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Uranium Royalty expects sector turnaround, targets acquisitions after C$30M IPO

After a recent C$30 million IPO on the TSX Venture Exchange, Uranium Royalty Corp. is on the hunt for assets as it looks to grow its streaming and royalty portfolio, President and CEO Scott Melbye told S&P Global Market Intelligence in a Dec. 17 interview.

"Eventually we'll have 50 to 100 royalties and streams and be diversified across the global uranium market," Melbye said.

Uranium Royalty has also closed a series of acquisitions that added to its royalty portfolio. Recent deals included a 0.5% net profit interest on the Reno Creek project in Wyoming, a 1.97% net smelter royalty on the Roughrider project in Saskatchewan, and a 2% gross revenue royalty on the Michelin project in Newfoundland and Labrador, Canada's easternmost province. The projects are respectively owned by Uranium Energy Corp., Rio Tinto and Paladin Energy Ltd.

The company's launch comes amid a tough uranium market that has seen key producers including Cameco Corp. curtail production due to low prices. Spot uranium prices have largely traded between US$20 per pound and US$30/lb over the past four years. Cameco CEO Timothy Gitzel has said uranium prices over US$40/lb are needed to justify bringing production back online.

To Melbye, the ongoing market challenges are an opportunity for Uranium Royalty to make acquisitions ahead of a possible turnaround in the uranium sector. Melbye sees the market improving in 2020 and gaining further ground over the next five years or so. A market turning point came in 2016 when major producers began cutting output, helping rebalance supply, the CEO said.

"That was key," Melbye said. "Now, obviously, it takes a while for the market to draw down excess supplies. But the right things are happening in a market that consumes more than it produces. At some point, the pendulum swings."

The company's model is straightforward, borrowing from the playbooks of royalty and streaming companies, Melbye said, pointing to the precious metals sector, where the likes of Franco-Nevada Corp. and Wheaton Precious Metals Corp. have emerged as key funding sources for mine developments. Melbye is hoping that Uranium Royalty can be a source of funding for uranium developers.

"We want to put the companies that have the greatest likelihood of success into our portfolio," Melbye said, declining to go into specifics about potential acquisition targets.

The bulk of Uranium Royalty's portfolio comprises projects that are in development or mines that have been suspended. But cash flow will increasingly become a priority, according to Melbye.

"Visibility to cash flow is something we're focused on and investors are focused on," the CEO said. "But we do have to get out of the chute here and grow the company first."