Namibia: Madison Metals, Lux to create first non-fungible tokens for uranium finance

By David Whitehouse
Posted on Monday, 3 October 2022 12:20, updated on Tuesday, 4 October 2022 09:24

A logo showing an entrance to the Rio Tinto owned Rossing Uranium Mine in the Namib Desert near Arandis REUTERS/Siphiwe Sibeko

Canada-listed Madison Metals has reached a first of its kind agreement to secure funding for its uranium projects in Namibia through the sale of non-fungible tokens (NFTs), Duane Parnham, executive chairman and CEO, tells The Africa Report.

The company has reached a forward sales agreement with blockchain operator Lux Partners to deliver up to 20m pounds of U308 uranium oxide from Madison’s projects in Namibia. Fulfilment of the delivery would back the first-ever uranium-backed NFTs, and sales of the tokens will generate cash for corporate use.

The agreement will allow the company to access “significant funding at a premium” to analysts’ valuations of the company and has the potential to “revolutionise the funding of junior miners,” Parnham says. Production of uranium at the company’s projects remains several years in the future.

NFTs are certificates of ownership which started off as part of the Ethereum blockchain. Other blockchains have also started their own versions. People have held them to gain exclusive rights to digital pictures and videos, and may be able to profit if the price of those rights increases.

Madison shares were approved for trading on the OTCQB venture market in the US in late September. Lux, a fintech which is domiciled in the Isle of Man, will initially tokenize 7.65m pounds of U3O8 that Madison has contributed to the partnership. The plan is for the NFTs to be created on Lux Network and made available on every major blockchain.

  • Uranium, which is used as fuel for nuclear power plants, does not trade on an open market like other commodities, with prices negotiated directly.
  • That means NFTs can create greater market transparency, Parnham says. “Others will want to come into the eco-system.”

Uranium prices climb

The World Nuclear Association forecasts that global nuclear generation capacity will grow by an average of 2.6% per year to 2040. Namibia is the world’s second-biggest producer and holds the fifth-largest total uranium resources in the world. According to the Namibian Uranium Institute, uranium produced in the country supplies about 10% of the current world demand.

Prices have increased this year amid the energy crisis triggered by the Russia-Ukraine war. According to Cameco, prices had jumped to $51 per pound at the end of August from $43 at the start of 2022.

Madison has a series of uranium development projects in the country. In September, it agreed to buy a 23% interest in mining licence (ML) 121 in Namibia’s Erongo uranium province, where the company already holds rights to the (EPL) 7011 prospecting licence. That is adjacent to the Rössing uranium mine, owned by the China National Uranium Corporation, which bought a controlling stake from Rio Tinto in 2019.

Madison has also signed a binding letter of intent with local company Otjiwa Mining and Prospecting to buy an 85% interest in two further prospecting licenses. The area benefits from water, road and power access and there is a good chance that common infrastructure can be used for the projects, Parnham says.

  • The NFT finance will help Madison to keep drilling and advance its projects towards production, and give the company scope to start purchasing uranium itself, Parnham says. The agreement will “change the business of mining and accessing capital.”
  • The company is applying for more exploration licenses in Namibia, says Parnham, who has worked in the country for over 20 years.

Bottom line

Madison is betting that the crypto wealthy can be enticed into investing into uranium exploration and mining in their favourite currency.

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