Bannerman Resources (ASX: BMN) – Putting Itself in Contention at the Head of the Uranium Pack

Bannerman Resources Ltd
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.04 (05.08.2020)
  • Market Cap: A$39M

The brute scale of Bannerman Resources’ massive uranium resource was never in doubt. It is a homogenous, average-grade bulk resource in Namibia, itself a benign mining-friendly country on the South-West coast of Africa. Therein lay the problem for most investors: Bannerman’s 2015 Definitive Feasibility Study demanded a pre-production CAPEX of the best part of $800M.  Given the Aussie junior’s tiny EV and the huge volume of pounds that needed to find a home, Chinese nuclear utilities and their voracious future demand for uranium seemed to offer Bannerman’s best – and perhaps only – option, particularly because Africa remains a happy playground for large state-owned Chinese groups.

But things have changed today.

Bannerman’s CEO, Brandon Munro, is known as a seasoned and engaging individual, with an enquiring mind and ability to shine a light on what is often an opaque space. He is undoubtedly one of the most intelligent uranium commentators, and his insights are incisive, compelling and articulate in equal measure. However, Munro has now decided to shine white light on his own operations and to address market concerns with Bannerman Resources. Today’s announcement that Bannerman Resources has reconfigured their approach to get into production earlier and with a much-reduced CAPEX means that this project just made itself very attractive to a new raft of funders and investors. As we say here, the optionality just got brighter. We would argue Bannerman Resources is now in rarefied air, just one of a handful of uranium juniors with scale that can genuinely get into production within the next 3.5-4 years.

Matthew Gordon talks to Brandon Munro, August 2020

The decision to reduce the scale of a bulk-tonnage project would usually damage the economics, often beyond repair. But, in this case, it hasn’t, partly because advancements in processing technology have reduced reagent costs and also because the shape of the out-cropping Etango orebody facilitates a long mine life at low stripping ratios. The new scoping study has reduced the scale of Etango to a much more manageable and pragmatic level, which will ensure Etango has the optionality it needs to aid its journey towards production. The CAPEX has gone down to just US$254M, less than a third of the previous number. Whilst the annual production has also reduced, from 7.2Mlbs pa to 3.5Mlbs pa, it is still a very meaningful production profile than can only be matched this decade by a few players. The company will refer to Etango as “Etango-8” from now on (referring to the new 8Mt pa throughput to the mill) as a lucid indicator of the new value proposition on offer. In contrast, the throughput of the “giant project” was 20Mt pa. Etango-8 might only be 40% of that throughput, but because of the boost from a 20% higher grade profile, the company will produce 50% of the yellowcake over a relatively long mine life that can readily extend into Etango’s 271Mlb mineral resource.

Jurisdiction matters. So, what of the Africa factor? It doesn’t have the sex & sizzle of the Athabasca Basin. Munro is open in his support for all uranium miners, but he is also candid about the advantages of Etango-8 in relation to his Athabasca cousins. The Canadian projects undoubtedly have high-grades, but they also come with extremely long environmental baselines and permitting times – not to mention very large CAPEX requirement – resulting in finance-driven contracting thresholds that will impose a herculean task on their marketing teams.  We expect that Bannerman can move into production and be negotiating contract extensions long before the Athabasca plays can start to commit their production under contracts.  It’s hard to overstate the importance of timing in the uranium sector – not only because the sector’s famed volatility presents financing windows but also because arriving late to the contracting party reduces options for new entrants.

So timing, as always, is going to be critical in the uranium sector. Expectations around the macro are pregnant with expectation. Indications suggest that price discovery will come in mid-2021 as US utilities are pressured to sign long-term contracts and the big players continue to mop up loose inventory in the market. We should start to see price slowly move early 2021 before term-contracts and tight supply make the environment somewhat more competitive.

In their 2015 DFS, Bannerman Resources presumed a uranium price of US$75/lbs. In the new scenario, the company has been able to reduce this price assumption to US$65/lbs whilst maintaining an IRR above 20%. The post-tax NPV is still attractive at US$212M, admittedly a “significant premium” above the company’s current market cap. But the scale of the project is driven home hard if the original price assumption is applied; at US$75/lbs the Etango-8 post-tax NPV explodes to circa US$350M. The uranium spot price is just over US$32/lb today, so we’re still some way off what Bannerman Resources would need to be economically viable, but such is life for all uranium producers and juniors. The entire market is calling for a minimum of $60/lbs, and our off-the-record conversations with other uranium CEOs suggest the more realistic number required is $75/lbs.

The AISC now stands at US$40.90/lbs. Although only a modest improvement on what the company had back in 2015, it is commendable that Etango-8 did not trade-off the impressive capital reductions for higher operating costs. Total throughput for the LOM is now 51Mlbs compared to 113Mlbs under the 2015 DFS. Investors should remember that resource endowment isn’t going anywhere; those pounds are ready to provide optionality in the future. The giant-version of Etango retains environmental permits, a pilot plant, and a DFS – providing a highly leveraged option to uranium investors’ dreams coming true.

This strategy actually reminds us of a mining company in a completely different commodity class: gold. Rio2 is a Chilean gold miner, and CEO Alex Black reduced the resource of its flagship gold project by half. While the market didn’t appreciate the move at first, the booming share price now suggests that it was an incredibly smart one. Perhaps more companies need to think with agility and change the development playbook.

This image has an empty alt attribute; its file name is company-profile-ad-copy-1024x115.jpg

Rio2-like returns might be what investors now expect to see from Bannerman Resources. Munro is targeting an accelerated pathway towards construction, with a PFS and DFS targeted within the next 18 months. Many uranium investors had viewed Etango as too large to succeed, but now the company appears to be fit for purpose and primed to time its entry into the next cycle perfectly if all the rumblings about potential uranium price discovery prove to be correct. 

This has turned Bannerman Resources into a vastly more attractive uranium investment proposition, but there’s a lot of work left to do. If there’s one person we’re confident can accomplish these deliverables, it’s Brandon Munro.

Will Bannerman Resources be producing pounds before the Athabasca Basin? Comment your thoughts below and we will respond.

If you are a uranium market spectator, feel free to check out some of the recent uranium articles on our platform as well as one of our most recent interviews with a uranium mining company.

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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.

Brandon Munro #17 – US Utilities Want Russian Uranium (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price A$0.035 (16.07.2020)
  • Market Cap: A$37.06M

Uranium Market Commentator & Bannerman Resources (ASX: BMN) CEO, Brandon Munro, calls in for our weekly catch up about the world of Uranium and Uranium investing.

Based on questions that were sent in by viewers, it is clear that there are a lot of new investors coming into the uranium ecosystem. So Brandon and i cover a little bit of old ground but with new data. We start with the relationship between spot price and term-contract in today’s environment. We also look at the effect of supply and the effect on Russia v US tensions. Does Russia care about the Russian Suspension Agreement. Should they?

And we get his thoughts on the timing of the US utilities coming back in to the market to help drive equities. Are US uranium juniors without a cash buffer getting nervous.

We Discuss:

  1. 3:22 – How is Spot Price Determined
  2. 6:49 – Relationship Between Term Contracts and Spot Price
  3. 10:43 – Importance of Kazakhstan: How Long Can They Withhold Production
  4. 14:57 – Utilities Globally: How Do They Work?
  5. 19:49 – RSA: Why Should Russia Care About the US Market?

CLICK HERE to watch the full interview.

Matthew Gordon: Brandon Munro – how are you doing, sir?

Brandon Munro: I’m well, how are you, Matt?

Matthew Gordon: All good, well actually, I am not all good; my 12-year-old took me swimming for non-stop lengths of the pool, then made me tread water for 5-minutes, then made me do pull ups and I can barely move. I am incapacitated like the old man that I am, and I can’t sleep. So that’s me. Woe is me.

Brandon Munro: Oh, geez. That’s tough. Were you able to do the pull ups all on your own or did you need to get pushed a little bit?

Matthew Gordon: the problem was I did do them on my own and I’ve literally just ruined my back. That was 3-days ago. Too old. I’m too old. Let’s get into something I can manage, which is asking questions. It’s another week in the world of Uranium and this week we would change it up a bit. We have got loads questions coming in every week, which people want to put to you. We have put some down on paper at some broad headings. we might do some more next week because there’s a lot, even if we do consolidate them to broad headings. You’re ready for this? You’re okay?

Brandon Munro: Yes. Sounds exciting to me.

Matthew Gordon: I’m going to start with an easy one, which we have covered off in the early days, but there’s some people who don’t necessarily have time to go back through the series, but let’s just talk about an easy amuse-bouche for you, which is, ‘how is spot price determined?’

Brandon Munro: Okay, well that is a nice warmup one, isn’t it? The first thing to understand is that it is not like a clearing house spot price that we see in certain other metals. It is a reported spot price. So there’s a handful of reporters, and the best known of them are TradeTech and UX Consulting, and what they do is they basically keep their finger on the pulse in the best way that they can to understand who is buying what, in what volumes at what price. The first limitation is it’s not going through a clearing house or an exchange. There is some capacity for partial accuracy. And that has been improved. It’s been improved first of all, because there is a quoted futures exchange, which gives, a more accessible level of information to investors. And that’s a NYMEX futures exchange, which you can look up, say on bar

And then the other thing is we have seen the emergence of traders who are very transparent, such as Numerco. So well-worth looking up Numerco, following them on Twitter, and they have really had a positive impact on that level of transparency.

The second thing to understand about the spot market is it’s not an immediate delivery market. In fact, spot can be anything up to 12-months delivery and it’s still categorised that way. So that is much to the irritation of some of the larger producers, the Cameco’s, KazAtomProm’s, for example, who want to move this market to a more realistic, immediate delivery or short-term delivery market. The other thing to understand is, as investors we see the price, but it does differ depending on the delivery point. The spot, or the price that’s quoted for say two-week delivery at Cameco might be different to the price that’s quoted for 2-week delivery at COMERX, for example, or in the US. And we have seen that play a big role just recently because of a disruption in both conversion and Uranium coming out of COVID, we have seen a lack of storage capacity at COMMEREX in France, and so a very big swing between what is being paid for delivery in Cameco, the Blind River and COMEREX in France. Normally the location swaps in this sector have been very, very fine, but that’s now changed, temporarily, no doubt, but that’s a big swing and a big arbitrage if people are able to move material, move in the sense of the location swap at the moment. They are the key downsides of what we have got at the moment we spot. It’s lack of accurate transparency. It’s a multitude of different delivery forms and locations.

Matthew Gordon: For people coming into Uranium, investors coming into the Uranium space and looking at it as a potential investment, that’s the first thing they look at. They think of, like other commodities, you look at the spot price and that determines the market. Once you move slightly further up that knowledge curve, you start to appreciate that. And in fact, term contracting with long-term contracts have a more significant role to play. Let’s just try and understand, if you may, the relationship between spot and term-contracts.

Brandon Munro: Yes, very good question. Particularly for people coming new into the sector Traditionally, this business was done almost entirely on long-term contracts between the utilities and the big producers. And that situation continued well into 2004, 2005. And the spot market such as it was, was really used for settling, say, overproduction by a mine that couldn’t be delivered into contracts or sometimes buying back production if there was a disruption or for some reason they had oversold who got over called on the production limits in their contracts. Now what happened in the last Uranium boom is financial players came into the sector. There was a huge increase in volume generally, and that made the spot market fulfil a number of other functions, not just that form of settlement of overs & unders, under contracts.

Then what we saw after Fukushima was a sustained period of low contracting, relatively speaking, and much higher spot volumes. So, instead of spot accounting for say 5% to 10% of the movement of material in the market in some years it’s been as high as 50%. We have seen an increased role of traders; there’s the concept of churn in that spot market. It’s not necessarily one pound being pulled out of a mine and sold to a utility, but that pound can be churned many, many times to create additional volume. But what we have also seen is the emergence, in particular of Kazakh production, a fair of which went into the spot market until fairly recently. So that’s important to understand, as well as you’re taking a little bit of an introductory trip into this sector, the important news is Kazakhstan has stopped selling into spot. They haven’t sold into spot since, the beginning of 2018. So no longer is there that pressure. And if we now bring that right back to a contemporary setting, one of the impacts of the COVID disruption in Kazakhstan is that at least one of the, let’s call it major culprits who sell their mined material into the spot market, derive the majority of that material from their joint venture in Kazakhstan with KazAtomProm. So even though KazAtomProm, isn’t selling into spot, their joint venture partner was.

So what we’re likely to see coming out of COVID disruption is both an increased demand, particularly if KazAtomProm is forced into the spot market to compete with Cameco and other producers, but also a lot of the supply will be cut off at the needs because those parties who traditionally sold their joint venture material into the spot market can no longer do that.

So, term contracts, whilst there’s a low relative volume of term contracts at the moment, they are such an important part of the risk mitigation and supply security that utilities rely on in this business, that they will come back. Spot probably won’t go into the dormancy that it was in the 2000, but its relative position will reduce as the importance of term contracting increases.

Matthew Gordon: Let’s move further up that knowledge curve. We talked last week at length, and possibly the week before actually, about the importance of Kazakhstan and KazAtomProm to the Uranium market. Kazakhstan represents about 40% of production globally. KazAtomProm has 24% of that. They occupy almost the entire bottom quartile of the cost curve there. They are very, very important. People new coming into this, recognising that some of the questions we have had are how much longer can KazAtomProm hold off from getting into production; either forced or unforced, and how can they mitigate that?

Brandon Munro: Okay, so let’s be clear on what we’re talking about: KazAtomProm and Kazakh production is still continuing and that’s because before their 7th April announcement that they were needing to curtail activities, they’d already done wellhead development and acidified their in-situ recovery wells. The acid that they pumped in in January, February, March for example, is still producing Uranium today. It is starting to deplete. It’s becoming less potent, if we can put it that way, but nonetheless, they are still bringing solution up to the surface and extracting Uranium. What we’re really talking about here is not production per se, but their ability to start again with the drilling of these extraction wells and the pumping of the acid in so that they can allow it to acidify the ore and start bringing that solution up. And finally, the point to understand here is, there could be a gap where the current production from January, February, March acidification tapers off to such an extent that there is effectively a full, a significant or majority break in production.

To answer your question, you’re working in scenarios always with this type of thing. What cause KazAtomProm have said publicly is that they will start slowly to recommence wellhead development from the beginning of August. And now we are all waiting for their third August quarterly update, because in the meantime, and since they gave that guidance, the lockdowns in Kazakhstan have been extended and there’s an awful lot of commentary and news flow coming out of Kazakhstan that things will get extended again, but be that as it may let’s work with what’s in the public domain right now. That wellhead development will be slowly reinitiated from August. I read that, to me, that the most optimistic scenario we’re dealing with here is that they would spend, let’s say 4 to 6-weeks slowly mobilising, and the wellhead development itself, in the most optimistic scenario, would be running at full steam by, let’s say mid-September. That will then take some time, several weeks, and it’s not like they can play catch up across all of those different 13 mine sites. And then there’s a process of acidic acidification and in the optimistic scenario that would all take place before the winter sets in and then they would be back to normalised solution recovery by, let’s say November. And we would still see the dip in production because of that lag effect. And that dip would still carry on into 2021 to an extent. But you could probably realistically see them back to normal production levels by, let’s say the second quarter of 2021. That’s the most optimistic.

Matthew Gordon: Which answers the question that we were sent. That’s something that people are going to watch very, very closely: what will KazAtomProm do? What will Cameco do? The 2 big players in the marketplace.

Let’s move it forward. So, again, for all levels of ability watching this show, it is quite clear from the questions that are sent in, and we need to make sure that everyone is comfortable and learns with us. We’re all moving forward towards the same place. And the next question is around, now that we understand some of the players a lot of people are recognizing that US utilities are very important. They are important because they represent 25% of the world’s global demand for Uranium. And the question is: do different utilities from different countries have a propensity or a favouritism to go to certain countries. So, do the French utilities always look in Africa? Do the US utilities always favour Canada, for instance? How does it work when you are a utility buyer?

Brandon Munro: Well, the answer to that is one of those classic yes, and no answers: if we talk about the French, for example, Électricité de France is the world’s largest utility because it is responsible for a 75% of France’s total electricity demand. And so EDF have had a long-standing relationship in Niger, which has been effectively backed by the French government. It’s a bilateral relationship, not purely a commercial one. They have derived a large proportion of their Uranium from Niger, but they’re also in a joint venture in Kazakhstan. They have production coming of Canada in joint venture with Cameco. And because of their comfort in Niger, they have also been happy doing exploration and development work in Namibia, for example, as well as Australia and elsewhere.

And they have been rationalising in recent times, trying to reduce the expense of their Uranium business. And there were a couple of spectacular examples of that, but that’s a story to tell another day. Now, they do also have trading businesses. They do also buy and sell in the spot market and to contractors and with others and so on, but they are something of an outlier.

Then let’s look at China: the Chinese model is a lot closer to the Orano/EDF model. They are buying heavily in the market and they have been for quite a number of years, back all the way to 2006. They also have a strong preference to deal in Namibia, and that’s for a range of reasons that would include the preference that Western companies would have in Namibia. And also the fact that because of the extent of their investments in Namibia, they are obviously able to have a relationship with the local Namibian community and the Namibian government that gives them a lot of comfort.

And one Chinese utility, CNC has the Rossing Uranium mine, and a 25% interest in Langer-Heinrich, which is the Paladin energy mine that’s on care and maintenance, and the other Chinese utility CGN owns the Husab mine, that they paid USD$2.4Bn for from extract resources back in 2012. The 3rd Chinese nuclear utility, SPIC has not yet acquired a mine in Namibia, Africa or anywhere in the world.

They’re the 2 major outliers. Then you’ve got the US industry. And as you’ve said, they are important. They still comprise roughly 25% of Uranium demand around the world. What happened is back in the late seventies, early eighties, a few utilities clubbed together to buy mines and got their noses bruised and broken, doing that. US utilities buying mines and operating mines is not a very popular thing at the moment and it is a bit frowned upon. It’s all commercial relationships and they buy across the board. And that’s all publicly available. You can go to the EIA report that came out a couple of months ago. You can see that the US utilities buy from Canada. They buy from Australia, they buy from Namibia, they buy from Kazakhstan and they buy from Russia. And there is a propensity to buy it from closer allies, such as Canada and Australia, but there aren’t any explicit limits other than the Russian Suspension Agreement on how much Uranium they can buy from anyone else.

Matthew Gordon: Well, that leads nicely onto a topic we discussed last week and a few weeks ago as well, which is the RSA (Russian Suspension Agreement). We had Dustin Garrow on earlier this week. Very well-known character, a Uranium consultant to many in the industry. And he’s been around the block a few times and seen the highs and the lows. He was talking to us about the RSA agreement, that Russian Suspension agreement. And it’s a very important topic, which the US government is in the process of making some decisions on. And the expectation is that, well, you talked about this last week; the decision needs to be made before the end of the year because we’re not quite sure what will happen if they don’t.

He put a very interesting thought forward, which is, at the time that the Russian Suspension Agreement was put together, back in the 1990’s, it was a very different world. There were very different demands in terms of the volume of Uranium used. And that Russia felt the US market was a very important to get into, and obviously the US didn’t want them flooding the market either for a variety of reasons, national security being one of them. Dustin thought, or he put this forward, which was, why should Russia care now, in today’s environment, when there is a much bigger demand story, there are new markets why keep banging down the door of the US market?

Brandon Munro: Well, that is an interesting question. And Dustin is certainly the guy to come up with those questions, with have such a vast amount of experience in the industry, including back in the old days when there was a bifurcated market with Russian material and non-Russian material and what was allowed into the US and so on. He’s got some insights from those days that not many people have got anymore. Here’s the thing; first of all, the Rosatom group of companies are extremely effective in this industry. They build plants on time, on budget, all of the time. They are in every aspect of the nuclear fuel supply chain, and they do it well. And they pride themselves on their delivery. They would not want to be the instigators of any breach of supply. They wouldn’t call force majeure. They wouldn’t withdraw unilaterally or voluntarily, but Dustin’s question and comment probably goes more to the situation where they are not allowed into the market by US government or by negotiations between the US and Russia, and how would they react? And Dustin does make a good point in that for Rosatom to lose their access to the US market with their enrichment in particular, sure, it would be a shame for them, and it would affect them, but it wouldn’t be a disaster. Russia has got very significant demands on Uranium for both its domestic requirements, but also its export program. And if they were left in a hole with their capacity for enrichment or SWU, they could redirect that capacity at re-enriching tails and other forms of secondary supply that would still have a happy home in their Uranium requirements now and going forward. It wouldn’t be a disaster for them. It would have an impact, however, on US utilities and depending on how far you want to go down this in terms of geopolitical posturing and how much of a conspiratorial approach you want to take to this, it would have the effect of putting a splinter in the finger of the US nuclear fleet, because it would make their enrichment quite a bit more expensive. The utilities would then have to very quickly recover that enrichment from non-Russian sources and non-Chinese sources, and there isn’t an awful lot of that. It would have two effects on the Uranium market as well as increasing the utilities fuel costs and their efficiency of producing energy.

The first effect on the Uranium market is it would quite quickly absorb the excess capacity in the non-Russian enrichment sector, which means less underfeeding, which means less secondary supply of Uranium that can make it into the market. Now, the second effect that it would have is, let’s say that we saw spiralling SWU prices. SWU is a separative work unit, which is the way that enrichment is priced. A spiralling SWU price would create an incentive for not only underfeeding to stop, but if Uranium is still relatively cheap, what the US utilities could do is they could overfeed. In other words, they pay a lot less SWU and they buy a lot more U308 so that they can push a lot of U308 through at higher tails assays. And for people new to this, probably the best thing to do is to go back to some of our discussions where we really talk about the nuclear fuel process and the whole cycle as it relates to conversion and enrichment. But for everyone who’s not coming here for the first time, that could create a situation where we see increased demand from the US utilities, and in the timeframe that we’d be talking about, what that probably means is very accelerated draw down on existing inventory of U308 and UF6 to fill that gap. That will affect different utilities in different ways: the utilities who counting more heavily on Russian enrichment would find themselves needing to act more quickly and more decisively. And of course, for someone who might not have been concentrating as much, this is a speculative scenario that we are answering. This is a scenario where there isn’t an agreement reached. There isn’t an act of Congress that comes to a resolution where there is a limitation, and the existing currently suspended dumping investigation resumes with the imposition of some very serious tariffs onto the Russian industry, and they decide, look, that’s just not worth it. We’re going to withdraw

Matthew Gordon: That’s a very interesting scenario that you’ve described, because it would suggest it, one could argue that the US can’t do without some Russian supply. And if that is the case, , what is the number? Is that 20% number reasonable? Because, obviously, if the price goes up for utilities, it’s not significant in the scheme of the total investment in terms of a reactor, but it’s significant in terms of ongoing costs, given that the capital expenditure is a sunk cost now. And when they’re competing against gas and renewables, it’s meaningful to them. But the problem has been that some utilities are not sticking to that 20% number. Isn’t that just a case of, so why are we focusing on the Russians and not on the utility buyers who are not regulated or not sticking to that 20% number?

Brandon Munro: Well, it’s a global number. So, presumably, those utilities were looking to get out ahead of each other and speculatively scoop the cheap material away from each other. And I guess they’re just taking their chances on the extension of the Russian Suspension Agreement and their material being available to them.

Matthew Gordon: Can I just clarify the terminology: when you say global, you mean a global US utility number?

Brandon Munro:  I beg your pardon. Yes. It’s an aggregate number amongst –

Matthew Gordon: So, first come first served is the attitude?

Brandon Munro: Yes. But your point, what I take from that point that you make is, it’s not going to be a total disaster for the US utilities, but it will increase their costs and it will increase their cost quite significantly. They pay about 20% of their operating costs as the total nuclear fuel. Now, that’s your U308 through to your conversion, through to your enrichment, your fabrication and storage and so on. But enrichment at the moment is a relatively minor component of that. But if you saw a market suddenly rebalance because all of the Western enrichment capacity is removed by US utilities filling the gap and putting their finger in the dyke, well, then you’ll see proper price discovery and probably market prices in SWU, which will increase that little component that’s enrichment and possibly have a 3% or 4% increase in the cost of electricity delivery for many of those utilities.

Matthew Gordon: Brandon, we are going to switch over to the Crux Investor Club section for Crux Investor Club members. We have got 2 quite good stories, this week; quite insightful, and impactful in terms of investment decision-making. I’m going to do that. Thank you very much, everyone for watching the show this week.

Brandon Munro: It was quite fun answering all of those random questions. Normally with our weekly chat, we have got like a nice thread and I’ve had a bit of chance to think about it and so on. And so, yes, that’s fun.

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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.

Brandon Munro #1 – Uranium Investors Need to Believe to Macro (Rewind to January)

We like checking in with Brandon Munro. He is a uranium market commentator and the CEO of Bannerman Resources (ASX: BMN). His insights into the uranium space are both compelling and revealing.

In January, after an incredibly disappointing 2019 for uranium, investor sentiment was at an all-time low. The Section 232 petition had failed to bear any tangible fruit, equities were tumbling away, and price discovery seemed an eternity away. Munro’s message to investors at the time was clear: believe in the uranium macro story, and look a little deeper. In hindsight, the mechanisms that were at work in January were accelerated by COVID-19, and they have led us to the more bullish sentiment we are seeing amongst the uranium community today.

Matthew Gordon talks to Brandon Munro, January 2020

The macro story for uranium is now better understood and for good reason. It is widely accepted that the world’s growing energy consumption necessitates a nuclear energy infrastructure. Fossil fuels are not as inefficient, and renewable energy is expensive and not entirely as green as initial publicity led us to believe or quite frankly our intuition suggests to us. Nuclear power is a (more) green solution to the energy needs of tomorrow. A global increase in the construction of nuclear power plants is evidence that the powers that be are fully aware of this. As of today, there are c. 440 nuclear power reactors operating in 30 countries (plus Taiwan), with a combined capacity of about 400GWe. In 2018 these over 10% of the world’s electricity. Moreover, around 55 reactors are under construction internationally, primarily in Asia, and there are big plans for Russia too. Further capacity has been added via nuclear plant upgrades, and plant lifetime extension programmes have been popular, especially in the US.

So, if investors are willing to accept this and put their faith behind the uranium macro story, it’s time to dig into the details.

Back in January, plenty was happening behind the curtain in a deep bear market. Industry insiders were claiming that UF6 reserves, held by utility companies, were all but gone. They also claimed the enriched uranium product (EUP) conversion price had risen by 400%, arguing that the price of uranium enrichment had risen from US$30 to a more sizable US$50. These are just some of the moving parts that were at play when we spoke, and they have continued to feature prominently in the discussions of the uranium investment community 7-months later. As the utilities’ reserves of EUP and UF6 have become substantially completely depleted, it has negatively impacted their optionality. The idea was that utilities would now need to look at their uranium supply chain with a greater sense of urgency, because without UF6 and EUP, long-term planning, and therefore contracts, would become a necessity.

Even with the significantly longer runway that utilities require to plug U3O8 in rather than UF6 or EUP, this hasn’t quite happened yet. While COVID-19 has been great for tightening inventories and restriction uranium supply into the market, exposing the supply-demand deficit, it has also thrown up all manner of problems for the utilities. As a consequence, long-term uranium contract discussions are currently a very low priority; they have much more urgent matters to attend to. It’s natural for uranium investors to feel frustrated at what appears to be another false dawn, but when looking more deeply at the fundamentals, like Munro did in this interview, and believing in the uranium macro story, there are still plenty of causes for optimism.

Munro dismisses the idea that U3O8 would return to its c. US$150/lb peak, and this is something we’ve heard consistently from some uranium brainiacs we’ve interviewed in the months since this interview. Specifically, Munro projected a sharp peak of US$90/lb, followed by a retreat to a sustainable US$50-60/lb. There simply isn’t the hype surrounding the nuclear space that was present 15-years ago, and it is unlikely this will ever return. The sentiment is still tarnished by nuclear disasters and the seething rants of purported environmentalists, and this is far from an easy reputation to shift.

Uranium investor requires patience and intellectual curiosity. Watch or listen to this uranium series with Brandon Munro and understand the space, the limitations, the opportunities and work out which companies will do better than others. Timing is everything. Gentlemen, start your engines.

Company Website:

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.

Brandon Munro #5 – Uranium: A Chess Game, with Missing Pieces (Rewind to May)

Back in May, we conducted an interview with Brandon Munro; regular Crux Investor viewers and readers will know him well. He is the CEO of Bannerman Resources (ASX: BMN) and is a uranium market expert. His commentary is always compelling and incisive, and he is never afraid to speak the difficult truth. What was going on back in May, and what can investors learn from these events to aid their investment decisions in the here and now?

Matthew Gordon talks to Brandon Munro, May 2020

For some context, back in May, the U3O8 spot price was knocking on the door of US$35/lbs. It has fallen slightly in recent weeks, sitting at a shade under US$33/lbs today, but even $35/lbs was nowhere near what uranium players are looking for; US$50/lbs is the widely supported bare minimum.

At the time, Munro bemoaned the psychological sentiment barrier of the uranium spot price. Recent price developments have further affirmed this belief. Until the sentiment of utility companies is forcibly modified by inventory, supply and other market conditions, uranium is going to continue in this unprofitable void with only a few producers managing to strike a small margin.

The NFWG report has been out for a while, but it was a real hot topic in May. The majority of uranium investors now see it as a move in the right direction and the first step of a more comprehensive strategy aimed at restoring America’s competitive nuclear energy advantage. It is a policy document that needs to be built upon with concrete strategies and definitive numbers. Cameco’s President and CEO, Tim Gitzel, explained his opinion at the time. Like the stateside uranium CEOs, he was entirely positive and thought the report provided an honest look at how the US industry has fallen away. He was pleased to see the DoE’s demand for pounds sequestered, but he was adamant that he didn’t want to see any form of preferential market availability afforded to uranium players ahead of McArthur River. It doesn’t appear this is going to be the case right now, but we are still waiting to see exactly what the US administration has planned, especially in an election year.

During a Cameco conference call at the time, it was explained that COVID-19 had its most severe impact on uranium producers who had been committing pounds of uranium via sales whilst expecting to mine them several months from now. KazAtomProm is an example of a company that has successfully mitigated potential impacts like this by maintaining a minimum 6-month inventory at all times. As a consequence, the company is able to make up the pounds it has lost to the coronavirus lockdown via its inventory and spot price purchases rather than relying on new production. This drains the market of more pounds, possibly as much as 20Mlbs, and fits neatly into the de-stocking thematic that is becoming ubiquitous amongst uranium majors. It will be interesting to witness how this dynamic uranium space continues to develop over the next year; which uranium companies will be caught short? And which will try to take advantage of unsuspecting investors.

At the time, Cameco stated that it took the Port Hope Uranium Conversion Facility offline for the right reasons. It was down for strategic reasons including accelerating some planned summer maintenance. It was claimed to be more a case of bringing forward planned downtime rather than an unexpected cessation of operations. Cameco was confident that Port Hope would go back online sooner rather than later, and this was proven to be true just a few weeks later, with the Port Hope Conversion Facility’s UF6 plant and Blind River Refinery recommencing operations on May 18th and being ramped up to normal operating capacity on May 25th.

However, the tone for Cigar Lake was established around this point, and it has continued to be representative of the company’s strategy today. The discussion around Cigar Lake featured broader ESG decision making issues that regarded the protection of employees, families and the wider community. Cameco claimed it would only turn Cigar Lake back on when the company is confident it can run it safely and sustainably, but with COVID-19 restrictions loosening, it is becoming increasingly clear that there is a strategic element behind this continued shutdown. Uranium producers want to see the carry trade made obsolete and the supply-demand deficit exposed in a way that induces a feeling of concern within the utilities. We thought Cameco was playing the long game at the time, and now it is obvious that this decision forms part of a multiple-year game of chess. Cameco’s strong balance sheet and access to capital should they need it, will continue to protect their position in the meantime, but the strategy wholeheartedly revolves around bringing about comprehensive destocking of uranium inventories. Picking up the loose change equates to price control and they and KazAtomProm seem determined to clean up the sector and take back control from the utilities. As will all economics the power shifts between buyers and sellers. Now it’s time for sellers to see some of the upside. It is also worth noting that perfumed/blended uranium, fuel fabricated from uranium that does not conform to the corresponding limits for Enriched Commercial Grade UF6, was considered by Munro to not be a possible substitute for Cameco’s lost production because the Japanese utilities were not forthcoming.

During this interview, Munro explained the importance of mobility for uranium inventories; in fact, he stated that this is much more important than their overall size. The mobility of inventory appears to have an inversely proportional relationship with uranium price movements. A mobile inventory gives uranium companies something that is extremely desirable right now: optionality.

KazAtomProm CEO, G. Pirmatov, had made some significant statements around the time of this interview, and Munro delved into them. Its ISR-amenable resources give it a competitive advantage over its peers; it is able to “flex up” and “flex down” its production levels without it meaningfully impacting on the unit-cost of production. Companies are also able to slow down ISR projects whilst continuing to achieve the same level of recoveries at first. The better quality Kazakh assets with a larger well configuration have a longer runway before they run out of uranium product.

The main activity that had been disrupted at the time for KazAtomProm was wellhead development, and this was predicted by Munro to have a varying impact on each of the company’s JV partners. With KazAtomProm’s shutdown recently being extended by a further month, these factors have become increasingly important for investors today, and investors should carry out careful due diligence of a uranium company’s front-end logistics to make sure they won’t be left short. All in all, it can only really mean pounds being taken out of the market, and that can only be a good thing for uranium investors.

Munro then explained that with big players supplying +40% of the world’s uranium, the remaining c. 60% would be primary supplied by vertically integrated players, such Orano, which is vertically integrated with French utility, EDF. There is a clear top 10 that could help plug the widening supply-demand deficit, but outside of this it will be a free-for-all, with uranium juniors across the world vying for their piece of the uranium pie. In this instance, the fundamentals of these companies become extremely important. Many of these companies will never get into production, and Munro advises caution before investing.

Uranium junior miners will only going to get financed once they have enough long-term contracts are in place with utilities. The U3O8 spot price remains a strong indicator of uranium market sentiment for equity investors. The utility companies are far from immune from the consequences of COVID-19, and this has been to the detriment of long-term uranium contracts. With no palpable appetite for serious discussion from utilities yet, it looked, and continues to look, like another waiting game for uranium players.

Company Website:

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.

Brandon Munro #16 – No to US Uranium Reserve Fund (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price A$0.035 (16.07.2020)
  • Market Cap: A$37.06M

Uranium Market Commentator & Bannerman Resources (ASX: BMN) CEO, Brandon Munro, calls in for our weekly catch up about the world of Uranium and Uranium investing.

It’s been a big week for uranium investors. The US House of Appropriation has blocked the idea of funding of the ‘US uranium reserve.’ What is the right of reply? What does this mean for US uranium equities? How should uranium investors interpret this information? We will be asking some of the main players this week how they intend to respond. Brandon gives us a precursor to what happens next.

We then take a look at the supply market in general, with news of the latest lockdown extension in Kazakhstan, with the world’s largest uranium producer, KazAtomProm, extending its initial 3-month production reduction by a further month. Cameco and the other uranium majors are following suit.

We Discuss:

  1. 3:05 – US House of Appropriation News: What Happens Next?
  2. 10:50 – Geopolitics of Nuclear Energy: Should Politicians Be Involved?
  3. 13:18 – Impact on Retail Investors: Looking for Catalysts and Getting Deflated
  4. 15:34 – Kazakhstan’s Extension of Lock-down Continues: The Impact on Market
  5. 18:12 – Your Questions Asked: What if COVID-19 Continues for Another Year, What Could the Impact Be?
  6. 24:24 – COVID-19’s Impact on Investors: Blue Sky Opportunities
  7. 27:29 – US & Russian Suspension Agreement Debates and Potential Results

CLICK HERE to watch the full interview.

Matthew Gordan: Brandon Munro. How are you, sir?

Brandon Munro: I’m well, how are you, Matt?

Matthew Gordon: Good. Feels like a long week if I’m honest. But we have got to get on with this. We have got another exciting week of Uranium conversation, we discussed some pretty big things this week. We are going to discuss some of them in this forum, and then we’re going to go and talk about some quite interesting stuff in the Crux Club for a moment, won’t we? Looking forward to it.

Brandon Munro: Looking forward to it.

Matthew Gordon: Let’s start off with the big one. People started talking about it last night, but they haven’t really got into the detail of it. The US House of Appropriations Committee have come up with something which is probably not too good news for the Uranium juniors in the US. What did you make of it?

Brandon Munro: Yes, I think it could be pretty discouraging for some of those companies that have really pushed the Section 232 process, and were hoping to obtain shorter term benefits. For the viewers out there, the House Appropriations Committee, whose job it is to take the recommended budget proposals, mark them up, and then submit them to Congress for approval. And that’s for the budget commencing in October 2020. They jettisoned, really, the proposed US Uranium fund. So if we go back for a moment to the report that came out of the Nuclear Fuel Working Group, which came out of the Section 232 investigation all those months ago, the report recommended a USD$150M per annum Uranium reserves that would acquire between 17Mlbs and 19Mlbs over about 10-years, and also convert a proportion of those so that the US could improve and enhance its stockpiling capability.

At the moment, the US Department of Energy maintains only enough strategic reserves for about seven reactor refills reloads. And that was seen as not enough. Now what has happened is that the House Appropriations Committee said, nope, we’re not going to fund that. We’re not going to approve that. And they cited a lack of detail, in fact, from the Department of Energy over that. They basically said, we’re not too sure about the justification for this Uranium reserve. And in fact, we didn’t really get our questions answered on how it would be implemented, et cetera, et cetera. So, a bit of a discouraging setback for many of those US producers, but of course, for the broader market it is just really a blip.

Matthew Gordon: Does it surprise you? Was this a shock to you?

Brandon Munro: No, and in fact, you and I were talking about it, if it wasn’t last week, it was the week before, where we were saying the DOE really seems to have its head space in nuclear technologies, particularly SMRs and advanced reactor technology. When you look at where the money is going, most of the funding has gone to R&D for those different technologies. They can see how it can more directly benefit the US industrial complex. They did appear to be quite slow in getting their head around the nuclear fuel cycle during Section 232. And my impression, and we talked about this as well, was that the reserve looked a little bit like throwing a bone to the US mining industry. Quite an attractive bone if it had come off, of course, and if that had been spread amongst only two or three of the miners, so it doesn’t really surprise me to see this, given how distracted DOE has been and where its focus has been.

Matthew Gordon: Given that, what’s the timing on all of this? What happens next?

Brandon Munro: The Committee itself basically told DOE to go home and do its homework. What they asked for was they directed that the Department of Energy needs to come back with a plan, including costings, within 180-days of the Act passing. They want them to tell the House Committee how they are going to go about procuring, converting, storing. They want information on the legal processes that allow them to do this type of thing, and all of the associated costings to that within 180-days. Now, that is obviously half a year from now. And presumably what would happen from there is that that then gets tipped into next year’s budget appropriations process. My take on this and my read is that unless the Republicans pull a rabbit out of the hat in the Senate during this appropriations process, we’re now looking at that money potentially being available from October 2021. It is a long way off, and there is a long period of lobbying that is going to be required to see this one through from here.

Matthew Gordon: If I’m a US Uranium junior I’m going to be pretty pissed, because someone has dropped the ball here. They haven’t done the homework. They haven’t put in the hard yards to actually provide the information which was asked for. And, quite rightly, the Committee has said, no.

Brandon Munro: Well, I don’t know where the breakdown has occurred. I honestly, I’ve got no idea. And there’s a number of people who come on your show who probably would have some good insights as to that. It would definitely be disappointing for Uranium juniors or Uranium producers who are eyeing off this potential source of demand. The opportunity to contract directly with the US government would be very attractive to them. I would look at it a bit more holistically though; which is the market is going to do the heavy lifting here anyway. By the time this all gets sorted out the numbers that they told the DOE that they would need in order to effectively resume production, the market is going to navigate and gravitate to those numbers anyway. I will be astonished if in 2 or 3-years’ time, we are not above USD$60/lbs, USD$65/lbs on a term contracting basis. It might be that when we finally get there, and the US finally starts procuring this material from US production, the market has solved the problem for them in any case. And we now look back at all of these delays and this great long process that has certainly put a wet blanket and a damper on a lot of the utility activity, we will look back at all of this and say, well, what was that for?

Matthew Gordon: I agree with you, but we have had conversations, probably back in the early days, where we were trying to explain to people the importance of US utilities, because it is such a big market. But the reality is that it is 25% of the market. And, the market will, well, we said at the time, it will have to sort itself out. It looks like it is probably is going to have to do that. It is going to have to find its own pricing in the market because it is not getting much help from the US politicians at the moment.

Brandon Munro: Yes, and look, I think some would justifiably ask the question, whether it is the US politician’s role to be helping in that instance. And that is a whole different discussion that really comes into what, philosophically, is the right level of government intervention and so forth. And there is a broad range of views on that, of course. But you’re quite right: we know what supply and demand needs to do, and if utilities want to buy diverse supply from anyone except, say, the Kazakhs and the Russians, for example, well, they are going to have to be prepared to spend a proportion of their portfolio of contracts at those prices and above over the coming years.

Matthew Gordon: But it does come back to this whole geopolitical component around energy, around Uranium and nuclear energy. We are going to chat in the Club member’s club about Nord Stream 2, but it is just a real reminder that, , whether politicians should or should not get involved with decision-making like this, they are because we have got various sanctions: Russian sanctions, we have got Iran sanctions. And, the US’s allies are even feeling a little bit ostracised about the way that the American politicians are approaching this at the moment, especially around Iran, for sure. It is hard to separate the politics, politicians’ activities, and the utilities decision-making in this environment, and in an election year too, so it is as complicated as ever. But, coming back to my point, the US junior Uranium companies are going to find this a little bit hard to swallow.

Brandon Munro: Well, you are absolutely right on the political and geopolitical implications. And this is in the counter argument to the one that I referred to a moment ago, which is that nuclear energy is inextricably linked to geopolitics. And even in the US free-market environment. In Russia and China, it is entirely absorbed into the political apparatus and the political industrial geopolitical apparatus in those countries. And as came through really clearly in the Working Group report from the Department of Energy is that the US has dropped the ball on that. The counter argument is this is a special form of energy, as we’ve always said, it is so closely integrated into geopolitical ambitions of the world’s major players, that it should be integrated into the political process as well. So that’s the counter argument, and the one that incidentally I favour. And we have talked so much about the role of geopolitics, and you can’t really understand the Uranium sector unless you have got a reasonable grasp of geopolitics. And as we have talked many times on the show, that is where we tend to navigate when we’re looking at the bigger picture of this.

Matthew Gordon: What is interesting to me about what you have said earlier is that this announcement, and obviously it is not going to faze utilities, but for investors, retail investors particularly, looking forward to these large catalyst moments over and over for the last couple of years, since Section 232 started, this will be a huge disappointment because it is a huge inertia yet again when they are looking for salvation in spot price and rising support from the US government. And to see that the short-term impacts won’t be there. There won’t be any movement in Uranium equities off the back of this, but your view is that it doesn’t matter. The market will sort itself out.

Brandon Munro: It doesn’t matter for most of the sector. So, when I look at my Twitter account, and some of the responses that I’ve had to this news, it has largely been comments like, ‘Oh my God, the whole sector is going to be done down’. And it is like, no, it won’t be the whole sector. It is a handful of companies who stood to benefit from this. We need to be really clear that for 90% of Uranium juniors out there, those exposed to Africa, those exposed to Canada, those exposed to Australia and elsewhere, this makes very little difference. Sure, it would have been nice to have another source of demand coming in there, it is always nice to have a government buying material out there that others can’t buy. But it is not even the same as the effect that, take the Ranger mine coming off stream that ERA is closing – that is far more impactful on the market than what the source of demand is. We just need to put that in perspective. I don’t want to downplay the disappointment for the key players here. But by the same token it doesn’t really make much difference to the broader industry here.

Matthew Gordon: That is true in terms of pounds out of the ground. It doesn’t really add up to a lot in the scheme of things; That is what you are saying. Let’s talk about Kazakhstan. Kazakhstan, we heard last week, and we interviewed KazAtomProm last week and we heard from the horse’s mouth, but this extension to the lockdown period, it really is big. They are handling things really well. They are handling things, as per Cameco… they are doing the right things for the right reasons, but the impact on that could be significant because there is no end in sight.

Brandon Munro: That’s right. We have seen the 2-week extension extended by another 2-weeks. And to us, and we talked about this on the show 2-weeks ago, I think it was, that was very apparent that that was going to be the case. The Ministry of Health’s own numbers in terms of the number of daily pneumonias by the end of August, the number of beds that would be required, they pointed very, very directly at 4-weeks of necessary lockdown, assuming an improving trajectory. Now, we haven’t seen that improving trajectory and yet there were those numbers that were still presumably valid projections. So that’s now been extended, I think KazAtomProm would have been forming a very similar view to what you and I formed a couple of weeks ago. They would have expected those lockdown restrictions to carry on.

Now, how much longer do they carry on? Well, that is anyone’s guess. I mean, in Australia at the moment in Victoria, they had 100 cases a day and they slapped a six-week lockdown onto the city of Melbourne, which is 5M people. And we’ve seen a far escalating problem compared to that in Kazakhstan and its neighbours. There is no end in sight. Obviously, there will have to be an end at some point, but is it 2 more weeks? Is it 4 more weeks? Is it 6 more weeks? Very hard to judge, and I think it’ll be very interesting now to tune in on the 3rd August when KazAtomProm has their quarterly results, because now they are obviously under some pressure to address production guidance. But equally they’ve also got now a change in circumstances; they have got this extension of two weeks, so they have the justification now to address production guidance in a different way. I’m very interested to see what they come out with on 3rd August,

Matthew Gordon: Someone sent in a question, which was (I had absolutely no idea, I couldn’t even begin to come up with an answer for), which was: what happens if this COVID situation carries on for another year? And before we get some vaccination solution here, what does that do for these producers? Because obviously, utilities have between 2 to 3-years’ worth of inventory in reserve for situations like this. They don’t want to run out. But these companies, the longer they are offline, the longer it is going to take to get online. The question was this: can those companies come up with a protocol which allows workers to get back in? And given the size of some of these, like KazAtomProm has about 20,000 workers, obviously not all of them are essential workers, they are not all in the field as it were, but how do we, as the world, how do we get back into production on these Uranium sites, these Uranium assets without endangering lives?

Brandon Munro: It is an interesting question, isn’t it? Because the scenario in which the world is still grappling with COVID in a year’s time without a vaccine; that’s a very realistic scenario. Most of the medical information that I’ve seen on a vaccine, is that we are looking at least that timeframe before a vaccine is developed and is safe and available to the public. And then there’s a whole lot of questions about affordability. There are questions about what are the attendant risks with the vaccine. This is a scenario that I have very firmly in front of my planning from the Bannerman point of view and so forth. But having said that, I don’t think it is realistic to expect that these big production centres will remain offline for that long, even if we’re seeing an escalated issue at a societal level. And there’s a few reasons why I’d say that. The first one is that we learn, we get better. The mining industry is incredibly adaptable. It probably adapts as well as any other industry, perhaps including military. It comes up with various techniques. Now that doesn’t mean that, if we’re talking about Kazakhstan, just for argument’s sake, it doesn’t mean that they’re going to be back at 100% production necessarily, but over time they would work out how they can do that.

The other thing is that, let’s say, again with Kazakhstan, that it continues to really battle COVID over that period of time, there is going to become a proportion of the workforce that develops immunity through having recovered from COVID. So, in addition to whatever other mitigating workforce steps implemented by KazAtomProm, they are going to be able to draw on people who won’t get sick. But the other thing is, what we’re talking about here is, both in KazAtomProm and Cameco situation, and some of the other companies that have been affected in other commodities, we are largely talking about preventative measures. Companies that are making tough, difficult decisions to prevent adverse circumstance answers, not only for their own workers and their families, but for the society at large, particularly in Cameco’s situation who are very keen to preserve or to avoid any contribution to the difficulties in Northern Saskatchewan. The society’s tolerance for those preventative measures will wane over time. We are seeing it wane already in the US in many different ways at a societal level. So over time, the balance will move more towards getting production and getting dollars in the door. The question becomes, in that scenario, while we’re playing this one out and role playing it out, where does that balance kick in? Because for a country like Kazakhstan, we have said it before: Kazakhstan is incredibly important to Uranium, but Uranium isn’t that important to Kazakhstan. , 20,000 employees across the country there isn’t massive compared to other hard rock commodities, such as Copper and Gold, and it is very, very small compared to oil and gas. The government, the society, the communities, we will see them accept that risk sooner, particularly in hydrocarbons and other forms of industry, than they will with Uranium. Would that be six months would have been nine months? That’s very hard to guess, but I think the idea that Uranium could be shut down for a year is unrealistic.

Matthew Gordon:  It is also quite interesting in terms of the supply story. Again, we’re going to have some old ground here, but this new data allows us to do that. The longer the current situation goes on, the less supply there is in the market, the less pounds there are on the market, and there is this undertone we’re getting from Cameco and KazAtomProm about sweeping up pounds in the spot market. It is really good news. I have got to bring this back to investors; it is good news for investors in Uranium companies. And the longer this goes on, the better is for the Tier-3, I’m calling them. I’ve got my Tier-1 producers like KazAtomProm and Cameco and the like, and then the Tier-2 are people that have formerly produced, and the Tier-3 is coming through. The longer this goes on, it is better for those Tier-3s, and lower, in terms of, there will be more need for them. There will be huge pressure on price the longer this goes on. And that can only be good for investors too. What’s your take on it from that angle? Because we talked in the past about the possibility of, if this goes on for a long time, people without cash are going to struggle, but at the same time, it is fantastic news for the supply side of the market. So how do you weigh those things up as an investor?

Brandon Munro: I absolutely agree. What we’re seeing here is the drawdown of inventory, necessarily by utilities and others, while the supply deficit widens. And that will carry on to the end of the year and even into next year because of the existing structural supply deficit, but also the guidance that’s coming out of KazAtomProm now seems pretty clear, to me, that it is going to affect 2021 production as well as 2020, as it takes time for them to reassess their wells and develop new wellheads and so forth. But here’s the rub: the more disruption that we see and the longer we take for a market to rebalance, the more volatile it is going to be. So if, for example, at the end of 2018 we had seen a market rebalance, we had seen a series of term contracts written, we had seen price discovery, and we had seen the utilities meet their requirements out to 2026, 2027, 2028, and so forth. We would have seen prices go up, no question. That was absolutely necessary to preserve existing production, let alone to incentivise new production.

But if the steps had been taken back then, it probably would have brought on enough new production at that price to avoid serious supply scarcity. But here we are two years later and that hasn’t happened, and the deficit has only got worse. And now we’ve got a serious supply disruption taking place right now. So that means upward volatility. That is great news for all producers, really, particularly good news for some of the, you used the term Tier-3 and Tier-4 producers, who can get into business. But it also becomes very important to understand as an investor; are you investing in a company that can produce producible pounds during that volatility period? Because if we go through a huge amount of volatility, like we did in 2006, 2007, and then the market settles down again by 2030, and your investment is only looking at that timeframe to get back into production, it will see some benefit, no question. Its cost of capital will go down, but it won’t be putting money in the bank as a result of selling pounds into those volatile price events.

Matthew Gordon: I think it needs some careful thinking about where you place your bets, depending on what your strategy. We have talked about it a lot before. We will talk about it again. But for the sake of today’s conversation, I do want to talk about utilities. We understand from last week’s conversation why utilities are inactive. You explained that. You articulated that last week. In terms of this Russian suspension agreement, it is just worth getting into in a bit detail about what the debate is. What is the US wrestling with. What are these politicians who are affecting the price of Uranium and the nuclear industry? What are they wrestling with?

Brandon Munro: I think we need to remember that there is a debate – sure. And there’s a lot of grandstanding and there’s a lot of political posturing and that’s what we read about because it comes out in the media. But what we’re actually talking about here is a negotiation; this is a negotiation between the US and Russia, where the US is seeking to get Russia to agree to the restrictions, and in return, Russia is seeking to get the US to agree, to allow it, to sell its Uranium, but in particular it is enrichment services, without forms of trade restrictions such as tariffs. I saw some commentary out of, it was Energy Fuels, and their view is that if there isn’t an agreement, that the resulting position will be the suspension of the trade action falls away, which we’ve said before. And they are saying that the result would be that tariffs would come in at 115%. So very, very significant tariff on Russian enrichment and Russian Uranium supply until the trade action can be re-established and resolved.

I am just repeating what I’ve seen there. I haven’t gone into the detail to understand that, and it might be that they have got access that I don’t. But of course, if that is the result, you can imagine why the utilities are just so nervous about this; because they could see those tariffs imposed on their existing contractual obligations with Russia, and unless they’ve got some a force majeure or other option to get out of it, that is going to make them pretty nervous about the cost that they will be paying for their nuclear fuel. So that is what is at stake. And there are various provisions where, for example, the US could unilaterally withdraw, giving a certain amount of notice. We’re hearing that perhaps they are playing tough with Russia, or attempting to, let’s just see how all of that plays out. But the word coming out from the US that I’m hearing is that this thing is still a long way from being resolved. We are likely to have a resolution in December, perhaps even late December. And so that gives viewers an idea of why the utilities are so distracted from what we are seeing.

Matthew Gordon: What happens if we don’t come up with something in December? Can they extend the negotiations, or does the resolution come into effect?

Brandon Munro: The resolution comes into effect. There’s no automatic extension. Effectively, what happens is that the 1998, I think it was, when the initial action, the trade action was brought, it was a dumping action that was brought, that’s the action that was suspended and why this whole thing is called the Russian suspension agreement -so that suspends that action. The status quo at that time of that action would then kick in. I’ve read from commentary from Energy Fuels that that involves 115% tariff that would be automatically applied on anything caught by that action, which is Russian Uranium and Russian enrichment services.

Matthew Gordon: We are now going to switch to the Crux investor Club. So thank you very much, everyone for watching this. I hope you enjoyed this week’s show with Brandon. We are now going to segue over to the Crux Investor Club members where we are going to talk a little bit more about the geopolitical component and the impact on investors. So for instance, what’s happening in Iran; there has been an explosion. We’re going to talk about what’s going on, and should we be worried? We are going to talk about Russia a little bit more, with Nord Stream 2. And, how that potentially influences what is going on in the nuclear Uranium space, especially for investors. Thanks very much for watching.

Brandon Munro: Thanks to everyone out there who is supporting us.

Company Page:

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.

#14 Uranium Sector Shutdown Excites Investors – Brandon Munro (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price A$0.035 (16.07.2020)
  • Market Cap: A$37.06M

Uranium Market Commentator & Bannerman Resources (ASX: BMN) CEO, Brandon Munro, calls in for our weekly catch up about the world of Uranium and Uranium investing.

A “fantastic week” for uranium? We run through Kazatomprom’s possible shutdown extension and the huge impact this could have on the available pounds in the market.

Then, we look at the political side of things. With the Democrats no longer discriminating nuclear power from other forms of green energy, the November election no longer carries any uncertainty for uranium investors.

We Discuss:

  1. 3:34 – News from Kazakhstan: Implications for Kazatomprom and Uranium Investors
  2. 16:49 – Parallels with Cigar Lake Flooding: What’s to Expect from the Uranium Market?
  3. 23:43 – The Great Unknown of US Politics: Democrats to Support Nuclear?

CLICK HERE to watch the full interview.

Matthew Gordon: How are you, sir?

Brandon Munro: Well, thanks, Matt. How are you?

Matthew Gordon: Yes, good here. End of the week. Busy week in the world of Uranium this week. It started off by I did that AUSIMM conference, online conference on Monday. Finished at 4:30AM. I must admit, my thinking and functioning was not particularly good on Tuesday, but we got through it. And then a lot of news, which we’re going to talk about now. Shall we do it?

Brandon Munro: Let’s do it. It has been a great week for Uranium, actually.

Matthew Gordon: It’s been a fantastic week.

Brandon Munro: Nice for the conference organisers to come out with the online conference. It is a lot more accessible during a week like this.

Matthew Gordon: Yes, true. And we will talk about it in the Crux Club afterwards. We’ve got a few topics that we are going to talk about today. And a few topics which we are going to save for the Crux Club members at the end of this conversation. Let’s kick off with, I think, the news that people are talking about most online, which is what’s happening in Kazakhstan, and what are the implications? So, what are you hearing?

Brandon Munro: Yes, well, there is chatter online about Kazakh’s shutdowns and extensions, but, you know, I just don’t think this topic is getting the eyeballs and getting the chatter that it deserves. We’ve been talking about this every week, so anyone who’s been tuning in will be well across this issue. And I guess we have been talking about it and giving lots of bandwidth to this topic because it’s just so important. So here we are on the eve of KazAtomProm needing to announce an extension of their three-month shut down. And unless you are deep into a Uranium group on Twitter or talking to analysts who really cover the space, it’s just not out there. No one is really talking about it. So great opportunity for people who are well-informed and who are looking to coincide other events like Australian tax loss, selling coming to an end, et cetera.

What’s happened? Well, the Kazakh government has announced that from 5th July, they’ll be reinstituting a hard shutdown for initially two weeks. And the 2-week period was a midpoint of 3 scenarios that were put to the Kazakh cabinet. People who have been following this would know that on 29th June President Tokayev instructed the Ministry of Health to come up with a proposal. Now, the recommended path was in fact a four-week shutdown. And what the minister of health did is he laid down a few scenarios, or projections, as to what the daily hospital admissions would be by the end of August, according to either not taking any action, taking a two-week shutdown or taking a four-week shutdown. And he recommended the 4-week shutdown, which incidentally would have had 2,500 hospital admissions daily, and the requirement for 30,000 hospital beds capable of looking after people with severe COVID-related illness.

Now, the president announced a couple of days later that they would go down the 2-week path, but certainly reserved the possibility of either a two-week extension or further tightening, if they don’t see progress, basically. And that was a position that was reemphasised by the deputy prime minister who emphasised again, that extension would be reviewed. And I think the implication here is it’s quite likely unless they really see good news during those two weeks. And the rationale for the 2-weeks was a little bit… they attempted to base it in medical science; saying that that is the gestation period. It seems to me to be, here is a minimum amount of lockdown that they can take, and partway through that lockdown the Kazakh health authorities will look at where their case load is and then decide if it needs to be extended.

So when you apply lessons that have been gained from other countries, for example, where a lockdown doesn’t have an immediate effect; it’s not a silver bullet in a 2-week period, unless you’ve got highly localised breakouts that you are looking to contain. I do expect that it will be extended in some form. If you look at where we are at with their case numbers, when KazAtomProm announced on 7th April, that they would be initiating a 3-month production disruption, the cases were somewhere around 50 new cases a day. You know, we’re talking 1,500 cases a day now in Kazakhstan, and that is after some significant lockdowns back in May.

Plus, what we’ve got is a range of measures that the state commission discussed in conjunction with this announcement. And one of those measures is that 80% of workers in national companies should be working remotely. So that also correlates quite closely with what KazAtomProm is doing. They have got about 80% of their workforce, probably a little bit more, who are at home at the moment, either working from home if they’ve got corporate roles, but mostly on some sort of a furloughing arrangement. So, of course, they won’t be able to come back to work, and they’re not going to want to bring people back to the fields, start acidifying new wells and doing wellhead development and then being told on three days’ notice, no, the caseload is back up too high. Sorry, you’ve got to go home again. You would expect that KazAtomProm management are going to have to look for some level of stability before they would want to start bringing workforce back.

All the writing is on the wall for an extension here. I feel for the KazAtomProm executives and I feel for the employees and shareholders, but in terms of, for shareholders, you have got to remember that the last time that KazAtomProm announced this production disruption their margin went up significantly with the Uranium price. I think shareholders aren’t going to do too badly. They’ve got a nicely inbuilt hedge here for the extension that we’re going to see.

Matthew Gordon: Obviously not only KazAtomProm and the board and the workers, but also the people of Kazakhstan, because it does feel a little bit compromised – the decision-making. As you say, 2-weeks, it suggests to me that when the world of politics and science collide, you don’t necessarily always get the right answers. And, it would seem logical that there will be an extension based on the data around the world, but we shall see.

But let’s get back to KazAtomProm. What will this mean technically for them? With the fields, there’s been again, conversations online, on Twitter in chat rooms, people trying to understand – nice mug, by the way – trying to understand what could happen technically if this extended period of lockdown continues, will they be able to just have the fields ticking over? Will the Uranium be, I think the phrase was ‘frozen in’, as it were? What are their options? How do they keep this thing going so that when they do get a chance to, you know, get things back up into production, the ramp up time isn’t more extended than it needs to be?

Brandon Munro: The Uranium production has been ticking because, as I think everyone who has been following this show for a while would have gathered, the fields were already acidified when the initial wellhead disruption was announced. And so those solutions that are coming out of those in situ recovery wells initially weren’t affected, but of course the recovery starts to drop and that ticking starts to tick at a much slower pace. And that varies according to the different assets. The better quality assets will have a longer period in which they tick along than some of the poorer quality assets. The important thing here though, is that after three months of no forward wellhead development, many of those assets would be ticking really quite slowly now. And if the production disruption is extended for any length of time, you would expect, materially, that many of those assets will stop ticking. We will see production coming out of those wells that don’t have a forward trajectory of wellhead development to look forward to, will stop production.

Now for your question on getting back into wellhead development, well, there are a couple of things about that. The first one is just sheer logistics; KazAtomProm employs more than 20,000 people, and the majority of those will be involved in this type of field-related activities in one form or another, whether it’s doing the wellhead development or logistics associated with it, et cetera. It’s a very big exercise just to simply remobilise that many people. And you might expect that they’ll do it in phases, et cetera, et cetera, particularly, which seems very likely for the foreseeable future, if they need to be doing that conforming with all sorts of social distancing rules, transmission rules, et cetera, et cetera.

KazAtomProm, in this part of Kazakhstan where most of their development is, it gets pretty cold by about October. They can start having decent-sized snow in October. That doesn’t stop well head development. But what it does do is it does make logistics that little bit more difficult. They are probably keeping an eye on the confluence of seasonal factors, logistical factors, but primarily it’s about health factors and the government policy.

Matthew Gordon: At times like this, you have got to be mindful that people’s lives are at risk. You can’t play with that. And I think the board of KazAtomProm, like many, many others, are making the right decisions, but at the same time in the background, you’ve got a cheering mob of Uranium investors who are absolutely delighted for a different set of reasons: that this supply to the market is being drastically affected. And the hope is that that will drive price discovery in the marketplace. I guess what the question is, you know, what are you hearing with regards to when you think things could come back online in Kazakhstan? Or is it just unknown at the moment?

Brandon Munro: It’s unknown, it’s unknown. And what will be really interesting is what guidance KazAtomProm chooses to give. They will need to give some guidance because they are listed on the London Stock Exchange. And they are very aware of that. And they’ve provided what I think has been good, accurate reporting to LSE over this period. But from about 7th July, that’s when the three-month period, since they first announced this, an estimated three months comes to an end. So somewhere around that time, they will need to be thinking about updating investors. The real interesting question is, what timeframe, if any, does KazAtomProm put on the extended production disruption? Do they take the path that Cameco has taken, and just say, look, we are down for an indeterminant time? Or do they try and play it the way the government has, and says, look, it’s this much, but it could be extended?

It’s the uncertainty of this that I think will have the biggest impact on the minds of fuel buyers in particular. The cheering mob, I don’t think they are going to be too influential in the equation here. It is obviously important for equities and equity sentiment, but in terms of the actions of KazAtomProm, or Cameco for that matter, or fuel buyers, that’s not a relevant factor at all. That’s just a side show. And people within the industry aren’t exactly cheering at moment because no one who is on the supply side here really revels in a competitors’ misfortune when it’s like this, when there are lives at stake, as you say.

What what’s going through the mind of fuel buyers right now is still COVID distraction. It’s still, we are not hearing about any real level of contracting taking place or mobilising for long-term contracting at the moment. We’ve got this pause in operations for fairly understandable reasons. What will be interesting to see is if KazAtomProm leaves a very wide-open scenario here, whether that’s enough to get the attention of fuel buyers and then to start realising, as you say that we’ve now got a situation that’s likely to lead to price discovery. And if you’re too slow in that situation, you can be on the wrong side of price discovery.

Matthew Gordon: Yes, it’s interesting. And we’ll talk about it in the Crux Club on the topic of what is holding fuel buyers back. We talked about it during the AUSIMM, but we will save it that for the Club. I just thought it was a brilliant answer. And one that I really hadn’t kind of understood in that way before, but we’ll come back tomorrow.

Now, so let’s just stick with Kazakhstan again for a second because the implication, the big, ‘so what’ I want to get to, the, ‘so what does this mean’ component of the conversation, I want people to understand why we are talking about Kazakhstan, why it’s important to understand that this is. If I look at Australia, who have handled this COVID-19 disruption extremely well, you have had about 100 deaths in a population of, what? Over 24M? You have handled it extremely well. You have taken it extremely seriously, as has New Zealand. The Qantas CEO came out with a statement last week and said, we are not going to get back to international flights until July 2021. That’s how seriously they’re treating it. That was a statement from a CEO of an Australian company. KazAtomProm, if they came out with a statement like that, that would send the industry into a tailspin, wouldn’t it?

Brandon Munro: Well, it would. Yes. It is 40% of the world’s production and the world’s lowest-cost production, with the exception of one or two bi-product streams of Uranium. It would absolutely set the world into a tailspin, but I do think that a statement like that is very unlikely. It is a good one reserved for your Uranium dreams between about three and four in the morning, when you are not officiating conferences on the other side of the world, but I don’t think we will see that level of announcement coming out from Kazatomprom.

Matthew Gordon: But we don’t know when. The point is that no one knows when. Uranium investors don’t know when, utility buyers don’t know when, and until that answer, that certainty can be brought back, or at least some sort of certainly can be brought back, it continues to be the great unknown for the supply-demand story in Uranium.

Well look, let’s talk about the ‘so what’ component here: given what we are hearing out of Kazakhstan, what do you think people are going to start doing? I think, you know, people looking at Uranium as an investment proposition, it is getting more and more attractive because the supply side is just being hammered every day that this continues. The story becomes more and more positive on the supply side. The demand side, I think, is well understood. For investors looking at Uranium as an investment proposition, looking at this, I guess they must be pretty intrigued, confused, and maybe excited in equal measure. What are you seeing? What are you hearing from your investors?

Brandon Munro: Yes, I think that is a good way to look at it. I mean, intrigued because of what we’re talking about; who knows where this is going to go, who knows when it’s going to end? Who knows what the implications will really be in terms of KazAtomProm joint venture partners and what they need to do? And there’s lots of speculation about what some of those joint venture partners who’ve been selling forward into the spot market, what they might need to do if they completely run out of production for an extended period of time. We could see multiple producers entering the spot market to buy back pounds that they’ve already sold in the next 12-months. There’s an enormous amount of intrigue. The confusion really comes from price response. Why haven’t we had a more interesting and assertive price response right now? Both at a Uranium price level where the Uranium price has sort of settled into a comfortable zone at circa USD$33, but in particular from Uranium equities. And whilst there has been an overall negative macro backdrop, and Uranium equities have still done okay in that context, we’re still looking at our cousins who are gold developers and so on, who have just been enormous runaway success stories right now, thinking, well, yes, we deserve at least that much. I mean, the gold bugs are crowing about USD$1,800. And you look at where Uranium’s going to go to on fundamentals, let alone on supply disruption, and we are going to take that sort of price performance and rub it in the dirt. There is confusion as to why we are not seeing a stronger response. And of course, the excitement; well, that comes from a number of things, but more and more the shareholders and investors and fund managers that I’m talking to are starting to draw comparisons between where we are now and where we were in 2004, 2005.

Multiple comparisons are being made between say, the Cigar Lake flooding event. That was only a three-month flood. So that was a pretty short disruption. But what it did was it created uncertainty. There was an uncertainty about whether this giant new development in the form of Cigar Lake was going to come on at all. Were they ever going to solve the problems that were leading to the flooding? And the fact that there were multiple flooding events, created that fear that one of the enormous, new high-grade projects that was banked as filling Uranium demand for many, many years was suddenly in doubt. So that is a parallel that we do have here with this production disruption. And of course, it’s not just limited to Kazakhstan, we’ve got Cigar Lake itself that is off production at the moment in Canada, with no line in sight as to when that’s going to come back on.

So equal measures – yes, I’d agree with that. I think all of those things are running through Uranium investors’ minds at the moment. And what I would say to that is you need to take those 3 equal measures and give yourself enough patience that they all become relevant in a positive way. If you are investing with just a little bit of patience at the moment, up to the end of this year, then the intrigue will play out, most likely positively, I believe. The confusion becomes irrelevant because we will have to have some degree of price discovery by then. And the excitement; well, we’ll know by the end of the year if the excitement was justified or mis-founded, but it will definitely be there. And for equities investors, that’s a chance to take advantage of the volatility that will follow.

Matthew Gordon: It’s kind of interesting. I’m thinking back to the last run, and I think the Uranium price popped before Gold, and this time it’s the other way round: Gold has got a little bit more exciting than the Uranium space this time round, and it perhaps distracted people from what’s going on the Uranium space in a way, in terms of the generalist investors. I will be interested to sort of see what the parallels are that we can draw from around those times. We are going to do a little bit of work on that one. I’ll come back to that one.

But let me talk about the other great unknown here; we have always talked about politics in this, okay. There is geopolitics going on, but there’s also the politics of the US. They have got the elections in November this year in the US. It has been an exciting 4-years for sure, certainly. I always call it TV gold, because it has never been so polarised. I don’t think in the US, I certainly haven’t felt it in my time anyway. I think it was earlier this week? Well, at the beginning of this week, end of last week, the Democrats have come out with a document. It’s called ‘Solving the Climate Crisis’. Let me hold it up here – Solving the Climate Crisis. It is fairly involved; 540 pages of involved ideas for how they are going to, well, how they’re planning for a clean energy economy for America. It is a fantastic read. You can get it online. I will make a link to this below in the description section, but you’ve also had a read of the section talking specifically about nuclear, and nuclear’s involvement as far as the Democratic Party are concerned. What did you make of it?

Brandon Munro: No question that it’s a positive for nuclear power. And we don’t have to go back that far to a time when there was a lot of uncertainty around what the Democrats’ position would be on nuclear power. Bernie Sanders was vehemently opposed to nuclear power, and AOC of course, was saying all sorts of things about everything, but including criticising nuclear power. All of a sudden, what does this mean? It means that it removes the uncertainty of the US election in November from the mind of both nuclear fuel buyers and also Uranium investors. So no longer is there a scenario as there would have been if Bernie Sanders was running with heavy support from AOC. No longer is there a scenario where the Dems could get in and that would send nuclear power progress in the US back by years.

What does the report actually say? Well, it says a raft of things, and I agree that it is well worth a scan through and a read. First and foremost, nuclear power is recognised alongside other traditional renewable forms of low-carbon energy with hydro. And so that discrimination against nuclear power has been removed from this solving the climate crisis document. They strongly recommend the implementation at a federal level of federal support for low-carbon energy sources, including nuclear power. And they highlight the fact that a number of States have already introduced zero-emission credits and so on to assist with nuclear power. There’s no talk of removing or discriminating against nuclear power at a subsidy or support level. And they go further in saying that that is at a federal level and States should be able to go further and produce their own initiatives, which means that the States who need the base-load resilience of nuclear power can still go with the zero-emissions credits and other forms of support to nuclear power to keep it going.

The report does have evidence of a little bit of compromises in the drafting, and there’s a little bit of the old-fashioned rhetoric about risks and so on. But by and large they’re founded in, I think, a logic, and generally quite fair. There’s a lot of calls for the regulator getting tougher, et cetera, et cetera. And the nuclear industry, as long as that doesn’t impose unreasonable levels of red tape and green tape, the nuclear industry would welcome that by and large. So, very positive. And now November becomes less of an important attribute for what Uranium investors need to look forward to. Now it’s back to the sit-com, as you say, we can just observe it for its pure interest and entertainment value, and not for its effect on our Uranium holdings.

Matthew Gordon: What I took from it, and it really is quite comprehensive, and if you look at what people’s expectations were from the Nuclear Fuel Working Group, they couldn’t go far wrong by taking a look at what is in this document, for some of the joined up thinking that I think we are going to be hopefully going to be seeing from them in the near future to bring some level of certainty into the you know, the nuclear ecosystem and for Uranium equities, some certainty around how this all comes together to provide a zero carbon, you know, cleaner and greener, or clean-energy economy for the US. It is quite nice to see documents like this, but then it becomes, because this is entirely the Democratic position. There is no kind of cross-party components to this. No doubt, if there is compromise within the party, it is going to have to be even more compromised if it becomes a cross-party platform, whether it be through the Nuclear Fuel Working Group or something even bigger. But that all takes time. I’m not quite sure how to view that as an investor. It is positive, but how many more steps do we need to wait for to get an idea of how the US is going to react?

Brandon Munro: Well, it does take time. And I think that is why the strong bipartisan support for nuclear that is now confirmed by this document is important. We are no longer looking at the Nuclear Fuel Working Group report that was released two months ago, and just wondering, you know, how much of that is really going to get implemented before November, if there’s a change of government. Now we can look at it and say, look on its merit, we are going to see those steps being implemented.

Another thing that came through really strongly in the Democrats’ position is strong support for SMRs and the technology development associated with the SMRs. There weren’t so much unconventional new conventional reactors, and there wasn’t a lot of foreign policy emphasis in the way that we had from the Working Group, but equally there wasn’t any debate about that topic. They just decided that this is a domestically focused document that is about emissions control. It’s not about the industrial platform, so there was no need for them to comment one way or another. I would say all of the best bits of the Nuclear Fuel Working Group report have been preserved in a bipartisan way by the platform that the Democrats have put out on this.

What does it mean? And what for Uranium investors? Well, it’s part of the slow burn demand growth that we’re seeing in nuclear in the Western world. Nuclear is still driven by China, Russia, India, and the developing nations; you know, let’s not forget that for a moment. But the Western world is projected to grow modestly. And more importantly, we’ve seen a number of years now of the US reactor fleet deteriorating, and that’s been a drag on the nuclear industry and therefore Uranium industry really since Fukushima. The reversal of that deterioration is important because it stabilises what still represents 25% of demand for Uranium today, and in a very dynamic part of the sector in terms of leading long-term contracting and so forth.

It does matter in today’s terms. And at a micro level, decision uncertainty at a utility level, in other words, does the utility have confidence that they’re going to be buying for a reactor that’s still going to be operational in 4 or 5-years’ time? That decision uncertainty does filter through, into contracting decisions and the general performance, particularly amongst a larger utility that’s got a fair portfolio of reactors. If they’ve got a portfolio of a dozen or so reactors, and they’re looking at some of them coming off in a short period of time through an early retirement or an end of life retirement, they can manage the risk within that portfolio. If they suddenly look at that dozen or so reactors and say, actually, nothing’s coming up to end, and we’ve just got two 80-year extensions through, they have to buy for that entire portfolio. And that affects the way that they think about long-term contracting, which does dovetail now into the next several months. And what I see as a number of, a confluence of a number of factors, coming together for them to re-evaluate their procurement policies and probably get more active in that part of the market.

Matthew Gordon: There’s a lot to unpack in that. A lot of moving parts. I do think we should come back to the SMRs, because I think it’s going to be really, really important across the world. Lots of companies and lots of countries are getting involved in that. And we talked to Ben Heard about that, and maybe we can talk about that in a couple of weeks. Actually, the Ben Heard interview came out yesterday, where we do talk about it, and I’ll put the link again below here. But the interesting bit to me in all of this is that the US, the politicians seem to be coming together, having the same thoughts about nuclear assets, you know, as a zero-carbon solution, which is great. It’s an evolving narrative. I think you’ve got activists as well who are now coming around to this way of thinking. A few have come out in the last 2 or 3-weeks as pro-nuclear as a solution. I think that’s kind of interesting.

We should probably now segue over to our Crux Club members and talk about a few other topics. Thank you, everyone who has been watching this. If you are at all interested in getting into some detail on a few of the topics, you can go and have a look around Crux Club and get that at Shall we jump ship and go and talk to the members?

Brandon Munro: Let’s get in the speedboat.

Matthew Gordon: Let’s get in the speedboat.

Company Page:

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.

#15 Investors Excited, Kazakhstan Lockdown Continues – Brandon Munro (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price A$0.035 (16.07.2020)
  • Market Cap: A$37.06M

Uranium Market Commentator & Bannerman Resources (ASX: BMN) CEO, Brandon Munro, calls in for our weekly catch up about the world of Uranium and Uranium investing.

The extended lockdown in Kazakhstan impacts KazAtomProm’s, the world’s largest supplier of uranium U308 (24%), ability to get their employees back to work. This in turn means that so far as much as 8Mlbs of uranium has not been produced. However, despite this news, the company has maintained guidance with regard to being able to supply their term-contract customers. They are 6 to 7-months of inventory with which to draw on, but indicate that they will probably need to go in to the spot market to acquire uranium pounds to fulfil order (at still low prices) and maintain their stockpile position. What are the impacts for utilities and uranium investors. We discuss.

As COVID-19 continues to restrict production in Canada and impacts production in Australia and Namibia, we discuss the implications for junior uranium companies. Investors and potential investors take note.

And for members only, Brandon and I discuss why utilities remain inactive. What are they focussed on instead? And what has happened to the price momentum? We look at some of the factors. Please join the waiting list for Crux Club if you want to get more insight in to the uranium sector and other commodities from our expert contributors each week. All for less than a dollar a day

We Discuss:

  1. 3:43 – KazAtomProm’s Announcement: Implications and Opinions
  2. 6:12 – News & Announcements from Uzbekistan: Struggles Dealing with COVID-19
  3. 9:28 – A Look at Australia, Canada and Namibia: COVID-19 Update and Impact on Businesses
  4. 13:05 – Get the Calculators Going: Growing Supply Deficits and What it Could Potentially Mean for Investors

CLICK HERE to watch the full interview.

Matthew Gordon: How are you doing, sir?

Brandon Munro: Yes, I’m really well, thanks, Matthew. How are you?

Matthew Gordon: Not bad. Not bad. I have a busy week. And got a lot on today so thanks for joining us from the cottage, it looks like?

Brandon Munro: Yes. It’s the school holidays. It is that big test. I feel like I am in a reality TV show – will I get the kitchen done in time? We have had trades people wandering around doing all of that. I’ve been doing a little magic with my hands. Or claiming to. Hoping it will be fixed up by someone else but saying that it was me. You know, one of those jobs. We have got a little bit of freedom here in Western Australia and I think when we can’t travel anywhere else it just really pays off to have a place of your own where the kids can just unpack and unwind and run around and do all that sort of thing.

Matthew Gordon: Yes, you guys in Australia and Canada have got so much in common: you have got so much land that everyone gets to have a second home. It is a very unusual thing here on our tiny little island of Great Britain. Very jealous. Very jealous.

Brandon Munro: Well, we have got something else in common because this little town I’m in, Bridgetown. It is beautiful. Fabulous place. But it has the record for being the coldest place in Western Australia. And as many of your people know, it is kind of hard to find cold places in Western Australis, it is normally the other end of the spectrum. So being the industrious people that they are, they even market that fact. Its tourism claim to fame is that it is called, ‘Fridgetown’, and so we start these days at the moment at about 1 or 2 degrees, which is a little bit fresh for the tootsies, but we manage, we adapt, we survive.

Matthew Gordon: Wowsers. I didn’t realise it went down that low. There you go – I have learnt something. But today we are going to talk about Uranium, as usual, for our weekly catch up. A new announcement from KazAtomProm.

Brandon Munro: Yes. Totally not unexpected. And we have been talking about it on our show for several weeks now and I think we drew similar conclusions. But it is helpful. It is good to have it out now. It is good that the market is now informed. And as people would know who have read the announcement, KazAtomProm have said that it is a month that they will be delaying the resumption of wellhead development and other operations. And that is pretty consistent with what was expected and what we were thinking. But the little gems in the announcement, I think, are in some of the side comments and what may or may not be able to be read into those. There is lots of the use of the word ‘initial’, ‘if safe’, ‘resumption’, and so forth.  They have left the door open quite clearly for an extension. Also, what is quite interesting is when the time comes to ‘resume’, whatever that means, it is quite clear that it is going to be a softly-softly approach here. KazAtomProm have said in their announcement that they will be gradually returning to wellhead development. And it seems like they are even going to test the waters a little bit with their logistics by resuming exploration first rather than wellhead development. I find all of that quite interesting. I think what we are looking at here is a company that is positioning for a real possibility, perhaps even a likelihood that this one-month period is going to have to be extended, if not in fact, at least in substance.

Matthew Gordon: I think the Uranium bulls are getting quite excited about that: the implications of an extension or a possible extension there. Are you hearing the same sorts of things?

Brandon Munro: Not really. Obviously, people are excited about what continued disruption can do for the tightening for the market and the Uranium price. But like many things, this is an announcement that was anticipated. It was expected. There isn’t anything that is a catalyst as such, and so we haven’t seen lurching prices on ASX etc, etc. I think the market has just kind of taken it in its stride for now.

Matthew Gordon: I couldn’t help but notice that Shell also made an announcement this week with regards to Kazakhstan. What do you know about that?

Brandon Munro: Well, they have announced that they are withdrawing all of their staff. They have chartered a couple of jets and they are taking them all back to the Netherlands and then they will be distributing all them around the world. That in itself is very telling; the word is because they cannot be absolutely sure that their people there will get adequate medical care, which isn’t a slight on Kazakhstan at all, I mean, that is exactly what has happened to any country that has really grappled with either a first or a second wave COVID problem. But what is says to me is that in their judgement this isn’t a problem that is just going away in just a couple of weeks. They can’t just simply tell their staff, stay at home, lock yourself down. Take full-paid time at home for two or three weeks and then we will ride this one out. They have probably already been through that thought process, and now they are saying, look, we are better off taking the hard pill and actually moving everyone out. And you wouldn’t really do that for a matter of two or three weeks. There seems to be some longer-term thinking. 

And the moves that big, enormous majors, particularly in the oil and gas sector in this part of the world, make are always a leader. It is always influential to both private and public enterprise. I think it is significant that Shell have made this decision. It will be really interesting to watch what some of the other partners, Chevron and others do in its wake.

Matthew Gordon: And the other thing I noticed was Uzbekistan – they put out a press release. So that whole region is really grappling with how to deal with what’s going on there with COVID-19?

Brandon Munro: That’s right. Uzbekistan is now back into lockdown. Not quite as rigid as the initial lockdown, but for all intents and purposes the same. So now we get to watch what Navoi Mining, the Uzbek state-controlled Uranium miner does in response to that. Do they just carry on, or do they take the lead from KazAtomProm? The dynamics are very different here – we need to be clear on that. Navoi Mining, they sell mainly off the market: to the traders, to the Indians, to the Chinese. They aren’t a market participant to the same extent that KazAtomProm is. They are not the dominant player. Whilst they are still firmly in the Top 10 of Uranium producers, and any significant disruption there is going to affect 2020 supply, they are not going to be thinking about the market in the same way that KazAtomProm might be, or Cameco might be for that matter. I think they will be more reactive. But I think that just illustrates what a regional issue this timing of this second wave that is being experienced in central Asia.

Matthew Gordon: That’s what strikes me about this: I think that Uranium bulls looking at this will be just encouraged; it is just another story around supply that they can confirm their beliefs about. Why don’t we just do a round up and then maybe have a conversation about supply and then have a conversation about Australia, Namibia, Canada, if you may? So, Australia – all good?

Brandon Munro: Australia is all good in South Australia and Western Australia. And to a lesser extent, Queensland, which are the major mining centres, Northern territory included. But we are experiencing our own second wave in the State of Victoria which doesn’t have any Uranium mining or exploration or any Uranium influence whatsoever. But it is just a healthy reminder to the rest of the country that these things can escalate very, very quickly, and that is what we have seen. Victoria has just announced a fairly hard lockdown of all of Melbourne, the capital city there of 5M people, for 6-weeks. So South Australia has got its border closed with Victoria. Western Australia has got its border closed with everyone at the moment and probably for some time to carry on. But no foreseeable disruption to mining. Just a reminder that a second wave of COVID can potentially be more painful than the first.

Matthew Gordon: And news out of Namibia?

Brandon Munro: Yes. Namibia, the Erongo Province, or the Erongo Region, as it is called in Namibia, they are back in an extended lockdown for another 28-days. It was announced earlier this week. That is very difficult for the local people. Very problematic for many, many reasons. Mining has been exempted as an essential service, so Rossing and Husab can carry on. But as we have talked about many times, it is still that element of greater difficulty that is involved as a result. And there has been a bit of press about increasing industrial relations tension at Rossing. You might also see the interplay between those two things. I am still expecting disruption at the edges of both of those giant Namibian projects.

Matthew Gordon: We have an analyst based in Namibia. We were talking to him this morning. And he was saying, you know, obviously with youth unemployment quite high and poverty levels as they are the dependency on mining is there, but at the same time they have got to manage this in a responsible manner. And I think they are doing that, the Namibian government. Interesting. And then Canada – what is happening at Cigar Lake?

Brandon Munro: Well, nothing is happening but what is very noteworthy is that Northern Saskatchewan is still grappling to get COVID under control. And it is an outlier compared with most of Canada. And that is really the driver here. I don’t see Cigar Lake coming on anytime soon. I think it is entirely feasible that we could see Cigar Lake remaining off until the end of the calendar year even. And what always happens in these situations is that when you put a project into care and maintenance, as effectively Cameco has, it is a little bit like jumping into a cold swimming pool or a cold river – it is damn painful at first, but you do adjust. You do acclimatise. And there is probably an element of that going on corporately. All the while, we haven’t seen much of a spot price response and we haven’t seen the utilities bashing the door down with Cameco to start term contracting. Whilst there are health and safety concerns as we continue to see persisting in Northern Saskatchewan, I don’t see Cameco sort of chomping at the bit to change the situation at all. 

Matthew Gordon: The supply side of this macro story, is certainly… I think we are able to work out some numbers now. We are starting to get a sense of how much disruption there is going to be on the supply side. You are talking about end of year for Cigar Lake. That is all of a sudden vey meaningful. The implications of Kazakhstan’s operations being delayed a month and potentially more – that is 4-months now, right. That has huge implications. I am hearing, you are saying that Namibia may be having minor disruption, and the same for Australia, which is something. But are you starting to get a sense of the deficit in the marketplace as a result?

Brandon Munro: Absolutely. If we go back to our discussions in April, for example, I was projecting a 20Mlbs 2020 disruption. So, in other words, forecast of 2020 production I was predicting 20M lbs short compared with what the case would have been at the beginning of the year. Now, that was prefaced on Cigar Lake being off for 4-months, Kazakh operations being disrupted for 3-months and relatively minor disruption in most other centres ranging between about 5% and 8% of annual production. Now, the only one of those areas that has outperformed my expectations is Australia. But Olympic Dam had significant disappointment on the production side for unrelated reasons. So that was largely evened out.

So, now we look at it, it is not operations are down for 3-months, it is notionally 4-months, and every chance that with the slow resumption of wellhead development, that is going to look lie 5 or 6-months. Cigar Lake, which is in care and maintenance for 4 months and counting and quite possibly going to go to the end of the year. Namibia and others that are dealing with second waves. So that 20Mlbs is locked in now, and the question is, how much does that grow? Does 20M lbs go to 30Mlbs of disruption? If these significant players stay off to the end of the year, we could be talking about 50Mlbs of disruption.

This is still brewing as an astonishing supply side event for a sector that is already very tight on the supply side. And all the while utilities and intermediaries are distracted with other issues and other matters. So we have seen a little bit of a recovery in the spot price, but given the risk here to the supply side for the rest of the year there has been no price response to talk about, which just stretches the ‘lacky band’, or the rubber band even further, and it makes for an even better close to 2020 or 2021 if you are sitting in the seat of a Uranium investor.

Matthew Gordon: Well, this might be the perfect point to switch things over.  I am just going to say to our regular viewers, I hope you enjoyed what Brandon had to say. We are now going to move into the Crux Investor Club section where we will go into a bit more detail about price, why it hasn’t moved and what utilities are doing and what the implications are for investors. So, thank you very much for watching.

Company Page:

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.

#14 Kazakh Uranium Shutdown has MAJOR Impact – Brandon Munro

Uranium Market Commentator & Bannerman Resources (ASX:BMN) CEO, Brandon Munro, calls in for our weekly catch up about the world of uranium and uranium investing.

What’s been going on this week in the perpetually vacillating world of uranium? This week has been a “fantastic” one for uranium. Let’s delve into it.

Matthew Gordon talks to Brandon Munro, 10th July 2020

As we discussed last week, with two senior Kazakhstan government figures, who are important in the nuclear sector, testing positive for COVID-19, and cases increasing across the country, there was much speculation about a potential lockdown, and this is exactly what has happened. There hasn’t been a lot of discussion about this issue in most uranium circles, but there should be as the implications are significant to the supply side from the world’s largest producer o uranium, KazAtomProm. Uranium investors appear to be underestimating how important this developing situation is. The Kazakhstan government has announced that from the 5th July, it will be reinstituting a “hard shutdown” for an initial 2-week period. This is likely to be extended halfway through the 2-weeks, based on where the caseload is at, resulting in more disruption to KazAtomProm production of uranium: the source of 24% of the world’s uranium production, and the lowest cost source of uranium production (except for a few by-product uranium streams).

When KazAtomProm announced on 7th April that it would be initiating 3-months of production disruption, there were around 50 new cases per day. They are now topping 1,500 cases per day. It remains to be seen how much of this is due to increased transmissions and how much is due to increased testing. It is telling that Shell has flown all its non-Kazakh employees out of the country. The Kazakh state commission has discussed implementing a measure that 80% of workers in national companies should be working remotely. This is in line with what Kazatomprom is operating with at the moment and solidifies the company’s current position.

KazAtomProm previously stated that it wouldn’t be making up the pounds it had lost during the initial 3-month shutdown period, and these missing pounds have only just started to impact the market now because of a time-lapse created by inventory and supply contracts. This additional curtailment will be perceived as positive news by uranium bulls. This situation has parallels with the flooding of Cameco’s Cigar Lake. The mine suffered a catastrophic water inflow in October 2006, followed by a second inflow in 2008. Re-entry was achieved in 2010, but production was repeatedly curtailed. We could see multiple uranium producers enter into the spot market to buy back pounds they have already sold in the next 12-months to satisfy JV partners. The major source of confusion is price response; uranium investors have been left scratching their heads at the lack of assertive price response. Cigar Lake is still offline with no confirmed return date, so a sharper price response for U3O8 and uranium equities might have been expected by now. We’re all just waiting for that key catalyst moment.

A nuclear power station

Lastly, touching on the political side of things, will the DNC support nuclear energy? Bernie Sanders and Alexandria Ocasio-Cortez were anti-nuclear, but the current position of a potential Joe Biden administration had been enigmatic. However, a recent 540-page document released by the Democrats, called ‘Solving the Climate Crisis,’ has a generally pro-nuclear message. This remove any uncertainty that might have been held against the November election because both sides will support nuclear as an energy solution. The discrimination against nuclear power has been removed, and it has now been positioned alongside the other green energy solutions. Another micro-catalyst?

What did you make of Brandon Munro this week? What questions do you want us to ask next week, and what issues would you like us to cover?

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.

#13 Uranium Investing Made Simpler – Brandon Munro (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.04 (30.06.2020)
  • Market Cap: A$39M

A Conversation with Brandon Munro, CEO of Bannerman Resources (ASX: BMN).

We have interviewed Munro throughout this uranium bear cycle; his insights have been incredibly useful for investors.

Uranium Market Commentator & Bannerman Resources (ASX:BMN) CEO, Brandon Munro gives us an exclusive run through on the World Nuclear Association (WNA) Nuclear Fuel Report – Extended Summary.

This is the first document of its kind by the WNA. The summary lays out the nuclear fuel cycle and macro thesis for the need for nuclear (and why uranium investors should feel comfortable), in easy to understand format and language. And most appealing is the plethora of charts, tables and diagrams to make the numbers easy to access and extrapolate. Good work WNA.

As ever, Munro masterfully breaks it down so that we can appreciate the moving parts and why the Extended Summary has been put together like it has. Munro was also co-Chair of the Demand Side Sub Group and contributor to the Fuel Report and Summary. Good work, Brandon Munro.

We Discuss:

  1. WNA Report: What is it and What’s its Purpose?
  2. WNA Expanded Summary: A Long-Time-Coming Tool For Investors
  3. Giving Nuclear Energy a Voice: Conservative Promotion Based on Past Experience
  4. Recent Events’ Impact on the Nuclear Space: Time for the WNA to Step Up?
  5. One Tool for Many Users: Who is The Target Audience?
  6. Can This Report Hold an Impartial and Balanced View on the Space?
  7. Hope For Harmony: Lack of Investment Needed for Nuclear to Shine

CLICK HERE to watch the full interview.

Matthew Gordon: Brandon, how are you doing?

Brandon Munro: I’m very well. How about you, Matt?

Matthew Gordon: Well, I’m a bit excited. I’ve seen this report this morning from the WNA and I suspected that you would know a thing or two because you’re one of the co-chairs of the Demand Committee. So, this is the WNA putting out an expanded summary of their report from last September. So, it’s for a point in time, up until that time. There are no new data points in there from September to now, but it looks pretty exciting to me because it seems to be quite a nice summary of you know, what’s going on in the supply-demand side of things in this market.

Brandon Munro: Yes, it’s just hot off the press. We’ve been working on it behind the scenes for some time, but now it’s just been made public. And for people who haven’t followed the WNA’s Nuclear Fuel Report, it’s put out every two years and it looks in detail at the whole nuclear fuel supply chain. So, there’s a demand subgroup which I co-chair, and that determines what the demand for nuclear fuel will be, in this case from 2019 out to 2040. And then it looks at the different aspects of the nuclear fuel supply. So, there’s Uranium supply, conversion, enrichment, fabrication, and it finishes off with a little bit of discussion about how they all come together with supply and demand graphs, which I think are some of the most interesting aspects of this report for investors in this sector. So that’s the document that comes out in September and it’s available first of all, to WNA members and otherwise it’s available for purchase at a price that I think is very reflective of its value, but it’s not particularly accessible to, for instance, retail investors. It is something like £800. So, it’s quite an impost on a retail investor trying to get behind the information there.

Matthew Gordon: Okay. But you’ve now decided to put out this expanded summary, which covers most of the, I mean, not all of the juice has been given up on this, on the main report, but you’ve highlighted and gone through the micro-ecosystem that nuclear and Uranium inhabits. And I actually think you guys have done a good job. I mean, for someone who is coming new to this, whether they may just be interested parties or investors, it’s a really concise summary of that ecosystem. So, I think, well done for that. I mean, I got asked the question, so, it’s nine months later, so, 1 – why does it take so long? And then 2 – what were you hoping to achieve with this document?

Brandon Munro: Yes. So, look, first of all, the credit needs to go to WNA Secretary. They are the people who have done all of the heavy lifting. As you know, I’ve played a role in the report itself, as a member of some of the committees and co-chairing the demand committee. And I also played a review role and a little bit of touch ups on this summary. But the hard graft has been done by WNA in August. Olga Skorlyakova in particular, so all credit to her and the team there.

So, it is staggered, I’d say. I wouldn’t necessarily concede a delay because it has been intended to be that way. What WNA were trying to achieve is that the main report, in all of its detail and glory, is available to members and those who are prepared to pay for it. And obviously there is media and others who receive complimentary copies. And then this comes out with a staggered approach so that the information is available for free without diminishing the value proposition for the main report. As I say, for members and those who are paying for it.

In terms of what it’s achieving – well, it’s the first time that WNA has done this. So, we’re feeling our way a little bit. Some of the things that are motivated initially with the concept when myself and Olga and some others were throwing around ideas as to how we can add value to the main report, was for the investor community, which is one of the audiences that the Nuclear Fuel Report is designed for, what it enables is people to get behind the key graphs. So, the key graphs have made it into the public domain through WNA presentations, and you would have seen some on Twitter and some companies that picked up the key graphs in their own promotional materials. So, the Bannerman corporate update, for example: Uranium 2020, that’s on our website. That includes one of the graphs. And it’s very useful for us, but it’s harder for people, or it has been very hard for people to get behind what’s the methodology? What are the three scenarios and what’s behind them? How exactly has WNA gone about constructing the supply side, constructing the demand side? What’s the thinking behind why some projects are in one category and other projects are in another category? And for the people who really want to get technical, there’s quite a lot of discussion about load factor methodology, and exactly how WNA builds up their demand projections. So, it’s most of what you would need to be able to construct a model. Now, if you buy the full report, then you can of course check the WNA numbers at a granular level against your own model. But for somebody who’s looking in detail at the space, this is now a fully accessible and free version that they can go back to.

And whilst it is nine months late, or staggered, as I’m prepared to say, look, we’re talking about a horizon that goes all the way out to 2040 so I don’t think its lost value because of that. You know, people aren’t accessing this information and using this information to understand where nuclear is at in 12 months’ time. This is the industry’s view for 3 different scenarios as to where nuclear can be at all the way out to 2040. And that hasn’t lost any relevance through the passage of that time.

Matthew Gordon: I hear what you’re saying there. And I like the fact that it’s the WNA for the first time making more information accessible. That’s great. And I like, I particularly like sharing the methodology by which they have created these different scenarios for nuclear electricity generation. So, all that is good and to be commended. You know, my notes about the WNA, they are, this must be quite a move for them because they are quite conservative in terms of approach to the market. If I look at the way that the renewable sector comes and bashes them regularly, and there’s no kind of repost from nuclear; they are a kind of a quiet voice and perhaps I’d like to see them turn the volume up somewhat, if I’m honest. But how is that affecting their ability to promote nuclear? I mean, do you think that this document is the first of many, or a renewed, or invigorated approach to getting the story out there? Is that also the point of this document?

Brandon Munro: No, it’s not designed to be a point of the document. The WNA, they are very graceful and poised in the way that they approach things. And you’re not the only person who’d like to see the volume turn up a little bit. And bearing in mind that the nuclear sector is one of the most unfairly attacked sectors of any industry in the world. And the people who have been in this industry for a while, they’re just punch drunk to it, to be quite frank. So, increasingly, I think you will see advocates from both inside and outside of the nuclear industry, having a bit more to say about where renewables cannot provide the entire solution, and where it needs to sit side by side with nuclear. But we are not anti-renewables. That’s a point that needs to come across. And that’s a lot of the reason why WNA doesn’t want to be perceived as being an us and them type thing. It’s an us together situation. For the planet to deal with climate change challenges and all of the implications that come with that we need to have every available energy source, particularly the carbon-free energy sources like nuclear and the low carbon energy sources like renewables, they need to be working hand in hand in the appropriate circumstances and in the appropriate places. And the opposition that I’ve got to a lot of the renewables’ lobbying, is the ill-conceived and dishonest advocacy around renewables being able and capable of providing a hundred percent solution in all situations. It just isn’t true and it’s totally unfeasible. But WNA, as you pointed out, they are a lot more gentle about how they go about things. And so, they’re more careful about making those statements in that way.

Back to your question, this is not designed to be a lobbying document. It’s not designed to be an advocacy document. It’s designed to be a document that puts the facts out on the table as best as the industry can produce those estimates and those facts. So that’s why when you read through, you made the comment that you found the explanations quite helpful; that’s what we’ve tried to do with this document. And WNA does put out some excellent publications for those looking for a brochure that they can give to their neighbour who is a bit concerned or confused about nuclear. There’s an excellent one called The Sleeping Giant that you can download from their website. There is a bunch of other material there. And someone looking for a policy document or an advocacy document should go to some of those. This is about information. This is about economics. And that’s the value of the full report. And to a slightly lesser extent, that’s the value of this expanded summary in a more accessible form.

Matthew Gordon: Okay. So, I think we’re agreeing with each other. It’s a great explanation of where Uranium and nuclear kind of sits today, using the data from September. So obviously it’s nine months later, quite a few events have happened since then, which have affected the market. Does the WNA feel that it should update its data, given these quite extreme and extraordinary events, and what it could mean, certainly on the supply side? Because as an investor, I’m looking for guidance from someone. I kind of like that there is a kind of sober approach, a conservative approach from the WNA to this, because I hear lots of commentary from, they could be funds, interested parties, commentators, company CEOs, and they need to tell a certain story because their model is different, right? They either need shareholders to believe what they’re saying, or they need to raise capital, and they need to believe, or people to believe, that this market is going somewhere soon. The WNA numbers, along with some of the trade people are, I think, a little bit more realistic. So, I like this, but don’t you think in light of what’s happened recently that WNA should be leading from the front: talking about some of these events, what it’s going to do to the numbers? This nuclear report comes out every 2-years, don’t you think it’s time for it to, you know, step up and say, well, look, everyone, don’t worry. Things haven’t changed that much, or they have? But at least give some kind of guidance.

Brandon Munro: Yes. Look, you’ve got to ask yourself, what is the WNA role here? This is one of the functions of the organisation. They’re not a full-time information provider or consultancy like a Platz or one of the other S&P, or one of the other specialists in the industry. And the moment WNA starts updating this information for a particular event, well, where do they stop? You know, where do you draw the line as to something that’s so significant? So, I’m not advocating within an inside WNA at all for updating. I think people just have to be patient for the next edition to come out. However, having said that, one of the advantages of now putting out this expanded summary with a great degree of additional detail versus what’s in the public domain, is somebody can get behind these numbers and formulate in their own minds their own adjustment for some of these more dramatic events.

So, my expectation personally is that the COVID-related supply disruption will take about 20Mlbs out of supply for this year, and as per our discussion last week. I think that could well go up if we see certain disruptions extended beyond their initial estimates. So, you can look at the key graphs on supply and you can quite easily understand what 20Mlbs less for this year is likely to do to that. And you can get behind the methodology. So, whilst it’s not quite handing over a model so that you can just plug in the new numbers yourself, it’s pretty obvious looking at that, what that supply disruption is going to do. And I think that’s the value of this tool for not only investors, but all of the other stakeholders and members of the audience that this is trying to reach.

Matthew Gordon: I buy that. I think it does make it accessible from that point of view. And you can do some very simple maths there. Because there’s different types of investors going to be watching this, from those who are not yet invested but are slightly curious about this noise that Uranium market is creating. But they won’t quite know how to go about it. I think the charts in here are, well, it’s great. It is generous to share that with the public for the first time. Great. There’s going to people who want to be told what to do. There’s going to be people who use it and sort of reach around and do their own numbers. And some of these newsletter writers can produce some interesting content around that based on some real numbers. And then there’s going to be sort of other market commentators who, as usual, have their own view on where this is going and their timeframe. So, yes, I think it is a very interesting document. I did want to speak to you about what you set out to try and achieve with it and whether, well, here’s the question – do you think you’ve achieved everything that you wanted to achieve when you started writing this?

Brandon Munro: Well, I don’t think we can answer that until we’ve had some feedback. A large part of what WNA was trying to do with putting the expanded summary out was to provide information to people. And if the feedback starts coming back that it’s very helpful and it’s useful, well, then we can get a lot closer to saying, yes, we’ve ticked those boxes and we’re happy with the extra effort involved, which of course is quite substantial. So, let’s wait and see. I’m happy with the end product. And I hope that it ticks those boxes. But a large part of it is getting eyeballs onto this document, getting it explained in addition to the text, and getting people to go through it and start a conversation around it.

Matthew Gordon: But that’s what I’m trying to get at here. Who did you design this to go to? We have talked about a bunch of different audiences, like I’m focused on investors, right. But there’s obviously a wider audience that perhaps that are there help or influence, or you know, update with this. All those different audiences will have different needs. So, you know, when you write these things, you’ve got to have in mind who is reading it and what you think they want from it. And then, you know, getting feedback. Because there are 2 ways to come at it:  you can talk to them and say, what do you need from it? And write it to suit that. Or you can say, actually our remit is just this. We are just providing raw data for you in a slightly different way. And all of you will get something from it, but not any one individual will get everything they need from it. So, you know, getting feedback is kind of, it’s a little bit horse before the cart, isn’t it?

Brandon Munro: So, it’s a good point, because this is not a document that was written or prepared primarily for investors, and that on the one hand, is very helpful because it makes it impartial and it makes it balanced. And it makes it a document that offers you something different to what you might get from a bank or someone else who is advocating on the investment side in the sector. It is written more for members to understand what’s happening in the industry and do their own planning according to trends and form their own view. It’s written for policymakers, both within countries that already have nuclear power and countries that are considering nuclear power. It’s written for journalists to help straighten out a lot of the facts and hopefully address some of the mistruths about nuclear power. It’s written for academics, it’s written for students, and it’s written for the nuclear power supply chain. So if you’re a company who makes widgets and you’re hoping to sell X number of these widgets to a company that makes pipes, that’s hoping to build nuclear power plants, well, this is probably the best document out there for someone like that to understand what their market is likely to look for.

So, it cuts both ways. It has not honed in on what an investor wants to understand from this and what an investor requires, but equally you’re not getting the varnish that you do on many reports that are written for investors. And your point about balance and being impartial; I think there’s a point for people to understand here: this is a very balanced document because it has been written by committees who are predominantly composed of utilities on the one hand, who have got an interest in ensuring that this doesn’t overstate some of the dynamics for Uranium. And on the other hand, there’s a number of people from the supply and the development side who have got an interest in making sure that the document doesn’t understate the case for Uranium. And the same can be said for conversion and enrichment and fabrication. So that tension, which I know well after chairing one of those committees, that tension has ensured that we’ve come out with a really balanced outcome and something that can be relied on as a very good starting point for investors. And more sophisticated investors will then go and try and apply their own judgment having full understanding and knowledge of what the methodology is behind these numbers.

Matthew Gordon: You kind of answered my next question, which was a to be, given that the clue is in the title; it is the World Nuclear Association, you know, everyone talks to their own playbook. Do you think that you genuinely achieved an impartial and imbalanced view of the world, of nuclear, as people should see it? You know, I say this in the context of, I don’t think you are combative enough compared to everyone else, and compared to gas, compared to, you know, other forms of renewable you know, even coal, quite frankly. These people have lobbyists and they are talking a very aggressive game and fighting their corner. We’ve seen that played out with some of the conversations that we’ve had with utilities who are multi-energy source utilities. Nuclear seems slightly humbled by its past, or slightly nervous about its past in having these conversations where because of events like, well, not necessarily Fukushima, but certainly Chernobyl, or Three Mile Island, et cetera, you have to apologise slightly before you start a conversation. Is that the way it feels?

Brandon Munro:  That is very Canadian. Sorry. I just couldn’t resist it. They’re our closest cousins on humour, the Canadians to the Australians.

And you’re right. So, to answer your question – yes. I do think it has come out in a very balanced and impartial way. But remember, we’re dealing with the future here. It will necessarily be wrong. That’s the only thing it can be. We’re hoping it’ll only be a tiny bit wrong because by and large we’ve made solid assumptions, and more importantly, people can understand those assumptions. And with any economic forecast, as long as the assumptions are stated correctly it’s up to the reader ultimately to interpret those assumptions, see if they agree with them or not and make adjustments. So, it’s a forecast. It is delving into the future based on a set of circumstances. But each of those three sets of circumstances, which we’ve grouped into the scenarios: the reference, the lower and the upper scenarios, they are based on realities, forward-looking realities. The reference case is based on the current reality not improving and not getting worse. And the current reality, as we all know for the reasons that you just talked about, particularly since Fukushima, has been tough on the ground, tough with slow policy changes, still a fair bit of taboo at a political level. Communities are just starting to come around. But to be fair, nuclear just isn’t getting the chance to show even a small fraction of what it’s capable of doing for the world and achieving in the climate change challenge. So that’s the reference case. The lowercase means that those demands get harder and the reality is a more difficult reality. And then the uppercase assumes that the world and the nuclear industry makes improvements at that. Improvements in a policy, improvements in economics, and achieves at least some of the things, positively, that the industry is trying to achieve. But it is grounded in reality. It is not a wishful document. It is not an aspirational document. It’s not a, but only if we could achieve this, or with all the will that we could do this. So I contrast it very, very heavily with many of the documents and policy rhetoric that I see in some of our competitive forms of industry.

There are other both industry and non-industry groups who are putting out much higher scenarios for nuclear demand growth, you know, including the likes of IPCC, IAEA, WNCE. And in fact, the nuclear industry has a harmony project which is not based on moving from where we are with the current reality, that is based on the industry changing, or having an influence on the reality in a positive way to enable it to make a bigger contribution to climate goals. So, I do think it’s impartial and I do think it is grounded in reality, but we are talking about the future so it’s necessarily never going to get everything right.

Matthew Gordon: Okay. I agree with that. It is grounded in reality. The data points are excellent. And the way that, again, come back to the charts, people should look at this document, look at the charts. You know, it allows you to very quickly see the state of the nation, as it were. There was a flicker, there was a moment in this document where I thought there might be some selling. There might be some upside that, you know, some sort of ray of sunshine. And maybe it’s a discussion for another day, but you talked about harmony. Okay. So harmony is a, it’s kind of hope. It’s a moment of hope, and you go, well, can nuclear provide 25% of global energy needs at some point in the distance, right? And then the hope was crushed because they said, well, we’re going to need to treble our current production, infrastructure and so forth. In the same breath they then talked about the lack of investment in Uranium mining since 2016, actually 2014, to today. The lack of investment in any of the required infrastructure to get the Uranium sector, let alone the nuclear sector, moving again, which is obviously the supply side of the document. And I encourage people to look at that because that’s fascinating; the drop off in investment and the access to capital to do that, as we know it in today’s market. And then it goes very quickly onto the billions and billions of dollars which are going to be needed to be raised, and the infrastructure built in a market, which is again, struggling, I think, in the Western world and the places that we talked about. You know, USA and Europe investing in new plants or upgrading plants, et cetera, compared to what’s going on in China, or even the middle East, quite frankly. So, I just thought there was a moment there where the WNA might try and propose a way forward, bring other associations in, energy associations in, governments in, and try and get some sort of collective movement. But that I know is a big task. It would be a big effort required and maybe it’s not within the WNAs remit. But I think it would be really interesting to talk about between you and me, what we think it would take to deliver harmony, as described by the WNA.

Brandon Munro: Yes. And there’s a lot in that. There really is a lot in that, and there’s a lot that’s being done. This isn’t the document for explaining fully what needs to be done with harmony. And I think I’m glad that you asked me and we discussed the audience before you asked this question, because whilst you said that we are crushing hopes with the way that that’s been written, it is also a little reality check for policymakers that if you want to deal with climate crisis, these are some of the things that we need to be dealing with. We need to be, as policymakers and as global citizens, we need to be addressing some of these things that make nuclear more capable.

We know that the technology is there to be able to provide 25% of the world’s electricity. We know that industry can respond. It just needs the same build rate of nuclear power plants that we had in the 1980s. That can definitely be done. It is policy enablers predominantly; it is levelling the playing field. It is ensuring that there is, for example, some of the design specifications there, you don’t have nuclear power plants needing to have one design for the US, another designs for California, another design for Canada and another design for France, et cetera, et cetera. Those sorts of things can be addressed relatively easily in the context of the challenge that the world is trying to respond to. So, let’s pick that up in a separate conversation. It is a good one.

And the other thing that you said that I’d just like to pick you up on is you said, ‘the little ray of sunshine with harmony.’ I reckon you need; I know that you’ve only had this for a very short period of time, this document, but go back and have a look at those graphs. If you are a Uranium investor and you’re looking for sunshine in this document, you’ve got enough there to get sunburned Australian-style, really. Like you look at the concept of unspecified supply and how much Uranium is going to need to come on, particularly from 2025 onwards, by 2030, by 2040, there is a lot to be excited about as an Uranium investor, set out in an impartial, balanced way from deep within the industry itself with a whole bunch of utilities sitting across the table who’ve got no interest in paying more than they need to for Uranium. There’s plenty of sunshine here. I think maybe what you’re referring to with the harmony is that it’s gone beyond sunshine and it’s, you know, you are looking for the sky to open in a very heavenly way. And if we can achieve harmony as an industry, well, that’s exactly what will happen, I guess.

Matthew Gordon; We shall see. We shall see. You know, congratulations to everyone involved in the report. I had to rush through it this morning to be able to get you on the line to be able to get this out today. I suspect this will be our weekly catch up because it is a good meaty subject. I’d love to come back to the harmony component. I think I’ve learned a few things in there, just in terms of, you know, the order of play, quite frankly. And honestly, the charts are fantastic. And to be sharing that with the public for the first time, I hope it’s the first of many. And as you say, I’ll be sure to give you my feedback once I’ve read it again. Because like I say, I would love to see WNA kind of doing more than it is doing now. Isn’t that the name of the game?

Brandon Munro: Yes, look. I think you have got to be a bit fair. They are doing a lot and they’re doing some great work at a policy level.

Matthew Gordon: I know, but you’ve got to ask for more, if you don’t ask for more, you won’t get. So, they can choose not to, we’ve got to be demanding as investors.

Brandon Munro: We always want more.

Matthew Gordon: Exactly. As investors we always want more. You should know that by now, Brandon.

Brandon Munro: Okay. More to come. I will look forward to that.

Matthew Gordon: I will look forward to that. Thanks for making time to run through this. We will catch up with you next week. Maybe on Harmony, maybe on something else. Hopefully there is more news and more feedback on social media. And once everyone’s had time to digest this over the weekend.

Brandon Munro: Yes. Terrific. And look, it’s been wonderful to come on, and I think, you know that I’m in no way a spokesman for WNA. That’s not my role here. I’m an industry participant who is privileged to have been quite involved in the process and just passionate about what I’m doing. So hopefully I haven’t overstepped the mark there or crossed any lines. But it was great to talk and great to talk about something that’s been quite a big part of what I’ve been doing for the last couple of years.

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#12 Parallels with Last Uranium Cycle Mean Consolidation – Brandon Munro (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.04 (30.06.2020)
  • Market Cap: A$39M

A Conversation with Brandon Munro, CEO of Bannerman Resources (ASX: BMN).

We have interviewed Munro throughout this uranium bear cycle; his insights have been incredibly useful for investors.

Uranium Market Commentator & Bannerman Resources (ASX:BMN) CEO, Brandon Munro, calls in for our weekly catch up about the world of Uranium and Uranium investing. How do new investors in uranium play this cycle & which companies are set up to win?

We Discuss:

  1. New Entrants: Parallels With the Last Cycle
  2. Dangers of Believing in Promotional Material: How NOT to be Left Holding the Baby
  3. US Government Initiatives for SMR’s: Uniting Various Energy Sources
  4. Spot Price: Volatility Incoming?
  5. Kazakhstan and Significant News on COVID-19

CLICK HERE to watch the full interview.

Matthew Gordon: Brandon, how are you doing, Sir?

Brandon Munro: Yes, I’m really well thanks, Matt. What about you?

Matthew Gordon: It’s all good. I’m liking the backdrop. So, you’re obviously up at the cottage again?

Brandon Munro: Yes, yes. Getting a few more things done. So, we’ve got school holidays coming up in a couple of weeks and there aren’t a lot of options as to where you can go from Perth, so we’re just very lucky that we’ve got this one. But it comes at a price; my wife has said that the kitchen wasn’t quite up to scratch. So that’s what we’re doing at the moment here.

Matthew Gordon: Oh boy. Oh boy. We’ve all had that conversation, haven’t we? We have all been there. I see the river from there – that’s absolutely gorgeous. You’re a lucky, lucky, man. And I bet, can you smell the eucalyptus?

Brandon Munro: Yes. And some of the gums are in blossom at the moment so there’s almost like this gentle honey smell around. It’s been a beautiful day today. It is been embarrassing to call this winter to be quite frank. It is a nice sunny day and really lovely down here. So, you’re right – we are very, very privileged,

Matthew Gordon: Privileged indeed. Well, look, we’re here for our weekly catch up. It feels like it’s been a quiet week, but no doubt I think we’ll find one or two things to talk about. I was particularly interested in some of these new entrants coming into the marketplace. There have been a few fundraisings as well, little bits of money here and there. And some of these new entrants coming in and, you know, and I’m not going to name names here, but I am kind of interested in the parallels between the last cycle and this, where we saw lots of young, new excitable start-ups looking at the Uranium market and going, Oh, maybe there’s some money to be made here, and not necessarily focusing on the quality of the asset or the target. I think there are some mistakes that are going to be made. And I think, you know, what we’d like to do is maybe help investors recognise what good and bad looks like and not make the same mistakes as last time around.

So, I mean, are you seeing that? Is that your sort of sense of what’s happening in the marketplace? So, with these new entrants coming in, that there is some kind of ground swell, there is the ability to get financed. There is the ability for these companies, who perhaps don’t necessarily know what they’re doing, to kind of enter the market and position themselves as an option?

Brandon Munro Yes. I mean, that is clearly what is happening. Usually what happens in a cycle, of course, is the longer you run in the cycle, the poorer quality assets not only make it to market but succeed initially in market. So, we are at the beginning of that, and time will only tell how these assets are in terms of quality and longevity and whether they can make it. But it is the early part of that run. What is interesting is some of the names behind the company. So we’re seeing not only Uranium tragics bringing product to market, but we’re seeing some in ASX, we’re seeing some big names in terms of promoters, brokers who play right across the commodity spectrum, who have had big wins in a number of different commodities: precious metals, base metals, minor metals, even tech. And clearly, they think that now is the time for them to start positioning in Uranium, because they’re putting their energy behind these backdoor listings and start-ups. So, on the one hand, it says very good things about the market. And on the other hand, it is obviously getting Uranium out there, giving investors a lot of choice. And they’re going to need to find ways of exercising that choice wisely.

Matthew Gordon: Yes, I think that’s right. I guess what I constantly try and make people aware of, or slightly rail against, is the promotional component to these stories. And that’s not to say some people can’t make some money through this, it’s just a pure promotion play, but unfortunately, it is usually the wrong people and someone at the end of it gets left holding the baby. You coined my phrase that I use regularly. And you know, it’s got to come back to fundamentals, surely? I am looking at some of the assets that people are purporting to be able to build a company around, they just don’t stack up. And not only that, but something which we got a lot of feedback from the conversation we had last week, which was the point that you made: that the skillsets necessary to run Uranium companies are in short supply. It’s not easy. It’s not mining. It’s ‘mining plus, plus, plus’, I think you once said to me, where you’ve got to know what you’re doing if you’re coming into this space. So, I think people suddenly realise the importance of what you said there. And I think again, unfortunately, I’m seeing a little bit of that over the past two to three weeks.

Brandon Munro Yes. There’s a lot in that. And I think we talked a lot about the special challenges and the complexities of Uranium last week. And for anyone who didn’t hear that, it’s really worth going over again. The promotional side is interesting as well: used incorrectly, or perhaps too aggressively, there’s something quite distasteful about over-promotion, but it does have its role as well. We’ve been in a bear market. Many Uranium companies are capital starved at the moment. There’s a lot of developments that aren’t going forward because the cost of capital is just way too high. And we’ve talked before about how fortunate Bannerman is and I am because all of that work was done during the last boom. So, all of those thousands of metres of drilling were funded at a much better cost of capital than what we could ever hope for right now.

So, good promoters and people who can really bring a lot of attention to a stock and good support behind a stock, they do have a role because they are going to enable projects to move forward a bit faster and at less cost to shareholders than if they’re sort of limping along and making the best of the current market conditions. So, you know, I’m slow to criticise good promoters. It is more about how they do it, how honest they are about it. And as you say, whether there is a real end game, or if it’s all just making sure you jump out of the train before it hits the cliff.

Matthew Gordon: Well, there’s the skill, right? There is the skill, if you want to play that game. I personally, you know, maybe it is a necessary evil, but it does leave a bad taste in the mouth. And, you know, I, again, a phrase that I’m going to repeat, because I know we’re going to be dealing with this soon, which is: getting the timing right is nigh on impossible. I’m not sure anyone has got that scale, whether they’re trying to find the bottom or the top, it’s hard to do. But at the end of this peak, which whatever that ends up looking like, someone is going to be left well out of pocket. You know, it’s usually the retail guys. That is my constant fear and battle and, you know, desire to educate. So, I think, you know, I agree – necessary evil. Some are better than others, but promotion is something you need to be careful of because it has pros and usually many, many cons to it, in my humble opinion.

But look, maybe we should stay away from that and talk about some of the more positive things that have happened recently. So, there’s yet again more US government initiatives. And by that, I mean dollars being lauded about on offer. What’s your take on that?

Brandon Munro: Oh, it’s all good news. It’s all grist for the mill. And we’re seeing more direct involvement from the Office of Nuclear Energy and also the Department of Energy themselves. There are some very good spokespeople for the industry within those offices, which I think is really positive. And they’ve got a fairly steady news-flow in terms of grants, forms of support, other government initiatives. What is interesting is that it’s all focused on the downstream. So, 90% of what we’re seeing is focused on SMRs, on competitiveness of conventional reactors of the nuclear supply chain as such. And so, it’ll be interesting to see what they’ve got backed up for Uranium miners. And if we start seeing more of the news flow and for the front-end fuel cycle.

Matthew Gordon: Yes, yes. I mean, obviously it’s just a drop in the ocean compared to what’s needed. I mean, you know, we talk obviously every week and we’ve spoken to a few other Uranium market commentators who don’t necessarily buy the SMR, the US SMR initiative in terms of its ability to meaningfully impact the economics of the US, based on international sales, which I thought was really interesting. In fact, I thought it was so interesting that after you, we are speaking to a guy called Ben Hurd. Who’s an eco-modernist. Okay. That’s a phrase I’ve never heard before. And basically, they’ve done various studies and reports, and it’s a quite interesting group actually, who are talking about can we actually ever achieve zero carbon energy, globally? And you know, there’s lots of people who advocate yes, and lots who say, no. Not ever will that happen. And they looked at and they studied, I think, over 34 different reports from various large groups, and made their own conclusions. But I’m going to find out about that. But one of the things that he talks about is SMRs. So, we’re going to maybe do a little deep dive there because he seems to know quite a lot about it. Maybe it is worth exploring where the US sits today and, you know, whether its hopes of regaining its seat at the table using SMRs is a likely possibility.

Brandon Munro: Yes. And look, I’m delighted that you’re talking to Ben. He is an incredibly intelligent individual. He has done a huge amount of work across the entire energy sector. He is an environmentalist at heart. A very good advocate for SMRs in the Australian context. And anyone listening should follow him on Twitter – he talks across the spectrum of environmental social issues, which obviously is extremely important for our industry, that we have strong credible pedigreed environmentalists who see the virtues and the value of nuclear energy. And given that he’s operating within the Australian context where conventional reactors have effectively been ruled out, it’s wonderful to have his focus on SMRs. So, well done on reaching out to him, and I really look forward to seeing what he’s got to say.

Matthew Gordon: I’m fascinated. I mean, we read a couple of the reports that they produced. I mean really, really interesting. I mean, just unconventional thinking, and pulling people up as well, you know, because everyone talks their playbook, right? So, different groups create different reports, but it talks to their own playbook rather than genuinely in an unbiased way. And he’s looking at how do we deliver a smart energy nexus? I just thought that’s a kind of interesting way of looking at it. You know, because if I look at…I won’t name it, but a report, which I read where it talks about nuclear competing against other energy sources, and I was like, well, it’s not necessarily competition. I think there is maybe room for all of the above if you look at the energy forecast requirements coming down the line that I’ve seen. So, how do they work smartly together? Because I guess different geographies will have different abilities, you know? If you are living in Australia or Spain, maybe solar makes a lot of sense. If you are off the coast of Scotland, wind makes a lot of sense. And clearly nuclear plays a big part of this or should play a very big part of this going forward as well. So yes, it should be an interesting conversation. You obviously know Ben well, and yes, anyone listening to this should listen to that.

Let’s sort of talk about one other thing: with regards to the spot price. I mean, again, we said last week that it’s kind of in the doldrums, but do you see any kind of volatility in the price coming up?

Brandon Munro Yes, I think we will see more volatility. It’s very flat at the moment and there isn’t much volume going through at all. There hasn’t been a lot of momentum coming from utility buyers, but we are getting to the end of a quarter, we’re getting to the end of the month. And what we have seen in the past is the capacity for it to be volatile. Single market players, or a couple of market players acting with a sense of singular motive, can affect the spot price when there isn’t a lot of volume, and there isn’t a lot of buying on the other side. So, I’m watching for that, probably expecting that. And let’s just see how it goes.

Matthew Gordon: Yes, well yes, let’s all see how it goes. Okay, the last thing I want to talk to you about before we move over to the Crux Club members, is Kazakhstan. Two of the senior members of government have contracted the coronavirus, and two people who are quite relevant to the production of Uranium. So, what do you know?

Brandon Munro: Yes, look, this is really the most important thing to watch in the Uranium sector at the moment. And people who follow us each week will know that we’ve dedicated time to this topic every single week; following what’s happening in Kazakhstan with COVID. What is the likelihood of the Kazakh production disruption ceasing early? Ceasing on time, or being extended? And for the first time, I think we’ve got a fairly clear indication that the chance of an extension is significant. So, you’re right; there’s been two high profile members of the current and former Kazakh government who have tested positive. First of all, Nursultan Nazarbaev who was the founding president of Kazakhstan, former PM, he’s reported as now having COVID-19, or Corona virus.  He is well into his seventies, he might be 79 now, so the country will be very concerned about that. He’s still obviously revered in Kazakhstan. He only recently handed over power, probably less than a year ago. And so, there’s not only a heightened awareness factor in Kazakhstan at the moment, but there’s also a respect factor that will be playing a big role. You wouldn’t want to be the company announcing your return to full business if something unfortunate was to happen to the founding leader of the new nation. And now the other one is the country’s health minister, also is reported to have had COVID-19. And so, these 2 things, plus what seems to be a bit of a second wave really in Kazakhstan has led to numerous shutdowns and new measures. And it seems to be that they want to really curtail all forms of activity this weekend, and that has the potential to carry on.

So, we are only a couple of weeks away from the end of the three months that was initially prescribed as being the anticipated, or estimated period of production disruption, where wellhead development and so on, wouldn’t carry on. I would call it quite likely that we’ll see that extended or if it does stop, it’ll probably stop in a fairly gentle way.

Matthew Gordon: Yes, I think the Uranium bulls we’re quite excited by that news because it’s everything that they’d hoped. Because if the supply side of things carries on as it has been for another quarter, or another period of time, they’re counting the pounds which are missing from the market. They are counting on Cameco and others actually signalling their intent. And for utility buyers, we don’t know what they think. We don’t know what they think. Because I still hark back to the US utility numbers, which came out a couple of weeks ago, which kind of caught everyone on the hop. And I guess that they’re the most important ones, but I think generally for Uranium bulls, they’ll see this as a signal to be piling in. And I think that seems to be the noise that we’re hearing. It’s like, obviously we talked about earlier: new entrants coming in, the ability to get bits of financing away. There’s a lot more commentary in mainstream press. We’re seeing reports on TV. So, I think that the ground swell is there, it’s just still that lack of clarity on how, and when we start to see movement on spot price again, and what that does for equities?

Brandon Munro Well, that’s right. As I say, I can see things being fairly flat for the rest of this month There is no a particular timeframe in which I’d expect an announcement from KazAtomProm over this. So, there’s every chance that they’ll bide their time until next month when there’s even further clarity and they know exactly what’s going on. I know they have announced that they’ve returned to wellhead development, or announced that they haven’t, in which case the market will expect some level of guidance over how long they expect the extension to carry on for. And that’ll be the trigger that I think bulls will be looking for.

We have talked before about the compounding nature of any extension of the Kazakh production cuts, and I think that is really important for people. So, for anyone who’s tuning into our show for the first time, this is the important thing to understand: first of all, it’s been 3-months at the end of this month that production disruption has affected all of Kazak production, including their joint ventures. And what that means is that they haven’t been able to do wellhead development. In other words, the already acidified horizons that were developed 3 or 4 or 5 or 6-months ago, they’ve carried on with production. The pumps have continued running. They have still operated their recovery facilities. So, it was the work that was done between three and 6-months ago that’s been yielding the Uranium that’s continued to be produced and sold. And also, KazAtomProm – the main player in all of this who is the majority owner of these assets, they flagged that they could still comfortably ride through about three months of disruption whilst tapping into their inventories that they maintain as a producer. And that would have put them into a slightly more comfortable position by being able to work down their inventories to more manageable levels.

The moment we go over those 3-months, if that is in fact what happens, not only do these assets start reaching the tail of their productivity; in other words, the work that was done a few months ago, except for the very best of those assets, the recoveries will be starting to taper. They’ll be getting right down. So, the amount of Uranium hitting the recovery plant and then being able to hit the barrel will be tapering quite significantly at this point. Also, the amount of Uranium that’s capable of being delivered, not only by KazAtomProm, but by its partners will be tapering as well. So, we’ve said before that for the first few months, the market hasn’t really felt this production disruption, and it’s now that they will feel the first 3-months of production disruption and also any extensions which will compound on that.

The other thing to bear in mind is just the effect that it could have on the utilities, traders and other market players’ sentiment. They could look at 3-months and they could see that as perhaps absorbing some of the excess inventory that existed, producer inventory, absorbing a little bit of utility inventory that they could rely on to see them through. If we do see an extension, particularly if there isn’t very clear guidance as to how long that extension is going to last for, now there aren’t available producer inventories that can simply fund these disrupted pounds. It’s going to need to come from somewhere. And back to your question about spot price: well, in terms of Cameco, they will need to come from the spot market in terms of KazAtomProm, they’ve told us in public forums in interviews that in fact, if it goes much longer than 3-months, they’ll also need to consider coming to the spot market to buy the pounds that they can deliver into their contracts. And that’s not to mention the other joint venture parties who whilst some of them won’t need to buy in the spot market in order to deliver into long-term contracts, there will be a similar effect because they won’t have the pounds available that they can deliver into the spot market.

So, it’s a very significant time. It’s a very significant time to be monitoring what’s going on. And yes, I agree with you – the Uranium bulls are looking to start placing their bets right now at a time when we’re going to see probably another couple of weeks of equities under pressure for those investors who are investing purely on what the spot price is doing at this point. So, it’s a great time. It’s a great time to be watching. And for those investors, it’s a great opportunity, I think.

Matthew Gordon: I think it is a great opportunity. I think it’s great opportunity if you pick the right company and know what you’re doing, and don’t bet on this, you know, bother to maybe go through some of the transcripts of our conversations, that would make a lot of sense. Understand what you’re playing with before you put your money down. So, but yes, it’s definitely opportune times for sure. And to that point, I think, just for the viewers, we’ve managed to nail a date down to actually speak with KazAtomProm. That was something that’s been a long-time baking, but we finally managed to do it. So, we’re speaking to them in a couple of weeks and we’ll be able to talk to them about their strategy and what they think of the market currently. So quite excited about that one.

I think it’s time to move over to the Crux Club. We’ve got 2 quite exciting topics to talk about in there, actually. Two quite big things. So, we can say goodbye to our regular subscribers, and move over there.

Brandon Munro: Great. Thanks, Matt.

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