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 Fri Jan 6, 2023
KW Excerpt: Kaiser Watch January 6, 2023: Canalaska Uranium Ltd (CVV-V)
    Publisher: Kaiser Research Online
    Author: Copyright 2023 John A. Kaiser

 
Canalaska Uranium Ltd (CVV-V: $0.320)
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Kaiser Watch January 6, 2023: Introducing the 2023 Favorites
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(0:11:55): Canalaska Uranium is the only uranium junior in your 2023 Favorites. What are your thoughts on uranium and why pick Canalaska?

2022 was a pivotal year for the uranium sector, partly because the Sprott Physical Uranium Trust and uranium optionality companies were active purchasing uranium in the spot market for stockpiling purposes, which helped U3O8 establish a new trading range in the $45-$60/lb range. That is still below the $80/lb needed to justify developing new uranium mines, and Kazakhstan as the biggest producer with an apparent ability to lift supply to meet rising demand remains the biggest obstacle to higher prices. Much more important for the uranium juniors was that the energy transition finally got legs when Biden managed to get the Inflation Reduction Act passed, which reinforces the need for nuclear energy to provide baseload electricity when solar and wind power are not generating electricity. That does not mean places like the United States will build new large scale nuclear power plants, but the pace of decommissioning will slow, as turned to be the case with Diablo, California's only nuclear power plant. However, there is growing interest in small modular reactors, a new smaller scale technology that will take less time to permit and install. SMRs are not a replacement for large scale baseload nuclear power, but are suitable for remote locations. This could be a new source of demand for uranium.

The Russian invasion of Ukraine also helped out because it highlighted the profound foolishness of Chancellor Angela Merkel's knee-jerk response to Fukushima in 2011 when she pulled the plug on Germany's nuclear energy sector in favor of increasing dependency on Russian gas. As things turned out Merkel's pandering to the anti nuclear lobby led to increased reliance on thermal coal combustion, a step backwards for Germany's energy transition goals. The irony is that the anti-nuclear lobby overlaps with the anti-fossil fuels lobby, an example of how unthinking purist demands can backfire in the face of practical realities. Germany is in a pickle because if it chose to restart its nuclear power plants it would take several years to recertify them so that they can be restarted. On the plus side Poland, which relies heavily on coal which it also mines and has no nuclear power plants, is going ahead with two nuclear power plants. Japan, which has only 9 of 54 reactors operational, has relied on LNG imports to generate electricity from natural gas. Germany never did allow Nordstream 2 to start delivering gas, and during the summer Russia cut off Nordstream 1 supply.

The hope that Russia would one day resume pumping gas to Germany evaporated when both pipelines were ruptured by mysterious undersea explosions which were clearly an act of sabotage requiring a sophistication normally possessed only by state actors. Fingers have been pointed at both Russia and the United States who have submarine fleets capable of executing such an act of sabotage, but neither has an obvious strategic benefit from such an act and way bigger problems if proven to have been responsible. However, taking Russian gas offline indefinitely is of major financial benefit to natural gas producers who can convert domestic surplus supply into LNG and ship it to places like Japan and Germany. It's quite possible that a private sector group pulled off this stunt with the help of a mercenary group; the assumption that it required a high degree of sophistication to be undetected may be wrong. The Russians and Americans monitor everything underwater in the Baltic and North Seas, so it is odd that no grounded accusation has surfaced. It might have been an operation too low-tech to be detected, with both American and Russian officials scratching their heads about the culprits.

In any case, Japan now has to compete with Europe for LNG imports which has focused Japan's attention on the idea of restarting more of its nuclear power plants. But this faces a new challenge in that during the past decade the worker force with technical knowledge about operating nuclear power plants has slipped into retirement, and what young person will have pursued an education related to nuclear energy? In this regard the small modular reactors become important because they are likely to be installed and operated a lot longer than older large scale power plants.

Putin's noises about reconstituting the Russian Empire has made the "stan" countries like Kazakhstan nervous, and since they are all autocracies, the United States and its allies are unlikely to lift a finger if Russia were to invade any of them. But even if this were to happen, China, which eventually will be the world's biggest uranium consumer, will buy uranium from whoever runs Kazakhstan, so there really is little risk that uranium production from Kazakhstan will stop flooding the market. But the fragmentation of the global economy into geopolitically constrained trading zones could become a problem for France and the United States, which is why I am mainly interested in juniors exploring for uranium in Canada's Athabasca Basin which hosts the world's richest uranium deposits.

Canalaska Uranium is my uranium 2023 Favorite because it has an emerging high grade discovery on its West McArthur project that has a geological context which allows us to dream about a McArthur River scale discovery. Canalaska did enough drilling in 2022 with an inadequate rig to furnish data allowing management to believe it understands the geometry of this system between 800-1,200 m depth. Drilling will resume in Q1 of 2023 with a proper directional rig and by the end of Q2 we may have confirmation that the emerging discovery at West McArthur qualifies as world class.


 
 

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