(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 )
First Consolidated Resource Shows an Impressive 124 mmlbs U3O8
Plateau Uranium has reported a NI 43-101 compliant total resource of 124 mmlbs U3O8 (51.9 mmlbs indicated and 72.1 mmlbs inferred) with an average grade of about 250 ppm U3O8 at a 75 ppm cutoff. Even more significantly, at a 200 ppm cutoff the resource still totals 78.7 mmlbs of U3O8 and an average grade of roughly 475 ppm U3O8. Now, if you’re like me, talking in terms of “ppm” (parts per million) makes it hard to understand just what we’re dealing with for grade. In the Athabasca Basin, uranium grades are usually reported in percentage terms, and “ppm” makes for hard conversions. In order to simplify things for this discussion, 200 ppm U308 is 0.44 lbs/tonne, which is equal to roughly 0.5 g/t gold equivalent on a value basis. Given that PLU's project is being planned as a bulk tonnage operation I think that the gold equivalent conversion will make the picture I’m about to paint a little clearer.
Sticking with the 0.5 g/t Au equivalent (200 ppm U3O8) cutoff, PLU’s resource is comparable to a 3.25 million ounce gold deposit grading 1.3 g/t Au on a gold-equivalent basis (using $50 long term U3O8 and $1200 Au pricing). Given that the deposit has a low work index, low strip ratio, clean metallurgy, high recoveries, and low acid consumption I’ll take the analogy further and say that PLU’s resource is like a 3.25 million ounce oxide gold deposit. And now that I’ve got you thinking in oxide terms, note that 75 ppm U308 is roughly 0.2 g/t Au equivalent, which is a pretty common cutoff in oxide gold deposits. In that context, PLU’s reported resource is comparable to a 5.2 million ounce gold deposit (at an average grade of about 0.7 g/t Aueq) on a value basis. If that doesn’t have your attention yet, then there’s very little more I can say… those are some very, very attractive numbers for a deposit with the attributes noted above (low-strip, soft rock, high recoveries, clean metallurgy).
To sum it up, today's resource confirms my belief that PLU is sitting on a veritable gold mine in the uranium sector. Depending on the cutoff used, PLU has an indicated and inferred resource of 78-124 million pounds of some of the lowest cost uranium on the planet in a world where I think a premium should be placed on zero-carbon energy sources. I can’t predict when the broader market might realize the unique nature of PLU’s resource, but when and if that happens I think that there may be huge gains to me made. There is more work to do, including a new PEA and planning for a full feasibility study, but at this stage I like my odds. With the new resource showing growth in core deposit areas, I’m optimistic that the new PEA expected in the 2-3 months will continue to show a very robust project, even at depressed uranium prices. Given the impressive average grade at the 200 ppm cutoff, I think PLU could see projected costs fall even further, which is really saying something when you are already at the low end of the projected cost curve. On top of that, if (i.e., when) the broader uranium sector catches a bid down the road, I think PLU shareholders could be in for quite a ride. Time will tell.
For those interested in a refresher on the details of the project, the link to my initial note on the company can be found here:
In the meantime, being early can be “boring” for some people. For me, boring is great, because when deposits of this quality are flying under the radar of 99% of the market participants it means that the re-rate potential down the road is absolutely massive. At current spot prices, there is virtually no chance that the looming uranium supply deficit can be filled. In the meantime, that means that all I have to do is be patient and wait as I firmly believe that I’m holding a piece of what looks to be one of the best undeveloped projects on the planet. Quite simply, PLU is showing up as best-in-class relative to any potentially comparable peers. Some people think being early is tough, but in this case PLU sure makes it feel easy
See the full press release here: