On the 21st November 2019, Mikko Leivo posted an article analysing Global Atomic as investment case to the Crux Investor Opinion platform. After seven or eight densely argued pages, the article eventually concluded that Global Atomic, in Mikko’s opinion, was a good investment proposition. But not before he had given the executive suite a thorough roasting on the way through. The excoriating prose left us as a management team reeling and wondering how to respond, despite the article being an overall endorsement of Global Atomic.
I don’t want to get into a he-said, she-said back and forth with Mikko but I would like to share some personal views about my involvement with the company and with the team.
I first met Stephen Roman in October 1997 when I was a neophyte mining analyst at HSBC, after a stint as an exploration geologist for Rio Tinto and mint-fresh graduated with an MSc in Mineral Deposit Evaluation from Imperial College. He doesn’t remember that particular meeting, but fourteen years later when Global Atomic Fuels Corporation walked into the offices of Blakeney Management in 2011 where I was the Africa and the Middle East resources portfolio manager, I was able to place him. And with Stephen Roman was George Flach. George and Stephen had, at this point already been working together in Niger for five years – Stephen as overall boss running the financing of the private uranium exploration company and George as the geological brains trust finding pounds in the ground. The list of deposit discoveries was impressive, Tin Negouran, Dajy, Isakanan, and of course the flagship asset, Dasa. Convincing as Stephen and George were, as good as the geology was, I didn’t recommend to the investment committee at Blakeney Management that we should invest in Global Atomic.
On a regular basis over the following five years I saw George and Stephen. I tracked how they were managing in a post-Fukushima uranium environment, I saw them lay their bodies on the line as they both got serious bouts of malaria in-country, and I noted how they went for extended periods, years, taking equity not cash for salary. Although I didn’t invest at any stage during that period I was impressed by their dedication, their resilience and courage, and their general comportment. Here were genuine men in an industry that is notorious for its flaky fakers. And like many companies in lean times overhead costs were shared with other companies operating from one stable.
There were, however, three key reasons why Global Atomic Fuels Corporation did not elicit an investment recommendation from me in the period from 2011 to 2015.
Firstly, the high grade portion of the deposit was deep in the graben* which rendered the start-up economics challenging. Secondly, the uranium market was in over-supply and I couldn’t predict the turning point with confidence. Thirdly, Global Atomic was a private exploration company without cash-flow and anyone who has been part of the mining sector since 2011 knows how hard it was to finance any project, especially private exploration projects.
When I next looked at Global Atomic in 2018 I was gobsmacked by the transformation that Stephen and George had achieved in the company. The three key reasons for not investing had been addressed, and in spectacular fashion to boot.
Stephen had recognised the importance of a financing lifeline for Global Atomic and had recommended to the shareholders of both Global Atomic and TSX-V quoted Silvermet that a merger should take place. Remember that there was a considerable common shareholder base as Stephen had a loyal following after the success of Gold Eagle, and those investors had invested in both Silvermet and into Global Atomic. With the merger Global Atomic has fledged into a publicly listed development company with cash-flow. The vision and the gumption to complete this transaction is of immense value to the shareholders of Global Atomic and it was delivered by Stephen and George.
The previously moribund uranium market was finally showing signs of life with genuine demand growth and a genuine supply response to the low prices, pushing the market towards an ongoing deficit position. Ok this may be a purely external factor and nothing to do with management, but keeping a project alive during a painfully slow turnaround in metal prices separates dedicatees from dilettantes.
A further key point was that the first dividend cheque from the Turkish recycling business was C$7M, and with that windfall capital George led the discovery of the Flank Zone. The Flank Zone is a body of mineralisation linking the high grade resource in the graben with the shallow low grade surface resources, in a spectacular discrete mineral occurrence containing about forty million pounds of uranium at a grade of around half a percent U3O8. This discovery absolutely transformed the economics of the Dasa deposit and is a play-opener to the strategic large-scale resources at depth in the graben. The Flank Zone discovery is of immense value to all shareholders of Global Atomic and it was delivered by Stephen and George.
Icing on the cake was provided in the form of the 2017 MOU with Orano (ex-Areva) which took Stephen and George four years to negotiate. The MOU is a wide-ranging arrangement that covers technical and logistical cooperation in-country as well as providing the option for Global Atomic to truck ore to Orano operations at Arlit. A genuine development option that may save the capital of having to build a stand-alone plant is of immense value to all shareholders of Global Atomic and it was delivered by Stephen and George.
What I hope this narrative shows is that the current strengths and assets of the Company are the result of years of work and dedication by good people. Part of my pitch to Stephen and George back in 2018 was that I recognised the transformation in the Company that they had achieved and that I wanted to be a part of the ongoing growth and evolution of Global Atomic, and I wanted to be part of the management team. Stephen and George and the rest of the team in Toronto have positioned Global Atomic to be a leading player in the anticipated uranium equities upturn. As a team we would be proud to provide the fuel for a low-carbon energy source to assist our beleaguered planet, and as a team we are very proud that the Company is in such good shape to make good on that aim.
If, on reading this article, you have any questions about our plans or our people, I would be glad to talk to you, so please get in contact with me at +44 20 7389 5023.
Exec Vice President
*Graben – an elongated block of rock lying between two faults and displaced downwards relative to the blocks on either side, as in a rift valley