LME CEO weighs in on low-carbon aluminum during LME Week

London Metal Exchange CEO Matthew Chamberlain has expressed doubt over sourcing aluminum from exclusively low-carbon sources in the short term. “There have been calls for us to exclude high-carbon production, but we don’t think that’s the right thing to do because there simply would not be enough aluminum on the market,” Chamberlain said on Oct….

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London Metal Exchange CEO Matthew Chamberlain has expressed doubt over sourcing aluminum from exclusively low-carbon sources in the short term. “There have been calls for us to exclude high-carbon production, but we don’t think that’s the right thing to do because there simply would not be enough aluminum on the market,” Chamberlain said on Oct....

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Chinese iron ore prices rising strongly again despite property market fears

Chinese iron ore prices have certainly been on a roller coaster ride this year, hitting a record high in value terms after a period in which the price had risen and fallen sharply. Futures on the Dalian exchange for delivery in January 2022 are now tra…

Chinese iron ore prices have certainly been on a roller coaster ride this year, hitting a record high in value terms after a period in which the price had risen and fallen sharply. Futures on the Dalian exchange for delivery in January 2022 are now trading at RMB 777 per ton. That compares with about...

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This Morning in Metals: Job openings, hires decline in August

This morning in metals news: job openings and new hires fell in August, the Census Bureau reported; steel producers in the U.K. are warning of an energy-related crisis; and, lastly, Liberty Steel received a £50 million boost that it says will preserve about 660 jobs. Stay up to date on MetalMiner with weekly updates –…

The post This Morning in Metals: Job openings, hires decline in August appeared first on Steel, Aluminum, Copper, Stainless, Rare Earth, Metal Prices, Forecasting | MetalMiner.

This morning in metals news: job openings and new hires fell in August, the Census Bureau reported; steel producers in the U.K. are warning of an energy-related crisis; and, lastly, Liberty Steel received a £50 million boost that it says will preserve about 660 jobs. Stay up to date on MetalMiner with weekly updates –...

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ArcelorMittal adds €50 surcharge on European longs products

ArcelorMittal plans to introduce a €50 ($58) surcharge on all of its long products in Europe in order to account for sharply rising energy prices, an official with the Luxembourg-headquartered group said. Stay up to date on MetalMiner with weekly updates – without the sales pitch. Sign up now. ArcelorMittal introduces new surcharge “The price…

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ArcelorMittal plans to introduce a €50 ($58) surcharge on all of its long products in Europe in order to account for sharply rising energy prices, an official with the Luxembourg-headquartered group said. Stay up to date on MetalMiner with weekly updates – without the sales pitch. Sign up now. ArcelorMittal introduces new surcharge “The price...

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Raw Steels MMI: Steel prices settle going into the fourth quarter

The Raw Steels Monthly Metals Index (MMI) dropped by 2.4%, as most forms of steel around the world declined, despite coking coal prices being at all-time highs. Do you know the five best practices of sourcing metals, including steel? Global steel produ…

The Raw Steels Monthly Metals Index (MMI) dropped by 2.4%, as most forms of steel around the world declined, despite coking coal prices being at all-time highs. Do you know the five best practices of sourcing metals, including steel? Global steel production According to the World Steel Association, global steel production declined for the fourth...

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Aluminum MMI: Aluminum remains high but stays below all-time high

The Aluminum Monthly Metals Index (MMI) went up by 3.1% this month, as all forms of aluminum jumped this month. We’re offering timely emails with exclusive analyst commentary and some best practice advice. Sign up here. Primary capacity interest Historical high prices, increasing demand and production cuts in China have opened a window of opportunity…

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The Aluminum Monthly Metals Index (MMI) went up by 3.1% this month, as all forms of aluminum jumped this month. We’re offering timely emails with exclusive analyst commentary and some best practice advice. Sign up here. Primary capacity interest Historical high prices, increasing demand and production cuts in China have opened a window of opportunity...

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This Morning in Metals: Anglo American explores integrating hydrogen into South African economy

This morning in metals news: miner Anglo American announced the results of a feasibility exploring the potential for hydrogen in the South African economy; General Motors last week announced plans to double its revenue; and, lastly, steel prices have showed signs of flatlining of late. Stay up to date on MetalMiner with weekly updates –…

The post This Morning in Metals: Anglo American explores integrating hydrogen into South African economy appeared first on Steel, Aluminum, Copper, Stainless, Rare Earth, Metal Prices, Forecasting | MetalMiner.

This morning in metals news: miner Anglo American announced the results of a feasibility exploring the potential for hydrogen in the South African economy; General Motors last week announced plans to double its revenue; and, lastly, steel prices have showed signs of flatlining of late. Stay up to date on MetalMiner with weekly updates –...

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Fabled One Payment Away From Owning Past-Producing, Silver-Gold Property in Mexico

Source: Streetwise Reports   10/11/2021

The acquisition of Santa Maria will afford Fabled Silver Gold additional exploration and mining opportunities.
 
Fabled Silver Gold Corp.’s (FCO:TSX.V; FBSGF:OTCQB; 7NQ:FS…

Source: Streetwise Reports   10/11/2021

The acquisition of Santa Maria will afford Fabled Silver Gold additional exploration and mining opportunities.

 

Fabled Silver Gold Corp.'s (FCO:TSX.V; FBSGF:OTCQB; 7NQ:FSE) mission is to acquire precious metal properties with blue sky exploration potential, in Mexico, and Santa Maria, which the company is four months away from fully owning, seems to be proving via drilling results that show that it fits the bill quite nicely.

 

"Santa Maria boasts a property-wide epithermal vein system, with some veins containing base metals along with silver
and gold." 

 

 

 

 

According to an agreement penned between Fabled Silver Gold and
property owner Golden Minerals Company (AUMN:CA) in December 2020, when the former company makes the final cash payment to the latter in February 2022, Fabled will own outright these 101 Chihuahua hectares containing very high grade silver and gold.

Santa Maria is in an advanced exploration stage, with a preliminary economic assessment (PEA) having been done already and updated in 2018. The property encompasses an underground silver-gold mine and, thus, represents a potential source of near-term production from an operation developed at low costs.

The PEA outlined an underground mine producing about 3,130,000 ounces of silver equivalent (average silver grade 331 grams per tonne [331 g/t]) over the estimated 4.2 life of the mine.

Santa Maria boasts a property-wide epithermal vein system, with some veins containing base metals along with silver and gold. The deposit features both oxide and sulphide zones.

The latest drill results are from holes SMUG21-16 and SMUG21-17, placed to test for mineralization at various elevations underground and to test for dike extension to the east, a news release noted. Both holes successfully defined the mineralized dike from surface to 310 meters (310m) below surface.

Specifically, SMUG21-16 intercepted the mineralized dike at the hanging wall structure at 74.8–79.9m downhole and from there, returned very high-grade, up to 418 g/t, silver equivalent. SMUG21-17 also intercepted the dike, but did so at about 75m below the noted SMUG21-16 intercept, or 310m below surface.

Results of the last hole of the 1,200m underground diamond drill campaign, SMUG21-18, are pending.

Though Santa Maria dates back to 1658 when it was called La Union, known mining took place there in the 1940s. Most recently, the project sat inactive between 2011 and 2014, and then Golden Minerals acquired and expanded the property. Between 2015 and 2018, that company conducted test mining and drilling there.

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Disclosures:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Fabled Silver Gold Corp. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Fabled Silver Gold Corp., a company mentioned in this article.

( Companies Mentioned: FCO:TSX.V; FBSGF:OTCQB; 7NQ:FSE), AUMN:CA, )

Cashed-Up Blue Sky Uranium Expects Drill Results at Ivana Targets Soon

Source: The Critical Investor for Streetwise Reports   10/11/2021

As the Sprott Physical Uranium Trust almost singlehandedly caused spot uranium oxide prices to explode recently, sentiment for uranium juniors turned …

Source: The Critical Investor for Streetwise Reports   10/11/2021

As the Sprott Physical Uranium Trust almost singlehandedly caused spot uranium oxide prices to explode recently, sentiment for uranium juniors turned pretty positive as a consequence. Because of these developments, the Critical Investor is interested in the current state of affairs at Blue Sky Uranium.

Ivana deposit; Rio Negro province, Argentina

After a lackluster summer so far for mining juniors in general, Blue Sky Uranium Corp. (BSK:TSX.V; BKUCF:OTCQB; MAL2:FSE) has been no exception, but continues to advance their flagship Amarillo Grande uranium project in Argentina. Despite the summer doldrums and negative sentiment in mining, the uranium price spiked in September fortunately, and Blue Sky Uranium didn’t stay behind. The sudden move of the uranium oxide spot price is shown on this up to date chart provided by Tradingview, taken from my website.

I used to take the chart shown on the Cameco website, with data provided by UxC and TradeTech, but the big disadvantage is the delay, as the data provided is updated only once a month. So this means violent moves like we are seeing lately are completely missed for the month of September, and this is not exactly useful for investors.

The cause for this dramatic move is assumed widely known by now, but in a nutshell it is the Sprott Physical Uranium Trust that is purchasing uranium oxide on the spotmarket in large quantities recently. It freed up cash to the amount of US$1.3B, culminating in adding 1.25Mlbs of O3O8 to its physical stockpile at one day. The trust started buying on August 18, 2021, and amassed 7.77Mlbs O3O8 on September 14, and I’m assuming this has grown to over 10Mlbs now, as huge buying lasted until September 21, 2021, causing the spot price to spike at US$51/lb O3O8.

Since then it dropped off to US$43/lb O3O8, and since 10Mlbs at an average purchasing price of say US$40/lb U3O8 equals US$400M, the Sprott trust still has about US$900M to spend. As everybody is waiting for utilities to start buying again, it seems Sprott is attempting to gobble up substantial amounts and take them off the markets (their other physical metals funds have the same tendency btw), to strain the buying of producers on the spotmarkets, so they will run into trouble to fulfull their long term contract obligations towards utilities. This can only work if you have a. huge amounts of capital at your disposal and outbid others, and b. if utilities are indeed close to buying large amounts for new long term contracts, so the Sprott Trust must be able to continue purchasing and strain the markets until utilities start buying.

"On September 28, 2021, the company announced the launch of a 3,500m reverse circulation (RC) drill program, in order to expand and upgrade the Ivana Deposit. The program will include about 260 shallow holes, as the mineralization is situated near surface (at -1m to -25m depth so far)."

If Sprott is just testing the waters they wouldn’t have let the spot price spike at US$51 by spending US$400M, as it would drop back again if they stopped purchasing heavily, and it is back to normal for all other parties involved. If Sprott was acting just to stockpile physical uranium oxide, it would have been much wiser to buy gradually on the spot market, at much lower prices. In my view Sprott has other plans and expectations. It was also interesting to note that Rick Rule recently mentioned that he didn’t see much upside in uranium stocks in the short term, right after the spot price spiked.

Although Rule recently retired officially from his managing roles at Sprott, he still is a director, and still plays an ongoing role in the management of certain Sprott investment strategies. Therefore, and as Rule still seems to be a force on the markets, I’m trying to decipher the Sprott uranium strategy. This entire first move could be a first gear of a multi-staged bull run on uranium, and ditto uranium stocks.

"Blue Sky Uranium seems to be perfectly positioned as a developer with an existing, growing resource and advancing it to PFS stage."  

Blue Sky Uranium is working hard to be ready for this bull market. After raising CA$5.46M at the end of January, the company went to the markets again in August, this time for another CA$2.13M. Since then, the company has been preparing for a new drill program that was announced on September 28, 2021, and it also mentioned a lawsuit by environmentalists, regarding the exploration permits. In this update the current state of affairs will be discussed with CEO Cacos.  

All pictures are company material, unless stated otherwise.

All currencies are in U.S. Dollars, unless stated otherwise.  

On August 5th, 2021, Blue Sky Uranium announced the closing of the final tranche of a CA$2.13M non-brokered private placement at CA$0.16, with a total of 13.32M shares issued, and a four month holding period. The financing units had full warrants, with an exercising price of CA$0.25, and with an exercising period of 2 years, expiring on August 5th, 2021.

There were CA$49k in finders fees paid, and in connection to this 306k finders warrants (same terms as the financing warrants) were issued to the finders. Proceeds will be used for exploration, and general working capital. So far for the basics. Raising over CA$2M isn’t a bad thing  for a mining junior, but there are certain aspects I would like to hear more details about.

For starters, the full warrant is something that you don’t see so often anymore, as usually investors are used to deal with half warrants the last few years. The second thing here is that I’m wondering why there had to be raised at another bottom, whereas the share price has reached highs up to almost at a double just a few months before this financing, and dilution could have been more limited:

Share price Blue Sky Uranium, 1 year timeframe (Source tmxmoney.com)

CEO Cacos had this to answer: “Having been in this industry for nearly 30 years, I have learned that being able to perfectly time the market for fundraising is not always possible. But given the potential size of uranium resources that can be found at the Amarillo Grande Uranium project, and the potential value that could be discovered, I think it will not matter in the long run whether we could have done a financing at 5 or 10 cents higher. Also, as the market had pulled back during this time, a full-warrant made the financing more attractive to these investors.”

Another important subject is the fact the company raised no less than CA$5.46M in January as mentioned.

With retiring a loan of CA$1.4M, doing process test-work and only completing 1,500m of cheap RC drilling at the Ivana North target at their Amarillo Grande project in Argentina until July, I wondered why the treasury arrived at just CA$1.2M at the end of June 30, 2021 according to the Q2 financials. Especially since the 1,500m of RC drilling didn’t seem to be paid out of the no less then CA$1.9M spent on exploration the first 6 months, as the company made the announcement in September 29, 2021 it entered into an agreement with arm’s length driller AGV Falcon Drilling to pay for their services by issuing 1.67M shares worth CA$344k, or CA$0.2063 per share, to preserve cash and the option to leverage a rising share price.

This share issuance is part of a deal worth CA$590k in three tranches, for the total drill program of 4,500m at the Ivana Central and Norte projects. I delved a bit deeper into the financials to seek further information.

The financials showed why exploration had seen CA$1.9M in expenditures on page 11:

The amount of expenditures still puzzled me, as drilling expenditures were mentioned, and RC drilling usually doesn’t cost more than CA$100-150/m all-in, so 1,500m would result in CA$225k max, this includes drilling, office, salaries, supplies, transportation etc. CEO Cacos had this to explain:

“COVID has placed great restrictions on how we would normally operate. There are strict protocols requiring much larger camps, not being able to use facilities in nearby towns, etc. The pandemic has also slowed down the pace at which we could carry out our work programs.”

I also wondered, as COVID-19 isn’t going away completely yet, if more significant overruns were to be expected in the upcoming drilling activities, as 6,500m of drilling has to be completed:

“Going forward, as matters in Argentina are improving, my team informs me that we will be able to begin to revert to more relaxed protocol procedures. Some of the workers will be able to commute from nearby towns so that we will not need to provide them with camps. With smaller camps, costs should be lower."

"We are now getting geared up to resume this program at Ivana North and to test Ivana Central and two other nearby targets to arrive at a total of 4,500 meters of drilling as you know. In addition to this, we just announced a 3,500 drill program to expand and infill our flagship Ivana deposit.”

He also mentioned to me that the issuance of shares for drilling was already included in the CA$1.9M exploration expenditures. This was explained by this statement under Note 5 in the financials, but not immediately clear to me as a non-accountant:

“As of June 30, 2021, the Company accrued $336,869 to be paid by in the future through issuance of the Company’s shares (see also Notes 3 and 9).”

"As our exploration programs have intensified, we also owe it to our shareholders to increase our marketing and investor relations programs. This ensures Blue Sky’s exploration activity reaches a wider investor audience."

Something what also wasn’t clear to me was that the company already entered into the aforementioned agreement with AGV Falcon Drilling on January 20, 2021, which wasn’t announced in a news release around that time, causing my misunderstanding (see under Note 9 of the financials):

“On January 20, 2021, the Company entered into an agreement with AGV Falcon Drilling S.R.L. (“Falcon”) to receive drilling services at its Ivana mineral property (Note 3) in exchange for payment in common shares of the Company. The agreement is for up to a total of 4,500 meters in drilling at a cost of US$131.17 per metre. The agreement calls for shares to be issued after each 1,500-metre tranche of drilling is completed. Shares issued under this agreement will be priced at the greater of (1) $0.13 per share, (2) the 10 day volume weighted average trading price of the Company’s share on the TSX-V prior to the share issue date and (3) the minimum share price as required by the TSX-V for the settlement of a debt by issuance of shares. The agreement grants the Company the right of first refusal to purchase the shares issued under this agreement for a period of three years from its inception.”

"As our exploration programs have intensified, we also owe it to our shareholders to increase our marketing and investor relations programs. This ensures Blue Sky’s exploration activity reaches a wider investor audience. The onset of a PR campaign is always more expensive than the ongoing maintenance of an engaged IR program, so I expect the numbers will taper off for the second half of this year."This clears things up for me, as the September 29, 2021 announcement in fact was a formalization of the January 20, 2021 agreement, setting the share price and number of shares. I also noticed CA$1M spent on Corporate Development and IR over the first six months of this year, so I wanted to know what kind of CD/IR was done here, and if it would continue at this burn rate. CEO Cacos answered:

As the company announced the start of a second phase test-work program in April of this year, targeting further process design tests for the Ivana deposit, I was curious about the status of this program. As a reminder, based on 2018 test-work, the overall process plant recovery was 85% for uranium (derived from 89% leach feed preparation recovery and 95% subsequent alkaline leach circuit recovery); and 53% for vanadium (derived from 89% leach feed preparation recovery and 60% subsequent alkaline leach circuit recovery). Since management is aiming at improving these already very good results, I was curious if they are succeeding at this.

CEO Cacos had this to say about it: “We have just shipped a bulk sample to the Saskatchewan Research Council where Chuck Edwards, a world-renown metallurgist and processing engineer, is carrying out advanced studies to improve recovery and cost for extracting uranium and vanadium. We will keep you posted as the studies progress.”

An update would also be welcome on the most important requirements for the upcoming PFS, which are permitting and project planning, the ramping up of engineering work besides the process testing, and the expansion and infilling of the existing Ivana deposit, already containing a NI43-101 compliant Inferred resource of 22.7M lb U3O8 and 11.5M lb V2O5.

On September 28, 2021, the company announced the launch of a 3,500m reverse circulation (RC) drill program, in order to expand and upgrade the Ivana Deposit. The program will include about 260 shallow holes, as the mineralization is situated near surface (at -1m to -25m depth so far):

The goal is to test the zone west of the current Ivana deposit where 2018 sampling returned strong results. Some infill drilling of this deposit will also be completed, in order to upgrade categories of the mineral resource estimate, necessary for engineering work for the PFS. According to CEO Cacos, he expects the first drill results to be announced sometime in Q1, 2022, possibly January.

As mentioned, the company is still in the process of completing a 4,500m reverse circulation (RC) drill program, aimed at identifying new uranium resources near Ivana and throughout the district, focusing on the Ivana North (IN) and Ivana Central (IC) targets, located 10 and 20km north respectively of the Ivana deposit.

According to CEO Cacos, Blue Sky Uranium has completed 1,591m of drilling at the Ivana North target, and drill results will be released very soon, according to him in the next couple of weeks from now. The second portion of the program (approximately 3,000m), focused on Ivana Central will resume once updated drill permits are received.

This is expected around in the fourth quarter of this year, and drilling can resume one to two weeks after this, and results can be expected two to three months later, so roughly around towards end of Q1 2022.

In general, the determination of further exploration plans is constantly under consideration, as management has set their goals high, aiming at expanding the existing resource towards 100M lbs U3O8.

As a reminder, this would improve economics substantially, as the 2019 PEA, based on the current 22.7M lbs U3O8 resource, shows a decent but relatively small post-tax NPV8 of US$135.2M, with a robust IRR of 29.3%, at US$50/lb U3O8. It is not unlikely to assume the post-tax NPV8 to triple if they indeed achieve a 100M lbs U3O8 resource, conservatively accounting for a longer mine life as well, which would discount future cash flows more, so the NPV wouldn’t equally more than quadruple just like the resource itself.

There would probably economies of scale kicking in, but I wouldn’t like to see a quadrupling in production, and a fourfold capex as a consequence.

Besides economics, permits are also part of every mining project as you know. Since environmentalists seem to have noticed the Amarillo Grande project, they launched a lawsuit against Blue Sky Uranium, in order to “assert environmental protection rights”, among other arguments, targeting their exploration efforts.

The defendants are the fully-owned subsidiary MCA and the Government of Rio Negro. Environmentalists can cause significant delays or even bigger issues for mining companies, but in this case the judge wasn’t particularly impressed by the case, as mentioned in the news release from September 16, 2021:

“A preliminary request by the plaintiffs to have exploration activities on the Project suspended until the “Amparo” final decision was denied by the Judge hearing the case. The Company is conducting further investigations, but based on information received to date, believes that the lawsuit is entirely without merit. 

The Company and MCA have obtained the relevant permits for all of its exploration activities to date and operated in full compliance with applicable laws and regulations and intend to vigorously defend the claim in Court. The Government of Rio Negro is also defending the claim. The Company will provide additional information as it becomes available. Further, this action does not impede the Company’s ability to continue with its exploration operations in a business as normal mode.”

Good thing is that Blue Sky Uranium can continue uninterrupted with their exploration programs, and most likely has nothing to worry about regarding this lawsuit.

CEO Cacos had this to add: “While we feel that this lawsuit is without merit, we take very seriously any actions that target our project or the activities of our project. As such, we will ensure to vigorously defend against this action. We feel the Government of Rio Negro will do the same as they have significant vested interests in the Argentinian uranium industry, and receive a lot of revenues from mining.”

Regarding exploration, as management contemplated earlier this year to look for potential for in-situ recovery (ISR) zones, analogous to the Kazakhstan mines with comparable geology, it was good to see this concept being elevated to an actual target zone (Zone 6 on the map below).

As a reminder, the redox roll-front concept which is responsible for a 270M pounds U3O8 resource at the Inkai ISR Mine in Kazakhstan is also applicable at the Amarillo Grande Project. In fact, the Ivana deposit itself is a hybrid deposit, in part a surficial deposit, in part a sandstone-hosted deposit.

Blue Sky Uranium has eight different exploration target zones, of which only half have been drill-tested. The red zone in the map below is considered the redox front by the company’s geologists.

According to CEO Cacos, the next step in their exploration programs will likely be to focus on the Ivana Deposit and the immediately surrounding targets: Ivana Central (2), Ivana North (3), Cateo Cuatro (4), and, Ivana East (5).

These are targets that if they yield significant uranium/vanadium resources, they could conceptually by mined using a mobile processing plant, thus minimizing additional capital expenditures.

The treasury currently stands at an estimated CA$2.5M after raising CA$2.13M, which should be sufficient to complete the ongoing drill programs, part of permitting, met work and engineering, and commence working on the PFS.

Conclusion

As Blue Sky Uranium raised more cash not too long ago, a new 3,500m RC drill program commenced just over a week ago in order to expand and upgrade the Ivana deposit, and the first results are expected in Q1, 2022, possibly January.

The earlier commenced 4,500m RC drill program hasn’t been completed yet as the company awaits drill permits for the last part, but the first results can be expected in the coming weeks. The process testwork is underway, just like engineering work for the PFS. As Sprott seems to be singlehandedly kickstarting the next uranium bull market, Blue Sky Uranium seems to be perfectly positioned as a developer with an existing, growing resource and advancing it to PFS stage.  

I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on www.criticalinvestor.eu in order to get an email notice of my new articles soon after they are published.

The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value.

Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.

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The author is not a registered investment advisor, and has a long position in this stock. Argentina Lithium and Energy is a sponsoring company. All facts are to be checked by the reader. For more information go to www.argentinalithium.com and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only, and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence, and talk to their own licensed investment advisors prior to making any investment decisions.

All presented tables are my own material, unless stated otherwise.

All pictures, charts and graphics are company material, unless stated otherwise.

All currencies are in US Dollars, unless stated otherwise.

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Resources Are In Correction Mode: What Will It Take for Gold to Move?

Source: Adrian Day for Streetwise Reports   10/09/2021

In his review of the past quarter, Adrian Day, founder of Adrian Day Asset Management, discusses recent moves in the resource markets and why he believes gold an…

Source: Adrian Day for Streetwise Reports   10/09/2021

In his review of the past quarter, Adrian Day, founder of Adrian Day Asset Management, discusses recent moves in the resource markets and why he believes gold and gold stocks are positioned to rise.

Note: in the first article in this series, Adrian Day discusses impending tapering by the Federal Reserve and its potential effect on U.S. markets. The second article discusses the macroeconomic environment in Europe, China, and emerging markets.

Resources: Corrections from previous moves continue

There have been significant corrections in many resources after recent market moves. Lumber is down 72% from its May peak; iron ore is down almost 50% in the past two months. Other than aluminum, up  14%, most metals were down this past quarter, on average nearly 5%. China buys about 50% of most commodities, so a slowing Chinese economy, particularly the property market, will hurt resources.

Energy prices have been the leaders in the past quarter, and year, with U.K. natural gas up 324% year to  date, while oil is up over 50% YTD, and coal anywhere from 34% to 238%, depending on the type and location. Restrictions on production of traditional energy sources were always going to have a result; someone (I forget who) commented a few years ago that “we will run out of supply before we run out of demand” and that is happening sooner than expected.

Tight supplies mean continued high prices, though as we have discussed before, there is no shortage of  spare capacity in oil from places that are not trying to eliminate carbon fuels (Russia and Saudi Arabia, for example), so oil prices in particular may retreat, particularly if the Chinese and global economies slow. And there are plentiful gas shales in many countries available if fracking is permitted.

Cautious on uranium for now

Nuclear power is clearly essential if economies are to produce sufficient power without emissions, and more people are realizing this after the frenzy to ban nuclear power a decade ago. As with oil, there is no shortage of potential supply, at least in the near term; both Kazakhstan, the largest producing country, and Cameco, the largest private producer, have deliberately withheld supplies to boost the price. This is what has made me cautious on uranium.

The demand has also been artificial: some uranium developers have been raising equity and using the proceeds to buy uranium in the market, while the largest impact on demand in recent months has been the new Sprott Physical Uranium Trust with its “At The Market” equity raise feature. This means that whenever the trust is trading at a premium, Sprott can sell new units in the market and use the proceeds  to buy physical uranium.

This they have been doing aggressively, raising the size of the program two weeks ago by $1 billion to $1.3 billion. (For context, the market cap of the Trust ahead of the announcement was less than $1 billion.) Uranium prices jumped 40% in the past month, the result of this buying. In the last week, however, the Trust has been less active in issuing stock and buying uranium, and the uranium price has plunged, by the largest weekly decline since January 2008. been slipping. This demonstrates clearly how  much the near-term price of the mineral is dependent on the Trust’s buying. Like all similar attempts to boost prices, whether short squeezes or attempts to corner markets, this makes me nervous. The optimistic view is that the recent price surge will push utilities towards making long-term contracts.

Longer term, the outlook for uranium is very bullish as China continues its nuclear power build, and countries from Japan to Germany realize, a decade after Fukushima, that they need nuclear power as a solution to this summer’s power problems. For now, however, we are standing aside.

Why has not gold responded more?

The big question on gold investors’ minds, for good reason, is why gold is not higher given the unprecedented money printing and rising inflation. The second question is when will it change?

To some extent, gold has simply been in a long consolidation after the extraordinary move early last year, when gold jumped over 30% from its end-March low to early-August high. That kind of move— in four months—is extraordinary for an asset that is intended as a hedge and an insurance. Gold is not supposed to do that. Bitcoin…Tesla…perhaps, but not gold! It has been a long consolidation, as month- by-month more and more people give up, while natural gold buyers feel there is no rush to invest.

Gold is down nearly 8% year to date, and down again in September, which is disheartening. But we should put that in context: gold was up 25% last year, so the pullback is less than one-third of the previous year’s move up. The current gold bull market started at the end of 2015, when gold hit $1,051. Gold cycles, both up and down, tend to be long; indeed the shortest have been the last two, in the 1970s and from 2001 to 2011. And it is not unusual for gold to have mid-cycle corrections, often caused by an extraneous shock. In the 1970s, gold dropped over 40% in a correction lasting 20 months. In 2008’s credit crisis, it fell nearly 30% in eight months. So far, this pullback has taken 15% off gold’s peak price  and has lasted just 13 months, well within norms for mid-cycle corrections. I would suggest that gold bottomed in March at $1,685, meaning the correction lasted less than seven months.

What is holding back gold?

There have been fundamental factors holding back gold, and three are most important. One is the dollar, which has moved up over the past several months as the “cleanest shirt in the laundry basket.” However low U.S. interest rates might be, they remain meaningfully higher than those offered by other major world currencies.

The second factor is that the stock market and other assets—including cryptocurrencies—have been doing well. So long as the stock market moves up, investors believe that gold investments can wait.

The third major factor holding back gold is the Federal Reserve’s constant threat to start tapering. The Fed has a history of talking more than doing, and, for reasons beyond me, the institution still has credibility. It is not only gold that has not responded to money printing and inflation, but other assets such as TIPs, commodities; none is acting the way one might expect, all seem to buy the Fed’s narrative.

Gold chart

Fed talk hurts more than the walk

The fact is that many times in the past gold moved down in advance of Federal Reserve tightening, responding to growing talk, but turned when it actually started to tighten. This is “buy the rumor, sell  the news,” only in reverse. Gold acts this way because all too often when the Fed does actually start to act, it is too little too late.

The Fed starting raising rates in August 2005, and again in December 2015, after months of discussion. In both cases, gold bottomed the same month rates started being hiked. Similarly in May 2013, when the Fed started talking about tapering, gold slid for the next several months. It was just before Christmas that we saw the first rate hike, and gold bottomed almost to the day.

The recent action has been frustratingly modest and volatile. However, the longer gold meanders in its current trading range, the faster and stronger the eventual move will be. In the meantime, gold investors can accumulate at prices that will appear very good in a few years’ time. They should not wait too long.

Gold stocks at historical lows

The major miners (per the XAU [Philadelphia Gold and Silver Index]) more than doubled in the end-March to early-August period last year, so they too have experienced a long consolidation. The stocks are now extraordinarily inexpensive, with the senior and intermediate gold companies trading in the lowest 25 percentile of their historical valuations, and more or less the lowest price-to-free cash flow ever. Given the price of gold…given the strong cash flows…given the improved balance sheets (the XAU is net cash positive today)…given the improved discipline among top mining companies, today’s low valuations are a gift.

We all know that gold stocks are volatile. It can be discouraging when a new stock you buy falls 10% in  the first week you own it. But that volatility works both ways, and once gold starts to move up convincingly, then the gold stocks will respond very strongly. It is worth noting that flows into gold ETFs and other investment vehicles are very procyclical, so we can expect flows to increase as the gold price moves up.

Seniors and juniors inexpensive

Although the major miners will be the first to move when gold turns, as well as the more certain to move, the exploration stocks are now at very low levels; we may yet see lower levels if tax-loss selling continues into year-end. This period will prove, I believe, to be an extraordinary buying opportunity for  the juniors and explorers as well.

Silver has been far weaker than gold over the past couple of months. Part of this is due to seasonal weakness as electronic and jewelry manufacturers—which combined account for about half of 2021 demand—take a summer break. The resurgence we frequently see in September, as jewelers buy gold and silver for the upcoming holidays, has not happened. In addition, we have seen investors who bought  into the “silver squeeze” story get exhausted and sell as the price has continued to decline.

We believe gold and silver both represent very strong buying opportunities and gold in particular has the   best risk-reward profile. We also are buying selective resources, notably copper and agriculture, where the supply side of the equation is as compelling as the demand, but are near-term cautious as China’s economy slows, particularly of specific resources where the near-term supply situation is not as strong.

Overall, we are increasingly concerned about the possibility of a near-term pullback in global equities markets, particularly given the overvaluation, as the Federal Reserve and other major central banks move, hesitatingly, towards some form of tightening. The global economy and debt situation are not secure enough to withstand too much tightening. This is temporary, and we are confident that they, and particularly the Fed, will start easing again within a year or so, favoring combatting economic weakness over fighting inflation. This will be very positive for gold and silver, which we believe are close to strong moves up.

Adrian Day, London-born and a graduate of the London School of Economics, is the founder of Adrian Day Asset Management. His latest book is "Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks."

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