Madison Metals (CSE: GREN) (OTCMKTS:MMTLF) is a uranium resource developer with a first-of-its-kind twist: Its as yet unmined uranium is backing a Non-Fungible Token (NFT) operated by Lux Partners Ltda private financial technology company based on the Isle of Man.
So how does this work, and how does it improve the odds of a positive investor experience?
Let me explain.
Madison Metals is a CSE-listed company with a well-seasoned management team who are exploring a uranium project in Namibia with a historic uranium asset estimated to contain over 9 million pounds. That’s according to a 2015 resource estimate prepared by SRK Consulting.
Lux Partners Ltd. Lux operates Lux Networkthe first decentralized blockchain integrated with and operated by a network of regulated bank and money transmitter partners.
Lux has agreed to ‘tokenize’ up to 20 million pounds of as yet unmined uranium, which it will market to interested parties as an NFT. Each NFT will be backed by one pound of Madison’s uranium. The funds realized from the sales of NFTs (plus transaction fees and royalties) will be returned to Madison to provide a non-dilutive alternative to exploration financing.
“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 Duane Parnham, executive chairman and chief executive officer of Madison Metals in a recent press release.
So, instead of issuing shares to raise capital, which by the very act of dilution reduces shareholder equity relative to the value of the resource in the ground, the company is ‘forward selling’ up to 20 million pounds of its uranium to Lux.
The benefit of this approach is evident in Madison’s share structure. The company has a grand total of 20.5 million shares issued and outstanding – a compact issuance that bodes well for future share price performance. Total fully diluted shares amount to an equally palatable 29.3 million.
The upside for shareholders means Madison will have recurring revenue throughout the exploration and development phase.
This innovation provides Madison shareholders with a way to partially monetize its uranium resource to fund further uranium resource development without relying on stock market sentiment to achieve financing.
In the current environment, that is a truly groundbreaking development, which underscores the culture of outside-of-the-box thinking inherent in Madison’s management team.
According to Zack Kelling, Lux Partners CEO, “Through staking, users are exposed to the upside of the uranium market while also earning additional fees from lending and liquidity. By digitizing assets, Lux expects to unlock greater price discovery, asset value and liquidity throughout the entire mineral extraction life cycle.”
Madison Metals uranium will become available for staking on the Lux Network on October 15th,but will be available on any and all NFT exchanges after that.
In a tiered pricing model, Madison will sell an initial US$30 million worth of U3O8 at US$17.50 per pound, after which it kicks up to an average price of about $40 per pound for the balance of the 20 million pounds.
Of course, it’s not necessarily a slam-dunk that the company will realize the full value of the 20 million 1pounds allocated to Lux. But if you compare the level of global interest in uranium mining to the exploding interest among NFT enthusiasts, it is easy to imagine that there is an entirely new audience for an NFT that is actually backed by a physical energy commodity like uranium.
Uranium demand increasing
Nuclear power plants generate roughly 20 percent of the electricity used in the United States and are the country’s largest source of emissions-free electricity. According to the Nuclear Energy Institute, US nuclear plants prevented the emissions of more than 476 million metric tons of carbon dioxide in 2021.
With the sabotage of the Nordstream 1 and 2 pipeline now sure to increase energy availability pressures on Europe just as winter approaches in the northern hemisphere, companies like Madison could become important components of revitalized zero-emission energy mandates.
And with newer nuclear power generation technologies advancing relentlessly toward safety and stability within the process of nuclear fission, there is incrementally less safety risk.
According to Spherical Insights“The Global Nuclear Power Plant Equipment Market size was US $31.72 billion in 2020. The market is projected to grow from US $32.44 billion in 2021, then to US $38.82 billion in 2030, growing at a CAGR of 2.6% in the 2021-2030 period.”
NFT Market Still Growing Despite Q3 Weakness
Coin Telegraph reports the NFT market breached the 11 million ETH mark for the first time in three months, while the number of NFT holders grew 32.24% along the same timeline, as shown below.
Madison Metals and Lux Partners’ novel approach to capitalizing exploration through NFTs is a brand new approach to raising capital less dilutively than issuing shares and warrants. Investors thus gain exposure to the upside in uranium demand and industry growth, and NFT investors get exposure to uranium prices at a discount.
If this works out as expected for Madison, it could be a paradigm shift in the way natural resource exploration and development gets funded.
Learn more at https://madisonmetals.ca