Uranium Exploration Co. Makes Option Deal

Source: Streetwise Reports 10/17/2024

The company is both grantor and recipient of earn-in options in this two-part arrangement with another uranium explorer. Read on to learn why analysts rate the stock Buy.

Atha Energy Corp. (SASK:TSX.V; SASKF:OTCMKTS) executed two definitive option agreements with Terra Uranium Ltd. (T92), as announced in a news release.

One agreement indicates T92 has the option to earn a 70% interest in Atha’s Spire and Horizon properties by spending least CA$4.75 million (CA$4.75M) on exploration over a five-year period. Spire and Horizon are in Atha’s East Rim Exploration District in Saskatchewan’s Athabasca Basin. T92 is to spend certain amounts annually by Dec. 20, CA$75,000 in the first year, 2024, and CA$1M in each of the next four years.

The second agreement outlines how Atha may earn up to a 60% stake in T92′s Pasfield Lake project, also in the Athabasca Basin. Atha may earn an undivided 15% interest in exchange for either financing CA$1 million in exploration expenditures or completing one drill hole at least 1,000 meters (1,000m) deep in the geophysical target annually by year-end between 2025 and 2028.

After exercising each Pasfield Lake option in each of the four years, and upon written notice by Atha to T92, Atha may convert each undivided 15% interest in Pasfield into a 1% net smelter return royalty (NSR) for an aggregate 4% NSR.

If Atha has not converted its interests in Pasfield Lake into an NSR upon completing the last of the four options, the two companies will form a joint venture on the project in which T92 will hold 40% and Atha, 60%. Also, Atha will have the exclusive right to access and use all of the camp facilities at Pasfield for a daily fee the two companies will negotiate.

Also, in the latest news release, Atha announced updates to agreements with three firms regarding investor relations services. The uranium company extended its agreement with Hybrid Financial Inc. for three months on Oct. 11, 2024, when the initial six-month term ended.

Atha and Gold Standard Media LLC (GSM) agreed to extend their agreement for another three months when it ends on Nov. 30, 2024, at no additional cost to Atha.

Atha and Creative Direct Marketing Group Inc. agreed to defer the start of the marketing campaign due to market conditions at no additional cost to Atha. Atha has already paid Creative Direct the upfront fee of US$83,700.

In Pursuit of Uranium

Headquartered in Vancouver, British Columbia, Atha Energy acquires, explores and develops primarily uranium, but also radium and vanadium, projects in Saskatchewan’s Athabasca Basin.

The company has amassed a multibasin land package totaling 8,500,000 (8.5M) acres, and this is why it is the “standout ‘go to’ investment in the sector,” wrote Technical Analyst Clive Maund in an Oct. 17 report. Atha has the largest properties in both the Athabasca Basin, 4.4M acres, and the nearby Thelon Basin, 3.1M acres, two regions that host every type of uranium. Additionally, the company owns 339,000 acres in the Central Mineral Belt (CMB) in Newfoundland and Labrador in Canada. All three basins are top-tier uranium jurisdictions, according to Atha’s September 2024 Investor Presentation.

The company has a portfolio of assets, including advanced projects with potential for further discoveries. This year, Atha is spending CA$30M on a multiproject exploration program, now in progress.

What makes Atha stand out among its peers and affords it a competitive advantage is the caliber of its management team, noted Canaccord Genuity Analyst Katie Lachapelle in her Sept. 17 initiation report. Collectively, the team has experience in exploration, project development, permitting and mining.

The Canadian explorer’s most advanced project is Angilak in the Thelon Basin in Nunavut, where the existing mineral resource is 43,300,000 pounds (43.3 Mlb) of U3O8 and where Atha completed a maiden exploration program in September.

It comprised 13 holes over 5,167m drilled in prospective regional targets proximal to the Lac 50 trend, a Sept. 3 news release noted. Through this drilling, the company expanded the known uranium mineralization at Lac 50 and identified multiple new mineralized trends.

Subsequently, Atha acquired the entire prospective Lac 50 structural corridor and a second parallel corridor by staking a further 69,704 hectares (69,704 ha) containing 48 mineral claims. This expanded Angilak to 158,447 ha, according to a Sept. 19 news release.

Another of Atha’s projects, Gemini, is in the southeastern margin of the Athabasca Basin, 31 kilometers northeast of Cameco Corp.’s (CCO:TSX; CCJ:NYSE) Key Lake mine. Gemini is a high-grade, basement-hosted discovery of uranium with a concentration of 6,190–96,600 parts per million, located about 60m below surface and occurring in thick intercepts. The mineralized trend is largely untested over 600m of strike length. At Gemini, Atha has a comprehensive exploration program, including 8,000m of diamond drilling, underway.

The company’s CMB properties in Labrador have an existing resource of 14.5 Mlb U308. The several known zones of uranium mineralization there offer expansion potential.

Also, Atha owns a 10% carried interest in 250,540 acres in the Athabasca Basin, owned and operated by NexGen Energy Ltd. (NXE:TSX; NXE:NYSE.MKT) and IsoEnergy Ltd. and currently being explored.

What makes Atha stand out among its peers and affords it a competitive advantage is the caliber of its management team, noted Canaccord Genuity Analyst Katie Lachapelle in her Sept. 17 initiation report. Collectively, the team has experience in exploration, project development, permitting and mining.

“We believe the depth of management’s expertise increases the company’s potential for success in its exploration efforts and future project advancement, including project funding,” the analyst wrote.

Market is Strengthening

In the nuclear power renaissance happening around the world, many countries are expanding their capacity, thereby driving up demand for uranium, reported Jeff Siegel in an Oct. 4 Energy and Capital article. Globally, 64 nuclear reactors are under construction, 88 are in the advanced planning stage, and another 344 are proposed, according to World Nuclear Association data.

“Only a fool would not be bullish on uranium stocks right now,” Siegel wrote.

The U.S., for instance, will need another 110 Mlb of uranium for its planned tripling of current nuclear power capacity, reported Siegel. In early October, the U.S. Department of Energy closed a US$1.52 billion loan to restart Holtec International’s Palisades nuclear plant in Michigan, the first such restart in the country’s history.

Demand in the States also is coming from the big technology and other corporations looking to use nuclear energy to power artificial intelligence and data centers, reported Noble Capital Markets on Oct. 16. Amazon Web Services just partnered with Dominion Energy and will invest US$500M-plus in small modular nuclear reactors in Virginia. Constellation Energy Group (CEG:NYSE) is going to restart the Three Mile Island nuclear power plant in Pennsylvania and provide power only to Microsoft Corp. for the next 20 years, reported Chris Temple of The National Investor last month. On the news, he advised investors to increase their uranium exposure.

Technical Analyst Maund considers Atha Energy to be “THE top play in the uranium sector” and has an Immediate Strong Buy rating on it.

More new demand for uranium will come from Russia, building 34 nuclear reactors over the next two decades or so, noted Siegel. Together, these will require 18 Mlb of uranium per year. Similarly, India’s nuclear capacity expansion plans will triple its uranium demand by 2030. Also by 2030, China intends to have 102 nuclear reactors online, and they will need about 56 Mlb of uranium per year, almost double the country’s current consumption.

“As nuclear energy gains traction as a clean energy solution, particularly in countries like China, uranium stocks are poised for growth,” Fundamental Research Corp. analysts wrote in an Oct. 15 report.

The World Nuclear Association estimates the expected increase in global uranium demand to be 28% between 2023 and 2030 and then 51% between 2031 and 2040.

With so much demand for uranium, the market is facing a structural supply deficit that will reach 1.3 billion pounds by 2040, according to a Crux Investor article by Matthew Gordon.

“The uranium market presents a compelling investment opportunity driven by a projected long-term supply deficit, growing institutional interest, and the increasing recognition of nuclear energy’s role in a low-carbon future,” Gordon wrote.

The uranium price, now at about US$83.15 per pound (US$83.15/lb), is the highest it has been all year. It was ignited last month when Russia President Vladimir Putin hinted at banning uranium exports to the West, according to an Oct. 11 Forbes article.

Trading Economics forecasts that a year from now, the uranium price will be about US$91.80/lb, American Nuclear Society’s NuclearNewswire noted on Oct. 3.

The Catalysts: Growth Strategy Results

Atha Energy’s growth strategy has three parts: exploration at scale, targeted exploration, and mergers and acquisitions, the company said.

Events related to any of these components could boost the explorer’s stock. Possible catalysts include additional results from the current exploration program on an ongoing basis and/or further farm-out agreements or acquisitions.

“THE Top Play”

Technical Analyst Maund considers Atha Energy to be “THE top play in the uranium sector” and has an Immediate Strong Buy rating on it, he wrote in the previously mentioned Oct. 17 report.

The company’s 3-, 13- and 26-month charts indicate its stock price had been in a bear market since trading began until September when it had an upwave, or preliminary breakout. This, along with other indicators, including positive accumulation-distribution convergence and high volume, suggest another upleg is expected soon.

“Given the outlook for the uranium price and what Atha Energy has going for it, its stock is astoundingly cheap after its persistent downtrend this year,” Maund wrote.

Canaccord’s Lachapelle has a Speculative Buy rating on Atha and a target price, implying a 64% return from the share price now.

“In our view, Atha is positioned to become a go-to name for pure-play uranium exploration torque,” she wrote. “The company has no shortage of prospective targets [and] boasts a strong balance sheet and the right team to execute.”

In addition, in terms of valuation, Atha is trading at a discount when compared to its peers in the financial services firm’s uranium coverage universe, Lachapelle pointed out. On an enterprise value per pound basis, Atha is cheap, at US$1.40/lb, versus its peers at US$4.56/lb.

Gordon with Crux Investor wrote this about Atha recently: “Atha Energy provides investors leveraged exposure to the strengthening uranium market through high-impact exploration and strategic resource growth. The company’s technical expertise and access to capital position it well to potentially deliver substantial shareholder value as an emerging Canadian uranium leader in a favorable market environment.” [OWNERSHIP_CHART-11007]

Ownership and Share Structure

According to Refinitiv, 10 management and insiders own 16.44%, or 45.69M shares, of Atha Energy. The Top 5 are Timothy Young with 6.32% or 17.57M shares, Matthew Mason with 5.8% or 16.12M shares, Atha Chairman Michael Castanho with 1.16% or 3.22M shares, Blake Steele with 1.08% or 3M shares and Atha Director Sean Kallir with 0.9% or 2.5M shares.

Seven institutional investors together hold 9.38% or 26.08M shares. The Top 3 are Alps Advisors Inc. with 6.26% or 17.41M shares, Sprott Asset Management LP with 1.3% or 1.6M shares and Vident Investment Advisory LLC with 0.8% or 2.21M shares.

The remaining 74.18% of Atha is in retail.

According to the company, it has 277.9M shares outstanding, 14M options, 4M restricted stock units/performance rights, and 10.2M warrants.

Reuters reports Atha’s market cap is CA$186.2M, and its 52-week range is CA$0.46−$1.42 per share.

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( Companies Mentioned: SASK:TSX.V; SASKF:OTCMKTS, )

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