OKR ups enrichment tech investment as U macro heats up

Our uranium Investment, Okapi Resources (ASX:OKR) just increased its investment in its uranium enrichment technology partner.

OKR has moved from a 19.9% stake to a 21.9% stake.

While this may not sound like much of a movement initially - it is worth noting that OKR’s only other ASX listed enrichment peer, Silex Systems, is currently capped at $874M with a 51% ownership of GLE - its uranium enrichment project with uranium mining giant Cameco.

As such, the relative increase in ownership by OKR could eventually deliver a large incremental return for shareholders - should the enrichment technology be further proved out.

In other words, given the interest in the enrichment space - even small ownership increases could prove very valuable.

Macro tailwinds for uranium enrichment:

We’ve recently been doing a deep dive on the uranium macro environment and OKR had some good commentary on this in today’s announcement.

Specifically, OKR outlined the key points of a recent US Department of Energy report which laid out an ambitious plan to 3x the current US nuclear energy output from 100 GW to 300GW.

Importantly, this would mean the following:

• The US would need to engage in the mining/milling of an extra ~50,000Mt of uranium per year – a 22x increase from the most recent peak
• US enrichment capacity needs to increase by ~30 million SWU per year (6x higher than its current capacity of 4.9 million SWU) or 40 million SWU per year to be energy independent. SWU stands for Separative Work Unit - a measure of the effective price for enrichment services to be completed.

We think that kind of leap forward in both uranium enrichment and uranium production will require the kind of resources and tech that OKR has and forms the basis for our OKR Big Bet:

“OKR 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 OKR Investment Memo.

What’s next for OKR?

We expect a busy year for OKR with the following newsflow to come:

🔄 Drilling at most advanced project in Colorado

A permit is in place for 18,200m across 60 drill holes - we want to see OKR firm up a timeline for this drilling.

🔄Drilling at second Colorado project

At the Maybell project OKR has engaged a company called BRS Engineering to work over historical data - the company has direct experience at the Maybell Project when it was operating. We’d be looking for a drill program in H2 2023

🔄Drilling at Athabasca Basin

Following geophysics results which are currently being processed, we expect OKR to drill its most promising targets in Canada later this year.

🔄Progress on enrichment tech

Scientific progress and regulatory approvals aren’t linear processes but we are looking for one of the following three things to happen on the enrichment front:

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

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

🔲 Regulatory approvals