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Eclipse Metals has several drill-ready targets and looks well positioned to take advantage of renewed strength in uranium price

Snapshot

Eclipse's projects sit in one of Australia's richest uranium districts

Eclipse Metals -

Quick facts: Eclipse Metals

Price: 0.01 AUD

ASX:EPM
Market: ASX
Market Cap: $14.15 m
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Which way will uranium jump in the new paradigm that the coronavirus is creating?

So far, the signs are good.

“I see a lot of light at the end of the tunnel for uranium,” says Carl Popal, the chief executive of Eclipse Metals Ltd (ASX:EPM).

“The spot price has done very well. It’s up around 40% in the past month. The US has budgeted for 2021 US$1.2bn towards nuclear energy research and development related programs, and they want to expand on that.”

And in the meantime, the world is waking up to clean air - in some cases for the first time in living memory.

“Take India,” says Popal. “For the first time in most peoples’ lives, you can see a kilometre ahead of you in New Delhi. Humanity’s current best and proven option at hand for decarbonisation is nuclear energy.”

With the coronavirus crisis, long-established paradigms are changing in front of our very eyes, and the world, says Popal, is waking up to the reality of what a carbon-free future could actually look like.

To fuel it, he says, nuclear will inevitably be part of the mix.

And that’s where Eclipse comes in.

The company has several projects in the Northern Territory of Australia, one of the world’s premier uranium mining addresses.

“The Northern Territory produces a large chunk of the world’s uranium from the Alligator River Uranium Province,” explains Popal.

“That’s where we have our five tenements.”

The lead project, Devil’s Elbow, has already yielded extremely high-grade results from surface assays, trenching and drilling, including 3.2% U3O8, 3.7% U3O8, 4.40% U3O8 and 5.8% U3O8. High-grade gold and palladium showings have also been encountered.

Devil’s Elbow was first discovered in the 1980s by Uranerz (Australia), which brought with it its German technical pedigree. It was followed by the Canadian giant Cameco (TSE:CCO), but the promising showings were never converted into anything more meaningful.

That wasn’t because the ground didn’t have the potential though. Quite the contrary. But Cameco didn’t have access to enough acreage across the whole tenement to make a go of it. Eclipse though has access both to historical Cameco areas and to the south of the Ranger Fault.

The company is also adept at social relations, which is essential in this area.

“The Alligator River Uranium Province isn’t Crown land, it’s Aboriginal land” explains Popal. “You need a land access agreement with the aboriginal people.”

Eclipse’s relations with the aboriginal communities are on a very sound footing and have been for some time. Eclipse took the land over in 2010 and ratified consent to negotiate an agreement with the traditional owners in 2014.

The company then allowed the project to be worked in joint venture by the international major Rio Tinto (LON:RIO) from 2016. Under the terms of this agreement, it was Rio Tinto’s responsibility to conclude negotiations on the land right agreement with the traditional owners. However, after two years the conditions precedent in the deal were not satisfied, and accordingly, the agreement automatically terminated.  

“We had the option to allow Rio Tinto an extension to our agreement,” says Popal, “but we decided to grab the bull by the horns and deal with it ourselves

Accordingly, a land access agreement was put in place in December 2019, and Eclipse is now cleared for exploration and drilling, allowing that some further delay will be inevitable due to the coronavirus.

The company has seventeen robust walk-up drill targets that have been defined within the Devil's Elbow exploration licence based on the integration of all geophysical products generated from Cameco Australia’s historical geophysical surveys.

“As soon as we’re able to put the coronavirus behind us we want to go and drill,” says Popal.

“We have enough funding to drill some of the targets. To really get a proper understanding of large geophysical anomalous targets you’d want to put a few deep diamond drill holes in, and spend a couple of million.”

Accordingly, the company undertook a fundraising at the beginning of April, not long after Popal had taken up the reins as executive chairman, after taking a break for personal reasons.

“We’ve now got enough funding to carry out the first stage of exploration drilling,” he says.

“It will be targeted drilling, going for priority one and two targets, initially to prove that the anomalous ground area has got the signature properties that we’re looking for.”

So how long is the coronavirus hold-up likely to be?

It’s an open question of course. But nevertheless, it’s worth bearing in mind that drilling is and of itself a fairly isolated activity. The company has to be mindful of local aboriginal needs, in particular, that the aboriginal people may differ in their immune response to coronavirus. So they could well be more vulnerable.

But all told, it seems likely that ground exploration and drilling will be underway within a month or two. That’s the time when the company’s intuition that Devil’s Elbow’s similarities to the nearby Ranger and Jabiluka projects will be tested properly. And the time when the current meagre valuation could start to enjoy significant correction on the market.

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