GUE delivers high grade uranium drill results - uranium price peeks higher.

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 2,671,018 GUE shares and 500,000 GUE options and the Company’s staff own 35,000 GUE shares at the time of publishing this article. The Company has been engaged by GUE to share our commentary on the progress of our Investment in GUE over time.

Hints of another uranium spot price run starting?

Back in 2023 we took new positions in a couple of uranium stocks predicting that the uranium price would run.

...and it did.

But for the last 6 months the uranium price has gradually drifted downwards after its strong run.

So did uranium stocks.

Even with the 6 month breather in the uranium price, it has still held strong above ~16 years highs.

Shown here in the 25 year U price chart:

Last week we saw a tiny uptick in the uranium price

While the rise is only small, it did seem to generate some interest in small cap uranium stocks last week.

3 year U price chart:

It may be just a blip, but we will be watching to see if the uranium price can keep moving upwards over the next few weeks and start another leg up.

Developments in the uranium macro space seem to support an improving uranium price, and highlights on the pressing need for domestic production in the US:

Our Investment, Global Uranium and Enrichment (ASX:GUE) has a number of uranium projects in the US including its ~52Mlb JORC resource uranium project in Colorado, USA.

It also has another project in Colorado which has an exploration target of 4.3 to 13.3 million pounds of uranium.

Drilling is almost finished on this project and last week GUE delivered further high grade results from near surface.

In last week's announcement the company said it will release a new JORC compliant resource estimate that combines the new drill results with the historical drill results.

...and also some further new drill targets to test.

Over the last couple of weeks GUE has moved off a low base from ~5c to 7.5c a rise of 50%:

Probably from the uptick in the U price combined with the high grade drill results announced and a general “risk on” mood in small cap stocks.

Aside from the ongoing drilling and existing JORC resource, one of the main reasons we Invested in GUE is its ownership of a 21.9% share in a uranium enrichment technology company.

Uranium enrichment is a process which brings uranium ore mined from the ground to a state where it is suitable as fuel for reactors.

The only other ASX company with exposure to uranium enrichment tech is Silex Systems which delivered an epic re-rate of more than 3,000% over a 5 year period.

Back in June, GUE reported that its uranium enrichment company achieved a 3x “separation factor” in it’s enrichment process (read our “armchair nuclear physicist” explainer on that here)

GUE has indicated previously that if this enrichment tech is successfully scaled up - it could be safer, cheaper and more efficient than other competing methods of enrichment.

Russia controls ~50% of the world’s supply of enriched uranium (Source) and the US government has now banned Russian uranium imports.

At a time when uranium and nuclear power is growing in strategic importance, we want to see GUE drill more to grow its “pounds in the ground” and provide updates on the uranium enrichment technology.

And if the uranium price moves into an uptrend, more interest (and capital) will likely flow into uranium stocks.

There’s a lot of geopolitical moving pieces at play - we think they all point to a “stronger for longer” uranium price, and increased US domestic production.

Here is what’s been happening in the uranium and nuclear energy news...

What's happening in uranium?

The macro environment for US uranium continues to improve.

In May the US passed legislation banning Russian uranium imports.

The US, especially, is the most vulnerable to supply shocks after decades of neglecting the industry.

And the US has the world’s biggest nuclear reactor fleet, producing ~20% of the country's electricity supply.

Then in August the largest producer of uranium in the world Kazatomprom (Kazakhstan’s nuclear fuel company) announced production for CY2025 would be roughly 16% lower than was previously forecast. (Source)

In September, leaders from the United States, Canada, France, Japan, and the United Kingdom - “the Sapporo 5” on the sidelines of 68th International Atomic Energy Agency General Conference in Vienna.

Previously they had committed US$4.2BN into improving nuclear fuel production capacity over the next 3 years.

With US$5.6BN already mobilised to date - it appears the group is ahead of schedule and backing words with action. (Source)

It makes sense too, because three weeks ago, in September this happened:

(Source)

This is Russia’s “ace in the hole” when it comes to the international commodity market.

And some companies are moving quickly to position themselves to benefit from the US’s response to Russia - domestic production.

This was an interesting uranium industry story, which also broke last week as well:

(Source)

We see this M&A activity as further evidence that momentum is building in the US uranium industry.

But it turns out that the US is getting squeezed by Russia AND technology developments too.

AI data centre demand in the US has seen the owner of the shuttered Three Mile Island nuclear plant in Pennsylvania commit to investing US$1.6BN to revive it, agreeing to sell all the output to tech titan Microsoft Corp:

(Source)

...for the next two decades.

That's right, the company Bill Gates founded needs lots of nuclear power to feed its AI data centres in the US.

AI requires immense amounts of data and processing, which means more data centres, which means more energy will be needed.

And a large (and growing) portion of that energy will likely have to come from nuclear.

That nuclear power production doesn’t happen without uranium.

Or uranium enrichment.

To bring more uranium onto the market, the uranium price needs to be high enough to encourage capital flows into exploration and mine development.

The uranium price did have a solid rerate in 2023, now we want to see the next leg up.

More on GUE’s recent uranium drilling...

Over the last few months, GUE has drilled its now ~52Mlb Tallahassee project in order to put out a scoping study which is due in the coming months.

A scoping study is an early plan on what a mine development may look like.

GUE has also been doing exploration drilling at another Colorado uranium project called Maybell.

Below is a quick summary of the results from those two drilling programs.

Tallahassee Uranium Project

GUE put out an enhanced and upgraded JORC on its large Colorado, USA uranium project in early September.

They announced an 11% increase in the JORC Resource at the Hansen Deposit within its Tallahassee Uranium Project in Colorado, USA to 22.9Mlbs U3O8.

The total attributable Tallahassee Mineral Resource now stands at 52.2Mlbs U3O8 at 530ppm using a 250ppm cut-off grade up from ~50Mlbs.

GUE upgrades large USA U Resource, Scoping Study to Come

Maybell Uranium Project

In late September (last week), GUE announced further high-grade drilling results from its maiden drill program at the Maybell Uranium Project in Colorado, USA.

These latest results from GUE's maiden drill program at Maybell continue to deliver significant high-grade uranium intercepts outside of the historical mining areas.

We discussed the highlights of the drill results in our Quicktake below:

GUE Puts out Further High-Grade U Drilling Results

GUE’s wild card: enrichment technology

One of the main reasons we are Invested in for GUE is for its ownership in a uranium enrichment technology.

Uranium enrichment is a process which brings uranium ore from the ground to a state where it is suitable as fuel for reactors.

GUE has a 21.9% stake in a uranium enrichment company, which achieved a major milestone in the development of its technology today.

We have taken a view that GUE’s major stake in uranium enrichment technology will eventually catch the attention of the market if nuclear power continues to increase in strategic importance globally.

Again, the only other uranium enrichment peer on the ASX is Silex Systems, which is currently capped at ~$1BN and has a 51% interest in its enrichment technology.

Below is what the Silex Systems charts looked like between 2017 and the midway point of this year:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

While the Silex share price run has cooled a bit over the last few months (like most uranium stocks), we think the market could be on the lookout for another enrichment story.

The only other company that has enrichment exposure on the ASX is GUE.

GUE has indicated previously that if this enrichment tech is successfully scaled up - it could be safer, cheaper and more efficient than other competing methods of enrichment.

And in June, GUE announced that its enrichment technology had achieved “a separation factor approximately three times higher than the enrichment factor.”

An “important measure for commercialisation.”

Read more about GUE’s stake in an enrichment technology partner in the article below:

GUE: Uranium enrichment technology achieves 3x “separation factor” in enrichment process

Together across enrichment, and the previously discussed “pounds in the ground” this is our GUE Big Bet, which represents the ideal upside scenario for our GUE Investment:

Our GUE Big Bet:

“GUE re-rates to a +$250M market cap by achieving a major technological breakthrough with its uranium enrichment technology and/or is acquired at multiples of our Entry Price by a US focussed uranium major looking to gain access to its assets and technology”

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, and it will require a significant amount of luck. There is no guarantee that it will ever come true. Some of these risks we list in our GUE Investment Memo.

What’s next for GUE?

🔲 Maybell JORC Resource (coming months)

Upon completing the current drill program, GUE plans to prepare a maiden mineral resource estimate for Maybell.

Depending on the resource size and economics, next steps could potentially include additional drilling in 2025 and a scoping study to evaluate development options.

🔄~52Mlb Resource Scoping study (coming months)

A Scoping Study is due shortly at GUE’s advanced ~52Mlb JORC resource in another part of Colorado. GUE indicated in September that the scoping study is due in the “coming months”

🔄Further updates on uranium enrichment technology (Ubaryon)

At the fundamental level we want to see Ubaryon de-risk its enrichment technology both operationally and from a regulatory perspective:

Milestones:

🔄 Further validation and extend the enrichment performance (show how well it works)

🔲 Achieve continuous operation at bench scale (scale up process)

🔲 Regulatory approvals

At the same time we are hoping Ubaryon is successful in getting funding either via an Australian Federal government grant or through the US$700M program made available by the US Department Of Energy (DOE) .

How does this impact our GUE Investment Memo?

We see recent drill results from Maybell as reducing exploration risk somewhat, as high grade mineralisation was found.

Exploration Risk

There is no guarantee that GUE’s upcoming drill programs in North America are successful and GUE fails to find economic uranium deposits.

Source: GUE Investment Memo 20th February 2023

We also see recent macro events as contributing to a slightly reduced amount of commodity price risk for GUE.

Noting of course, that commodity prices can fluctuate quickly (see our GUE Investment Memo for a full list of risks, as well as the risks section below).

Commodity price risk

The uranium price could fall, or fail to rise enough to make GUE’s US assets viable.

Source: GUE Investment Memo 20th February 2023

Risks

We see the main risks for GUE to be “Development Risk” and “Technology Risk”.

While development risk was not included in our GUE Investment Memo, it is increasingly relevant to GUE as the company is on the cusp of delivering a scoping study at its ~52Mlb resource in Colorado.

The economics could be lower than market expectations, or the project could prove more difficult to develop further in the future.

Meanwhile, it's still possible that GUE’s stake in its technology partner doesn’t work out.

GUE could fail to secure regulatory approvals, the technology could struggle to scale up, or the technology partner fails to validate the efficiency improvements it brings at scale.

Technology risk

It's possible that GUE’s stake in its technology partner doesn’t work out. GUE could fail to secure regulatory approvals, the technology could struggle to scale up, or the technology partner fails to validate the efficiency improvements it brings at scale.

Source: GUE Investment Memo 20th February 2023

Our GUE Investment Memo:

Click this link to see our GUE Investment Memo where you can find a short, high level summary of our reasons for Investing.

In our GUE Investment Memo you’ll find:

• Key objectives for GUE
• Why we Invested in GUE
• The key risks to our Investment thesis
• Our Investment plan