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GTR has commenced Uranium drilling campaign. Uranium price keeps going up.


Published 15-NOV-2023 11:30 A.M.


6 minute read

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 41,043,000 GTR shares and 1,579,715 GTR options at the time of publication. The Company has been engaged by GTR to share our commentary on the progress of our Investment in GTR over time.

The Uranium price has been gradually increasing for the past two years...

And it started accelerating over the last two months.

Right now, it is the highest it's been for over 14 years at ~US$74 per lb.

The US is now almost solely reliant on imports for its nuclear power industry - importing ~95% to be exact.

Recognising this, the US government introduced up to ~$10BN in funding support for the domestic uranium/nuclear industry

And the spot price continues to rise...

(now even higher than it was when we first started writing about the Uranium price run last month).

It’s an extremely strong macro backdrop for GTi Energy (ASX:GTR), who this morning kicked off its latest round of uranium drilling, aimed at increasing its existing JORC resource base.

Anyone who has been around the markets for over a decade remembers the 2007-8 uranium run well...

Between 2004 and 2008, the uranium spot price more than quadrupled, hitting ~US$140/lb.

The move was so strong that even today, it gets talked about by the uranium bulls.

At the time, the macro theme for uranium was mainly based on energy security concerns and a rush to find alternatives to high carbon-emitting fossil fuels.

On the demand side, the theory was that nuclear power uptake would increase, and on the supply side the theory was that supply wouldn't be able to keep up with that demand.

No matter the reason - during the 2007-08 run in the uranium price, companies, big or small, reached nosebleed levels.

Now, ~15 years later, we think the uranium macro fundamentals are as strong as they have ever been, supply chains are as fragile as we have seen them, and there is a chance we are at the very beginning of a 3rd uranium price run.

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The US is one of the most vulnerable to shocks in the uranium supply chain - at the moment, it has the world’s largest nuclear reactor fleet, which is responsible for ~20% of the country's electricity generation capacity.

Major commodity fund operator, Sprott, recently put out an update on uranium market fundamentals - read a quick summary of the article here.

Despite this, it relies on imports for ~95% of its uranium needs.

The push by the US government to kick start the domestic industry is a key reason why we are backing GTR’s strategy to try and increase its existing JORC uranium resource base.

GTR has an in ground uranium resource of ~7.37 million lbs across three projects in Wyoming, the uranium capital of the US.

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GTR’s resources all sit within ~80 km of five permitted uranium processing plants owned by the likes of $3.6BN Uranium Energy Corp to the $29.4BN Cameco.

In the first half of this year, GTR put out two resource estimates across two different projects.

Now, the company is moving into the growth stage, looking to increase its resource base and show size/scale potential.

We think that as its resource base grows, GTR becomes more and more of a potential bolt-on acquisition target for major regional producers with processing facilities.

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Today, GTR kicked off its latest round of drilling at its Lo Herma project, which holds 5.71 million lbs of GTR’s resource base.

The drill program is for 26 holes across ~4,600m - the first phase of a much larger permitted program for ~68 holes.

Depending on the results from the first phase of drilling, GTR can then move into a bigger program.

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GTR recently got back geophysics results from its Lo Herma project, meaning GTR will be drilling with new target areas identified.

Basically, we want to see GTR drill out the bright purple/red areas from the geophysical survey results, where we hope GTR manages to extend the uranium mineralisation that contributed to its current JORC resource.

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Why we want to see GTR increase its resources:

With the uranium price rising again, the economics of taking existing resources and processing them through existing infrastructure starts to make more and more sense.

GTR’s project fits this criteria well - with majors like Cameco, UR-Energy, UEC and Energy Fuels in Wyoming all looking to increase production and bring their projects back into production in response to the US government's push to restart the domestic uranium industry.

Currently, the US is reliant on imports for ~95% of its uranium supply - that means that ~20% of the country's electricity generation capacity is almost solely reliant on outside sources.

So, it makes sense that the US is in a rush to get the domestic industry firing again.

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The latest from GTR’s Executive Director Bruce Lane -

Bruce runs through the strategy pretty well in the following presentation in Perth last month:

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After today, GTR is firmly in the “Grow JORC Resource” phase, which means lots of drilling and hopefully more uranium discoveries.

Ultimately we are hoping the drilling delivers significant resource upgrades - which forms the basis for our GTR Big Bet as follows:

Our GTR Big Bet:

“GTR proves out a large resource base in the “uranium capital” of the USA and generates offtake or acquisition interest as the USA moves to secure local uranium supply”.

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our GTR Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

What’s next for GTR?

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More geophysics results 🔄

GTR also has results pending from airborne geophysical surveys run at its Green Mountain and Loki West projects.

GTR confirmed that “in-depth analysis of the geophysical results, combined with historical drilling and mapping data” for those projects would be ready in the coming weeks.

Drilling across those projects is expected in the second half of 2024.

What are the risks?

In the short term, the key risks to our Investment in 88E are:

  1. Exploration Risk - There is always a chance that GTR finds nothing with this round of drilling. If this happens, then the market will start to discount the potential for GTR’s Lo Herma project and likely sell the company down, leading to a share price re-rate lower.
  2. Funding Risk - GTR had $2.74M cash in the bank at the end of the September quarter. With drilling now underway and an airborne geophysics program completed recently, GTR will be burning cash much quicker than normal. If the exploration program doesn't yield strong results, then the company will be in a position where it needs to raise funds after an unsuccessful drill program. As long as the capital shortfall is noticeable, there will always be a weight on the company’s share price from those selling expecting a discounted raise.

To see more risks we have touched on in the past, check out our GTR Investment Memo here.

Our GTR Investment Memo:

Click here for our GTR Investment Memo where you can find a short, high level summary of our reasons for Investing.

In our GTR Investment Memo, you’ll find:

  • Our GTR Big Bet
  • Key objectives for GTR
  • Why we are Invested in GTR
  • What the key risks to our investment thesis are
  • Our investment plan

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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