#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

https://youtu.be/QpJcMWElnwk

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,’ https://climatecrisis.house.gov/sites/climatecrisis.house.gov/files/Climate%20Crisis%20Action%20Plan.pdf 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.

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Bannerman Resources (ASX: BMN) – How Relevant is the US Nuclear Industry? (Transcript)

Russia and China are leading the worlds Nuclear Energy space. How have they done it? Can the US claim it’s crown? We pose these questions and more to Brandon Munro, CEO of Bannerman Resources (ASX: BMN), the Namibian based Uranium exploration and development company.

Click here to watch the interview.


Matthew Gordon:  Hello and welcome to our viewers on CruxInvestor.com and also to our listeners on CruxCasts, our new podcast series. We’re going to be speaking in a second with Brandon Munro. He’s the CEO of Bannermann Resources. They’ve got a Uranium asset in Africa. We’re going to hear all about it now. Good morning. How are you sir? Or good afternoon. How are you sir?

Brandon Munro: Very well thanks man. Thanks a lot for the opportunity to come on.

Matthew Gordon: Well we’ve had a lot of people asking us to have you on the show so we’re delighted to be speaking to you. So I want to start off as I usually do and get you to do a two minute overview of the business for those people who perhaps haven’t heard the story before and then we’re going to get into some of the meat of the interview in a second.

Brandon Munro: Well Bannerman Resources is ASX listed. We’ve been exclusively focused in the Uranium space since 2006, when we started to develop our Etango Uranium project in Namibia in Africa, as you say. Etango is very unusual. It’s enormous. It’s 271Mlbs of Resource with a Reserve of 130Mlbs within that. So what that gives us is a minimum mine life (LOM) that’s 16yrs with quite exceptionally large production potential. On average 7.2Mlbs. It’s very advanced. We completed it first PFS 2012 and since then we’ve been using our time productively to undertake a 3yrs ‘demonstration plant’. So it’s that pilot stage and of course we’ve had the opportunity to engage in various marketing activities within the Nuclear sector.

Matthew Gordon: Thanks very much. Nice and concise. I thought we’d start first of all by getting your view of the market, before we get into your story. I’d love to go through your presentation and get into that because there are some things in there which I don’t understand. And I’d love your input on that. So let’s talk about the market first of all. So the the geopolitical situation, around Uranium, you have some very passionate people out there. It is very sensitive subject. The psychology and the psyche behind it is quite an emotive one. So tell me about who you think the main players are? And how that would impact on Bannerman going forward?

Brandon Munro: Well in a very broad sense, we are I believe on the cusp of a very broad policy realization that the clean Energy imperative is a must. There’s growing and irrefutable evidence that regardless of your belief on what the causation is, we need to address climate change and we need to address man’s contribution going forward to that. Now what’s happening just in the recent months is a recognition that renewables can’t provide the whole answer. So we had a few years of very optimistic projections on renewables. I’ve worked in the Renewable sector. So I feel like I’ve got a good understanding of how it works. And the truth is renewables do have to play a very important role in decarbonising our various economies, but they simply can’t provide the exclusive solution.

Matthew Gordon: Okay so just let me just interrupt there. So can you just define give me you’ve worked in both spaces can you articulate the difference in Renewable Energy and Nuclear which is positioning itself as a green Energy?

Brandon Munro: So I would divided along the lines of intermittent Renewable Energy sources, and baseload Renewable Energy sources. So of course we think commitment. It’s predominantly the various forms of Solar and off-shore / onshore Wind. And other technologies tidal et cetera just aren’t proven yet. And it’s a long way off before we really going to know if Wave, Tidal et cetera is going to play much of a role at all. And there is an urgency here which I think is driving Nuclear policy. The baseload sources of clean power are really only Nuclear. And of course Hydro. And what we’re seeing is a broad acceptance that Hydro comes with a very substantial, tangible cost. And that cost is both in the form of direct environmental damage that’s caused by dams and the rather significant legacy that we’ve seen but also social and geopolitical costs. When we look at some of the Hydro projects that are planned in Central and East Asia for example. Many in many instances those projects have implications for multiple countries downstream. And we’ve got some very unfortunate legacy examples of where poorly planned Hydro projects have had devastating environmental and social impacts. And so when I look at the Energy perspective, in a very broad sense, with this clean Energy imperative, there is a huge gap of what is currently being invested in Nuclear, and what needs to be, if as a society and a civilization, we have got any chance of arresting the current climate trajectory.

Matthew Gordon: So I mean would you… given Uranium will at some point become a depleted Resource, do you think Nuclear is an intermediary Energy baseload source for now, whilst people work out how to efficiently harness the Renewable side of things?

Brandon Munro: To an extent it is. But the filler is a multi-decade filler. So it’s not a solution just for the next five or 10 years, until storage comes in and saves all of the downsides and issues associated with intermittent renewables and the negative impact on grid stability. It is a multi-decade solution. And interestingly it’s multi-decade solution for itself. So if we start to project many decades forward, when we do start to see Uranium Resources around the world come under terminated pressure. There is a Resource sitting out there which benefits civilization in two different ways. And that is Nuclear waste. The technology does exist to extract further benefit and Energy out of Nuclear waste. That waste is very safely and securely stored, waiting for that day. And the piece of the puzzle that’s missing is, it just simply isn’t commercial to extract that Energy source from that Nuclear waste. So when you look at it that way, I don’t think it’s preposterous at all to talk about Nuclear Energy as becoming a Renewable form of Energy in the same way that bio-Energy works on maise fields waste or sugarcane waste to make Energy.

Matthew Gordon: That’s the first time I’ve heard that. That’s an interesting point. The Nuclear sector has been very good PR itself over the last 10yrs, 15 years. It’s come from a position where people would think, based on fear of the unknown and obviously as few blackswan events I think they’re called in this industry, people are very nervous about what it could mean to their safety. I mean how has this PR revolutionized the way that Nuclear has been positioned and how does that affect companies like you?

Brandon Munro: Well I would say that the industry is not very good at talking about itself at all. And the areas in which the Nuclear industry has made PR progress, has come almost exclusively from two forms. 1. The first form is at a very high level. The Nuclear industry has in just the last couple of years, successfully positioned itself at key policy making bodies. So the World Nuclear Association, now has a seat at the Clean Energy Ministerial. An incredibly important body, that will influence government policies around the globe at a time when those are factors that I mentioned before, in terms of clean Energy imperative and the downsides of intermittent renewables are coming into focus. 2. Now the second area where we are on a positive trajectory in the Nuclear industry, is actually caused by some very credible environmentalists, And a very good example is Michael Shellenberger. He’s an environmentalist who has dedicated his life to environmental causes. He was one of the original anti-nuclear campaigners, certainly a climate change activist. And several years ago he had a very deep dive, based on fact, based on economic reality, and based on an assumption that Energy growth would continue despite what people might wish it to be. And he came out of that deep dive with the irrefutable evidence that Nuclear power offered the ideal solution, over and above renewables. Now it’s people like Michael, and other people like James Hansen, who have that multi-decade credibility in the environmental space, where the if I call it, the moderates in our society are prepared to really listen carefully to what they’ve got to say, and maintain an open mind and a dialogue. There are of course still extremist groups on both sides of politics, but in particular on the environmental side. And I don’t think we’re ever going to win them across the Nuclear power, simply because they’ve got too much organizational and financial infrastructure that is tied to an anti-nuclear position. So those people are unwinnable. But for the vast majority of people who want to see a better world, and who are becoming open minded to the only way that we can achieve that, which is Nuclear power playing a role then I think we are starting to make progress in the PR game. And I just hope it continues and increases, because as a civilization we don’t have a lot of time to ponder over these matters.

Matthew Gordon: Interesting thought there. I mean do you think this is a PR issue. Technology advancements have also helped the cause.

Brandon Munro: So it’s entirely a PR issue. When you’ve spent as much time as I have amongst the Nuclear industry, and amongst the engineers, and the extremely clever people who operate in their little niches in this industry. When you’ve done what I have visited the world’s premier long-term high radioactive waste depositories, and just seen the extraordinarily levels that they’ve done to reduce the risks down to zero. And when you look at all of the facts, such as being compiled by Cambridge University (Should refer to Oxford University research . Brandon called us to correct this after the show & supply the actual paper) on Fukushima, and other examples in history where there’s been releases of radiation. It’s nothing but a PR issue, because those facts are absolute. Those risks have been reduced down to something that as a society sits well well below all other forms of Energy. And statistically Nuclear is still the safest form of Energy that we have ever used as a civilization.

Matthew Gordon: OK. I think there’s some some great points in there and you know it would be nice to even get a hold of some of that research, to help get that out into the marketplace. Because as you say with education, comes understanding for all matters. But let’s move on to an area where passions rise. So I’ve spoken to quite a few Uranium companies recently. We’ve got the US companies, it seems versus the world, where there are a few friendly folks and I think the U.S. would align themselves to in Australia, Canada et cetera. But I think the recent 232,  Section 232 UREnergy and Energy Fuels, used some pretty strong language around their PR. Adversarial type commentary and they position as a security issue. Now I have the pleasure of speaking with Mike Alkin yesterday. I really enjoyed that. You know he’s a big proponent a big advocate for that level positioning. It is a security issue for the United States. They did that very passionate about this. But I’ve also spent some people across the aisle, the phrase we use here. Who don’t necessarily see it that way. I mean where do you sit in all of this?

Brandon Munro: So I’d offer a slightly different perspective. I think it’s an incredibly important issue for the United States. It’s not a security issue, per say. It is a global relevance issue. Wasn’t that long ago that the United States led the world on all things Nuclear. And Westinghouse to this day is still built more reactors than any other reactor builder. And to see them take that mantle, and a couple of years ago to have their flagship industry in bankruptcy, speaks volumes to just how far both policy makers and industry in the United States have allowed this flagship industry to deteriorate. And it comes at a time when Russia has really asserted itself with justification as the world’s premier equipment supplier. And you have China who is moving very, very quickly and rapidly, and effectively on the heels of Russia, looking to assert itself as number one. And China’s got a very strong driver and that they’ve got an extremely strong domestic driver. And because of their clean air imperative and their requirement for baseload Energy and the cannibalization of their coal-based baseload that they need to achieve. But they’ve got an even bigger driver and that is the ‘Belt & Road Initiative’. And long term off-take agreements, and long term 18 year partnerships that come with the new Nuclear reactor, is exactly what China is looking to drive there. So you have two extremely motivated effective state controlled industries that have left the United States relegated behind, not only themselves, but also South Korea in this industry. So I think that is far bigger and far more important than the issue of whether or not the United States has got access to fresh Uranium to make tritium componentry of their weapons program. And so I think there’s a broader approach that the US needs to take to address all of those. And we’ve seen really in the last few months the first strong indications that they are in fact prepared to do that with the funding salvation package for vocal some of the innovative funding packages for Gen 4, and SMR reactors but also the rhetoric and I find that particularly interesting coming out of Secretary Perry and others.

Matthew Gordon: That’s really interesting. We’ve not heard that thinking before, certainly not with the interviews that I’ve done and we are new to this. So, can we get into that a bit, because you are saying that Russia, China. They have taken the lead were from it from America, from Westinghouse, and for whatever reason the United States kind of dropped the ball there a bit. Do you think that this 232 issue will save the US Uranium businesses? Or do you think it was a tactical move by the two companies involved? Obviously the knock on effects of being huge. We’ll get onto that in a second with regards to the utilities. Do you think that the market can recover its situation? Do you think it needs to recover its situation or should it focus on other ways of dealing with this?

Matthew Gordon:  So if you if you don’t mind, let’s dig into what you just said a little bit further.Okay so what you’re saying is Russia and China have taken the lead. America has dropped the ball. And they’ve kind of let things slip, for whatever whatever reason whatever the political reasons, internally, funding reasons, they’ve let the ball drop. Do you think necessarily that they need, this is a position they need to recover? You know isn’t this just a business like any other business, any other sector. Or would you think because of the nature of the commodity we’re talking about there’s a bit more emotion around this than that would be otherwise?

Brandon Munro: I don’t think it’s about emotion at all Matt, but I do think the geopolitical influence factor is extremely important here and runs strong through Nuclear. Whether they need to recover really depends on whether America’s entering a longer-term phase of looking in, or if it will return to looking outside its own borders, after we’ve had administration change, which might well be another several years away. The reason why it’s so important from a geopolitical perspective, is Energy security as your audience would know, is really one of the absolute hot topics when it comes to geopolitical tension at the moment. We tend to hear about trade, but we’ve seen in the relatively recent past how Russia has asserted itself on Energy security with some of its neighbors. We’ve seen a huge push by the US to become Energy independent. They’re getting very close with the hydrocarbon industry in particular but we don’t have to go back that far in Asia for example, to see the extraordinary lengths that Japan and others went to the Energy security. What is exceptional with Nuclear power is the capacity to buy, stockpile Uranium, in its various forms, and be 100% Energy secure within your own borders. So one of the calculations that I’m saying is Japan’s entire Nuclear requirements, before Fukushima, could be stored in a single warehouse, stored, protected, guarded. However you want to look at Energy security. It’s not about protecting a fleet of coal bearing ships that are coming in for countries that are really concerned about this. And it’s not about protecting trade access to hydrocarbon producing nations et cetera et cetera. So it offers us Energy security, but over and above that, it is a large scale industrial complex across many many different components, across many many different vendors of equipment. And to be able to spearhead as a sovereign nation an industry that can deliver infrastructure of the scale and complexity and longevity of Nuclear power plants. I think if America wants to remain one of the largest economies in the world throughout 21st century, it absolutely needs to play in this game. And when you start to look at some of the trajectories that I believe Nuclear power will experience because, of the fact as we’ve talked about, to remain outside of an Energy source that’s likely to comprise 20% of the growth going forward, for a large country like America. Just doesn’t make any sense whatsoever.

Matthew Gordon: And how much role do you think the fact that this huge Nuclear fleet as well. I mean the that seems a very important thing for them. These floating Nuclear reactors all around the world. Is that a larger part of the consideration?

Brandon Munro: Well it is with the current administration. So we’ve seen a lot of focus on technology and IP from the Trump administration. And there’s much of that that’s driving of course the trade tensions between the US and China right now. But where the next generation of Nuclear reactors, the so-called small modular reactors, play an important role, is as with the broader industry. America was streets ahead. They had the first regulated, or approved or authorized, SMR reactor. And have done almost nothing with it in the last 5yrs. And what we’ve seen is Japan and sorry,we’ve seen Japan but in particular China and Russia, catch up to that technology. Because China and Russia they can make available commercial scale pilots for all of these. Whether it’s floating reactors or other small modular reactors. The Trump administration has realized that they do have time to catch this issue. And so it’s seen a lot of spending come in and also a lot of talk just in the last year about expediting availability and permitting and approvals, so that they can get commercial scale SMR and Gen4 reactors into action. Now going back to my point about technology and IP. To be at the forefront it’s such an important new technology is very attractive to a country like the United States for various reasons but part they in largely because they need to maintain their competitiveness of their manufacturing industry and technology is the only way they’re going to be able to do that in the coming decades compared to a workforce like China.

Matthew Gordon: I think there’s a lot more to be discussed around the US competitive. I don’t want this to be a US centric interview. But just to finish off the geopolitics components. Obviously China Russia, Kazakhstan. Well in terms of proximity to where you’re based Africa, they all have their foot through the door and a lot of those countries already with other commodities obviously. Are you seeing or have you been approached by those types of players,  with regards to securing future production, or is that a conversation that has not been had and if it is a conversation that you’d be allowed to be having?

Brandon Munro: Well it’s a conversation that I won’t have at the moment. It would be foolish to have those types of conversations, as we are only just bottoming out of 8yrs bear market. But to answer your question about are we saying it absolutely we’re saying it. If you look at China for example, we saw CGN and acquire Extract Resources and Kalahari Minerals for $2.4Bn and then proceed to spend somewhere between $2-3Bn building the Husab Uranium Mine and continue to operate that mine, in circumstances where clearly it’s uneconomic at the current process. And so the fact that they’re prepared to continue pushing with that mine and producing rather than acquiring in the spot market, says a lot about their long=term ambitions and their long-term requirements to not only acquire production certainty moving forward, but acquire expertise and demonstrate that China is capable of building and running, what was one of only two multi-billion dollar resources developments in Africa in the last 10 years. And now the same can be said for Russia, that they acquired during the last boom the Mcuju River Project in Tanzania for over $1Bn. And they have very close relationships with the large scale production that we say in Kazakhstan. And Uranium One, which is a state identity, owned by the Russians, operates more joint ventures in Kazakhstan than any other company other than KazAtomProm. Of course and that extends beyond that. We have India who has finally started to achieve some genuine traction with their Nuclear program, after several years of false starts. They have an aggressive program to not only stockpile Uranium, but to start securing their own supply certainty. And South Korea has demonstrated in the UAE that they can build on time and efficiently reactors and they must be eyeing a significant export market to complement their other heavy industries, such as shipping and so forth. So there are multiple players that have a keen interest in securing large scale certainty and supply, and that’s what you have in Africa. The projects are much bigger. They tend to be higher on the cost curve, but they offer a unique form of security of supply. Because A) large nations have got greater geopolitical influence with African countries. I’m not saying that misuse that influence. In fact I’m staying quite the contrary. Most African countries benefit enormously from that investment. But they do have the influence to be able to secure and protect their own investments. But on top of that the role of interest groups, and the role of adversary Uranium mining in the Nuclear sector, they simply don’t get any real traction whatsoever in Africa. Because the development agenda is so strong, and governments in Africa been through that, whether it’s Uranium mining, other mining, all sorts of other activist groups. And they’ve learnt to put the interests of their citizens and their prosperity well ahead of whatever television screens might fill up within Europe or the US Central.

Matthew Gordon: I know Africa quite well. And I agree with what you just said as well. This is my segue into let’s talk about Bannerman while you’re here. Obviously we people understand Athabasca, the Australian Story, the Kazakh story. You mentioned that Africa is plentiful, Uranium plentiful in Africa, but slightly further the cost curve. So it’s a different sort of play. And I’d like to come on to that in the presentation. So if you don’t mind, I’m just gonna go through some of the pages from your Nov presentation, if we may. And if I can just just kick off with some of some questions around the financials. So back then you had AUS$7.7M. Is that pretty similar to now. Or have we burn through a bit of that?

Brandon Munro: It’s very similar. And we have a very tight cost control. We did do a little bit of drilling but that was only under 1,000m of RC. And the work that we’re doing on our project at the moment that I’m sure we’ll talk about is almost entirely done internally. So our cost controls tight and we’ve still got the lion’s share of $7M.

Matthew Gordon: Okay. Market cap $50M share price, circa $0.05 cents. Over a billion shares. That’s the standard Australian thing isn’t it? Why do Australians do that?

Brandon Munro: Well it’s the biggest thing is we don’t have a reason here not to do that. In the sense that, if you were to compare the Australian approach with the Canadian approach. Both come… companies on both exchanges. They operate the same way, in that they have a level of success hopefully. They issue more shares. They need to go to the next level of success with its feasibility studies etc. They issue more shares. That dynamic doesn’t differ at all and in fact in the last few years ASX has been far more bountiful for Resources investors and companies than in other exchanges. The difference is, investors in Australia they really hate consolidations or reverse share splits. They don’t like the effect that it has on their sense of value. They don’t like the effect that it definitely has on liquidity and there’s too many examples where companies might undertake a consolidation and someone pulls the shares out of the bottom drawer thinks that they’ve tripled and in fact the shares to where it is. They just go to a third as many. So there is no incentive and there’s a strong disincentive to consolidate registers. So we just don’t do it. And it doesn’t bother us. However what I’m learning here at the moment is it does bother North American investors a lot and they seem to think that somehow management must be horrendously negligent to allow a share count of a billion shares.

Matthew Gordon: There you go. Like I say the U.S. versus the world, again. For the second time. Okay. I’d like to get that. Talk to me about your share register. Then you’ve got well about 40% seems to be retail and you’ve got a couple of big names in there and the usual kind of high net worth (HNWI) etc to the board sitting on 8%. Your heavily Vested you continue to invest?

Brandon Munro: Myself, NO. I acquired a substantial position, at least from my own financial circumstances, when I came in as CEO. I do have 50%  of my packages paid in equity. That is performance weighted and it requires performance hurdles to be achieved. But there’s just too much going on in the sector for me to be in the market at the moment. We do have strong board participation, as you’ve noticed, but I think the other thing that is interesting about our register is despite being a microcap and still being at about $50M level. We’ve got very unusual levels of institutional support. So about 34% institutions, including those big names that you mentioned and a number of specialists Uranium funds, which of course makes me very proud, but I think also gives investors a lot of comfort.

Matthew Gordon: Yeah. Okay. And then we’ll see what sort of hurdle. I mean given the position of the marketplace not much is moving. What type of performance targets are you talking about?

Brandon Munro: And so our employee incentive plan that relates to all employees. it’s 50% judged on KPI performance and 50% judged on total shareholder return. So compare Bannerman against a basket of peers. We exclude, obviously, the more beta related companies but we don’t compare ourselves against the share price growth that you would get from a UPC or a Yellowcake or KazAtomProm or a Cameco or even some of the producers. So we are competing against companies that have got active in Exploration programs and so on, in the Uranium space. And only if we outperform those companies do we do we benefit from the EIP.

Matthew Gordon: So I guess not. Not much happening at the moment. No one’s doing anything really at the moment.

Brandon Munro: Compared to what it would be like in a couple of years, I’ll certainly agree with that.

Matthew Gordon: There you go. Okay fine. Well I’ll take that. We’ll get into the board in a second.  Well I think you spent a bit of time sort of describing the market in the presentation and had a lot of interviews recently, plus you’ve been quite good at describing that. The one page I did quite like was, and you just alluded to it, was the financial players in the space. You know you’ve got Tribeca on board. The UK’s got Yellowcake but there seems to be a few more of these types of funds starting up. I guess.. it indicates that people’s perception of where this market is going to go. Do you agree?

Brandon Munro: Absolutely. So it’s both being created by sentiment and reinforcing positives. And it is I think my deck sets out. If you go back only 12 months there are only two players in this space and that was UPC, who’s been around since the early stages of the last boom. They’ve done it raisings in their life and right something like CAD$645M. And Geigerounter Fund, based and listed in London, who invest in equities, including Bannerman. So just in the last 12 months the increasing sentiment behind the bottoming of the Uranium sector and the expectation of the bull market, has driven demand from contrarian and really early adopting smart money to fund these different groups. And you you mentioned Mike Alkin, who is an extraordinarily intelligent voice in this whole sector. So he runs SachemCove Partners Fund, which are disclosed as an investor in Bannerman I’m proud to say. L2 Capital out of Brazil. Tapping our family office money in Brazil with Marcello Lopez. I’m proud to say he’s disclosed that he’s Bannerman shareholder. I mentioned the Geigercounter Fund. Oclaner Asset Management out of Singapore. They’ve been having shareholders in their specialist Uranium fund. You talked about Tribeca as well, and there are those who haven’t voluntarily disclosed, and so I’m not I’m not privy to disclose that on their behalf. But I think the big news as well, is that we’ve just seen overnight, the first ETF that’s being formed to track the new Solactive pure play Uranium fund index. And I’m also very proud to say that Bannerman has made the cut for that. And we’re one of only 7 Australian listed companies, including some of the big ones like, ERA that are included in that index and therefore will be included in the ETF. So what all of these do, is they create new opportunities for capital to enter the market, that otherwise would either find the sector too small. So that entire scholastic index is only about $15Bn which includes Cameco, KazAtomProm, UPC and YellowCake. But it also provides other risk tolerant investors with the avenue to invest in the broader Uranium thematic which is very important. It was started by a positive turning sentiment but very much exacerbating the increased sentiment through the capacity to draw in new funds from unusual corners of the investment community and start deploying that directly into both physical commodity and also equities

Matthew Gordon: I did catch that earlier this week. So I think that is interesting because… here’s one for you. We’re talking about investment and seek in a companies such as yourself. Okay. This shows for retail investors, High net worths, family offices who perhaps are not as sophisticated as institutional, primarily because they can get access to information. So if you were one of those guys, I mean what type of exposure would you have to Uranium? You’ve got obviously equities, you’ve got physical, you go ETFs… getting a slightly better rep hopefully. I mean what would your, not advice but what would you do?

Brandon Munro: I guess I’d say if I was running a family office?

Matthew Gordon: There you go. Well done.

Brandon Munro: And I didn’t have you or me to make Uranium picks? What I would probably do is heavily weight something like an ETF and then have a couple of serious Alpha picks outside of that. And whether it’s an ETF or whether I’m putting my money with someone like Mike Alkin, would really just come down to very finely balanced risk tolerance decisions. Someone like Mike Alkin, with these extraordinary sector knowledge, and amazing due diligence, and ability to think in detail at a helicopter view, I think that that offers in fact superior risk management to just taking in ETF which needs to invest by a robot. However, you’re never going to be criticized for buying IBM in the form of investing in an ETF. You just need to pick the macro. And then whatever happens in the ETF is what happens. So I think there is a role for all of those. But the point that I’d make though, is the moment you’re at any scale as a hedge fund or a family office or in high net worth, it becomes difficult to play in the Alpha space, because there just isn’t much value out there at the moment with the Uranium sector being on its knees.

Matthew Gordon: By Alpha you’re talking about the large producing companies, equities?

Brandon Munro: Well I guess that probably depends on your definition of Alpha. I’m talking multiple returns. And the sorts of returns that made some investors quite famous during the last boom.

Matthew Gordon: Sure sure. Okay we’ll let you know. Again without kind of going through a lot of old ground here. Would you agree that the 232 announcement kind of frozen the contract market because utilities are trying to work out what what side that’s going to fall on?

Brandon Munro: No question. For 18 months it’s done that. Because we saw the petition issued in January last year, and a long period of uncertainty before a decision was made to take up the investigation by the Department of Commerce. And what we’ve seen now, is because the decision is just around the corner potentially as little as days away but more likely several weeks away. It’s frozen all sorts of activity. The traders they don’t have any balance dates coming up. They need to be careful of closing positions, so they are under no requirements to buy. The producers. They’ve got the inventory cover to hold over this period, so they don’t need to buy to cover lost production. The utility certainly don’t need to buy, in the next few weeks. So we’ve really come to the sharp end of this uncertainty because the decision will be made and it will become public within the timeframe of almost every conceivable procurement decision in this market. And I think that’s why we’re seeing a drifting spot price. Because despite that overhang paralyzing the buying, there are still small pockets of owners of U308 that do for whatever reason need to sell. And when they’re selling into an illiquid buying market, that will of course put pressure on the price to where we see today.

Matthew Gordon: Right. Okay so. So the few things there. And again I don’t want to get into talking Bannerman here. So I’m I guess at the moment the price is is binary.It’s either going to be economic or it’s not. So it doesn’t matter whether it’s $18, $25, Well maybe $30 some people might be able to make it work. It doesn’t matter until the price moves and the price isn’t going to move until the utilities get certainty. That’s around 232. And to them it doesn’t matter which way it falls. They just need certainty. They just need to know what the moving parts are, to be able to make decisions about go forward contracts.

Brandon Munro: I certainly agree with that and it’s an interesting point because there is some perception amongst investors that it’s about picking winners and losers ahead of Section 232 results. I don’t buy that. Yes different results will potentially benefit some companies over others. And there are some scenarios which will actually be detrimental to certain companies, but for a company like Bannerman and in most companies out there the result cannot be negative. Because there’s been 18mths  of uncertainty that’s hung over the sector like a wet blanket, that has stopped all sorts of procurement decisions and all sorts of trading liquidity. And as a result of that just the sheer action of that uncertainty dissipating, will produce market activity for certainly everyone’s benefit on the Uranium side of the equation.

Matthew Gordon: I agree with that. And so talking of which. I want to…looking at your page 12 and your presentation when everyone can get that from your website. The questions I want you to answer will allow me to work out are you one of the companies that’s going to survive. So I think I agree with you. There will be lots of winners. But depending on how long the price takes to ramp up, there may be a few people that fall by the wayside because they may not be able to raise money cheaply or efficiently. That’s something that I guess there’s a lot of conversations going on and they don’t have the cash flow to survive another six months,let alone 12-18mths. So in here at some point, I’d like your view on where you think the spot price is going to go, and over what time line, because I think very few people can tell me that. I just wondered if you had an opinion?

Brandon Munro: Well I can tell you that but I do have an opinion.

Matthew Gordon: I ask myself. We wouldn’t hold you to it.

Brandon Munro: I’m one of those potentially foolish commentators out there who is prepared to offer an opinion. And I’ve done that, you might know, quite consistently over the last couple of years. And I think my foolishness is encouraged by the fact that I’ve got it right more than I’ve got it wrong. So what I foresee in terms of the spot price, is closing the year between $35 and $40. That is enough growth from where we are today, below $25 to get the attention of the more important sectors of the market, that are going to drive it in the following year, in 2020. It will shake away some of the perception that exists amongst utilities that we have another 3-4yrs of flatlining prices. And it’s that perception that it’s led to them relying on their dwindling inventory cover and also the ability to secure contracts in the future at what I presume would be similar pricing to today. But it’s probably a bit South of where many of the Uranium bulls are hoping to get to in that timeframe. And what I would say to support that prediction, is that we do have this situation where Cameco has almost entirely been out of the market this calendar year. They still have a native between 10-12Mlbs that they need to secure by the end of the year. I think if they saw the right circumstances I’d be happy to secure forward to some of their 2020 production. And it just makes for various reasons, it makes absolutely no sense for them to sit there as a buyer of last resort in the high 20s. However if they have the opportunity to be buying at the sort of prices we’re seeing now, they can make a good financial return. When you compare that to what they’d be then selling that into their contract portfolio for. And equally as we start to see an increasing momentum in the Uranium price, Cameco aren’t going to be averse to supporting that momentum because of what it means for the medium term growth of the value that they achieve from their contract portfolio. But Cameco aren’t going to do that into a debt market. That just would be naive. So we had Section 232 resolved. It will take a little bit of time for people to understand what that really means. By September, we have the World Nuclear Association Annual Symposium. And that’s very unique because you have a whole wide ranging number of people from all these little different niches of the industry, who don’t only talk to each other. And certainly don’t understand each other’s business, getting together and finding out what the hell’s going on. So that’s important both from a Uranium point of view, and having a wide discussion around what the resolution of Section 232 actually means. But also when you pull all of the little bits of news and all the snippets of developments from around the world together, it paints, as I said at the beginning, of very very positive picture of the immediate growth prospects for Nuclear. But many people in the industry they’re so hard at it doing whatever they do on a day to day basis, it takes something like World Nuclear Association Symposium for that to be surmised, and presented to them before they realize well it’s back to the good days. So it’s a combination of those factors in September, I think we’ll start to produce the environment that we need for confidence to come back initially into the spot market. Once we start seeing that momentum, I think it’s reasonable to expect Cameco and other producers to get behind that and if we say the $30 psychological barrier breached earlier in the year than later, then I certainly se that momentum continuing through $35 and if we see that psychological barrier breached before the WTI symposium, then I think we’re looking at the top… the upper end of the range that I’ve just articulated.

Matthew Gordon: Thanks for that. That’s either very brave or very foolish. I’m not quite sure yet. Let’s find out.

Brandon Munro: Ask me on 1 January and I’ll tell you.

Matthew Gordon: Exactly. But that’s kind of interesting what you said about the end of the symposium. Because if I listen to some of the narratives in the marketplace, people are talking about… collusion is a terrible word to use in the moment.. but there’s people to about, price control, price fixers, price makers. People with alternative business models to the rest of the market. But you talking about a kind of collective set of discussions and decision making which will, once there’s some agreement as to the way forward, certainly after 232, the price will very quickly uptick to $35, $40 by the end of the year.

Brandon Munro: Yeah and I would describe it more as a collective consciousness. It’s a collective acceptance about where the Nuclear industry is going in both the short and medium term and therefore what that means for both buying decisions in the Uranium and Nuclear fuel cycle, but also producing decisions. And I’ve heard some of the commentary around manipulation or influence and so on. And you know what not Matt. I just don’t buy that. I’d say I’ve been in the room with Cameco, right to the most senior leadership. The same with KazAtomProm. I’ve spent a lot of time with those guys. They are exceptionally careful and respectful of anti-trust guidelines, and all of the negative information and implications that could come with that. So I think it’s a simplistic view to say that is is someone trying to be a puppet master here, and that in some way they either have an agenda to suppress prices, or to support process. The reality is Cameco needs to buy this stuff. It’s in their interest to buy the price up, because their contract portfolio is floating and 60% exposed to an increased spot price. And that’s all you need to know about it.

Matthew Gordon: Yeah. So no collusion. Okay listen let’s talk about this page 12 of yours. You talk about track record in the sector, so let’s get into that. I want to understand what you mean by ‘leveraged price’. We talk about the ‘strategic appeal’ of Bannerman. Obviously we can all see that this is an advanced asset. Your in DFS. You’ve got a pilot plant. And then some phrases which I want to understand. Low none financial risk etc.. So let’s start with a track record. Talk to me about the team. This has been going since 2006. What have you been doing? What have you achieved and what have you learned since 2006?

Brandon Munro: We’ve taken the Etango project through the initial ascertain of Resources, through scoping study, PFS, DFS, optimized DFS and a pilot plant. You’ve seen in that deck the heapleach demonstration plant. That’s enabled us to test at scale, the heap leach process. We were always very confident about metallurgy, but that’s not the same thing as financiers and others in the market, having that level of confidence. And until you’ve tested it at that sort of scale, it’s hard to win people over. And the reason why it’s hard, is we achieve 93% recovery in only 22 days, which is absolutely extraordinary. Along with some of the horror stories that you see in copper and other other minerals out there. So we needed that scale to demonstrate our confidence with that sort of results. Now what I would say, is throughout this process the company has been run by people, in particular my predecessor, Len Jabber, who were determined to build and operate the project. These are people who saw themselves standing on the edge of the mine and being accountable to the board for meeting targets and without putting too fine a point on it, that isn’t done throughout the industry whether it’s Uranium or other commodities. It means that the work being done meticulously. It’s been done very thoroughly. And it’s been done honestly as well.

Matthew Gordon: Okay so the team today, what’s their experience? I mean you’ve replaced Len and so was the current team look like? Are you guys capable of finishing this this project?

Brandon Munro: Well certainly not capable of finishing on our own. It’s a big project and we’ll need a lot of people to come in.

Matthew Gordon: Is that money? Or is that people?

Brandon Munro: Well it certainly both. You know to develop a big project like this will, we’ll need to be hiring extensively. And and hiring all sorts of expertise. But if you look at the governance, which I think is the most important thing, ranging from our Chairman Ronnie Beevor. He used to run Rothschild in the Asia-Pacific region. Mike Leech. He’s a non-executive director on the ASX, but also Chairman in country. He was the MDA of Rossing for many years and he was the CFO of Rossing for 15yrs before that. So it’s obviously extensive operating experience. But also extensive experience within the Nuclear sector, with marketing the product relationship with utilities. He’s been the Chamber of Mines President. He’s been the president of the Namibian Uranium Association et cetera et cetera. It’s a very deep country and Nuclear experience residing there. Clive Jones who was one of the founders of the company. He is a geologist. He’s been involved with a number of ASX listed companies. And Ian Burvill is an engineer who has quite a deep processing skill suite. And he adds enormous value as well. In terms of my experience. I’m a little bit unconventional you could say, I first of all studied quantitative economics at university and somehow found a more interesting path through law, and worked as an M&A lawyer for a number of years, including during the last Uranium boom which was a lot of fun. And from there I’ve been an executive in the Resources sector predominantly, a bit of infrastructure, for about the last 10yrs and I lived in Namibia for 5 or 6yrs. I’m still heavily involved in the Chamber of Mines and the Uranium Association. So I’ve got credible, I would say, country experience and relationships. And also what I do these days is spend a bit of time involved with the World Nuclear Association. And I’m currently on the co-chair of the demand subgroup which is the working group that determines all of the demand projections for Nuclear fuel, from here out to 2040, which will be published in the Nuclear Fuel Report in September, ahead of the symposium.

Matthew Gordon: Very good. Can I just ask you. Because not a lot people spend time on the assets or some of the other asset risks, like just jurisdictional risk around licenses promise et cetera. I mean I know Namibia through other commodities, but you know give us your view or at least tell the viewers and listeners you were you doing business in Namibia. What’s that like? What are the problems you encountered… because you’re 13 years into this thing or the company’s 13 years since this thing., what are the problems along the way and how have resolved those?

Brandon Munro: So I first moved to Namibia in 2009. And as I say I lived there for a number of years. And then I’ve been closely involved through that event for the last 3 or 4yrs after moving back to Australia. And Namibia is a fantastic operating environment, across a number of different dimensions. Just in terms of being there, and getting around, and getting people to work there and move there and visit there and so on. Africa is often regarded as ‘Africa for beginners’ Namibia is regarded as ‘Africa for beginners’ by the guidebooks. It’s a very easy place to live, to visit. Between Johannesburg and Vindhoek there’s 6 flights a day, a couple of flights a day to walk Walfish Bay, which is where our project is, and you can drive around the country very easily. It’s safe, secure. I never even had a car broken into when I lived there. So many many things like that that just make your existence seem to maybe a very simple. And I shouldn’t forget to mention that they’ve got very good and reasonable access to South African whites. There’s a few of my old buddies who would really criticise me not mentioning this.

Matthew Gordon: OK I’m a buyer, good.

Brandon Munro: And the have Windhoek larger. What more could you ask for?

Matthew Gordon: All the good stuff. But let’s get into the mines the Ministry of Mines. How do you engage with them? How do they help you? How do they hinder you?

Brandon Munro: These are people that I’ve known for a long time. The Minister of Mines and Energy, who is relatively new. He knows other people in our company and board members extremely well, over a long period of time. He was the Director of Planning in Namibia, which is a very complex and sophisticated position, that means he needs to have a holistic view of the entire sector. So very very intelligent person, very eloquent, and very supportive. And within the actual bureaucratic and technocratic aspects of the Ministry of Mines, you can’t be a big fish in a small pond, like Bannerman in a Etango are, without having everyone’s attention and support. So we were granted a ‘Mineral Deposit Retention Licence’, which is the ideal form of tenure for waiting patiently when there is a downturn. That was a strong form of support from the government. And we just had our EPL. There is an adjoining ‘Exclusive Prospecting Licence’, that has just been renewed within the minimum time frame involved. We’ve got all of our environmental permits supported by the Ministry of Mines and Energy, but issued by the Ministry of Environment and Tourism. And so… and I’ve got to say we’ve earnt that as well. We’ve earnt it through being transparent. Through being honest with government, through forming partnerships and also through really investing heavily in community programs, and making ourselves and invited guests that people want to stay,rather person who simply forces themselves in the door and sort of hangs around until you start talking dinner.

Matthew Gordon: Ok. This has been plain sailing the whole time?

Brandon Munro: Yes.

Matthew Gordon: Great. Okay. Can we get on to price and leverage, and what you mean by that. Because you use some phrases in here which I just need to understand. So you’re you’re doing, on page 18, you’re doing the EV to Resource /Reserve valuation. I think that’s fairly industry standard. But you know we talk about grades and margins here. So Africa, Namibia specifically, what are the grades like in relation to the Athabasca, Australia, Kazakhstan. How’s that effect your numbers? You’re the economist.

Brandon Munro: They’re polar opposites to Athabasca. So Namibia is able to reliably operate Uranium mines that have amongst the lowest grades in the world. And there’s a couple of aspects to that. The first one is we’ve got ask yourself, why the country’s been able to do that for more than 40 years. And it’s because the other associated costs are very low. But also, the mineralogy and the consistency and the sheer volume and scale of these projects is very, very large. So they have the benefit of economies of scale. And it’s very difficult to compare with Kazakhstan and other ISR projects, because still, it’s the Hydro-mineralogy that’s the most important thing for ISR deposits. Grade comes a long second to permeability and consistency, when it comes to an ISR project. So it’s a little bit like apples and oranges to compare the two. So the other thing that I’d say about operating in Africa with a low grade deposit, is unlike Copper and Gold for example, you do start to have diminishing returns with grade in the Uranium space. And that’s because of the complexity that comes through the radio nucleotide side of things and the radioactivity and the various steps that take associated with that. So when you’ve got an open pit, large scale, lowish grade mine, and you have to be absolutely responsible about it, but you don’t have the cost in costs associated with dealing with the radioactivity that you do in say a high grade underground mining in the Athabasca basin. And that’s why McArthur River and Cigar Lake, I think that’s still got the highest value per tonne of any commodity for any industrial mine in the entire world. And yet they still just sit there at the top of the first quartile in our industry.

Matthew Gordon: Ok. I mean I guess it’s a much more technical answer than perhaps someone as limited as me would be capable of understanding, but at some point maybe if we can’t start next time we can get into into that. And I think if we look at page 33 on your presentation, you actually do a peer analysis for us. Because for me it’s about, if I’m going to invest in Uranium, I’m a believer in the Uranium story. You know you do I invest into? Who is most likely to be able to deliver profitability? It’s a pure numbers game for me. But it’s always interesting to understand technically, how the company… what the company has to overcome and its ability to be able to deliver against that. Perhaps we can just point out on Page 33 in a second. Certainly in relations to peer analysis. But let’s just go through the presentation. You talk about strategic appeal so Etango is the largest ‘unaligned’ Uranium project with a Feasibility Study so by ‘unaligned’ I assume no one’s forward bought any of your assets. They don’t any equity you are independent to some degree. So why do you make that analysis why is that sort of interesting?

Brandon Munro: I think it’s very interesting because what we do know really about any sector but particularly Uranium, is what follows the early stages of a recovery from bear to bull market is consolidation. And consolidation is particularly acute in the Uranium sector because of the security of supply dynamic and all of the imperatives that followed that. So if we look at the last Uranium boom. What we saw was all of the usual factors of commodity consolidation. We saw the majors trying to look bigger than each other. We saw the media trying to become majors. We saw companies with single or multiple commodity exposures looking to diversify into other exposures. But what you also have on top of that in Uranium is you have the role of the sovereigns. Predominantly sovereign countries wanting to secure their own Energy needs. But also sovereign supported integrated Nuclear power producers or vendors, looking to secure the Fuel going for it. And the non-aligned fact becomes so important. Because if you want to try and look forward and estimate who is going to be attractive when the consolidation range starts. In other words it has that strategic appeal, that will obtain a premium over the votes that are lifted by a common rising tide, that becomes extremely important. As does the scale of production, as does a long life nature of the asset, as does its position in Namibia. So that’s why I say that we’ve got exceptionally powerful strategic appeal with both the Etango and Bannerman.

Matthew Gordon: Well you don’t have any consideration as to whether you’re selling a US, Russian, China or other interests. This is this would just be a transaction which is about the economics?

Brandon Munro: Well we’ve in a position to look pretty much to anyone in the world. Or rather I’d put it that anyone in the world can look at us. And that’s the unique appeal that we’ve got being in Namibia. And if you want to, let’s take China because they’ve clearly got the most voracious appetite for Uranium and Uranium projects going forward. China’s going have a hard time investing in Australia because of the Foreign Investment Review Board. They’re gonna have a very hard time controlling anything in Canada because Ottawa doesn’t allow majority control by foreign companies in their Uranium sector. I think it’s pretty clear that they’d find it hard in the US at the moment with all of the geopolitical and nationalistic fervor that we’ve got going on there. You then look at Niger. Well Niger is so tightly protected and controlled by the French, that it would require a bilateral agreement with Paris to start stepping on those toes at any sort of scale. And then you run out of countries that have got any sort of relevance to the Uranium sector, given that KazAtomProm, necessarily by law controls all of the Uranium deposits in Kazakhstan. And the same can be said for India and the same can be said for Russia and South Korea and UAE. They can all come to Namibia. We have Russian companies in Namibia. We have Indian companies in Namibia. Clearly we have Chinese companies in Namibia, as well with Husab and Rossing. They’re in . Langer Heinrich. So it is unusual. It is unique and it’s both the asset is attractive to those groups and their balance sheets, but also that jurisdiction is really an open door, that doesn’t exist in many other parts of the world.

Matthew Gordon: That’s interesting. The next bit of your presentations talks about as an advance asset, and people go to page 26 of your presentations, get it from your website. There’s is a nice chart there says ‘your up there. You are as far as you can go with this project, without actually getting into production.’ So what’s next? Let’s say the market comes back online. Let’s say the price gets to $60 or whatever it gets to that’s economic for you to move forward with project. Is it focus on your one asset, one country, non-diversified risk approach? Or do you have to go out there and speak to or discover more? Or do you go an Orano and say ‘hey you guys my assets, why don’t JV? Or could we buy one of those off of you?’ What’s the future look like assuming those things are great in the spot market and contract market?

Brandon Munro: Well the future for Etango, because it’s so advanced,large and technically simple, would be to move forward as quickly as possible once we’ve had the price signal that we require. And the next steps on Etango we’ve been undertaking at DFS update for some time. And we’re making time our friend ther. The more time we’ve got before that price signal, the more work we can do and the better return on investment we can get for our internal resources that are being deployed there. But equally it doesn’t make sense to draw that process to a conclusion, go out to fresh procurement and produce a new DFS number until we’re ready to finance. Number one it could go stale if things take a little bit longer. But number two you get much better prices, and offers out of vendors, if they know you just around the corner that they’re in the running.

Matthew Gordon: I guess what I’m trying to weigh up, is I’m assuming the price comes back. I’m assuming you’re able to raise finance at a rate which you’re you’re happy with or both sides are happy with. You’re going to move into production and you can either eyes down focus on your one asset or now might be the time to start having conversations about future acquisitions, given where some companies are at. How you view certain assets and your experience in Africa. Is that any part of you thinking at the moment? Or do you want to just get get get step one done first?

Brandon Munro: So I don’t think Matt that are mutually exclusive. And I think from where we’re at at the moment, we don’t have any investment decisions to make to continue Etango. going forward. All of the work being done as I said there’s a little bit of work to be done wrapping up the DFS update. But that’s something to be done for hundreds of thousands of dollars, not millions and a couple of months work. And then it’s in to financing, so that could be done either in conjunction with or it could be interrupted by, some sort of a consolidation activity. And what I think and I’m speaking really on behalf of the industry as a whole rather than Bannerman’s Board specifically here, but I think the Uranium sector needs consolidation. There are too many single asset companies who are promising the world to utilities, and the utilities and not miners. They’re not mining investors. They don’t have the sophistication to really say through all of these promises and rank and decide and evaluate who’s a real producer, who’s got a real asset and who doesn’t. So one of the problems that we face as an industry is they think there’s a world of supply of Uranium coming down the funnel at them. And people like you and me and those involved in the sector, know that that just ain’t the case. And consolidation is one of the things that will help to sort that problem out and help to create a more realistic picture of what supply is actually available.

Matthew Gordon: That’s interesting, because we look at the way the market has performed in terms in the past when prices are high you get lots and lots of Uranium companies. When it’s low they everyone so falls by the wayside and left with a few. When you saying with the 50 or so companies, I’m talking producers down to explorers at various stages. You say you think there’s still room for consolidation in there?

Brandon Munro: Most definitely. And it’s healthier for the Nuclear industry as well because you’re producing an awful lot of assets that can serve that over the next 50yrs, 60yrs, 70yrs rather than skyrocketing prices, bringing on another glut of production. And then here we go again.

Matthew Gordon: I would agree, I would agree. So tell me what you mean by, looking at Page 28, you have Bannerman has low-technical risk. I mean you could low risk because Uranium is low-technical risk? Are you saying that you specifically have low-technical risk.

Brandon Munro: Very much specifically. So we touched on grade before so we do operate with relatively low-grade. And that affects our economics. I would argue that it shouldn’t affect an investment decision. Your investment decisions should be based on economics potential returns and therefore risk grade is just one of many factors that comes into that economic decision and our DFS numbers. So the low-technical risk. It resides in several things. And I would define these, what are the risks that this project is unable to produce Uranium in the quantities it claims, when that Uranium is required. So if we run through the list. First of all, the ore body is incredibly consistent and simple. I’d call it boring. The mineralogy is almost entirely consistent throughout the entire deposit. And we get about 96% of the Uranium from the one single mineral. The volumes are vast. Some of the intersections are continuous over more than 280m, for example. And because of that the strip ratio is low. It outcrops and both the strip ratio and the internal dilation is very low. We can control that even further, through radiometric sorting on the trucks. But the more important things the metallurgy is very simple. We will adopt a heap leaching process. And as I mentioned, we’ve tested that extensively with our demonstration plant with very very good recoveries.

Matthew Gordon: Can I just say you mentioned something earlier. You said that you’re probably higher up the cost curve than some. So how does this low-technical risk, ease of operation, bulk tonnage operation, marry up with that higher cost. Is it just because of the grade?

Brandon Munro: Correct yeah. The grade pulling our cost up, and everything else is keeping it at a level that’s reasonable and at the level that keeps the economics robust.

Matthew Gordon: So you’re still going gonna make money. Because you’ve got volume of ore, you’re still make money, but it’s gonna be… I mean looking at your projected IRR around 15% at the moment. I’m sure you’ll optimize that at some point further down the line. Which could you say low end compared to some of the peers that you put yourself up against. But you do have a heck of a lot more Resource than most.

Brandon Munro: Well we do. It is a very big project. And so that gives us what I would say is more related to strategic appeal. Both to sovereigns, but also to utilities, both in the way that the asset would hold itself in a consolidated group. And one of the things that’s most important for Uranium mine is mine life (LOM). Both from a customer’s point of view. But when you think about how much investment of various types of resources is required to get a Uranium company and a Uranium project going, with environmental approvals, social approvals, all of the infrastructure required to export class seven ships et cetera et cetera. You don’t want to be doing that for only 10 years. You need to get a return on that distributed Resources output, over a long period of time. And we have that. There’s plenty of material under the pit that’s not included in the Resource. It just doesn’t make sense to drill that deep at the moment.

Matthew Gordon: Can I ask what what’s with regards to your DFS, what price is the Uranium in at? I can’t see it..  it probably is in your presentation I just can’t see it.

Brandon Munro: So initially for the first five years, we would produce at a cash cost of $33  which increases after 5yrs but the overall breakeven is $52 after paying off CapEx and so on. Sop we need to see a recovery in the sector before we would even contemplate financing this project.

Matthew Gordon: Okay understood. So I guess the two variables which you can’t quite control are grade, but you’ve got a sort of sense through your drilling of what what it currently is but usually it may improve and it may go down, but you can’t control that. And you can’t control price. What you do seem to have a lot of is ore, a large Reserve. And you’re ready ready to go. So help me understand, when we use a phrase here, you’ve got ‘substantial value backing’ by that you just mean data?

Brandon Munro: Yeah. Data that’s come at a cost of 360,000m of drilling for example. Whether you look at it from what’s been spent, we’ve spent about AUS$80M on the project, against market cap of $50M. We’ve extracted very good data for that. We’ve got a lot of Resources. We’ve got a lot of Reserves. So I want to talk in terms of those factors. Gives you good confidence as to what’s represented by that $50M market cap, as we stand today.

Matthew Gordon: Right. Okay. And given that, we mentioned earlier, I mean the price is important. It is important for everyone. But if the price comes back to where people want it to get to everyone’s making money. It’s just a question of how much. You told me you needed to get about $52 to be for your all in cost. You think it’s gonna get $35 $40 by the end of this year. So when do you.. asking you to put a pin in the map for me. When do you think it’s going to get to that point where Bannerman can start thinking about either raising the capital or getting into production?

Brandon Munro: So that will very much depend on the trajectory of long term contracting. What we would need to see is the established lower cost producers, most notably Cameco and KazAtomProm exhaust their contracting inventory. Which means that the utilities would need to then start outbidding each other for what is a fairly small amount of remaining current production, and start bidding into new production at. Now that’s not going to happen in 6mths, it probably won’t happen in 12mths. It could happen after that, if we say the top or trajectory that’s the more optimistic view on that. If it takes longer than it it will be driven by both that dynamic with existing consumers of Uranium, but also through stockpiling ahead of the Nuclear build programs that we’re seeing just around the corner in China and elsewhere.

Matthew Gordon: Okay. Given that timing you’ve outlined, you’ve got a very good share register. Some big names in there. What’s your burn rate at the moment? I mean how long can $7M get you through to before you need to go back to your shareholders and say ‘hey we just need a bit more, you can sort of see where this is going’, and be able to raise more capital?

Brandon Munro: Well that’s a good point. Thank you. We burning about half a million a quarter which includes a reasonable amount of spend on the asset itself. That last quarter included drilling and DFS update work. We still have potential to reduce that. And we could but we’re at that fine line between maintaining enough corporate infrastructure to be nimble and responsive, and able to react to changes in the market, and going down a path where you’d lose all of that in favor of greater cash longevity. So we still got at least a couple of years of runway, that we can extend if we saw a market behave in a way that’s different to what we expect.

Matthew Gordon: That’s fantastic. I think that has been a wonderful session Brandon and I can’t thank you enough. And some great thoughts in there. Great thoughts there. Well let’s stay in touch and so see how you get on. May even see you at the symposium. Grab a beer or wine. And perhaps maybe to watch you again in the next few months. So I think I’m ready for seeing you again.

Brandon Munro: Yeah terrific. Thanks a lot. And let me know if you want me to drop any of these links. I don’t know if you do follow up with your audience.

Matthew Gordon: We would love that so if you can afford those we’ll get those out. Everyone along with the rest of your stories. Appreciate it. Thanks for your time Brandon.


Company page: https://www.bannermanresources.com.au/

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Bushveld Minerals (AIM: BMN) – Interview with CEO Fortune Mojapelo (Transcript)

Crux Investor had the pleasure of interviewing Fortune Mojapelo, CEO of Bushveld Minerals (AIM: BMN). He tells us about his journey in the mining space as well as telling us about the strategy of the company.

  • Vanadium has excellent fundamentals and a solid outlook.
  • Largest High-Quality primary Vanadium Resource in the World.
  • Brown Field capacity, allowing them to hit targeted production volumes quickly and cheaply.
  • Management team with a depth of technical expertise in Vanadium.
  • Operation with a natural hedge towards a Multi-Billion Dollar Market opportunity.
  • Substantial capital growth ahead, with possibility to start paying a dividend to shareholders.
  • Vanadium Redox Flow Batteries (VRFB).

Click here to watch the interview.


Matthew Gordon: Well why don’t you start off, for some of the people new to the story, by giving us a two-minute overview of the business.

Fortune Mojapelo: Well what we are, we’re a Vanadium focused company. Vanadium is the commodity we focused on. And our vision, our ambition is to build it into one of the most significant lowest-cost, vertically integrated Vanadium company. Bit of a mouthful but basically what it means is, we want to combine our large primary Vanadium Resource base which is high-grade open-cast Resource base, across three deposits. The largest primary Vanadium Resource base of anybody in the world, combined with processing infrastructure that allows us to process this Vanadium into final product. And that processing infrastructure is centred around two key primary plants that we have in South Africa. The Vametco Plant, which we acquired in 2017. And Vanchem which we recently announced. So that gives us a platform to produce low-cost Vanadium at large scale. And the integrated piece of the business is how we take that Vanadium further downstream into the Energy Storage market, where we essentially plan on being one of the largest, one of the more significant Energy Storage companies through Vanadium Redox Flow Batteries (VRFB).

Matthew Gordon: The Vanadium spot price. If you look at it, it’s all over the place. It’s been a crazy ride.

Fortune Mojapelo: Yes.

Matthew Gordon: Tell us a little bit about where Vanadium sits in the market, its uses and applications?

Fortune Mojapelo: Yeah, it’s been a very volatile commodity. And when you look at its price profile it’s quite interesting to see. It can put some people off. But we think that in any commodity, your number one goal should be looking for that project or that production base that is cheap low-cost. If you’re the lowest cost producer, you won’t have much to worry about the volatility in the price.

Matthew Gordon: You’ve got a good margin. You’re one of the lowest quartile producers of Vanadium. But even so in terms of predictability, being able to plan ahead, it must be difficult?

Fortune Mojapelo: Again, I mean it depends how you structure your business.

Matthew Gordon: Tell us about that?

Fortune Mojapelo: For example you structure your business with a lot of debt, which is predicated on Vanadium coming in at a certain price. You got a problem if the price doesn’t realise there. But I think if you have a low-cost producer, and you’ve got a good capital structure, you should be okay. All right. We all want a stable Vanadium price. Make no mistake about it. But we think the first thing is make sure you’re a low-cost producer. And for us, it is one of four key pillars in the projects that we get involved in. Overall though, we think that as a commodity, Vanadium markets’ outlook is actually very good.

Matthew Gordon: Is this coming to your Redox Flow Battery (VRFB) component.

Fortune Mojapelo: But even before that.

Matthew Gordon: Describe Vanadium uses today and we’ll get onto what they could be.

Fortune Mojapelo: About 90% of the world’s Vanadium today is used in steel making. 8.2% of Vanadium to a ton of steel, you double its strength. And so it’s used in construction steel whenever you’re building infrastructure and it’s you know tensile strength in the steel…

Matthew Gordon: The rebar?

Fortune Mojapelo: And rebar. And so that’s been the traditional kind of space for Vanadium applications. And I should add that even if that was all that was to Vanadium consumption. That’s been the bedrock for a century plus. And I think it will continue to be, given its unique place in that space. In countries like China, where you got regulations that are being put in place to regulate the types of rebar that is produced, China is moving away from low-quality grade to rebar, to grade three, grade four rebars.

Matthew Gordon: China resetting the quality of the rebar did have an impact on the Vanadium price. And therefore, the knock on effect. Was that a big impact on you?

Fortune Mojapelo: It has an impact on Vanadium. I think the new standard in China, it’s estimated that if and when fully implemented, just to meet that standard, it should raise the demand for Vanadium in China domestically as much as 30%. Now given the China control about 50% of global Vanadium consumption is taking about a 15% uplift in the demand. That impact hasn’t really come through yet, because we believe that the enforcement of that standard hasn’t been as strong yet, but we believe that there will be… the government will start to implementing the inspections, and that in the second half of this year, we’ll see the enforcement of that standard increase. And therefore that demand upside will start to come through, from then on. And that’s of course just one part of the demand story. There is the Redox Flow Batteries, you talked about earlier on. And timing couldn’t be better, in terms of what’s going on in the world around higher energy electricity generation. The push for cleaner energy et cetera. So the use of Vanadium in Energy Storage, we think is going to substantially increase the demand profile of Vanadium, through these batteries called Vanadium Redox Flow Batteries.

Matthew Gordon: How long you’ve been with the company now?

Fortune Mojapelo: I have founded the company together with partners. Which stretches back to 2008. We enlisted in 2012 on AIM but we started essentially Bushveld Minerals, as an early stage exploration project, which we were developing from as early as 2000.

Matthew Gordon: You’ve gone from junior Explorer into Producer. You’ve obviously done quite well in terms of establishing yourself. So tell us about that journey?

Fortune Mojapelo: It’s been an interesting journey. I think we started our journey in the junior space at an interesting time, because it’s about the time that the global financial crisis was setting in. And as you know when that happened, risk capital becomes scarce because people are less willing to take big risks and the casualty of that is actually endeavours such as junior mining and Exploration. I partnered with three individuals in South Africa, two twins. Identical twins, both Professors of Geology. Maurice and Richard Filion and Anthony Filion is Richard’s son. And essentially, we started life with a view that you know these two gentlemen are doyen of geology in Africa. They know the Bushveld complex inside out. They’ve advised many people to find new deposits. Let’s create a business where we leverage that IP and we do it and we build projects and that’s how we started life and we started looking for Exploration projects that we can build up. And our journey grew from there.

Matthew Gordon: Are you a geologist?

Fortune Mojapelo: I’m not a geologist. I studied actuarial science and I worked in strategy consulting for a little bit.

Matthew Gordon: When you start it’s all about equity. Raising equity to be able to do what you needed to do.

Fortune Mojapelo: Look when we started, my interest was to do principal investments. I was looking for opportunities in Africa where there is scope for scale growth. And I’ll be honest with you, a year before that I didn’t know about anything called Junior mining at all, until I met with the Filions. And I think from there and we gelled. And we started finding projects, we started developing the projects, and were fortunate to get Baccus who backed us early. And you know one project led to another project, until we got Bushveld Minerals listed in 2012, on AIM.

Matthew Gordon: It’s interesting when we talk to a lot of CEOs, it’s not all plain sailing. It’s not smooth lines.

Fortune Mojapelo: It never is.

Matthew Gordon: So what are the important things for you, given you weren’t into junior mining when you first started. What are the things which stand out for you, what are those moments where there was a significant change in your understanding, or indeed the business?

Fortune Mojapelo: You’re always learning as you go. And I think for me starting point was that when you’re working with a technical team, in a technical field, that is exceptional, that it’s distinguished, who know what they’re talking about, is a good starting point. You know they will tell you that everything starts with geology and mining, and I tend to agree with them. And then the second thing is, your early deals there’s a general thing your early deals are always going to be the most expensive. But what’s more important is proving yourself and making money for your investors that give you capital to do what you want to do. And with time as you develop and as you prove successful. You can get a bit more leverage in your conversations with investors. So our very first project, was an expensive project from a financing point of view. But it gave us a platform to develop more. And that’s how we’ve developed ourselves. Even after we listed, we faced what every junior company faced. It was hard to raise money. We had projects that we were comfortable with, that they are solid projects. And we had a guiding philosophy, which we believed in, which I think has stood as very well. And we were fortunate that we had good projects. And from about 2013, after seeing our share price come down, or maybe it can come down since listing, we did what I think was pivotal, which is we decided to focus on Vanadium as a commodity. And it is really there that I think our inflection point started. We were still very small but we got our scoping study on our flagship project that we had done quickly. We did a Pre-Feasibility Study (PFS) and we developed a conviction about this market, that we’ve carried since then. And we believe it’s a market that is really for us to participate in.

Matthew Gordon: How much of the Vanadium market… you’re world number one?

Fortune Mojapelo: Well the largest in terms of the Resource base.

Matthew Gordon: In terms of the Resource base…in terms of production?

Fortune Mojapelo: In terms of production, we not the largest producer. There is at least two primary producers, that produce more than we do. Largo Resources and Glencore Rhovan operation in South Africa. But after their position that we did that we just announced a Vanchem between Vanchem and Vametco, from just a potential point of view, we have the capacity to become the largest primary producer, yes.

Matthew Gordon: What are you supplying in terms of world production now?

Fortune Mojapelo: Currently just under 3%.

Matthew Gordon: Just under 3%. And after?

Fortune Mojapelo: When we’ve gone through the refurbishment of Vanchem and we’ve got Vametco operating at full capacity, we’re targeting just about 10% of the global market.

Matthew Gordon: So significant. You have – Bushveld Minerals, Bushveld Vanadium, Bushveld Energy. Are those eventually going to be three different companies or are those just brands with the overall group?

Fortune Mojapelo: Bushveld Minerals is the listed holding company. Underneath that we got Bushveld Vanadium which essentially houses our mining and processing assets. So, it’s is the Resource platform. Mine it as cheaply as possible. And process it and produce Vanadium units. Bushveld Energy says let’s take it a step further and take a position in the energy storage market.

Matthew Gordon: I want to see if that gives us a clue or sense of where you want to go. Because if you’re creating those brands now, will they be separate entities at some point?

Fortune Mojapelo: I think you want to always retain flexibility around that. So we structure our companies always in a view, in a way that allows us that flexibility. Is it foreseeable that Bushveld Energy could be a standalone company in the future as possible. It’s not something that’s we definitely do. The reason we created it that way however, is that it is focused on a specific sector which is the energy market, and the energy storage market to be specific. If for example, we wanted to attract investors that are particularly interested in the energy market only, we have the ability to do that through Bushveld Energy. So we like that.

Matthew Gordon: But right now they are on the same P&L?

Fortune Mojapelo: Yes.

Matthew Gordon: Different team? Same team? Different skillset that’s for sure.

Fortune Mojapelo: It’s a different skill, especially if you look at the Bushveld Energy team is headed up by Mikhail Nikomarov, who’s got extensive experience in the energy markets. And his team includes people who have been involved in energy project development. So it is, you’re right, a very specific skill set that is required there.

Matthew Gordon: There’s Energy, and then there’s Energy. So again we’ll probably come onto it, but just to finish off with the recent acquisition. You made a recent acquisition! Why did you do it? What you’re thinking and what are you trying to fix?

Fortune Mojapelo: So our strategy that we’ve spelt out, the best route to developing are our projects is through targeting Brownfield assets. In fact if I step back. I mentioned earlier on that there’s a guiding philosophy to our projects. It talks about four key elements. 1. You want a commodity that is good sound fundamentals and good outlook from a price point of view. 2. You want to project all cost proposition will put you in the first or second quartile of the cost curve. 3. You want to have projects that you can reasonably bring into production, in the foreseeable future, without requiring massive CapEx. 4. And then the fourth one is you want scalability.

Matthew Gordon: Or it looks cheap or non-dilutive CapEx?

Fortune Mojapelo: Because if you need billions of dollars, where you gonna raise the money right? Especially if you’re a junior. 4. The fourth point is you want scalability. Vanadium ticks all of those boxes for us in South Africa. It’s a commodity with good fundamentals, as we talked about earlier on, from a demand side, from a supply side. In South Africa we really well located there.

Matthew Gordon: Well you are. But again, there’s a perception in the market in terms of country risk. Because there have been problems at various points in South Africa.

Fortune Mojapelo: I can come to that. But if I may for a second. I think you’ve got a commodity whose supply outlook is concentrated, mainly between three countries; China, South Africa and Russia. With South Africa having the largest high-grade primary Resources. We always say if you want high-grade Vanadium Resources, you’re going have to come to South Africa. Because that’s where we’ve got the combination of scale and grade. But also, the distribution of Vanadium Resources globally, and the distribution of the production Vanadium. It’s such that in our view, if you look forward to see where does new supply come from. If you don’t have grade that allows you to build a primary plant like we have in South Africa. You have to build a steel plant, which requires billions of dollars. Which is why you see most of the production in China and Russia, being of that nature, co-production steel plants which are expensive to build. New supply in our view is not going be dominated by the steel plants or big iron plants. It’s going to come from primary producers. But if you’re going to do primary production. You’re going to find grade.

Matthew Gordon: I think that’s true of a lot of commodities. I agree with you. Where are you’re selling your production?

Fortune Mojapelo: +50% of our production goes to the US.

Matthew Gordon: Goes the USA.

Fortune Mojapelo: But it’s predominantly the steel sector at the moment. And yeah. So you were we were talking about this philosophy and how we go to brownfields. So when we focused on Vanadium, and with our project in Mokopane, we did a scoping study, we did a Pre-Feasibility Study. What that showed us, we’d a project that required $300M. It was a high-grade Vanadium Resource. $300M CapEx to build mine & plant. Gives a good IRR of 25% assuming a Vanadium price, we’ll call it $33Kgs. Very nice project right.

Matthew Gordon: What’s it been averaging the last five years?

Fortune Mojapelo: Look I mean when prices have gone as low as $13.50 and gone as high as $127… So I couldn’t tell you exactly what the average is. But I’ll tell you that at $33, we’re comfortable we have a project that is good. All right. But the point I’m highlighting here is that, if you’re a $20M market cap company, or £20M might be coming market cap company, how are you going to raise $300M? Even though with a project that is solid, it is at that point for us where the epiphany of brownfields here, which is if I can find existing facilities, that I can convert into primary production for Vanadium, that a cheap and I can do it cheaply, then fantastic. And South Africa is unique in some respects in terms of Vanadium, because historically a lot of our industry was built on a vertically integrated basis. They didn’t just have mines, they’d in mines and processing plants. But what happened over like a 30yr globally, a shift upstream. So, your BHP’s, many of these companies they decided to focus only on mining. They saw the Pilbara expand capacity though just mining and ship it to China. Let China process it. It left a number, that kind of migration, left a number of facilities, downstream facilities, underutilised, in some instances not profitable et cetera et cetera. That is for us the opportunity when we talk Brownfield. It is can I acquire a facility that is either not being utilized or underutilized, and combine with my Resource base and produce Vanadium cheaply. The acquisition we did of Vametco was as a result of that of that strategy. We acquired it initially for $16.5M in partnership. It’s a plant which just last year, delivered a $107M in EBITDA. All right. And it’s a low-cost producer. And it’s a plant which we are now scaling up in terms of its production throughput. The same thing when you think of Vanchem. We thought okay. What are the plants out there that we can get our hands on? We’ve got the Resource base to supply them. We’ve got the logistics infrastructure to link our deposits with the plants. So Vanchem was the next one, where we did Vanchem. And between the two of them we create processing capacity that would have cost us many times over to build on a greenfield basis.

Matthew Gordon: I understand the financial logic. But in terms of a strategy for the business. We’ve touched upon briefly, in terms of what your plans are in terms of the energy space as well, but how do you describe your strategy? I mean you’re… logical, methodical about this. Would you describe yourself as aggressively confident about the way you do things?

Fortune Mojapelo: Maybe it’s part of a function of my upbringing and my learning. We tend to be very fact driven. Very analysis driven.

Matthew Gordon: Where does that come from?

Fortune Mojapelo: I studied Actuarial Science. I worked in a firm like McKinsey & Company, and there’s this sort of stuff that we did. And when we decided that Vanadium was a market we’re going to focus on, we bought Vametco at a time when Vanadium prices, this is when we agreed the deal, Vanadium prices were about $13.50. And yet we thought even if we have to subsidize this plant for another two years, it would still be worth it. What gave us the conviction, was a lot of work that we had done around the market structure, to come to the conclusion that this is a market in a structural deficit. A deficit that will continue for a while. A deficit that quite frankly, to close it, is the opportunity of primary producers, who have existing production capacity. And it was hard to convince people, so the deal wasn’t easy.

Matthew Gordon: By people, you mean the then owners?

Fortune Mojapelo: To convince financiers. But in the end, we got it done. And I think we’ve been proven right in respect of that. Another part of our strategy… so the brownfield strategy is a very clear strategy, that says Target Brownfield assets, and make sure that you invest in them. You refurbish them as necessary, and you maximise your throughput through them. Second part of it was that we realised 90% of the Vanadium demand is coming from the steel sector. What other sources of demand are there?

Matthew Gordon: What don’t you tell people about the VRFB which is Vanadium Redox Flow Battery. Start with that. What’s the difference between them and Lithium ion?

Fortune Mojapelo: Both of them are batteries which means that they store energy. And you charge them, and then you discharge them when you need energy. Vanadium Redox Flow Batteries (VRFB) essentially store that energy in Vanadium Electrolyte. Vanadium is one of those… 

Matthew Gordon: So it’s liquid?

Fortune Mojapelo:  It’s liquid. Vanadium can exist in four different oxidation states. It’s quite stable. So the concept of Vanadium Redox Flow Battery really is a reversible oxidation reduction reaction, between Vanadium and different oxidation states. So from two plus to three plus, from four plus to five plus. The charging and discharging, is the movement of ions between the different oxidation states. But what’s good about it is that it’s one element you’re using, so you don’t have the risks of cross contamination. Secondly what’s good is the fact that the way you store the electricity in these tanks, you can scale them up to the amount of energy you store by just increasing the size of the tanks, without duplicating the entire system. So they’re flexible, they’re scalable, they’re intrinsically safe.

Matthew Gordon: So less risk of fire or overheating?

Fortune Mojapelo: Never heard of any Vanadium battery catching fire. They can operate in fairly robust ranges of temperature and they’re long lifespan.

Matthew Gordon: So that’s less degradation?

Fortune Mojapelo: No degradation.

Matthew Gordon: No degradation?

Fortune Mojapelo:  And you can run this for 20 years plus.

Matthew Gordon: So uses for something like this… You’re talking about the much longer life.

Fortune Mojapelo: Yes.

Matthew Gordon: Larger.

Fortune Mojapelo: Yes. Safe.

Matthew Gordon: Safer.

Fortune Mojapelo: And scalable.

Matthew Gordon: Scalable so different applications to Lithium Ion.

Fortune Mojapelo: Lithium advantages are typically, its high energy density. And Lithium is cornered, mainly, the mobility space. You’re not going to put a Vanadium battery in a car. And so mobility, your cellphones, your laptops. That’s typically its space. In the stationary, when you took stationary storage, Lithium still plays in that space, but it’s typically are in the short duration space, like frequency regulation for example. Once you gain long duration, and long lifespan, that’s a space we believe flavors Vanadium Redox Flow Batteries.

Matthew Gordon: So how much of Vanadium Redox Flow Battery would be Vanadium? What’s the potential size of this market, have you done any work?

Fortune Mojapelo: Yeah we’ve done a lot of work. And in fact, on our website, we’ve got a webinar on the ‘Energy storage 101’, which does a deep dive into…

Matthew Gordon: What’s the URL?

Fortune Mojapelo: www.bushveldminerals.com or bushveldenergy.com. Both websites will give you access to it. It’s worthwhile, because it’s quite a deep dive into this, into the applications of stationary energy storage. So maybe just to explain on a very high level. You use, if you’ve got a utility, and your load in a country for energy is not flat. You’ve got peak periods, and you’ve got off-peak periods, and you’ve got another peak periods… in South Africa for example, typically morning and evening peaks, afternoon off-peak. So how do you design your generation to meet that? Typically you go with what is called base load. Which is not designed to be at the peak level and then you supplement during the peak periods, with peaking capacity. And these are typically other gas plants or diesel generator plants et cetera. What energy storage allows you to do, is it can help you to flatten in off-peak periods you can store the excess energy and you can supplement during peak periods. Equally as you introduce more renewable energy to the grid, you need to smooth that entrance of that into the grid. Energy storage can help you with that. Thirdly in some markets like South Africa, you’re generating… peak, your peak generation capacity for solar is during the day, off-peak. If you’re able to store that power you can make it available in a more flexible way during peak periods. And there are few other things like, your transmission CapEx deferral. When you’ve got a transmission infrastructure. Think of it like a highway. If you get a freeway that gets clogged in the morning, and gets clogged in the evening, you got four lanes. You don’t build half a lane. You’re going to build two lanes right. Or three lanes extra lanes. But if that same four lane freeway, during the afternoon, is virtually empty. Building an extra two lanes is not quite efficient. So what if you could distribute that traffic more regularly during the day? The result of that is that you don’t have to build that extra lane. So your CapEx for transmission expansion, you can push it out more. So the world over utilities are recognising the value of stationary energy storage. It’s so big a market. It’s expected by 2027 to be in the order of $50Bn+.

Matthew Gordon: Globally?

Fortune Mojapelo: Yeah. So you’re talking about something like a 100,000 megawatt hours of new energy storage deployments per year. Now there’ll be different technologies to take a share of that market. We estimate that if Vanadium Redox Flow Batteries (VRFB) captures only 10% of that market, you will need about 55,000t of Vanadium to support that. That’s more than 50% of last year’s total production.

Matthew Gordon: But there’s ifs and buts in there? If being gets to that. So that VRFB style of battery is not there yet. Is there… Well you tell me… is there much of a take-up?

Fortune Mojapelo: What do you mean?

Matthew Gordon: I mean Lithium ion everyone’s gearing up Lithium ion and there’s a few other options, that people around that, but where is this design today?

Fortune Mojapelo: So what if I tell you that today, the biggest battery installed with more than +4hours storage capacity in the world is a Vanadium flow battery built by Sumitomo, 60Mw hours, 15Mw for 4hrs in Japan. The biggest battery being constructed in the world today is an 800Mw hours. 200Mw for 4hrs storage. Vanadium Redox Flow Battery is being constructed in China. It’s not a technology that’s in a lab. It is a technology that is in commercial deployment.

Matthew Gordon: Sorry there’s one-off batteries to sort of see what sort of scale they can get to, because they are going to…You mentioned some pretty… Sumitomo- big name, a lot of money. So are they planning to roll this out? Are they going be manufacturers or is this just like you say…

Fortune Mojapelo: There are several companies there are manufacturing Vanadium Redox Flow Batteries today. And the point I’m making that they are in commercial deployment today. They need to scale up of course. But what’s going to drive this scale up is more uptake of the various systems. Right now, we are seeing signs of that growing momentum. So I’ll give you an example, in South Africa our utilities announced that they’re going to be procuring 1,400Mw hours of battery energy storage. Funded already.

Matthew Gordon: Have they decided on the technology for that?

Fortune Mojapelo: It’s batteries. Multiple batteries will bid in that space. It’s long duration type. We believe that Vanadium batteries have a very strong proposition there. Not to mention a strong local content proposition there. The World Bank has announced a program for 17,500Mw Battery energy storage by 2025, in low and middle income countries. And they’ve committed a $1Bn to mobilise another $4Bn towards this. It’s a terrain which will be occupied by multiple technologies. So I’m not saying that this is going to be solely Vanadium’s terrain. But the numbers I told you, I said, if VRFB’s were to capture even 10% of that market. This is what it means. The point about it is that it’s such a big deal for Vanadium, that the entire Vanadium industry, in my view, should be doing everything they can to support the VRFB opportunity: the technology is there, the scale-up is what is required. And what we did in setting up Bushveld Energy is precisely to drive that going forward. 

Matthew Gordon: You’ve adapted your strategy since 2012 to understand what’s coming down the line. But you’re… what you’re saying is, you think there’s a big bet to be made on the Battery technology… 

Fortune Mojapelo: I think there’s a big low-risk bet. Let me tell you why low risk. Because our demand is anchored in steel-making. If Batteries never existed, we still have a fantastic story, anchored in supplying to the steel market with a low production cost basis. Two, it’s low-risk because the capital expenditure required to play in that space is much, much smaller relative to the capital expenditure incurred in building mines and processing infrastructure. I’ll give an example of that. To build a processing… a chemicals electrolyte manufacturing plant, capable of delivering 200Mw hours worth of Electrolyte a year. That will cost us $10M. Debt / Equity included, $10M to build. And that will use about 1,100 metric tons of Vanadium. To build a mine and a plant that supplies 1,100t of Vanadium. If I just do a ratio, simple ratio. You’re talking about a $100M. So the capital intensity down there is very, very low. And if you take that into account, for us as a company, it’s a no brainer to say, let’s do everything we can to support this emerging industry, which is not only attractive for its demand strengthening proposition. Commercially we think it’s potentially x10 as big as the commodity market.

Matthew Gordon: Okay so tell me, we’re going to bring this back to your company right. We’re talking about the market here. So, where’s Bushveld going to sit in this? What precisely are you doing? You’ve got the Vanadium. You’ve got energy division, we’ll call it. What are you going to be actually doing?

Fortune Mojapelo: So, there are two things. The first one is Bushveld Vanadium which is developing a large Resource base. Developing processing capacity. We have two processing plants producing Vanadium, low-cost high-quality. With good margins in case…

Matthew Gordon: For sure, I bought that, big tick.

Fortune Mojapelo: Tick. Second part of it is Bushveld energy. Which is there to promote the Vanadium Redox Flow Battery (VRFB) opportunity for Bushveld minerals. There are three things we do there. One is to manufacture electrolyte for the industry. Two is we engage in market development. It’s project development. What I mean by that is a team of people that understand the energy industry. Those are regulated market. Those are structured in markets. You need to know where the structural levers are to unlock them at large scale. So it’s individuals, who know the energy markets. We go we secure mandates for large-scale energy storage deployments. That’s the second thing we do. So for example bidding into the Escom program, the World Bank program. The third component to the business is partnering with Vanadium Redox Flow Battery companies. And we don’t need to reinvent the wheel there. We partner with the existing players…

Matthew Gordon: So, break that down, because that’s about the future. The future value of your company is inextricably linked to this. If you think the market’s going the way it is. So, I get the bidding bit, that’s a real skill. It’s tough. It’s hard. But in terms of these JV’s, these partnerships and linking with existing Battery technologies and manufacturers. What would that look like for you in real terms?

Fortune Mojapelo: Suffice to say there are several of these companies that have a good product. That have good management teams. That need to solve two things: Security of supply of Vanadium. And the need to solve for the price volatility of Vanadium historically. Two things which we can work on…

Matthew Gordon: Would it work on a contract basis in terms of forward purchase?

Fortune Mojapelo: No.

Matthew Gordon: No, it would be always spot.

Fortune Mojapelo: No, we’ve got a solution for that, which I’ll talk to. And then they need to scale up. For us it’s a case of saying, let’s partner with these guys. And partnership takes many different forms. And whether it means equity partnerships, whether it means JV’s, or whether it means just a simple relationship of supply of Electrolyte into their systems.

Matthew Gordon: Well you need certainty too. What they want is very important. But what you need is important too?

Fortune Mojapelo: But we can do a lot about that. That’s why we’ve got a project development arm so we go secure the mandates. So, I can come to someone and say, “I’ve got a partner”. Let me give an example. We’re doing a mini-grid at our mine. A 4Mw hour battery, 2.5Mw of solar. So for me to go to battery companies and say, I have the opportunity to build batteries, to supply into. I will supply the Vanadium into that. Can you give me a solution? And can we put together a solution which is ‘bankable’, which provides a solid business case to our mine. And in the case of the mini-grid the answer is absolutely. And we’ve had a number of responses from companies, and we’re in negotiations at the moment. And we are going to appoint somebody, and news of that we will publish.

Matthew Gordon: That would be interesting. Well I think there would be a few other miners knocking on your door at that point.

Fortune Mojapelo: At least it will provide a good model that others can… that combination of solar + storage can be a viable source to their energy requirements. I had mentioned that we’ll help them solve for the cost piece, the supply piece. The question is how do we do that? On the supply side, that’s why we’re scaling up our production capacity. I mean you’re talking about more than trebling production from 2,560 last year to about 10,000Mt. On the cost side, what we tried to do is to say, let’s take out the price risk of Vanadium from the CapEx decision that needs to be made about a Vanadium flow battery. And because the Vanadium, as we talked earlier, doesn’t degrade over life. And that at the end of the life, I can take it out of the battery without destroying the battery. And I can use it in another battery or I can convert it into pure Vanadium and sell it into the Steel market. It’s got residual value. And that allows us to actually rent the Vanadium into battery systems. And they’re of such a scale that a single contract can allow me to deliver enough Vanadium and it’s secure. And while it’s sitting in that battery, it’s earning yield and it’s still sitting on the balance sheet. So we think that by combining innovations like this, we’re able to solve for the two main hurdles that Vanadium flow batteries may have faced in the past. And we think that is going to support their deployments globally.

Matthew Gordon: Could you give us five reasons why they should be thinking about your company as an investment proposition.

Fortune Mojapelo: Five! I‘ve got seven. First one is that we have a commodity of Vanadium with excellent fundamentals as I said earlier on it’s in a structural deficit its outlook is really solid. Two, we have high-quality high-grade primary Vanadium Resources. The largest primary Vanadium Resource base of anybody. And three, we have Brownfield processing capacity, which we’ve put together, which we’re going to be scaling up, which allows us to hit the kind of production volumes that we are targeting very quickly and much cheaper than it would cost us on a greenfield basis. The fourth point, I would mention is that through the way we’ve gone about it. We’ve also acquired and inherited management teams with depth of expertise in Vanadium. South Africa has been doing Vanadium for decades. So we understand Vanadium from a technical point of view. The fifth point to highlight is that, the integration we have into energy storage. We have an operation that has got a natural hedge. Well if Vanadium prices come down, energy storage solutions such as Vanadium become a lot more compelling. Right. And also that gives us access into what we see as a multi-billion dollar market opportunity for the company. Then finally, not finally, second but not least, is that we are operating in a South African jurisdiction. The Bushveld complex, which is host to the largest high-grade primary Vanadium Resource base in the world. And with the story that we’ve put together today, with the growth that we have, our proposition then to shareholders is even just on a production growth basis, we’ve got substantial capital growth ahead. When you look at the downstream integration into energy storage that’s significant capital growth proposition. On top of all of that, we believe that being a low-cost producer we’ll be generating sufficient cash to look after our growth. And also, at some point to start paying a dividend to shareholders. So, in a nutshell that the proposition… 

Matthew Gordon: That’s a magical phrase that. We like that. You’re sitting on a little bit of cash at the moment. I think you’re looking at building that up… you seem to know where you’re going with the company. It’s been fascinating listening to you today. Thank you very much for coming in and we look forward to seeing you soon.

Fortune Mojapelo: Thanks for your time.


Company page: www.bushveldminerals.com

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