Kivalliq Analyst Interview – Grade is King

Rob Chang – Equity Research Analyst, Metals & Mining, on Kivillaq Energy Corporation and its Angilak Property in Nunavut, Canada

Uranium Investing News had the opportunity to talk with Rob Chang, Research Analyst for  Metals & Mining with Cantor Fitzgerald in Toronto. Rob has been in the financial industry since 1995 with companies such as Versant Partners, Octagon Capital, Middlefield Capital, and BMO Capital Markets.

Uranium Investing News: Thanks very much for taking the time to speak with me this morning. What’s your perspective on the current junior uranium market?

Rob Chang: Sure, thanks for having me. The uranium junior market has been going through some tough times ever since what happened in Fukushima, Japan early last year. As you’ve seen the uranium spot and long term price has been under pressure for that whole period and even though we’ve lately seen some recovery with the producers, the uranium juniors have yet to see an increase except for a few notable companies. In general they have all been trending downwards since Fukushima.

What we have seen though is that some companies have taken advantage of the lower prices and have looked into and completed some acquisitions. In fact what we’ve noticed since Fukushima is that there have been seven meaningful transactions in the uranium space where we see larger uranium companies acquire smaller ones as opposed to in the previous two years leading up to Fukushima where there were only three transactions. So we’re certainly seeing some opportunistic acquisitions happening in the space.

UIN: Can you tell me why Kivalliq stands out for you and why you consider it a good investment?

RC: For all mining grade is king. When I look at the uranium universe any company with projects with high grades will certainly stand out. In Kivalliq we see a company with an asset that has the highest grades of uranium in its deposit outside of the Athabasca basin. Now the Athabasca basin is an anomaly, where the grades are exceptionally high. If we set that aside and look at the rest of the world Kivalliq is the highest grade out there, grading at 0.69% right now and a meaningful size deposit. When you look at being able to economically extract resources grade is certainly king and that is the reason why we like Kivalliq

UIN: Kivalliq announced their first 43-101 compliant resource in March of this year. Can you put this resource in perspective compared to the Angilak project as a whole?

RC: The NI 43-101 resource that it reported earlier is 27.13 million pounds and that’s a meaningful size. As I noted earlier it’s also at a very high grade of 0.69% – especially when you compare it to the global median, which is 0.076% U3O8. Generally when investors first look at a uranium company the rule of thumb threshold for a “meaningful” uranium project is 20 million pounds. Kivalliq currently has 27.13 million pounds. Now when we look at it in context of the entire Angilak project package which is 252,830 acres of property, the Lac Cinquante deposit of 27 million pounds is only a very small part of the property package. And, it is on one specific EM conductor and when we look at the property, throughout the entire package there are dozens of conductors that could potentially host significant mineralization and so far Kivalliq only has a resource on one. There is the potential of finding significantly more once it tests those other conductors.

UIN: Kivalliq is in Nunavut in Northern Canada. Investors might be concerned about access to infrastructure in such a remote part of the world. What would you tell a Cantor Fitzgerald client about that?

RC: Infrastructure is certainly going to be a challenge given that the project is in a relatively remote part of the world. There are companies developing projects in the area with Areva advancing the Kiggavik project that is to the north east of the Kivalliq site. However, we’ve been to site several times and we do recognize that it will be a challenge. We will need to see a large deposit at Kivalliq in order to make this economic. But at the very least we do see the potential for a large size increase as well as high grade that could support an infrastructure build. But given that currently the only way to access it is really just flying things in, the cost to explore and of course the cost to potentially develop and then mine at the site will be very expensive. So we will need to see significant size, but we believe there is that possibility with what we see at the Angilak property.

UIN: Olympic Dam in Australia is a long way from Kivalliq in Nunavut. But BHP’s decision to delay expansion at Olympic Dam is big for uranium. Do you see it having any impact on Kivalliq?

RC: It certainly will. The Olympic Dam expansion makes up a significant part of the supply equation that was expected over a significant period of time. Originally it was supposed to come on somewhere in 2014-2015. It now has been delayed. Some think one to two years, others think three to five years. What that does is it pushes back a large portion of the uranium production that was expected to come online. While globally we are seeing more nuclear reactors being built, the supply and demand equation may fall into deficit quicker with Olympic Dam not producing the extra amount it was supposed to. What that basically means is, companies with significant projects that could be developed to fill in that supply gap, such as Kivalliq, would certainly become more important and notable. So it certainly would have a positive impact.

UIN: If investors want more information on your coverage of Kivalliq, what is the best way for them to contact you?

RC: They could look for research on cantor.com. Earlier this month Cantor Fitzgerald acquired certain assets of Versant Partners as well as hiring the sales, trading, investment banking and research teams from Versant Partners to establish a Canadian presence. We’re very excited about this new opportunity due to the larger platform. Cantor Fitzgerald is global with 60 offices in twenty countries taking care of 5,000 institutional clients with over 300 equity sales and trading professionals around the world with global reach. So we’re excited about the improved platform and look forward to better serving our clients with our improved reach.

UIN: Rob, thank you again for your participation.

Disclosure: This interview was prepared as part of Kivalliq’s advertising campaign with the Investing News Network. Please see the full Versant Partners Inc. disclaimer on their web site at https://www.versantpartners.com/en/disclaimer.html.

Click here to see the Kivalliq Energy Corp.(TSXV:KIV) profile on Uranium Investing News