The following Guest Post is from Stockhouse.com on Azarga Uranium. Azarga Uranium is a sponsor of Epstein Research and a client of Stockhouse.com. Peter Epstein, of Epstein Research, had nothing to do with the writing, editing or distribution of this piece. The reported facts & opinions contained in this article are entirely those of Stockhouse. Peter Epstein and Epstein Research disclaim any responsibility for any errors herein or actions taken by the reader.
It takes a long time for a uranium mining project to move through the permitting processes that are necessary to advance to construction of a uranium mine. That’s simply a fact of life.
For mining investors looking for an attractive window to buy into a uranium development company, getting in before completion of this long process is perhaps the best opening. For this reason, experienced mining investors may be especially interested in the recent news release from Azarga Uranium Corp. (TSX: AZZ, OTCQB: AZZUF, Forum).
On May 1, 2019, Azarga announced that the U.S. Atomic Safety and Licensing Board (ASLB) issued an order to schedule a hearing providing the opportunity to resolve the final contention on the Company’s U.S. Nuclear Regulatory Commission (NRC) License for its Dewey Burdock In-Situ Recovery (ISR) Uranium Project, located in the state of South Dakota.
Azarga is now well-known to the Stockhouse audience. We first introduced the Company in a full-length feature article from March 2017, focusing on the robust economics of Dewey Burdock. Further, in November 2018, we published a feature article on the significant resource increase at Dewey Burdock.
What makes this a particularly exciting opportunity for mining investors is that Azarga’s progress toward the end of the Dewey Burdock project permitting process is coinciding with what more and more mining analysts see as a new, long-term bull market emerging for uranium.
Stockhouse has been closely covering the uranium market, and we recently published an information feature advancing 5 Reasons Why Uranium Is About To Take Off. The Big Picture here is that given the massive pipeline of nuclear reactor projects ordered, planned, proposed, or already under construction, the nuclear power industry could potentially double in size over the next two decades.
Fueling confidence/optimism in this trend is a growing consensus that nuclear energy needs to play a pivotal role in meeting national CO2 emissions goals to address climate change. Nuclear power plants, because of the enormous incremental power added by each new reactor in a relatively small footprint, can accelerate the transition away from (high-emission) fossil fuel power generation.
Further enhancing investment potential for uranium companies based in the U.S., such as Azarga, is the current “Section 232” investigation by the U.S. Department of Commerce. The investigation is addressing the issue of whether the U.S. government should mandate a 25% domestic quota for the uranium demand of U.S.-based nuclear reactors. This investigation has now been completed and a final determination is required by Jul 13, 2019.
If a quota is put in place, at worst this would imply a floor for uranium prices within the U.S. market, likely significantly above the current spot price for U3O8 (US $25 per pound). Further, it would likely result in a pricing premium for U.S. uranium production, even if general expectations for strong gains in the price of yellowcake materialize. Given that the U.S. currently produces less than 2% of U3O8 required for domestic reactors, the latter scenario is very plausible.
This leads back to Azarga, Dewey Burdock, and the finish line for the permitting of this Project. The Company’s President & CEO, Blake Steele framed the latest news:
“The ASLB decision provides the NRC Staff and the Company with an opportunity to resolve the final contention for the Company’s Dewey Burdock NRC License within legally established timelines. The Company plans to fully support the NRC Staff throughout the evidentiary hearing process in an effort to resolve the final contention and is pleased with the timeline established by the ASLB, which sets November 29, 2019 as the ASLB decision date on this matter.”
Experienced mining investors will be able to connect the dots themselves. Azarga has received its draft EPA permits for the Dewey Burdock Project. With the final contention pertaining to compliance with the National Environmental Policy Act, a favorable ruling by the ASLB resolving this final contention could be the catalyst that triggers final rulings with the other agencies involved. Azarga has noted that its state of South Dakota permits have been recommended for approval and a continuance has been ordered until completion of federal regulatory approvals (NRC and EPA).
Mining investors who choose to wait until after this process has been completed (which would substantially de-risk Dewey Burdock) may not be able to get in near the current valuation level, a mere $42 million for this TSX-listed mining company.
Growth in nuclear power (and yellowcake demand) is in a strong upward trend. The world of mining sees an imminent bull market for uranium. Azarga Uranium (and Dewey Burdock) is aggressively pursuing the finish line of Project permitting. The Company also has three other advanced-stage uranium projects in its pipeline. It all adds up to opportunity.