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IsoEnergy: Hosting the World’s Highest Grade Uranium Deposit

DISCLAIMER: Any written content contained herein should be viewed strictly as analysis, observation & opinion and not in any way as investment advice. No compensation was received for this report. Visitors to this site are encouraged to conduct their own due diligence.

IsoEnergy (ISO) is a uranium exploration company which boasts 24 prospective assets covering over 241,000 hectares located in the infrastructure-rich eastern portion of the Athabasca Basin. Though overshadowed by the likes of NexGen Energy’s (NXE) Arrow and Fission Uranium’s (FCU) Triple R, IsoEnergy’s Hurricane deposit happens to be the world’s highest grade uranium deposit at 48.6M lbs grading 34.5% U3O8. Given an aggressive drilling campaign totaling 25,700m of drilling since winter 2022 alone (of which 6,800m exclusively for winter 2023) the possibility for additionally strong intercepts or even discoveries spread over priority projects such as Larocque East, Geiger and Hawk remains high. Developments at IsoEnergy (and at adjacent projects from Cameco, Orano ) are worth keeping tabs on. Note that in the past week alone, shares of IsoEnergy have advanced by +22% alone. Using a 1.00x NAV multiple we establish a C$3.95 price objective equating to 35% upside from the current 0.74x P/NAV level. We note that the risk remains on the upside given an aggressive current drilling program spread over numerous high priority targets.

As seen from the map below, unlike Arrow and Triple R, IsoEnergy’s projects are strategically much better located in the eastern portion of the Athabasca Basin. Not only is the infrastructure well built out in the east but every single prospective IsoEnergy project is located within 50km (at most) to uranium mills such as Key Lake, McArthur River, Cigar Lake, McClean Lake and Rabbit Lake.

Located just 35km northwest of the McClean Lake uranium mine and mill, the history of the wholly-owned flagship Larocque East property dates back to the mid 1970s. Consisting of 31 contiguous mineral claims, The property was originally staked in 1976 by Urangesellschaft Canada Ltd in partnership with the Saskatchewan Mining Development Corporation (SMDC). In total, the property encompasses nearly 16,000 ha. and was re-staked by Cameco (CCJ) in the early 1990s. Between 1998-2018, the property was owned by Denison Mines (DNN) and subject to an extensive EM surveying program along with a drilling program targeting specific conductors. IsoEnergy was formed in 2016, having been spun out from NexGen Energy. The Larocque property was acquired in May 2018. IsoEnergy to this day remains a 50.1% owned subsidiary of NexGen Energy.

In July 2018, drill hole LE18-01A discovered the Hurricane zone when a 8.5m interval returned elevated radioactivity averaging 1.26% U3O8, including a subinterval of 3.58% U3O8 over 2.5m. Since the initial discovery holes for the world-class Arrow and Triple R, the deposits (and with it, the respective companies) have grown to currently encompass the following figures:

Given subsequent drilling at Larocque post-2018 Hurricane discovery, the Hurricane Zone now measures 575m long, 75m across and up to 11m thick. The maiden resource was announced on July 18, 2022. Of note was the fact that nearly 94% of the contained metal is retained at a cut off grade of 10% - thus demonstrating that the Indicated resource is highly insensitive to cut off grade. More recent high-grade assays have included:

  • LE20-64: 5.0m at 48.8% U308 including 4.0m at 57.5% U3O8

  • LE20-68: 11.0m at 6.9% U308, including 1.5m at 49.3% U3O8

  • LE20-76: 7.5m at 38.8% U308, including 3.5m at 74.0% U3O8

For context, within the Athabasca Basin, the Hurricane deposit ranks near that of Denison Mines' Midwest deposit at 50.7M lbs and that of Cameco's Millennium at 76.0M lbs Measured & Indicated:

What places Hurricane above the rest of the Basin's significant deposits is the high grade nature of the currently defined Measured & Indicated resource. At a grade of 34.50% U3O8, Hurricane ranks well above Denison's Phoenix at 19.13% and Cameco's Cigar Lake at 14.05%:

A series of systematic step-outs combined with geophysics have identified the Kernaghan Trend of which 3.5km is covered by Larocque East. Of the 6,800m winter 2023 drilling program, 2,000m will be dedicated to targets on this particular trend while 4,800m will be dedicated to the Hawk property, located to the southwest of Hurricane. An EM survey conducted last year has identified multiple moderate to strong basement conductors. Moreover, the property contains at least 10km of prospective conductive strike. Other notable assets include Collins Bay which is located along trend (and within 7km) of the Rabbit Lake uranium mine and mill. Evergreen is another underexplored property which straddles the margin of previously defined conductors. Note that in December 2022, an upsized C$18.3M financing was completed.

Since early 2021, the company has been lead by the capable hands of Mr. Tim Gabruch who has 25+ years of experience in the uranium industry. He was most recently instrumental with Denison Mines' development of Wheeler River. Prior to Denison, he spent 20 years with Cameco in a multitude of roles spanning corporate development and marketing.

We value the Hurricane deposit using an in-situ $/lb multiple, partly based on precedent post-Fukushima transaction multiples within the Athabasca Basin.

We ultimately ascribe a $6.50/lb in-situ value to the currently defined Measured & Indicated resource, noting that a premium to average transaction multiple is more than warranted. This premium to the $4.12 average can be justified in a multitude of ways which make Hurricane all the more attractive when compared to peers. For starters, the aforementioned highest grades in the Basin are from a deposit currently considered to be relatively shallow at a depth of ~325m. The infrastructure in the eastern portion of the Basin is well developed while access to Orano's McClean Lake mill is just ~35km away. Moreover, ownership is clean at 100% and the asset is not encumbered by any royalty or interest.

Applying a 1.0x NAV multiple, our price objective of C$3.95 is derived, implying 34% upside from the current level. As mentioned before, note that the stock has increased by +22% in this past week alone. We believe the risk remains on the upside for a multiple re-rate higher which in the near term would be spurred by continued drilling success, not just from in-house projects but from nearby competitor projects (Cameco, Orano) as well. For anyone looking at exposure to the Athabasca Basin, IsoEnergy needs to be considered as part of a basket of notable uranium explorer/developers.


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