Metal Tech News - October 3, 2022
Is digitizing and selling mineral resources still in the ground the future of financing mineral exploration and mining projects? Madison Metals Inc. believes it could be and has signed a historic agreement to contribute up to 20 million pounds of uranium from resources at its projects in Namibia to support the first-ever uranium-backed NFTs.
NFTs, or non-fungible tokens, are unique digital assets that are recorded on blockchain similar to cryptocurrencies such as Bitcoin or Ethereum. The major difference, however, is the non-fungibility of NFTs, which means each token is uniquely identifiable. This would be similar to cut diamonds, with each one being unique and having its own value based on its characteristics.
NFTs linked to both digital and physical artworks rose in popularity during 2021, creating a craze that has faded in 2022. However, many fine art brokers, such as Sotheby's, have created marketplaces to sell art-related NFTs.
Lux Partners Ltd., which operates the first decentralized blockchain integrated with and operated by a network of regulated bank and money transmitter partners, is adding uranium-backed NFTs to its Lux Network.
Lux will initially tokenize 7.65 million lb of uranium that Madison has contributed to the Lux partnership.
According to the Lux market website, investors will gain "unprecedented access to both uranium markets and the expected upsides from holding a key clean energy resource" by purchasing NFTs equivalent to one pound of uranium from future Madison mines for US$35.
These tokens are scheduled to begin selling on Oct. 15, and Madison has contributed another 12.35 million lb of uranium for Lux to tokenize as markets dictate.
"We are pleased to form this strategic alliance with Madison's resource team to support the launch of Lux Uranium and the Lux Network (Lux.Network) of blockchains, which powers the minting, trading, and staking of the NFTs," said Lux Partners CEO Zach Kelling "By digitizing assets, Lux expects to unlock greater price discovery, asset value, and liquidity throughout the entire mineral extraction lifecycle."
The cash generated by the Lux Uranium NFT sales, which would be US$700 million if all the current and future tokens sold at the originally offering price, plus royalties from trading fees, will go to Madison.
"Having the ability to potentially monetize our uranium resources at a premium using innovative technology provided by industry leaders is a testament to our forward-thinking strategy to deliver shareholder value," said Madison Metals Executive Chairman Duane Parnham.
The ability to buy unmined Madison uranium via an NFT comes at a time when nuclear is increasingly being considered as a top option for weaning the world off carbon dioxide-emitting fossil fuels for energy generation.
The one pound of U3O8 purchased with a Lux Uranium token will produce a pellet capable of generating the same amount of energy as 17,000 cubic feet of natural gas, 149 gallons of oil, or one ton of coal at well under 1% of the CO2 output.
Many experts see nuclear power plants fueled by uranium as a key baseload power provider to grids fed with the intermittent energy generated by wind and solar.
The anticipated increasing role of nuclear in the clean energy mix is forecast to create a uranium supply shortage in the coming years.
A shortfall Madison plans to help fill with the development of mines at its project in Namibia, a forward-thinking mining country that currently accounts for roughly 8% of the global uranium production.
Madison's uranium properties are close to current and past producing uranium mines in Namibia, which offers the advantage of existing infrastructure that helps to lower the costs and speed the development of mines.
The cash generated through Lux Uranium NFTs is expected to further bolster Madison's ability to quickly begin producing this increasingly popular low-carbon energy fuel.
"We believe there are many benefits to forward selling a portion of our assets in this way," said Parnham. "We expect it to provide non-dilutive capital to explore, develop and mine our properties while also generating additional revenue through token trading fees."