Standard Uranium (TSX-V: STND) – Raising $3M to Start Drilling Davidson River

Standard Uranium Ltd.
  • Shares Outstanding: 45M
  • Share price C$0.30 (21.02.2020)
  • Market Cap: C$13M

The uranium space was incredibly saturated before it crashed after Fukushima in 2011, with c. 50 companies growing to 400 players, all vying for a piece of the yellowcake market. However, the vast majority of these producers sank because of plummeting uranium demand and plummeting uranium prices after 2011, leading to a much lower number of active uranium players today.

In recent months, there have been numerous macro-catalysts that have instilled an undeniable sense of bullishness into the hearts of uranium investors. Before the COVID-19 pandemic, there was mounting speculation that utility companies were close to depleting their uranium inventories. This was evidenced by a skyrocketing EUP and UF6 conversion price. Once COVID-19 induced lockdowns in countries around the globe, these supply frailties became even more exposed.

In recent weeks, the U.S. Department of Energy’s long-awaited Nuclear Fuel Working Group report was released, which outlines policies to help restore America’s competitive nuclear energy advantage. The shutdown of Cameco’s Cigar Lake uranium mine and Port Hope uranium conversion facility, in addition to Kazatomprom announcing significantly impaired uranium production that it will not make up the tonnes for, evoked even more bullish sentiments. While Port Hope has recently gone back online, Cameco clearly appears to want uranium inventories to be de-stocked no matter the cost. Kazatomprom has talked a similar language, stating that the carry-trade of uranium has become increasingly obsolete.

Baby-faced uranium players are seeking to capitalise on this positive momentum. Uranium investors will be hoping they don’t flood the market again!

Standard Uranium (TSX-V: STND)

Today, Jon Bey, President & CEO of Standard Uranium (TSX-V: STND), joined us to provide an exclusive announcement to our viewers. Standard Uranium is the first of this new wave of junior uranium miners.

Matthew Gordon interview Jon Bey, 2nd June 2020

The Background

Standard Uranium (TSX-V: STND) is a Canadian uranium early-stage exploration company. The company conducted its IPO on the 29th of April. Standard Uranium’s primary focus is on its Davidson River flagship project, which lies within the Southwest Athabasca Uranium District; however, the project itself lies just outside the Athabasca Basin (renowned for uranium discoveries). I wanted to know if Bey could deliver a highly-prospective plan to investors in a reasonable timescale. It’s early, super early, but they are in the right postcode.

The Business Model

Standard Uranium’s first port of call is to make a uranium discovery. Standard Uranium does not want to develop Davidson River and flip it. Instead, Bey thinks he has assembled a team that can take the project all the way through to production in a new uranium bull market. That is the stated intent. The team appears to have the specific locational experience needed, and the Davidson River project itself is untouched; Bey regards it as highly-prospective.

Prior to 2012, the Southern Region of the Athabasca Basin was unavailable for exploration courtesy of coal/oil & gas reserves. However, when radioactive boulders were discovered in the region, it was opened up for exploration. The Triple R deposit was uncovered as a consequence, which was eventually taken about by Fission Uranium. Fission’s flagship project, The PLS project, is host to the Triple R deposit. Standard Uranium acquired its project in mid-2017 after a 3-year long legal dispute. NexGen and Fission Uranium were making exciting discoveries in the surrounding area at the time while Davidson River went untouched, and Bey felt confident Standard Uranium could replicate the success of his uranium peers. After all, Davidson River sits in the same conductor as these existing uranium projects: the Patterson Lake conductor. The company spent the next 2-years studying geophysics to see if the patterns indicated the existence of the conductor.

Exclusive Announcement

As we began to ask questions about how Bey intends to finance the development of Davidson River, he dropped the news that his company has signed an engagement letter with Red Cloud and Eight Capital to raise C$3M. The capital will consist of a combination of combined hard dollars and flow-through dollars. C$2M has immediately been assigned to drilling operations at Davidson River. The drilling should start in mid-July 2020. This should get the Standard Uranium train rolling. With generalist investors looking at uranium again, it will be interesting to see how the market reacts to this new wave of uranium juniors entering the fray. Bey hopes the deal will be closed by the end of June, notwithstanding continued COVID-19 disruption.

Moving onto the G&A side of things, Standard Uranium practices a “very low” remuneration policy. The monthly remuneration burn rate is c. C$25,000. This is aided by certain management members being contracted on a part-time basis. Bey himself claims to have spent the entirety of 2019 taking a salary of next to nothing in order to cover costs. He has instead been paid via shares. It appears at this point that he is quite well aligned with shareholders, as is the rest of the management team and board.

I think that Standard Uranium is just the beginning of a wave of new uranium junior entrants. Thor Mining announced its entrance this past week: a team with little uranium knowledge and a business that has failed to deliver its tungsten/molybdenum project and presided over 2-years of falling share price. The uranium space needs teams who understand uranium and aren’t switching horses mid-race. The uranium space is starting to really heat up and generalist investors are coming back. However, not all uranium companies will work, even in favourable market conditions. It’s important to keep yourself locked into for the latest news and insights into the wild and opaque world of uranium.

As for Standard Uranium, what did you make of Jon Bey? Do you think his company has what it takes to compete in this new era of uranium interest? Comment below and we will respond.

Company Website:

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

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

Plateau Energy Metals (TSX-V: PLU) – A Light At The End Of The Tunnel For This Uranium-Lithium Player?

The Plateau Energy Metals company logo
Plateau Energy Metals Inc.
  • TSX-V: PLU
  • Shares Outstanding: 99M
  • Share price: C$0.29 (28.05.2020)
  • Market Cap: C$26M

Interview with Alex Holmes, CEO of uranium explorer and lithium developer, Plateau Energy Metals (TSX-V: PLU).

Uranium and lithium have been struggling in recent years. Spot prices have fallen to uneconomic lows and uranium and lithium companies have been struggling to stay afloat.

Plateau Energy Metals has a couple of great uranium and lithium projects, but will they ever see the light of day?

We Discuss:

  1. Company Overview
  2. Uranium: Overview of the Macro and Plans for the Asset
  3. Cash Position and Money Needed for Uranium Asset’s Development
  4. Lithium: A Breakdown of the Project
  5. Lithium Market Overview: Survival Mode vs Building Value
  6. Recent Raise: Are People Believing in a Positive Future for Lithium?
  7. MOU for SOP: Structure and Reasoning
  8. Reassurance for Shareholders Stuck in 2 Difficult Markets

If you are a uranium market spectator, feel free to check out some of the recent uranium articles on our platform as well as one of our most recent interviews with a uranium mining company. While you’re at it, why not check out another lithium interview or another EV-revolution-related article?

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.

The Plateau Energy Metals company logo

GoviEx Uranium (TSX-V: GXU) – How Is This African Uranium Developer Progressing?

The GoviEx Uranium company logo
GoviEx Uranium Inc.
  • TSX-V: GXU
  • Shares Outstanding: 439M
  • Share price: C$0.15 (18.05.2020)
  • Market Cap: C$66M

An interview with Daniel Major, CEO of uranium developer, GoviEx Uranium (TSX-V:GXU).

The NFWG report dropped recently, and uranium companies have been clamouring to give their take on proceedings. Major is a seasoned uranium mind. What did he make of the report? He isn’t surprised. He only thinks the document will benefit a few players, while the rest of the document is geopolitical.

What about GoviEx itself? The uranium junior is continuing with its revised PFS at uranium project, Madaouela. The aim is to prove it is just as economic as Cameco’s McArthur River uranium mine in a slightly lower price environment, sub-US$50/lbs.

We Discuss:

  1. Nuclear Fuel Report: Opinions and Insights into Geopolitics, Renewable Energy and Benefits to Non-US Miners
  2. Buying Uranium: Predictions on Price Movement
  3. GoviEx Affected by COVID-19: PFS Reset and Reasons for it
  4. Ablation: A Non-Commercially Understood Technology
  5. Linkwood Loan Repayment: An Update on the Situation
  6. Niger as Jurisdiction: Dealing with COVID-19 and Potential Terrorism Threats
  7. The Numbers: Raise, Cash Position and Burn Rate
  8. The Future: Ideas on JV’s and Partnerships

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

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.

The GoviEx Uranium company logo

Bannerman Resources (ASX: BMN) – Can This Uranium Junior Get Financed?

The Bannerman Resources company logo
Bannerman Resources Ltd
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.04 (18.05.2020)
  • Market Cap: A$39M

Crux Investor recently carried out a hard-hitting interview with Brandon Munro. He is the CEO of uranium developer, Bannerman Resources (ASX: BMN).

Throughout this uranium bear market, Munro has been an excellent source of uranium knowledge. However, it’s important to remember that he himself is CEO of a uranium junior, Bannerman Resources.

In this interview, we discuss Bannerman Resources. The company has an excellent flagship uranium project, Etango, in a prospective mining jurisdiction, Namibia, but the CAPEX is enormous. If Bannerman Resources can get financed, investors could be on to a uranium winner. Can it? Let’s unpack this…

We Discuss:

  1. Company Overview
  2. The Uranium Market: Supply & Demand Fundamentals
  3. Etango Project: What Have They Got?
  4. $800M to be Raised by a $40M Company: How? What is Plan B?
  5. Update on the DFS: Why it Won’t be Completed
  6. Geo-politic Tensions: Penalties for Partnering with Chinese Funds?
  7. Namibia as Jurisdiction and Potential of M&A
  8. Securing Partner Interest: Grades, Uranium & Share Price, and Contracts
  9. Cameco and Kazatomprom Leave Little Chance for Juniors: Opinions and Insight
  10. Team Experience and Track Record: Are They Prepared?
  11. Future Possibilities and Reasons for Optimism
  12. Timings for Progression and Means of Getting There
  13. Management as Shareholders: Still Buying?

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

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.

The Bannerman Resources company logo

Dustin Garrow – Exploring The Intricacies Of The Uranium Space

Homer Simpson, nuclear safety advisor for Springfield Nuclear Power Plant, holds a uranium rod while wearing protective gear.

Conversation with Dustin Garrow, Managing Principle of Nuclear Fuel Associates.

It’s been an eventful few months for the uranium space. Back by popular demand, uranium-expert Dustin Garrow returns to the Crux Investor platform to discuss some intriguing areas and shed some light on some nebulous themes.

We start by discussing the Nuclear Fuel Working Group’s report, and what it could mean for the uranium industry, both domestically and internationally.

Then, we move into the fundamentals of uranium supply and demand, including Garrow’s personal projections for the uranium price.

It’s an incredibly interesting watch for uranium investors and generalists.

We discuss:

  1. Nuclear Fuel Report Announcement: Opinion and Expectations
  2. Time of Benefit to Uranium Miners: Anything to Look Forward to?
  3. Building the Reserve: What it Means for Producers
  4. Supply and Demand Fundamentals: A Singular Source of Clarity
  5. Price hits $30: Will it Hold, Rise or Drop Away?
  6. Cameco: Contracts, Terms and Delivering Results
  7. Identifying Winners and Losers: Knowledge of Putting Together Deals
  8. Mood in the Market: Optimism for the Future
  9. What Will Make Generalists Come Back to the Uranium Space?

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.

Homer Simpson, nuclear safety advisor for Springfield Nuclear Power Plant, holds a uranium rod while wearing protective gear.

Bannerman Resources (ASX: BMN) – Feeling like we could do right (Transcript)

The Bannerman Resources company logo
Bannerman Resources Ltd
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.04 (06.05.2020)
  • Market Cap: A$43M

We recently had the pleasure of interviewing Brandon Munro. He is the CEO of uranium developer, Bannerman Resources (ASX: BMN).

Munro has been guiding us through the complexities of the rapidly changing uranium market, but today, we talk to him about his uranium company, Bannerman Resources.

Etango, their asset, is in Namibia. A country well versed in uranium mining with two of the world’s largest uranium companies, Rossing and Husab, operating there. Munro talks us through optimisation of the DFS, but also explains why he is in no hurry to complete it. Seems counterintuitive but his rationale is solid. We also address the most common question that detractors throw at the company: the CAPEX is just too big for them to be financed. He gives us his answer to that and also talks about contingency planning.

So can bannerman Resources get financed? And where do they do place themselves in this uranium cycle? They have a very experienced uranium management team which we like. They have enough cash to last a couple of years. It’s a large resource. If you buy into their ability to deliver the plan and raise cash, this is worth investigating. Munro oozes control. Are you a buyer?

We discuss:

  1. Company Overview
  2. The Uranium Market: Supply & Demand Fundamentals
  3. Etango Project: What Have They Got?
  4. $800M to be Raised by a $40M Company: How? What is Plan B?
  5. Update on the DFS: Why it Won’t be Completed
  6. Geo-politic Tensions: Penalties for Partnering with Chinese Funds?
  7. Namibia as Jurisdiction and Potential of M&A
  8. Securing Partner Interest: Grades, Uranium & Share Price, and Contracts
  9. Cameco and Kazatomprom Leave Little Chance for Juniors: Opinions and Insight
  10. Team Experience and Track Record: Are They Prepared?
  11. Future Possibilities and Reasons for Optimism
  12. Timings for Progression and Means of Getting There
  13. Management as Shareholders: Still Buying?

CLICK HERE to watch the full interview.

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

Brandon Munro: I’m well, thanks Matt. How are you?

Matthew Gordon: Not too bad. We haven’t spoken for ages.

Brandon Munro: Just like old friends.

Matthew Gordon: Hey, well, today we are not going to get your view of the world of Uranium. Today we are going to talk about Bannerman – much in demand. We have been asked by everyone. So, let’s do it. So, kick off, please. Give us that one-minute overview of what you have got at Bannerman and then we’ll get stuck into it.

Brandon Munro: So, Bannerman is Uranium focused. We have been in Namibia working on our Etango project since 2006. It is an enormous project. The total resource is 271Mlbs, and within that there’s a mining reserve of 130Mlbs. It is highly advanced, and we completed our DFS back in 2012, optimised it in 2015, again in 2017, and we have also got a three-year pilot plant through running our heap bleach demonstration plant to add to the advanced attributes of the project.

It is great being in Namibia. It is great having such a large project that’s advanced; it is got environmental and social permitting and also the credibility that we have within the nuclear sector and the Uranium sector counts heavily in our favour.

Matthew Gordon: Okay, thanks. Thanks for that. Now today, if you don’t mind, I want to feature on where you guys think you fit in the mix, okay? Because we have put great store by talking to the market and saying junior Uranium companies need to work out where they fit in this cycle and the next, and how they’re actually going to monetise them, what they’ve got for shareholders. Okay. But first, again, because for all types of audiences watching this, which is how it should be, there’s a lot of generalists moving into this space; I think it is worth going over the supply-demand component, albeit briefly because they can watch some of the other interviews we have done with yourself and people like Mike Alkin. So, can you just sort of give us a little overview about what’s happening in the market in terms of supply and demand?

Brandon Munro: Sure. So briefly, in terms of demand, there is steady growing demand within the Uranium sector, driven particularly by nuclear power plant growth in the far East, China, Russia, middle East, and the emerging world. And the absolute big driver of demand over the next two decades is China. So to put some numbers on that, the World Nuclear Association’s demand numbers are about between 2% per annum compound average growth rate, which is their reference case, up to 3.5% per annum compound average growth rate, which is their upper case scenario. And as many of your listeners would know, I’m reasonably familiar with those numbers because I chair the WNA committee that puts those numbers together. The big driver is China. And just to put the scale of their demand influence into some perspective here; by 2040, based on the upper case numbers, which is what I subscribe to when it comes to the China growth story, those upper case numbers point to China’s annual consumption of Uranium being more than all of the Uranium that was mined around the world last year. So, they will become an enormous player in this sector.

And 2040, for people who perhaps don’t follow the Uranium cycle, this cycle moves on a long bandwidth in the sense that reactors, they spend about five years in planning and permitting and about five years being built, and then they run for at the moment up to 80-years. So, when you’ve got a cycle length that long, 2040 is really just around the corner. China needs to be making its decisions in the next few years as to where it will source its Uranium by 2040. And if you subscribed to that number, like I do, that means astonishing implications for this sector, and who’s going to have the producible pounds that China can access by the time we get there.

 So, if we turn to supply, the Uranium sector today is very much a supply story. We have had oversupply since Fukushima in 2011, and that was because most of the world’s producers were happily producing into long-term contracts where the prices had been set during the last boom. So, when we saw a big drop off in demand, particularly in Japan, but also in Germany as a result of Fukushima, that 10% immediate hole in demand for Uranium did not receive a complimentary supply response. Those producers just happily kept producing into those contracts, and the utilities were keen to honour those contracts and they kept accepting deliveries. That produced a significant overhang in the market, which only started to be addressed three years ago. We have spent the last two years in quite a deep sector deficit, which has primarily been caused by the Kazakhs, which are the largest Uranium producers in the world, reducing their production by 20%. And also, because Cameco putting the McArthur River Uranium mine, giant Uranium mine, the largest one in the world into care and maintenance.

So last year we were running, by my modelling, about a 20Mlbs deficit and that’s on a total consumption annually of around 180M lbs. So that’s a big substantial deficit. Enter COVID-19, where we are seeing that deficit, by my numbers, doubling, most likely this year because we have seen various mine disruptions, and there’s been a lot of commentary on that that people can get from the other videos that you’ve done with myself and other Uranium market commentators.

So, you put those two together, you’ve got a very attractive demand profile that is distorted towards Chinese growth. And then you’ve got a supply side that creates what many, including myself, believe is a spectacular investment opportunity in the near term in Uranium.

Matthew Gordon: Fantastic. And we are going to answer, at the end of this interview, some more questions about China, so we’ll come back to that one. What I want to go into now is what have you got today? So, we have talked about your 271Mlbs project. So, let’s get into the asset itself, because where I want to get to, Brandon, is for you to tell me how this thing gets financed and the economics and so forth. But let’s remind people of what you have got first.

Brandon Munro: So, Etango is an open pit Uranium project. It is close to all of the infrastructure, including the mining town of Swakopmund. We are about 20km from China General Nuclear’s Husab Uranium mine, one of the largest in the world. And we are slightly further from the Rossing Uranium mine that CNNC recently purchased from Rio Tinto.

We are close to all of the infrastructure that you would want. We are not relying on third parties to build roads, highways, railways, pipeline ports, et cetera. And we are in Namibia, which has successfully exported Uranium for 45-years and remains the fourth largest Uranium producer in the world.

It is a low-grade bulk tonnage project that not only is very, very large from a resource point of view, but exceptionally large from a production point of view. The average over the mine of life is 7.2Mlbs. And to give you some comparatives, that is enough Uranium to service the requirements of 17 large-scale conventional nuclear reactors.

So, we are an asset that will assist the large-scale deployment of nuclear reactor fleets in a very significant way. Now, that’s very unusual, that scale, and it is really only Nexgen who can compete with that scale, and they’re obviously in a different league in terms of the scale that they are talking about delivering into at some point in the future. But what we do have that is very important for investors to understand, we have the potential for producible pounds into the next cycle. As this cycle heats up over the next three to five years, we have all of the long lead items in the bag already. We have environmental approval. We have the social impact assessment approved in Namibia. We have the infrastructure in place. Obviously, we have got the DFS and a 3-year pilot plant under our belt. All of those factors that traditionally in the Uranium sector take an enormous amount of time and risk are already there for Etango and for Bannerman. And so for an ASX listed company, we think that puts us in a very unique and special place.

Matthew Gordon: Okay. But I think that the problem the market sees with your project, and if I’m looking at your share price, it is going to bounce along at 4 cents for a long time. Since you know, the last 3-years or so, people just don’t get how you as a USD$40M market cap coming is going to get USD$800M of funding and where are you going to get it from?

Brandon Munro: And that’s a fair criticism if you believe that our only option is to go down a conventional financing route. Conventional financing route from where we stand today would look ugly and it would be very unlikely to deliver shareholder returns. And our board, and myself, we are acutely aware of that. And there are alternatives, particularly when you’ve got the scale and the strategic importance that we have. There’s obviously the potential to do joint ventures at an asset level. There’s a potential to obtain soft debt export financing type grants. To give you an idea of why we think those are realistic avenues to go down, that scale, as I mentioned, at full scale: 7.2M lbs per annum, that services 17 nuclear power reactors of one gigabyte scale. The capex to build those reactors is about USD$80Bn, assuming that the Chinese are building them efficiently. So that USD$800M is 1% of that. So, the concept of getting soft debt from one or more utilities, or sovereign debt, to ensure that their investment of USD$80Bn is fuelled over the long-term with money that they would receive back once it is in production; I don’t think that’s unrealistic. And I think those numbers have a relativity that really makes that a coherent path forward.

And of course, the vertical integration option is certainly a well-worn path in Africa for delivering exceptional shareholder returns. As we saw during the last boom with Extract Resources being taken out for USD$2.4Bn, Mantra being taken out for over USD$1Bn, cash, by sovereigns, because they’re in Africa.

Matthew Gordon: Okay. So if I may, sorry to interrupt, but Brandon, I mean, I kind of buy that vertical integration idea, but you’ve got to make it a reality and you’ve got to do it. You talked about soft debt there; I’d love to understand what that means. It is got to happen. And with the company at your scale, you’re going to have to do it in a way that shareholders actually benefit from this thing. And it is not just a deal for whomever comes in. Presumably, I think you’re indicating Chinese there. Have you got alternatives in case those numbers don’t work your way? Are there smaller, earlier-to-start type models that you’ve been looking at?

Brandon Munro: Yes, we do, and we have flagged in our quarterly report that we are looking at smaller scale operations where we can get into production at a smaller scale. Now, often what you see in bulk tonnage mines is they rely very heavily on economies of scale, and at 20Mtpa through the processing plant, Etango is a bulk tonnage operation, you won’t get away from that. Where we are very blessed though, is we have got an unusual ore body: apart from being very homogenous, very simple, very large, it outcrops, and about the first 50Mlbs have got a very, very low stripping ratio because of that. So that gives us quite a lot of flexibility to dial down our potential production. And what we hope is that by dialling it down to that level, the benefits that we get from reducing that stripping ratio, not only counterweigh whatever economies of scale that we give up, but we are hoping that that might produce an economic benefit as well. And clearly, that’s going to go very heavily to that headline capex number.

 So, what we would then have is two horses in this Uranium race. We have got an enormous battle Strider, which is capable of pulling even the heaviest of carriages, and then we have got a more sprightly thoroughbred that can run the shorter races a lot faster. And we don’t see one as being preferable to the other. They will just each of those potential projects, if the smaller scale works for us from a numbers point of view, each of those potential projects will suit a different market and different end-users with different levels of appetite. And once we have done that work and completed it, and on the assumption that the numbers come through in our favour, we expect that that will really position Bannerman in a very, very different way. And it certainly goes to the investor concerns that you’ve just highlighted.

Matthew Gordon: Okay. So, another one; these are the sort of questions that are coming in from subscribers and so forth. So, you’ve got a DFS. You originally came out in 2012, you optimised it in 2015 and then again in 2017. Are you done with that? I mean, obviously, you’ve got the smaller scale potential that you’re looking at. But with regards to the large-scale project, is the DFS complete now?

Brandon Munro: Well, with an enormous project like this, you never actually sit on a DFS. Well, assuming that you’re still a believer in Uranium and you’ve got a company that wants to produce, you don’t sit on a DFS like this. When it is this big, even small wins, small reagent wins can add millions to your NPV. And that’s what we have been doing. So, you’re right; the last optimisation study that we did on the DFS was 2017, that coincided with the completion of our three-year pilot plant program. We have just announced a membrane test work completed to a DFS level. That’s a big win for us because we save an enormous amount on acid, as an example, so acid is our biggest reagent, once we can put a number on that acid, and I’ll come to the DFS update in a moment, once we can put a number on that acid saving, we think that for the large scale project, that will be a tremendous boost to our NPV. And even the smaller reagent costs, like if we can recover 80% of the asset from the processing flow sheet, which those definitive level membrane test work has proven, that’s a big saving on neutralisation reagents. Neutralisation reagents might only be several cents in the pound, but that adds a chunk to NPV when you’re at this sort of scale.

Now, what we need to do at the end of all of that is to glue those pieces together via an updated DFS. And that’s the DFS update process that we have been undergoing for a long period of time now. And I just want to explain that that’s not a process that I’m in a hurry to draw to a conclusion.

Matthew Gordon: Why not?

Brandon Munro: Well, first of all, once we draw that to a conclusion, we lose the opportunity to continue optimising and working through the mid-priority level optimisation targets, and we are getting a huge return on investment at the moment because we can do most of that work in-house using our existing resources with a little bit of help can buy from consultants.

But the bigger issue is this: if we were to say, right, the market wants us to update the DFS, or we need the news flow, or you know, we think it’ll make our share price go up or something like that and we still see another 6-months or 12-months before the market turns significantly in our favour, we have now got a DFS update that’s immediately starting to go stale. But what’s even more relevant is when you’re going to procurement on a DFS and you’re asking suppliers of consumables or capital equipment to bid, if they don’t see that this project is about to be built, they feel like they’re negotiating against themselves. And the big engineering firms who are asking the questions, they’re just filing away their numbers to be compared against competitors. You’ve got to get them bidding with this procurement at the point where they think you’re about to start financing and construction, and they’ve got a chance of being selected as the providers of that equipment, that reagent, et cetera, et cetera. So, I’m not in a hurry to do those DFS update because I want the best numbers and numbers that are indicative of what we can build this project at. And if it means that I’m leaving quite a lot of value on the table at the moment, it hurts. It hurts to see the share price. It hurts to see some of the questions like you’re posing at the moment about capex and so on, but that’s still the best way of creating longer-term shareholder value, in my opinion.

Matthew Gordon: What’s your preference? The large-scale project, cause you think scale is your friend or do you think that you’d like to be able to get into production early on this outcropping part of the ore body?

Brandon Munro: Well, the nice thing is that I don’t need to choose between the children anytime soon, but really strictly, I can’t start expressing preferences until we have seen and published the numbers from the smallest scale project.

Matthew Gordon: But are you not nervous about raising USD$800M? Have you had conversations with, let’s say, the Chinese, because that seems to be what your PowerPoint is suggesting. The Chinese are the ones who are most likely to fund this aren’t they?

Brandon Munro: Well, by, for the reasons of demand growth that I described, you’d say so; there are three Chinese utilities, all of whom will have very significant Uranium demand requirements. One of those doesn’t have any owned production. The other two have mines in Namibia that they control and own. But in this game, you’ve also got the Russians, you’ve also got middle Eastern groups who are going to require that degree of production by then. You’ve got South Korea who are looking at an export strategy after successfully completing the BRACA project in UAE. Poland is looking at turning on six or seven reactors. So, there are a number of different groups, but yes, it is primarily the Chinese. When you look at –

Matthew Gordon: Have you had conversations?

Brandon Munro: No.

Matthew Gordon: Why not?

Brandon Munro: Number one, it is the wrong time in the cycle to do that, as you’d well known from your banking background, you don’t want to go knocking on the door when the perception is you’d be on your knees. But the second thing is that we are right down the road from these guys. I see them a couple of times a year at WNA events. We are still at the getting to know each other stage. So, we don’t need to open up those conversations and I wouldn’t want to at this point, in any case. Realistically, we still need more tension in this Uranium sector before we’d be able to test some of those financing alternatives that I described.

Matthew Gordon: Okay, so given the current tensions in the marketplace between the US, Russia, and China, do you think you would be penalised in any way by talking about buddying up to the Chinese?

Brandon Munro: Oh, well, I mean if we did so, it would depend on what buddying up means. But, I mean, look –

Matthew Gordon: I mean by taking their money.

Brandon Munro:  Well, if you sequence it with a degree of production control, yes, I think you probably would, it would all depend; it would all depend on what their, how much money they’re giving for what level of control. So, the soft debt model that I articulated, that would realistically involve providing say a 25% offtake. There would be no point providing all of the offtake in return for soft debt or you’re not generating any value. But I think to provide a USD$700M soft debt component, you’d still have to offer up something substantial, of course.

But as we have seen with their model in other parts of the world, I don’t think that would then lock us out from selling Uranium contracts into anywhere else in the world.

Matthew Gordon: Not even in the US?

Brandon Munro: No, I don’t see why. I don’t see why. If you look at Rossing, they sold to China at the same time they were selling to the US. Husab has contracts into US utilities even though that is fully owned by the Chinese, they have to sell 25% of their Uranium onto the open market. And CGN have been very active trading. So maybe with a US-owned utility, and there’s only two of them, it might be an issue, but the other utilities are happy to buy on the open market. And for them it is going to come down to terms and price and seeing a big brother behind you would probably count in your favour because it just demonstrates financial strength.

Matthew Gordon: So, Brandon, tell me about Namibia. You know, what is the Namibian government doing? Obviously, it has got a track record of Uranium mining, but as a jurisdiction that’s investible, you know, if I look at North America, you know, North American investors, they look at Africa with some trepidation because they’re not quite sure about the mining code there and the ability to mine with that impediment. So, what has your experience been?

Brandon Munro: I think the first thing to understand is that Africa is a very big place, as you well know, but not everyone who is looking at it from a Canadian or a US perspective might really understand. So to compare Namibia with some of the African countries that have produced good films, is a little bit like comparing Canada with Nicaragua, or compare Canada with El Salvador, or you know, it is that type of comparison that just doesn’t follow. But specifically, on Namibia, it is a very, very good operating environment. And I believe that I’m qualified to say that, apart from being involved in Namibian companies for a decade, I lived there for more than five years with my wife and young children. It is very safe. In all of that time we didn’t even have a car broken into, let alone any issues. It is very secure. It is politically stable, very low population density, second only to Mongolia in the world. And so that relieves it of a lot of the challenges that much of Africa faces. And you only need to go to the Fraser Institute rankings to realise that Namibia is right up there with Botswana as being in a league of their own in Africa. And that helps in terms of foreign investment. It helps in terms of operating on the ground in Namibia. And then what you can do is, you can impose an overlay, which is Uranium operability.

And I can’t emphasise this enough; if you’re developing a project, the jurisdiction and the infrastructure and the capacity to export your product is enormously important because you’re not only relying on what you control within the mine gate, you’re relying on the external infrastructure too, but also government infrastructure. Exporting Uranium requires an entire government department, to not only be set up and functioning in a country, but interacting with the IAEA in Vienna and various other agencies. And that can’t be turned on overnight, particularly in developing countries that often lack capability. So, the fact that that’s been ongoing throughout Namibia’s 45-year history of exporting Uranium is vitally important.

The other final point I’d make is, socially, what a pleasure working for a Uranium company in Namibia; most of Swakopmund where I lived initially and where, which is the closest town to us, most of Swakopmund was built off the back of Uranium. People appreciate it. They don’t see it as some zeitgeists or some problematic commodity in the same way that you get in many parts of the world. There isn’t that political backlash there. It just doesn’t exist in Namibia, which I obviously find confronting sometimes in my hometown of Perth, in Australia and elsewhere that you go. So Namibia is really in a class of its own, and I’ve said this before and I’ll say it again and I’ll put my reputation behind it: Namibia is the best operating environment for developing a Uranium mine on the planet when you take all of that into account. It is not perfect. No jurisdiction is. But in terms of getting a Uranium mine to market and getting your product out and getting it financed and getting political and community support, it is the best jurisdiction on the planet.

Matthew Gordon: There’s a few companies operating in Namibia, there’s a lot of chat at the moment about roll-ups, and M&A, are you open to that?

Brandon Munro: I think you’d be a negligent CEO if you weren’t. If that’s the route that delivers the best result for shareholders, then there’s really only two reasons that would get in the way: ego or negligence. And neither of those are a problem for me or my board for that matter. So, we were open to anything that makes sense and delivers shareholder value.

Matthew Gordon: Are you in discussion at the moment?

Brandon Munro: No.

Matthew Gordon: Let’s talk about grade. It is a low-grade bulk operation – nothing wrong with that. But obviously, you’ve got to be very efficient in terms of the way that you process this and you’re going through that with the DFS in terms of various optimisations, I get that. Okay. But how do you make money? How do you drive share price? Because at the moment, it is a waiting game; you are waiting for the price of Uranium to recover. What does it need to get to, and what types of contracts, term contracts will you need in place to be able to get this thing, one financed, and two, therefore running and off the ground? Because you talked about a 3-year timeline, which is great, but it doesn’t factor in the financing component.

Brandon Munro: So, I’ll have to talk through the 2015 numbers. And so, for someone who’s joining the video at this timestamp, please go back and listen to everything I’ve said about improvements that we have made since then. But using the 2015 numbers, we have got a breakeven of USD$52. And at USD$75/lb, we have an attractive NPV of USD$419M for our project. That is post-tax NPV. So, at USD$75, we make great money. At USD$51/lbs, we don’t break even based on those numbers. And this starts to look like a really good project from say, USD$65. Where it really shoots the lights out, because of its pure scale and the degree of leverage we have got is if you build into your model assumptions of a long-term Uranium price of above USD$75./lbs And quite frankly, if you’re a Uranium investor and you’re not working to that scenario, then you know, perhaps you either misunderstand what the dynamics are in this sector, or you’re just in there for a short-term trade, because that’s why I’m in Uranium and I think most of the people who are on my register, that’s why they’re in Uranium as well.

Matthew Gordon: Okay. I had a question thrown at me yesterday from, again, there’s a lot of people coming into this who have not been through, you know, the last three, four years and they’re just coming out at new. So, they’re saying, well, Cameco and KazAtomProm, surely they’ll just turn the volume up and they will start producing to meet the world’s needs, right? It is fine. So, people like you have got no chance. You don’t have a place at the table. And you are as likely to be taken out by those two players as anything else. I mean, how do you answer that question?

Brandon Munro: Firstly, fair enough; with someone coming into this sector to look at the numbers and come to that sort of a conclusion that the idled mines can simply fill in the production. There’s one really important thing for any Uranium investor to understand, particularly those folks who are coming to this story for the first time, and that is that there is a very substantial level of depletion of mine-produced Uranium that is starting from next year that becomes critical by 2025, and an enormous challenge for buyers of Uranium by 2030. And if you want to see those numbers, probably the best place to go to is the latest Bannerman presentation that you can get from our website because we do set out the curve there.

But just to put some of those depletions into context, we have got the Cigar Lake mine, the largest currently operating mine in the world. That is due to run out of reserves by 2027. There are mines in Niger which are being closed from next year. You’ve got the Ranger Mine, which has been an enormous producer over many years, closing next year. You’ve got numerous smaller mines closing over that period and you’ve got Kazakh production, which is in situ recovery, which tends to have a longer tail as those mines grow longer in the tooth. And so, you’re seeing depletion on that timeframe of most of those Kazakh mines just because of the nature of in-situ recovery and the way that their production profile tapers over time.

So yes, there is the capacity, obviously, for some of these idled minds to come on at prices before Bannerman gets into the race. But the point is that this sector needs Etango from 2025 because of all of these other mines that have run out of ore and the level of production depletion. And like you said at the beginning, you know, Etango fits into the mix. We are going to need all of the producible pounds in this sector, particularly when you recognise that many of the projects out there won’t be capable of producing pounds in that timeframe.

Matthew Gordon: Okay. We have always talked about the need for an experienced management team, and I don’t mean in the sense, in the normal mining sense, I’m talking about Uranium is mining, but it is mining plus, we call it; which means that it is got its own peculiarities. It is got its own quirks and it has got a series of quite complex and regulated activities too. We are dealing with radioactive matter here after all. So, what’s your team got? What’s the relevant experience here? Have you put Uranium mines into operation before? Do you know how to sell product into the market? Can you get deals done?

Brandon Munro: Yes, look, I certainly agree with you, mate, and I like the word ‘mining plus’, but I’d call it, ‘mining plus plus plus plus plus’, because you’ve got the social aspect, you’ve got the political aspect, you’ve got the radiological aspect, you’ve got the environmental aspect, you’ve got the interest group aspect and you’ve got a very complex market to add to all of that. So, to answer your question, absolutely. And we are very privileged like that because there is only a small talent pool to go around in the Uranium sector. It is been a bear market for a decade. And it wasn’t particularly cool before that either. So many of the people in this sector are advanced in experience if we can put it that way and falling away. Many of the people that I met when I joined the sector back in 2009 just aren’t around anymore. They’re not working anymore.

So, as many of your audience would know, I’ve got a profile in the nuclear sector and I understand the market and the dynamics quite well, but that’s not the same as operating and building mines, of course. Our chairman in Namibia and our non-executive director is Mike Leech, so he was the managing director of the Rossing Uranium mine when that was the largest Uranium mine in the world. For 15-years before that, he was the CFO at that mine, responsible for contracting and all of the other aspects of interacting with the Uranium market that you would expect in Namibia. Our managing director in Namibia is Werna Ewald. He was mining manager at Rossing and he has also been very involved at a leadership level in the Chamber of Mines of Namibia. Born Namibian, very, very well regarded. He obviously understands this precise style of mining very, very well.

Dustin Garrow, who has been on your show; quite successfully, judging from all the Twitter comments, Dustin is our strategic marketing consultant. Not only has he been in the nuclear industry forever and knows everybody, but he sold Uranium from Namibia for Paladin for many years. Any of the nuances of selling Namibian Uranium into the world market, including some of your questions that you answered before, he is all over. He’s across all of that, and obviously a fantastic person to have as part of the team.

And so that’s the Uranium specific experience and we certainly believe that that gives us enough experience at the senior level to then be able to infill the middle management and other operating jobs that we would need to do. Particularly given that Namibia has got a long history in Uranium and there’s plenty of very capable and well-experienced folk that you can draw from there before you even need to start looking at ex-pats, et cetera.

Matthew Gordon: Okay, so that does answer that one. That’s quite a good summary, actually. Come back to this price component. Okay. Because there’s something that it is just niggling away here. If you are, or do have conversations with Chinese utilities who need to, you know, they need a lot of pounds, given the numbers that you were mentioning there. They have a very different set of needs from the company and the shareholders, in the sense that you’ve got to work out how to capture value and not just give it away because you know, the utility just wants the pounds. They couldn’t care less what your share price is, right? So, they could step in today and secure it all. But that’s not good for you. It is not good for shareholders. So, your conversations and your timing is really, really important. But needing USD$52/lbs to break even when you look at USD$33/lbs today seems a long, long way away, and getting to USD$75/lbs, it feels even further away. So, what does the next 12-months look like for you at Bannerman and what do you need to happen in that timeframe?

Brandon Munro: Yes, great question. And I think you can look at that from two perspectives: from the inside of Bannerman, I can answer that and then I can attempt answer that from the perspective of an investor as well. Inside Bannerman we have got our work cut out for us. We don’t run a big team, we keep our overheads low. There is plenty of value addition that we have got lined up for the next 12-months. And so, from managing a team and managing a project and adding value to that project, I’m quite comfortable if that’s how long we have got, because there’s a lot that we can do in terms of NPV accretion, et cetera, et cetera. So, I’m not worried from an internal perspective.

From an external perspective, and how investors would look at this, there’s something that you sometimes see amongst retail investors on Twitter and elsewhere, which is that they look at the gap as you have between USD$33/lbs and USD$52/lbs or USD$75/lbs and they seem to think that this is a binary question: Bannerman is worth X today at USD$33/lbs and it is worth 100 X at USD$75/lbs. So, I might wait until we are at, you know, until we can see USD$75/lbs on the writing on the wall before I’d want to step into a stock like that. But the reality is it doesn’t work like that. We are a heavily leveraged play. And if you look at any of the other sectors where big leverage companies have emerged from that transition from a bear market into a bull market, they’ve revalued at every single step; every transition between X and Y. And that’s what we will see with Bannerman.

And so, and that’s, if you look at our register, we have obviously got a very large component of specialist Uranium funds. Now, they’re in their own category because they are strong believers in the thematic and the fact that there’s, as we stand, 22% of our register is in the hands of those funds, just demonstrates that they don’t have a problem with USD$75/lbs, but we have also got about another 20% of generalist resources institutions on our register.

So, a retail-investors should ask themselves, why those guys there? And they’re there because they see Bannerman as a series of stacked options, leveraged options to the Uranium price. They know that as Uranium price goes from USD$30/lbs to USD$35/lbs, we see a leveraged effect in Bannerman share price because of our scale and the fact that we can deliver producible pounds into the next cycle. Same from USD$35/lbs to USD$40/lbs. Same from USD$40/lbs to USD$45/lbs and so forth.

And for many of the institutions on our register, they treat them as stepped options. As it goes to USD$35/lbs, some of those institutions will say, right, do I rewrite that option by holding or do I cash that option in? Because I’ve now seen Bannerman share price double, for example, and therefore I’m going to cash that option out and take it off the table? And retail investors, I think, can include Bannerman in their portfolio in a very similar way. And you know, if they’re holding on a multi-year, multi-bagger for when we do get to USD$75/lbs, then that’s fantastic. I look forward to seeing them at the party when we do get there.

Matthew Gordon: Okay, so you’re talking about being a leveraged play, and can you just give me your definition of what you mean by that?

Brandon Munro:  Yes, so it is a conventional definition of a leveraged place. So, you’ve got very, very large production capability that exacerbates and multiplies the movements in value compared with the movement in value of the underlying commodity.

Matthew Gordon: Okay. So, basically, people need to believe that this thing will get into production. And I think there are companies that we have interviewed that won’t. So, people need to believe that you’ve got the capability and the knowledge and will be able to get the finance to be able to get this thing into production to be able to accrete value up that, those steps as you’ve described. And you feel you’re will?

Brandon Munro: Yes. Well, I guess we haven’t talked about financing capability. We are a lean team with a lean board, but our chairman, Ronnie Beevor, he’s an investment banker, ran Rothschild in Australia Pacific for many years. You know, this was his bread and butter even at this scale for many years. Ian Burvill is also on our board. Ian was a partner of Resource Capital Funds, still the largest PE resources, PE firm in the world. Ian worked for Rothschild before then so there isn’t anything about financing that between them, Ian and Ronnie don’t understand. And whilst I wasn’t a project finance lawyer because of the corporate and the M&A background that I’ve got, I interacted a lot with that. So, I think I understand the process relatively well, at least well enough to be able to set out a strategy for that.

Matthew Gordon: Okay. I look forward to sort of seeing what you actually do over the next 12-months because I think that the Uranium space has gone through some rapid movements recently, but it needs to move more for people to believe that this thing’s going to happen anytime soon. I mean, have you got a view on when you think you’re going to start to be able to have meaningful conversations in the context that you’ve described earlier? In a way that you feel a bit more in control, because the share price perhaps wouldn’t allow you to have a strong and robust conversation with a funder now, but at what point do you think you will be able to have those conversations?

Brandon Munro: So, in terms of the timeframe, as we have discussed on other occasions on the show, that’s a bit of a difficult one because all of the feedback that I’m getting is that utilities are really quite restricted at the moment with COVID-19 measures, whether it is working from home or dealing with some of the onsite challenges that they’re got at their reactors. So even as we see Uranium start to knock on the door of USD$35/lbs that’s not in itself going to be a trigger for long-term contracting because the buyers have got bigger fish to fry right now. And if they have to focus on their key priorities as Uranium goes through USD$35/lbs to USD$40/lbs well, so be it, from their perspective.

I still think that we are talking about end of this calendar year before we see substantive contracting take place. And I think that will benefit Bannerman and other Uranium companies because by then we will have a spot price that creates a more realistic base from which to achieve long-term contracting premiums from.

The other way to look at this, which isn’t so much a timing point of view, but is more of a price point of view, is that our project starts to look really interesting to a number of parties once they can see USD$50/lbs, USD$55/lbs, clearly. It doesn’t mean we need to have that price. It just needs to be that they can see that this sector has now emerged from the long-term bear market. They don’t need to see USD$136/lbs like we saw during the last boom. They don’t need to see term contracting at USD$95/lbs as we saw during the last boom. They need to see this price pushing through USD$50/lbs to USD$55/lbs, and at that point, the sovereign groups or the utilities or the groups that are looking at vertical integrations, they will start weighing up on the one hand, the relative simplicity of being a buyer of Uranium through long-term contracts at, let’s say USD$55/lbs versus the security of being an owner in some form of production at a similar price.

There are pros and cons on both sides of course. But that for me is an inflection point where Bannerman becomes a lot more interesting to those types of groups. And you asked me when I would start talking to those sorts of groups, for me that would be a clear marker that we have got sufficient tension in the market that I know that they’d want to be talking to me, but at that point that’s when I’d be interested in opening a discussion with them.

Matthew Gordon: Have you got enough cash to get you there?

Brandon Munro: Depends on the timeframe. We certainly have got enough cash to get through that first PR estimation. So, we have got USD$4.5M, based on our typical burn rate, that’s about eight quarters, so 2-years.

So, we have got enough money to see this calendar year out, next calendar year, and if we needed to go a bit further, we could. So, if we find ourselves not seeing conditions improve within that timeframe, well, it probably speaks bigger things about the market and something’s gone wrong somewhere. So, I would say we have, we have got the cash that we need to see that cycle through.

Matthew Gordon: Have you been buying shares?

Brandon Munro: Well, we talked about the project work that we have been doing, so I am out. It is a blackout period for Bannerman. And let me just tell you, the last shares that I bought on market last year were at about where the share price is now. So, I’ve been pulling my hair out, seeing sort of a global financial crisis type numbers on our share price and not being able to participate. But good luck to around who did, all of those supporters who got in there at USD$0.02 cents who have now seen a healthy return. Good on them.

Matthew Gordon: Right Brandon, I think that’s a great summary. We haven’t spoken for a long time about Bannerman. You’ve got something interesting happening. I hope that market does recover for you guys because I think Uranium has been battered. But I think people are excited again.

Brandon Munro: Yes. For good reason, for real good reasons. So, all those excited folks out there – many of you have waited a long time. Enjoy it because I think it is going to be a wild ride from here.

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

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Dustin Garrow – Uranium Investors, term-contracts explained (Transcript)

Homer Simpson, nuclear safety advisor for Springfield Nuclear Power Plant, holds a uranium rod while wearing protective gear.

Conversation with Dustin Garrow, Managing Principle of Nuclear Fuel Associates.

With a possible uranium renaissance finally on the cards, uranium investors will be clambering for all the content they can get their hands on. Well, this isn’t one they can afford to miss.

It’s been an extremely eventful few weeks for uranium. We had Cameco suspending its Cigar Lake uranium operation, Kazatomprom announcing impaired uranium production figures, and then the NFWG report. The report was tonally definitive: it’s time to restore America’s competitive nuclear advantage. However, there was a deficiency when it came to the specifics, particularly subsidisation figures and timescales, but it was just a policy document after all.

We were keen to gain some insight into the uranium space: Garrow was the man to ask. He’s a uranium market commentator and sits on a number of boards for uranium junior mining companies.

First things first, what is his take on the NFWG announcement? Was it what Garrow expected? Having been involved with the section 232 petition peripherally, Garrow is pragmatic about the working group outcome. While he appreciates the general message, he admits there was an expectation of many more specifics. He strikes a similar tone to Energy Fuels CEO, Mark Chalmers. This is a good first step and is just a policy document. He wants to see the DoE follow through with a robust, detailed plan to rebuild the American uranium industry; it’s the only away American uranium companies can compete internationally. Garrow also states that the timescale will be key: no commitment has been made beyond the 2021 budget, and American uranium players won’t be able to stick around forever. Worryingly, it looks like this plan will be a long time in the making.

Not only do uranium companies need to stick around and wait for the uranium price to elevate, they also have to wait for the entire American uranium infrastructure to wake up, including enrichment facilities. Garrow thinks uranium investors need to focus on the supply-demand fundamentals. The gap has never been bigger, and it seems likely this will be the final catalyst when the commercial market really starts to shift.

So, the U3O8 price has risen to US$33/lb. How will this price move in the short term? Garrow is aware there are numerous theories out there, but his instincts tell him that price discovery and the utility companies’ buying habits are like the chicken and the egg. Price discovery is driven by increasing demand from the utility companies, but Garrow thinks this demand is triggered by a rising spot price. Once the uranium spot price rises past a certain point, Garrow says this is a signal for utility companies to start buying again. Garrow thinks we’re still a little early, but remarks that several utility companies were making moves before COVID-19 in an effort to capture the long-term market. He’s hearing that some are in discussion with bigger American uranium producers about long-term contracts. These are exciting moments for uranium investors; best make sure you pick a winner! Garrow states there will never be a uranium mine built on the spot market, so keep that in mind when making investment decisions. Uranium investors need to pick winners and identify losers. Negotiating long-term contracts can be extremely complex and requires a specialist set of skills: skills that many uranium companies lack.

The general mood in the uranium space is optimistic. Uranium has been discussed in the highest levels of the White House, and there appears to be no doubt that the American government plans to follow through with its intentions. The government has also realised that the reactor space has become dominated by foreign powers. There are ZERO orders for U.S derived reactors in the foreign market. It’s very clear: it is time for the United States to catch up.

We discuss:

  1. Nuclear Fuel Report Announcement: Opinion and Expectations
  2. Time of Benefit to Uranium Miners: Anything to Look Forward to?
  3. Building the Reserve: What it Means for Producers
  4. Supply and Demand Fundamentals: A Singular Source of Clarity
  5. Price hits $30: Will it Hold, Rise or Drop Away?
  6. Cameco: Contracts, Terms and Delivering Results
  7. Identifying Winners and Losers: Knowledge of Putting Together Deals
  8. Mood in the Market: Optimism for the Future
  9. What Will Make Generalists Come Back to the Uranium Space?

CLICK HERE to watch the full interview.

Matthew Gordon: Dustin, how are you, Sir?

Dustin Garrow: I’m fine, considering the extended lockdown here in Colorado, but we’re up in Steamboat Springs, so it is not the worst place to be.

Matthew Gordon: No, it’s beautiful. Absolutely beautiful. And keeping yourself busy?

Dustin Garrow: Oh yes. I think, certainly with the improvement in the Uranium market, there’s been a lot of conference calls with investor groups that are either currently invested or are looking to come back in the space and they’ve seen the price go up some 40%. I see this morning it was, you know, above USD$33, and so it continues to improve. So, it gets a lot of attention.

Matthew Gordon: Yes. I mean, as a percentage, it has moved up significantly in the last two months for sure, after some period of flat-lining. But we spoke in September when you were in London for the WNA conference, we caught up there and talked about the marketplace and winners and losers and so forth. But a lot has happened since then. We have had a lot, we have got you know, the indeterminate shutdown at Cigar Lake. We have had KazAtomProm closed down for a 3-month period, or at least reduced their facility’s output. Namibia; Rossing, Husab affected, Australia -it looks like reduction in the numbers but may face closure depending on how they manage things. So, the market is sort of driving that supply-demand fundamentals story even further, even tighter to the cross point there.

We also had a fairly big announcement yesterday, and I do want to get your feedback and all of the above from the Department of Energy in the US about revitalising the nuclear energy complex there. So why don’t we start off with yesterday’s announcement first: it is short on detail, no numbers, no dates no sense of how money is going to be allocated, and I think the market was disappointed. If you look at the share price of some companies, I think they did drop pretty quickly after 12 o’clock. Was it what you expected?

Dustin Garrow: Well, I think, you know, having been kind of peripherally involved in the 232 process, which by the way, ended a year last July. And so, the Nuclear Fuel Working Group (NFWG) was an entirely new creation from the Trump administration. And I think with the 13 Federal Agencies involved, there’s always a little scepticism of how a group that large, representing such a diverse number of areas within the government are going to come together, which they did. But I think that there were some expectations of you know, more specific actions. I think they’ve laid out, obviously, there’s more direction. But I think as Mark Chalmers at Energy Fuels said, you know, this is the first comprehensive study of the US fuels cycle in decades. And so that’s an important first step. And the Secretary of Energy though made the comment that this is a roadmap. In other words, this will allow the government now to see their proposed to have a senior administration official oversee the ongoing process. I understand there’s even a call later today where the stakeholders, which would probably be producers, processors, certainly the utilities, NEI, will all have a chance, I think, to begin to discuss some of the details perhaps of how does this now get implemented.

And then I think one of the bigger issues though, Matt, is the length of time we’re dealing with. I mean, on the Uranium side, they talked about the Uranium reserve being put in place and it may be something that enhances the American assured fuel stockpile program, which was put in place actually back in 2012. And they put some numbers: 17Mlbs to 19Mlbs pounds beginning this year. But you can assume, is that a 10-year program, which they’ve talked about? Will there be some ramp up? Well, you know, again, those kinds of details are really lacking.

And the other that’s important is how do they allocate that? When they submitted their 2021 budget request, it said to keep at least 2 US Uranium mines in operation. Well, you know, first of all, that’s a pretty meagre domestic industry. You know, most of the projects are pretty small, in situ recovery mines, so do they actually mean specific mines? Companies? You know, what will be the annual volume?

The Secretary of Energy said yesterday, they don’t have a process for determining pricing, which is pretty important. I think the producers have told the government that they need, really, a long-term government commitment at reasonable prices, considering the production cost profile in the US. And it’s got to go on in order for it, allow them to raise capital to rehire people to, you know, again, restart their facilities. I think one of the issues, clearly, is they’ve stated that it’s only no commitment is made beyond the 2021 budget request. So right now, it’s a one-off situation. So anyway, yes, I think the market, the investment side was expecting more specifics, and they may come in time, but it may take a while.

Matthew Gordon: So yes, thanks for the answer. I think the thing that was missing as well was an indication of how it’s going to engage with the stakeholders. There’s a lot of stakeholders. There’s a lot of money to be deployed. There’s a lot of planning and economics to be worked out. The timeframe here is, or potentially, could take a long time to put together before anyone is in a position to make a decision about allocating budgets, and even then, it’s got to go through a congressional process of approval. Even though this is a bipartisan proposal, or recommendation, this is going to be a long time in the making. How do Uranium miners, because that’s what we’re here to talk about today, how do Uranium miners get an understanding or a sense of how they benefit and when?

Dustin Garrow: Well, again, I have been trying to make a determination of how the government is going to approach a newly created entity or activity. They may decide we have got to in put a lot of resources, we’ll have a lot of video conferencing. We will make decisions quickly. We’ll just have to have to wait and see. But you know, I think normally the government is very deliberate in how they do things. So again, it may take a while. And again, I think that one of the issues, there’s a lot of US producers, when you look across those that have existing facilities, those that have proposed developments that they’ve been working on for years. I mean, I don’t want to necessarily identify specific companies, but the list, as you point out, is fairly lengthy.  I just looked this morning at the in-situ recovery capability; if you look at all of the projects, existing, proposed, you know, it’s above 20Mlbs a year, which no one has, the most anyone has produced recently is below 5. So again, I think there will be a lot of stakeholders, as you say, involved, and it will be an interesting process.

Matthew Gordon: Okay. So, given the big thing we heard though was that the US government would be acquiring or servicing a Uranium reserve, you’ve talked about the 17Mlbs to 19Mlbs over a 10-year period. I mean, right now as it is today, I can think of a couple of companies that between them, they maybe could put together 1Mlbs today. They are also going to need to see the price recover to a point where it is economic for them to get their facilities back up and running. Of course, I’m referring to the 2 petitioners here in this instance, I know lots of people are throwing their hat in the ring about how quickly they get back into production, but they all need a price to be incentivised to do that. It’s nowhere near that at the moment. So, it is nice to see a spot price at USD$33/lbs but it’s going to be better for these companies to understand what the utilities are prepared to pay in terms of term contracts, however they’re structured. And we are going to talk about that later. So, that’s the only thing I’m seeing; building over reserve. What can it mean and what can investors interpret that as meaning for the companies that may be invested in US companies?

Dustin Garrow: So, what will happen on the project with the producers? Yes, I think that some have been preparing for the commercial market to improve to the point where they can be participants. But I think, as you know, it’s all about the timing and how long does it take? I mean, it’s like Fukushima, you know, Tim Gitzel at Cameco has said, he never thought 9-years later we would be where we are. Finally, the market is seemingly beginning to respond. So, I think that’s a, you know, a big factor for the US production industry, some have been able to benefit from long-term legacy Uranium contracts, which has kept their operations going. Those have pretty much run out, or they’ve moved the deliveries forward in negotiations with the customers to benefit now rather than over the next few years. There are a couple of producers with contracts that are still in place, but they’ve really dropped off. So, then the question becomes, what do you do now?

Do you keep, you know, they have to cut back, I mean, production now is at virtually zero, so you’ve got these several companies that have gone to bare minimums. There’s not really a, again they would have to rehire people, so it is how long do the investors want to be involved in kind of living off of very minor raisings? When will the market be there? Let’s put it that way; be it the government or the commercial market. So, I think that’s kind of, you know, it’s put them in a difficult position. Even waiting until October 1st, if the USD$150M is approved, you’ve still got another five months at least before there would be any funding available.

So, anyway, it’s a difficult position right now. And that includes conversion. I mean, the Metropolis Plant has been shut down for well more than a year. I think it’s approaching two years and you know, it’ll take a while for them to get back in operation. I see that they have put a date of 2022 on that. And I understand they are still shipping yellow cake off site. It’s being transferred to other converters to be toll converted so they meet their delivery commitments. But that’s a big deal; when you move yellow cake off site from a conversion plan. So, anyway, yes, it’s gotten down to where it’s at a difficult situation.

Matthew Gordon: This is a difficult situation, but I’m trying to work out where the power lies and I’m trying to, and again, help investors understand where the market dynamics are shifting to, because what we heard yesterday was the significant intent from the US government by the Department of Energy, that’s what I heard, but it’s going to take time. And it’s going to take time before they know how they are going to allocate budget and they’re not committing to anything beyond 2021. So, I think there are some immediate beneficiaries when the system starts working with whatever they construct starts working, for sure. And if they do start buying pounds this year, then again, there’s a couple of beneficiaries of that. But it seems to me that the power has shifted back to the market dynamic, which is the supply-demand fundamentals, which, you know, has been growing and has been accelerated with this COVID-19 situation we see here. The gap is huge. The demand-supply gap is huge like it’s never been before. And do you think that investors, companies, funds alike should be focused on that, knowing that the nuclear working group is, and you feel the working group is working towards solving something, but let’s focus on what things we know and what things we can control rather than relying on a government which is traditionally slow moving?

Dustin Garrow: Well, yes, I think that you know, as we are all aware now, with the COVID-19 effects on the Uranium market, and as you say, the supply side is really the issue. I mean, demand effects seem to be relatively modest. EDF will probably have the biggest impact. But you know, here in the US, the Department of Energy just put out their short-term energy outlook on April 7th. So they have attempted to include some COVID-19 effects on the economy. They see nuclear down less than 2% this year in total generation of electricity in the US.

China has said their nuclear plants are back. You know, I don’t think they ever reduced operations. South Africa is keeping a unit down a little longer than they thought, but it’s really the cutbacks on supply which could be the final catalyst on the commercial market side, which I think, the understanding of supply issues really came up with the WNA report in September, when they came out and said, in every scenario there’s a need for unspecified Uranium sources. And that was a way of trying to describe inventory in increased production at existing mines, whatever, to fill that gap. So, I think that we have had now, you know, more than 6-months of the industry realising that supply certainly was an issue.

Now we have had these cutbacks, you know, the general census production would be about 140Mlbs, 142Mlbs this year. Last year it was around 140Mlbs. If you’d start, depending on your assumptions of restarts of Cigar Lake and things like that, they are probably going to lose 20Mlbs, maybe 25Mlbs this year, if not more. So, you’re down 110Mlbs to 115Mlbs with Uranium requirements. If you look at WNA of, you know, around 180Mlbs, you have still got secondary supplies; 25Mlbs seems to be a number that people are agreeing on. So, like you said, that gap has really gotten substantial. And then the restarts, I think when the Kazakhs start to put in well fields, they have to put the Lixiviant to them.  So, there is a slow ramp up. But yes, I think that we may now be seeing the market finally being transitioned into one of deficit, of structural deficit. And so, there’s just got to be better contracts longer term, not just to restart the mines that are down: principally MacArthur and things in Kazakhstan, but for new mines. I mean there is a, I think an acknowledged need to build new production capacity beyond what’s in care and maintenance. And by, pick a date – you know, is it 2023, 2025? It looms large when it takes years to get these projects actually producing yellow cake, which is the ultimate, let’s say, need of the market.

But the movement of the spot price; one of the points that was brought up recently is when that gets closer or exceeds term prices, then the utilities can go into their managements and say it’s no longer USD$25 and low 30s, or really closer to USD$40/lbs. True long-term contracts have been kind of in that range. People haven’t really been signing them. But now spot, you know, that relationship has always been pretty close and that again has justified the term contracting. So, I think we may be moving into that new phase of the market.

Matthew Gordon: Yes, I think that’s interesting. We have heard CEO’s talk about submitting RFPs, but the numbers that they’re submitting not close to anywhere near close to what the utilities are wanting to see at the moment. But do you feel that the gap, where we are today at USD$33/lbs, and where most people are saying, well, most that I talk to, to be able to run this economically, some will get into production at USD$30/lbs, but they are not making much money. You want to make money, right? That’s the name of the game. So, do you think, how quickly do you see these markets move? You were around for the last cycle – you saw it explode. Do you think we’re in the same or similar market conditions to back then? Which would allow the price to move rapidly when it does start going, or we’re going to be stuck in the thirties for some time? In which case, it’s not going to move the dial for a lot of producers.

Dustin Garrow: Well, I think, at this point there’s several opinions, of course: there are those that say, yes, the price will move up. The spot price will maybe move into the mid-thirties, it could stall out. We could see a new trading range kind of in the USD$32/lbs to USD$35/lbs area for a while. Then the utilities would say, well, you know, it just shows maybe there’s not as big of a supply issue looming. There are others saying USD$40/lbs by third quarter. USD$50/lbs by the end of the year. I think what triggers, particularly the term contracting, is both the level and the velocity, you know, that the price keeps moving up. Then the utilities reach a conclusion that well, this is now sending me a signal that supply is an issue in the future. And so, I think we’re still a little early, but I think we are more likely to see some of the utilities again, they started to come in the market before the COVID effect. A couple of the big US utilities distributed long-term requests for proposals, one in January, one in February, but they were really capturing the true long-term market. I mean delivery starting, you know, kind of $22/lbs to $24/lbs and going out to $28/lbs to $30/lbs. So, they were beyond the carry trade impact.

And, you know, as a couple of the market observers have said, they probably saw the best prices that may be offered under new term contracts for quite a while. But then they’ve kind of stepped back a bit with the COVID-19 effects, where they have had to handle all of that. And some of it is reloads. You know, again, spring and fall are big reload timeframes in the US, and the fuel groups get involved in that. Having worked in a fuel group in the past, you go out to the reactor do you do fuel start-up tests, and so that is a high priority. And you know, they’ve got a pretty full agenda right now of issues they have to get cleared. But I’m hearing that some are still in discussions with the bigger producers about long-term contracts. And again, Matt, that’s one thing that, you know, people tend not to focus on. If we went back 15-years and there’s a certain way you have to go about –

Matthew Gordon: Well, let’s get onto that. Let’s get onto that.

Dustin Garrow: I think the market fundamentals are moving in the right direction right now.

Matthew Gordon: Okay, well let’s get on to that. So, then let’s put it in a way that people are going to understand: so, Cameco has got orders to fill. Cameco is not producing any product at the moment, okay, it’s got orders to fill. It needs to find pounds in the market, and it has been able to cobble together pounds over the last year, put together with their own output, and you know, they’re hopefully making some money there. There’s not a lot of pounds out there now, but they just, they have these contracts in place. What happens if they cannot find the pounds that they need to fill the contracts? Do they just turn and go, sorry, can’t do it. We’ll have to wait until there’s something in the market, or we have to wait until we get into production. What are the punitive terms in a contract if you don’t deliver?

Dustin Garrow: Well, there are, you know, force majeure protections. Now, I don’t think MacArthur would qualify, but Cigar? I mean, it was shut down due to provincial health restrictions. So that to me is, if they had to trigger force majeure, they could do it there. But back on they’re making their deliveries, keep in mind they’ve got purchase agreements in place. I think they’ve got a couple certainly within Inki and as they made clear on their quarterly, they’re taking a disproportionate share of that production; meaning they’re taking pounds that were produced for KazAtomProm. So, I think that they’ve probably set up some agreements with probably, maybe the Kazakhs with others. Maybe the Uzbeks right now, that you don’t see in the spot market, but they are near-term purchases. So that’s one thing. It wouldn’t surprise me if they’ve gone to their customer base and some of them that said, hey, do you really need these pounds right now? What if we deliver them a year from now? That goes on. So, it affects the delivery commitment side. They’ve not really suggested that, but that’s what I would be doing.

And the other is loans. I mean, I think you know, again, Cameco is a pretty conservative company. Would I approach maybe utilities that are holding big inventories, which they don’t intend to sell but they don’t need for maybe several years? And there’s certainly one big region where that’s applicable and put in place contingent loans. You know, if we need to draw down this material, can we do it under this, these…? So, I think they’ve probably done some things on the procurement, acquisition side, more than just coming into the spot market to probably ensure that they’re going to meet their delivery commitments.

I mean, at the end of the day, it’s long-term delivery. Reliability is what carries the day in this industry. And even the Kazakhs have said, that is where they are continuing to progress that they want to be viewed as a long-term, reliable supplier. Well, to do that; you meet your delivery commitments. So, so I think that’s, you know, if you’d look at what Mike Campo will be doing, I think Orano is in a somewhat similar position. People kind of don’t talk about them. But in a normal year, if MacArthur was operating and Cigar, normally, they’d get about 20 million pounds out of Kazakhstan Canada and Missouri. Now, based upon some assumptions, they might lose 7Mlbs or 8Mlbs this year: with MacArthur, with the Cigar, with the cutbacks in Kazakhstan. And I think one of the telling issues there is, when they shut down McArthur and they borrowed one year’s worth of production share; 5.4Mlbs immediately from Cameco, it didn’t suggest to me they have a lot of available inventory. So again, when people say there are producers buying in the market, I assume that that’s both Cameco and Orano.

Matthew Gordon: So that’s just a sort of a mix on the market and off market acquisitions. And in a way it’s kind of a, I would just call it a structured finance really. Because you’re talking about borrowing under certain conditions with a view to either replace or pay at whatever structured finance rates you have agreed. So, it is much more complicated than I think most people appreciate, the way, the way that the product moves around the market.

Dustin Garrow Yes. There’s no question. And again, I just want to say, I’m speculating a bit on Cameco, but I know them again as a long-time conservative company and they want to meet their delivery commitments. So that’s what I’d be doing. I’d certainly be putting the loans in place. But yes, I think you’re right. I mean even in the spot market today, you step back and you say, well, the volume is 30Mlbs through mid to late April. And the question of course is where did those pounds come from? Well, I’m being told that actually some producers are selling. There are a couple that because of production cost structures are not as sensitive to backing out of the market, let’s put it that way. Some of the traders have been doing a bit but also the financial buyers, those that kind of showed up in a wave in 2018, they bought, there was speculated 10Mlbs, 12Mlbs, 15Mlbs.

I think that last year some of them may have managed those inventories a bit, sold some off. But what I’m being told is, is that then in the market, selling and buying; they’re acting more and more like traders. So, we see what’s called turn in the market, and that’s kind of reflected in that 30Mlbs. So, it’s not really 30Mlbs. It’s probably less than that, but we have had pounds transacted more than once by some of these. So, again, the market is, as you say, more complicated than it appears on the surface. But again, the financial buyers acting as traders, and it’s not all of them, but it’s enough to kind of kid more volume in the marketplace.

Matthew Gordon: Okay. We’re getting into an area which I love: which is where you work out how you make money. Okay. So, you have already started to describe the fact that term contracts can be extremely complex mechanisms, yes? You’re laughing because you know it. You know that they can be designed and cut in a number of different ways. So, park that, bear that in mind. It’s a complex thing. I have been trying to help people understand how to identify the types of companies, junior Uranium miners who have more of a chance of getting into production than others. So, we have looked at the fundamentals of the asset and the management team’s experience, their access to, or availability of cash to move this through, and the stage of development that they’re at. And they clearly the economics of what they’ve got. But the bit we very rarely talk about, it is that thing we talked about at the start, which was the complexity of putting deals together. Because even if you can economically get into production, you’ve then got to deal with and contend with putting these contracts together. Not everyone has those skills. So, what is your experience there? Is it simple or is it complex?

Dustin Garrow: What sounds like simple is pretty, pretty complex. Now, to make a couple of comments, I have listened to a number of the recent interviews with the CEO managing directors of development companies and I don’t hear a lot about the customers. In other words, it’s, well, term contracts are kind of the, we need to get those, but they focus a lot on optimisation; getting their costs down, which obviously you’d need to do. But I think that in one of your recent interviews, the managing director said the optimisation starts to get, the benefit gets smaller and smaller, and you know, term contracts aren’t something that come kind of later in the process. I’ll go on record; there will not be a Uranium mine built based on the spot market, ever. It has never been, and it won’t be in the future. It is too risky. Too specific on the customer base.

So, term contracts really, to me, trigger the development process. In other words, without term contracts, there are very few instances where you get financing, so you really can’t then get your capital in place to then start developing the mine. And you know, and I harken back to when we did the Paladin bankable contracts, those were a necessary part of the project moving forward. Without those, we wouldn’t have had the financing to do that.

Now again, I think one of the exceptions was the Berkeley energy agreement with the Middle Eastern sovereign wealth fund, which said, yes, term contracts would be nice, but they didn’t really require them. But everyone else is really going to look up, and you know, Cameco say MacArthur doesn’t restart without new term contracts. Converdyn: we will not restart Metropolis. So, it’s not just a nebulous concept.

Okay. So how do you go about it? First of all, new production centres, assuming a relatively balanced market, now, if it becomes a seller’s market, that’s going to change the dynamics. But the utilities will say, we’ll do a small contract, we’ll do 200,000lbs, 300,000lbs as a starter, and then if you develop the project, if you meet your delivery commitments, we’ll consider a larger commitment, because we can cover off with our flexibilities that we have gotten from our long-time reliable suppliers to cover if you don’t meet your delivery commitment.

So that’s another thing. I think there’s a sense that million pound contracts are just out there. Very few, if any. And they’re going to, again, the newer producers are going to have to see a suite of small volume agreements. Now, how do you go about that? Again, the utilities approached the market either on market, it’s called, which is an official written request or proposal, which they send out to their list of suppliers. So, in other words, even under that circumstance, you have to get on the supplier list, so you make sure you even see what they’re distributing.

But I went back 15-years and looked at term contracting and 70% of the volume was placed ‘off-market’. What does that mean? That is direct negotiations and it can be done by new producers. I did some of that with Paladin. And certainly, existing producers, you know, Cameco is in, talking to their, as they’ve said, their best and largest customers to extend their current contracts. So, you know, I think that that’s another issue that’s not fully appreciated. Is there going to be term contracting going on? Cameco – 36Mlbs? Well, there’s never been an announcement by a utility. Cameco only does it in the aggregate. So, a lot of the term contracting has been ‘off market’.

So, if you’re a new producer, you really can’t sit and wait for the phone to ring because it won’t ring. So, you’ve got to get out, and it is as important as optimising your project as talking to funding sources, but it’s actually engaging. When do you engage the utility industry, which ultimately will determine your future? And so, it’s complicated. And again, I won’t go into all the aspects of each contract. It’s more than price. People just think, well, I need USD$50/lbs, but there’s delivery, timing, delivery locations you know, quantity flexibilities, usually, you know, now even there’s 10%, 15% to the favour of the buyer. Extension options. The other thing too is that it has an impact on your working capital. If you look at Cameco’s delivery schedules, it’s skewed to the Q4 because they give their customers, in general, the right to call the delivery date. Now, if you’re a small new producer, if you do that, you’ve got to assume a pound you produce in January may not be delivered until December. So, you’re going to have to sit on that pound for months. And so that needs to be part of your economic calculation. Which some of them, I don’t think, take that into account, but you can negotiate better delivery terms if you’re a new guy. So that’s what I’m saying; you need to ICA marketing plan strategy, again, it is as important early on, is how are you going to construct and operate your asset?

Matthew Gordon: I think that that’s fascinating. It says to me that companies which are not talking about this, or not talking about their ability to do this, either don’t know or are nowhere down that process. It’s also interesting to me that, you know, in a buyer’s market and a seller’s market, the terms are going to be very different. The pricing and the structure of those terms, the securitisation capability of those terms will be reflected in the cost of your money as you’re talking to funders. Because if you’re a small company, new to the market, whatever your experience, you’re going to need a series of these small contracts to build, to add up to something that’s interesting to funder to allow you to complete your capex and get into production, because one small deal isn’t going to cut it. It is a fascinating, fascinating space and thank you for talking about it. And I’m sure there’s a lot more to it than that, but it’s a new thing that investors should be looking at and listening for from companies. I have not heard it. I have not heard that conversation from very many people. I can count on one hand how many people here have done it before and are capable of doing it.

Dustin Garrow: Well, Matt, what you hear is that, ‘we have met with’, or ‘we were in discussions with’, and I think that they’re just saying, ‘yes, I set up a meeting with six utilities during the WNA and we had a nice…’ Utilities generally want to meet because they want to see what is out there and what is realistic. But that is, you’re far away from negotiating a term contract or a SWU.

And just back on that comment you just made, when we put the bankable contracts in place for phase one at Langer, I think there were 4 or 5 utilities that we had got contracts with, and we actually had a couple of holes that needed to be filled in right at the last minute. But without that, the bank said, you know, you’ve got to meet these criteria on pricing volumes, delivery dates and all of that. So, I mean, it was a very specific set of criteria.

Matthew Gordon: Yes. It is a fascinating area to get into because there’s a few variables that you’ve talked about there, which could affect the economics in a meaningful way. The cost of money is important down there. The terms you negotiate with the utility in a buyer’s market can affect, especially when some of these guys are, you know, needing X dollars to start, to breakeven; worth considering and worth analysing.

Look, Dustin, thanks very much for running through with your experience of the term contracts market. I do appreciate it. To finish off, are you optimistic about coming back to the Nuclear Fuel Working Group (NFWG)? Are you optimistic that it’s a good thing for the US utility buyers and US nuclear complex as a whole?

Dustin Garrow Oh yes. I think that, again, it’s crucial that something is being done, that this has been looked at. And again, I think, Matt, to some of us who’ve had a long experience in the US, it’s at a very, very high level. I mean, Larry Kudlow has been involved. Bolton, before he left, was involved. So, I mean this isn’t just some low-level, a couple of departments are thinking about whatever. I mean it is at the highest levels in the White House. So, I think that there is a commitment to move forward to keep a viable US fuel cycle. I mean, we haven’t talked enrichment, but I think they realise we need to have domestic enrichment capabilities. And I think, you know, export reactors. I think the government has realised that the Russians, Chinese, to a lesser degree – Koreans, are dominating that market. And like they said, there are no orders for US-derived reactors in the foreign market. Zero. So, everything that’s going on in the middle East and India, you name it, there’s nothing on the order books for the US. So, there needs to be help somewhere if we’re going to reassert some kind of leadership role globally in the nuclear area.

Matthew Gordon: Yes, I think it’s fascinating. I think we’re obviously, you know, with generation four, or just new and innovative technologies as a whole, and supporting that and the ability to export, we’re kind of walking into the realms of, you know, corporate America here; as we said, maybe a subject for another day as to how they can get back at the table.

But you know, today I wanted to talk about Uranium miners. I think you’ve given us another big clue there as to what people should be looking for listening for when they’re trying to identify the right companies to get after.

So, you’re obviously very busy at the moment I suspect, but not running around the world. Lots of phone calls, Zoom calls. What’s the mood in the market at the moment?

Dustin Garrow: Well, as you know, I am Chief Commercial Officer for Yellow Cake. And so, there’s been a lot of interest in investing in a fund that holds the physical asset. But I would say in the last couple of weeks, based upon group calls and individual one-on-ones, I have probably talked to 30 different groups. And you know, it’s interesting, they ranged everywhere from continental Europe, London, Hong Kong, Singapore, so, I mean it’s pretty broad. Australia, a lot of interest, a lot of knowledge, which I think is important. There were groups that have come in, they’ve left, they’re coming back, but it’s not, you know, tell me the fundamentals of supply-demand. It’s more of, I understand that, but what are the nuances and what’s the timing? I mean, I’m forever asked when is, and now I can say, well, the price has gone up. Finally.

Matthew Gordon: That is fascinating. Again, that’s fascinating. We’re seeing the generalists, we’re getting inbound, you know, being asked for our views on this, not that they should do, but they do. And to see them interested for the first time in a long time is, well, I’m glad, obviously, very nice, but what do you think it’s going to take for them to actually step in and put some money in and sort of see where this is going? Because you know, for me, they talk about spot price. That makes that the most important thing. They go, you know, when’s this thing going to get to a point where these mining companies can get into operation? I don’t know.

Dustin Garrow: But yes, Matt, a lot of them have gone beyond what’s the spot price doing today? What’s a spot price going to be in a month? They realise that this is a much more complicated industry, and what they’re asking me on, on the production side, are questions like management. In other words, I’m going to begin to invest not an asset, but do you think these guys are going to get this done or not? And so, I think, and that’s, you know, something we have talked about before is human resources, operational, technical, managerial marketing expertise in this business is becoming increasingly scarce. But I think that that’s why I guess I’m more optimistic is because, like I said, a number of…it’s the odd call when somebody says, ‘hey, I have got a clean sheet of paper. Tell me about nuclear and Uranium.’ It’s like, ‘Oh no, you know, I have been in and out, I have gotten done well, I have gotten burned, you know, and now I have got my list of critical criteria and it sort of goes beyond the spot price’. And a lot of them more and more are understanding the term market involvement and what that means. But yes, so I think that is what gives me optimism is the, let’s say, increased sophistication in the space of the investors. Because for years, as you know, decades we didn’t have it. There really wasn’t any investor group, you know, mines were built by big companies and so they were part of a big financing arena: the Rios, the Cameco’s and all of that.

 But now it is, you know, it’s much more interesting because of the financial guys and their analysis. I listen to what they say. You know, in the old days it was, they had no clue. And now it’s like, no, we have run the numbers, we have our model and here’s what we’re concluding. So, it shows that they’re putting the time, effort in, which I think is needed.

Matthew Gordon: Yes, I guess there is a better…we have had inbound calls from fund managers, hedge fund managers, and they talk about specific assets and they’re telling me why certain assets within a company, unnamed, well, I’m not going to name it, will never work. They won’t work at a hundred bucks. So yes, there’s some very detailed analysis out there, but these, unfortunately the market isn’t aware of that information because it’s not capable of doing that type of analysis. So, it is a, I guess all of us are learning all the time.

So, I shall let you go, Sir. I thank you very much for today, as ever, but let’s not leave it six months next time. That was ridiculous. I know things were quiet, but I suspect they’re going to be a lot busier over the next few weeks and months.

Dustin Garrow: I think so. And you know where I am. I’m not going anywhere.

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.

Homer Simpson, nuclear safety advisor for Springfield Nuclear Power Plant, holds a uranium rod while wearing protective gear.

Peninsula Energy (ASX: PEN) – Reap What You Sow, Comeback Kid, Says Hello (Transcript)

The Peninsula Energy Limited company logo
Peninsula Energy Ltd
  • ASX: PEN
  • Shares Outstanding: 315M
  • Share price: A$0.15 (30.04.2020)
  • Market Cap: A$47M

In the wake of the NFWG policy document, Crux Investor interviewed the CEO of Peninsula Energy Ltd (ASX: PEN), Wayne Heili. We also interviewed him a few weeks ago. What is his take on proceedings?

A long-awaited breath of fresh air? Following on from the long-awaited NFWG outcome: a document focussed on restoring America’s competitive nuclear energy advantage, we want to hear from uranium companies. How is the announcement going to affect them? What does the timescale look like? What are details? Today, it was the turn of Wayne Heili, the CEO of uranium-developer, Peninsula Energy.

Peninsula Energy is an ASX listed uranium mining company. It began in-situ recovery uranium operations in December 2015 at its Lance Projects in Wyoming, USA. Central to the company’s business model is a project transformation initiative. This will alow Peninsula Energy to transition away from an alkaline ISR operation towards a low-pH ISR operation, which could allow the company to align the cost profile and operating performance with of the Lance Projects with ‘industry-leading’ global uranium production projects.

Being a US uranium producer, Heili is delighted with the news. He thinks it will benefit all US uranium producers. The report has demonstrated the government’s intent to create policies and legislature that will comprehensively help both uranium producers and consumers. Not only that, but Heili thinks the government is serious about this. While not everything to come out of this administration has been definitive, Heili is confident the executive branch will follow through, despite the temptation for political parties to overpromise and underdeliver in an election year.

This is yet another catalyst moment after the suspension of Cameco’s Cigar Lake uranium mine and Kazatomprom posting lackluster operational figures. Heili thinks someone has lifted the lid on the coffin the U.S uranium industry had been lying in.

There are some reasons to be sceptical. There is a lack of specifics. There are no names, no timing, and no numbers. These are generic, general policy ideas. The executive office is yet to provide a transparent and coherent plan as to how these strategies will be implemented. How will the Russian suspension agreement develop as we look towards a new uranium cycle? Some voices want it killed off by the end of the year, others express more complex ideas, such as renegotiation, and phasing a gradual deconstruction of the agreement. One thing is certain, the U.S has just climbed into the ring of a heavyweight brawl with two of the world’s biggest uranium players in China and Russia. How will these countries react? Heili is keen on extending the suspension agreement because he sees it as a big boost to the front end of the U.S uranium space. U.S producers need a bigger market share. This is also the recommendation of the NFWG, with additional guidance to look at further restrictions on how much nuclear fuel is imported into the U.S.

This good news has come just a week after Peninsula Energy took a significant step towards reopening and expanding its flagship Lance ISR uranium project in Wyoming, US. This decision was taken following government approval. Heili states that the company is operating under the assumption that the Department of Energy will make good on its commitment to increase the size of the federal uranium reserve. While there is a lack of certainty over the timing, Heili is expecting some buying in 2020, but is conscious that Peninsula Energy has no existing uranium reserves available to offer.

The plan for Peninsula is to keep its finger on the pulse of market movements, resume production, and have uranium ready to enter the supply chain by 2021. Peninsula Energy appears well-positioned to get moving quickly to start having conversations with utility companies surrounding potential long-term contracts.

However, the pragmatic reality is that this is still a waiting game. Peninsula Energy is no in total control of its own fate, and will rely on favorable market conditions and a degree of luck with timings.

Can Heili pull this off? What do you make of Peninsula Energy? What about the NFWG outcome? Comment below: we will respond.

We discuss:

  1. Nuclear Fuel Report Impressions: First Step Towards Change
  2. Russian Suspension Agreement & Conversations with China
  3. Impact on US Uranium Miners
  4. Peninsula Energy: What’s Changed & What Happens Next?
  5. The Market & Spot Price: Business as Usual or Essential Change to Come?

CLICK HERE to watch the full interview.

Hey, Wayne, how are you doing, Sir?

Wayne Heili: Great. Nice to see you again.

Matthew Gordon: Yes, well, we only, we only talked recently, but what a day? What a few weeks since we spoke? Interesting times to be in Uranium, isn’t it?

Wayne Heili: Yes. Well, who knew when the nuclear fuel and working group report would come out? I think we had some idea in recent days that it was pending but even as early as this morning, people were asking me, is it really coming out? Is it going to be the day that we finally see the nuclear fuel group report? And we did.

Matthew Gordon: Okay. So, I need to know, do you think it’s a positive report, because the market doesn’t seem to.

Wayne Heili: It is, it absolutely is. It shows exactly the intent of the executive branch of the US government to develop policies and implement very comprehensive and government-wide initiatives to support not just the front end of the nuclear fuel cycle, but you know, the nuclear energy utilities as well.

Matthew Gordon: But do you not feel that it kind of reads like a wish list rather than something that’s actually going to get delivered in an election year? Do you think they are serious about this?

Wayne Heili: I do. I think that what you have to discern here is that a lot of things are policy, and who sets the US government policy? The executive branch of the United States; the president and his branch of government. That’s where we see policy from the United States. You know, a lot of people are wondering, you know, when the president proposed USD$150M for purchase of fuel in his budget, or for Uranium in his budget. And I said, well, that’s a long time waiting, isn’t it? And it is because his budget has to be approved by Congress. But policy is his actions, his departments. So much of what’s contained in a nuclear fuel working group strategy report is government policy that can be implemented by the executive branch on its own, independently.

Matthew Gordon: So, what is your message to the market who have not reacted that positively to the news? I think there was an expectation that a lot of things have gone on in the past few weeks to get people excited. Lots of events: Cigar Lake, KazAtomProm, COVID-19, affecting output and production all around the world. And they saw this as the moment, the defining moment, which would finally give them clarity as to what’s going to happen, certainly for the US nuclear fuel cycle. But it didn’t go far enough for some, there’s no numbers. There’s no timing, there’s no names. It’s just generic general policy ideas at the moment.

Wayne Heili: This is exactly what we were expecting and hoping for. In fact, so much of it was known in advance. You know, with the government, with the president’s budget proposal, we already knew that the Department of Energy was going to be charged with buying fuel. So, you know, seeing the more esoteric of policy initiatives around the Russian suspension agreement, and you know, other initiatives it may not be as meaningful to the people who don’t do this, live and breathe it every day. But these policy issues and these policy matters are exactly what we need to put the nuclear energy back into prominence in the United States to regain some of the leadership that our nation has lost over time. So, my message really is that, this is not a disappointment. This is the delivery of expectations and hopes.

Matthew Gordon: Okay. So, tell me this: the Russian suspension agreement -we’ve heard a few variants on what people would like to do, how they would like to deal with that from the end of this year, December 31st, it finishes, end of. Others are looking, perhaps to renegotiate it and maybe phase that suspension agreement over a period of time, indeterminant at the moment. They have also namechecked China in there, so the US government has just got in a heavyweight fight with the other two main players globally in this space. How do you think they’re going to react?

Wayne Heili: Well, we’ve been relying on Russia to supply nuclear fuel into the United States for a long time, and our utilities have strong commercial relationships with the Russian companies who supply. That’s not changing, you know, the Russian suspension agreement put a cap on how much fuel could come into the United States in any given year. It was 20%. That agreement expires at the end of this year, and you know, it’s the recommendation of the nuclear fuel working group that the agreement not be allowed to expire, but be extended and perhaps, you know, further limitations were put on how much fuel comes into the United States. I think we have a long way to go before that’s fully resolved. You know, there’s going to be a lot of parties interested in the outcome of it. But extending the Russian suspension agreement, even at the current levels is a significant boost to the front end of the nuclear fuel cycle here in the United States where you know, we need to have greater access to the market share. We’d like to have the opportunity to participate at the levels that the foreign nations do. Oddly, American suppliers don’t supply 20% of the nuclear fuel into the United States. But you know, under the Russian suspension agreement, the Russians are guaranteed 20%.

Matthew Gordon: Okay, let’s shy away from the macro story because that’s not what your shareholders, it is not what our listeners want to talk about. They want to talk about what you think this means for Uranium miners, US Uranium miners, yourself specifically, what are you reading into what you’re seeing here? And maybe conversations that you’re having outside of this you know, leading up until this announcement and in the next few weeks?

Wayne Heili: Well, look, this is a breath of fresh air for us. You know, really if you look at the US Uranium production industry, which I’m a part of, maybe people have dug a hole and stuck us in the coffin and buried us already. You know, yesterday in my view, somebody lifted the lid of the coffin and realised we do have a pulse and we are still breathing and that we can come out of this. There is a pathway for us to build production capacity back up. There is a pathway for us to enjoy reasonable market prices for our product here in the United States. And very importantly, for companies like Peninsula, look, we already have a contract book, we already have contracts that we intend to deliver into, and are set for deliveries up to the year 2030. So let us supplement that contract but with additional contracts of modest and reasonable quantities, you know, selling to the government for the government’s identified needs, and you know, suddenly we become a stronger producer and we are producing at greater rates and at lower unit costs, and the vitality of our company and the vitality of our industry as a whole are reinvigorated.

Matthew Gordon: Okay. So, the question is, what’s changed? What are you going to do next? Who are you picking up the phone to off the back of this report? Are there discussions planned? Do you know how you start this journey along on this path to where it is that you want to go, wherever you think that path is going, what happens next?

Wayne Heili: Well, eventually we were going to presume that the Department of Energy is going to start building the Uranium reserve. They’re going to fund the purchases that they’ve proposed. And you know, today, Secretary Brouillette, in a briefing, informed us that they’re going to look for a broad and inclusive process to select the suppliers. You know, I think that Secretary Brouillette can count higher than two, and it’s not just two companies that are going to be involved in supplying Uranium for the government. Really, just based on that statement alone, they’re going to have a broad and inclusive process.

So, you know, the next step is really to see the implementation of this process begin. It’s really nice to have light shed on what the process is going to look like for everybody now. It’s going to become an implementation of the planning and the works that we’ve all been preparing for, for some time. You know, we’ve had the foreshadowing, we’ve had the foresight of what this could look like. What we got today was you know, the full unveiling of what it is.

Matthew Gordon: Okay. Then, you know, I know you are a fine with regards to cash; you’ve got your contracts in place, you’ve got your project, you’re ready, to go when you can get financed. But you must be, you must be nervous about the timing of all of this. It must, you want some certainty over this, don’t you? So when I asked you what happens next, I’m trying to actually work out, what’s your sense of the timing on when it has any meaningful impact on your business, your ability to transact, ability to sell your Uranium to the US government? Have you any idea?

Wayne Heili: Yes, to be straight with you. You know, if we are going to be looking at the government purchases starting in the government’s fiscal year of 2021, you know, we are not transacting in 2020. The government may put in place, or the Department of Energy may put in some limited buying opportunities in 2020. And you know, for those companies that do have inventory, they may be able to participate in that. Peninsula has been blessed to be able to sell our production into high cost, or high, excuse me, high priced contracts, you know, above the spot market throughout time. And we are not carrying inventory, waiting to find the price that need to, because we have the contracts in place already. So, you know, if there is 2020 buying, it’s not something that we’ll be able to offer into, but you know, our game plan is, is really to keep our finger on the pulse of where this is going and prepare our project to resume production and have material available for sale in 2021 and beyond.

Matthew Gordon: So, you’re not, you can’t drive the process, you can’t affect the process. You’re in a waiting game. You’re kind of out of control, aren’t you?

Wayne Heili: Yes, I think that’s fair. I mean, we can have conversations. We can make sure that we are always having a seat at the table. And we do that. We do that all the time. We do that behind the scenes. But you know, look, that’s our job; we are going to make sure we have a seat at the table when the opportunities are there and that we are part of that conversation.

Matthew Gordon: Okay. So, your message to your shareholders and others is that there’s a good report. It’s good for Uranium miners. It is good for the Uranium US nuclear cycle, and they should just be patient?

Wayne Heili: Yes, well, no, it is more than just be patient. You should accept that this is a very good report and it is a very good outcome for the industry. They should be excited about the outcome. It’s more than just patience. But you know, now we have light on the subject. Now we know what the government thinks needs to be done and what policies and pathways and strategies that our government is going to pursue in support of the nuclear fuel cycle and in support of the Uranium miners and the conversion industry and the other participants, who, like Peninsula, are developing additional technologies and working to enhance the technology of Uranium recovery in the United States, enhance the use of nuclear energy in the United States – it’s just a fantastic message to, to hear the government all in on support for nuclear energy, from cradle to grave. It’s exciting.

Matthew Gordon: You are excited. Let me ask you one last question: the market has moved a lot since we did our interview, you know, we were up around USD$32.50 from sort of, you know, late twenties, I think maybe when we spoke. So, it’s moved, and it moved off the back of, obviously closures of an indeterminant period at Cigar Lake, KazAtomProm, effects all over the world through COVID-19, as I mentioned earlier. So, then the price has moved, the supply-demand fundamentals moved that; people were getting nervous, utilities were getting nervous. Do you think that this report, the lack of detail in this report, the lack of numbers, the lack of certainty over timing, is going to arrest that growth in the spot price or do you think it’s going to be business as usual tomorrow and the next week?

Wayne Heili: In the Uranium spot market and in the Uranium market generally, it is going to be business as usual. I think the rise that we’ve seen since we last spoke was a long time coming. It was something that was building, you know, production hasn’t been meeting demand for a long, long time. And then, you know, with the advent of the impacts of the COVID-19 virus, companies sensibly, and countries sensibly shut down their Uranium mines for a period of time, took supply, future supply out of the market. The rebalancing that we’ve been waiting for has really happened and I don’t think that there’s going to be a dramatic slip backwards. I think that the market can continue to advance forward and the prices continue to improve because inventories have been thin. Everybody knows that. You know, producer inventories are thin, utility inventories in the United States and in Europe are known to be thin. When mines that supply into the spot market are shut down or reduced in their capacity, there’s just nowhere to get extra inventory other than to push the market price up and see what supply becomes more liquid in the market.

So, that’s what we are testing today. We are going to see what price points bring more supply into the market, and we have to be patient because you know, companies and countries are keeping an eye on the health and wellbeing of their citizens and their employees. And you know, Uranium mining is important -absolutely, but it can wait a little bit when there’s inventory. So, I think we are going to see the market continue to advance nicely forward. I think we could see prices of USD$35M to USD$40M in the near term, and who knows where it goes from there?

Matthew Gordon: So, who are the immediate winners in that scenario?

Wayne Heili: The immediate winners? Yes, the people who have purchased or obtained material inexpensively and held on to it. Those are the guys who can enjoy the fruits of sales at higher prices. In the longer term, it is the companies, the producers you know, who’ve been waiting patiently on the side lines for the opportunity to see the markets heal. We are, you know, we are there: the markets are healing, the markets are better than they used to be, and I think they’ll continue to be better. So, this gives us the opportunity to make the investment decisions to resume production, to put our minds in into production and produce Uranium at price points that are profitable. You know, it’s been a long time coming. We’ve been waiting for that. And I think the US government nuclear fuel working group report supplements that narrative, it supplements the market shifts that we’ve been observing in the last month or so.

Matthew Gordon: It’s exciting times, Wayne, exciting times. I suspect there’s going to be more news next week. Pick up the phone and let us know if you hear anything because it’s always a pleasure to talk to you and we’ll speak to you again soon.

Wayne Heili: Appreciate the time. And you go out and have a nice evening.

If you are a uranium market spectator, feel free to check out the most recent uranium article on our platform, as well as our most recent interview with a uranium mining company.

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.

The Peninsula Energy Limited company logo

Peninsula Energy (ASX: PEN) – Wayne Heili Reacts To The NFWG Report

The Peninsula Energy Limited company logo
Peninsula Energy Ltd
  • ASX: PEN
  • Shares Outstanding: 315M
  • Share price: A$0.15 (30.04.2020)
  • Market Cap: A$47M

In the wake of the NFWG policy document, Crux Investor interviewed the CEO of Peninsula Energy Ltd (ASX: PEN), Wayne Heili. We also interviewed him a few weeks ago. What is his take on proceedings?

Being a US uranium producer, Heili is delighted with the announcement. Will it benefit all U.S. uranium producers?

We discuss:

  1. Nuclear Fuel Report Impressions: First Step Towards Change
  2. Russian Suspension Agreement & Conversations with China
  3. Impact on US Uranium Miners
  4. Peninsula Energy: What’s Changed & What Happens Next?
  5. The Market & Spot Price: Business as Usual or Essential Change to Come?

If you are a uranium market spectator, feel free to check out the most recent uranium article on our platform, as well as our most recent interview with a uranium mining company.

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.

The Peninsula Energy Limited company logo

Brandon Munro – Implications of Uranium Supply Shortages (Transcript)

A photo of Bannerman Resources CEO, Brandon Munro.

Crux Investor recently carried out a great interview with uranium expert and regular Crux contributor, Brandon Munro. He is the CEO of uranium junior, Bannerman Resources (ASX: BMN). He had plenty of insight to share.

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

We discuss:

  1. The Implications of Cameco’s Announcement that Cigar Lake will be Closed for an Indeterminate Period
  2. What is Happening With Namibia’s Uranium Production
  3. What About the Uranium Spot Price Going Above the US$30/lb Psychological Barrier?
  4. Backwardation of Spot Price v Term-Contract Price
  5. How are the Utilities Reacting; What Are the other Bush Fires that they are Putting Out?
  6. How Does Russia VS Saudi Oil Price War Affect Uranium?

CLICK HERE to watch the full interview.

Hey Brandon, How are you buddy?

Brandon Munro: Yes, well thanks, Matt. How are you?

Matthew Gordon: Not bad. Not bad. I assume you’re in Australia and not in Namibia with that backdrop there.

Brandon Munro: Yes, that’s right. A mate of mine pointed out this groovy function in Zoom where you can do a virtual screen. So I don’t claim to be a green screen expert, so everyone out there just forgive me. It might look a little bit tacky, but let’s go with it. It’s a beautiful vista of the Etango demonstration plant, and it gives you the idea that we don’t have a lot of community issues at our project, that’s for sure.

Matthew Gordon: Well, that’s fascinating. So that is Bannerman’s Etango. Oh, there you go. All right. Well, you going to talk us through that next week, I hope, because you’ve got a new deck out. And we’ve been getting a lot of requests; you keep coming on here and telling us how it is all going on the macro, but they want to hear your story because we haven’t done that in a while. So you’re going to do that for us next week? Promise?

Brandon Munro: Let’s do it.

Matthew Gordon: Okay. Good man. Good man. What a week – another wow week for Uranium spot price moving. A little bit more clarity about what’s going on. Just a little, as usual. But I wouldn’t mind talking through some of those things with you. Now, I thought the big news of the week was Cameco, Cigar Lake – indeterminate period for care and maintenance. What does that mean and what are the implications?

Brandon Munro: So, indeterminate means as much to you as it means to me. It is by definition indeterminate. It’s interesting that they used the same language when they put McArthur river onto care and maintenance and that was a couple of years ago and counting. And it is a carefully chosen phrase because they’re basically saying that they can’t predict how long COVID-19 is going to take to play out, particularly in the Northern territories in Canada with lots of indigenous populations and so on. And as Tim Gitzel said in the press release, things have got worse rather than better in the few weeks since they placed Cigar Lake onto a 4-week temporary shutdown. So, it won’t come as a surprise. We were talking that we didn’t think that it would be only four weeks, but now the question becomes, not only for equities investors, but certainly for the traders and the utilities, is indeterminant going to be three months? Is it going to be six months? Could it be longer? I think that there’s as much chance of it being six months as it is three months, for example.

The things that would need to improve to enable them to turn the mine back on – all that we know is it’s really not going to happen in one or two months otherwise they would have taken different measures. So, this could be an event that continues to really grind at the inventories of utilities, but also the nerves of utilities and traders as they have to try and understand how many pounds are really going to be taken out of the market as a result of this.

Matthew Gordon: Okay. And what does it mean for Cameco? Because someone used the phrase with us this week when we were talking about some of the implications here, they said that Cameco has kind of switched off Cigar Lake for the right reasons for, you know, health and safety and you know, the indigenous population at risk, potentially, but they won’t switch it back on for the economics, meaning that they may look for price discovery. It has got a spot price before they switch the production back on there. So, in a way they are kind of controlling the market, I think was the implication. So what is your take on that as a positioning?

Brandon Munro: Look, it might happen as a consequence to what they’ve done, but I certainly believe that they have done it for the right reasons. Cameco are not going to wear this short-term pain simply for the benefit of the market at large; because it is a lot of short-term pain. There’s not only the cost of keeping the project in care and maintenance there’s a cost in terms of employees. Their market cap has gone up and their share price has gone up as a result of the increased Uranium price from this and other events. But nonetheless, it’s still going to chew their cash balance. As much as they will be able to maintain margin by buying in spot and buying in off-market parcels to deliver into those contracts, it won’t be the same margin that they get by producing those pounds, particularly as we see the spot price go up.

So, this is something that is costly for Cameco. It is a difficult decision for them, and I just don’t buy the argument that they’ve made it as some sort of veiled excuse to try and put pressure on the market. That will be the effect of course, but they’ve done it for the right reasons and I do believe that they will try and bring this project back on as soon they’re comfortable doing so.

Matthew Gordon: I agree that they have done it for the right reasons, but would you not also agree that there’s some kind of arbitrage between the lost revenue, lost income while it is on care and maintenance and helping assist in driving the price slowly higher? Is that not part of the calculation? They must have thought about it, when you do the maths, because it is just simple maths.

Brandon Munro: Yes, that is the case, and I think you would get that when you read the press release that they put out, and they said in as many words, there will be some short-term pain here, but the long-term gain, particularly for them and their contract book will certainly outlive and outlast and outperform the short-term pain. So they’re basically saying they’re going to take it on the chin for the next indeterminate period, whatever that is, but it will be beneficial for their business. And clearly they’re referring to the things that you’ve just mentioned.

Matthew Gordon: Okay. And you’re pretty well plumbed into a lot of the CEOs in the space. You obviously work with the WNA as well, so you know, all the players; the great and the good, have you had any feedback from them as to what they feel the implications are of Cigar Lake shutting down?

Brandon Munro: You know, not really. Most of the CEOs are pretty absorbed in their own business at the moment. And the CEOs that are talking about production, or have production, they’re very concerned about just keeping their business going and they are looking at what’s happened to Cameco and KazAtomProm for example, some of the players in Namibia, and they’re just very concerned that that same thing will happen to them.

A number of the other players that I’m talking to have got exploration programs or feasibility programs that they’re looking to do. And you know, the ones in Australia, they can’t get rigs in to be able to explore at the moment with the work that they’re doing, that’s happening elsewhere. So everyone is sort of fighting their own fight at the moment. And obviously amongst retail investors, there’s a lot of rejoicing, but amongst the CEOs, no one’s really rejoicing in each other’s pain at the moment.

Matthew Gordon: Well, I guess they can’t until it hits whatever magic number they’ve set for themselves: whether it be USD$40, USD$50, USD$60 or USD$70. But retail, I mean let’s talk about retail because there has been some huge movement in some of the share prices for some of these Uranium juniors, driven think, predominantly by retail.

Brandon Munro: In Paladin this week it emerged that Sachem Cove and Segra Capital Partners had both become large shareholders in Paladin.

Matthew Gordon: But what does that mean in dollar terms or percentage terms?

Brandon Munro: So, in the order of 8% between them I think is what I heard. So decent positions in Paladin. We have seen similar moves through our register which probably means a number of the companies that are experiencing the same thing. And so there has been this opportunity for the players that are really committed to the Uranium story to accumulate at these low prices. And for my part, I’m really pleased that they have. For the shareholders, it’s been a pretty turbulent time over the last few weeks, and so I am very happy to see those groups averaging down when we’ve been on our knees, rather than day traders coming in and that type of thing. And I think we’re starting to see that in terms of not having as many shares chipped out on the other side as we’ve, well, we have gone up to 150, even 300% from our absolute lows. And we are back to where we did our last capital raising, a year and a half ago, for example. So, it’s, it’s been a quite an abrupt recovery, which has taken a lot of pressure off me obviously, but also, you know, a lot of our shareholders.

Matthew Gordon: Okay. Okay. Interesting. Can we talk about Namibia? What is happening? Because again, I think that it is not quite clear.

Brandon Munro: Yes. So, during the week, this shutdown in Namibia was extended. There is a full shutdown in two provinces, or regions of Namibia, which is where the capital is, but also the Urongo region, which is all the Uranium mining. And that was extended to May, but what has happened is that the Chamber of Mines has successfully lobbied the Namibian government to enable a full return to production by all mining in those affected areas. So, it will be the intention of Husab, and I presume Rossing, to try and get away from processing stockpiles and doing the minimal amount of activity that they have been over the last few weeks and getting back as soon as they can to full production. There’s a little bit of red tape that they need to go through. They’ve got to satisfy the Ministry of Mines and the Ministry of Health that they can do that in a way that complies with reasonable COVID-19 precautions. But the Chamber of Mines is very effective in Namibia. They really do a good job. And so, there’s already a really good dialogue that I’ve been a part of.

 I think that’ll happen fairly quickly and I think we’ll see those mines start to get back on their feet, but it won’t be full production, you know, that much is really clear. There are problems with supply. They need to rearrange their rosters. You know, this kind of green team, blue team approach that we’re seeing throughout mining in the world is just really a key mitigation for COVID-19 infections. It’s very hard to get a mine singing sweetly and operating at full production when you’ve got all of those restrictions. So, there will still be a reasonable shave or for what their production levels are, but this talk of shutdowns and extended shutdowns won’t apply to those two mines, at least not for COVID-19 reasons.

Matthew Gordon: Okay, that’s interesting. Have you reassessed your numbers with regards how many pounds that’s going to take out of the market?

Brandon Munro: Yes, and I wasn’t anticipating a, you know, I’ve been on the calls and I’ve been part of all the emails and so on, so I wasn’t anticipating an extended shutdown in Namibia; mining is just way too important for the country, and between mining and fishing, and with the tourism industry, you know, eradicated in the meantime in Namibia, they are absolutely dependent on those two sources for foreign reserves. And you know, bear in mind the Namibian dollar is pegged to the Rand, so they do need to generate foreign reserves.

Matthew Gordon: Okay. can you, this maybe slightly out of your comfort zone, but what’s your understanding about what’s happening up in Niger? Are they, you know, do they have the same issues? I mean, I know they have a strong dependency on Uranium. They’ve been mining Uranium there for 60-odd years, but are you hearing anything with regards to how it’s affecting them up there?

Brandon Munro: No, I’m not. I’m not hearing anything really in terms of major disruption to their mining. I mean, those mines are very remote, they are in the middle of deserts. If some of the speculation that we hear about a Corona virus, not surviving very long on surfaces during heat and so forth, if there’s any store to that, then that might explain why Niger is doing quite well at the moment out there in the desert. Equally it might just be that they’re not testing and then they’ve got no idea. But my understanding at the moment is that the disruption to those Niger operations is very insignificant.

Matthew Gordon: Okay. Okay. That’s interesting. Thank you for that. Now the other big movement this week was, obviously, the spot price moving past that USD$30 psychological barrier. We talked about it the last time we spoke, you have some good views on that one and it’s actually pushed a little bit further than we possibly even hoped or imagine. So, what are your thoughts on what it’s going to be doing? Do you think it can sustain?

Brandon Munro: Yes, so look, the original thesis around the USD$30/lbs psychological barrier is once it breached USD$30/lbs, it would push quickly to USD$35, and that would be an initial resistance point where it would probably draw a breath. So, we are seeing that play out. It was USD$29.80/lbs then very quickly to USD$31/lbs, then USD$32/lbs, then USD$30/lbs to USD$40/lbs. And we haven’t seen any trading data come through so far to date, it hasn’t even started yet. So, there is every chance we’ll see the week finish at somewhere around USD$30/lbs to USD$50/lbs, and I would expect it to continue in reasonably short order through to that USD$35/lbs mark. But what’s different though is we’ve now got a catalyst driving it so there’s every chance we will see the spot price continue beyond that. And really the first time when spot would draw breath for market related reasons is at USD$40/lbs to $45/lbs, and that would be because there’s an expectation amongst traders and others that Cameco, Paladin would start filling their boots with long-term contracts and start turning on McArthur River and Langer Heinrich for example.

Now, even that becomes a bit interesting because the utilities are quite distracted at the moment so their ability to enter a whole bunch of long-term contracts when there’s just so much uncertainty and they’re fighting their own bushfires at an operational level, that calls into question that. So, we could find that over the next weeks and months we see a spot price escalate to those levels, pause there waiting for this Russian supply that some people think will come in, but I don’t see that materialising. I don’t see, with all that Cameco has got on and we thought that the utilities had got on at the moment, I just don’t see them filling a contracting book that’s big enough to get McArthur River up again, that’s not going to happen in a few months in this environment.

So, I would expect there all there will be fits and starts and there will be all of those types of things, but I don’t see any reason why the spot price is going to draw back once it gets to those sort of levels. Now, this is, you know, this is all crystal ball gazing, so by this time next week I could look like look like an idiot, or a fool or whatever.

Matthew Gordon: Or genius?

Brandon Munro: That’s all that we can do, right? We can just look at what is fundamental about the market. And in this case, there’s a bunch of really interesting virtuous cycles here that are very poorly appreciated in the sector. And the one that’s really at play here is the available, or mobile inventory has an inverse relationship to the price. And that’s something that the reporters and the consultants in this industry just either refuse to accept or refuse to talk about.

Matthew Gordon: Explain what you mean, please, because that is fascinating.

Brandon Munro: Okay. The kind of economics 101 view that prevails amongst the utility view and some of the consultants who inform on this market is that well, of course, at a higher price there will be more people who are wanting to sell their inventory. So therefore, the amount of available, or mobile inventory at USD$25/lbs is a lot less than the amount of mobile, or available inventory that’s at USD$30/lbs. And that’s a simple logic that’s easy enough to follow, you know, more people want to make profit at USD$30 than they would at USD$25/lbs, but it just doesn’t work like that. And the reason is that we don’t have much of a principle-based trading element to the Uranium sector. So, we don’t have many people who say, well, you know, I’m just going to put down USD$1 million and buy some pounds with that and wait until my million dollars is worth USD$1.1 million and then sell it. A little bit of that goes on amongst the traders but they have sort of learned that that’s a bit of a fool’s game with how volatile this sector can be.

And so, the material that’s available or mobile, that is mobile when people don’t think the price is moving. So, I’ll give you an example: it might be a utility who’s holding inventory, as they need to manage their own business risks. And their material tends to become mobile where the accountants come and talk to the fuel buyers and they say, now let’s talk about how much we’re sweating our balance sheet, and you’ve got how much sitting there in fuel? Okay, so why have you got all that sitting in fuel? Because the price could go up. But what happened last month? What happened the month before? So, you are telling me that we’ve had this commodity trading of between USD$24/lbs and USD$25/lbs for the last nine months, and you want to tell me that we can’t sell this stuff and make it work harder on our balance sheet? And they get told to sell.

The same conversation is very, very different if they’re saying, so what was it last week? Shit, it’s gone up 30%, okay, let’s not sell that stuff. Our balance sheet is doing just fine. If it went up 30% last week, it could go up 30% next week. Let’s just leave it right where it is. And so, what that means, the inverse relationship means that as the price goes up, there’s less material that parties are willing to sell into the spot market as mobile inventory.

And we saw that a year ago or so when we had a rapid price escalation from USD$24/lbs through to about USD$27/lbs, $28/lbs. The traders, when they started to see the movement, they were rubbing their hands thinking, oh, this is just fantastic. But they couldn’t get the material. They just couldn’t get the pounds to be able to make the turn on that. So that is a virtuous cycle. It operates the other way as well: when the price is going down, there is more pressure on utilities and others to sell their unnecessary material. The perception is, well, we will be able to buy it back cheaper later. And that has hurt us over the last few years. But it’s an example of the virtuous cycle that will catch a number of players who are napping in this industry because they’ve got a, you know, an economic 101 view of how this works.

Matthew Gordon: Okay, that’s fascinating, and I get it; it’s, as you say, it’s trading 101, right? It’s human psychology. That makes total sense. There’s still some confusion when we get these kind of inbound requests or explanations and so forth in terms of the relationship between spot price and term contracts. And you know, we’ve had a few good discussions this week and last week with some CEOs who have given their version of it. And everyone, you know, talks their own playbook, but what is your take on how that relationship is going to work going forward on a bull market, because it is a very different environment from the last, you know, 4 or 5-years.

Brandon Munro: Yes. So, it’s quite interesting because certainly if you’re looking at commentary on Twitter and on other platforms, we seem to have this backwardation and like it’s a big event that the spot price has gone beyond the reported term price. I’ve got to admit, either I’m totally missing something or I just don’t see the significance of that. So, it’s not like Gold markets switching from contango to backwardation or something like that. It’s just that we’ve got a really poorly reported term price that has been caught up by a spot price that is slightly better reporting. And the last two times in recent history when we have had backwardation, if that’s even a thing in the Uranium sector, the first one was in 2007, we had a term price of USD$95/lbs and that subsisted for, oh, it was quite a few months, you know, it was from June 2007 to April 2008. And in the meantime, that’s when we had the spot price achieving new heights on a weekly basis and it ultimately got up to USD$136/lbs.

Now, that backwardation was simply because no one had the appetite to write contracts higher than USD$95 until they saw a sustained higher spot price and they were convinced that that was the new normal rather than just being something that was over inflated. And then of course, in hindsight it was overinflated.

The other time in recent history when we’ve had this reversal was for a very short period of time before Fukushima. So, we had the spot price at USD$74 and we had the term price at USD$72 -so very, very thin difference, much like we do right now. And that was for no better reason than the spot price was increasing quite quickly and because of how long it takes to write and report a term contract, we were just playing a game of catch up. And then of course that game, well there was no catch-up to be played after Fukushima because the spot price fell quickly. And if someone was starting to think of writing term contracts at a premium to a USD$74 spot price, they quickly unthought that.

So, then, to come back to your question, we have seen over time that in a normal market that’s not outlandishly optimistic or not being affected by something pessimistic like the bear market that we’ve had, or for that matter, the Fukushima or shock event, the term price has always traded in the order of a 20% premium to the spot price. And that’s just really a reward for supply certainty and the different options that can get built into a term contracting package.

And that premium becomes more when there is less certainty and probably a bit less when there’s more certainty. So, in a situation where, in the past when there’s been very good diversity of supply, so both geographic and political and commercial diversity of supply, that premium has shrunk a little bit. And then when we started to see a situation where there isn’t very much commercial diversity to supply, like we have now, I’d expect that premium to push 20% and perhaps go higher, depending on where spot really is at the time.

And the other thing is that we are seeing a lot more volume through the spot market and it’s not really a spot market. It’s really a 1-year delivery market, but we are seeing more pounds go through at that level simply because very few producers are prepared to write fixed-price escalating term contracts at the moment. So that’s just a function of how low the price is rather than anything else, necessarily.

Matthew Gordon: Yes, I think, and by definition the contract market is illiquid, in a way; it’s got less data points compared to spot, which is going to pick up on the, you know, the sentiment thematic of the day, as it were. But we again, another conversation that we had with a CEO, it can help sort of clarify some, understand we picked up a year ago and I think perhaps some people feel things are changing, the way that contracts are written. He is saying that he feels that more contracts will be written, term contracts will be written, but based on a sort of moving average of spot. And I think we have talked in the past about structuring these contracts. So, the question is, do you think that these contracts are going to stick to the old model or are they going to need to have the flexibility? Because people sort of have been through what is quite a tough cycle at the moment and give themselves flexibility on both sides.

Brandon Munro: There is a trend towards them becoming more sophisticated, and we have got more traders in the market who are trying to establish some level of derivatives in this sector so there are a few more options with which the utilities have to manage their risk. And so that will lead to greater demands as to flexibility within contracts. And, but by the same token it will, as you say, cut both ways because there is a big push at the moment amongst the larger utilities to try and establish more diversity of supply. So, for example, Namibia has always been extremely important to the US and European utilities for that diversity of supply. And they don’t have that anymore because the two operating mines in Namibia are both now state-owned enterprises, and Chinese ones at that. So, they’re not expecting any new contracts to be written from those mines and they’ve lost an extremely important and diversity angle to their portfolio. They will be doing things to enable flexibility on the mine side to help mines get into production, to deliver that diversity. And for the bigger utilities who are the larger consumers, that is very much in their own interest to do that.

Matthew Gordon: So, you used the phrase there; you spoke about the diversity of supply, and another phrase from earlier in our conversation you talked about, you know, people, people fighting their own fires – it was in relation to CEOs, but I think utilities are, we need to remember they are not a one energy source company; they have got multiple choices. They’re looking at Shale gas, and I think that’s a bigger topic, perhaps we can discuss that another time, but it is worth making the point now that what has been going on in the oil market is also going to have an impact on the way utilities think about nuclear, about Uranium because that has gone slightly wobbly at the moment because of the Russians and the Saudis and their infighting. But you know, state utilities are looking at that, they’re looking at renewable, they’re looking at nuclear and they have got lots of choices. They are fighting fires in their own back yard, as it were. And again, so are you hearing much about those outside influences affecting the way that they’re thinking about Uranium now? Do you think that has sped up their thoughts on maybe coming back into the market a little bit quicker than perhaps they had intended two months ago?

Brandon Munro: Look, I’m not hearing a lot about it, but what I understand is that  they’ve got multiple plates spinning, as you say, and I think particularly for the diversified utilities, they’re just trying to get another few weeks down the road for something to look stable and less dynamic and less fluid so they can make some sort of a decision.

Matthew Gordon: Okay, and again, just a conversation that we had earlier this week with a Uranium trader, he said that it has been busier. There’s been a lot more calls; when normally they would expect the utilities to be sitting back and sort of see how the dust settles, they’ve been nervous enough to pick up the phone, place a few small orders, small, nothing meaningful just to kind of get a feel of what’s going on in the marketplace. I thought that, as a survey of one, was quite an interesting reference point. Because again, the utilities are hard to get a hold of, hard to talk to and companies like you get to talk to them. But I just wondered if you were hearing similar tales?

Brandon Munro: And so, if you think about that, it’s not a big difficult decision for a utility to nibble away at spot. What I have heard is consistent with your story, which is that there is a little bit of activity and it’s very much on the edges, but it hasn’t been a lot of utility buying that has pushed the spot price up. There hasn’t been that much volume and it’s probably more about the withdrawal of offers than it is anyone bidding particularly aggressively at the moment. And when you think about that, that’s still consistent with the way that I understand things are moving with the utilities. That might be a pre-approved a decision that was made a little while ago, and a utility, now they have got the budget and they think, well, I better get on the bike here because if I don’t buy now at USD$31.30 and I leave it, either my approval is going to cap out, because we have gone beyond what my authority limit is or I’m going to be going back and I’m going to be paying potentially USD35/lbs,USD$36/lbs, so I just want to get this 100,000lbs bought, locked away and then move on. And now, that’s quite different to gathering up the data and having the dust settle, as you say, to the extent where a utility can start changing its procurement strategy and moving from drawing on inventory versus trying to put some material away in the carry trade market, versus trying to get long-term contracts written. You know, they are bigger level strategic procurement decisions that need a whole bunch of factors that just don’t exist at the moment, not the least of which is access to the executives within the organisation who all running around and fighting their own little wars right now.

Matthew Gordon: Okay, now there’s again, there’s a small thing but when I see it makes me ask questions – so companies like yourself have been dusting off their PowerPoints, updating them, because you always see when companies  do something, they have not touched their PowerPoint for nine months, you know that no one is talking to them and they are not talking to anyone. You’re dusting off your PowerPoint, and you’re going to take us through it next week, but do you think that there are going to be a lot of juniors now clearly rejoicing that there has been some movement in the price? And therefore, if they did, because there have been a couple who tried to raise money and have not been able to, and I know you are okay, you’ve got a couple of years runway, we are not making this about you, but just generically, people are starting to dust off these PowerPoints for the purpose of going and having conversations. So, do you think the general funds are going to be excited enough about this small movement over the small period of time to, you know, answer those phone calls that may be coming in from juniors, junior Uranium players? Or do you think indeed, they are picking up the phone and there are lots of inbound phone calls coming to these Uranium juniors, for the first time in a long time? Do you think that that may have been in the price enough to elicit that kind of thinking?

Brandon Munro: I think it has been, at least it has started. My experience is that I have had a lot of inbound contact, a lot of inbound phone calls. So, my dusting off of my presentation is more about having something that is updated for COVID-19 that’s on the ASX platform so that I can have those discussions. So, that level of interest will inevitably tempt a number of companies and boards to start marketing and look at a raising. And there’s a number of my peers who have to raise and they would be pretty foolish to let this opportunity go. And you know, we’ve got to remember that it is such a volatile macro situation at the moment that we could have Uranium continue through USD$35 to USD$40 and some other macro shock result in the market closing, at least for new issues. So, I think there will be lots of PowerPoints thrown around and lots of investor discussions and lots of people getting tapped.

It seems to me to be from the general, it is still a little bit exploratory. Where we’ve been quite fortunate is that there has been a lot of publicity around this. It has partly been because there’s been that strong COVID angle in terms of mine disruption. There’s been a lot of publicity through the actual mining press that we, you know, Uranium is just such a small industry that we don’t normally get very much for that, so I’ve been lapping that up. But also, yes, Uranium is the only commodity that has done well out of COVID-19. Even Gold is, although it has gone up this year, it hasn’t been spectacular by any means yet. So that has raised a lot of eyebrows and the funds that are flexible enough in their mandate to dip into something that’s got as little liquidity as Uranium equities at the moment, I wouldn’t be surprised at all if we see them start to fill their boots at this stage.

And all of the, how would I put it, you know, the guys who normally spring into action at a time like this, we’re certainly seeing that. You know, we are getting the convertible note offers from New York beating down the door. Some of the other usual suspects, they’re obviously getting very active. So, they’re either, they’re sensing the commodity opportunity in Uranium and they are probably hoping that we’re all so beaten up in this sector that we will accept some of their terms as well.

Matthew Gordon:  I can imagine. You know, I do think there are some deals to be done out there. There are some great assets and some very average ones. And we spoke with John Borshoff earlier this week. He was, you know, obviously he’s got a slightly different model from most in this space, you know; he of Paladin fame, and they are still looking to make some acquisitions, and he still thinks there’s some deals to be done. I kind of agree with that. If you’ve got the cash, or the ability to get cash. But for people with good assets, I think they’re going to find it a little bit easier to raise money and you know, hold on until this thing does uptick towards those hard numbers that you’ve mentioned earlier. I mean, you know, I do think they will come this year, but I still think there’s going to be a little bit of uncertainty in the market. So, I’m still going to Q4. I’m still going to Q4.

Brandon Munro: Yes. Yes, I think so. There will be volatility that people will be able to, or investors will be able to take advantage of between now and then. But I agree with Q4. I think one of two things is going to happen: COVID-19 will have subsided enough for people to see enough settling the dust to get on with things, and that’s the utilities in particular, or it won’t have resolved itself enough and it just becomes a new normal, you know. We can function in a lot of chaos once we’ve adjusted to it and got used to it. And either of those things are likely to happen by Q4. So that’s when we, I think, we would start to see those types of dynamics come into play.

Matthew Gordon: Okay. Last question: what do you think is going to happen next week?

Brandon Munro:: Oh, well, well, we can’t say that – it will spoil next week’s show, right?

Matthew Gordon: Well, it has just, it’s been great television for the last three weeks. It really has. Just seeing the way, the announcements, people’s reactions. You’ve got extremists. People are very, very excited, and there are a few more smiles out there, which is great. The equities have moved; it has been nice to see. And you know, I hope it sustains and continues.

Brandon Munro: So, let’s throw through a few things out, and let’s not call these predictions, let’s call these hypotheses to test next Friday.

Matthew Gordon: Okay then.

Brandon Munro: So, the first thing is that I don’t think we will see the spot price retrace in the next five sessions next week. And if I think back to say, October, 2018, we went 17 sessions in a row where the spot price didn’t go backwards. There are a few of those where it took a breather, but it was either black or green for 17 sessions in a row without any red at all.

Matthew Gordon: What was the session? What is the time frame of a session?

Brandon Munro: Okay, gotcha. So, 17 trading days in a row where the spot price did not go down. It’s so what it tells us is that this is a sector that does get driven by momentum and I think that that momentum will continue in the next, over the next week at least. So, there’s the first thing. The second thing is I think the situation in Namibia will show a few retail investors that they got a little bit excited about the degree of supply disruption, so you might see equities stabilise this week, maybe a couple of equities come back a bit if they have got a heavy retail focus. And I think as far as the COVID world generally goes, there are just so many calls now for a release of the restrictions that we’ve got from so many different angles. And it’s amazing just how quickly many parts of our society have become A, impatient, but also have become experts on evaluating risk to the extent that they’ve got an opinion about it. And so, I think we will start to see that happen, And that could start to have an effect on the likelihood of, say, Australian mines shutting down.

And that there’s been a lot of investors in Uranium getting hopeful that Olympic dam will shut down. I’m just not seeing that from here. I think that is becoming less likely by the day and from a Uranium investors point of view. All that you can really hope for there is that they lose 5% of their productivity and their ultimate output because they’re running red team, green team type shift rosters and so forth, which are always just that little bit harder to implement with the fly-in, fly-out workforce.

Matthew Gordon: That’s your thesis.

Brandon Munro:  Yes. What do you think? Come on. This has to be two ways.

Matthew Gordon: I’m kind of a little bit like, it’s like some of what you said; I think that there’s going to be a little period of, a little pause to see what’s happening, have a look around, because the reality is that no one still, no one knows what inventory is out there. No one. You have come on the show and talked us through the various scenarios of UF6 et cetera, you know, so we can sort of see why last year it didn’t happen, but until, and again you’ve told me that around this time of year, the utilities usually, but may not, choose to share the inventory levels and I could see why they wouldn’t know – it is a chess game. Why give it away? Why give away your secrets? So until there’s clarity in that, I think the reality of situation, the situation hasn’t really changed enough other than people getting very excited about what the impact of, you know, Cigar Lake and Kazatomprom and you know, Namibia and so forth could mean, but no one has actually seen what the realities are. And you know, what that sliding scale of disruption to supply actually looks like. Because again, I think probably it was you who was talking about the way that Kazatomprom, you know, they don’t do spot, they do contracts and they’ve got enough inventory that for their contracts. Cameco have been impacted. So, I would be surprised if it moves quickly until the utilities give us some clarity on what those inventory levels are, if indeed they do, because it’s guesswork, and that makes me nervous as an investor. I’d rather miss some of the bump now and come in slightly later. But, you know, unfortunately I placed my bet about three weeks ago, so I have a vested interest in the market moving, but at the same time, how quickly that moves, I’m probably not as optimistic as some of the voices in the social Twitter sphere and places like that.

There you go. How’s that for a noncommittal answer and assessment?

Brandon Munro: Yes. I’m going to have to learn to make my answers a bit more noncommittal. I’m learning from you constantly, Matt.

Matthew Gordon:  I do try. I do try.

Brandon Munro: : But I agree with you that there is a period of digestion that’s going to need to take place, and whether that happens next week or whether that happens over the next month, there are a number of things that we need to digest and a number of things that we can’t digest just yet. For example, until we know how long the Kazatomprom shutdown last, whether it’s three months or two months or four months, because of the way that an ISR mine production tails off as you stop wellhead development. And even that number, it’s not a mathematical number that we can do in the same way that we can calculate how many pounds are lost for every month that Cigar Lake doesn’t turn back on, for example. So there is a bit of a moving feast and I think there will be a digestion. So maybe, maybe I’m happy to elevate your comments into fully committed mode and we’ll redo that next Friday.

Matthew Gordon: I hope I’m wrong, I hope I’m wrong, and it kind of doesn’t matter. We’re talking weeks, you know, or a short number of months.

Brandon Munro: This is fun, right?

Matthew Gordon: It’s just for fun. We’ve placed our bets, unfortunately, you know, so, you know, we will win. But like I say, I just, I want to sort of temper some of the enthusiasm out there and just help people remember that you need all of the facts in place to make informed, intelligent investment decisions and it shouldn’t be guesswork. So we are backing the macro story, like you say, it’s a bit of fun guessing when. It’ll be fine. It’ll be fine.

Right, Brandon, I had better let you go. Thank you very much. Because I know it is late on a Friday night and there’s wine to be drunk. I will be following you, not now, but in a few hours, down that path. What are you drinking tonight?

Brandon Munro: So, I’ve got a GSM that’s breathing at the moment, just waiting for me. So, Grenache Shiraz Mourvedre, Australian. I don’t mind that blend,  actually, this is a Barossa Valley, by a family-owned vineyard called Schilt. Awesome people. I’ve met them on several occasions. Real old school, three generations, German family, planted the vines like 130 years ago. Real, real great people. So, I’ve got that to look forward to you.

Matthew Gordon: You do? I’m not quite sure what we’re sure what I’m going to go for. I’ll see how I feel at about six o’clock, you know, and the sun gets past the yard arm and all of that. We shall see. Well, Brandon, thanks so much. I mean, so, so much intelligence. People do love what you are doing, sharing with them your knowledge. So, I’ll thank you on their behalf and also thank you from me.

Brandon Munro: Oh, my pleasure. Thanks for the opportunity to come on and answer some great questions, and I’m glad to see you participating and putting your neck out there. We’re going to keep going with that. I can’t give share tips. I am not giving share tips.

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A photo of Bannerman Resources CEO, Brandon Munro.