Fission 3.0 General Manager Jeff Mushaluk describes the progress his company has made in the Athabasca Basin.
Fission 3.0 (TSXV:FUU) General Manager Jeff Mushaluk joined the Investing News Network to review his company’s progress in the Athabasca Basin. Mushaluk is optimistic that the growing nuclear energy industry has the potential to drive demand in the uranium market.
Fission 3.0 owns a total of 18 resource projects in its portfolio, including 16 projects located in Canada’s Athabasca Basin in Saskatchewan, an area Mushaluk regards as the emerging frontier of the uranium industry. Thanks to the growth of the nuclear energy sector, Mushaluk is confident the global demand for uranium is on the rise, which could spell economic success for Fission 3.0 and its collection of uranium properties. The company is hoping to serve the growing nuclear power industry, which is beginning to incorporate small mobile reactors (SMRs) as a means of providing energy to smaller remote locations.
Fission 3.0 recently commenced a 2,051-meter winter drill campaign on its Patterson Lake North (PLN) project in the Athabasca region. After intercepting anomalies and strong alteration at PLN, Fission 3.0 intends to continue its winter drill efforts with a nine-hole program at two of its Key Lake South projects, Karpinka Lake and Hobo Lake. The company is also in development of the Macusani project in Peru. Fission 3.0 has entered into a binding agreement with Rhyolite Lithium, pursuant to which Rhyolite can earn up to 80 percent interest by spending up to C$22 million over a five-year period.
Below is a transcript of our interview with Fission 3.0 General Manager Jeff Mushaluk. It has been edited for clarity and brevity.
Investing News Network: What do you do? What does the future for uranium look like for Fission 3.0?
Fission 3.0 General Manager Jeff Mushaluk: We’re a mineral exploration stage company. We have an 18-project portfolio. Of that, 16 of them are in the prolific Athabasca Basin in northern Saskatchewan, one project in Alberta and another one in Peru. In total, 18, and we’re drilling one of our most prospective properties as we speak.
INN: Which is where?
JM: Currently, we’re drilling at Key Lake at our Karpinka Lake and Hobo Lake projects. The Key Lake area is host to the 200 million pound Key Lake mine that was operated by Cameco (TSX:CCO,NYSE:CCJ) and Orano. It’s a prolific area with a lot of history. We have 6 to 10 drill holes that we’re doing during our winter program right now. We just finished drilling in January at Patterson Lake North, which is located near Fission Uranium’s Patterson Lake South (PLS) discovery. This area is called the emerging frontier in the Athabasca Basin, which is on the west side.
INN: What do you mean by the emerging frontier?
JM: If you look at the Athabasca Basin, the first mines were in the northern part like Uranium City and Beaver Lodge. There are several mines in operation there, and we do have properties up there as well. Then the discovery was made on the east side of the basin. That’s where you have the Key Lake mill and a lot of the major discoveries like McArthur River and Cigar Lake that were developed on the east side of the basin. In 2010 Fission Uranium discovered the Triple R deposit in the PLS area which is on the west side so it was unconventional. As soon as the Triple R discovery was made, there was a staking rush to the west. I say emerging because that area is still relatively under-explored, but that is changing now with likely the ascending price in uranium because there is interest back in the sector.
INN: You’re an exploration company, but where are you at in the development process? What are the prospects ahead of you at the moment?
JM: I think the first thing you want to look at is the kind of shape is the sector in. The sector for uranium has been extremely challenging. We were in a prolonged bear market. Last year, I think we were one of the top performing asset classes in the world for the spot price of uranium. I think the prospect for uranium looks very favorable. What sets our company apart is, we have a diverse portfolio of 18 properties. We are even diverse within the Athabasca Basin. Our focus has been on trends and where there have been previous major discoveries. As the adage goes, the best way to find a new mine is to find one that was already operating. I think that’s the strategy that Fission 3.0 employs. We basically have three areas that we are focused on. The new part which is in the west, which we just discussed. The east side, the Key Lake area which is host to all the major discoveries. Then the historic, northern part near Uranium City and Beaver Lodge. That’s where our focus is during our winter and summer drill programs because they are our most prospective properties.
INN: How do the locations of your properties position you appropriately to be able to supply the markets that will require uranium?
JM: From an investment standpoint, I think uranium is an easy call for any contrarian. It’s a very, very simple story: supply and demand. We’ve seen the two biggest producers curtail supplies significantly in the last 24 months. On the demand side, the World Nuclear Association is forecasting 50 percent electricity demand growth by 2035. To give you a backdrop of that, we have rising demand for electricity and shrinking supply by the two majors. Uranium right now is basically an oligopoly of the Kazakhs thru KazAtomProm, and then you have Cameco. Those two have basically been able to control the price uranium and they have been curtailing supply. I think the most significant catalyst that happened in the uranium market, in my opinion, was when Cameco put the world’s richest mine on care and maintenance indefinitely and laid off between 500-700 people at McArthur River. If they can’t make money at these prices, then it will be very challenging for anyone to do so. I think that was probably the catalyst for change and as we saw last year the spot price went up about 40 percent.
INN: What role do you think uranium can play in the green economy?
JM: Well I am biased, I am in the uranium sector. There’s no question there’s a movement towards clean and green. I think nuclear has to be a big part of that conversation. Nuclear power has a zero carbon footprint. It is baseload power, it is clean power. China is the growth story, they have the most aggressive plans for new reactors. There is a record amount of nuclear reactors active right now, I think there are 13 new coming online this year and 13 again next year, so it is a very robust demand picture. Last year was the first year that we were in a deficit, meaning that reactor demand was 190 million pounds while mine production was around 140 million, so we have a shortage last year. Inventories keep getting drawn down. So it’s very positive for contrarian investors because there’s going to have to be new product to come online to meet this demand and right now it’s not going to be possible. A lot of the utilities are going to be significantly uncovered in the next two years.
INN: What kind of additional projects are expected to require source material?
JM: There’s a technological trend emerging called small mobile reactors or SMRs. The major reactors have to service a huge population. SMRs could service mobile or smaller areas and China is leading the way in terms of technology for that. I think that will be very robust for the uranium sector to have smaller nuclear reactors. It’s very positive but you wouldn’t know that by looking at the spot price or the sentiment in the uranium market.
INN: How do you feel about the long-term health of the uranium market?
JM: The uranium cycle is longer than what most investors will relate to when it comes to oil or gold or copper. It is very inelastic, so when you see West Texas Intermediate, where oil prices go from say $50 US a barrel to $70, uneconomic projects become economic. For uranium, it’s not that elastic because you need to sustain longer prices and you need a higher contract price to incentivize mines to sell their product. At $30 right now, every mine is losing money, so you need higher prices to incentivize new mines and new production to come online and we don’t have that yet. That’s the real material aspect of this. I think the year 2020-2021 is when a lot of these long term contracts mature so I think there is going to be kind of a rush into this again sometime soon. Probably after section 232 is addressed in the United States.
INN: We haven’t even talked about what you are doing in Peru, what is happening there?
JM: We have a property on Macusani, it’s been part of the Fission group for a long time.
INN: From the beginning, right?
JM: Yes. We signed a letter of intent in August of 2018 with a company called Rhyolite where they can earn up to 80 percent of that project by spending 22 million dollars. From our company standpoint, we have completely de-risked that project. We are using other people’s money to explore on our property while we still have a say on where we explore. That area is host to a lot of lithium and as well as uranium. It is a very interesting property. We are hoping to have more news out on that sometime the next three months.
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