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ASX:GTR

GTI Energy

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ASX:GTR
- GTI Energy
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$0.003

Last Price

Investment Memo:

GTI Energy (ASX:GTR)

- LIVE

Opened: 04-Aug-2023

Shares Held at Open: 41,042,995


What does GTR do?

GTi Energy (ASX: GTR) is an exploration company targeting Uranium discoveries in Wyoming, USA & Utah, USA.

What is the macro theme?

Nuclear power has the lowest carbon footprint and highest utility rate of all renewable energy technologies.

Uranium is the primary fuel source for nuclear power, which makes it a critical mineral for a green energy future.

We expect to see uranium production increase across the world, buoyed by the transitions away from highly pollutive base-load energy generation like coal and oil.

The US is also allocating US$6BN in credits under the Inflation Reduction Act (IRA) to expand its nuclear fleet which we expect to increase demand for domestic uranium supplies.

Our Big Bet for GTR

To see GTR prove out a large resource base in the “uranium capital” of the USA, and generate offtake or acquisition interest as the USA moves to secure local uranium supply.

Why did we invest in GTR?

Uranium price at ~12 year highs

Uranium prices have moved from ~US$32/lb in 2021 to now trade near US$56/lb.

US Government is investing in domestic uranium supply chains

The US launched a US$1.5BN strategic uranium reserve & is investing US$6BN in its existing nuclear reactor fleet.

At the same time the US is home to the world's biggest nuclear reactor fleet and imports ~95% of its uranium supplies. In short the US is desperate to rebuild its nuclear power supply chains.

GTR’s projects in the uranium capital of USA

Wyoming is the capital for uranium production in the US and was once the biggest producing region in the world.

Wyoming has also attracted US$4BN in funding for a nuclear power plant from Warren Buffet and Bill Gates.

GTR’s projects are ISR uranium projects

ISR (In-situ recoverable) uranium projects have the lowest environmental impact, lowest CAPEX and lowest operating costs. ISR projects can be put into production a lot quicker than conventional hard rock uranium projects.

Existing JORC resource base and low enterprise value

GTR has an existing JORC resource base of 7.37m lbs of uranium. At our most recent Investment price of 0.9 cents, GTR trades at an Enterprise Value (EV) of $14M, giving it an EV/resource ratio of ~$1.90/Lb of uranium. Producers in Wyoming trade at >$15 per lb of uranium resources.

GTR’s projects sit near existing processing infrastructure

GTR’s Wyoming projects sit near ~9 central processing plants, with five fully permitted for production. GTR’s projects have the potential to be a part of a regional “hub and spoke” production model.

What do we expect GTR to deliver?

Objective #1: Drilling at first Wyoming Project - Lo Herma

We want to see GTR define drill targets and then drill its most advanced Lo Herma uranium project in Wyoming. We want GTR to upgrade its existing 5.71m lb JORC resource for the project.

Milestones

complete Geophysics/Geochemical surveys

complete Permitting/planning

complete Define drill targets

complete Drilling started

complete Drilling results

Objective #2: Drilling at second Wyoming Project - Green Mountain

We want to see GTR define drill targets and then drill its earlier stage exploration project - Green Mountain. We want to see GTR get enough drilling data to put together a maiden resource estimate or exploration target.

Milestones

complete Geophysics/Geochemical surveys

in-progress Permitting/planning

in-progress Define drill targets

cancelled Drilling started [Drilling Deffered]

not done Drilling results

Objective #3: Increase global resource base and start feasibility studies

Ultimately we want to see GTR increase its total in-ground resource base and then take one of its projects into the feasibility study stage.

Milestones

complete Resource upgrade commenced

complete Resource upgrade completed

not done Feasibility study commenced

What could go wrong?

Commercialisation risk

GTR now has a total in-ground JORC resource base of ~7.37 million lbs of uranium. There is no guarantee that this resource can be economically extracted. Project development is risky and a range of issues can always come about leading to projects being considered stranded.

Exploration Risk

GTR is still drilling exploration targets to grow its in-ground uranium resource. This may or may not return any uranium mineralisation. Exploration drilling that does not lead to economic uranium resources may occur.

Commodity Risk

In recent decades, governments have often shunned uranium because of the issues related to spent radioactive uranium cells needing to be disposed of somewhere.

A lot of countries have abandoned commitments to nuclear power due to the risks of accidents like Chernobyl and Fukushima.

This may slow the adoption of nuclear power globally and impact the demand for uranium. Other energy sources may be more popular than nuclear.

Funding Risk

GTR is a junior explorer with no revenues to fund exploration and ongoing costs. This means the company is reliant on capital raises to fund exploration programs.

Assuming no JV partner appears, GTR will need to come to the market and raise additional capital from investors leading to dilution for existing shareholders if raises are done at lower prices.

Market Risk

If the broader market sells off, investors may shy away from high-risk investment opportunities like junior explorers. During market downturns, investors will look to pull capital away from the high risk investments. GTR is a junior explorer and may be impacted by these market wide sell offs.

What is our investment plan?

With the GTR share price well below our Initial Entry Price of 1.8 cents, we took the opportunity to “average down” our GTR investment while sentiment was relatively low.

We hope this is a strategy that pays off.

We will look to sell ~30-40% of our holdings if the company if the share price materially increases either from:

  • A new uranium discovery
  • Anticipation of material drilling event
  • An increase in JORC resource
  • A macro event that spotlights uranium stocks

Disclosure: 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.

Our Investment Summary

Date of Initial Coverage

29-Apr-20

Inital Entry Price

$0.018

Returns from Initial Entry

-83%

High Point

83%