We spoke with Craig Parry, CEO of Uranium explorer IsoEnergy (TSX-V: ISO) to give us his view of the WNA Nuclear Fuel Report. He agrees the Demand story is growing and performing but that the Supply side is lagging. Cameco needs to buy 12Mlbs by the end of the year. Or if they delay, they will need to buy 22Mlbs in 2020. Expectation is that this may drive the the price discovery in the uranium space.
IsoEnergy is an Athabasca basin project. NexGen is a major shareholder, as is Cameco. For NexGen, IsoEnergy is effectively an exploration arm. Whilst Cameco may just see them as optionality.
They have done some drilling and defined a mineralised zone with good grades. Next year they will have 2 drill rigs operating, will look at Uranium exploration and also infill work. We wait to see how they tackle the work programme and what results look like. With only $2M in the bank they will have to dilute shareholders some more to raise cash. NexGen will put some money in which helps. But this will be an expensive dilution given the lack of movement in their share price. The money will allow them to assess results and work out what to do next. Craig says they could look to add properties to their portfolio. We aren’t sure this should be core focus given capital constraints. Their share price is static. He feels he can raise money easily. They haven’t got a clear plan yet but they will be working out what they want to do in the next couple of months. So far 30 holes drilled; 17 holes recently. This a very early stage project. They want to spend $5M on drilling in the next 12 months. So they will need to raise at least that. Useful data for investors to calculate dilution vs. upside. Craig says IsoEnergy is constantly talking to institutional investors about raising capital. Or they could sell some of their non-Athabasca Basin Uranium assets for cash. This would be low cash contribution or will, dependent on structure of the deal, take a while before cash comes so it is not realistically going to contribute to the next raise.
Click here to watch the interview.
Matthew Gordon: You’re at the WNA Symposium London meeting people. What are you trying to get out of it?
Craig Parry: The WNA Symposium is the premiere industry event. You’ve got everyone from explorers through to operators and customers here. It’s the event to be at. And there are different dinners and social events to attend. Also being in London, we take the opportunity to go and see some of our investors here.
Matthew Gordon: What are people talking about?
Craig Parry: I suppose on the supply side, there’s a sense of cautious optimism.
Matthew Gordon: Did you see the WNA Fuel Report be presented?
Craig Parry: We saw the WNA Fuel Report. And at the heart of that is that the supply side is probably pretty challenged at the moment. Demand continues to grow very strong, So that’s a real positive. But the supply side is where the challenge is and where the issues are.
Matthew Gordon: The macro story is understood. That’s coming very, very quickly. On the supply side, there are some games being played in terms of price discovery. The market is working out how they deal with that. We we’re talking, before the cameras started rolling, about Cameco’s need to supply quite a large number of pounds to customers.
Craig Parry: That’s right. That’s one of the great reasons to come to the WNA is that you hear so much of what’s going on in the marketplace. And Cameco has confirmed to us yesterday that they need to buy 12Mlbs before year end. And in the last half of last year, they bought 4Mlbs and that was enough to drive the price from $17 a pound to $29 a pound. So, this year, they’ve got to buy four times that. The spot price of uranium is currently $25 a pound. So, I think at some point late this year or early next, assuming they go ahead with that program, which we know they have to because they do have long term contracts that they need to put that product into, we should see a much higher price. And if they delay that, they’ve got to buy 22Mlbs next year on the open market. Because it’s a very shallow market at the moment, there’s been very little trading there for the last six months. So, that’s probably the most positive thing I’ve seen for a long time.
Matthew Gordon: Let’s talk about you. When we last spoke, some good things going on but still fairly early days. You spun out of NexGen. You’re in the right part of the part of the world. What have you been doing since we last we spoke?
Craig Parry: When we started the company, we cast the net far and wide all around the world looking for uranium deposits and assets.
Matthew Gordon: And ended up next door!
Craig Parry: That’s right! We keep coming back to the Athabasca Basin because it’s home to the highest-grade uranium deposits, the biggest uranium mines in the world. So, we always end up back there. And in May last year, we acquired our La Rocque property from Cameco.
Matthew Gordon: They are a shareholder?
Craig Parry: Yes, they are a shareholder. At the end of this interview, I’m off to see a couple of guys there. Big shareholder, 5.4% of the company. And they got that holding through deals we’ve done with them. So, they’ve been willing to do deals with us. We acquired that La Rocque property in May last year. We had a drill rig out there. Six weeks later, we announced the discovery hole two weeks after that. So, we went from sort of conceptualization deal to discovery within eight weeks, which is a tremendous outcome. And we’ve been there drilling ever since and putting out some very, very good results. We just completed our summer campaign. We drilled another 17 holes on the property, some very, very good results. Probably the best of those holes was 7m of 5.4% so really spectacular high-grade Athabasca style uranium mineralization. So we’ll just keep working away at that. We’ve now defined a mineralized zone there. That’s 500m long, 40m wide. On average in 5m thick. So very much typical of those sort of conformity related deposits. And the plan going forward, come winter, we’ll have probably another drill rig out. This will go from moving up from one drill rig program to two drill rig programs.
Matthew Gordon: You’ve identified targets. Are they near each other or are they separate?
Craig Parry: Good question. We’ve got some infill drilling to do. We haven’t closed off many of those sections. And we’ve got a 250m gap between the eastern-most hole in the heart of the deposit. So, we’re going to do all of that infill work. So one rig will be working on that. And then very nice to my mind, possibly the most promising thing we saw from the program. We got the results of a resistive survey back, we which we did earlier in the year, and that shows about 500m to the East of the hurricane deposit, a very large conductive anomaly, typically associated with the graphite that hosts these deposits. We drilled one hole on the edge of that, got some very elevated radioactivity 50m up above the sandstone. And very strong geochemistry, very strong alteration all the way up the sandstone in that hole. So, we’re very excited about that. And we think we could be on the edge of something very, very significant. That hole looks a little bit like the discovery hole at Hurricane.
Matthew Gordon: So how much cash are you sitting on at the moment?
Craig Parry: We’ve got about $2M in the bank.
Matthew Gordon: What does that mean for you?
Craig Parry: We finish the year with a little bit under $1M in the bank. At some point we’ll have to come back to the market and raise some money. At this point in time we’re pretty well funded. We’ve still got NexGen there supporting us. NexGen is the mother ship, if you like, with 54% shareholder.
Matthew Gordon: They’ve got their own priorities, though haven’t they?
Craig Parry: They’ve got their own priorities. But plenty of cash as well.
Matthew Gordon: So, NexGen will follow their money, they’ll retain their current position? And then you’re going to go to market or are you going to Cameco?
Craig Parry: We’ll certainly talk to them, Lee from NexGen likes to say that ISO Energy will pay for the CapEx of the Arrow development. That’s a $1Bn. Lee’s very, very happy with what we’ve got here. And of course, when we started Next Gen, we wanted to become a major player in the space. You need more than one deposit to do that. So, having sort of options and alternatives is important.
Matthew Gordon: You’ve got to raise some cash. Have you any sort of sense of what you might do next? What’s the plan for the next six months?
Craig Parry: Good question. We have to sit there and assess those results we’ve got from this project. We only just put out our final announcement from that last week. So, we will look at all of that data and then work on a plan and a budget that approaches the deposit optimally. Between a mix of infill resource delineation, drilling and then on to exploration to find out some of those other targets. That’s the focus for us at the moment. We’ll continue to try and pick up other properties in the…
Matthew Gordon: I’m trying to get an idea of how do small companies survive? Either by keeping drilling. How do they pay for that? Do they rein things in until the price discovery comes back in the market place? Because you’re nowhere near exploration, you’re going to have to raise capital, but it’s going to be slightly cheaper if you get some sort of bump in your stock. So what are you doing to influence share price that reduce your cost of raising capital?
Craig Parry: Very good question. And I guess in our corporate presentation, you’ll see one of the most prominent slides early in the deck is NexGen share price chart, we started that company to $0.05 capital rise and it’s now trading around $2 a share. The point of all of that is discoveries still matter. And I think ISO Energy is one of the very few uranium companies that is in positive territory in terms of share price for the last 52 weeks off the back of that discovery. So, it’s not going too bad on that front. We’ve got to get out there and explain what we’re doing to the market. There’s a little bit of apathy…
Matthew Gordon: They’re going to ask the same questions I’m asking you, which is what are you going to do to be able to capitalize your program. Whatever you decide, is that for the next six months, or if you want to raise enough for 12 months, because there is no certainty about price discovery. It could be 3-6 months, maybe 18 months. No-one knows. What are you planning to do to get you through, or to be able to raise capital to get through to whatever point in time you think price discovery comes back to market.
Craig Parry: We’re in a fortunate position in that because of our association with NexGen and the fact we’ve got Lee on the board, we don’t have much trouble raising capital. We’ve got very good support by the market. So, we’re okay on that front.
Matthew Gordon: So, you can go into the market regularly, so you’re not diluting unnecessarily. Now, that’s expensive. And you’ve got NexGen in there for circa 50%? So, that’s good and Cameco’s a good brand. You’ve got all these good brands and you’ve made a discovery. So, lots of good things. I want you to tell me what you’re thinking is for the next 12 months to help people understand why you versus someone else.
Craig Parry: We’ve got to assess all of that information before we have a clear plan. So, you’ve got to do that work before you start coming up with that.
Matthew Gordon: How long does that take?
Craig Parry: We’ve got the full exploration team coming to Vancouver in a couple of week’s time. We’ll sit down and go through everything in detail and work out an exact plan and budget. We’ve now drilled about 30 holes on the property. We did 17 holes this last program, that program costs us about $2.2M.
Matthew Gordon: These are all quite shallow holes?
Craig Parry: Quite shallow, down to 350m or thereabouts, 400m max. We drill a little bit deeper into the basement than some of our competitors because we are looking for that basement hosted arrow type of deposit below everything that we’ve got. Another one of those would be fantastic. But I’d say, look, we want to have two rigs on the ground. I would think that, you know, a two-rig program, we probably want to spend somewhere of the order of $5M over the next 12 months on exploration through to the end of next year. So, we’ve got to raise that sort of level of money at some point.
Matthew Gordon: That gives us a sense of the quantum involved. Clearly there is dilution involved, that’s what people are looking at. But at the same time, you’re talking about the opportunity of creating value. Are you entirely independent of NexGen. I know you speak with NexGen, you’re ex-NexGen, but what you decide to do, that’s your decision?
Craig Parry: We are yes.
Matthew Gordon: Even though they’re 54% shareholder?
Craig Parry: Completely independent, arm’s length. Notwithstanding the fact that we’ve got a number of board members in common. Lee Courier our chairman, is the CEO of Next Gen. We’ve got Chris McFadden, Richard Patricia, Trevor Healy, all on the board of Next Gen. I’m a senior adviser to NexGen. I stepped off the board to focus on ISO Energy. There’s a little bit of crossover there. But we are we operate completely independently. We present our plan and what we’re doing to the board, every board meeting. That gets supported and quick queried and supported on an independent basis. We have all of those correct governance structures in place. Having NexGen there and being part of that brand and following those processes, that helps.
Matthew Gordon: Have those fund-raising conversations started?
Craig Parry: Well, they’re happening all the time.
Matthew Gordon: You’re talking to people about raising money all the time?
Craig Parry: You’re always out there talking to the banks and investors. That’s what we’re doing in part in London. One of our more significant shareholders is CQS. We’ll be seeing them tomorrow. So, you’re out there talking to people all the time on that front.
Matthew Gordon: So they know this is coming?
Craig Parry: Yes. There’s always that expectation. We do have a number of other opportunities. And I think when we last spoke, we talked about ‘are we at all concerned that when the uranium prices rise and equities start to bounce back that you’ll see a flood of other junior companies, ex cannabis companies change their name to Uranium ‘Something. And as I said then, we look forward to that. We’ve got a bunch of other properties, both in the Athabasca and another deposit outside the Athabasca that’s up in the Northern part of Canada. And, there’s an opportunity to sell those projects for cash and stock and sort of taken a less dilutive approach to raising capital there as well. We’re thinking about all of those things all the time.
Matthew Gordon: Juniors uranium Explorers need to show that they can build a mining business and develop it in to a uranium company. With Cameco and NexGen as shareholders, is that why you feel it’s going to easy to go to raise money because the market appreciates your connection with these guys?
Craig Parry: No, it’s never easy to raise money. I guess we look forward to a time when it becomes easy to raise money.
Matthew Gordon: That’s what I’m asking because you said earlier, “we find it easy”. But the truth is it’s difficult. I want to understand what you’re saying that other companies can’t say.
Craig Parry: You just got to do all of that prep work. And, it helps if you’ve got a discovery. It helps if you’ve got a team with a track record. There’s a bunch of challenges to do to get be able to get there. We’ve all personally supported the rights of financing. So, we’re all involved. And as Richard and Patricia was telling me last night, when you see the CEO writing a check for financing, something’s going on. You want to you want to back that one.
Matthew Gordon: Have you been writing cheques?
Craig Parry: I certainly have been writing cheques.
Matthew Gordon: For this company?
Craig Parry: For this company.
Matthew Gordon: Just checking…
Craig Parry: So, you’ve got the major shareholder there doing the same. So, Lee and the team of NexGen have backed us heavily, which is fantastic. And with all of that going on, we’ve got tremendous relationships with some of the Canadian banks, so Cormark and PI Financial, they gave us some $5.5M bought deal. First bought deal of any size in the junior uranium space for some years. Apart from having the capital to do what we need to do. That was a bit of a feather in our cap.
Matthew Gordon: Do you think you are moving on from the shadow of your big brother NexGen? You’ve now got to stand on your own two feet. You’ve now got to start showing that you’re capable of doing this yourself. I know you’ve told me some things that you’ve got planned. You want to make two-rigs out this year. What’s your expectation of where you need to be at the end of next year? What would you need to prove?
Craig Parry: Very good question. I would expect that we want to see that deposit grow substantially. We want to be well on the way, with all of that resource delineation drilling well on the way to having a resource defined. And then it wouldn’t hurt to see a bit more scale to what we’ve got there. So, we’ve done some aggressive step outs that support the next phase of work. I’d like to see us where we’d really need to be is well on our way to having a resource.
Matthew Gordon: And do you get that for $5M?
Craig Parry: A really good question. This sort of Athabasca unconformity related mineralization is typically quite drill intensive, a little bit like vein gold deposit. You do have to have a lot of tight sized drilling. But with about $5M of drilling we’re going to know very clearly where we stand. And hopefully we’ll have another discovery. Of course, these deposits occur along structures in a sort of string of pearls. You’ve got down to our South, West Cameco’s, La Rocque zone, very high-grade. They drill a hole there, 7m at 30%. You’ve then got a La Rocque North zone. Our Hurricane deposit and then these other mineralized intercepts along that structure. So, we want to get out and test some of those as well.
Matthew Gordon: You’ve only just started. Usually it takes 10 years to build a mine.
Craig Parry: You can do it quicker than that. We were talking before. We built a coal mine in Far Eastern Russia. We took that from discovery to production in 4 years. So, you can you can do it faster than that.
Matthew Gordon: Coking coal. Different. Different ballgame!
Craig Parry: Well look, uranium, that’s sort of a bit of a controversial topic at the moment because, you’ve got some of our competitors, NexGen’s competitors, out there saying it will take 10 years to permit and build that mine. I think that that project will get built a lot faster anyway.
Matthew Gordon: Let’s say 7 years.
Craig Parry: I think it’ll be faster than that.
Matthew Gordon: But you’re only at exploration stage. You’ve got a lot of things to prove to the market by the end of this coming year. $5M might get you there. But before then you’ve got to explain to shareholders the process of how you are going to get from where you are today to production. It’s a long time away. So why should investors come in now? Why look at ISO Energy when they are lots of other Athabasca juniors at the same place as you?
Craig Parry: Good and tough question. You see what the guys are doing are at Arrow. That’s our approach. We’re following that NexGen template, plus It took about two years to get the Maiden Resource on it. Then another year or so before they moved into that development phase. We’ve been working on this project for six or seven months now. So, we’re at the earliest stages. The deposit has to stack up as something that is an ore body that can be mined. So, we’ve got to get to that point before we understand that. But we know beyond that, those next steps, I’ve done it before. I’ve got a track record with every company I’ve been involved with and started and we’ve always taken the approach that we’re not only explorers, we are developers and operators. And that’s what we did at the coal mine in Eastern Russia, now in production. So, we take that approach. We’ve got that track record of doing that. So, we’re pretty well positioned to do well.
Matthew Gordon: That is a differentiator for sure compared to some of the people we’ve been speaking to who have not done it before. Mining is mining, but uranium mining is something where you need a team who have been there, learned what works, and you’ve got a lot of the right people around you because of NexGen. I think that’s what a lot of people are giving you a lot of credit for.
Craig Parry: We I think our track record speaks for itself. The reason to come on board as an investor now is that we’ve got a $35M market cap and we’re the only junior with a high-grade uranium discovery in recent years. Look at that NexGen share price chart, $0.05 and got as high as $4.60. That’s the ride we’re taking investors on.
Matthew Gordon: What are you at the moment, trading at $0.50?
Craig Parry: Trading about $0.50.
Matthew Gordon: How many shares did you say?
Craig Parry: 68 million.
Matthew Gordon: You’re going to have to dilute a bit to get through the next 12 months.
Craig Parry: Probably a little bit.
Matthew Gordon: Price appreciation will do a little bit for you. And then you’ve got to deliver results. So your message is you’re happy with the asset that you’ve got. You need to understand more. You are going to raise some money to get you through the next period. You still got the support of the big guys, NexGen and Cameco. This outlook is quite positive!
Craig Parry: Very, very positive. The thing I’m most excited for and we’ve got a little bit of news flow to come out over the next couple of months. So, we’ve still got some more assays to come out. And then, the rest of the news flow for the year will be about planning for that next drill program. And then look out for some more results early next year.
Matthew Gordon: We like your approach and we like the people you’re surrounded by and the fact you’ve been there done it before. Why don’t we get back in contact when you’ve got your plans laid out, had some of those results back through. We’d love to hear from you again.
Company page: www.isoenergy.ca
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