- Royalty exposure to world-class and long-life mines: The McArthur River and Cigar Lake mines rank as the two largest high-grade uranium mines in the world, with ore grade 100 times world averages as disclosed by Cameco. Based on disclosed production capacities, the mines have the combined capacity equal to 21% of global forecasted uranium demand (2021)1;
- Embedded exploration upside to a substantial land package in Canada’s leading uranium district: The acquisition provides royalty exposure to over 300,000 hectares of ground in the highly prospective Athabasca Basin, with well respected operators, and in one of the top mining jurisdictions in the world.
- Dawn Lake Project : URC acquired an option to purchase an additional 20% net profit interest (NPI) on a 7.5% share of overall uranium production from the Dawn Lake project lands. The royalty rate adjusts to 10% in the future upon production of 200 Mlbs from the combined royalty lands of the Dawn Lake and Waterbury/Cigar Projects (93 Mlbs produced to date according to Cameco’s disclosure).
Amir Adnani, Chairman of URC, commented: “Canada’s Athabasca Basin of Northern Saskatchewan remains a key production center to provide uranium fuel to meet the growing global demand for zero carbon emission nuclear power. Along with the 1.97% Net Smelter Royalty on Rio Tinto’s nearby Roughrider project, URC has gained exposure to long-life assets with existing infrastructure and exploration upside in this important region. With major producers as operators, we are able to work with companies with strong environmental, social and corporate governance (ESG) practices and proven operational ability.”
Scott Melbye, Chief Executive Officer of URC stated: “These royalties enhance URC’s exposure to potential near- and long-term cash flow from existing world-class operations. The additional option to acquire the Dawn Lake royalty interest as part of this acquisition provides additional exposure to this early stage project. We believe these exploration lands are in a prime geological setting with proven prospectivity, all within trucking distance of two existing mills. This transaction provides URC with over 300,000 hectares of royalty exposure in the world-class Athabasca Basin. URC also values its increased exposure to projects owned and operated by industry leaders, Cameco and Orano.”
1 UxC Q1 2021 Market Outlook – Base case 2021 demand projection
Status of the McArthur River and Cigar Lake Mines:
- McArthur River Mine is operated by Cameco in partnership with Orano. The mine was in production since 1999 until placed on care and maintenance in 2018 due to uranium market conditions. According to Cameco, the restart of the mine is a commercial decision that will be based on Cameco’s ability to commit production from the operation under acceptable long-term contracts.
- Cigar Lake Mine is operated by Cameco in joint venture with Orano, Idemitsu Canada Resources Ltd., and TEPCO Resources Inc. The mine commenced production in 2015. In December 2020, Cameco announced the temporary suspension of production at the mine due to risks posed by COVID-19. Cameco announced on May 7th, 2021 that production at the Cigar Lake mine had resumed, with the first shipment of ore sent to the McClean Lake mill at the end of April. Cameco stated that they were unable to provide additional production outlook for 2021 until the rate at which they will be able to sustainably operate the Cigar Lake mine is known.
Pursuant to the Agreement, URC acquired the royalties and royalty options from Reserve Industries Corp. and Reserve Minerals Inc. for a total consideration of US$11.5 million, satisfied by cash and common shares. This involved drawing down US$5.0 million from the previously announced margin loan facility with the Bank of Montreal for a portion of the purchase price.
The royalty interests and options to be acquired consist of the following:
- McArthur River – 1% GOR on an approximate 9% share of overall uranium production, drawn from Orano’s 30.195% ownership interest. The royalty includes the option to elect to receive physical uranium “in kind” on notice. While the McArthur River mine has been idled since 2018 The royalty has provided consistent exposure to the mine’s 18-year production history and should continue to provide regular royalty payments over the projects remaining 23-year mine life in the event of a restart.
- Cigar Lake – 10 to 20% sliding scale NPI on a 3.75% share of overall uranium production from the project lands, drawn from Orano’s ownership interest (37.1%). The royalty rate adjusts to 10% in the future upon production of 200 Mlbs from the combined royalty lands of the Dawn Lake and Waterbury/Cigar Projects (93 Mlbs produced to date). As a profit based interest, this royalty will begin to generate revenue after cumulative expense accounts, including development costs, are exhausted.
- Dawn Lake: Option to acquire a 10 to 20% sliding scale NPI on a 7.5% share of overall uranium production from the project lands. The royalty rate adjusts to 10% in the future upon production of 200 Mlbs from the combined royalty lands of the Dawn Lake and Waterbury/Cigar Projects (93 Mlbs produced to date). As a profit based interest, this royalty will begin to generate revenue after cumulative expense accounts, including development costs, are exhausted. The option is exercisable at any time until May 7, 2024 upon notice and payment of $10 to the existing holder.
The Dawn Lake Project
The Dawn Lake project is a large early exploration stage project located in northern Saskatchewan in Canada, approximately 700 km north of Saskatoon. The project grounds cover an area approximately between the McClean Lake mill and Cigar Lake mine.
The following map outlines the location of the Dawn Lake project:
The Dawn Lake project has been active since 1977, with resources currently outlined for the Tamarack deposit, currently listed by Cameco as having 17.9 Mlbs U3O8 of indicated resources at an average grade of 4.42% U3O8, and a further 1.0 Mlbs of inferred resources.