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

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

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

But things have changed today.

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

Matthew Gordon talks to Brandon Munro, August 2020


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon talks to Brandon Munro, January 2020


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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon talks to Brandon Munro, May 2020


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

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

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

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

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

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

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

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

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

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

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

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

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.

Global Atomic (TSE:GLO) – Most Likely Uranium Junior in the World? (Transcript)

Global Atomic Corporation
  • TSX: GLO
  • Shares Outstanding: 145M
  • Share price CA$0.51 (17.04.2020)
  • Market Cap: CA$75M

Interview with Stephen Roman, Chairman, President & CEO of Global Atomic Corp. (TSE: GLO)

FULL ARTICLE AVAILABLE TO READ HERE

Global Atomic really is one of the most promising uranium juniors on the planet.

The recently released optimised PEA for flagship Niger-based uranium project, Dasa, has world-class numbers that would make even uranium majors blush.

The company is reinforced by cash flow from a zinc JV, and this should start adding to the bottom line in 2 years’ time. The cash flow will be used to advance Dasa.

Roman has a track record of delivering uranium to the market; this is something of a rarity nowadays, as expertise has been drained out of the industry by this deepest of bear markets.

Looking towards the rest of 2020, Roman will be completing a variety of environmental and feasibility tests as he targets accelerated uranium production.

We Discussed:

  1. 2:45 – Company Overview
  2. 4:19 – PEA Results: Surprising Grade and CapEx
  3. 7:43 – Zinc Project Revenue Timeline
  4. 9:00 – Financing and Recent Raise: Why Didn’t They Raise More?
  5. 11:14 – Allocation of Funds
  6. 13:39 – The Uranium Market: Opinions and Insights
  7. 15:51 – 2020 Plans and Future Outlook

CLICK HERE to watch the full interview.

Matthew Gordon: Stephen, how are you doing, sir?

Stephen Roman: Hey, Matthew, I’m not too bad, not too bad. Surviving COVID. Everybody is healthy. And, we are getting back into the office, which is great. Cautiously, but things are moving ahead

Matthew Gordon: And you picked up a suntan along the way, even better, I like it?

Stephen Roman: Well, I get a lot of sun on top of this head.

Matthew Gordon: Hey, well look, we’ve got a lot to catch up on, but for people who haven’t seen this story before, can you just give us a 1-minute overview of the business please? And then we’ll pick it up from there.

Stephen Roman: Global Atomic Corporation, a Canadian company, Toronto listed. OTC QX in the US and also Frankfurt. We are a Uranium development company. We’ve got a world class asset in Niger, West Africa, but on top of that, we have a solid cash-flowing Zinc business in Turkey that we started in 2009. We have a super partner there, Befesa Zinc are the biggest in the world. And between us, we’ve just built a new plant in Turkey, 2019. So that’s now been commissioned and ramping up. COVID, of course, had a bit of an impact with Zinc prices. The price went from USD$1.10 to USD$0.85 cents. We have told the market that we expect that a 2-year pay-out now because of weaker Zinc prices. And that project is actually providing us cashflow to finance the development of our big DASA Uranium project. So yes, that’s the crux of the of the company; it is a Zinc cash-flowing asset and a solid Uranium development story.

Matthew Gordon: That’s the crux of the matter. I love it. It’s good. I’ll send the cheque later. Let’s talk about this, because when we last spoke you had just put out a PEA, which was really, really well received. And I want to talk about that as well. And then subsequent to that, you raised a little bit of money to move things forward. So those, are the main things since we last spoke. So why don’t you just remind people about some of the numbers in the PEA first of all, and then we can talk around that.

Stephen Roman: So the PEA and compared to our peers, who have been running their studies at USD$50, USD$60 Uranium. We thought with the Uranium price is down around USD$25 and we expect it to go up. And as a matter of fact, it did move up about USD$10 to about USD$35/lbs. We decided to do our PEA at a base case of USD$35 p/lb, which is we felt very conservative. I think by the time this project is in production, the price should be a little higher based on what is happening in the market. With that conservative approach, we came up with a project ramp access mining high-grade in excess of a 0.5% Uranium and producing a rate of return of about 26%, 27% after tax and an NPV8 of over USD$200M. So, we expect that mine plan will be optimised during our feasibility phase. And, with Uranium prices moving up, of course the NPV and the EIIRs move up commensurately with the price of Uranium. But we can make money in the current market. That’s the key. And with our cash-flowing Zinc business it adds to quite a story.

Matthew Gordon: Well, it is quite a story. I think people were surprised that the CAPEX is quite low, less than USD$200M. And also quite the grade… Did it surprise you?

Stephen Roman: Well, we knew we had a tiger by the tail here at DASA. So, we made that discovery. We had the groups like JP Morgan, McCrory’s, Investec all put money into Global Atomic when we were still private. And, this thing has really turned out to be something. It is now 250Mlbs. It is not drilled out, but the great thing is that the cash flow we brought in from Turkey through our project there has defined an area we call the flank zone and that is where we are targeting our initial production. And it is very high grade. Like 80% of it is running at over 1%. We have blended the grade down to about 5,300ppm or just over 0.5%. So that gives us a tremendous rate of return. We mine a small amount of tons: 1,000t a day. We can produce between 4.5Mlbs and 5Mlbs a year, which is really a sweet spot for a project in the Uranium space.

Matthew Gordon: That is quite unusual. We put out a report on you guys; again, fairly well received, because it just set you apart from some of the other stories out there, for sure. So we quite like the model that you have created, especially with the revenue from Befesa, but that hasn’t started yet really because you built your plant, Zinc prices have gone down, you are going to have to pay back that plant before the revenue starts flying. What’s the timing on that?

Stephen Roman: Well, we thought we would have it done at previous Zinc prices in 1-year, but now we are saying 2-years. We really won’t start getting major revenue from that until 2023. That’s the estimate at this point. We do get monthly management fees, sales commission. So that pays a lot of overheads, but the big annual dividends from production come out once a year post the Turkish AGM, when a dividend is declared. And so far, what we are doing is the project cost is about USD$26M – the new plant. We have already paid that down to about USD$23M, $24M. And we expect over the balance of this year and next year to pay that all off.

Matthew Gordon: Let’s talk about the market,

Stephen Roman:  And, it is important, Matthew, sorry to cut in there. It is non-recourse debt to Global Atomic.

Matthew Gordon: Let’s talk about the macro a little bit because you said to me a second ago, we can produce at USD$35/lbs, but in the current climate, no one is getting financed, are they? I know you have raised a little bit of money, but it’s a little bit of money. No one is getting their CAPEX financed in the current market. What are you doing about that? Why have you raised the money that you did? Because you could have raised more, but you chose not to.

Stephen Roman: Well, we like to keep dilution to a minimum – number 1. We had a bit of a pop in the Uranium price. We took advantage of it. COVID was there, obviously, we said, we had better put a little bit of working capital into the treasury. The stock ran up to about USD$0.70 plus cents a share. We did a unit offering at USD$0.60. There was a lot of people trying to get it at USD$0.50. We said this is not fair to be taking such a haircut. We did a smaller raise, but it provided sufficient capital for us with the funds we had on board to finish all of our feasibility work, make our applications for the mine plan and all of that. So really, we don’t expect to come back to market until we do project financing after we have our mining permit. I think that’s very important for people to realise; in a lot of feedback I’ve been getting, people are saying you didn’t raise enough. You are going to have to come back to the market. I don’t think we will unless COVID lasts for the next two years and everything is stalled, but based on our schedule right now, we are going to be applying in August for our mine permit. If things go according to plan, we should have it by the end of Q1/21. And the funds we have are sufficient to complete all the feasibility work and get our mine permit in hand. So that will be a big catalyst for the company after that.

Matthew Gordon: That is quite big. I hadn’t appreciated that. So that will get you through to when you start raising money to actually get this thing into production.

Stephen Roman: That is right.

Matthew Gordon: That’s impressive. What are you doing with the money that you did raise? How are spending it? I know you said put some in treasury, but you’ve also got to move things forward. So how is that broken down?

Stephen Roman: Well, we had then with that raising, we had about USD$6M, USD$6.5M in the treasury, which basically we’ve been using to do our environmental base, or environmental impact study. So that has been completed now. We are at the phase now where we have two public hearings. So, one at site with the small villages in the area and then one in Niamey. Once those are done, everything is submitted. We get a sign off from the environmental ministry. That goes in as part of our application for our mining permit. So, on top of using funds to do that, we’ve been using funds, obviously, to complete all the feasibility work necessary for our development plan and for our mining permit application and then the balance will be used for some geo-technical drilling that’s going to be required and the final engineering and design for the mine and the plant. So, we have sufficient funds onboard to do all of that.

Matthew Gordon: And there’s a little bit of debt with Turkish banks in relation to Befesa. Is that going to be rolled over? How is that being dealt with?

Stephen Roman: Yes, no, that’s a good point. Befesa has basically sponsored Global Atomic, and we have a deal with them at about a 5% interest rate to carry our portion. And what we have agreed to is that we would use all the cash flow to pay that down prior to receiving dividends. They have got 100% of the cashflow coming to them, aside from the management fees, et cetera that I mentioned. And the Turkish banks; we have lines of credit in Turkey. We have been operating there since 2009. The banks, they have been working with us. They like us. And the lines of credit help us with our general working capital requirements in the country.

Matthew Gordon: Now tell me this, I want to talk about the market just briefly, if I may. I like you, one of the few management teams who has actually produced and sold Uranium into market. And I always say to my followers and readers, that that’s really, really important. So, given that, what are you hearing in the market?

Stephen Roman: Well, the utilities are sitting on their hands at the moment, but it looks like they may start moving by mid next year; there are US elections in the meantime. Nobody knows whether Mr. Trump is going to be back in or the Democrats are going to be back in. Either group have declared that they are positive about nuclear power, it’s part of a clean energy solution. And we think after these things are sorted out and clarified, you are going to start seeing the utilities getting back into the market. Spot-wise – we can always sell Uranium in the spot market, but clearly, what Global Atomic wants to do is once things are in hand, as far as our mining permit and our development plan, is that we would meet with utilities and sign in some longer-term contracts so that we can project finance the DASA.

Matthew Gordon: Are you hearing anything about the Russian suspension agreement? Because it seems to be all quiet on the western front as far as we are concerned.

Stephen Roman: Yes. I haven’t heard a lot. Maybe you can shed some light on that one.

Matthew Gordon: Not yet. I’m trying. So I think that that’s a very similar picture to what we are hearing on the street, as it were; the fact that utilities are biding their time to lead towards the end of this year. And I think in the beginning of next year, we’ll start talking to companies, trying to understand what is possible and what’s not, and there are a few companies that seem to be positioning themselves quite well for that. But that may come a little bit too late for a few others. So, interesting times for sure. So, the rest of this year is head down, get on, control where you can control and hope that is enough?

Stephen Roman: Well, what, this year we will be busy. We’ve put out RFPs with groups that are interested in building the project. So that’s all part of our work plan going ahead. We have been reviewing those. We have been doing a lot of meetings with various groups from various locations that are interested in building the mine and the mill, getting quotes, building up the team capability in-country as well. So, all of this is ongoing with the anticipation that once the mining permit is in hand, we will want to move ahead fairly quickly.

Matthew Gordon: When is that again? When is the mining plan ready? When do you think you’re going to have that in hand?

Stephen Roman: Our schedule right now is by the end of Q1/21 next year that we would have it in hand. We are hoping that we can move that ahead, but Niger is also having a presidential election, and so campaigning is going to start there probably in the fall. That’s why we want to get our permit in to the government by August, so that at least they have their initial review and they can give us a bit of a heads-up on when they think it could be issued.

Matthew Gordon: Well, that all sounds good. You have been motoring along. You are building something quite nice. The market seems to like what you are saying. And hopefully this COVID-19 situation does clear up for all of us, and we can move on with business as usual. I appreciate the update. I mean, stay in touch and let us know how you get on and pick up the phone. We would be delighted to take that call, Stephen.

Stephen Roman: Thank you very much, Matthew.

Company Page: https://www.globalatomiccorp.com/

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

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

#14 Kazakh Uranium Shutdown has MAJOR Impact – Brandon Munro

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

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

Matthew Gordon talks to Brandon Munro, 10th July 2020

https://youtu.be/QpJcMWElnwk

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

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

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

A nuclear power station

Lastly, touching on the political side of things, will the DNC support nuclear energy? Bernie Sanders and Alexandria Ocasio-Cortez were anti-nuclear, but the current position of a potential Joe Biden administration had been enigmatic. However, a recent 540-page document released by the Democrats, called ‘Solving the Climate Crisis,’ https://climatecrisis.house.gov/sites/climatecrisis.house.gov/files/Climate%20Crisis%20Action%20Plan.pdf has a generally pro-nuclear message. This remove any uncertainty that might have been held against the November election because both sides will support nuclear as an energy solution. The discrimination against nuclear power has been removed, and it has now been positioned alongside the other green energy solutions. Another micro-catalyst?

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

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

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.

Peninsula Energy (PEN) – $40M, why now? Uranium Investors Puzzled! (Transcript)

Peninsula Energy Ltd
  • ASX: PEN
  • Shares Outstanding: 315M
  • Share price A$0.08 (09.06.2020)
  • Market Cap: A$30M

Interview with Wayne Heili, CEO of Peninsula Energy (ASX: PEN)

FULL ARTICLE FOR THIS INTERVIEW HERE.

As usual, Heili lives up to his straight-talking reputation when asked why they chose this point to raise A$40M. A 2016 loan has been extended on many occasions but now, in light of the market conditions not reaching a critical mass, the loan is due in October 2020. Heili explains how the funds will be used.

We Discuss:

  1. Company Overview
  2. AUS $40M Raise: Why Raise So Much? Debt History
  3. Retail Investors Taken Aback: Why Choose This Method of Raise and Other Options Considered
  4. Timings: Why Do it at This Time, Rather Than at the End of the Aussie Tax Year?
  5. Risks, Concerns and Fees: Terms & Agreements with Shareholders
  6. Assuring Investors of Future Success
  7. Current Cash Position, Contracts and Breakdown of Spend for $40M
  8. Timeline of Getting into Production
  9. The Market Waiting Game: Spend Now or Wait?
  10. Does the Market Understand the Reasons for the Raise? Could They Have Waited?

CLICK HERE to watch the full interview.

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

Wayne Heili: Fantastic. Matt, nice to talk with you today.

Matthew Gordon: Yes, I appreciate it. Thanks for coming on at such short notice. I do appreciate that you’ve got some big news, which I want to discuss with you, but first let’s give everyone new to the story that one-minute overview, you know, what your business is about.

Wayne Heili: Well, Peninsula Energy over the past 2.5-years has been making significant advances in transitioning our existing alkaline-based in situ recovery operations in Wyoming to one that’s going to use low pH mining solutions. We think that’ll significantly enhance the economic potential of that flagship property for us when we recommence production. Our numerous achievements over the last several years, Matt, have that combined with the improving outlook and for Uranium demand in the market have not been reflected in our share price. Our board, you know, our folks believe that the spectre of the near-term maturity of the debt that our company carries has been the burden. And it is been the reason why our share prices and our share performance hasn’t moved with other companies in this space. And today we’re in the process of addressing that one final issue that’s been holding us back.

Matthew Gordon: Okay. Which is a large raise! It is quite a big number, over USD$40M, it is not to be ignored. You know, your market cap is around what? USD$28M, USD$29M, and you’re raising USD$40M. Why so much money?

Wayne Heili: Well you know, we have to be careful. So I’m going to kind of step into the Australian dollar rather than the US dollar. And we’ll talk Australian dollars for a little while now. Our debt in Australian dollars is about AUD$27M. And our capital raise, we’re looking at about AUD$40M on the raise. So the purpose of this raise is to entirely eliminate that debt in the nearest prospect that we can, and then we’ll be taking on some additional funds to carry our company forward with the initiatives of improving the low pH technical understanding, some optimisation, some de-risking of our project moving forward. So, you know, the scale of the raise is really one that is recapitalising the company. Going after a rather large raise at this time, the fundamental purpose is extinguishment of the debt. Everything else that we’re going to do, you know, could have been done with a much smaller raise, but the debt extinguishment is the main purpose.

Matthew Gordon: Right. Okay. And I do understand that you’ve had conversations with the lender. You’ve extended it a few times over the past few years, they’ve reached the end of their tether, have they? I mean, I know you kind of got an extension from April through to the end of June?

Wayne Heili: Yes. You know, look, we took this debt in 2016 when the company had just stood up the project and was just beginning production. You know, over the last four to five years now, we have extended the debt on a number of terms. We have changed the conditions on a number of times, you know, and today we really do believe that with the debt coming due at the end of October of this year, we really do face a very real prospect that the investment horizon for those lenders and that lender group is really near the end. And we’re not certain that we would be able to extend or change the terms and conditions of the debt moving forward. Beyond that, we pay AUD$3M a year in interest and servicing of that debt. So that’s a big chunk of corporate burn that’s being financed by our investors. So, it is important for us to look for ways to reduce our burn rate, reduce our costs moving forward. And so, extinguishing the debt became a real priority for us.

Matthew Gordon: And what about, why this method? Why a 45.4% discount to the share price as I think it was at some point in May. That’s hugely dilutive isn’t it?

Wayne Heili: Yes. Well, we recognize the offer price is a significant discount to our last closing price or to the pricing of our last capital raise, which was completed at the beginning of this year. The COVID-19 influenced markets today, in those markets equity raises, that are primarily for the repayment of debt or for the restructuring of a balance sheet, are being similarly priced. This is a substantial discount, but it is in the ballpark and the same pricing as you would see if you looked into the universe of other raises trying to accomplish the same thing, Matt, we priced this rights issue to minimise the execution risk. We also put… we think the pricing puts values in the rights for the shareholders. So, if they might clear the market if any current shareholders did not wish to, or were unable to take up their entitlements, these shareholders may be able to realise some value by selling their entitlements in the market because of the way we priced it today,

Matthew Gordon: So, who recommends to you that that’s the price? What was the starting price? I’m assuming you negotiated it, but it is still 45.4% so what were they originally recommending?

Wayne Heili: Well, this was a, yes, you know, we were looking at a 50% discount. We weren’t quite at that that level. But, you know, you can see raises of this type in the markets today offering 30% to 60% discounts.

Matthew Gordon: Yes, I think the retail investors are… kind of taking their breath away. They’re not quite sure what to make of it. Well, you tell me: what do you think they should make of it?

Wayne Heili:  I want the retail investors to be assured that the form of this capital raise was selected because it puts our current shareholders front and centre first. They have first rights to take up this well-priced offering. We didn’t do a placement to institutions in advance of opening up this rights offer. This rights offer goes to our shareholders first and if they take up their rights, nobody else will. Now it is fully underwritten and has been underwritten by Canaccord and a group of sub-underwriters. So, if the shareholders do not exercise their rights or opt not to, for one reason or another, you know, we could be assured that this raise will be successful. But it was very important to the board, very important to the company, was the treatment of our existing shareholders. And that’s why we selected this form of a raise. And it isn’t inherent with this type of raise that there are generally larger discounts, but again, each of our current shareholders has the first chance at these well-priced new shares.

Matthew Gordon: Okay. What were the other options you looked at?

Wayne Heili: You know, for the last 18-months now, we have been negotiating an arrangement that would achieve a partial monetisation of one of our offtake contracts. And the intent of that monetisation was to repay the debt. That’s been a part of our story, but the viability of that arrangement really depends on the ability to purchase Uranium in the spot market and at the time of execution, and the ability to buy at a price that would generate a significant upfront payment to the company. With the recent increase in the spot price of Uranium, the upfront value for a monetisation type of transaction has diminished significantly. So, the appeal of the attraction and the monetisation is not what it once was. And for us, we’re being mindful of the proximity of the maturity of our debt. We did look at all of our realistic options for the company and we took the prudent decision, we think, to avail the company of what is a fairly certain market right now, the Australian market is a pretty buoyant fundraising environment at the moment. And it is not always like that. It hasn’t been under the COVID environment. There’s been a lot of uncertainty in the markets and it may return to a volatile and uncertain market. So, we see this as a good time to remove the spectre of long-term debt. We think this was the best mechanism that we could look at. We value our shareholders and we put them first in line for this raise and, you know, really other mechanisms that didn’t put our shareholders today first in line, were quickly eliminated.

Matthew Gordon: You must have been one of the few Uranium companies wanting the spot price to stay low then?

Wayne Heili: Well, that is the irony, Matt, of our position. You know, the monetisation depended on a low price and the markets were low for a long time, but the monetisation transaction was just simply not getting done with some of the negotiations and the agreements that had to be completed. It just couldn’t be, we had a structure that we thought was a win for all parties, but there were some contract details that weren’t working out. We have looked at it, it has gone on long enough. We needed to reduce you know, the price of Uranium going up was against the interest of the monetisation. But Matt, it certainly is not against the interests of the company in the long term.

Matthew Gordon: Right. True, true. A couple of things on the actual terms: first of all, the date for this, what’s the date for this?

Wayne Heili: Well, the record date for shareholdings is June 10th, but we’re really looking to complete this raise in the month of June. We’ll have the proceeds come and completed by the 30th June. And we’ll be printing a strong balance sheet for the end of our fiscal year, for the end of the June quarter.

Matthew Gordon: A question from an Aussie shareholder: why didn’t you do this after the end of the Aussie tax year? Allow them to sell down some of their shares and then roll over the capital gains into the next year?

Wayne Heili: Yes. I’ve heard a few folks say that, that it would have been more advantageous for the current shareholders. First and foremost, you know, that wasn’t something that went through my mind; sitting in the US, I don’t have the same tax years, and maybe that was a miss on our part. But our motivation for the timing was to make sure that the company was debt-free and had a strong balance sheet at the end of the fiscal year.

Matthew Gordon: Right. Okay. Second thing – Canaccord – under what terms are they underwriting this?  Are they going to have a position on this? I mean, how are you paying them?

Wayne Heili: Well, Canaccord is brokering and underwriting and managing the process. Euros is also a co-manager of the process. You know, Canaccord gets an underwriting fee of 5% and a management fee of 1%. So the total cost on this is about 6% of the proceeds. And Canaccord has gone out and enlisted a book of sub-underwriters. They do that on their own, but you know, we have talked to major shareholders, we have talked to investors and high net worth folks interested in this space. Some of the Canaccord folks, some of the principals are in that block, but the sub underwriting is being done by institutions and outside of Canaccord . So you’re not seeing Cannacord taking a major position.

Matthew Gordon: Okay. I guess my main concern when I see deals like this and groups like that, and I’ve had it done to me, so it is particularly raw, is where they dump stock into the market after a 4-month hold, the stock gets hammered as a result, and sometimes never recovers. Certainly, companies of a certain stage. Is that a likelihood here, or have you taken precautions, or have you been given assurances?

Wayne Heili: Yes. look, that’s a concern. Everybody has that concern, and what we wanted * accord to do was to get a strong look to strengthen our registry. You know, we have asked them to look for investors who are long on Uranium, and they have. We have very good support from long Uranium funds in the sub-underwriting. Look, we did not want fast money in this deal. Really what we want is for our existing shareholders to exercise their rights. We want them to benefit from the pricing and the future that this company has to offer. We appreciate our current shareholders’ support coming into this, and we hope to continue to enjoy them. We encourage them to all take up their rights. The best way to avoid fast money coming into this company is for the shareholders who are currently owning the company to take up their rights.

Matthew Gordon: No, absolutely. But at the same time, you don’t want to hold them to ransom here on needing to do that when some of them may not be able to, and, you know, some may also be long suffering buying in at much, much higher prices, and you’re asking them to kind of double down on something, which you need to give them comfort that you believe you’re going to be able to get over the line. Not just the raise, but in terms of getting the company into production and survive long enough to be a player in this market.

Wayne Heili: And that’s, really Matt, what the residual of this shareholding is about and our current cash position. We look to see that this company can move forward with our de-risking and optimisation work at Lance and start to prepare for the resumption of production operations at the facility with our current cash flow. We’ll have a strong balance sheet that’ll carry us through 2021 and beyond, and, you know, into 2022, and not just sitting on our thumbs, we’re going to be working to advance the technical aspects of the project. We continue to identify ways that we can make this a stronger production operation at a lower cost. We want to continue to test that. We have been preparing the new field demonstration, as you know, we have done one field demonstration at the project already with the low pH, but now we’re at the cusp of starting the second field demonstration.

We’ll do that in July or August, but certainly we’ll be starting the new field demonstration in the September quarter. You know, we’re going to invest in the project. We’re going to invest in getting it ready for production. The reality is, you know, we haven’t made a final investment decision to start or resume operations, but the market trends are very positive, and we’re prepared to do this. We’re prepared to ramp up our production on general market improvements or on US market opportunities. And we believe, and we have looked at this very closely, we can be back in production and producing at a healthy rate within six months of a final investment decision.

Matthew Gordon: You have got this raise, you’re going to be able to retire that debt, so you’re going to debt free. So there’s no burden. Was that a securitized debt possession as well? Sorry, if I may, I’m just trying to understand.

Wayne Heili: Yes.

Matthew Gordon: So securitized, so it is quite severe. You can park that up. You do have, I remember from our last conversation, some revenues over the next couple of years from your contracts that you’ve got in place. I mean, how much are we talking about as a contribution there?

Wayne Heili: Sure. Right. Well, look, over the next 18-months, our contract book yet has 525,000lbs of deliveries. If we do that, if we supply those deliveries from the market and make purchases in the spot market today, our deliveries are priced well above the spot market. So, there’s a good margin on that. If we did this without producing, we could realise a net inflow to the company of AU$9M over the next 18-months. Looking forward into the future, our contract book extends out to 2030, and generally is 400,000lbs to 600,000lbs per year, every year from now to 2030, so we’re really just moving into the sweet spot. And one of the benefits, if you will, of not conducting the monetisation is that we’re preserving that strong contract book and the near-term deliveries, which were the ones that had the most value in a monetisation. So rather than taking money today through a monetisation, but taking less than the value of the contracts, we’re preserving those contracts, and in 2021 and 2022 and 2023, we have a stronger contract book and much stronger revenues.

Matthew Gordon: Okay. I’m just trying to get an idea of the numbers here. So you’ve got, over the next 18-months, AUD$9M of contribution. That’s the delta, after you pay down your debt, paid any interest and paid fees to the various parties, I mean, what sort of number are we sitting on?

Wayne Heili: Well, the residual…let me grab a sheet of paper with some math on it. There we go. So, you know, out of the AUD$40M which we’re raising, AUD$27.5 is going to go towards the retirement of the debt and the payment of the interest. 6% of it is costs for the equity raise. Generally speaking, we’re looking at having AUD$9M to AUD$10M proceeds available for us to advance the project, to do the low pH transition de-risking work, and to carry the company forward. We had a good quarter. I’d say we’re having a good quarter. We had some revenues in the second quarter of this year and our balance doesn’t significantly diminished because we have been very careful with our spending. So, we’re coming in, you know, we’re coming to the end of this quarter with a good cash position. We’ll pick up some additional cash through this equity race. And we’ll be fairly strongly cashed up the potential to be, I guess, somewhere in the range of AUD$16M to AUD$20M.

Matthew Gordon: Okay. AUD$16 to AUD$20M. Your G&A is what for the next

18-months?

Wayne Heili: Yes. well, our corporate overhead has been reduced to probably around the range of USD$2M per annum or less in Australian.

Matthew Gordon: Yes, AUD$3M there for the next 18-months.

Wayne Heili: We have knocked that down. Look, we’re spending money at the project…we’re spending money on –

Matthew Gordon: That’s what I want to get to; what are you going to do with this money? You’ve got some cash. Do you just sit and wait it out because the market’s doing what it is doing, or are you progressing this new low pH solution that you’ve come up with?

Wayne Heili: Absolutely. Advancing the low pH…

Matthew Gordon: At what pace, what do you get? What are you doing?

Wayne Heili: We are spending the investment into field demonstrations, there are going to be about 3 patterns of wells. We have put these wells in. You know, you spend USD$250,000, USD$300,000, USD$400,000 on well installation and then you’re going to acidify or start running the operation. You have operating costs, chemicals, et cetera to run the test. I see that as being USD$500 to USD$1M; these are US dollars because I’m going to be, you know, the US operation. So, we continue to pour money into the technical improvements. We have some test work, laboratory test work and other scaled up test work that we’d like to conduct. Each one of these technical valuations are leading to optimisations. At the end of the day, I think, you know, we’ll be issuing a new Feasibility Study on the project, and then there’s costs associated with issuing a new technical report for any project. But you know, this isn’t just about overheads. This is about investing in the project, not sitting on our thumbs and waiting for the market, but again, bringing our project to a better point so we can enter the market sooner at a better operating cost.

Matthew Gordon: Right. Okay. So, we’re moving on to that slightly healthier, better part of the compensation, which is, how do you get your company into production? Again, I know we have had a talk previously, but for people new to this, your predicted timeframe for going from these tests through to Feasibility Study, through to a point where you are going to understand the economics better – what are you allowing for that timeframe?

Wayne Heili: Putting the company in production and conducting the tests is not mutually exclusive. They can happen concurrently. And that’s important to understand; if we decide to make that investment decision because the markets are, and good days are upon us, we can be in production within six months. We have two existing wealth fields at the facility that have not been optimally mined that we can today start putting into production as low pH and recovering more, or additional Uranium from resources from those areas. And, you know, we do need to invest in some of our facilities to make it compatible with the low pH chemistry, the change of chemistry, including asset storage change and including refurbishment of our wastewater systems. All of those things, you know, we have said, we’re ready to start doing some of the initial preparation. As the market signals indicate, you know, we’ll be investing in that right away. And we have the resources and the flexibility now to do that with this gap raise. We don’t have to wait and say, okay, now the market is good, let’s raise some money so we can start. We’re actually going to be in the position of saying, now that market’s good, let’s start.

Matthew Gordon: Okay. So you can be in production in six months at the point, you’ve got all of this stuff in place. Is that what you’re saying? And you’ve got the money for that. So when is the next raise?

Wayne Heili: Okay. Well, we have the ability, you know, with this planning to put us into 2022. We’re going to have a good cash flow, a good positive cash flow in 2021 with the contract sales that we do expect to happen. So we’re, you know, we’re really not going backwards at this point in time. We have year in, year out sales that can be met either through production from the markets, depending on what the market tells us to do. The market goes up, we’ll meet our sales through production. If the market stays slow, we will probably meet our sales through purchases for the period that we can. So we have great flexibility. We’re going to have a good cash balance and we’re going to have revenues that really nobody else in our space can speak of right now.

Matthew Gordon: Okay. You talked about a bunch of stuff there. Can you break it down? How do you spend the spare capital that you’re going to have? You have got about AUD$9M left from the AUD$40M Aussie raise. You talked about, maybe over that next 18 months, a AUD$9M contribution there in terms of, well, depending on what the spot price is. How are you going to allocate that money? And at what point do you stop? If the market has not recovered, at what point do you stop and go, okay, we need to sit on a cash reserve here. We have done enough testing. We know how to do this when it gets going, but the market’s got to give us those signals.

Wayne Heili:  Yes. I mean, Matt, you’re asking the questions that we ask every day is, you know, is the market, right? Should we be investing, or should we, should we be waiting? Today we know that we can guarantee or feel a lot better about the ramp up of our project. If we invest in de-risking and optimisation, and we’re ready to put several million dollars into the technical de-risking and optimisation of the low pH transition. We are prepared to do some of the fundamental investments that you know, that some of the longer lead time investments that are going to get us ready for production. So, you know, we have now, not allocated, but we now expect to have the resources to do these things, which are going to put us in a prime position to make the investment decision to start production. That decision hasn’t been made. And, you know, we’re going to watch the clock. We’re going to watch our cash balance very closely. We’re going to be good stewards of the resources that we have, but we’re absolutely planning to advance our capabilities and understanding of the project so that when we do come into production, we’ll come in strong.

Matthew Gordon: Okay. Do you think the retail market understands what you’re trying to do and why?

Wayne Heili: I hope so, you know, we have been communicating the importance of the low pH transition at Lance for the last two and a half to three years. I mean, this is something that has been front and centre in our story. This transition will put our project into a lower operating cost position with a higher productivity from our well fields in our ore body. This is technically a very important thing that doing with the transition. We are the first company in the United States to use what is a global leading Uranium recovery process: low pH ISR. And our project is particularly amenable to that chemistry. Not everybody in the United States should use that chemistry. And our industry in the United States for the longest time has fully relied on the alkaline chemistry. But this is a case where the technicals tell us that the alkaline chemistry wasn’t the right thing to do. And we should be doing the low pH. We have we have achieved the regulatory approvals that we needed to move forward and now it is really on us to invest in the project, start it up when the market says go,

Matthew Gordon: Okay, do you think your prospectus has done a good enough job of explaining exactly why you’re doing this, what you’re going to do with a spare capital? And what are you going to do to kind of get the forgiveness of the Aussie retail investors?

Wayne Heili: I hope so. We put a lot of effort into the prospectus, and I can tell you too, that a lot of effort goes into describing the risks of these operations, you know, in the company and general market risks for any company. So, I would encourage the investors to read the prospectus, to understand the pathway that this eminent trajectory that this company has been on. The accomplishments of the last several years are really remarkable, when you look at it in hindsight. Today, this is an opportunity for us to recapitalise this company, to put it in a position of strength, and having the ability to rapidly respond to the market stimulus. We all hope and expect that the Uranium markets are on a positive trajectory, an upwards trajectory. That’s what we have been seeing. We think that’ll continue. And, you know, our company is preparing itself to respond to better markets, rather than the markets that we have seen for the past decade.

Matthew Gordon: Could you have waited longer?

Wayne Heili: Could we have waited longer to do the capital raise?

Matthew Gordon: Yes.

Wayne Heili: No, I don’t think so. And this was really our judgment, the debt wasn’t due immediately, but the longer you wait before you try and retire your debt, the bigger the price you are going to pay to do so.

Matthew Gordon: Wayne, thank you very much. That’s a great update. I know it has been a tough, a few months, well, I say a few months, it is a few years really, isn’t it for a Uranium? And I the early signs are there. I think people are encouraged by what’s happened in the last couple of months, but you guys have still got a long way to go, and you’ve got to get yourself in a position to be able to fight that fight. So, thanks for today. Stay in touch. Let us know how you’re getting on. And if there’s any news, pick up the phone.

Wayne Heili: Thanks, Matt. You know, we’re doing everything we can to position this company for the rebound. We believe the rebound is here. We have seen that early signs of it. And on the Uranium pricing from the USD$34/lbs to USD$35/lbs price range, maybe it is just the start. There’s certainly a lot of macro impetus to see the Uranium price go up. You know, we see that happening. We want to be ready. We want to be on the front line, producing Uranium early and enjoying the profits, being well prepared.

Company Website: http://www.pel.net.au/

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.

CanAlaska Uranium (TSX-V: CVV) – Why should Investors be Interested in this Project Generator?

CanAlaska Uranium Ltd.
  • TSX-V: CVV
  • Shares Outstanding: 58M
  • Share price: C$0.16 (11.06.2020)
  • Market Cap: C$9M

Interview with Peter Dasler, President & CEO of Uranium explorer, CanAlaska Uranium Ltd. (TSX-V: CVV).

CanAlaska Uranium: a uranium-focussed explorer in the Athabasca Basin. The uranium junior also had a nickel project, but it has farmed it out.

CanAlaska has just C$1.5M in the bank, and times have been hard, so it has been hunkering down and waiting out the uranium bear market. Does a uranium project generation strategy stand the company in good stead for when the uranium market finally turns?

We Discuss:

  1. Company Overview
  2. Business Model: Project Generator or Explorer?
  3. $9M Company with a Large Land Package: Creating Value without Dilution
  4. Cash Position and Cost Cutting
  5. Constructing Deals That Make a Difference: Are They Capable of it?
  6. Macro Picture of the Uranium Market: COVID-19 a Saviour?
  7. Raising Funds for Exploration: Track Record to Convince Investors
  8. NexGen Comparison: What Similarities do the Two Companies Hold?
  9. Partner vs. Raising Funds
  10. Hunker Down and Wait For Price Discovery: Considered Strategy?
  11. All About Nickel: Choices Available, Terms of the Deal and Timeline for Deliverables

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: https://www.canalaska.com/

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.

Peninsula Energy (ASX: PEN) – Share Price Plummets After Equity Raise Announcement. Why Now?

Peninsula Energy Ltd
  • ASX: PEN
  • Shares Outstanding: 315M
  • Share price A$0.08 (09.06.2020)
  • Market Cap: A$30M

On the 4th of June, Peninsula Energy announced a ‘transformational’ equity raise to the tune of A$40.3M, in a move that has left uranium retail investors puzzled. Why on earth has Peninsula Energy made this extremely-dilutive move now? Why so much? Why raise at a time when capital is so expensive? We spoke with Wayne Heili, CEO of Peninsula Energy (ASX: PEN), to get to the crux of the matter.

First, what are the details behind this raise?

Key Highlights

  • The equity raise takes the form of a A$40.3M fully underwritten renounceable entitlement offer at A$0.071 per share. A 45.4% discount to the May 28th price. Wow.
  • Peninsula Energy states that it will emerge from the raise ‘debt-free’ with net cash of over US$10M for working capital.
  • By using this capital to fulfil a debt repayment, Peninsula Energy argues that it will remove the need to pursue a uranium contract ‘partial monetisation transaction.’
  • The company also argues that the raise leaves it well-positioned to continue the ‘low pH transformation activities.’ Peninsula also claims it will be well set as the flagship Lance Project edges towards a restart.
  • Lastly, the company points towards its ‘strong’ long-term existing contract book, claiming cashflow will continue to be generated. True.

Matthew Gordon interviews Wayne Heili, 11th June 2020


The main requirement of this raise is to pay down debt that stretches back to 2016. Possibly for main retail investors this has been hidden in plain sight and was unexpected. The reality is that the uranium market has taken longer than anyone imagined to show signs of recovery. So, what looked like a smart loan deal in 2016 doesn’t look so smart now. The loan has been extended on several occasions, but apparently one too many, and now needs to settled.

The reality is that this is a huge raise: it is considerably larger than Peninsula Energy’s current market cap! Heili is straight-talking: the company currently has A$27M of debt, and this needs to be settled before the company can move forward.

This debt will be entirely eliminated by the raise, which leaves Peninsula Energy in an arguably stronger position to deal with the months ahead: debt-free, with operational cash, potentially with cashflow from the company’s uranium contract book. Crucially, Peninsula Energy could be more poised to take advantage when the market turns, as this cash can be used to optimise processes to ready them for the word ‘go’ quicker than other uranium juniors.

The remainder of the free funds will be used on technical operations at the Lance Project, as the company looks to improve its low pH transformation activities and further de-risk the project to shore up its value. Peninsula Energy has been working hard on the Lance Project for past 2 ½ years in an attempt to transition away from the existing alkaline-based operations to a low pH mining solution, which could significantly reduce future
operating costs while increasing production capacity.

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

Part of the motivation behind this raise appears to be faith in the US Department of Energy’s Nuclear Fuel Working Group Report, which was recently released and provides framework policy recommendations to restore America’s competitive nuclear energy advantage. Peninsula Energy believes the recommendations will ‘materially benefit US uranium mines’. This includes the company’s Lance Project, which has the scale, 53.6Mlbs U308, needed to be relevant on the main stage. It has the largest resource of any recently-producing US uranium project and is also the one project authorised to use ISR.

Peninsula Energy has based these decisions on market signals, but the main criticisms that are being levelled at the company by existing shareholders are the size of the raise and the timing. Heili has been candid and is keen to stress that this raise is not larger than necessary. He states this is simply the amount needed to transform the company into a genuine contender and he took it while he could. It seems this has not made heavily-diluted shareholders any happier, but the reality is that without it the company could not last. The loan was securitised and the asset fundamentally tied up without this new low-pH solution being worked on, and that cost money.

I have question marks about the quality of communication with the market. While Heili has claimed to have been beating the drum for a low-pH solution at the Lance Project for several years, it doesn’t appear he’s been beating it loud enough given the confusion in the uranium market.

I see the rationale behind this decision, and I think it could prove a smart move in time, though it is certainly a risk. However, I remember a similar debate that surrounded Energy Fuels’ US$16.6M raise back in February. Investors like myself doubted that deal, but it proved a savvy piece of business as time progressed. Let’s see if the same is true this time around.

Company Website: http://www.pel.net.au/

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.

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

Standard Uranium Ltd.
  • TSX-V: STND
  • 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 CruxInvestor.com 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: https://www.standarduranium.ca/

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: https://plateauenergymetals.com/

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