan the flames of what should be a red-hot PEA.