Interview with Brandon Munro, CEO of Bannerman Resources (ASX: BMN).
Munro gives us a detailed response to the question, ‘Last year was another uranium trainwreck. What is happening?’ Uranium investors are desperate for some good news; it’s been all too long since they heard any. However, Munro explains in this interview that beneath a surface of squalor lie plenty of reasons for investors to feel a little more chirpy. However, there are also some reasons investors need to stay grounded.
If investors buy into the uranium macro story, they simply need to keep their faith. Munro argues all the uranium market requires is a sentiment shift in order for investors to begin seeing results. However, there are a few more substantial pieces of verifiable information; there are signs of things moving behind the scenes, and indications spot price could decide to awake from its prolonged slumber. Industry insiders claim UF6 reserves, held by utility companies, are all but gone. EUP conversion price has risen by 400%, unbeknownst to many investors. The price of uranium enrichment has also risen from US$30 to a more sizable US$50.
The information presented by Munro is positive for investors, but let’s stay calm and pragmatic. Nothing has changed just yet. Additionally, Munro, like many industry experts, explains uranium is very unlikely to reach the US$150/lb peaks of the previous cycle. Instead, a sharp peak of US$90/lb is seen as more feasible, followed by a fall back to a stable and consistent US$50-60/lb. There is no nuclear renaissance hype in the present day to drive prices to their previous highs.
Munro also touches on some issues that have been doing the rounds in the Crux community as of late, specifically the Sahel terror situation and the disastrous impact it is having on some mining companies.
Bannerman Resources itself hasn’t seen a great deal of share price movement this year, but Munro claims it is primed for growth in an imminent bull market, given its strong, experienced management team and solid portfolio of assets in favourable jurisdictions.
- Difficult 2019, What’s to Come in 2020?
- Uranium Inventories: A Historical Overview & Problems Arising
- Markers for Investors: When is the Market Going to Recover?
- Joint Comprehensive Plan of Action: What’s Changing in the Geopolitical World?
- How will Political Turmoil Affect the Uranium Market?
- Return of the Peaks: How Quickly Could it Happen and is it Outright Possible?
- Future for Uranium Juniors
- A Look into Bannerman: Importance of a Seasoned Team and a Mining-Friendly Jurisdiction
Click here to watch the full interview.
Matthew Gordon: Hi Brandon. We last met at the World Nuclear Association event in London where you sit on a couple of committees.
Brandon Munro: I sit on a working group that is
producing the next nuclear fuel report. It was released in September, in 2019,
so we have now started kicking off with the 2021 report. So I am involved in
three of the working groups and I chair the working group that determines the
demand projections for nuclear fuel projections out to 2030.
Matthew Gordon: You have had a few meetings in London
this week, a few working group sessions this week, you kindly agreed to come
and tell us a little bit about what you are discussing. So, last year –
difficult year. Another difficult year for Uranium. I’m not quite sure anyone
knows what’s going on. Do you?
Brandon Munro: I can hopefully share a couple of
insights with you: what we have got is an extraordinary situation where the
visual part of the market, which of course is the spot price and the
non-existence of any real term volume. There
is no real price discovery, but the extent to which this exists in the spot
market, we’ve got something that just looks dull, boring, disappointing and
that’s had a corresponding effect on most equities. It has been carnage out there for the last
year for many, many companies. But what we can see taking place under that
visual surface veneer, I think is very positive for the sector.
Matthew Gordon: Let’s look at a few of those moving parts: behind the curtain, because people talk about
the macro story. There is billions and billions of dollars of nuclear reactor
infrastructure being built across the world, in multiple jurisdictions and
countries. And people focus on Germany, reigning things back, the French did,
now they are not. But there is more to it than that in terms of that
infrastructure build out, but I don’t want to talk about that today because I
think that is well covered. Can we talk about the inventory side of things
because I think you have talked in the past about different piles of U308 and UF6
and EUP, what is happening there?
Brandon Munro: What we are seeing is inventory
Matthew Gordon: What does tightening mean?
Brandon Munro: The sector always exists with a lot of
inventory. That’s been the case for the last 30-years. It is not helpful to
look at the absolute total amount of inventory that is calculated throughout the
sector. You need to understand where
that inventory is held. Inventory that is held by the Russian government or the
US government or Chinese stockpiles, that is kind of interesting, but it
doesn’t dictate anything in the market, because that material is just locked up
for strategic purposes. The relevant
part for investors and the price, is mobile inventory; what inventory is
available either to supress demand or to be sold into the bid when price goes
up. Because that is what is interesting to an investor; is that going to
suppress a price rise?
Matthew Gordon: Absolutely.
Brandon Munro: And what we have seen there is a
tightening. In U308, we have seen tightening, largely because if the deficit
that we have got at the moment. So even after allowing for secondary supplies,
we have run a 20Mlbs deficit for the last couple of years. So that is being
drawn down, predominantly by utilities underbuying. But what I find
fascinating, as you mentioned, you have got three forms of Uranium in the nuclear
fuel cycle. And for the listeners, you have got: U308, which is the mined
concentrate. That has been subjected to conversion and conversion is a service
that is applied to the U308, that the utility pays for, that turns U308 from a
powder, or yellowcake, into a gas; Uranium Hexafluoride. And that is still a
homogenous commodity because it is just UF6. From there you get enrichment,
again, typically a service paid for by the utility where the Uranium that they
have bought off a mine, then goes to enrichment, to the specifications required
for their particular type of reactor technology.
In the old days, that’s how it worked. The utilities would
buy the Uranium and they would pay for the conversion service, they would pay for
the enrichment service. But what’s happened since Fukushima, when we had
reactors come down, particularly in Germany and Japan, is inventory started to
build up, not only in U308 but also in UF6 and in EUP; the enriched Uranium
product. And that has been a problem for our market because you have a
substitute ability between those three forms of nuclear power. And not only can
the utilities arbitrage between those three forms; if they don’t like the price
they are getting in U308, then they can go to UF6 or EUP. But they can also
ignore the time criticality of planning before in the old days, they would have
to have bought their U308, two years before they needed it, because it takes a
lot of time to transport and move through that cycle.
Now, if they sort of mess up on the planning, well that’s
okay because there was UF6 available that they could buy one year out from when
they needed it, or EUP which they can buy 6 months out from when they need it.
And that has contributed to the utilities being able to hold
off on re-starting the contract cycle.
Back to what’s relevant today and why I am saying that the
sector in the market is tightening in a very favourable way. First of all, UF6
has tightened almost entirely. So I have just been to a room with people who
plan in this sector, and what happened, as you know, a couple of years ago, Covidien
put the Metropolis conversion facility into care & maintenance, and cleverly,
they bought all of the UF6 they could find. All of the mobile inventory they
could find in the form of UF6, they bought up. And they did that because they had conversion
contracts. And when they closed the doors on Metropolis, they would have to
continue delivering into those. So UF6 is very tight. Even so much so that a
few months ago, we saw Uranium Participation Corp. swap out their UF6 for U308
and take advantage of that arbitrage.
We’ve also seen a tightening in enrichment and that has been
exacerbated by geopolitical concerns around Iran sanction waivers, and maybe we
can come back to that. Se we are seeing a UP tightening: U308, we are also
seeing tightening but not to the same extent, hence why we have got $25 Uranium,
or $24.50 Uranium. But if you look at
what happens when those markets tighten, UF6, in the time frame I have described,
that has gone up 400%, spot conversions. So conversion is the price of the
service, so the difference between what you pay for UF6 and what you pay for
U308. 400%. And that has been a wake-up for the utilities because many of them
forgot that those sorts of increases are possible.
Matthew Gordon: So that tells us something. What
about the enrichment component? Has that gone up?
Brandon Munro: Yes, also. Not to the same extent but
it has gone up from mid-thirties, so it is measured as USD per, the SWU price,
the Separative Work Unit, gone up from mid-thirties to about USD$50. So, that
is also a healthy increase.
Matthew Gordon: This is what you mean by
‘behind the curtains,’ there are things going on which are indicative of a
movement, or the need for a movement, relatively soon. So, why weren’t these
conversations happening at the beginning of 2019? Because the numbers were
starting to move in 2019, but they haven’t had an effect on spot, obviously
there aren’t that many contracts being written, so how do you work out where
the threshold is? Where is that critical threshold that these numbers need to
get to. Where are the markers for investors to actually know when this market
is going to go? It feels like not too many people know what’s going on in the
Uranium space at the moment.
Brandon Munro: I’ll tell you all that it needs,
because, as you know, I’ve been in meetings in London for the last couple of
weeks and I get asked the same question: what’s the catalyst?
You only need a sentiment switch for this market to tighten.
And that sentiment switch can come from anything, so if we use the examples now
of UF6 and enrichment; in UF6, when sentiment was low, Covidien were able to
buy all the UF6 that they needed to buy, and they did that. The moment the
price started to go up, the mobile inventory disappeared. And that is a fact in this market; there is an
inverse relationship between the mobility of inventory and the price; as the
price goes up, inventory disappears. And we even saw that, talking to some of
the traders as I have over the last couple of weeks. We even saw that in November,
October, November when we started to see a bit of an increase in the Uranium
price, it went up by 8% in a couple of weeks, and the inventory, the
availability of U308 vanished. It only started to come back when the price
softened again and the various parties who had it to sell figured that there
was no time value in money at that point.
Matthew Gordon: Sentiment of utility buyers?
Brandon Munro: Correct
Matthew Gordon: Nothing to do with retail, nothing to do
with institutional buying?
Brandon Munro: So let me try to explain that a bit
further and put some numbers on it.
So, maybe sentiment is a little bit wishy-washy, but what we
are really talking about is their view of the medium-term price and what effect
that is going to have on their immediate actions, okay. So, some numbers: we
are running a 20Mlbs deficit in the U308 sector at the moment, after taking
into account secondary suppliers.
So, to put some numbers on that: 2016, the sector was
knocking out about 160Mlbs of U308 production. Mined production. That’s now
come down 25Mlbs because of care & maintenance in McArthur River, the
Kazakhs producing and various other supply disruption that has taken place in
the sector. Secondary supplies – all of the various forms: running at about 25Mlbs
against a reactor burn up of 180Mlbs. Rough numbers. So, so far, there isn’t
enough demand at the U308 level to put pressure on the price. So what we know, is
that there is about, instead of 180Mlbs worth of demand, because that’s the
amount that’s being burnt up each year, it’s about 160Mlbs of demand. Caused by
two things: preferential buying of UF6 and EUP over U308 and utilities wearing
down their inventories. So 20Mlbs, if I now translate that into numbers in the
US for example, in rough terms, the US nuclear fleet consumes about 50Mlbs of
Uranium and they have been underbuying in the last few years by about 20% – so
10Mlbs per annum. All they need to do is
make a decision that they are going to change their policy from under-buying to
full coverage, and that’s 10Mlbs. That’s a dramatic effect on that 20Mlbs deficit.
Or we could see financial plays into the marker again. In 2018, about 10Mlbs
was taken out of the market by Yellowcake and UPC topping up. Again, that’s a
10Mlbs swing. A swing like that, particularly if it goes up to 180Mlbs and starts
to expose that supply and demand deficit in U308, that’s enough to generate a
very sharp price response which will then have secondary effects in terms of
Matthew Gordon: Do you think that there will be a
financial impact from players like Yellowcake in the market? Yellowcake have
got their own issues at the moment. I don’t see any generalist funds wanting to
back it – another team buying up Uranium at the moment, are you aware of any?
Brandon Munro: Yes. But it’s private. We are aware of
Family Offices clubbing together. We are aware of banks and hedge funds. But it
is not the same model as Yellowcake. Yellowcake is a buy created market
instrument with liquidity and hold into the long term. So the other buying in
the financial market that we are starting to see is not a sequestration of that
Uranium in the way that UPC and Yellowcake is.
Matthew Gordon: It is such a small market; it’s a USD$10Bn
market, it’s nothing so the big institutions – it would surprise me if they
were to create teams to take advantage of the Uranium space.
Brandon Munro: Yes. And look; let’s face it; investor
sentiment is desolate at the moment in Uranium, so for generalists to get
involved in the commodity, we are going to need a movement in price. I don’t
think we are going see a change in investor sentiment until we see a change in
price. I don’t think there is enough potentiality visible in the market for
investor sentiment to change price.
Matthew Gordon: Talk to me about the JCPOA please.
Brandon Munro: So Joint Co-operative Plan of Action.
Matthew Gordon: Who are all of the parties involved in
Brandon Munro: So it is Iran on the one hand and then
you have the UK, France, Russia, China and the US; so they are the co-operative
parties. Put in place in 2015 because as you know, Iran was showing signs of
building a military nuclear program. The plan was designed to hold off
sanctions on Iran in return for Iran complying with certain obligations.
Predominantly they were obligations of maintenance and monitoring, unfettered
monitoring of their facilities and obligations designed to go further than non-proliferation
obligations that go further than everyone else, to put a big spacer between
Iran defaulting on its obligations and having the capacity to produce military
Matthew Gordon: Before Christmas, things started getting
more complicated; the US pulled out, plus the actions of a couple of weeks ago
by the US, further complicated relationships with Iran. So, can you talk to us
about your view on the US and European, well, generally European and allied
with Russia as well and how you see that going forward.
Brandon Munro: It’s good to step back a little bit to
try and work your way through the detail in the complications here. So, the
JCPOA was set up, one of the first things that the Trump administration did was
to withdraw. And they did that in a way that withdrew unilaterally. There was a
diplomatic scramble by the other co-operative parties to try and keep the
agreement on foot. And what that enabled
the Trump administration to do was to re-establish a whole range of sanctions
on Iran that were being held off because of their commitment to the JCPOA: oil
sales, access to the US financial markets etc. But what they didn’t do, they didn’t allow those
sanctions to extend to the provision of services and fuel to the US nuclear
industry. And there was this thing created called the ‘Sanctions Waiver’. And
the sanctions waiver needs to be re-evaluated every 90 days. So every 90 days,
the Trump administration sits down and decides if they are going to give
another 90 day waiver or, are we going to withdraw the sanctions waiver?
Importantly for the sector and for the utilities and for listeners, the next
sanctions waiver consideration date is 31st January.
Now, what happened, November 15th, Mike Pompeo
announces that the Trump administration is withdrawing the waivers in respect
of Fordow enrichment facility that was being used initially under the JCPOA to
create medical isotopes but one of the progressive breaches of the agreement,
the JCPOA that Iran announced, was enrichment of civilian grade Uranium rather
than just for medical isotopes. Now, Fordow is a tailor-made facility for the
electorate in the US, built into a mountain, real James Bind stuff. Clearly it
was set up to produce military grade enrichment; when you look at the
configuration of the cascades and that sort of thing, so it is an ideal target
for the Trump administration to show that they are really serious about
this. December 15th coming
up, the utilities become very concerned because no-one was particularly clear
who was involved in the Fordow facility and when the waiver gets lifted on
December 15th, it could have been mayhem. Now, to understand why the
utilities are concerned, half of the enrichment services provided to US
utilities comes from Russia; some of it directly from TFEL and TENEX and some
of it is effectively resold by other enrichment providers. And the excess
capacity in the Western world of enrichment, isn’t enough to fill that gap. Not
only that, but RosAtom, as the Russian nuclear giant, it is involved in absolutely
every aspect of the civilian nuclear power cycle. As it turned out, TFEL
withdrew from its involvement in the Fordow plant because it was providing
assistance with its medical isotopes and according to them, any civilian
enrichment creates contamination which makes that program impossible. So that
one sort of washed over: December 15th came and went and all was okay. So now
we fast forward to what you were talking about with the huge escalation of
tensions in Iran – a month before the next sanctions waiver. So, there is a lot
of concern from US utilities, but also European utilities that if that
sanctions waiver, or the entire deal falls over, the Russian nuclear providers
are going to have to make a decision; do they back Iran and continue to support
Iran? And be restricted from providing a whole range of services.
Matthew Gordon: It’s not just the Russians here; you’ve
got the Brits, the French, the Germans, there’s a lot of superpowers in the G7
who are involved in this. G7 plus Russia. They don’t agree with the American
stance and position – certainly not what happened two weeks ago. And I think
there has been a lot of posturing going on, and I don’t want to get this into a
political conversation, I want this to be about Uranium, but the reason why
Europe hasn’t followed the US is that they think the Iran deal is a good deal.
Brandon Munro: Correct.
Matthew Gordon: It’s working and I think a lot of people
in the US think it’s working, but it’s rather unfortunate timing, because
again, there is the perception, but the perception is that in an election year,
going to war has traditionally been quite a good vote-winner. So, you know,
that whole mess has been slightly discredited with the timing, but what impact
is that going to have, if any, I’m going to bring it back to investment, okay –
is what’s going on in Iran going to have an impact on the ability for equities,
Uranium equities to move forward, or is this something that is actually going
to be another negative impact, another negative event in the world of Uranium
Brandon Munro: Let me just clarify one thing before I
answer that question, yesterday, so until very recently, all of the other
parties, ex-US, were declaring their support for the deal and doing their
upmost to keep the deal on.
Matthew Gordon: Thanks
for giving me an update, good,
Brandon Munro: Just yesterday, they invoked the
dispute clause under the JCPOA. Article
Matthew Gordon: What does that mean?
Brandon Munro: That basically means that there is a
14-day dispute resolution and what Boris Johnson has said is that he would like
to see a new deal which he aptly named the ‘Trump Deal’. So, I think what they have realised is that
they need to try and get Iran to come back to the negotiating table and
renegotiate the whole JCPOA.
Matthew Gordon: So that is hot off the press.
Brandon Munro: Hot of the press. Which helps to
contain or to eliminate the sanctions exposure of the other countries.
So how that unfolds; we have got absolutely no idea. And
what effect that has on the sanctions waiver that is considered on the 31st,
if such a thing still exists – so that has created a new layer of uncertainty.
Now to go back to your question, it’s a difficult outcome to pick because it
depends, let’s just ignore the dispute that has been called for the moment, it
depends on Russia’s reaction. I think they are so dominant in the nuclear
sector and it is such a profitable, effective business for them that they would
throw Iran under the bus, but you can’t put a significant probability on that
because it is so wrapped up in Russian foreign policy which has been extremely
successful in the Middle East.
Matthew Gordon: It has. Most people don’t understand that.
Brandon Munro: That would then, so if they were
sanctioned, if Rosatom as a whole were sanctioned, that would lead to a period
of chaos in the nuclear supply chain, because they are so pervasive in
everything, particularly what the traders are doing; much of the supply of U308
these days is coming from carry trades and so forth that the traders are
involved in, but they often have so many chains of custody with those supply
chains that most of the time you have got Uranium 1 in there or Rosatom in
there somewhere, and there’s a chance that it could invalidate all of those. As
well as the effect on enrichment.
Matthew Gordon: Why is the US taking a risk on
this? It is a no-size industry, it is negligible compared to oil. Obviously,
Iran is sitting on a lot of oil, again, this is a conversation for another day,
50 million barrels discovered last year, new barrels discovered last year, and
this sector, geopolitically is the messiest thing I have ever seen in any
investment class because it is a very emotive topic, why? Why are people so
wound up about it? Investors get wound up about it. Countries get wound up
Brandon Munro: Gets you and me pretty excited.
Matthew Gordon: I’m excited because I think there
are some great opportunities. I think there are some great companies just
sitting here waiting for people to just get back to doing business and stuff. For sure. Again, maybe we should talk about
that, it is another big topic that, that’s another geopolitical component that
I know we did talk about way back.
Brandon Munro: You asked me what effect this is going
to have for equities. So, there is a period of, if it unfolds that way, there
is a period of confusion and chaos and hard to know what equities would do.
Into the medium term though, it is going to be beneficial for U308 and beneficial
for equities. Number one: it is an important reminder to the buyers in the
sector, the utilities that geopolitics does matter and geopolitical risk does
play a role. So they can’t just hoover up all the material from Kazakhstan that
they want, at whatever price they want, they must have a diversity of supply
which leads to a stacking in the price that they pay for Uranium.
Matthew Gordon: Because the supply chain may break
further down the line, they need to get certainty.
Brandon Munro: Yes.
Number two: if we see a break in the chain of custody amongst
all of these trades, then it is going to push the utilities back into dealing
directly with producers which in the medium term is a good thing for
transparency in the U308 price and it is also going to lead to more price
discovery. Whilst the traders argue that they play a very important role in ensuring
the efficient operation of the markets and so on, where we are at the moment is
that they are playing a role in suppressing price discovery through the various
instruments that they have got.
So positive in the medium term, unknown in the short term. But
with any unknow, we could see a very sharp price reaction in U308 which would
be extremely positive in the short term.
Matthew Gordon: I think people would have argued that at
the beginning of 2019 too, wouldn’t they? So what lends you to feel that it is
more the case today than it was a year ago?
Brandon Munro: Because we are talking about the scenario
where we have sanction waivers lifted and we have chaos in the sector.
Matthew Gordon: We
get a lot of commentary from retail investors, family officers, fund managers,
CEOs of Uranium Juniors and they are talking about a return to the peaks of $130,
$140 Uranium, sitting at $25 today, I’d love your view on that one. But the
other thing they talk about is the speed at which that returns, the speed at
which the share price returns and it’s a hockey stick, of course. Those are
great stories. I don’t believe them. But they are great stories. What’s your
position? Do you think we are going to see a repeat of the last cycle? Honestly?
Brandon Munro: Yes. I don’t think it’s realistic to expect
a repeat of that degree of volatility.
Matthew Gordon: Why?
Brandon Munro: Well, when you look back at that
volatility and I was in the sector at the time but I was working as an M and A
lawyer, so we are on the M and A side; take-over defences and so forth and I
can remember, there was a lot of commentary about Uranium going to $200. And it
was a great unknown. The extent of reactor builds was an unknown. Obviously an
up-side unknown; there was a nuclear renaissance, there was a huge amount going
on. It was a demand story in those days. And when there’s enough people saying Uranium
could go to $200, as it sails through $100, it still feels like a viable buy to
keep buying it up.
And we still had some other dynamics in terms of Chinese
being very early in their procurement cycle, they had big plans which are now
back on track, but back then they were significant. Those dynamics don’t exist
at the moment. Instead of being a demand story, what we’ve got today is a
supply story. A lack of supply story and a lack of incentivisation. I do
believe there will be volatility and I think the opportunity for this market to
slowly balance out at the right price, I think that opportunity has slowly been
dissipating over the last 12 to 24 months.
We would need price signals today, and really over the last
12 months, to incentivise enough new production to create a balanced market. So
an overshoot is certainly likely but I don’t see it being likely that we will
see an overshoot $120, $130, $136 that we saw last time. It shouldn’t be part
of an investor’s plans.
Matthew Gordon: Lots of companies talking about the need
for a $50, $55 spot. Just to be able to break even. Then you have got to
incentivise to actually make some money, because that’s the name of the
Brandon Munro: Yes.
Matthew Gordon: Whatever that number is: $65, $70. It
feels like today, a long way away.
Brandon Munro: It feels like it.
Matthew Gordon: But it may go quickly. So you were saying
that it may quickly go up to those sorts of numbers but then the controls in
place or moderation in the market, or a little bit more savvy investment
strategy now compared to then, will temper that growth point? Or are you saying
that this is a slow and steady growth there? Again, because we have seen some
numbers from various analysts which suggests that this may hit $40 by the end
of next year. Which obviously doesn’t do anything for anyone. So what’s your
Brandon Munro: Yes, that’s right; $40 doesn’t do
anything for the sector.
Matthew Gordon: It might as well be $25.
Brandon Munro: Correct – but that is exactly the
point; in terms of fixing the supply disruption that we have got today but
coming down the barrel particularly when Kazakh production starts to taper off,
it could be $25, it could be $15, it could be $40. It doesn’t incentivise
Matthew Gordon: The Kazakhs have just announced that they
have over-produced by 4%.
Brandon Munro: The Deputy Minister, are you referring
to that announcement?
Matthew Gordon: Yes. They don’t seem to be following
their own guidelines, are they?
Brandon Munro: I don’t know.
Matthew Gordon: Okay.
Brandon Munro: There’s a number of statements; I did
ask Kazatomprom that question over the last couple of days and they didn’t know
Matthew Gordon: So where does that leave the rest of us?
Brandon Munro: What we’ve got, we have this situation
where we need a significant escalation in the uranium price to even start to
put new projects into the game, and as you say; is it going to be enough for
them to get financed and constructed and built? So the ranges that you are
talking about – I’ve got no problem with Uranium prices getting there and
staying there. And I think there is capacity for an over-shoot. I just don’t
Matthew Gordon: What do you see?
Brandon Munro: I can see an overshoot to $90.
Matthew Gordon: Okay, sustained?
Brandon Munro: By definition it is an overshoot, so
Matthew Gordon: Because at the beginning of this
conversation, you talked about some of the controls in place and some of the
people who can control the market to a degree. And I have asked this question
continuously over time and people say it’s impossible for any big players to
control the market. That may or not be the case, personally I think it is in
the interests of people like Kazatomprom, like Camaco, not to let the market go
too crazy because no one wants 500 entrants in the market place like last time
round. At the same time, we have had conversations with CEOs, talking about
roll ups and consolidations and so forth, listened to Rick Rule saying there
are perhaps 6 to 10 players who will run in the market. There are 50 today. So
obviously, people are expecting a lot of change in the structure of Uranium
producers. What’s your take on what the horizon will look like? How do you see
the junior mining space playing out? Because there are like 5 biggish boys and
then there’s a bunch of others.
Brandon Munro: Well, if we talk about capacity of the
market, volatility and capacity to overshoot.
I think for an investor, they have to be saying, is there investment in
the category of producible pounds in the next
cycle, or is it something that could come on in the cycle afterwards.
Because if we do see an overshoot, it’s only the companies that are in a
position to benefit from that overshoot that are going to produce a superior
result. Sure, there might be a little bit of a bubble amongst all Uranium
companies with an equity’s response, but at the end of the day, particularly
for institutions and investors who need liquidity, if it is not producible
pounds, then in a sense, whatever the price is doing in the next cycle is
irrelevant. Perhaps it will help their cost of capital which might mean that
they are diluted a little bit less, but you’ve got to be able to produce pounds
into the next cycle. As you know well,
there are very few companies in that small universe of Uranium investment that
can do that.
Matthew Gordon: To me, that is some big red flags across
the market. People need to understand what good looks like and what not so good
looks like. Previously we have talked about teams who have produced and sold
into market. We think that is really important because it is a lot more complicated
than other sectors. We have talked about the need for the asset to be of a
scale; scale is really, really important here and to be able to mine economically
because again, the basic rules of mining still apply. Companies with a sense of
what the economics looks like. This gives you some cues as to whether to invest
in them or not.
But, you guys for instance? What’s your team’s structure?
Have you got people on board who have been there and done it before, in a
Brandon Munro: Absolutely.
Matthew Gordon: You have? Okay.
Brandon Munro: And for us, that has been extremely
important. So if you look at who we’ve got in the team. So in Namibia, our
chairman is Mike Leech. He was the Managing Director of the Rossing mine at a
time when it was the largest Uranium mine in the world. But before that, he was
for the last 15 years, he was CFO so he was involved in all of the marketing
and contracting and knew everything about that, to do with Rossing, which was a
Matthew Gordon: Let’s take that; you say that, when
you go and have conversations, sorry for swinging it back to Bannerman and I’m
putting you on the spot here a bit, but I want people to understand the mindset
of the junior miner board, okay. You’ve got an experienced team, when you are
talking to – whether it be funds, I know that you have a lot of talks with
people in China because the scale of your project would suggest that that is
probably where you are leaning but I’m sure you can tell us another time. What
are they looking for? Is that an important factor to them? I certainly think
that it is, but do they?
Brandon Munro: Absolutely. Because as you say, you
say; Uranium mining is a little different and I know there’s a lot of
understatement in that.
Matthew Gordon: Yes.
Brandon Munro: It’s critically different. You need
two things at a senior level: you need that understanding of Uranium; there’s
people who have done it before, but you also need to know the country.
Matthew Gordon: Okay.
Brandon Munro: So we’ve got Mike Leech; so in terms
of knowing the country, former President of the Chamber of Mines in Namibia and
former Chairman of the Namibian Uranium Association, the list goes in. In my
opinion, he is one of the most senior mining executives in the country.
Matthew Gordon: So Namibia is known for mining. What is
the main mining output?
Brandon Munro: Uranium and Diamonds. It does have Gold,
it does have Copper, Lead, etc. Mining is extremely important to Namibia. It’s
a big chunk of its GDP and the majority of its foreign earnings and Uranium is
half of that equation.
Matthew Gordon: So it is important that you get into
production and generating cash and employing people.
Brandon Munro: And it’s not just Mike, our Manging
Director in-country, Verner Evault, he was our manager at Rossing, he was born
Namibian, very well known in-country. Very great reputation. Dustin Garrow is
our marketing advisor.
Matthew Gordon: We have interviewed him a couple of times.
Brandon Munro: Dustin sold Namibian Uranium for Paladin,
he obviously knows Namibian Uranium because he has been in the industry for
more than 40 years. But, he knows Namibian Uranium, he knows exactly what needs
to be done to get it out of the country. We are not going to have a mishap in
our first shipment and all of that stuff that can go wrong in that sector.
Matthew Gordon: I had forgotten he was involved with you guys. We like him a lot. He just talks common sense. I encourage people to watch the interview with Dustin.
Brandon Munro: And as you know, I lived in Namibia
myself for more than five years so I know the set up in Namibia.
Matthew Gordon: There’s a lot of things going on in
Namibia like unemployment is quite high. You sort of look at what’s happening
in various other countries in Africa, is Namibia a really benign environment or
should people be worried about the jurisdiction?
Brandon Munro: From a living their point of view,
it’s entirely benign. I lived there with my family, with my four kids for more
than five years and I never even had my car broken into. I’d liken it to living
in large parts of Australia. Good
infrastructure. Very strong development agenda, as you know, because of unemployment
and fiscal reasons, etc, etc. But the other thing is, because the country is
largely built off diamonds and then Uranium, there’s a very strong not only
acceptance of Uranium but respect for Uranium. You go into Swakopmund, which is
the coastal town near our project and half of the infrastructure has been built
by Rossing. People remember, appreciate and value that. And that is so
different to so many different Uranium mining jurisdictions. Even the little
NGOs, the interest groups that we have got there that oppose nuclear power and
oppose and Uranium mining, we let them
have their voice, I’ve been in debates with people there; it’s all very
respectful but they don’t get any traction with local people because people
value and are appreciative of what Uranium mining has done for the whole
Matthew Gordon: You are going to come back and tell us
the Bannerman story properly.
Brandon Munro: Okay. I’d love to do that.
Matthew Gordon: In the next couple of weeks, probably
online when you are back in Oz. It’s good to see you over here. Really is –
it’s always good to see you over here. Perhaps you can share some of your WNA
conversations with us as well, when we talk.
Brandon Munro: Great. It’s always good to catch up. Thanks for making the time.
Matthew Gordon: I appreciate it. See you soon.
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