After the 2010 fallout from the Fukushima disaster, the lingering effects on the uranium market remain. However, with several factors in line to reboot the demand for nuclear power in 2013, a transformation from bear to bull for uranium juniors could very well be on the horizon once more. Now a year since announcing their partnership, it appears Blue Sky Uranium Corp. [BSK:TSX.V, MAL:FSE] and French giant AREVA Mines is about to shift into full exploration mode, in uranium hungry Argentina.
Argentinian President Cristina Fernández de Kirchner (or ‘CFK’ as she is known by her followers) has been very active in promoting her country’s interest in growing its uranium presence. The country currently has two active nuclear power plants, and is planning a third and fourth. But a lack of uranium exploration or development in the country has forced Argentina to import all of its supply.
Federal policies are now in place to prioritize the importance of bringing on domestic uranium supplies, both for domestic consumption, and for exports on a global scale. The combined exploration efforts of the Blue Sky/AREVA partnership in the Patagonia region of southern Argentina looks to be the most likely source to fill this need.
Going forward into 2013, AREVA has agreed to carry all of the exploration costs associated within the agreed partnership lands, leaving Blue Sky with the choice of allotting its own exploration budget elsewhere, should it want to further explore its 5,000 km2 land package.
Japan’s newly elected Prime Minister Shinzo Abe has been very vocal since his election that nuclear power is essential for Japan’s future. After the Fukushima disaster, all 50 of the country’s nuclear reactors were shutdown. As the country re-emerges from the damage, already 2 of those reactors have been put back online.
Welcoming Japan back into the nuclear age will undoubtedly make an impact on the global uranium market, but other countries as well will influence the resurgence as well. New reactors in both China and India have been announced and are in serious development.
As well, 2013 marks the coming conclusion to the Megatons to Megawatts program implemented twenty years ago between USA and Russia. The program, which decommissions nuclear warheads in exchange for high-grade uranium for use in power generation, currently supplies 25% of the world’s uranium for consumption. While the remaining 75% of uranium supplies are coming from the ground, a supply gap is certainly due to follow once the program has ended.
These factors combined spell a very positive future in the 2013 for the uranium market. The average consensus among analysts is an almost 30-40% increase in the price of uranium, specifically due to the return of Japan on the market.
A positive turn in the entire uranium market could very well lead to a change in sentiment in the junior uranium space. After an almost two-year lull, the decoupling of share prices in the uranium sector could finally be coming to a close.
ARGENTINA AS A URANIUM DISTRICT
Given that both Blue Sky and AREVA have management teams with many decades of experience dealing in Argentina, an awareness of how to deal with the country’s government is valuable at this stage. While a positive relationship with the Federal government is essential, so to is the friendliness with the provincial and regional governments.
So far, the most important relationship to-date for both Blue Sky and AREVA has been derived through working in collaboration with the provincial government of Rio Negro Province. Rio Negro is where Blue Sky has been the most active since their arrival in the country in 2007. After signing an alliance with the Rio Negro government, the partnership has received very smooth permitting processes and access to projects within the province.
Rio Negro already houses an advanced nuclear industry, with the first reactor having been built in 1974 (CANDU design). Nuclear power currently produces 7% of the country’s electricity, but there has already been a stated goal of 20% by 2025.
To achieve the 2025 goal, uranium demand is expected to double to 220 tonnes/year. Lacking any domestic production may make that goal difficult to achieve without significant exploration and exploitation being encouraged by government. The race to meet the demands will be quickened by the fact that a new nuclear plant is already in construction, and another is in planning.
For AREVA and Blue Sky, the geology of the region looks very promising, and both believe that the next major uranium discovery will occur in the northern Patagonia district and geological environment.
So far, the partnership has discovered an enclosed basin that covers over 200 km2, with Blue Sky’s holdings being the dominant force in that basin. To date, an incredible amount of technical knowledge and expertise to evaluate Blue Sky’s properties have been unleashed by both Blue Sky and AREVA. Together, they have located and identified several high priority targets that they feel have a potential major deposit discovery imminent.
Coming out of 2012, the partnership made three significant uranium discoveries on their properties in Rio Negro. On deck for 2013, AREVA will be fully funding the combined exploration efforts. This will include at least two high-impact drill programs with potential for significant discovery. It is AREVA’s belief that the next major discovery of 50 to 100 million pounds will come in this geological environment.
THE BOTTOM LINE
Uranium juniors have been on the mat for what seems like forever, and finally in 2013 it appears they’ll have a reason to get back up. Japan’s return as uranium buyers, coupled with the inclusion of new power plants in India, China, and Argentina should provide a significant upswing in global demand.
Blue Sky has the potential to finally significantly benefit from their first mover advantage in Argentina. Gaining the backing of AREVA was a major accomplishment, as it is the largest fully integrated nuclear power generation, exploration, and development company on the planet. The French giant has been in Argentina for decades now with a long-term game plan that seems to be coming to fruition. The last five to eight years have involved extensive research on AREVA’s behalf, surveying the entire country to determine the best entry point to get involved on the exploration side.
After visiting every uranium company actively working in the country, AREVA chose Blue Sky and its massive land base as an ideal partner. The vote of confidence from AREVA comes not only with incredibly valuable shared knowledge of the region’s geology, but also with a cheque book that is set to cover all of 2013’s exploration costs.
While the two companies work towards meeting the partnership’s goals (and those of Argentina as a whole), one cannot ignore the swirling impact of several factors that should lead to an upswing in the uranium sector. With AREVA covering exploration costs, and an impending price hike in the commodity, Blue Sky Uranium appears to have a heck of a 2013 ahead.
G. Joel Chury
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