Uranium-backed digital tokens not dead – Parnham

Madison Metals CEO Duane Parnham

Madison Metals CEO Duane Parnham

30th June 2023

By: Darren Parker

Creamer Media Contributing Editor Online


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After uranium developer Madison Metals’ initial attempt to provide the world’s first uranium-backed non-fungible token (NFT) fell through in April, CEO Duane Parnham tells Mining Weekly that the idea is still very much alive and that a revised offering with a fungible token (FT) will hit the market within a few weeks.

“We have found an amazing group of developers, marketers and cryptocurrency personalities that have had huge success in the crypto market space, and arrangements are moving fast. We're probably weeks away from making an official announcement. We're that close,” he says.

NFTs and FTs are digital assets stored on a blockchain that represents ownership or proof of authenticity of a unique item, piece of content or, in this case, a share of a particular commodity. This means that a uranium-backed digital token represents ownership or value connected to a specific amount of uranium.

Parnham explains that, under the new deal to put uranium-backed FTs on the market, Madison will be responsible for the sales forward agreement of uranium.

“We're providing the in-ground verified resources at this stage. This means that the development team can put out an FT token that's backed by Madison's uranium. It's not Madison's token, but it's Madison's forward sales agreement that backs the token,” he explains.

In April, Madison terminated its NFT partnership with venture capital firm Lux Partners, ascribing the dissolution to challenging market conditions and an unfavourable economic climate, which Parnham said had made it difficult to continue the partnership.

One of the contributing factors to the decision to end the partnership was developments involving financial services company Stripe, which provides the payment processing platform used by Lux. Stripe froze Lux’s funds and then terminated the account used last year, thereby disrupting key banking and financial operations.

Given the challenges in creating a satisfactory product that both parties can trust, Madison and Lux agreed to refund any NFT purchases that had been made up to that point and for the companies to move forward independent of one another.

However, despite the unsuccessful partnership with Lux, Parnham still believes the concept has legs.

He says that, for the first time ever, retail investors can participate in what has historically been an opaque trading environment with respect to uranium, owing to it being a hazardous material with various restrictions placed upon its trade.

“Other than buying uranium directly from a miner like Madison on a sales contract basis, the only other way ‘Joe Retail’ could play in uranium as a commodity was through either a participation agreement or through the purchase of futures,” Parnham says.

He believes the digitisation of assets presents a real and measurable opportunity for the creation of additional funding streams. Since the usual buyers of uranium are typically utilities, governments or trading houses, the introduction of uranium-backed FTs means that a fourth market can be opened up.

“I've experienced increasing difficulties trying to fund early exploration ventures, and it's getting harder and harder every day. The ability to bring capital into these early startups has been getting more difficult. This is why we have been looking at ways to innovate and tap into other forms of market – such as the crypto market,” Parnham says.

He believes the demand for uranium is set to increase in the coming years owing to the urgent need for cleaner energy sources globally, which makes it an ideal time to bring a uranium-backed FT to market.

In particular, the demand for triuranium octoxide (U308) – also known as yellowcake uranium – has caused global supply to be put under strain.

“There is a tightening of physical U308 availability. Most of it is starting to get bought up for a number of reasons. One reason is that governments are starting to realise that nuclear energy is here to stay. Another reason is that there are new participation units and funds starting up, which look to mop up any remaining physical supply,” he explains.

He believes that, if the entire market moves towards the buying up of futures, then the tokenisation of integral resources would amount to future resource contracts on a blockchain.

“I think the whole platform regulatory environment in the US is going to enable the tokenisation of more of these types of assets going forward. I think you're going to see more and more of this in other commodities,” he says.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online


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