- Nuclear power development is heating up spurred by climate change fears and movement away from fossil fuel dependency due to growing carbon emission concerns.
- Due to a long period of low-price environment, several uranium projects were discontinued, leading to potential shortfalls.
- Deep Yellow has a uranium project available for development in Namibia.
- Via a merger deal, the company is eyeing to create a uranium entity with geographic diversity with one of the largest attributable resource inventories in the world.
Concerns over climate change and minimising carbon emissions, proven 24/7 delivery of clean energy are the principal drivers influencing the need for more nuclear power.
Uranium is the most common choice for nuclear power generation. Kazakhstan is the global leader in uranium extraction, followed by Africa and Canada. Russia is also a prominent player in the market.
The average price of uranium in 2021 was US$36.5/lb. The lower price for a long period of time has led to the closure of several uranium exploration projects. However, uranium prices are forecast to rise, requiring long-term prices in the vicinity of US$60/lb to US$70/lb to incentivise new uranium mine development and allow a sustainable supply industry.
As deferred or cancelled projects and disturbance in Eastern Europe have led to a potential shortfall in the market, uranium outlook looks positive. There have been growing investments in the energy commodity.
Uranium demand and supply (Image source: Deep Yellow update)
Deep Yellow building the leading global uranium platform
Having identified the growing trends, Deep Yellow Limited (ASX:DYL|OTCQX:DYLLF) has embarked on a journey to emerge as one of the key players in the global uranium market. The ASX-listed company operates its uranium project in the highly attractive uranium jurisdiction of Namibia.
Moreover, it is all set to boost its portfolio of world-class projects with a recently announced merger deal with Australia-based mineral explorer Vimy Resources. The merged entity will have one of the world’s largest attributable resource inventories and a strong balance sheet to carry out development activities across the projects in Australia and Namibia.
The merger deal will involve 100% acquisition of fully paid ordinary shares of Vimy. Post completion of the deal, Vimy shareholders will receive 0.294 shares of DYL for each share and will have a 47% interest in the new merged group.
One of the world’s largest resource inventories
The merged group will have a resource inventory of 389Mlbs, highest among its peers and one of the largest in the world. The merged entity will have a market cap of AU$658 million and have a strong balance sheet with cash and cash equivalents of AU$106 million (as of 31 December 2021), with zero debt.
Data source: Company update
The Tumas Project has a mineral resource of 114Mlbs (263ppm U3O8) and a reserve of 68Mlbs (345ppm U3O8). DYL estimates annual production of 3Mlb from the project. The Omahola Project currently holds a mineral resource of 125Mlbs (190ppm U3O8).
Vimy’s Mulga Rock Project has a resource of 90Mlbs (263ppm U3O8) and a reserve of 42Mlbs (835ppm U3O8). The Alligator project holds a mineral resource of 26Mlbs (1.29% U3O8).
The Tumas and Mulga Rock projects are in the advanced stages of development while the Omahola and Alligator River projects are in the early stage of development.
The merged group will provide a company of scale to pursue a large, high-quality uranium asset with greater financial flexibility. Through strategic M&A, the merged group will continue to focus on developing a multi-project, global uranium entity.
The merged group will act on a dual strategy to develop current advanced assets (Mulga Rock and Tumas) while expanding through acquisitions to achieve greater scale with high-quality mining assets.
DYL shares were trading at AU$0.730 midday on 18 May 2022, up more than 5% from the last close.