Skyharbour buys into Rio Tinto’s Russell Lake uranium project

Canadian explorer Skyharbour Resources (TSX-V: SYH) has inked a cash and shares deal to acquire an initial 51% stake in Rio Tinto’s (ASX: RIO) Russell Lake uranium project, in the Canadian province of Saskatchewan.

The Vancouver-based miner has the option of becoming the sole owner of the property, which is in the uranium-rich Athabasca basin, between two of Orano Mining’s properties and near Cameco’s (TSX: CCO) (NYSE: CCJ) Key Lake and McArthur River assets.

Russell Lake is also next to Skyharbour’s flagship Moore project, which makes it especially attractive, the junior said.

“Uranium properties with the pedigree and prospectivity of Russell Lake are few and far between,” president and CEO Jordan Trimble said in the statement. “[It is in a] very strategic location, notable historical exploration and findings, as well as the numerous property-wide targets with the potential to generate new discoveries,” he said.

Under the terms of the agreement, Skyharbour can earn a 51% stake in Russell Lake via a cash payment of $500,000 and the issuance of 3.6 million shares, along with $5.7 million in exploration spend over three years.

An additional 19% may then be earned via a $1.6 million cash payment or the issuance of 2.2 million shares, and $6.4 million in exploration spend over two years.

Skyharbour can then earn the remaining 30% interest in the property by paying to Rio Tinto $33 million in cash or via 42.6 million shares of the company, provided Rio’s ownership doesn’t exceed 19.9% of Skyharbour.

While there has been historical exploration carried out at the Russell Lake, the junior noted that most of it happened before 2010.

“The property has been the subject of over 95,000 metres of drilling in over 230 drill holes. The property’s claims are in good standing for 2-22 years with assessment credits built-up from previous programmes,” the company said.

Market revival

After years of depressed prices and halted production, the uranium market is experiencing a revival on supply worries steaming from sanctions against Russia’s state-owned atomic energy company, Rosatom.

Earlier this month, Cameco and Orano increased their stakes in the Cigar Lake uranium mine in northern Saskatchewan by buying Idemitsu Canada Resources’ 7.9% interest in the asset for C$187 million (about $144m).

Spot prices have doubled from lows of $28 per pound last year to $64 in April, motivating the reactivation of projects that were set aside after a 2011 earthquake and tsunami crippled Japan’s Fukushima nuclear power plant.

RELATED: Unloved since Fukushima, uranium is hot again for miners

Cameco is also restarting its McArthur River mine and Key Lake mill this year, which have been on care and maintenance since mid-2018. 

“Things are moving very quickly in our industry, and we’re seeing countries and companies turn to nuclear with an appetite that I’m not sure I’ve ever seen in my four decades in this business,” CEO Tim Gitzel said on a May 5 earnings call.

For years, Canada was the world’s largest uranium producer, accounting for about 22% of world output, but in 2009, was overtaken by Kazakhstan.