Investing in a uranium juniors is just like investing any other junior mining company as it carries a certain degree of risk. If the company hits the jack pot the risk is small. If their exploration plans fail, the risk can be huge. So much depends on the hit or miss factor along with market sentiments on the commodity in question. For that reason, looking to invest in exploration stocks are not for the faint of heart. But what happens when a certain commodity turns around? Like for instance uranium. Uranium has been in slump for years and anyone who invested in the last bull run most likely lost money. But now, uranium is hot again and for juniors who have properties and cash on hand there is no shortage of interest in these stocks. The big question is always the same though. Which junior to invest in and when a person wants to play the trade but can’t decide which company, that’s where royalty companies may come into play.
Royalty companies are companies that invest in any said commodity. Royalty companies have been around for while now and there are numerous precious metal royalty companies that trade on the markets around the world but there are not a lot of uranium royalty companies. Uranium Royalty is one of those companies but Uranium Royalty is the very first royalty company that is involved in uranium. The corporate portfolio includes interests on 16 development, advanced, permitted and past-producing uranium projects in multiple jurisdictions, including royalties on the world class McArthur River and Cigar Lake mines. It also holds a 4.6% stake in London-listed Yellow Cake plc.
The company’s strategy is to obtain direct exposure to uranium costs by owning as well as handling a portfolio of geographically varied uranium interests, including uranium royalties and streams, as well as equity investments in uranium firms and holding physical uranium once in a while. In implementing this approach, the firm seeks interests that provide it direct exposure to uranium costs, without the direct operating expense as well as focused risks that are connected with the exploration, advancement and mining of uranium jobs.
In addition to its existing portfolio of royalties as well as its strategic investment in Yellow Cake, the company’s key focus is to determine and also evaluate royalties in uranium projects, pursuant to which the Company would receive payments from operators of uranium mines based on production and/or sales of uranium products. They would also look at uranium streams where the Company would make an upfront payment to a project owner or operator in exchange for long-term rights to purchase a fixed percentage of future uranium production.
The company will also look at off-take or other agreements to which the Company would enter into long-term purchase agreements and options to acquire physical uranium products and direct strategic equity or debt investments in companies engaged in uranium. Uranium Royalty is involved in a lot of different companiesand projects like the McArthur River project which is the world’s largest high-grade uranium mine, with ore grades that are 100 times the world average, which means it is capable of producing 18 Mlbs per year by mining only 200 to 400 tonnes of ore per day. The mine is owned by Cameco and Orano.
The company is also involved in the Cigar Lake/Waterbury project. Cameco has reported that the project is currently owned by a joint venture of four companies, being Cameco (50.025%), Orano Canada Inc. (37.1%), Idemitsu Canada Resources Ltd. (7.875%), and TEPCO Resources Inc. (5%) Both the McArthur and Cigar Lake projects are located in the Athabasca Basin in northern Saskatchewan.
The company is also involved in the Church Rock Royalty which is a project in New Mexico. The Church Rock Royalty is equal to 4.0% of net returns. Net returns are calculated based on the gross value received by the payor from the sale of ores, metals, minerals and materials from the property, less certain specified deductions for transportation, insurance, etc. and royalties that are paid in respect of such production.
The Michelin Project is a development stage conventional uranium project located in Labrador and Newfoundland, Canada covering approximately 69,800 hectares of mineral licenses and is located approximately 140 kilometers north of Happy Valley-Goose Bay. The Michelin Royalty is a 2.0% gross revenue royalty on uranium recovered from the underlying property, calculated based on the actual proceeds of sales of uranium, without deductions. This is just a very brief outline of what Uranium Royalty is involved in. The company’s involvement with other miners and explorers is numerous and being one of the first uranium royalty companies it has the potential to become one that will set a standard in the royalty business of uranium.
The company has 107 million share fully diluted.
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Added note: The author of this article does NOT hold any share positions in the above company at the time of this writing. The author may buy or sell any time going forward.