CATALYST ALERT: Cigar Lake suspension extended for “indeterminate period”

The World’s largest uranium mine, Cigar Lake, is now on care and maintenance for an “indeterminate period” after Cameco announced yesterday that it would extend the 4 week temporary production suspension announced on March 23. Whilst its hard to say how long “indeterminate” could be – Cameco’s massive McArthur River mine was suspended for an “indeterminate period” almost two years ago – Tim Gitzel noted that Cameco was “especially sensitive to the situation in the remote, isolated communities of northern Saskatchewan that are home to a sizeable portion of the workforce at Cigar Lake”. The “situation” Gitzel refers to is the intense vulnerability of remote indigenous communities and a historical backdrop with which he wants no association – the decimation of many northern indigenous communities during the Spanish Flu. That situation won’t be resolved for many months, possibly only once a vaccine is available. And every month that Cigar Lake remains down reduces 2020 uranium supply by 1.5 million pounds.

…the [uranium] sector is already in a deep deficit and 2020 production is likely to widen the deficit by a further 10-20Mlbs, quite possibly more.

As I wrote on 25 March, COVID-19 is a serious supply disruption to a sector that was already in deficit by around 20 million pounds U3O8 (11% of global uranium consumption). This latest news follows Kazatomprom’s 8 April decision to reduce production at all Kazakh mines for 3 months, removing more than 10Mlbs U3O8 from 2020 Kazakh production, and adds to other supply disruptions, including at the giant Rossing and Husab mines in Namibia.

Of the ten largest uranium mines in the world, only BHP’s Olympic Dam has not, as yet, had its uranium production affected to some degree.

The spot price has rallied 20% since the first COVID-19 supply disruptions were announced, with a corresponding rally in equities (including Bannerman Resources, which has recovered the losses inflicted by the COVID-19 market rout). 

However, the financial community is only just starting to talk about “the other yellow metal”, with uranium raising eyebrows because nuclear power demand is not expected to have any material decrease during COVID-19 power reductions. Unlike other commodities, where an investor needs to weigh supply disruption against demand destruction, the picture for uranium is very clear: the sector is already in a deep deficit and 2020 production is likely to widen the deficit by a further 10-20Mlbs, quite possibly more.

Oh, and there has been no change to the uranium macro factors that generated the superb risk/reward set up prior to COVID-19:

  • Nuclear power (ie uranium demand) is growing steadily with almost 20 reactors scheduled for start up in the next 12 months.
  • Existing uranium supply is depleting as numerous mines reach the end of their lives between 2021-2025. Current idled capacity is not enough to bridge the gap.
  • Secondary supply is decreasing as excess enrichment capacity tapers off.
  • Current uranium prices are well below the current cost of production for many mines.
  • Advancing new uranium mines takes years and the 9 year bear market has led to underinvestment in exploration and development; only a handful of mid-large uranium projects have environmental approvals and definitive feasibility studies in place (Bannerman’s Etango project in Namibia is one of those). All of these need higher incentive prices.

Now is a great time to refocus on uranium investment opportunities, including Bannerman. Please let me know if you would like a telephone call or Zoom presentation to get back up to speed on uranium.

Brandon Munro is CEO of uranium developer, Bannerman Resources ASX: BMN, and regular uranium market commentator on CRUX Investor and CRUX Club.

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Bernie Sanders Withdrawal Excites Uranium Bulls

Bernie Sanders’ withdrawal from the US presidential race has gone largely un-noticed by uranium sector investors.  After all, he was no longer the Dems front-runner and his policies seemed too whacky to be taken seriously.

But for nuclear fuel buyers, this is a big deal.  And hence, it is a big deal for uranium.

You see, nuclear power utilities don’t like uncertainty.  They plan in decades.  And their preference is to buy uranium in decades – via long term contracts – thereby neatly mitigating supply and pricing risks against their long term power projections.  Traditionally, utilities have been quite willing to pay substantial premiums to lock in uranium supply that removes supply uncertainty.

For US fuel buyers, however, the last few years have created an unprecedented level of demand uncertainty.  When President Trump came to power, many US utilities were facing a barrage of commercial competition, from cheap shale gas and the market distortions generated by breathless calls for renewable energy subsidies.  The Democrats had seen a renewable future that tolerated nuclear power to lessen the burden of fossil fuel, but had no interest in supporting a future vision of nuclear.  Then Westinghouse went broke.     

A Sanders presidency would have been a death knell for many US nuclear plants…

And let’s not forget that US utilities have been contending with two years of uncertainty generated by the s232 petition, the subsequent investigation and continuing delays in releasing the recommendations from the Nuclear Fuel Working Group.

But there was one uncertainty that gnawed at utilities’ confidence and might have handed them a reason to kick the procurement can down the road for another six months.

What if Sanders got in?  His policies were stridently anti-nuclear – and his populist followers wanted a revolution (NB: revolutions are not known for using reliable facts and logic to provoke enthusiasm).  A Sanders presidency would have been a death knell for many US nuclear plants – and would have made 5-10 year planning a lowest-common-denominator game.  Long term fuel procurement would have to wait until the utilities figured out which of Bernie’s crack-pot ideas were for show (and which were for genuine infliction on the capitalist pigs that produced America’s largest source of carbon-free energy, inadvertently saving millions of lives in their apparent pursuit of endless greed).

COVID-19 chaos – and its rampage through imbalanced US society – has wobbled the return of Trump that was near-certain only 3 months ago. Whilst a Sanders turnaround in the Dems primary race was a small chance, if his competitor is a fellow septuagenarian these chances can’t be ignored by conservative utilities.  And what if the Democrat convention is postponed?  And what if the election itself is postponed?  And what if…(insert chaotic COVID-19 outcome here)?  “What-if” is a close cousin to “wait-and-see” – both of which supress the panic that should be flooding the hypothalamus of a fuel buyer as he reads about another uranium mine shut-down.

All these what if’s have now been spirited away to the great revolution graveyard in the sky.  A centrist Biden presidency might not be quite so gushing towards nuclear power, but it would not be hostile and ought to be comfortable with the status quo. 

And status quo is just what utilities crave when forced to make procurement decisions.

Brandon Munro is CEO of uranium developer, Bannerman Resources ASX: BMN, and regular uranium market commentator on CRUX Investor and CRUX Club.

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Time To Grow Up and Get Your Pyjamas On

My kids drive me nuts.  My youngest son spends most days in his pyjamas playing computer games. My youngest daughter complains about never having enough data whilst she is creating her next Tik-Tok or editing videos of one of the animals being “so cute”. Each of our kids has three screens; a phone, iPad and a laptop. I don’t remember sanctioning any of those purchases. I don’t see my kids for large parts of the weekend, as they are playing on their computer. It’s perfectly normal my wife tells me. It can’t be I say.

So to counteract this growing behavioural trend, we decided to take the kids on a 3-week trip to Asia at Christmas. Exquisite beach hotels, swanky City hotels, lots of day trips on boats, up river, out to sea, up mountains, fish-markets, elephants, nature walks, temples, rural villages, making hats from leaves… Something of a memory lane for me, as I had grown up for large parts of my life in Asia. These day trips usually involved mini-bus and being driven to a variety of locations.

I loved looking out the window of the bus and watching people going about their lives. The economies of these Asian countries are thriving, especially in the big Cities. In my day, there were thousands of bicycles and small motor-cycles which drove the economy. These days its trucks and cars that block the roads, and pollute the air so much so that pedestrians have to wear face-masks to venture out on to the sidewalks.  But in the rural towns and villages, it is still the humble motor-cycle that pulls makeshift trailers and laden with wares, and I mean laden. There is art-form to stacking a motor-cycle 2-meters high and 2-meters wide with chicken cages, hay or even people. Head-on they look like a motor-home approaching, but the distinctive ‘put-put’ mutter from the small motor is a giveaway. One enterprising gentleman on a scooter caught my eye.  It seemed he had just collected his wife and new born child from hospital; his wife riding pillion, holding the delicate new-born child and a suitcase; as the husband weaved his way through the crowded traffic, whilst holding a saline drip suspended from bamboo cane. A very perilous construct, but life moves on.

I turn around every 15 mins or so and say, ‘look at that guy with the 3 goats on his back’, or ‘what an amazing looking temple’. Silence from the back. Heads are down and buried in their phones. I try to engage them. My wife tells me not to worry. All rather a depressing. There were good moments too, lots of them, but that stuck with me.

Back home, my eldest son, who is still at school, is a digital consultant to our business. He throws Gary Vaynerchuk quotes at me, whilst downloading the latest social media business app, which as it turns out saves us 40% on our film-editing time. And there has been a lot of that. It turns out we don’t have to hire a new social person as the App he has identified can create and schedule all our social media activity weeks in advance and collate the statistical analysis for us. He has an awareness to Brands, Apps, Enterprise software, business models revolutionising different sectors. I’m starting to feel out-dated and out of touch. But I couldn’t be prouder of him.

My technology exchanges with my son made me realise that my generation is guilty of being a bit out of touch and not listening to our kids. We need to take a look at the life they inhabit. Take a look at their norms. How do they interact with the world around them? My youngest son isn’t playing on his computer; he is playing, laughing and talking online with his friends. They are having as much fun as I used to kicking a ball around or building toy models from balsa wood. We have to look up and see what our kids are doing today, listen to them, as they are ones that will inhabit and define the future. The types of jobs that they will have probably don’t exist today.

In this virtual world, they have to think differently. 

The schools and Universities we herd our children to are slowly making changes to subjects. And kids are accessing the information that they need online and digesting the information in different ways. They are equally comfortable with and reliant on technology. They are self-learning from a very early age. The online games that they play on their computers are teaching them skills they will need in the future. I see that now.

However, what it has created is opportunity for investors. That was a cold segue! But tell me you didn’t think the same thing. Hear me out.

I was first subjected to this phenomenon when Mine-craft first surfaced. I was even dragged to a 2-day event at Disneyland Paris. I have never felt more out of touch in my life. Even that time when my then girlfriend was trying to teach me the dance moves to ‘Don’t Blame it On The Boogie’ didn’t even come close. Thanks for trying Siobhan! Then the sequence of ‘must have’ software games started to invade our house.

The gamers that my kids watch online are multi-millionaires. And there are lots of them because there are billion dollar industries being started in bedrooms all over the world. These gamers are sophisticated business people and have built up huge followings by recording themselves or playing live acting like kids, bantering with their mates, laughing screaming and quite often swearing. YouTube pays them through a share in advertising revenue that they generate. These gamers are lauded by their avid followers and wanna-be hoards of children in bedrooms all over the word. And right now I am lauding them too for their financial acumen.

Apparently, the best players do online collaborations. It has got professional. Some players have built teams around them. The compete for honours and money. Big online events where people pay money to watch the best players and best teams battle each other online. You can even bet on the outcome of the game. There are currently about 500,000 frequent and occasional viewers. In addition, there are conferences all over the world holding events where you can pay to watch the same guys you pay to watch battle online battle each other live. Most professional real-world sports teams like soccer and football have e-sports equivalents. These professional gamers wear the team jersey and are sponsored or paid by the club. They are representing! And some of these guys make millions, but without the danger of brain injuries and ligament damage.

I was not aware of the scale of this industry until about a year ago, when someone asked if I wanted to invest in a HK based e-sports team. They sent me many large tomes about the industry, the training methods, the selection process, the competitions, the turnover, business plans… these are sophisticated operations. They know where the cash is and how to structure an organisation to put them in a position to extract it. In this virtual world, they have to think differently. Their cost structure is different. These teams are popping up all over the world. Some are going public. Could these companies be part of our future investment portfolio? Probably. But first we need to understand the sector. Like all sectors in their infancy, there will be winners and losers. Hopeful, enthusiastic management teams with no commercial acumen, need to be separated from the herd. This a fast-moving sector, but the fundamentals of business and investing still apply.

We are going to interview several of these over the next few weeks to learn more. Why not come along for the ride with us? Send us your questions and we will put them to these companies, or go and do the research for you.

An Interview with Mark Selby, CEO of Canada Nickel

Nickel forecasts make extremely good reading at the moment and with very few mines capable of coming online in the next 3-years, investors are clambering for big, solid deals which can get in to production. Could this be one?

Nickel: The New Gasoline?

A statement of emphasis, intrigue and opportunity, but one that demands investigation.

  • The Creation of Canada Nickel
  • Structure & Management
  • Business Model & Strategy
  • Nickel Market & Equities
  • How do Investors Get Involved?

Click here to watch the interview.


The pillars of validity supporting this statement were revealed by Canada Nickel CEO, Mark Selby, in an interview with Crux Investor.

After nearly 20-years in the nickel business, Selby announced the launch of his new enterprise last week. Drawing knowledge from “10-years and $100M” of investment in the Dumont Project, this latest venture has induced more excitement for him than any that have preceded it.

Structure & Management

Having departed the Royal Nickel Corporation, investors saw Selby as the ideal candidate to drive the project forward.

Selby was keen to stress his focus on implementing “the right corporate structure.” Canada Nickel will be “dividend out of Noble Mineral Exploration Inc.” It will be a “clean, brand-new company,” with 50M shares outstanding after financing is complete.

By taking this approach, Selby claims to have severed himself from the shackles of a legacy structure with legacy shareholders. He has begun the assembly of a new management team to propel the company forward.

Business Model & Strategy

Selby states the potential for exploration at the Crawford Ultramafic Complex is “tremendous.” The 3.5km body has shown great promise, exemplified by the December 2018 phase 1 drilling program. Unlocking the value of the site for shareholders is central to Canada Nickel’s business model.

In addition, several other opportunities have caught the attention of the company. Exploring these will create a portfolio of assets that could render the company ‘the go-to for Nickel sulphite investment.”

However, Selby insists Crawford is the pre-eminent project on the Canada Nickel agenda.

Another element of Canada Nickel’s business plan is to overcome the difficulties associated with investing in Nickel. Unlike Copper and Gold, aside from the ASX, platforms for Nickel investment have been lacking and the market has become somewhat forgotten for the last ten years.

Nickel Market & Equities

Selby warns against the presumption made by some investors that prices will increase linearly. For investors today, he expects a rollover of Nickel prices by the end of the year. A “big spike” is expected after an influx of scrap and NPI into the market which will need to be worked through over six months. However, he is confident of a return to an upward trajectory after this period.

While this will likely result in an initial “dampening” of equity for new investors, Nickel has been proven to move in relatively predictable cycles. At the end of 2005, Nickel prices rolled over off a peak, but just 6-months later prices had nearly quintupled. Nickel’s status as the best performing base metal by a wide margin can provide prospective investors with additional confidence.

Selby advises investors to take advantage of Nickel prices falling and position themselves strongly. Every 15-20 years, Nickel prices have moved in “super-cycles.” While the date of potential spikes is not definitive, increasing demand over the next decade creates a strong likelihood of exciting Nickel markets in the near future.

Robert Friedland’s quotation, that Nickel is the new gasoline, is reinforced with solid statistics. Robust Nickel demand growth occurs at a rate of 4-5% per year. By 2030 we will need 2Mt of Nickel per year, in a market which only generates 2.4Mt of supply in the present day.

The potentially exponential growth of demand has been capitalised upon by Canada Nickel; the marketplace is almost completely devoid of projects, so Selby has secured a strong position for the company by delving into the market at this particular time.

How do investors get involved?

Noble Mineral Exploration Inc. and Spruce Ridge will be receiving Canada Nickel shares. Noble will dividend 10M of the 12M shares to its shareholders.

Between now and when public trading commences later this year, the only way to invest is to purchase shares from Noble or Spruce Ridge.

Selby states now is the right time to get involved given the current valuation point of Nickel. New Nickel discoveries have exited at valuations exceeding a billion dollars in previous cycles: enough to excite any investor.

The anomalous readings at Crawford.

Interview with Mike Young, CEO of Vimy Resources (ASX:VMY)

CRUX Investor had the pleasure of catching up with Mike Young, the CEO of Vimy Resources. Throughout the interview, we address issues such as, is there really such thing as a free spot market? Is 232 not a matter of National Security? How will Vimy Resources assure they don’t miss this selling window?

We discuss the Cost-Cutting measures implemented, their business strategy going forward. We learn about their two projects, Alligator River and Mulga Rock, the plans of renewing the DFS on the latter, whilst also moving Alligator River forward. This is no mean feat, and Mike discusses how it will be possible financially. Is this a project you want to invest in? Listen, Learn and Decide.

Matthew Gordon: Okay, so first things first, you did raise, I think, was it about AUD $1.8M? So why did you do that?

Mike Young: So we needed to top up our working capital, It was coming down towards the end of the financial year. We had a remaining capacity of about 37M shares which we used up. That has brought on some new people to the register, a few new Uranium-specific investors that we are were really pleased with, some of whom your listeners would know. And then we had some really good support from our existing shareholders as well. As I say it was $1.8M because of the remaining capacity. Now the ASX says I’m not allowed to say it was oversubscribed, so I won’t.

Matthew Gordon: Don’t say that. So tell me, what’s the use of proceeds there? I mean, what’s going to use for? Because, and the reason I ask is, obviously, when we spoke last, we recognised the fact that the smaller companies would, depending on the outcome of 232, which we’ll talk about in a minute, may need to top up just to keep the lights on, keep things moving along. You have a DFS which you were going to revisit, you’re obviously continuing to work on Alligator River. But you’ve got a bunch of overheads as well. I think some people are talking about salaries, and overheads, and G&A, what have you been doing about that?

Mike Young: I’ll discuss all those. So obviously, the Alligator River is our main project that we’re doing fieldwork on. So just so your listeners are left with no doubt, Mulga Rock remains our premier project. It’s a big project, 3.5Mlbs a year. You know it needs, as I’ve said before, $55+ price to work and we need the market to come up to meet that. We did a DFS on that. The DFS was completed over 18mths ago and so we necessarily have to reset some of the figures in when moving forward. So we’re doing a refresh study on that to look at the areas of the DFS that may need to be recalculated. Now there will be no new engineering. The plan that we want to use to mine it and to treat the ore will not change. It’s just looking at, you know, have costs per human capital gone up, have cost for machinery gone up or down. And in the discussion I had this morning with an engineering company that helped us on one of the phases, they said they really have not seen prices move very much, even though we’re in a mini Iron Ore boom at the moment. It’s not like the last boom where wages got out of control. Our second project where we are doing field activities is Alligator River. We want to do some drilling up there. We’re waiting for another company to finish with their diamond rigs so we can bring it over to Alligator River and do some holes in both Angularli and Such Wow. And I’m just absolutely pumped. I hope I can get up there while the rig’s on site to see the core come out. But I’m really pumped about drilling Such Wow. And then you asked the question about the overhead, sorry just going to grab some water.

Matthew Gordon: Why don’t you do that, don’t want to lose you mid-interview.

Mike Young: It is the afternoon here. So is this really water? Yes it is. So, funny story right? It’s Canada Day today. And the first Prime Minister of Canada, Sir John A Macdonald gave a very passionate speech one time about the Intercontinental railway. And he spoke for quite some time. And as he was speaking, he was drinking quite a bit of water that turned out it was actually gin. So it’s always,… I’m very proud of that as a Canadian, but to your listeners that is water. But with the Section 232 sometimes I feel like having gin. Anyway, what was the next question?

Matthew Gordon: The next question was, well I think you were just going to tell us about some of the working on Alligator River and maybe give us a sense of out of the $1.8M how much is going onto the projects. So how much is being spent refreshing the DFS at Mulga Rock, how much are you going to be spending on Alligator River moving forth over whatever period you’ve defined the $1.8M to be used against.

Mike Young: The Alligator River budget is about the same as it was last year. It’s a shade over $2M which we’ve already spent some of that. We’ve had heritage surveys, Aboriginal meetings on site. We have payments rents and rates, payments to the Aboriginal people so. So we’re starting to eat into that budget a bit. So we will this year again because of the market situation and cash situation will be a small program but it won’t go over $2M for the entire field season. The one thing about Alligator River though is that we don’t have the luxury of waiting for the market to improve and raising money at a later time, because of the wet season. So once October hits you’re pretty well packing the camp up, getting it you know cyclone proofed, putting everything away and you wait until you come back in the following May. So because of that, we do want to do some field work. The guys are up there doing ground geophysics. They’re doing ground sampling. But we want to poke some holes in those targets and that’s something we’ll do this year. And we do that in response to how much money we’ve got. One thing I am really proud about the guys is they spend money very wisely on that Alligator River project. And we get a lot of information for the spending.

Matthew Gordon: C.$2M on Alligator River. How much cash did you have before the raise?

Mike Young: If you had gone through our last quarterly report, the cash position would have been about $1.2M-$1.3M. So together with the raise, we’re at about $3M now.

Matthew Gordon: And that sees you through to when do you think? I mean are you going to have to go back out to market?

Mike Young: That’ll take us in to some point before Christmas. I mean you don’t have to be Einstein to figure out we’ll have to tap the market again at some point. But the thinking is that after the 232, we should see some some positive sentiment in the market, and it won’t be as dilutionary. It’s a necessary evil of any company, in the phase we’re in. You’ve got two choices. You can pack up and do nothing and have two people in the office waiting for the market to improve, in which case you’re burning money and doing absolutely nothing. Or you can at least try and put some money in the ground and any other activities which is what we doing.

Matthew Gordon: Yeah but let us come onto in a second. I just want to finish off and the reason for this raise, and also something I touched on earlier, which was you got people saying, I guess it refers to what you also just said, which is in terms of the overhead right now, salaries… The headquarters, the G&A in the field etc. Have you felt the need to do anything about it since reducing the cost while you are in this kind of period? Not pack of the bags and go home. But how do you keep things moving forward and look at your overheads?

Mike Young: Yeah it’s a good question. It’s one we get a lot. One of the things we did do is when the DFS was finished, Tony Chamberlain who was our CEO, he left the company and we didn’t replace that position. We don’t need to at the moment. He stayed on the Board. So we had the continuity of the intellectual property if you like. And then two people that we have on staff. Julian Tapp and Scott Hyman. People do ask about the number of people we do have. And one of the things about Uranium particularly in Western Australia with the approvals process. We wouldn’t need Scott whose the Uranium marketing guy in the States, and we wouldn’t need Julian if we were doing say gold, salt or lithium. So Julian managers the approvals. And he also does Uranium market economics. I’ll come back to that because he’s part of the WNA working group and on supply & demand. And that’s going to be a major catalyst when the new Fuel Report comes out. So let’s come back to that in a little bit. It Julian is only working for us part-time. And Scott in the States. America is our number one market. It’s the biggest free market for Uranium there is. He’s done on a mountain of work getting in front of the utilities. Understanding for example, can we sell all of our off-take into American markets, and if not where else can we sell it. And if so who are we going to sell it to. So Scott’s prepared the groundwork for when the market comes up again. And I think, this is really important, and I learned this in Iron Ore. When this market switches and it will switch quickly. The Utilities will jump back in very fast. And they’ll be competing with one another. If you haven’t done your homework. If you haven’t done the groundwork. If you haven’t been in front of them, and you’re not the first person they think about when they’re topping up their portfolios at junior section, I think we talked about last time, you’ve lost. You’ve lost. You’ve missed it. And the way that contracting works ia they happen in cycles. And when the contracting window closes, it’s closed again and you’re at the vagaries of the spot market. And we know what I think of the spot market. So we believe that what we’ve done is set the company up very very well for when the market opens up. If we had not had these guys on staff and had just been ticking along and it had been me traveling to America to try and talk to the utilities, the future outcome would be much worse. Right now most of us have also gone on to part-time so we recognize that we need to watch our dollars. Ao Julian works two days a week. I’m working four days a week. Our CFO is working four days a week. So we took a decision rather than letting more people go that we would work part-time than lose a position through that process. So we’ve done what we can, but but with keeping an eye on the strategic outcome that we need to have.

Matthew Gordon: So that interests me. So you’ve said you’ve gone down to a four day week.

Mike Young: Yes.

Matthew Gordon: And pro-rata the salary, accordingly presumably as well?

Mike Young: Correct.

Matthew Gordon: Okay. And I’m always interested with junior companies when executives pay themselves big salaries, but don’t take big equity positions instead. In terms of the remuneration, how have you guys done that? Are you saying, ‘I don’t mind taking less cash because I think I can create something great here. I’m going to take a significant portion of my remuneration in shares’. How have you guys structured that?

Mike Young: That’s a good question. And oddly enough when the notice of meeting for the EGM comes out which we’ll be having shortly. That very question will be addressed. And that’s really all I can say.

Matthew Gordon: Okay. So you’ve thought about it. It’s something you’re addressing. Okay let’s see what happens.

Mike Young: And it needs shareholder approval. So it’s something that we’re doing and it needs shareholder approval.

Matthew Gordon: Okay fair enough. Let’s step back. We’ll wait till that meeting happens and we’ll see see what comes out of that. We can pick up on it next time we talk. Let me talk you about strategy, because again I’m fascinated with Juniors. The mentality, because we recently looked at five different gold companies in West Africa. Three different sets of strategies there, and they’ve all played out differently. So for you junior Uranium space the vagaries of the market. It’s a very erratic space. And what’s your view…. You can go back to the market at the end of this year for some more cash…are you going to go big and get it while you can? Or are you going to take it in small increments and minimize the dilution component? Because again different people have different views on that. What’s your take?

Mike Young: Well it it’ll depend on where the share price goes. I strongly believe that 232 is going to be a catalyst. When the Fuel Report comes out in the WNA, you’re going to have another catalyst. I think that the sentiment of the market will change drastically. I don’t know where the spot price is going to go. I’ve given up trying to predict it, because as we know it’s not a free, the spot price, isn’t a free market anyway. So God knows where it’s going to go, but it’s going to go up. Whether it’s dragged up by speculation or whether it’s dragged up by mid-term contracts. I couldn’t say. My view is that you will see utilities start coming into the term market. And if you’ve got buyers on the buy-side of that spot market then the price will go up. So I think that combined with with an outcome on Section 232 which I’ve always said will be good or ‘gooder’, which is a reference to Dumb & Dumber by the way…just in case not everyone gets that one. So I think the outcome will be that with certainty from the 232 decision, you will see the market open up again. The Utilities have absolutely been frozen out. They have just shut up shop in America because of 232 And once there is a decision the outcome is not hard.

Matthew Gordon: But what’s your decision?…the markets the market. What is your decision going to be in terms of how you take money going forward? You can take all the money you need for the next couple of years in one go, because it’s there. And let’s face it, if you think this goes the way you think it is going to go, you take it.

Mike Young: You take it. Every Chairman of every company I’ve ever worked for, has always said if it’s there you take it. Get your money while you can.

Matthew Gordon: What you are saying with that strategy. It’s slightly more diluted dilatory initially, but in the scheme of where you think this thing’s going, it’s going to be a safer, better, more sensible bet to just take it while it’s there than do lots of small incremental less dillutory raises.

Mike Young: Well they are less dillutory in a small term. But if you do more of the same outcome. So you make those calls as a judgment at the time you do the rise, you assess all those things. Now one of the things I’d like to look at the next raise is looking after existing shareholders. So there’s lots of options there. There’s lots of things you can do there. Rights issues. Or you can do your share purchase plans. Or you know whether it’s underwritten or not underwritten. There’s lots of different ways of looking at it. But one thing I want to do is make sure that our existing shareholders, particularly in the smaller retail side, get looked after because they have been very supportive, particularly with the Morgans stockbroking network. They’ve been very supportive and very patient. And they understand the Uranium thesis, particularly with what’s coming up, the catalysts coming up. So we want to look after them as well. So there’s a lot of competing interests, because there’s also having a lot of new players. So as we’re already seeing, we’re seeing new investors coming in the space. People I’ve not heard of before, phoning us up out of the blue. The one thing that really flash is a lot of people out is when you go to a trading halt. Suddenly the phones start ringing, ‘can I be involved’. And we had a lot of that. So there’s people who have been following the story, and they are phoning… we’re seeing a lot more of it. So you can see that there’s a thaw in the sector. You can see that people are starting to get into it. You know the Yellow Cakes and those guys are catalyzing more and more interest than in the investment side of things. As I said we had good response to this one. We were limited by our placement capacity. We’re going to correct that and then we’ll move it forward.

Matthew Gordon: Okay. So lots of new equity type investors coming to the party. Certainly, having conversations about coming to the party, again depending on what happens in the market I’m sure. And I do want to come back to 232, which I apologize for in advance, but just finish up this financing component. At what point do the banks get involved? How many contracts do you need to have in place? To what value? Because obviously you’re a small player? You’re going to have lots of small contracts, with different Utility providers in the States or wherever. I will point to the bank say to you,  ‘Okay I feel comfortable bringing some kind of debt component to what you’re trying to do here’?

Mike Young: Yeah we’ve done a lot of work on that. Those are commercially and constant discussions that we’ve got. So what I can say is that a good majority of the off-take will need to be contracted. I think I have said as much as 75%, in the public domain, so I can repeat that. But as for the numbers, we’re not going to talk about that. That’s obviously commercial. But we have talked to banks and we do have a plan on that. So we have an idea of what pricing we need. The percentage of contracts that we need. And it’s one of the reasons that we concentrate on America, is the fact that with American Utilities you have low counterparty risk, and it’s a third of the market, well just under a third of the market. So that’s why we’ve got a guy in America for that exact reason is that the American Utilities will definitely be our baseload in terms of getting getting financing.

Matthew Gordon: But banks don’t know much about mining. Well some know more than others, but compared to you they don’t know very much. So what what sort of margins do they need from you, to be able to get comfortable around any kind of debt provision?

Mike Young: Well look we’ve had preliminary discussions. We haven’t got into that amount of detail. It’s kind of a chicken and egg question. But what I can tell you is that the banks that we are talking to understand Uranium very very well. So there’s a bit of parlez-vous Francais.

Matthew Gordon: I’m just asking questions and it was a little bit more involved than we had last time, because I think you’ve helped people move their understanding on a little bit, and certainly conversations we’ve had with other Uranium companies to. So just want your view on contract and spot. You’ve told us your view on spot. It might be worth reiterating again, in terms of there’s no real such thing as a free market in spot, which it should be. Can you explain to us why… Are Utilities currently loading up with cheap spot price product or are they are they not buying? What are they actually doing at the moment, because they are not doing contract.

Mike Young: There’s very little action in the spot market from a Utilities. So I was looking at the Trade Tech report from the weekend. And when you look at it, it’s intermediaries and traders. And then there’s a few few producers. So that’ll be some of the American, well one of two American producers, and then there was a Utility at the bottom. It was very small amount of it. And the spot market as an overall, on a monthly basis the overall tonnage that goes through the spot market, and really the only tonnes going through that market, are the ones that Utilities are buying, because the other tonnes of being traded from trader to trader. So when you when you see a report on the tonnes that have gone to the spot market you’re seeing a lot of churn. So each sale that happens is accumulated as part of the spot market. But if I sell you a piece of Uranium, you sell it back to me, that’s that’s double counting. And that happens a lot. So the spot markets very opaquely traded. And as I said before, there’s no clearinghouse. So the price mechanism that you see, is reported voluntarily. So it’s not a true market. So it’s an arbitrage floor price is what it is. Now on the track side, there’s just no contracting. There was one RFP in the entire time of the Section 232. Certainly when it went to the Commerce Department, there were probably only two or three RFP’s. And they were for a small amount of material.

Matthew Gordon: Right. So there’s basically not enough product on market for utilities to load up cheaply. And what was tonnage there is is sort of just being recycled through the market. People making some sort of arbitrage.

Mike Young: By and large. So we saw that late last by calendar year, when Cameco said they were going to come into the market, we saw the price almost hit $30. And the expectation that Cameco was just going to weigh into the market then eventuate. And it’s pretty much like a share in a company, when you’ve got nothing on the buy side, it dwindles again. And that’s what’s happened, people quitting positions. So you know it’s not a true reflection. The spot market does not reflect what’s actually happening in the real world.

Matthew Gordon: Do Cameco have contracts to fulfill themselves? And all they doing it?

Mike Young: Yes they do. They’ve got about 18M to 19M tonnes of contracts to fill. Also they’re managing their own stockpiles. They’ve still got some stocks. You have to ask the Cameco guys, because people from outside looking in, we don’t know what their strategy is. So we could speculate. I don’t want to. Tim’s pretty open when he does his quarterly reports, but at some point they’re either going to have to turn McArthur back on, or buy more on the spot market.

Matthew Gordon: In the contract space, these these contracts are set prices. Yeah? so Cameco has got, people like Cameco, have got contracts in place with the Utility set prices, and they’re not filling them now because it’s too expensive to produce. They’ve shut down some of their assets, and they’re unable to fulfill these. Are they obliged to do so within a certain timeframe? Do they get penalties if they don’t?

Mike Young: Well I don’t know the contract terms, but Cameco is quite open about how much they’ve paid. That’s the thing about this industry is, the contracts are all private, but they can be floor and ceilings. They can be collars. They can be based escalated. They can be related to the spot price. There’s lots of different contracts. So Cameco obviously, the contracts that they have, I assume are related to the spot price, because as the spot price fell, they closed MacArthur. If they had a fixed floor, like the one they had with TepCo, they would have left MacArthur open. So our contracts will be a floor price. They have to be. We need to baseload our our contracts with a floor price, and that floor price needs to be, as I’ve said in the past, $55 or higher. Now I think when you look at when we will be in production, which would be 2022-23 there’s every possibility that contracts at that price would be being being filled. There’s no doubt. Otherwise as we know, the world runs out of Uranium. Just because the marginal cost production.

Matthew Gordon: Right. OK well let let’s quickly skirt skirts around 232, because i want your opinion. Okay. Everyone knows, the 14th of July is the big day supposedly when something’s got to be announced or… there’s a 180 day extension to allow them to negotiate trade terms with with with interested parties… is what I’m reading. What’s your take on 232 timing.

Mike Young: Our understanding is that a decision has to come out by July 14th. So we’ve heard that it could be delayed. Trump could make a different decision… sorry the President could make different decision. Our view is that he won’t. What happened with automobiles was that he made… There was a decision at the time that he had to make a decision…but the implementation was delayed. So that was in the automobiles for example. So I think you’ve got to remember that the American utilities put together a group called AHUG to lobby for their side of things. And they will be telling the President and his administration that, ‘look we can wait a little while longer but we can’t wait much longer to start writing contracts because by by 2021 2022, we’re 60% uncovered and we should be writing these contracts today’. So I think there’ll be pressure for him to make a decision. It’s the same as the two petitioners. They’re going to want to spend, if the decision goes the way they hope it will, then they’re going to want to spend capital and raise money to expand their operations. So you’ve got a lot of people waiting. So my view is that I don’t think they’re going to they’re going to stop around and do another 180 days I guess. That’s not my view. My view is that it’s not going to be a 25% quota. We saw that news release from Bloomberg on the 21st of June. That was obviously… that’s an old political trick called ‘floating a balloon’. You just leak a bit in to the press and see how everyone reacts. And then you use that as a way of saying, ‘OK well here is the best decision’, and I absolutely believe that the administration and the DOC put that information into the marketplace to see how the Utilities would react. And how the petitions would react. And not so much the market, I don’t think that that elegant. But that was definitely a way of ‘floating the balloon up’. One of the things I said was it would be 5% and then go up 5% every year to 25%. But I think that was met with a well… AHUG wasn’t very happy about it. You’ve got to remember there’s probably two orders of magnitude of people working for the Utilities than there is work for the miners. So I don’t envy the decision, because you got to balance both these competing forces.

Matthew Gordon: That’s a really interesting view. I mean another interesting view which you put forward when we spoke last time. I asked the question, ‘Did you feel that this was a national security issue? And I’ve asked a bunch of CEOs in the Uranium space whether how they felt. And it falls very clearly in to two camps. The American companies, all of them, and American fund managers, all of them. It’s a national security issue. Everyone outside of the US, not so much. And I just thought that was interesting in terms of the psyche here. Not necessarily because of the story that was being that being pitched, but I think people truly, truly believe it, on both sides. And I just thought that was that was an interesting reflection of the societies that we were dealing with. Has your position changed?

If you missed it – Here’s the previous interview with Mike Young

Mike Young: There’s a bias about… you will always be biased towards the outcome that you hope you’re going to get. And so on the American side of course the two petitioners are going to say it’s a national security issue.

Matthew Gordon: But Mike so did other American players. It wasn’t just…

Mike Young: What’s the issue? What’s the national security issue?

Matthew Gordon: I think it’s around the nuclear fleet, people are arguing. They’ve got a very large nuclear fleet, which they don’t want to be reliant on people outside of the country to supply the energy source for that. That was the key driver.

Mike Young: So why not have a 100% quota then. So if there’s national security issue then you should be getting all your Uranium from America. If there is truly a national security issue, and you need to make sure that if there’s a problem, you have all the Uranium you could possibly use. Shut the mines down until you need it. That to me that’s just a purview. That’s just something that was retrofitted. We had two companies who couldn’t compete. The utilities didn’t want to write the contracts that they needed, and they found some loophole in the law under Section 232. And I initiated that investigation, hoping utilities and come to the table and write some contracts with them. But once he got into the Congress department, they lost control of it and they had to back in behind it.

Matthew Gordon: But it was not just you. I think there are quite a few people having the same same boat. My initial reaction was it was a commercial means, and very brave one, and do admire it, to put forward the petition. But it Dustin Garrow said, when I spoke to him, the ex-Paladin director. His view was that it was something which they felt was a good commercial decision, but it’s actually frozen the market and in retrospect it killed the momentum which was building up prior to that. And maybe we would have been better, my interpretation of what he’s saying was, maybe it would have been better not to have done that, and perhaps the market would be flowing and running including, for the benefit of everyone, including those two companies. What do you think?

Mike Young: Oh I agree. I agree with that wholeheartedly. But I think when the guys went into this, UR Energy and Energy Fuels went into this, I really don’t think they realized they were taking a tiger by the tail. I really think, and it’s an informed opinion, I think that they were hoping that at some point Utilities would come to the party and basically write contracts that were sustainable for these guys. I mean if it is a national security issue, they shouldn’t be buying spot material from overseas and selling it into the domestic market. But they’re running a business. I get that, right. And if I was living in the States as passionate, and one eyed as I am, I’d probably be onside. But I’m not.

Matthew Gordon: Well there you go, and I think that one will run and run. but I guess when when the price comes back…

Mike Young: Sorry. One thing I will say, we’ve just seen that up in G20, Prime Minister Morrison, who’s just been re-elected, met with President Trump. And what was interesting is that President Trump, and Scott Morrison’s team. They had a dinner together just the two of them, plus all their all their advisers. And what I read in the paper is that the President got off his plane, and within 20 minutes was having dinner with Prime Minister Morrison. And one of the first questions and said was, ‘How did you do it? How did you win the election?’ So President Trump has admiration for Scott Morrison. He’s a conservative. He won the on unwinnable election. There’s a lot of parallels between him and Trump, in terms of winning that election. Everyone thought they’d lose. The same sort of leftist nonsense in the press saying they were going to lose, and they still won. So there’s there’s a bond between them that just doesn’t exist with say Trudeau or some of the other countries. And so my hope, and it’s only hope and speculation, is that that will stand us in good stead for whatever the outcome of the 232 is. But again it’s, and I think my my colleague Brandon Munroe put it best. He just said you know at the end of the day the President makes the decision that it could be anything. We could be we could be told we have to mine Uranium on the moon.

Matthew Gordon: There you go. We do have a Space Force now, so maybe. So let’s move on to the WNA, the symposium in London. You talked about a Fuel Report. Are you seeing that field report as a catalyst for change as well? Because obviously you had one in April. Somewhere is Europe. Was it Spain, the last one?

Mike Young: That was in June. In Lisbon.

Matthew Gordon: Lisbon, Portugal. You mentioned earlier the Fuel Report. What’s going to change now versus back in June?

Mike Young: So the Fuel Report comes out every two years. Done by the WNA. It’s a seminal bit of work. So WNA is really the go to source for a lot of analysts, in terms of the number of reactors are, demand going forward. Most times when you see an analyst report, they’ll be referencing WNA, they may be referencing one of the other analysts, but ultimately everyone looks at that Website as the Oracle. What’s happened in the last two years is that the supply & demand working group, the makeup of it has changed. Julian Tapp, who works for us, has joined that group. Brandon Monroe of Bannerman is the co-chair. The WNA has fundamentally changed the way that they look at supply & demand. And what I can say is that the makeup of the committee has moved towards what I would say is a more commercial way of looking at the supply & demand, particularly on the supply side. And so I can’t really say anymore because Julian doesn’t talk to me about it, which is quite right. But what I think is that report is going to be what I call slowburn catalyst. Because as people start to work through that report and look at the supply demand economics going forward, basically they’re going to see that the avalanche of Uranium that people imagined would be coming with a price increase, probably won’t be there and that that we are heading towards a systemic shortage.

Matthew Gordon: That’s going to be fascinating. We’re actually talking with Julian tomorrow. So I guess I’ll get some of that or none of that from him, but it will be interesting to see what at least how they’re approaching it. But to that point, if I look at what’s going on out there. The French are extending…they were getting rid of Nuclear. They’re now they’re extending the life of some of the reactors there by 10 years. You’ve got China bringing them online TaiShan, 1 & 2. India with the world’s largest reactor. You’ve got lots of these modular, smaller reactors. Basically the infrastructure around the world is being built geared up for nuclear power. These are usually government led programs. And what I’m not seeing a lot of is government led pressure on the Uranium market to start performing. Have you seen any pressure from governments with regards to supply. Because this will become a national security issue for other people, power security.

Mike Young: That that is a really really good question and I’m going to be chinned I thought of it first, because I wish I had. No were not. However China has gone about buying a lot of Uranium. They do have large stockpiles, but that is material that is earmarked for reactors. And they have taken advantage of the lower prices, buying a lot of material from Kazakhstan. There’s no doubt about that. And the Chinese, I think certainly during during the 2000s, when they had massive build up of infrastructure, they really did get stung by the higher high Iron Ore prices. And I think they’ve taken that lesson. The one thing I admire the Chinese for is that they never make the same mistake twice. And for example, we saw it in Hong Kong. So they have built up a good stockpile of Uranium. There will still be a customer. They are still growing. Nuclear power is very important to their long term plans, particularly with particulate pollution. But not so much in other countries. I think other countries, particularly in America, which is still a quarter of the market, they believe in market dynamics. And I think the utilities do understand that they’re going to have to pay more to incentivize new supply. But no there is not a concerted question, it’s a great question. Well the French government has EDF. So EDF, although it’s a public company, I mean they still are quite interconnected. It’s a big part of their power supply of course so you know the French government will be talking to EDF, and EDF they go out and they’re very active in marketing at all the conferences. There a big team of EDF people. So they’re very aware of having to get secure supply. I think they’re probably ahead of the curve a bit. But I think it’s a great question. You’re certainly not seeing key stakeholders getting out there ensuring that there’ll be new supply, and I think they’re leaving it up to the market economics. Now you then say OK well at what price if we start to increase nuclear builds and it starts to go up, say instead of just linear 2-3% growth per year it starts to grow more. It just means that the people building those ones at the back end are just going to have to pay more for Uranium. And given that Uranium isn’t a huge part of the input cost of generating electricity, that’s probably why they’re not too concerned about it. I don’t think the world…it’s the same as any commodity price high enough, you can get it out seawater. I don’t think we’ll get to that point. But I think what you’ll see is as we get new builds, they’ll just basically depend on the market to set the price, the marginal price of production. As as demand goes up, obviously supply goes up in the marginal cost production goes up. But then you’ve also got Kazakhstan who at some point may want to increase production, if the price is high enough. And you’ve got Cameco sitting there with McArthur River shuttered. And down the track in the late $20, you’ve got NexGen and Fission with those mines as well. Which will probably fill holes that are left behind by the Cigar Lake closure. So if we do see new builds  at the level that we think are going to occur, you’re going to see a Uranium market acting pretty much like any other commodity market during our growth phase.

Matthew Gordon: It’s just interesting to me that we try and do some research… I think one delightful individual called us clueless because we’ve been in this space for the last five years. But we did try and research this as best we can, and the stuff that we see there…. the governments within these countries aren’t yet treating this seriously, because maybe, as you say they don’t want to get involved with market dynamics, but because maybe it’s a political hot potato for some. But at some point it’s going to either have to rectify itself through post 232, well they are going to  enough have to step in and get involved.

Mike Young: Interesting point you just raised actually. The political hot potato. The last 6mths, I’ve been amazed at the way that because of the climate emergency that is now creeping into the popular lexicon, people are now looking at Nuclear. Even even with the mini-series of Chernobyl. People are still… That’s you shouldn’t fly because the Hindenburg blew up. But actually watched Chernobyl and it was really interesting. You’re watching it as a person in the industry going, ‘That’s not quite right. That’s not right’. But it had more to do with the then Soviet style of approaching a disaster than it had to do with the technology. We know that technology doesn’t exist. So that’s why the Hindenburg metaphor is so good. But what we’re seeing even the extremes of the around for the report. So the Australian Industry Super Australia released this report called modernizing the electricity sectors. It’s 100 page report. I’ll make it available online with the link. But in this we’re talking about Nuclear power. This is in Australia, talking about Nuclear power. So it’s a good report. It’s very very well written. There’s some very clever people have written it. It’s looking at all the different power sources. Because right now the Australian electricity market on the East Coast, the West Coast is quite isolated because of distance, but the East Coast national electricity markets have a bit of a mess. There’s not much certainty. A lot of companies certainly want to see certainty. And the industry super fund, I think they they have about $3Trn of investment. So they’re a big heavy hitter and what they think and what they say matters. When that came out…there was a lot of jaw dropping down here in Australia when this came out. It’s really interesting, although it’s Australia specific, there are some really interesting, good information in there and how they compared to different electricity sources. So that to me is a really important watershed. And I think what’s going to happen is that people who are anti-nuclear are going to find themselves on the wrong side of history at the end of the day.

Matthew Gordon: Well it’s be interesting to see how it all pans out. We’ve haven’t got long. We’re in July. Two weeks to go apparently.

Mike Young: So I will not be dry-July for me I can tell you. It’ll be champagne corks. They just have to make a decision. Just do something.

Matthew Gordon: But one way or the other I think you’re not alone in that thought. Okay well thanks for your time Mike appreciate appreciate it. Always entertaining and insightful. I think again you know we should probably catch-up again when you’ve revised the DFS on Mulga Rock. Be great see some what comes out of the project work on Alligator River for sure. Do let us know. I’m you know remembering the words, ‘you want to look after existing shareholders and make it make it right’. So I look forward to hearing about that as well. So thanks for your time again and we’ll speak soon.

Mike Young: Thank you. Appreciate being on. I think you’re building up a great following. You’re doing a great job. So I’m looking forward to catching up. Hopefully we can catch up. You’re in London.