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

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

Matthew Gordon talks to Brandon Munro, May 2020

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

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

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

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

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

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

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

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

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

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

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

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

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

#14 Kazakh Uranium Shutdown has MAJOR Impact – Brandon Munro

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

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

Matthew Gordon talks to Brandon Munro, 10th July 2020

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

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

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

A nuclear power station

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

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

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

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

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

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

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

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

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

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

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

We Discuss:

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

CLICK HERE to watch the full interview.

Matthew Gordon: Brandon, how are you doing?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Brandon Munro: We always want more.

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

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

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

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

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

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

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

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

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

We Discuss:

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

CLICK HERE to watch the full interview.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Brandon Munro: Great. Thanks, Matt.

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

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

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

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

Munro is back. What did we cover this week?

Matthew Gordon talks to Brandon Munro, 22nd June 2020.

New Entrants

Right now, there is a new wave of entrants into the uranium space. Uranium juniors now have a vastly enhanced ability to get financed. These companies have questionable levels of experience and uranium expertise, alongside assets that might not cut the mustard.

One important thing for investors to pay attention to is the current influx of names involved in the uranium space, particularly in Australia. We’re currently seeing some uranium “tragics” bringing product to the market. In addition, there are some big name promoters and brokers, who feature across the entire spectrum of commodities, that are positioning themselves firmly in the uranium space. They are putting their energy into backdoor listings and startups.

On the one hand, this paints the uranium market in a very good light; everyone is interested in uranium right now. However, this increased array of uranium choices carries with it an increased risk. Now, more than ever, investors need to determine how to exercise these new opportunities wisely.

An important component of these new entrants will be their promotional material.

A Necessary Evil

Some of the assets that companies are flouting as flagships right now don’t stack up. Moreover, the skillset needed to get the best out of these assets is extremely rare. If investors aren’t careful, they can be left with an unfinanceable asset in a dodgy mining jurisdiction with clueless leadership at the helm.

While over-promotion is always going to be quite distasteful, promoters themselves still have a critical role to play in the uranium renaissance. To spark price discovery, and to act as a catalyst for excitement in the space, uranium companies need to be rigorously communicating their story to the market. Many have been starved of capital for years, and the cost of capital means that some companies have no way forward. If uranium companies want to develop into stock winners for shareholders, they’ll need to whet the market’s appetite.

U.S. Initiatives For SMRs.

90% of current U.S. initiatives are focussed on the downstream; specifically, SMRs and the competitiveness of conventional reactors within the nuclear supply chain. It will be interesting to see what the government has up its sleeve for the front end in the coming weeks, as American uranium miners look on in anticipation. The current initiatives combined are only a drop in the ocean in a sector crying out for subsidisation. We’ll be delving into the details of SMRs in a coming interview and article.

Uranium Price Volatility Inbound?

As we approach the end of the quarter, Munro is predicting that volatility is around the corner for the uranium price. Right now, it is stagnant with low trading volume. This lack of volume means that single major players can have a large impact on the behaviour of the market. Kazatomprom’s and Cameco’s strategies are likely to become even more significant in the coming weeks. Both have spoken the language of de-stocking, but Kazatomprom’s track record may have investors believing otherwise.

Kazakhstan – Big News For Uranium Investors

Two of Kazakhstan’s senior members of government have contracted COVID-19. These individuals also happen to be integral to Kazakhstan’s uranium industry. What does this mean for the ‘3-month’ suspension of production for Kazatomprom?

For the first time, this is a clear indication that the chance of an extension is significant. Kazatomprom has already previously remarked that it has no intention make up any of the pounds lost from its existing shutdown, but an extension could further tighten the inventories of utilities, sparking a long-term uranium price rise. Uranium producers will be reluctant to return to normal operations whilst such events are unfolding.

Moreover, the health situation in general across the country is showing signs of deterioration. Kazakhstan will impose a two-day lockdown in the northern city of Kostanay and four nearby towns next weekend after a jump in fresh COVID-19 cases. While countries across the world are beginning to ease their lockdowns, Kazakhstan is in the midst of a second wave: a more protracted crisis, which is terrible for human life but favourable for increased uranium prices. There have been numerous new shutdowns and measures which will lead to a curtailment of all forms of activity by this weekend. This appears highly likely to be extended. Are you feeling bullish yet? The existing supply/demand deficit is growing larger by the day, as the missing pounds creep up. The only thing missing is a lack of clarity on how exactly this will impact the price of uranium equities.

The longer the shutdown goes on, the more recovery rates will fall for Kazakhstan’s uranium projects. The amount of deliverable uranium will be tapering rapidly, both for Kazatomprom and its JV partners. The market has not yet felt the crunch of the initial 3-month suspension, but it will be beginning to feel it now. Further shutdowns will have a cumulative effect. This will not cause contractual/commercial issues, but could also shift the sentiment of utility companies that, until now, have been biding their time.

What did you make of Brandon Munro this week? Which topics would you like us to cover next week? Comment below and we will respond.

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

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

Brandon Munro #10 – Uranium Geopolitics Starting To Influence Market Price? (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.03 (22.06.2020)
  • Market Cap: A$33M

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

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

Uranium has always been very political. Munro covers some extremely important topics that retail investors can’t ignore.

Nuclear Intelligence Weekly interviewed the CEO of Kazatomprom, Galymzhan Pirmatov, in May, but it is only now receiving mainstream coverage. Munro discusses Pirmatov’s comments and sees the interview as an in-depth version of the UxC interview we have previously discussed on our platform. Kazatomprom’s team has created a complex strategy that looks very smart. It is positioning the company well for a new uranium bull run.

Moving deeper into Kazakhstan related issues, we talk geopolitics. We’ve previously discussed how much pressure Russia could put on Kazakhstan’s uranium production, but this week we touch on the opinions of U.S. uranium producers, who have become increasingly frustrated at Kazakhstan flooding uranium into the market at zero margin to keep the spot price compressed. They are demanding more transparency this time around.

Munro then touches on vanadium: he actually sees a more compelling national security argument under which a section 232 petition could occur than uranium ever had. Predicting the trajectory of the uranium price is far from an easy task; it’s likely to be very volatile. Munro isn’t forecasting anything. He’s still bullish, but he is aware of just how volatile global markets currently are.

What did you make of our interview with Brandon Munro? Did you enjoy his pearls of knowledge? Comment below and we will respond.

We Discuss:

  1. Nuclear Intelligence Weekly interviews Galymzhan Pirmatov: Opinions and Implications
  2. Uranium One Numbers: Our Take and Interpretation
  3. Kazakhstan’s Sovereign Wealth Fund, Samruk Kazyna, Sells Stake: Why and What Will the Impact be?
  4. Kazatomprom’s Dividend Policy Challenged
  5. Geopolitical Chess Game: US Rhetoric on Kazakhstan and Russia
  6. Potential Strategies for US to Assure National Security and Save Their Nuclear Industry
  7. Vanadium to Get a 232 Petition? Is it Necessary?
  8. Choppy Spot Price for Uranium: Predictions and Trends
  9. Peninsula Energy to Raise $40M: What’s Happening on That Front?

CLICK HERE to watch the full interview.

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

Brandon Munro: Well, Matt, what about yourself?

Matthew Gordon: All good here. All good here. Desperate to talk to you for our weekly catch up because there’s been a lot happening. Again. Geopolitics at work. So, some of the things that I have noted: well, let’s start with Kazakhstan first of all, because I think that the geopolitics is the theme for this week, right? So, and the impact it’s going to have on utility buying. And the little bit of update with regards to production as well. So, I think it was Nuclear Intelligence Weekly who had an interview, which was, I think, back in the end of May, but it’s only sort of come out recently with Mr Pirmatov, who is the CEO of KazAtomProm. Quite a few interesting points came out of there. So, first of all, what was your take on the interview? It seems quite smart to me.

Brandon Munro: It was a good interview. Yes, it was probably the next level of depth after the UXC interview that we talked about a couple of weeks ago. And we should tell everyone that this is normally subscription-only material, but fortunately KazAtomProm are putting it up on the media portal in their website, so good folks like us can go and look at it. So, good depth, good level of questions and indicating I think a very sophisticated, outward facing approach now coming out of that corporate team in KazAtomProm. There were some things that I think are important for the market generally to understand out of that. The first one that I found useful is that there has been a bit of speculation about what happens if KazAtomProm comes on earlier than the three months where they’ve had their reductions and their suspended well head development.

So, I think as at 22 May, when this interview was first recorded, I think they have well and truly put that to bed. He said that you are right in assuming that it’s going to be throughout the second quarter, and he certainly left the door open for it extending beyond that. And the one comment that was made in the context of how they draw down their inventory was, well, if it does go on longer than the three months, we certainly can’t rule out needing to buy on spot to meet our deliveries. So, I found that aspect really quite interesting as well.

Matthew Gordon: Well, it’s huge. That’s a huge statement if it comes to be, obviously, but the fact that he’s leaving the door open for it; one, I think to me that it shows responsible governance in terms of staff, employees, etc. It’s responsible reporting in that it kind of gives the market a little bit of guidance as to how they are thinking. But the bit that I was quite interested in was where they talked about where they are. They have always been a big, big, big producer, but in the section where they talked about sales into the market, I mean, it goes back to like 2015 to today. I thought that was extraordinary because it wasn’t the kind of the well-run oiled machine, they were kind of trying to work out how they actually got product into market. So again, what did you think about the way they described that and what are the implications for it today?

Brandon Munro: So, people can go right to the end of the interview to see that couple of paragraphs. You are right; it was really interesting and very useful context, particularly for someone who perhaps hasn’t followed KazAtomProm, over the last several years like we have.  Essentially, what CEO Pirmatov said was between the three years from 2015, 2016, 2017, KazAtomProm wasn’t actually able to sell all of its Uranium. And he said that they only sold about three quarters of it and a lot of that was through traders. So, when you go back and look at the Uranium price during that period, it starts to make a lot of sense; if KazAtomProm was struggling to get rid of their material, no wonder it was sold down to that extent. But what’s important then is that he confirms that through THK and I think just becoming a lot more commercial and a lot more sophisticated, they’ve got a lot better at that and they’ve been able to, for 2020, actually oversell. And I think that was one of the comments that came out in our discussion when they did release their results a few weeks ago. So what they’ve seen is a period of a few years of underselling building up producer inventories, obviously being a very motivated seller, if they can only get rid of three quarters of it, to now moving to a point of not only balance, but before the COVID disruptions, they were already overselling to reduce their inventories down to the target level, which he mentioned there.

So apart from just having, you know, good data for people to get hold of and read and understand and contextualize, I found it interesting because you get the impression that there’s been this open tap of material that the utilities and the traders and others have just been accustomed to loading, you know, pulling out the bucket and filling it whenever they needed to. And that’s really changed now. And I’m not sure that the market at large of Uranium bias fully understands what this means if that tap suddenly slams off. And you can’t just blow the bucket up there, you’ve got to go and start buying your water in small bottles. So it’s that type of a movement or change or shifting in market dynamics that I think of when I read that paragraph, and if that’s the way it plays out, I think it’s very telling about how much this market is going to tighten up.

Matthew Gordon: I think so. I think so. And the other component to this is technical, because this is an ISR operation predominantly, and there’s some technical limitations to that. They can’t just switch off ISR or, you know, the whole thing effectively, it freezes up, you know, the glue solidifies as it were. So how are they, or are they maintaining, you know, bare minimum run rates to kind of keep this thing going so that when they do switch on, there’s not such a huge, again, another delay in getting up to full operational capacity?

Brandon Munro: No doubt there’d be some work being taken place at a desktop level in terms of planning as to how they will recommence wellheads. And there’d be lots of smart people within KazAtomProm gaming through just how they can operate with the logistics and so on to get everything moving. But don’t forget, this is a company; they’ve got something like 22,000 employees in KazAtomProm. So, it’s not just about getting started again at one single operation, one mine. They are going to have to do that all over the South part of the country. So the other thing that probably relates to what we were just talking about is that the market hasn’t felt these production disruptions out of Kazakhstan yet because where we’re at the moment is all of those we’re only halfway in or a bit more than halfway into this three month period. And most of those assets would still be producing more or less what they were producing before, because they’d be working off the pregnant liquor or the material that the solution that’s got.

The acid in that dissolves the Uranium, that was a result of the wellhead development that was done several months ago. They will only the best quality assets will still be producing. They’ll still be pumping that solution out more or less how they have perhaps the more challenged geological assets they’ll start to sear a tapering off. So, they’ll see it in their solution numbers, they’ll see it in the permeability rates and the amount of solution that they’re able to actually to draw for a given level of pressure and so forth. But even once they’d started wellhead development, this is a several month lead time process. So if, if they’ve operating a, let’s say a lesser quality asset, that’s already tapering now, well, you’ve got to take the day that they start there and add three months before you’ll start seeing that laden solution coming back at the level that they used to. So, you’ve got this lag effect that will only come into effect a few months after the decision is made to get back into it and to re mobilize the bulk of those 22,000 employees and get them working productively again.

Matthew Gordon: Absolutely. So, it’s not binary, it’s not on-off. There will be a lag again that impacts the market again, that affects access to U308. And again, that’s very telling for that for the marketplace. Now, one of the other companies too, you’re sticking with the Kazakhstan theme for a little bit longer, a Uranium one, they put out some numbers. I, again, interesting. I think production is down slightly but profitability up, because you know, they’ve been able to sell it, sell at higher rates. So, you know, swings and roundabouts though, but I suspect we’re going to see a, you know, different sort of set of numbers from them. I have seen the next quarter, but again, what was your take on the Uranium One announcement? What did it tell you?

Brandon Munro: So, on the face of it, on the face of it, what we saw was on a seasonally adjusted basis. So, this period versus the same

Matthew Gordon: Year on year, yes.

Brandon Munro: Their production levels were down by 5%. Now, what I think is interesting there is, I don’t think that number has taken into account what’s happening in Kazakhstan yet because Uranium One has got amongst the best of those Kazak ISR assets. So the ones that I would expect to have the most resilience, the assets that would carry on producing at nameplate for the longest after the wellhead development stops are that portfolio of Uranium one, two together with 1 or 2 others that are in joint ventures with a rhino and also you know, in kinds of fantastic project as well, but chemicals got, so I don’t think we’re seeing the effect in those numbers. And yet they’re already down 5% for either just reasons of those assets depleting. We’ve talked before about how ISR mines do have a long tail where they start to run off and they start to deplete. They’re not as binary as the conventional mind that you know, essentially runs out of all one day and, and grinds to a halt. So presumably what we’ll see is continued reduction. And regardless of that, it’s just indicative of what we’re seeing across the whole market, whether it’s the Olympic Dam or whether it’s the Namibian giants or whether it’s Uranium One, it just seems that there’s 5% to 10% being shaved or for everyone’s production numbers at the moment, assuming that they’re still producing.

Matthew Gordon: Okay. You think that’s a case of well head decline v deliberately reducing production, because the price in the market is, you know, if there was access to product and market, why pump it out there and sell it for a low price?

Brandon Munro: I just haven’t seen any evidence of Uranium One operating in that way. They’ve got low production, low cost assets. What I have observed is they’re quite willing to sell at the prevailing market price. And they were quite willing to do that even when the spot price was in the low twenties. So maybe there’s an element of that, but I it’s nothing that I have been able to pick up.

Matthew Gordon: Okay. I’m sort of intrigued to see how these numbers play out in the next quarter because there’s, there’s again, harking back to conversations we’ve had previously. And I think something that I want to end on with, you know, the US impression of what, what Russia and its allies are trying to do to Uranium prices. I just, I just would like to understand that at some point right now it’s all speculation, but again, I think the final kind of Kazakh focused story for this week as if we haven’t had enough already was Samruk-Kazyna they have put up, well are offering up to 5% of KazAtomProm. They’re big holders, but I think the number talks about is for it’s about $150M for about 4.5%. Again, why, why would they do that now? They are $75Bn fund. So, I guess this is inconsequential to them, but even so it’s a, it’s a bit, a big, bold move. What does it say to the market?

Brandon Munro: So, there’s a couple of things here that are quite interesting. So yes, there are a very big sovereign wealth fund, but this is very important for them. A few years ago, Kazakhstan created a roadmap of privatizations, predominantly assets through Samrat Casona, but you know, also other privatizations as well. And cause that prom was seen as being the flagship. It was the first ship out of the harbour with significant telco airline privatizations backed up behind it, et cetera, et cetera. So, they obtained an, a plan or an approval back then to reduce their holding down to 75%. A as everyone knows, there was the initial IPO where they reduced their holding to about 85%. Then in September last year, they did a secondary sale, which brought their holding down again by a few percent and that four and a half percent that you mentioned that was actually what they were intending to do.

And they ended up upscaling it taking about $206M rather than the $150M and reduced themselves all the way down to the 75% target. There’s a small retail component back into Kazakhstan. But if you assume that that’s all fully subscribed, and they will be bang on 75%. And that’s box ticked. In terms of the timing. I think if you look at the share price graph of KazAtomProm in London, that probably tells the story here that the secondary place in September last year was at $13 per depository receipt and they’ve traded below now they’ve popped up above it and it just looks to me like it was their first good, solid opportunity to get the job done without doing it at a lower price and the previous price it was set so well done to the sovereign wealth fund, I’d say, but what it also means for the broader market is quite interesting because there’s another $200M worth of stock that’s been placed predominantly institutionally generalist investors have picked that up.

So, one of the things that the Uranium market has suffered from is just being so small, very important as we always talk about, you know, it’s an incredibly important energy source, but the investible universe is very small. It’s hard to get banks interested. It’s hard to get analysts at broking firms and, and so on interestingly, to get enough volume going through their desk to them investing in coverage. So, here’s another $200M out there. They, they did a switch rule on their advisers. I saw. So, there’s another couple of advisors who are incentivized to get out there and talk about the story and all of that just has to be positive for the market. It’s just extra eyeballs, extra reason to talk about Uranium and cause Adam prom. So, I think it’s a good development and now it’s brought that whole cycle to an end.

And now KazAtomProm is the entity that we were waiting for it to become. Now, the other thing that I find quite interesting is just getting back to that interview for a moment, quite a bit of discussion about dividends. And they’ve got a very generous dividend policy. And I must say the folks that Nuclear Intelligence Weekly are very astute, do you know, I like them a lot and they’re, they’re good, intelligent journalists as the name would suggest, right? So, they pressed and prodded and it to be on the dividend policy for two, from 2 angles, really, first of all, and the dividend policy is to pay out 75% and KazAtomProm made a commitment to pay out $200M. The first angle is, well, you’re going to need a fair bit of capital to get this wellhead development started up again. How are you going to go with that?

Is there enough there? And cause I don’t prompt said they would, but you know, I think the fact that those questions were being asked is interesting, but the other element is the Tenge certainly is very helpful for KazAtomProm it’s really dropped a lot because they’ve got Tenge costs and a US dollar selling price. So, in terms of running business, that’s fantastic. Except when you’ve made a commitment in U S dollars to send $200M out the door. So that was the other line of questioning, which is starting to pick apart a little bit at well, if the Tenge continues to fall, how’s that going to help your capacity to pay dividends? And when that, the importance of that and the relevance back to the whole market is that’s going to create further incentives that are commercial level for cars that impromptu allow this market to continue tightening and to allow the Uranium price to generate better margins for them, just so that they can keep topping up the bank account and to be able to both pay that dividend out as well as have the capital available to get started again.

Matthew Gordon: Yes. I mean, it’s a very generous dividend. I mean, I I’m stunned that they were set up at that and if I’m stunned that they would set it cause they, they don’t need to. Do you think it’s under pressure from back home with the, the sovereign wealth fund?

Brandon Munro: I’m not sure pressure’s the right way. That’s just how it was set. The sovereign wealth fund is there for generating money out of its sovereign assets and deploying them into other parts of the country. So, it has been a cash cow and they want it to stay that way. Undoubtedly, that’s what it’s all about creating those expectations to generate a point of difference, I think on the LSE.

Matthew Gordon: Yes. Well I think that’s my, my next point is that is the need for their parents of transparency because there’s one group of people who are not buying it. And that’s, I think the US Uranium producers & juniors who are saying, well, actually you are undermining our markets. You have been constantly selling into the market at zero margin gains because you’re trying to undermine what we’re doing over here. You’re trying to take over our energy business. And there was an article to that effect this week from The Hill. It was okay, a lot of politics involved in the narrative and the wording and the way they crafted that message. But do you, do you think that Kazakhstan is trying extra hard to be seen as a proper company, Western standards? There’s now 25% of shares in the open market? Are they concerned about their reputation?

Brandon Munro: Yes, I think they are. I think they are trying hard. I think they’re as best as they possibly can. They’re adopting quality governance seeing the way that they behave behind closed doors as I get the chance to, I can never fault any of that. Their inner process of commercializing their mentality and their culture in the organization. And that can be a slow ship to turn around. Not only for businesses that have emerged from a Soviet sphere of influence, but the same thing happens in privatizations in countries like the UK and Australia, you know, you take, what’s been a government entity and you try and get those that empower organization to think culturally like an entrepreneur and it’s, it’s hard work. So undoubtedly, there’s a bit of that that’s going on, but I just, I struggled to buy some of the, some of the accusations that are coming out at KazAtomProm in the US it just doesn’t add up for me.

Like they’re only selling 10% of their own product into the U S so they’re certainly under selling into what is still the world’s largest Uranium market. So, this concept that they’d sort of flooding it, it just doesn’t the numbers don’t support that. And when you look at the report that we talked about last week, the EIA report it wasn’t the Kazak material. That was the cheapest, it was the Russian material. So, the material coming from KazAtomProm also from Uranium One. So, and when you put that Kazak material against Australian material it’s more or less the same price. So, the numbers don’t support the type of rhetoric that you just described that is coming out of some corners of the industry. So, I struggled to believe it, and I struggle to agree with it.

Matthew Gordon: So, but aren’t, they are falling under the umbrella of Russia. They, they are being positioned as a puppet for Russia. They are, will do exactly what they’re told by Russia. And there’s this very aggressive national security stance on, on multiple fronts in the US at the moment. And I think we’ll need to stay up, stay away, maybe from what’s been happening on the streets of America this week. That’s a, that’s a very hot topic, deliberately deservedly, slow, hot topic, but for today on Capitol Hill in lobbyist groups, we’re seeing this very aggressive language. We’ve got another Section 232 coming up for Vanadium, which we’ll talk about in a second. But this whole national security issue as a justification for a lot of these industries. Cause they’re seeing it as a route to maintain the you know, the America’s position in the world and be self sufficiency. And, you know, for lots of reasons, people are using that as the headline banner for their argument, national security don’t you think that the US is justified in taking that position? Why, why should it be beholden to Russia? Why should they let Russia come in and take over there that energy or nuclear energy requirements, because this is the, it’s the game of political chess, isn’t it?

Brandon Munro: Yes. I think there’s 2 parts to the question that you’ve just asked. The 1st one is the concept of lumping Kazakhstan and Russia together. It’s a convenient thing to do. And I think for let’s say a readership or an audience who maybe haven’t spent much time thinking too carefully about a lot of this stuff or haven’t followed the history or haven’t been to those parts of the world. It’s an easy thing just to lump more together. They were of course, very close they’re all in the Soviet Union together. Still a lot of Kazakh commerce and spoken is done in Russian, et cetera, et cetera, but it’s a sovereign nation. It is its own country. And whilst, possibly Russia still got a lot of influence there. And we’ve talked before about what would happen if really, if push came to shove, push isn’t coming to shove at the moment, and I think they are operating fairly independently.

They certainly regard Uranium One and Atom (inaudible) as competitors and certainly behave as competitors. And until something happens where the geopolitical deck chairs get moved around a little bit, I think it’ll continue that. So that’s the first part of the question.

The 2nd part of the question is I think what you’re asking about is it is the US enabling itself or making itself too vulnerable to Russian dominance in the energy sector, which is nuclear. So, and this, it goes to the whole Russian suspension agreement and discussions to a lesser extent, Section 232, the answer is, in my opinion, the US does need to be careful of that. They need to be very careful and their solution needs to be, to get their own industry to the point where it can compete as a viable alternative, and not only for the Russian suppliers, but also the European suppliers.

And that came through in the nuclear fuel working group report. There’s an understanding that that is the case. The article that you’re referring to that was published in The Hill, and they talk about it, some of the more extreme views in the industry about what levels of enrichment and contracts and so on might be expected should the Russian suspension agreement not be renewed. And they’re probably realistic. I think there was a number there are 40% of US demand after the end of this year. And when you look at how well the Russians compete well, that’s probably about right. They probably would be able to fill that amount in, just on producing a very good product reliably at a very good price. Now, where does that leave the US well, yes, it does leave them quite vulnerable and the best way out is for them to have their own domestic alternative that’s viable and competitive.

Matthew Gordon: Yes. I think if you look back to how Russia has used gas or weaponized gas in Europe and with their NordStream 1 and NordStream 2, I think that seems to be what the Americans are fearing. That if he, if you let the Russians come in and control 40% of the nuclear energy supply in the US they take the lead, they start dictating, and the utilities will be at the behest of what the Russians decide. So, it, I think the fear seems to be Russians producing at a not-for-profit basis. And in, in a way where it’s a lost leader effectively, they’re saying we don’t mind losing money here, but we’ll, we’ll play the long game. We don’t mind we’ll subsidize it from elsewhere because it’s not a lot of money in the scheme of things or cripple the US ability to produce because companies are independent that there’s nothing nationalized in the US although they’re having some calls of the past couple of weeks to nationalize a number of commodities, Vanadium being one of them, which like, I guess we should talk about.

So I think that’s the fear from that, but I’m not quite sure from what you said, whether you, whether you believe that those fears are valid or you think that the strategy is that the Russians are employing is misunderstood, or indeed, maybe, maybe they are valid. It’s just commerce, it’s not geopolitics, it’s commerce.

Brandon Munro: Look, I think those fears are valid and you see them expressed in rather shrill terms from time to time. So if I’m being a bit cagey here, I’m just being very careful what fears I’m agreeing to, because there is a fair bit of console out there, but in the way that you’ve just described it, I’m quite happy to, to agree with you there, that there is a legitimate risk here that needs to be fundamentally mitigated, and it can be mitigated in a couple of ways. The first one is what I talked about in terms of establishing the American industry as announcing quite determined to do, but it also needs to be mitigated at a utility level or at a reactor by reactor level. And that exists amongst many of the US utilities. Many of them have their own risk mitigation policies where they can’t be more exposed to X percent from Kazak / Russian material.

They group them together and, and so on, but it’s not uniform. And the risk mitigation, what we would regard as sensible risk mitigation when prices are really low. Number one, it’s pretty tempting to look past some of those risks when you can mock-up really cheap pounds. And secondly, when prices are low, that risk just doesn’t seem so real. It doesn’t seem so acute. You know, when there’s 2015, 2016, when there was so much material around, as we talked about is it really realistic that Russia could turn off the taps? You know, there’s all of this around fast forward to 2025. When we do know that there’s going to be a real crunch here, that’s when they’re at their most vulnerable. And that’s when the mitigation needs to be both at an industry level, at a government level and at a reactor level.

Matthew Gordon: And I think that’s what people were certainly Section 232 was about you had these companies begging their government to help them fight against what they saw as you know, a state competing against a company, which, you know, has, it has a balance sheet, which, which looks like it. They, whatever it was for, for those 2 companies at the time, they couldn’t possibly hope to win. What they needed to do is kind of create this recognition that this was a potential problem and what the rhetoric we’re starting to see off the back of a nuclear fuel working group. And even prior to that, and certainly some of the press was coming out now. And, and I appreciate these are possibly pay for a lobbyist type articles, which is a little bit, you know, sensationalist. But the point, the point is there’s a mood in America.

Now Trump has created a mood on several fronts, but businesses, I think, want him there, he, he is pro business. He’s telling people what the success rate for some of those industries is another matter. And the fights he chooses to fight is another matter, but Uranium and nuclear have got the attention of, of the hell. We still haven’t seen any announcements around. We’ve seen lots of announcement, non no announcements around the commercial component. What is the government going to step in and do, how much money are they going to put forward? We talked last week; it’s going to take billions of dollars. We’re still not hearing that kind of conversation. It’s just all competent without any substance. So, do you think it’s coming down the line or again, a key convert? This question, is this just a lateral rhetoric?

Brandon Munro: So, two things there, the first one is America’s vulnerability to Russia. If we can just lump the whole concept of Russia together, when it comes to Uranium is very different to their vulnerability, to Russia when it comes to enrichment. And Section 232 was about Uranium. So, I’m not so willing to take what is a genuine vulnerability when it comes to enrichment services and extrapolate that to Uranium. You know, they’re still Canada, they’re still Australia, they’re still Namibia. For it, for at least the foreseeable future there’s Kazak material that will be reliably available there. So, it’s just a really different proposition. But the second point that I’d make is that the strategy adopted that was articulated in that in that report, I think is very sound. They’re saying we we’ve got a fairly limited strategic reserve at the moment. It’s what they’ve got at the moment is only enough for about 7 reloads.

So, if they did find themselves becoming too vulnerable, say to Russian enrichment, and there was a spat, and that was withheld well, they don’t, you know, and there’s 90 reactors there, right? So, seven reloads doesn’t really buy them very much time. So, the strategy then a building up that reserve from seven to what really needs to be more like 22. It needs to buy them in a good solid year, if not to have buffer time, that’s a solid strategy. And that’s something that I can really get behind and agree with. And the idea is they want to take that Uranium that’s talked about, then they want to make sure that they’ve got conversion that is re-established in the US so they can then that Uranium push it through the conversion cycle to create the demand, to get convert on up and running again at metropolis works facility. And then they’re talking about, we need to enrich that material so that their stockpile for strategic reasons, as a primary form of mitigation against this vulnerability that we’re talking about is sitting there in AUP. And then it’s just fabrication. And the US exposure to geopolitical interference in fabrication is actually very small.

Matthew Gordon: Okay. I buy that argument. You mentioned that something that you said, US needs friends. You’ve still got Canada, you’ve still got Australia, still getting them. Maybe they need friends. It’s very combative environment at the moment. Doesn’t seem to be a lot of French friend making going on at the moment, because it was bringing on a topic. Again, we talked about last week, which was the Iranian sanctions, right there has, at the time, there hadn’t been a response. I think there was a response by Russians Senator, but that was it. But now we’ve got the French, the Germans and the UK of command said, we regret the US has position on the Iranian sanctions. China has come out and effectively said, forget it. If anyone wants to, we’re cracking on us normal, and if anyone wants to join us, we would welcome them.

The Russians, I think there’s no official statement from them, but I can imagine that’s going to be something along the lines of the Chinese. So, if the America American is to deal with this. We talked last week said it’s not a big enough deal commercially for countries to go to go to economic war with the US and we’ve, and we’ve seen Trump’s temper tantrums in effect that China, even the Chinese wobbled a bit there. So, Europe’s not going to do too much about it, but it’s pretty strong language that they’re… well for Europe… they’re using there about their belief that the US has called this wrong. So, is the US going to back down or is, or is it going to encourage you it’s convictions and carry on as normal?

Brandon Munro: Well, that language has been used consistently, right? That to May 2018, when president Trump unilaterally with, during the first place. And it doesn’t seem to have swayed the decision making too much. In the meantime, we’ve seen a willingness, I think, from the administration to rub up against its allies and its friends as it suits them. So, I don’t think that’s going to be particularly persuasive. It is strong language but there was a huge diplomatic effort back in 2018 to try and dissuade the administration from leaving the JCPO way. And that ultimately was ineffective. We don’t know just how much they manage to slow the process down. And perhaps they did, perhaps there was enough discussions behind closed doors, but it ultimately didn’t succeed in trying to pull that deal back together. And we haven’t seen it succeed in any way in terms of renegotiating or bringing your new deal to the party.

The other thing to bear in mind with China is they can’t really do anything in the US in the nuclear sphere at the moment, either because they’re largely unable through either the trade dispute or through direct sanctions in, on some of those Chinese nuclear entities. So, they don’t have much to lose in the way that Russia does. So, it doesn’t surprise me that China’s basically saying, well, you know, around sits at the, towards the end of our belt and road initiative, a large part of our export strategy is about rolling it out through there. So, if the US is going to make open up those pathways for us, but we’ll jump into them.

Matthew Gordon: There has been this week by the US Department, of Commerce they said it was going to open an investigation into whether inputs of vanadium, which are the metals used in aerospace and defence and energy applications. They’re looking at a potential section two, three to probe. Another one as we alluded to earlier is, did we, did they need this? Is this just another move by the vanadium lobbyists to try and get noticed? Cause they’ve seen what’s happened with Uranium?

Brandon Munro: Well, I think you could probably argue that in vanadium there’s a bigger cause for concern than Uranium in many respects. Not only does it have those technology related applications that are used in directly in national defence and national security, but vital in steel production and becoming a lot more important in storage as well. And certainly, my opinion that vanadium redox flow batteries are the only currently viable commercialized technology and storage, if you don’t have access to pumped hydro. So, this, the supply of vanadium is very choppy. An awful lot of it comes from pork quality magnetite. A lot of that is in China. And so there’s a geopolitical aspect where China and Southern Africa dominate the supply and Russia dominate the supply of the Vanadium, but there’s also a commercial choppiness as well because in many respects, the supply of the Vanadium operates not according to the vanadium price, but according to the iron ore price and how much of that lower grade magnetite is being pushed into the market. So, you’ve got compounding geopolitical and commercial vulnerabilities there. What makes it interesting for us in this conversation is an awful lot of the vanadium that’s been mined in the States has been mined together with Uranium and as we’ve seen with energy fuels, for example, and so anything that benefits or helps along the Vanadium is presumably going to help along a number of different traditional Uranium deposits as well, conventional mined Uranium deposits as well.

Matthew Gordon: Yes. And I can imagine that Energy Fuels be feeling a little bit perky about this one, given that they’ve got the White Mesa Mill. They need to feed… it’s a beast. They need to feed the beast.

Brandon Munro: I think I might’ve given the template for the petition, huh?

Matthew Gordon: Yes. Well, it, it, it feels, it feels the same as there have been lots of conversations. We’ve had this conversation around rare earths as well. So, I wonder if you sometimes wonder if these guys have energy fuels in particular, just as you say, here’s a template and off you go again, but it’s, it’s certainly an interesting conversation. Vanadium has been very volatile in the marketplace. There are some very big producers out there all over the world, you know, not just, just the U S you know, so I’m not sure supply as a big issue, a big issue really it’s 90% of the steel market at the moment, but there are say these other applications, which are very niche and, you know, you know, aerospace, air engineering, et cetera, et cetera. Also, VRFB the, the that looks huge to me in terms of long-term storage capability.

So, but we shall move on. And talk about that another day. I want to ask you one last question, and then I’m going to want you to sum up what it means to the market, which is obviously spot price at the moment. This is the thing that people look for. I know there’s a lot of other moving parts as we’ve talked about multiple conversations last 10-weeks. But spot price is a thing that people look at. So, it it’s been an interesting week. What’s your take on the movement of the spot price at the moment, and, you know, can you, can you sort of forecast what you think is coming up on the basis of what you’ve seen over the last couple of weeks?

Brandon Munro: And the only thing that I’ll forecast is it’s going to continue to be choppy. I think that’s, that’s fairly clear. We just, aren’t seeing a lot of volume in the spot market. So, whenever we don’t have much volume, it’s vulnerable to impact of traders and we’re coming up to a significant milestone at the end of June. So, there’s, there will be parties who are motivated to impact that number. And if there isn’t enough buying that might happen, and we’ve got a swing buyer in the market, Cameco who can sort of make this dynamic work for them either way, in terms of allowing the price to come down or pushing it up, or just doing it, being happy to participate with whatever it does. And we’ve got a number of players who are sitting on the side-lines just to see what happens particularly in Kazakhstan.

No doubt that response in that interview was directed at utilities and others to say, look, we’re not going to come on early, so don’t try and wait out this market. Don’t game it to see that if we come July one, are we, are we back in action? Are those pounds just pouring out again? So, what does all that mean? Well, it means that until we’ve got a greater level of buying in the spot market there will be parties who are sitting on very healthy paper profits at the moment. Just to remind everyone, the spot market is not an immediate delivery market. So, there will be parties that financial players, traders who bought Uranium in the $24 to $25 range back in March. They won’t have taken delivery on that material yet. They won’t have paid for it yet. And now they’ve got the chance to take a $24 pound and sell it at a $30, $32 $33, $34/lbs.

And if they’re under a little bit of a squeeze in, for other reasons related to covert and the various financial ramifications of this pandemic, that’s going to be tempting for them to tip that out. And if there isn’t a lot of buying that way, we might we’ll see the price, come back a bit. So happy to predict a little bit of volatility around the edges. But I think what we do have here is a broader trend, which is moving up and for all of the things that we’ve talked about, all of those reasons that the market isn’t feeling the disruption yet, that disruption is going to be felt in the latter half of this year. At the time when the genuine buyers will be coming into the market, particularly as the utilities are able to come out of the direct distractions and difficulties that they are facing with covert.

Matthew Gordon: Okay. I guess we shall see what happens in the next week or so. With regards to that choppiness. Final thing is we note that Peninsula Energy an Aussie company with assets in the USA. They have really gone for it. They’re raising A$40M. That’s a chunk of change. That’s one of the biggest raises that we’ve seen recently. So, I wonder what they know.

Brandon Munro: Ah, look, I don’t want to get too involved in commenting on other company’s balance sheets and that type of thing, but it is a little bit like what we’ve seen with the KazAtomProm raising. It’s good to have a broker drawing feeds out of this type of thing. Good to have advisors drawing fees. It’s paying for the wheels to go around in the sector. I think we both agree that the folks at peninsula are really good people there they’re very competent and good operators. You know, I respect Wayne a lot and I also know what it’s like to have a big dominant player on the register. When I took over this, the helm of Bannerman, RCF was a 38% shareholder. And whilst I have only ever had very good dealings with them and, and it’s been a very positive relationship it is something that can be a turnoff to a lot of investors to see a private equity fund having a dominant position. And we didn’t have to deal with debt, not by then anyway, not by the time I came in. So, without commenting specifically on what peninsula has done I think it’s, it’s positive for the sector. And, you know, I think they’ve put themselves in a really strong position to go forward now.

Matthew Gordon: Yes, I think, I think it’s a, it’s good for the market that they believe they can get that over the line given, given that their starting point today. I think it projects a lot of faith in the financial market, where I have come from that they think they can get a deal that size over the line for the company of the size. Cause it’s, you know, it’s a really big percentage of the, as a percentage of, of the company, so good luck to them. And I’ll be speaking to them later to find out, get the, get it from the horse’s mouth from Wayne. So, I’ll say hi for you. Brandon, thanks very much. I think it’s these, these little movements in the, in the market, they all kind of add up, and I think the it’s moving, moving the market and the positive market sentiment forward. I think generalists are now paying attention to this. We’re seeing a lot more coverage of Uranium with articles, with interviews. It’s exciting times for you guys.

Brandon Munro: You know, also Matt, in terms of what we’re doing with these weekly chats, I’m getting really great feedback. I think more and more people are seeing this as a regular opportunity to learn about the sector, the intricacies of it in real time. So, while some of the topics that we talk about aren’t dramatic catalysts, the fact that we’re following threads on some big issues is a great opportunity for a lot of investors and others who are interested in the sector just to develop a solid understanding. And I know that you’re passionate about educating investors, and that’s certainly where I’m coming from. So really gratifying to get all of that feedback and long night continue.

Matthew Gordon: Well that continued Brandon go have yourself a fantastic weekend. I have still got a few hours to go here. I’ll be finished in six hours. I think, I hope. But we’ll catch up with you next week.

Brandon Munro: Great. Okay. Thanks again for having me on

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Uranium Space is CRYING OUT for this… #11. Brandon Munro (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.03 (22.06.2020)
  • Market Cap: A$33M

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

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

For access to the UN-CUT interview go here.


Brandon Munro is back and he’s ready to share the latest and best insights into the uranium space with our Crux Investor viewers.

First, we take a look at the impact COVID-19 has had on Kazakh uranium production. We all know the pounds are down and won’t be made up, but is the virus going to extend the 3 months shutdown?

Namibia is a country that has classified mining as an essential service, so the uranium sector there can continue at close to fully-optimised production.

We then talk about how well Australia has dealt with the COVID-19 crisis and the positive impact this had had on BHP’s Olympic Dam: it’s still open as usual.

After taking a look at Paladin Energy’s fall from grace off the ASX300 and what this could spell out for all Australian uranium juniors, we talk about the need for consolidation in the uranium space. With projects, capital and expertise spread thinly, uranium companies need to band together if they hope to prosper or even survive come the turn of the uranium market. What did you make of Brandon Munro this week? Comment below and we will respond.

We Discuss:

  1. COVID-19’s Impact on Countries: Looking at Kazakhstan
  2. Production in Namibia: How Did COVID-19 Affect it?
  3. Cameco and Kazatomprom: Independence of Market and Production Clues
  4. COVID-19’s Affect on Australia’s Olympic Dam
  5. Paladin Energy Removed from ASX300: Implications and Opinions
  6. Business Models Galore: Survival of Uranium Companies Lies in M&A

CLICK HERE to watch the full interview.

Matthew Gordon: Hey, Brandon, how are you doing, sir?

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

Matthew Gordon: Ready for our weekly catch up? It seems like a quiet week though, compared to what has been going on.

Brandon Munro: It has been a quiet week. Quite a bit was happening in equities this week, but in as far as the market goes, I think it was just one of those weeks where it just did its thing; not a whole lot of market defining announcements, no big catalysts, nothing that had Twitter running hot, or my email clogging up, or my phone running off the hook – just a week in Uranium.

Matthew Gordon: Well, I think the interesting thing that happened yesterday was the fact that the market had a little bit of a shock. The US Fed made noises about a potential second wave of COVID-19. It was coronavirus which got people nervous. I think it got people, perhaps younger investors, nervous. I mean, I have not sort of seen this thing before, and we, you know, we had all sorts of numbers thrown out as a result from market experts. So maybe, and again, you know, we perhaps should stay away from all things medical as to whether we believe that to be true or not in the US, so maybe we should talk about COVID-19; how it is affecting countries around the world. So why don’t we start with Kazakhstan, because that’s something we have talked about over the last couple of weeks. Any new news there?

Brandon Munro: Yes. So, the public information obviously is that Kazakhstan’s cases have reduced, but they’re still significant. So, they’re at about 250, a bit below 250 new cases a day. And if we put that in a little bit of context, when KazAtomProm announced that they would be suspending wellhead development at least for an estimated 3 months, their cases were averaging 50 per day, so still five times up from when they decided it was appropriate to take that action. And it is worth thinking about Kazakhstan, because I think a lot of the market is looking at that 3-month estimate, wondering if they would potentially come on early, which they would have to do in the next couple of weeks, or if it can go longer. And we have talked at least a couple of times about why that production disruption extending would have such a compounding effect on both sentiment as well as the pounds available in this market.

So, we have got still quite a few cases coming through. They’re not out of the woods yet. Karaganda province, which borders the most important production centre of Uranium in Kazakhstan, there was a New York Times article that talked about a number of towns being shut down, or shut in. Various restrictions because of outbreaks there. Someone who works in the mining sector in Kazakhstan that I deal with, not in Uranium, but in another commodity, they told me a story during the week about how there was a case in their office building and so they have all had to go home for another two weeks, and how disruptive that is. So, there is that sort of disruption going on. And so, we have had the guidance that the three months is likely to take its full course. And what would be really interesting is, at the end of this month, to have a look and see what guidance KazAtomProm gives going forward. And when you talk about the sort of numbers that we have, I think it is very open to them to play it safe, be a bit cautious and stay offline.

Matthew Gordon: And let’s just remind people what the implications of that are, which we talked about this last week: Mr Pirmatov talked about the possibility, or at least they would consider coming and buying in the open market, not something that they had envisaged a couple of months ago, certainly not discussed a couple of months ago. So, the implications in terms of availability in the open market are potentially quite big.

Brandon Munro: Particularly if they don’t have a firm idea of when they’re going to come on again and how long it could go. Because if these decisions are truly being made on medical grounds, nobody knows, nobody knows. And you know, the scare that you referred to about second waves in the US, well, Kazakhstan starts hitting winter as early as October on the steppes there. And they could well be looking at well, what would the implications of a second wave be? Would they do a couple of months of wellhead development with the risk that they’d have to shut in again and delay and see winter out? So, there are a lot of uncertainties there. And just because of the sheer volume of their production in the market, and the fact that the 4th month of a production disruption will have a much bigger impact than the first 3-months because of the ISR mining. This could really have quite a big effect once they start coming into the spot market.

Matthew Gordon: Okay. So, the implication for Uranium investors, or people thinking of investing in Uranium, is that the macro story just builds and builds. It is accelerating. If KazAtomProm has to come into the market, there’s going to be less supply around. So therefore, when this thing pops, it should pop quite quickly.

Brandon Munro: Correct. And what has slowed the Uranium recovery down for the last 3-years, in other words, we had fundamentals that 2.5 to 3-years ago were very attractive, but the market hasn’t reacted to it. And it has been the presence of inventory, primarily, that has done that. It has enabled utilities to defer buying decisions and various other mechanisms within the market that has disconnected the price from some very, very strong fundamentals. Once that inventory goes, and particularly if it starts going backwards because you’ve got large spread producer buying of Uranium in the spot market, plus a nice little sentiment lift coming from either financial investors or utility to realise that they need to restock, then you’ve got the ideal conditions for the fundamentals to match up to price and price has got a long way to go before it matches fundamentals.

Matthew Gordon: It certainly does. I mean, again, it is something we have discussed on many of our previous weekly catchups. Okay, well, let’s kind of move it on because I think that what we’re trying to understand is, you know, what’s happening in the world of Uranium in terms of production? So let’s go for your home from home: Namibia. What is the news from there?

Brandon Munro: Well, Namibia has locked down the Erongo province, or Erongo region. Again, the Erongo is the region in Namibia that has hosted all of the Uranium mining. Bannerman’s Etango project, Deep Yellow, Langer Heinrich, and Paladin’s Langer Heinrich project. And of course, the giant Rossing and Husab projects that are owned by two of the Chinese utilities. So, they’re in lockdown, they’re in lockdown for 14-days at this stage. But importantly, during the first lockdowns, Namibia ironed out all of the details around mining and what’s allowed. And as a result of that, mining has been classified as an essential service. So, mining carries on. If we go right back to our first discussions about COVID-19, you can still operate a full workforce and you can still operate a mine, but you can’t do it perfectly easily when the rest of the society around you is shut down. So, it will just make it hard for them to hit targets and do so for the next couple of weeks, but essentially full production.

Matthew Gordon: Okay. And so, when do we start understanding or hearing about the numbers? Will it be a 5%, will it be a 10% reduction in their operating output?

Brandon Munro: We will get that through the Bank of Namibia figures. That will only come through at the end of the year.

Matthew Gordon: Okay.

Brandon Munro: We’re talking about utility-owned mines here that have got no direct disclosure obligations in that way. They obviously need to keep the IAA informed and the Namibian government informed. But there’s not an awful lot of transparency there. And for that matter, not all of that Uranium is hitting the market in any case, a lot of it goes directly back to those utility owners for absorption into their own supply chain.

Matthew Gordon: Okay. The net effect being the same. So, do you think, given the conversations we have had in the past couple of weeks, and I think some other market commentators have commented too with regards to the position that Cameco finds itself in. It is closed down, for the right reasons, but it is going to open up for the right, different reasons. And KazAtomProm saying that they may potentially need to come into the market to buy. Are there any clues that whether the Husabs of this world would also, you know, keep production at a level which may help global prices?

Brandon Munro: I don’t think the two things are related: Husab and Rossing are operating according to things that are essentially independent of market. You know, Rossing is operating to deliver into contracts that will have some market mechanisms. So, you know, they have got a bit of an interest in seeing the price increase, but essentially, whatever they don’t deliver into a contract goes back to CNNC. And with Husab, that’s largely the case. So, I don’t, I think they will be operating according to a vacuum as far as the market goes. And the things that are worrying them are far more operationally based on the ground.

Matthew Gordon: Okay. So, let’s move on to another group who perhaps care even less about the price of Uranium, which is Olympic Dam, BHPs production, because it is a by-product there. It is just part of what they’re doing during the normal course of business while mining Copper. So, what’s happening in Australia, are they being affected? Are you seeing any signals or signs there?

Brandon Munro:  No, they’re not being affected at all in fact. South Australia, the state in which Olympic Dam and Ranger are based. ERs Ranger mine, it has had, I think, two new cases in the last 6-weeks. They have got no active cases in the whole state. And in fact, just this afternoon, the South Australian government announced that it would be opening its interstate borders. So, its borders with Western Australia, Northern territory and Victoria and new South Wales on 20th of July. So as far as they’re concerned, they don’t have a problem in South Australia. And so, the chance of it affecting either of those minds, particularly once they have now made all of the relevant adjustments; blue team, red team, et cetera, et cetera, bus in bus out, all of the different things that they have done. I just don’t see any capacity for disruption in the short term. Of course, there’s a chance of a 2nd wave in Australia. That’s what has people concerned – what happens when we have to open up international borders in a more substantive way? But for the foreseeable future, I just don’t see any substantial potential for disruption there because of COVID.

Matthew Gordon: Well, I think the Australian policy, I mean, you are world leading. I mean, the number of incremental deaths due to COVID-19 is extremely low. So yes, that’s a big moment if the borders open up, if international flights do start coming in, and I guess we shall see when you guys decide to open up the borders.

Can I talk about one other thing Aussie? Because, potentially, Uranium just lost its seat at the table in a way, in that Paladin has just been removed from the ASX300. What’s your reaction to that? I know we want to stay away from commenting about companies specifically, so I want to talk about this in the context of Uranium as a sort of leading commodity in the world.

Brandon Munro: Yes, it is significant. So the S&P runs a series of indexes on ASX. People would be familiar with the All Ordinaries, then there’s the ASX-100, ASX-200, and ASX-300. So, essentially, the ASX-300 are the 300 largest stocks on the Australian stock exchange that meet certain liquidity requirements. There needs to be a minimum pre-float, et cetera. But for all intents and purposes, it is the 300 largest stocks. And if you fall below an acceptable market capitalisation, or if the rest of the stock market goes up and you maintain your market capitalisation, but a bunch of other companies push in front of you, then you get delisted out of that. So, for anyone who doesn’t understand that. So yes, indeed. So, S&P announced they’re rebalancing today, which will take place next Friday, the third Friday of June is one of their quarterly rebalancing dates, and Paladin and unfortunately for them and their shareholders, has been pushed off. It is not a massive immediate effect for them, but that will limit some of some of the investment funds’ capacity to invest who are mandated according to ASX-300 requirements, et cetera, et cetera. So there probably will be some selling to come out of it. But what is relevant and what is important is that now there isn’t a pure play Uranium company in that ASX-300 that isn’t closing a mine. You have got ERA there, that’s got a large market cap, but it probably, because of its liquidity requirements and the fact that Rio now owns 89%, is not investible.

So, if you were to define ASX-300 as an institutional grade, for argument’s sake, there’s nothing of institutional grade left in Australia. That’s, on the one hand, you know, rather sad given where we were before this bear market started, but on the other hand, it is a very interesting opportunity and it will certainly entice consolidations. For example, if Paladin had consolidated or merged with another company in the last six months, they’d still be in the ASX-300. And there will be companies that will see the opportunity to, 1 plus 1 equals 2, but that 2 gets you into the ASX-300, and therefore 2 goes to 2.2 or 2.3, when you see both the capacity for index buying, but also the appetite that’s building amongst institutions that we know is there, where a number of these investors, they love the Uranium setup. They love the fact that it is so asymmetrical at the moment. That it is a very good hedge against broader macro risk because nuclear power doesn’t march to the macro tune at the moment. Plenty of very, very credible commentators, writers, analysts who are saying, look, it is Gold first of all, of course, but Uranium second, in terms of an excellent metals hedge against macro-economic concern; that’s just elevated in the last day in the States as we saw.

So, once you see a company re-emerge, which could be Paladin, or it could be some other group, into that institutional investment grade, I think they will get a big lift under the wings. And that’s going to drive a number of things into the sector and something definitely worth watching.

Matthew Gordon: Yes, I’m fascinated by some of the business models out there. You know, like I say, we don’t want to talk about companies specifically, so let’s just talk about the model. So, you’ve got groups here, and we have spoken to a few recently who are talking the language of M&A. Others who are talking about joint ventures, and others who are just, you know, obviously they believe they have got what it takes because their single asset is big enough to be a leading producer at some point, subject to financing and a lot of things going right for them. Do you think that, like I say; we’re dancing around an area here that I’ve got to be quite careful about, do you see mergers happening in this space? Because the macro story is building, but at the same time, it has taken a long time to get here. We have seen a few raises in the market to deal with different problems, and they have been varying degrees of expensive and varying degrees of, well, let’s just keep the lights on and keep going to the end of the year. Do you see some companies needing to merge, needing to come together? Not any because they’re running out of cash, but to be a much more interesting story, to be a bigger story in what is a sort of dwindling market.

Brandon Munro: Yes, I do. And in fact, I’d go even further than that and say, this sector is crying out for consolidation. And if you run through, first of all, there’s the point that you made just about efficiencies; so, there’s too many management teams and too many overheads for too few assets at the moment, basically. But you then need to look at expertise. That’s an even tighter commodity in Uranium than money is. You need people in Uranium who have dealt with radiological issues, who have built mines, who have run minds, who have dealt with regulators, who have dealt with the IAAE, who sold the stuff, who understand how the nuclear sector operates, who can make strategic decisions on all of this. Who can gain the credibility of the buyers, which are utilities, which are a totally different animal to someone who is prepared to take a Copper concentrate or something like that?

There’s just so much to understand in the Uranium and nuclear sector. And this is a sector that’s essentially been in a bear market for 30-years and has been in a very deep bear market since 2011. You don’t see that the flood of young talent that’s come through this sector, and the people who were leaders in it, a few are still fantastically still hanging around and still in the sector, like Dustin Garrow. And thank goodness that he is. But he is working because he loves to work. He’s not working because he is of a working age. And so many of his compatriots have made the decision just to retire. Some of them aren’t even with us anymore, sadly. So, there isn’t enough expertise for the number of projects. So that’s the second thing.

The third thing is that capital is becoming more difficult. And as we were just explaining, if you can bulk up, you’ve got access to deeper pools of capital who are more suited for a commodity like Uranium. Uranium is capital heavy. It is not like little CIP plants in Gold or, you know, buying the plant down the road that’s just stopped operating in Kalgoorlie to punch out 10,000oz p/a, or something like that. Uranium is capital-intensive by its very nature. So, you need to have access to more developed pools of capital. And then from an operations point of view and at a more global level, when a utility looks at the Uranium space right now, what they see is they see a couple of dozen Uranium companies who are all assuring them that we will be ready in production in three, four, five years. And it is not a utility’s job to go and do the detailed analysis on the environmental implications and how realistic that is, or try and second guess what their technical processes are, or even understand that there’s daylight between a Scoping Study and a PFS and a DFS and what that risk profile really means.

So, the utility sees this array of projects that seem to all be very likely to come on stream. And so, what’s the big deal? Where’s this supply crunch? They just think that we’re lying to them or exaggerating, or we have got confirmation bias because we love our own project or something like that. What this sector needs is the better projects to consolidate into a handful of lumps. And those leaders then go to the utilities and say, look, we’re here to build a long-term Uranium business. That’s what we’re passionate and invested in here, but you need to understand, Mr. Utility, that we will only bring these projects on sequentially, as you demonstrate, as the market, that we need those pounds. So, all of a sudden, this array of projects that are all declared to be fantastic, separate into a few stragglers, which will be found out by then, and a few clients of credible projects in the form of Uranium companies that are serious about building. And that’s a natural progression in this sector and it will happen.

The problems that we have got, I guess there’s a fair bit of management who are clinging onto their jobs at the moment. There are shareholders that are a bit reluctant to enter into even a scrip for scrip consolidation at the bottom of the market. You know, as much as company A might merge with company B on identical ratio to what they do at the top of the market, they’re still a sentiment-driven thing because merging at USD$0.20, not USD$0.50 that happens at the top of the market. So, shareholders are more likely to support a merger in an elevated situation. And when we were just getting a little bit close, because the Uranium price was really going down and desperate, and we were seeing a few, certainly I saw a few CEOs who maybe saw this is their opportunity to exit and go into Gold or Copper or something more fun. Then it picked up again, and so they’re in there for a little bit longer. So, there’s a bit of a long answer for you, Matt. But I do think that this sector requires consolidation from both a push and a pull factor perspective, from both a top down and a bottom up perspective.

Matthew Gordon: Great answer. I love that answer. We spoke with Dustin, actually yesterday, and it was fascinating. He echoes a lot of what you’ve just said, because like I said, you know, he has been around the block. He’s worked from all angles in the industry. So, he does have a view. And the interesting thing he said was that, one, with regards to management, that the people just aren’t around who had been there and done it before. And he said, you cannot underestimate that factor because he said, I saw it in the last cycle, there were lots of names, lots of conversations, lots of pitching, lots of promises made, and very few companies actually got over the line. And he’s talking about companies in the Athabasca Basin. He’s talking in Australia, he knows Namibia. He saw what worked, he saw what didn’t work, and more didn’t work than worked, This is not necessarily a direct correlation to share price, because there was sentiment in the last cycle which was very positive with anyone who mentioned the word Uranium. If they walked into our bank and said the word Uranium, we were interested. But the reality was very, very different. And he said, it is going to be no different this time around.

In fact, here’s an interesting thing: and I’m looking at them here, he gave me, he’s got a couple of handfuls of companies that he thinks will make it, based on his knowledge of what’s happened in the last couple of couple of cycles. And it is kind of fascinating, you know, his view, having been there and done that. So, I enjoy that conversation with him and saying, you know, what people say and what they’re capable of doing are two very, very different things. And he kind of, again, off camera, gave me examples of, you know, companies who he thought talked a good game, but had no chance of actually getting over the line. So, a lot of what you just said makes a lot of sense to me. And again, Dustin’s explanation of how the utilities were, how the buyers think, what they’re looking for, what they actually believe. Some of these utilities’ companies are and are not capable of delivering. It is it is obvious to them. It is perhaps a little bit less obvious to us Uranium investors, but it is essentially getting an insider view on that one. As usual there are always many, many unknowns.

But as a Uranium investor, I think the mood seems to be positive. We are seeing companies who are coming into the Uranium space who are applying for permits and licenses. We’re buying into companies with permits and licenses, which haven’t really done anything in there, and I think that’s always kind of indicative of the mood. They feel that they’re going to be able to get financed. I know they’re sort of jumping on the bandwagon, but nevertheless, it is one of the early indicators that this is a market which perhaps is moving in the right way again. We’re having brokers approach us, you know, talking about, are we aware of any companies or projects, which would like money for this space? And we’re not talking big money. These are the obviously very, very early stage, barely even exploration, just I think asset hunters.

And so, Brandon, look, I think we started this talk thinking that not much happened this week. Nothing really to discuss. We have done it again. We have perhaps gone off in an impassioned speech about several topics there. But look, I appreciate your time. Have a great weekend. Are you up to anything fun this weekend? What’s happening?

Brandon Munro: Ah, just chilling this weekend. I’ve been really busy this week and I was pretty busy last week as well. So, I’ve got a few things to catch up on, on the home front. No bees, unfortunately. So, nothing quite that exciting, but hopefully I’ll keep myself busy with my daughters; that will be enough for me.

Matthew Gordon: Beautiful. Beautiful. Yes, me too. I must check up on those little bees. It is been wet. Very, very wet here. It is terrible. In fact, you know what I’m doing? I’m going up on the roof. We have got a leak. The lead work on the roof somewhere is not working. So, I’m obviously a man of many skills – that is so not true. I’m at least going to try and spot where the leak is and then maybe call a man who can. But these days it is very hard to get anyone to come out because they don’t want to be in contact with us. So yes, that’s my task for the week. Okay, well, Brandon, thanks so much again. Let’s talk next week. Hopefully some exciting developments. You never know.

Brandon Munro: You never know. But we always manage to find something to yabber on about, and from my understanding, your audience doesn’t mind it either. It was great to chat, thanks for having me on again.

Matthew Gordon: And it is time to say goodbye to our regular viewers from, as we join Crux Club. We are going to be talking now to Brandon and get his views on China’s influence on the Uranium market and Uranium investment by association. We look at how China affects companies and countries in terms of how they interact with China, what China’s drivers’ goals and ambitions are and how they think they’re going to get. It should be an interesting conversation. We are also looking at the NEI blog recently, which talked about the number of reactors in the US applying for an operating extension; what the impacts could be for US utilities, and of course, for our investments? But before we go, if any of you are interested in understanding what Brandon has to say on Uranium, and indeed what other market commentaries have to say about a variety of commodities and investments, go to You can find that at, where you can sign up for the waiting list, but in the meantime, goodbye.

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

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

#11. Brandon Munro – What is the Uranium Sector “crying out” for?

A weekly catch up with Brandon Munro, Uranium Market Commentator and CEO of Bannerman Resources (ASX:BMN).

It’s that time of the week again. Brandon Munro, Crux Investor, Uranium. Are you sitting comfortably?

There haven’t been any big catalysts or market-defining announcements this week, but is there anything uranium investors should be paying attention to? Of course there is.

Matthew Gordon talks to Brandon Munro, 18th June 2020

COVID-19’s Impact on Kazakhstan

New cases of coronavirus have reduced, but they are still significant: c. 250 new cases per day. To put that into some context, when Kazatomprom originally announced that it would be suspending wellhead development for an estimated 3-months, the country was only at 50 cases per day, 5 times less than now.

The big curiosity for uranium investors is how Kazatomprom’s strategy will play out. Will the uranium giant come back online early, or will there be a further delay? Such a delay would have a profound impact on investor sentiment within the uranium space and would massively tighten the pounds in the market.

The current guidance is that the originally quoted 3-months will remain accurate, but uranium investors need to keep their eyes peeled. With these sorts of case numbers, Kazatomprom would be more than justified to stay offline. In such an instance, Kazatomprom CEO, Galymzhan Pirmatov, has stated that Kazatomprom ‘could’ turn to the market for uranium pounds to fulfil its existing uranium supply contracts rather than increasing production. Buying in the open market could provide Kazatomprom with the certainty it needs to fulfil its supply obligations. Uranium bulls will be reading between the lines and hoping this, along with noises from Cameco about doing the same thing, drives price discovery. A likely second wave when Winter hits in October could cause further significant production disruption. When the market does move, it’ll move quickly.

The Namibian Uranium Sector

Casting our eye over to Namibia, Munro’s home from home with Bannerman Resources’ Etango Project, the country has locked down the Erongo Region, which is home to all the uranium projects in Namibia. The region is in lockdown for 14-days at this stage, but, importantly, Namibia has already classified mining as an essential service. There will be some minor disruption for the next few weeks, but Munro expects close to full uranium production to be achieved, though the real numbers will only be confirmed at the end of the year: these are utility-owned mines with no direct disclosure obligations in this regard.

Cameco & Kazatomprom

I’ve previously discussed how Cameco and Kazatomrpom appear to be singing from the same hymn sheet when it comes to uranium market destocking, though many speculators have disagreed with me, claiming Kazatomprom intends to continue producing to drive everyone else out of business. Munro himself thinks their strategies have no relation to one another and are largely independent of market conditions and mechanisms. These operational decisions will, for the time being, be made in a vacuum away from the market.

Australasia & COVID-19

We all know that the major Australasian countries have dealt with COVID-19 extremely effectively, aided in no small part by their low population densities. BHP’s Olympic Dam, the largest known single deposit of uranium in the world, hasn’t been affected in any significant manner. Uranium is a byproduct of this copper operation; thus, decisions aren’t necessarily uranium-focussed. The South Australian government has even announced that it will open its interstate borders on the 20th of July. Our European and American viewers/readers will be watching on with envy!

Paladin Energy

Another Australian uranium story regards Paladin Energy: the company has been removed from the ASX300. Does this mean uranium has lost its seat at the top table in Australia? It’s clearly a meaningful event; there is no longer a pure-play uranium company in the ASX300 that isn’t closing a mine. In fact, Munro claims that there is nothing “institutional-grade” left in Australia when it comes to uranium equities. However, from a more bullish standpoint, this removal could entice consolidations, as uranium companies vie for a spot in the ASX300. If an Australian uranium player is to re-emerge as an institutional grade investment, it will likely be given a lot of momentum and could spark interest and activity in the market. Mr Borshoff would agree and say ‘I told you so’.

“Crying Out For Consolidation”

It appears that mergers in the uranium space are almost guaranteed in the near future. Moreover, Munro believes that “this sector is crying out for consolidation.” The better projects need to consolidate to have any weight attributed to them by the utility companies. Right now, it’s far too cluttered with individual uranium vessels promising utility companies that they are their best bet for an eventual long-term supply contract a few years down the line. There are too many management teams and too many overheads for too few low-quality assets.

In addition, and most significantly, expertise is the rarest currency in the uranium sector. Experienced, knowledgeable minds are hard to come by, and every uranium company would have a hugely increased chance of success with one at the helm. These issues combine to create an environment where mergers are needed to rebalance the sector and reduce the risk profile of many uranium companies, many of which are run by people who have never produced and sold a pound of uranium before. Uranium is an idiosyncratic, complex sector that has complications at every stage. Do some uranium companies need to stop promoting pie in the sky dreams of production and get down to robust negotiations? And if yes, which companies do you see needing to come together?

What did you make of Brandon Munro this week? Comment below and we will respond.

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

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

Brandon Munro – The Geopolitical Side of Uranium: USA Battles Russian & China

Bannerman Resources company logo
Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.04 (05.06.2020)
  • Market Cap: A$37M

Crux Investor recently had yet another intriguing conversation with Brandon Munro. He’s the CEO of Bannerman Resources (ASX: BMN).

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

In our latest weekly update with uranium expert, Brandon Munro, we discuss some interesting geopolitical themes.

Uranium investors need to spend time educating themselves about a commodity that is very volatile, very strategic, and very controversial. Munro does a great job of explaining the intricacies of the uranium space, including touching on the fundamental supply-demand war between uranium mining companies and utility companies. A compelling, interesting watch.

We Discuss:

  1. Iran Sanctions Lift: Announcement’s Impact and Possible Workarounds
  2. Russia’s Involvement: Can it Be a Mediator or Will it Have to Choose Sides?
  3. Geopolitical Games and China’s Position
  4. Measures to Speed up US Mining Processes and Manage Strategic Imports: How Will it Impact Uranium Miners?
  5. EIA Uranium Marketing Report’s Numbers: A Shock to the System
  6. Utilities and Junior Uranium Miners: How Long Can They Hold on?
  7. EU Numbers Due: What Should We Expect?
  8. Hope for Uranium Investors
  9. Tiny Update on Bannerman Resources

CLICK HERE to watch the full interview.

Company Page:

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

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

Bannerman Resources company logo

Brandon Munro – Uranium Hots Up as USA Battles Russia & China (Transcript)

Bannerman Resources company logo
Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.04 (02.06.2020)
  • Market Cap: A$37M

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

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

We Discuss:

  1. Iran Sanctions Lift: Announcement’s Impact and Possible Workarounds
  2. Russia’s Involvement: Can it Be a Mediator or Will it Have to Choose Sides?
  3. Geopolitical Games and China’s Position
  4. Measures to Speed up US Mining Processes and Manage Strategic Imports: How Will it Impact Uranium Miners?
  5. EIA Uranium Marketing Report’s Numbers: A Shock to the System
  6. Utilities and Junior Uranium Miners: How Long Can They Hold on?
  7. EU Numbers Due: What Should We Expect?
  8. Hope for Uranium Investors
  9. Tiny Update on Bannerman Resources

CLICK HERE to watch the full interview.

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

Brandon Munro: Yes, I’m well. Matt, what about you?

Matthew Gordon: Yes, yes. Good. You’re up at the cottage, I can tell, up in the mountains?

Brandon Munro: Yes. So, we’ve had builders down here, so it’s been lots of banging and clanging and sawing today. So, I’m very pleased to be using this machine instead of all of the other stuff.

Matthew Gordon: Fantastic. Fantastic. And maybe pick up some bottles of wine while you’re there.

Brandon Munro: It is in the right region for that, yes, if we were to run short.

Matthew Gordon: Well, look, I think that that line is good for now whilst you’re out on the sticks. So, we had better take advantage of it and sort of rush straight into this. And plus, I’m sure you want to get stuck into your Friday night. So, a few things happened this week. I’ve got to start with the big one – Mr. Trump and Mr. Pompeo have made an announcement with regards to the Iran sanctions waiver. So, what’s your take on that move of theirs?

Brandon Munro: Yes, I think a little bit of background: we’re talking about the Iran sanctions waiver. Back in 2015, the JCPOA, the Joint Cooperative Parties of Agreement was signed. So, we talked about that when I was in London, so maybe in the show notes we can put some of the details for people on that. At the end of last year in November, the Trump administration ceased the waivers in respect of the Fordow enrichment plant, which at the time was an easy one for them to stop the waivers on because, you know, it was built into a mountain, deliberately concealed and had the potential to be reconfigured for weapons-grade enrichment. At the time there was a bit of a scramble, and a couple of days after that event Sergei Lazur of the Russian, a foreign minister, confirmed that Russia would stand by Iran.

And then a couple of weeks later they said, Oh, look, because of technical reasons, we can no longer provide any support to Fordow. So that’s how the last little mini crisis here was resolved. What we’ve seen now is the Secretary of State refuse to grant any further waivers in respect of three of the remaining four nuclear facilities in Iran. And the only one that remains, importantly is the Bushehr nuclear power plant, which is being built by RosAtom and others. So, they have granted a 60-day sort of cool off period in which any companies, any European or US or other companies that are involved in those can basically wind down their support for those programs before the sanction start to kick in. And then there’s been a 90-day waiver granted in respect to the Bushehr nuclear power plant.

So, that’s the background. Now, in terms of implications, it will depend on how much of RosAtom’s different divisions are involved in those other three activities. My understanding is there isn’t an awful lot. The big one is the Bushehr nuclear power plant. That’s a signature project by RosAtom. And we’ve talked before about how RosAtom has the lion’s share of nuclear plant exports at the moment, and their USD$133Bn forward order book. And this is just another example of how they have very effectively built nuclear power plants outside of Russia and even outside of the former Soviet sphere of influence. They aren’t going to want to give that up. And I think the Trump administration is astute enough to realise that if they would have put that jewel in the Russian crown at risk, well then, we really do have a big problem here.

And I think, just to remind the listeners, the problem here is that RosAtom still provides a significant proportion of the enriched Uranium product, the EUP that is required for the US nuclear power plants, and European for that matter. So, it’s in the order of 20% to 25% for the US and a little bit more for Euratom, the EU power plants, and that’s higher because of former Soviet sphere of influence, countries like Czech Republic and Hungary and so on. So that would be really serious difficult news for the US nuclear fleet and the EU nuclear fleet if all of a sudden, let’s call it in 90-days’ time, those utilities no longer had access to that Russian enriched Uranium. And there’s other Russian nuclear supplies that are important as well, but that’s the main one.

Matthew Gordon: So, what’s the workaround here for the US? Because obviously they’re making demands of the countries and companies working in Iran: being Germany, France, UK, Russia (through RosAtom), and China. And they’re obviously threatening sanctions to anyone who breaks that agreement, sorry who continues to work with Iran, should I say. So, the US has got to come up with some kind of workaround because Russia is just so, you know, I heard a Russian Senator this week say that obviously they disagree with Trump’s move, Pompeo’s move. They think that this will actually drive the Iranians to build a nuclear weapon because, you know, things are tough in Iran. Sanctions are very, very severe as it is and there’s a lot of tension with regards to the relationship between Iran and the US. So, if Russia sides with Iran, can it also work with the USA?

Brandon Munro: There are two workarounds: the one workaround which will be driven outside of the US is that the various players who are involved in the three facilities that will no longer be granted sanctions waivers will need to withdraw. So that would effectively be a repeat of what we saw with the Fordow plant when the Russian interests gracefully withdrew on a technicality. The alternative workaround, which is still the one that I think from a world peace point of view and a stability and a non-proliferation point of view is the favoured one, is the US and the Trump administration use this leverage that they have got to try and renegotiate the JCPOA or a replacement. That’s what the other parties to that agreement are calling for. That’s what they have wanted for quite some time. And it might just be that this additional pressure now, particularly on Russian interests, and to a lesser extent, Chinese interests, will help to bring Iran to the table in such a way that a workable solution can be obtained.

What we saw from last time is that I don’t think we should hold high hopes for that. It seems to have been a signature foreign policy for the Trump administration as we get closer to the elections. I’m not sure that this is the type of outcome that would please the more hawkish ends of their support base. So, I would very much like to see an outcome along those lines, but I’m not particularly optimistic about it.

Matthew Gordon: Obviously, Pompeo and Mnuchin have been at loggerheads over this topic. There’s a sort of doves and hawks battle yet again, on another topic, but you know, the tensions are high between the US and Iran. As you said, you know, with the killing of Soleimani, the Iranian general, you know, there was some retaliation at the US base. There’s a lot going on in the region, which perhaps the Russians are better suited to try and resolve, are they not? Because this is a very sensitive, we always talk about the geopolitical sensitivity of the topic and you know, this is a prima facie case in point here for us: the US is interfering with other people’s ability to generate energy.

Brandon Munro: Quite right. So, yes, I think Russia does have the influence to be in the best position to resolve this, but it will require a degree of compromise from the US side as well. Russia needs to be able to resolve this whilst retaining face itself, and not being seen as simply cratering to a strong arm or hawkish US position here. So, without a degree of that compromise, I think it’s very unrealistic to think that Russia will compromise unilaterally. And unfortunately, that just leaves the Iranian citizens caught in the middle. And as well as the assassination, or the death of the Iranian general, we have also seen tensions high with Iran in the world spotlight receiving a fair bit of sympathy in relation to the compounding detrimental effect of US sanctions at the time of COVID-19. I think they have used that channel of communication quite effectively. The US would call it propaganda, and there’s always an element of that. But I think there’s a number of parties internationally who are thinking that maybe hard-line sanctions are not really the humanitarian approach when a country is on its knees because of a pandemic. So maybe that will find its way into this calculation at the same time

Matthew Gordon: I find it quite interesting at the moment; again, the geopolitical component here, you’ve got the British, the Germans, the French, who have one view against the Americans, and say we will issue sanctions against anyone who, who doesn’t follow our lead. And it’s such a small market, the Uranium market is such a small, it’s very important, obviously, but it’s a very small market. To stand up to the US over what is insignificant amounts of money, which may be detrimental on other much bigger projects, that’s, you know, that’s a big call for these countries to have to make, either individually or collectively as the EU. China on the other hand, they don’t care. Do they?

Brandon Munro: I’m sure they care. There’s no question that this is very, very important to them, and their nuclear export ambitions are enormously strategic to China. But whilst they do care, they aren’t at the same sort of commercial risk that RosAtom and the Russian interests are. China imports very little nuclear fuels into the US. A number of their suppliers are already on US sanctions lists. So, it doesn’t make a big difference to them. They haven’t yet significantly cracked the EU import market for nuclear fuels. And China’s main focus at the moment is domestically, and they will try, as they have in many other industries, to perfect the nuclear fuel chain and the nuclear power cycle internally and domestically before they turn their focus to exports. So, they don’t have as much skin in this particular game. But what I’d say, Matt, is your point about this being a small but very important cog in a bigger wheel – it’s very true and it’s certainly escalates the risks here. We’ve got an industry that’s still worth very small amounts relative to other industrial interests and certainly relative to military expenditure and other geopolitical large cogs that we’ve got at play here. So that puts America probably more at risk than Russia in this situation.

If RosAtom was to say, look, we’ve invested in our foreign policy that’s based on being a reliable party here, and we agreed to build the Bushehr nuclear power plant. And if in 90 days, the Trump administration says that’s off the sanctions list as well, I think we could easily see a scenario where Russia says, our priority is our firm commitments with our foreign policy partners including Iran. And if that means that we have to suffer commercial losses into the US and potentially the EU as well, in the grand scheme of things, that is something that Russia certainly could bear as a nation. And RosAtom, being an apparatus of state, they of course would have to toe the line in terms of what Russia’s strategic interests dictate.

That’s a difficult situation for the sector, but in particular it’s a difficult situation for the US, and if it escalated further, then I could well see a scenario where Russia puts its arm around Kazakhstan and says, right, you know, you’ve got to remember where your allegiances are here. And that’s something that was made in different ways as part of the section 2.32 investigation. And whilst it wasn’t specifically named in the working group, I think reading between the lines, you can see that there is a vulnerability there. And look, if RosAtom lost USD$20Bn because of all of this, again, just in the scheme of things and what this actually means for foreign policy for decades to come, that’s a standoff that I think Russia would be prepared to take and it would only really be at the cost of US and EU utilities.

Matthew Gordon: Well, I think for fear of being dragged into a kind of political discussion, we probably better go elsewhere; I saw some interesting commentary here, because I think the EU or European countries are keen to get some sort of peaceful resolution. And as you say, there’s a kind of in a softening in their stance with regards to, in these difficult times, because Iran has not got the infrastructure system to deal with COVID-19, that perhaps we should be looking for new ways to have these conversations. If you keep treating a country, and unfortunately the poor bystanders of that country, in a certain way, unless you’re expecting some kind of collective Stockholm Syndrome, I think the resentment just builds and builds. So there’s a kind of, there’s a conversation that needs to happen and hopefully that gets resolved for the sake of the ordinary people there.

Let’s get on to the kind of commercial component here, which is what are the implications now? Because one of the other notes that came out this week was, and it kind of reflects on what follows on from something that we talked about last week with regards to the Republicans and bi-partisan submission. Some House Republicans have introduced a measure which would speed up the mining process in the US. Obviously, we’re talking Uranium. So, I think Uranium companies, let’s talk about the impact or what they hope the impact will be of that.

Brandon Munro: The first thing to say about that, in common with our conversation last week is that there was a lot of criticism about the report from the Nuclear Fuel Working Group: that it wasn’t specific enough, that it was too rhetoric based and so forth. And we saw it as a policy document, and now, two announcements really in 2-weeks following that report, they’d go very much to the heart of what that report was driving at. So, the US administration is very keen to demonstrate that whilst the report might have been big on rhetoric and small on action, the actions are flowing, and presumably they’ll continue to flow. So that’s the first thing that I think is important and significant here. The second thing I’d say, which is similar to what I said last week, is this doesn’t come as a surprise. It did have a significant gestation period and the administration with the help of the US Uranium producers has been analysing these issues for quite some time and I suspect what’s happened here is that they were just waiting for free or open air time that the reports delivery grants them to then be able to start pushing this through Congress.

Now, from the perspective of an aspiring Uranium producer, or Explorer for that matter, it’s obviously great news. The amount of green tape that had built up during the previous administration was significant. Some of it you would argue is necessary and good for both the environment and the industry, and from an industry perspective the last thing we want to see is companies not being appropriately regulated. So, I do hope that these actions are measured and appropriate in the circumstances and they reduce unnecessary green tape rather than reducing protection of the environment per se. But nonetheless, it’s good news for those players. And it also just continues to put this issue onto the agenda, which is a good thing in general for our sector.

Matthew Gordon: Yes. I mean, obviously in a wider context, it wasn’t just talking about Uranium, it was talking about, you know, lots of different commodities where,  I think they talked about a list of 50 commodities, I’m sorry, maybe 48 commodities of which, you know, they had to import in varying degrees, 18 of which a hundred percent were imported. There are some great numbers in there as well. So it makes you realise that perhaps the US mining sector does need a boost, does need some love and attention, and it seems to be getting it off the back of not just the nuclear field working group report, but lots of other impetus, which is again, coming up in an election year was probably always going to happen because you have got to win some votes. It would be nice to sort of see how these things actually manifest themselves down the line. But you know, the Uranium sector, I guess, will hope that the market starts taking note of them in particular.

Brandon Munro: Look, I think it goes a little bit further than an election year. I think we will see, coming out of all of the different implications of COVID-19, I think what we will see is increased protectionism and a slowing down of globalization more generally. And this is a combination of, no doubt the election year, the Sino-US trade war, but also some positioning for a restriction in trade because of those dynamics. So those minerals that the US imports very significantly, there are examples where they’re imported from China where the US is very vulnerable of course. But there are other examples; Niobium being a good one, where the importation is from countries that are on very good terms with the US, they’re just extremely concentrated. And these issues have been flagged through strategic minerals reports, both by the US Geological Bureau, but also in the EU. And these things were flagged 10-years ago, but we haven’t really seen substantive measures taken to really protect these economies from their lack of diversity on their own production. And that’s the sort of inactivity that will catch economies napping, if there is indeed a strong move towards protectionism and also towards the slowing of globalisation and a restriction of trade.

Matthew Gordon: Good point. And again, I think it is maybe worthy of a conversation another day, because that’s a nice big juicy topic right there. Because I think the implications of some of the actions that we are seeing with the, certainly from the US at the moment, certainly the language is going to have a huge impact on the way that other countries are going to have to start to think. Something that was, you know, four years ago inconceivable in some cases.

 But let’s move on to this other big topic because this kind of through the market somewhat: the EIA Uranium marketing annual report. The numbers in there I think shocked some people, I think they were hoping to see that the cupboards were bare, and the cupboards aren’t bare. It would seem. But again, what was your take on what you saw?

Brandon Munro: Yes, the report came out and it did catch some people by surprise because they were expecting a decrease. And I was in that category. What we saw was a small increase in the total composition of inventories held by US utilities and a decrease in the total inventory is held by US utilities and US producers of those nuclear fuels. So, in rough terms, what we’ve got is an increase in U308, of about 5M lbs. So, to put that in perspective, at the end of 2018, the US utilities, amongst all of the different forms of nuclear fuel, had totally inventories of other 111Mlbs. And that’s against an annual consumption of about 50Mlbs. So just over 2-years, which when you think that the fuel cycle itself, takes about two years to move from U308 to UF6 to enriched UF6 back into an oxide and then fabricated into fuel rods, they were leaving themselves very little manoeuvrability if their only option for restocking was to go to the beginning of that fuel cycle and buy U308, and carry that U308 all the way through the fuel cycle. So, what we’ve now seen is that number of 111Mlbs increase to 112,800Mlbs, so 1.6Mlbs – not that big a deal unless you were expecting or hoping for another big drop, which is what we had between 2017 and 2018.

Now, what I find interesting; the first comment that I’d make is although I expected the number to go down and it went down by bit and it went up by a bit, it really isn’t a big deal. We’re talking about a small number of pounds in the overall context of the market. But understanding the composition of these pounds generates far more interest and I think gives us far more clues as to how the market’s operating at the moment than simply looking at one of those headline numbers.

So what we’ve got is U308 going up significantly, about 5Mlbs, and that’s the bit that was surprising, when all you have access to is perhaps a summary numbers. What we know about this is that a large number of pounds were bought in the spot market at the end of 2018. That’s when the Uranium price was lifting substantially, shortly after Cameco put McArthur River onto indeterminant care and maintenance. And that volume for 2018 was about 88Mlbs through the spot market with significant a reactor, or utility participation. What would have happened is the vast majority of those pounds purchased in the spot market would only have settled for delivery in 2019. So, what we’ve got here is something of a smoothing effect; between 2017 and 2018, there was a fairly dramatic a fall in U308, and that was smoothed by those deliveries taking place in 2019, which then increased that number. So that’s the first thing to understand.

The second thing is just talking to people inside the industry, there seems to be a view that one utility in particular had bought quite aggressively and opportunistically in the spot market when prices were low. That is also going to distort those numbers to a significant extent. And if you’d taken that one utility’s numbers, or its aggressive spot buying out, then that would all but even out that U308 number. So that one utility, from what I understand, is a substantial proportion of those 5Mlbs where the U308 price has gone up.

So, for those two reasons, I don’t think it’s valid to see this as a broad indication of the functioning of the market, the health of the market, the attitudes of US utilities and so on. It’s partly a function of how the spot market works, or how ineffective it is you could say, and the activities of one particular utility.

So, the next thing that’s interesting is then to look at the downstream nuclear fuel components here. So UF6 dropped by 3Mlbs and EUP dropped by 4.5Mlbs. And for the audience here, they’re not measured in million pounds. These are all converted into the equivalent of U308 pounds. And then correspondingly, fabricated fuel, so fuel that’s in rod’s, ready to go into reactors, increased by about 4Mlbs. So, what to understand there? First of all, the increase in 4Mlbs in fabricated fuel is not surprising in the least because we’ve got quite a glut of refuelling outages coming up in the spring and then the fall of 2020. So, the utilities would have needed to finish 2019 with strong levels of fabricated fuel so that they could do that refuelling. So that I would have totally expected to see. The UF6 and the EUP dropping that is indicative of the tightening of those markets that we’ve discussed before and is also reflected in the price of conversion for example. And then if you look at the supply inventories, they dropped by 5Mlbs, although the supplier numbers of U308 only dropped by about a million pounds, even less than 1Mlbs. So, what that’s telling me is that we’ve got utility downstream dropping, and also supplier downstream dropping as well. So those two numbers together indicate quite a significant tightening of UF6 and EUP within the US market. And when you add those numbers together, that’s close to 20% of annual consumption that’s tightened in that way. So, in summary lots of interest from it and lots of indicators, and I would have liked to have seen it drop by a couple of million pounds as a whole rather than go up by a couple of million pounds. But when you do add back those producer changes, the total number of both utilities and producer inventory contracted by about 3Mlbs, which is reflective of what we understand, which is an overall contracting in inventory around the globe.

Matthew Gordon: So, what does this now tell us? Because like I say, I keep saying, I can’t believe how opaque this is. Opaque is the keyword for this industry. What does it tell us about how long utilities can keep going without necessarily being impacted by, you know, obviously, supply disruption because of COVID and more, more generally, you know with production, when things do come back online? Can they string this out to the end of 2021 before they come back into the market? Because if we look at the long-term forecast from, you know, UXC and Trade Tech and so forth, we’re talking 2021, 2022 numbers of below 40. That has a big impact for Uranium juniors hoping to get into production and get financed to be able to try and get into production sometime soon. So again, what’s your take on timing now that you’ve seen these numbers?

Brandon Munro: Well, what it tells us is that US utilities across all of their components of nuclear fuel have still only got just over two years of inventory. That leaves them very exposed to a shortage which could be generated by geopolitical reasons. It could be generated by other commercial reasons. And in particular, it leaves them very exposed to a shortage of EUP or UF6. And the reason I say that, two- and a-bit years – it does sound like a lot of time, but not if you have to go through the entire nuclear fuel cycle. So, if there’s a shortage for whatever reason, they have about 12 million pounds collectively across the whole industry that gives them that buffer if they can’t buy EUP or UF6 in the marketplace. So that leaves them vulnerable. And so, it tells me two things: it means that this sector is well set up for some form of catalyst, and you know, given what we’ve been talking about, there’s every chance we’d see a geopolitical catalyst here. And it also tells me that this sector, and the US sector in particular remains ripe for a re-evaluation of risk management and procurement strategies. Carrying that little inventory, given the amount of risk that’s out there to supply in the sector, both commercial and geopolitical seems to me to be bordering on irresponsible. And I think to me, in my opinion, there has got to be some realisation generally speaking amongst the utilities that they need to manage their risk in a different way. And it’s going to come from all sorts of different directions. We’ve talked about the carry trade diminishing. So that was one of the key risks mitigants that the utilities could use. They could just maintain their current inventory level knowing that they can buy on the carry trade for delivery in 1 or 2-years’ time.

The other risk mitigant that they were able to use as to buy EUP, six months out of when they needed to fabricate rather than buying U308 one and a half years out of when they needed to fabricate. But if any of those risk mitigations fall away, and I think both of those will become less available over the next year, the utilities will have to go back to using you U308 as their primary risk mitigation via long-term contracting. And I think that’s the setup that we’re all looking for by the end of the year.

Matthew Gordon: That’s the US numbers, but the EU numbers, when are they due?

Brandon Munro: If they don’t come out next week, they should come out the week after. So very imminent.

Matthew Gordon: Right. And do we expect to see the same sorts of things? I mean, I know we talked last week about, you know, they recommended that they have three years’ worth of inventory, but is that the case or is that just a recommendation?

Brandon Munro: I’d expect that to be the case. So, I’d expect to see stable numbers out of the EU and any significant build-ups I think will be disappointing and any significant drawdowns will be interesting.

Matthew Gordon: Okay. Okay. Well look, I think we maybe need to wrap it up there because I know you have got to get off, and so have I unfortunately. I do enjoy these conversations.  Just one last thought; obviously we’ve seen what Gold is doing in the market. People are getting very excited. Lots of projects getting financed. Silver too, actually, has had a couple of very good weeks. What would you say to people looking at Uranium? Because it’s been a roller coaster in the last three months.

Brandon Munro: Well, it has been a roller coaster, but that’s been driven by broader equity sentiment. What we’ve seen in the sector is, again, it hasn’t been spectacular in the last week, but the Uranium price has kicked up a touch. We’ve got a Uranium price. It’s on a generally upward trajectory with a very, very strong setup for later in the year, based on fundamentals. So, I still think when you look at how under-priced Uranium equities are at the moment, particularly on the ASX, they didn’t have the lift this week that most of the North American stocks had after these sanctions waiver announcement, or the speculation by the Washington post. So, on the ASX in particular, the equities are still very, very good buying for investors that are prepared to hold to the end of the year and perhaps into next year to see those fundamentals work out. So, for anyone out there who’s buying in the market today, good luck to them. And I think they’re doing the right thing.

Matthew Gordon: That’s a good point actually. We are speaking to someone later today about irrational exuberance as part of investment rationale, and I am looking forward to that, but I think that has a large bearing on what you’ve just said with regards to, you know, place your bets based on fundamentals not on the psychology of the market.

Brandon Munro: I’m not seeing any exuberance in Uranium at the moment. So, by definition is not irrational exuberance.

Matthew Gordon: Well yes, maybe, maybe. Well look, I will look forward to catching up with you next week. It has been another sort of surprising week in the world of Uranium. I know it seems a little bit macro at the moment. There are some great stories out there, people getting people getting financed, getting some money through the door. It is a little bit of a waiting game. You guys are good. You’re fully cashed up down at Bannerman, aren’t you? How are things progressing?

Brandon Munro: Yes, well, we’ve got a couple of years of runway and lots of things that we can do to add value right at the moment.

Matthew Gordon: Beautiful. Beautiful. Good man. Okay buddy. Well, I’ll let you go and have a great weekend.

Brandon Munro: Thanks, Matt. Great to chat again. Look forward to next week.

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