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We are initiating coverage of Pegasus Resources Inc. (PEGA) with a price objective of C$0.25 per share. This equates to upside of +61% from the most recent C$0.155 per share close. On the cusp of an inaugural drilling campaign, we feel that the near-term risk/reward dynamics warrant consideration. Provided a successful campaign, our C$0.25 per share price objective will closer align Pegasus’ valuation to the peer group. There are few publicly listed juniors operating in the Wyoming/Four Corners states with this combination of strategic location, historic data and prospectivity. The Pegasus story is worth telling, we certainly view the historic results and the close proximity to the needed mining infrastructure (the White Mesa mill) as meaningful positives. Successful de-risking of the asset may likely prompt an eventual consolidation play from the much larger Western Uranium & Vanadium (WUC) who own an adjacent deposit.
COMPANY OVERVIEW
Pegasus Resources Inc. is a junior exploration company with an asset base highlighted by properties in Utah. Located just 3.0km from each other, both the Energy Sands Project and the Jupiter Project have had historic drilling on site. Additional properties include the Pine Channel uranium project (north Athabasca Basin) and the Icefield Project (British Columbia). Company shares are listed on the TSXV under the symbol PEGA and are traded on the OTCQX Best Market under the symbol SLTFF. Its principal business activity is the acquisition and exploration of uranium and vanadium resource properties located in North America.
Pegasus Resources’ key property is the acreage assembled in Utah’s San Rafael Uranium District via staking since 2022 (Energy Sands) and via earn-in (Jupiter). Combined, these two properties encompass 2,520 acres situated adjacent to Western Uranium & Vanadium’s San Rafael deposit. Though we see these two properties as highly prospective, we highlight the following key points which when taken together, make the investment case into Pegasus Resources compelling on a risk/reward standpoint:
Mining at the Energy Sands project in the mid 1950s resulted in small scale production
of both uranium and vanadium (51.8 tons at a grade of 0.373% U3O8 and 1.10% V2O5).
Historic shallowing drilling at Energy Sands is highlighted by a 2.5ft intercept grading 3.41% U3O8 with an additional drill hole encountering 2.5ft grading 2.16% U3O8.
Jupiter is host to nearly 200 historic drill holes. Drilling was performed when the property was held by Atlas Minerals.
Both Energy Sands and Jupiter are located adjacent to Western Uranium & Vanadium’s San Rafael deposit which currently hosts a global resource of over 5.2M lbs U3O8 and over 7.0M lbs V2O5.
Successful exploration on Pegasus’ Utah properties may eventually lead to an economic resource in an area which has all the needed infrastructure for large scale mining and milling operations.
Given close proximity to the White Mesa mill (180km), the Shootaring Canyon mill (140km) and the proposed Macerick mill (6km) there is excess milling capacity in the area (from White Mesa alone). Additional feedstock to White Mesa is needed.
SAN RAFAEL URANIUM DISTRICT
The San Rafael Uranium District is located in east-central Emery County, Utah. The district is highlighted by Western Uranium & Vanadium’s San Rafael Project. The history of the Project dates back to 1880 when the area was being sporadically mined for both uranium and vanadium. From 1948 to 1956, production increased rapidly to 60,584 tons having an average grade of 0.25% U3O8 and 0.44% V2O5. In 1954, the U.S. Atomic Energy Commission (AEC) drilled six deep holes in the center of the Tidwell Mineral Belt and intersected well mineralized material, with private industry subsequently continuing with deeper drilling and discovering larger deposits at depths exceeding 300 feet. Production gradually decreased until 1971 when all mining ceased in the San Rafael Uranium District. the two core uranium deposits of Project; the Down Yonder and Deep Gold, were originally discovered by the Continental Oil Company (Conoco) and Pioneer Uravan geologists in the late 1960s and 1970s to early 1980s, respectively. Exploration drilling was conducted just east of the core of the Tidwell Mineral Belt and north-northeast of the Acerson Mineral Belt. The area containing the deposits was considered to contain highly prospective paleo trunk stream channel trends. Some of the larger historic producing mines in the area were Atlas Minerals’ Snow, Probe, and Lucky Mines. The deposits in the San Rafael Project are peneconcordant, channel-controlled, sandstone-hosted, trend type, with mineralization hosted in the upper sandstone sequence of the Salt Wash Member of the Upper Jurassic Morrison Formation.
Contact us for more research specifically pertaining to our October 22, 2024 initiation report on Western Uranium & Vanadium.
The Down Yonder deposit was discovered by Conoco between 1968 – 1970. In 1972, another deposit was discovered and developed at about 600 feet, and the Snow shaft was sunk on it by Atlas Minerals in 1973. The Snow, along with the Probe, both of which were worked by Atlas until 1982, turned out to be two of the largest mines and biggest producers in the district. Snow produced 650,292 lbs of U3O8 at an average 20 grade of 0.188% U3O8 while the Probe produced 293,985 lbs of U3O8 at an average grade of 0.186% U3O8. Within the district itself, to date, in excess of 4.0M lbs of uranium and 5.4M lbs of vanadium have been produced from over fifty mines in the San Rafael Uranium District between a period between the 1950s-early 1980s. The two highlight deposits encompass the Deep Gold Uranium Deposit and the Down Yonder Uranium Deposit. Following periods of ownership/involvement by Atlas, Union Carbide, Pioneer Uravan and EMC (among others), by 2007 Uranium One Inc purchased a package of uranium properties which included the Deep Gold deposit and the Shootaring Canyon uranium mill in Utah. Much of the property was subsequently acquired by Energy Fuels.
According to a November 2014 NI43-101 compliant Technical Report, the mineral resource for Western Uranium & Vanadium’s entire San Rafael Project comprises an Indicated mineral resource of 758,050 tons grading 0.225% U3O8 containing 3.404M lbs U3O8 and an Inferred mineral resource of 453,800 tons grading 0.205% U3O8 containing 1.859M lbs U3O8. Most of the mineralization is seen at about 775-970 ft below the surface in the upper sandstone horizon of the Salt Wash Member of the Upper Jurassic Morrison formation. Though low-grade, past mining in the Tidwell Mineral Belt produced vanadium as a co-product.
ENERGY SANDS URANIUM PROJECT
Pegasus’ wholly-owned Energy Sands project is positioned within the prolific Tidwell Mineral Belt of the San Rafael Uranium District in east-central Utah. Pegasus’ staking of the Energy Sands Project began in February 2022. At the time the project was highlighted by 30 unpatented lode claims totaling 600 acres. In November 2023, it was announced that additional staking adjacent to the property had increased the footprint of Energy Sands by over 160% given the addition of 48 new lode claims which totaled 960 acres. The greater Energy Sands project is strategically located approximately 4.0km from (and on-trend to) Western Uranium’s San Rafael Project.
Historic drilling detected sandstone-hosted uranium and vanadium mineralization. Small scale mining was conducted between 1953-1956 by the Minerals Corporation of America in two isolated regions of the Energy Sands property. Total production amounted to 51.8 tons at a notable grade of 0.373% U3O8 and 1.10% V2O5. Uranium mineralization on the project is hosted within the Salt Wash Member of the Jurassic Morrison Formation. Mineralization within the Tidwell Mineral Belt of the San Rafael Uranium District is oriented in a series of roughly northeast trends. Individual mineralized bodies are tabular to lenticular with the long axis aligned along the trend. This geological feature shapes the potential for resource exploration and development of economical uranium deposits.
Historical drilling conducted in the mid 1970s by Consolidated Monarch Metal Mines Ltd identified several near surface intercepts with high-grade uranium mineralization. The limited, near surface program was highlighted by the following intercepts:
The drilling summary included the fact that drill program calculations estimated approximately 1,168 tons of rock in place containing 15,350 lbs of vanadium and 43,230 lbs of uranium in a flat lying deposit at a depth of 9’ to 15’ below surface. These estimated tons were seen as readily available for mining.
In March 2024, Pegasus announced the results from a sampling program conducted on site at Energy Sands. Of 41 samples collected, 13 displayed uranium grades exceeding 1.0% with a notable sample being ESRS24-016 returning 18.8% U3O8 and ESRS24-007 returning 3.55%
The remaining 28 samples returned grades ranging between 0.5%-1.0% U3O8 (4 samples) and grades between 0.0%-0.5% U3O8 (24 samples). A RS-125 handheld spectrometer was used to gather the various samples. Note that the samples were collected from mineralized outcrops, tailings, and historical mine workings. This sampling program will aid in the identification of targets for the upcoming drilling program which is expected to begin sometime in early 2025.
JUPITER URANIUM PROJECT
On July 3rd 2024 Pegasus announced that it had secured exclusive rights to the Jupiter Uranium Project, located just 3.0km north of the Energy Sands Project. The Jupiter Project encompasses 48 unpatented claims totaling 960 acres. The claims occur in the Bureau of Land Management, and access is obtained over a well-maintained service road which joins I-70 near Green River, Utah. Between 1972-1983, the Jupiter Project was held by Atlas Minerals. During this period, nearly 200 drill holes were drilled with the highest concentration occurring in the northeast corner of Section 15. The historical drill logs revealed promising results, with notable uranium intercepts. Atlas Minerals was advancing the project towards full-scale mining before the collapse of the uranium market in the early 1980s.
As per the Project earn-in terms (amended on September 17, 2024), a share component, cash component and resource estimate component will lead to an eventual 100% ownership stake. As per the agreement, given that Pegasus has already issued 2.20M shares to the vendor along with the initial C$25,000 cash payment, the company is well on the way to earn a 75% stake in the Project seeing as a C$75,000 payment due before July 3, 2025 is still outstanding. Finally, the publication of a NI43-101 compliant resource estimate will further increase the ownership stake to 100%. Depending on the size of the future resource, contingent bonuses of C$100,000 for every increment of 500,000 lbs of uranium (up to 2.5M lbs) will be paid.
Note as well that upon completion of the agreement to 100% ownership, the vendor will retain a 2.5% NSR on the Project. A robust drilling program is already in the works for Jupiter with the concentration being both infill and twining drill holes. A geological model is also in the works to enhance the future property development plans.
EXCESS URANIUM MILLING CAPACITY IN THE AREA: EXPLORATION BADLY NEEDED
Utah is currently home to two fully built & permitted uranium mills (White Mesa and Shootaring Canyon) with a proposed third mill (the Maverick Mill) still in the early permitting stages. Though the Shootaring Canyon mill still requires substantial capex to re-start, all conventional uranium mining in the area revolves around the White Mesa mill, given that it is the only conventional uranium and vanadium mill currently operating in the US. At a licensed capacity of 2,000 TPD or for 8.0M lbs of uranium per year, the mill has ample capacity for additional feedstock. Owned by Energy Fuels (UUUU) since acquisition from Denison Mines (DNN) in 2012, Energy Fuels is currently mining and stockpiling uranium ore from its Pinyon Plain, La Sal and Pandora Mines. By late 2024, the expectation is for a ramp up of production to approximately 1.1M-1.4M lbs of uranium by late 2024. This expected amount is a far cry from the stated currently licensed capacity of 8.0M lbs per year at White Mesa. At most, the mill has produced between 4.0M-5.0M lbs per year, but that rate was only achieved for 1-2 years many years ago. Within a 500km radius of White Mesa, we just don’t see the resource base needed to feed the mill to even near licensed levels. Ultimately, there is substantial excess milling capacity at White Mesa, and for this reason the company has branched into separate circuits to recover vanadium and rare earth elements (REEs) as well.
Between public companies such as Energy Fuels (UUUU), ISO Energy (ISO), Western Uranium & Vanadium (WUC) and Anfield Energy (AEC), a substantial resource base doesn’t exist yet split between their respective uranium projects, all within a 500km radius of White Mesa. For this reason alone we see that exploration and drilling within the White Mesa periphery will be paramount for conventional uranium mining going forward. For context, though most of the mines in the area (listed in exhibit 10, below) average uranium grades between 0.20%-0.30%, some higher grade deposits such as Pinyon Plain average grades closer to 0.60%. It would take roughly 3-4 similar higher grade mines coming into simultaneous production in order to fully supply that much ore to feed the White Mesa mill in order to produce 8.0M lbs of uranium per year. Meaningful exploration in the area is desperately needed.
Due to the lack of currently booked uranium resources, Energy Fuels has a toll milling agreement for White Mesa with IsoEnergy’s nearby Daneros, Tony M, Sage Plain and Rim mines. Further such agreements are expected to be announced by Energy Fuels in the months ahead. Ultimately, exploration companies in the area need to devote capital to prove out new potential mines and (hopefully) grow and upgrade the resources at current mines. Given Pegasus’ close proximity to the White Mesa mill (180 km) these dynamics play well into ambitious exploration plans at both Energy Sands and Jupiter.
TIER 2 PIPELINE PROJECTS: PINE CHANNEL, ICEFIELD
Pine Channel
Located at the northernmost edge of the prolific Athabasca Basin, the pine Channel project is a drill-ready uranium property consisting of 6 mineral claims encompassing 6,028 hectares. The property is underlain at shallow depths (60m-100m from surface) by the structurally complex Tanto Domain, which is host to numerous uranium, copper, nickel and gold occurrences. One specific trend has been defined to be approximately 2.5km long as defined by both airborne and ground electromagnetic (EM) surveys. Historic drilling by Denison Mines in the 1970s included several highlight intercepts:
PN-79-1: 0.028% U3O8 across 1.2m
PN-79-2: The 0.0062% U3O8 across 0.6m
PN-79-3: The 0.039% U3O8 across 0.7m
Pegasus has the opportunity to earn into a 100% interest in the property assuming a combination of share based payments, cash payments and exploration expenses.
Icefield
The Icefield Project includes three properties along a trend situated along the British Columbia – Alberta border. Historic drilling and mapping has occurred with several high grade polymetallic intercepts detected.
Gold Mountain is an early-stage gold/silver property located approximately 50 km NW of Golden, BC, just north of Highway 1. The property is comprised of two mineral claims over 802 ha and encompasses the historic Grizzly occurrence featuring gold and silver hosted within polymetallic quartz / carbonate veins.
The Vertebrae Ridge property consists of two mineral claims totaling over 2,871 ha and is approximately 30 km NW of the Gold Mountain property and 80 km NW of Golden, BC.
The Punch Bowl property consists of three mineral claims totaling 3,079 ha and is approximately 90 km NW of the Gold Mountain Property and 140 km NW of Golden, BC. The property surrounds the historic Punch Bowl showing where discrete quartz-gold veins are hosted within quartzites and pelites of the McNaughton Formation.
The properties are located within the main ranges of the Rocky Mountains near the British Columbia – Alberta border. The majority of the Punch Bowl property lies within the lower Gog Group McNaughton Formation along two NW-SE trending faults (the Chatter Creek Fault and McGilvray Fault). Roughly half of the Vertebrae Ridge Property lies within the Lower Gog Group Jasper Formation, with other portions of the property laying within the Waterfowl, Stephen, Whitehead and Cathedral Formations consisting of course clastics, mudstone, shales, and limestones, respectively. The Gold Mountain claims lay within the Lower Chancelor Formation which consist of limestone, slate, siltstone and argillite. The trend which the two properties lay on is of significance as it has potential for Fosterville like deposits hosted within turbidites of the Gog Group. A number of untested syenite bodies along with regional geochem survey anomalies occur along this trend and would be interesting targets for further regional gold exploration. Pegasus has the opportunity to earn into a 100% interest in the property assuming a combination of share based payments and cash payments.
PEER COMPARISONS
Our US based peer group includes a group of companies which are still pre-production and pre-PEA/PFS (specifically speaking - more recent PEAs or PFS’). Though Western Uranium & Vanadium (WUC) is currently stockpiling ore, they neither have their own mill nor do they have a more recent economic study. All other relevant, pre-production comps include Premier American Uranium (PUR), GTI Energy (GTR), Nuclear Fuels (NF), Myriad Uranium (M) and Strathmore Plus (SUU). As can be seen from the graph in Exhibit 12 below, producers and more senior developers are listed on the higher part of the comp group while the more representative group of junior exploration/development companies are listed on the bottom half of the table. Note as well that some of the more junior companies listed bellow do have some booked resource, either NI-43-101 compliant or as with the case of GTI Energy, JORC compliant.
VALUATION
We see the best comparisons with Nuclear Fuels, Myriad Uranium and Strathmore Plus, owing to the fact that all three companies are pre-resource. Moreover, much like Pegasus, all three peers are busy advancing their respective flagship assets which have all had extensive historic drilling in the 1970s/early 1980s – Nuclear Fuels with the Kaycee Project, Myriad Uranium with the Copper Mountain Project and Strathmore Plus with the Agate Project. Recent developments this year have included:
Nuclear Fuels: Drill hole JD24-002: intersected 5 separate mineralized intercepts with a single 8.0 foot interval returning 0.205% e U3O8 for a Grade Thickness (GT) of 1.640 and a total hole GT of 1.821. Drill hole JD24-063 at the Stirrup East Zone returned 0.107% eU3O8 over 4.5 feet, with a GT of 0.482. As part of the first drill program at Kaycee a total of 107 holes were drilled at an average depth of 499 feet. 83% of the holes returned anomalous uranium; 18 of the drill holes returned a GT of 0.2 or better. A Technical Report released in October identified an exploration target between 11.5M-30M lbs.
Myriad Uranium: Recent drilling at Copper Mountain continues to validate the historic drill results. Inaugural drilling specifically at the Canning deposit (strike length of 2,500 feet) revealed highlight intercepts such as CAN0013 (1,881 ppm eU3O8 over 8.20 feet), CAN0021 (2,530 ppm eU3O8 over 6.56 feet) and CAN0023 (1,644 ppm eU3O8 over 8.53 feet). The Canning deposit has a historical resource estimate ranging between 8.8M-19.0M lbs.
Strathmore Plus: Phase 1 drilling recently tripled the length of the mineralized trend at Agate. Given 100 exploration holes drilled over the project area, the lower sand’s norther trend was extended to 3,700 feet in length. Highlights from the drilling campaign included AG-175-24 (7.5 feet of 0.128% eU3O8), AG-200-24 (15 feet of 0.116% eU3O8) and AG-162-24 (16 feet of 0.067% eU3O8).
Ultimately, valuing any pre-resource exploration company is difficult – more so if also pre-initial drill results as well. For benchmarking purposes, we can see the stage set from the three peers listed above however. Following largescale initial drilling campaigns, the EVs range between C$9.2M-C$19.4M (average C$15.1M). For this reason alone, we view the upcoming inaugural drilling campaign to be the single largest near-term value driver for Pegasus. With an inaugural campaign targeting 23 holes between Energy Sands and Jupiter (averaging ~420 feet per hole), successful data collection, historic confirmation and positive grade continuity will be the critical elements needed to create value and further de-risk the property. In anticipation of the drill results, we establish a C$0.25 per share target which would equate to an EV closer to ~C$7.0M which would still be on the lower end compared to the peer group. This price objective somewhat reflects the smaller inaugural drilling campaign and overall life of project drilling at both Energy Sands and Jupiter. The C$0.25 per share target equates to upside of +61% from the most recent close. Keep in mind however that as we await results from the winter 2025 drilling campaign, positive high grade results can certainly surprise further to the upside while consequently, drilling a series of misses can easily lead to undershooting the target.
CONCLUSION
Ultimately, valuing any pre-resource exploration company is difficult, even more so if also pre-initial drill results as well. Therein however lies the opportunity at this early stage. We note that Pegasus’ budgeted C$380,000 inaugural drilling campaign roughly equates to Strathmore’s Phase 1 drilling budget of C$365,000 (converted from $USD) from last spring. The individual drill holes will have more length however – 23 holes averaging 420 feet in length compared to Strathmore’s Phase 1 average drill hole length of 150 feet. The lengths proposed by Pegasus come closer to Nuclear Fuels’ drill holes which average ~550 feet per hole to date. The upcoming drilling campaign will robust as 15 holes will be targeted at Jupiter (mostly to infill and twin) along with 8 holes targeted at Energy Sands.
Ahead of a highly anticipated drill campaign, we like the internal fundamentals as well given the recently closed financings (a combined C$1.5M given tranche 1 having closed on September 3rd and the final tranche having just recently closed on November 15). Moreover, given where both Energy Sands and Jupiter are located, provided a successful drilling campaign (and subsequent follow-up campaigns), we see the Pegasus story as one within a broader theme of property consolidation. It would be only natural for Western Uranium & Vanadium to act as consolidator and build upon its currently booked resource at San Rafael. This point becomes more prescient the more they speak about building the Maverick mill, just ~6.0km away from the Pegasus properties. Regardless, even if Maverick never comes to fruition, badly needed feedstock will still be necessary for White Mesa or even possibly Shootaring (if that mill ever gets refurbished). Given the near-term drivers, we feel the risk/reward dynamics justify an early-stage investment. The risk remains on the upside to our C$0.25 per share price target.
NEAR-TERM TIMELINE & POTENTIAL CATALYSTS
Winter 2025: Jupiter drilling (15 holes for approximately 6,300 feet)
Winter 2025: Energy Sands drilling (8 holes for approximately 3,360 feet)
2025: Jupiter Earn-in completion ($75,000 needed before July 3 2025 for a 75% stake)
OWNERSHIP
Management, insiders and board members own a combined ~8% of the issued & outstanding Pegasus Resources shares. There are 29.53M shares (basic) outstanding.