Power Metal nets £10 million for uranium drilling JV in Saskatchewan
Power Metal Resources’ (LSE: POW) gained 3.3% on Monday after it announced a £10 million investment from London-based UCAM for a joint venture to drill for uranium in northern Saskatchewan and Newfoundland.
The company holds 16 early-stage properties on a combined total of 924 sq. km. that sit in and around the Athabasca basin, as well as one in Newfoundland, which it acquired in September.
“It’s the biggest thing we’ve ever done,” CEO Sean Wade told The Northern Miner in a Zoom interview. “You don’t get many deals like this with a £20-million market cap and below (company). It’s a great validation of our model.”
Power Metal shares traded for 16 pence apiece on Monday after markets closed in London, valuing the company at £18.3 million. Its shares traded in a 52-week range of 10 pence to 25.68 pence.
The tie-up follows the spot price for uranium oxide rising to $82 per lb. this week from $78.50 per lb. at the end of August. It’s among various tailwinds for the uranium market, including a deal last month between Microsoft and Constellation on a 20-year power purchase from the restarted Three Mile Island nuclear plant in Pennsylvania.
Cash for spring drilling
Under the yet-to-be named JV, UCAM is to hold a 70% interest, according to a Power Metal news release. London-based private investment firm JCAM LP owns UCAM, which also has investments in Greenland-focused Amaroq Minerals (TSXV: AMRQ; LSE: AMRQ).
The GCAM investors formed the JV because they recognized the rising demand for clean energy sources such as nuclear and uranium, Wade said.
“These are the things that have driven that,” he said. “We were there in the right place at the right time, with a fantastic set of projects. But there is also incredible value and returns to be made the earlier stage you are.”
The £10 million investment in the JV will finance exploration and drilling in northern Saskatchewan, such as at its Perch River, Tait Hill and Reitenbach projects, where the company has already done surveys and geochemistry work. Power Metal could also receive another investment of up to £4 million depending on UCAM achieving returns of three times the initial investment.
Results from the surveys are to define an upcoming drill program, which Power Metal is planning now and could start next spring.
“All the exploration costs are going to be borne by the investor,” Wade said. “We can really go after the discoveries. We’ve got the firepower to do it that perhaps we wouldn’t have had before.”
The JV will also focus on Power Metal’s Drake Lake-Silas project in Newfoundland, which cover 12.5 sq. km. and 5 sq. km., respectively. It hosts 5 million indicated lb. of uranium oxide (U3O8) and 5.8 million inferred lb. U3O8, as well as 15.8 million inferred lb. of vanadium grading 0.088% V2O5, according to a resource from 2008.