IsoEnergy (Uranium) – NexGen’s Baby Brother Taking Baby Steps

It’s hard to not to like Craig Parry, CEO of IsoEnergy. He’s a laid back Australian with a laconic drawl, who has been living in Canada for long enough to consider it home. He cut his teeth in the uranium mining space on the Board of NexGen, one of the better junior Uranium stories in what has otherwise been a spectacularly depressed mining vertical for the last few years. We’ve spoken to Parry a few times about his plans to develop IsoEnergy (TSX: ISO). He claims his plan is simple. Drill holes in a target rich environment and work out what you’ve got. In fact he was keen to labour that point in our interview .

This potentially leaves investors struggling to work out how IsoEnergy is different from all the other junior uranium miners saying exactly the same thing, but we’re not sure Parry is particularly phased by that. The reason for this is that he has a huge institutional following, not least of all a c.50% equity stake by NexGen, who continue to follow their money. Retail shareholders represent about 15%, but don’t seem that interested. Chatrooms and forums are all quiet. We found one lone retail commentator who, a bit like us, was wondering where everybody was. The thing about most junior miners is that retail investors are very good at holding the company Directors to account and constant questioning of decision making. Looks like IsoEnergy shareholders, like a lot of Uranium shareholders, are exhausted. Good news for the management team, not so good for liquidity and volume of trading.

For those of you new to Uranium equities as an investment thesis, and to keep it simple, here is the Uranium Demand / Supply story in a nutshell. Currently, nuclear energy is commercially the cheapest, Zero carbon energy source on the planet (1), end of lifeNuclear reactors apart. There are billions and billions of dollars of new, longer life nuclear reactors being built, large and small, in multiple jurisdictions, and they will all need uranium products as the basis of that energy production. WATCH our interview with Mike Alkin who nicely summarises the macro story or indeed any of our interviews on our YouTube channel . The Supply side is relatively complicated. The two main suppliers to the market Camaco (Canada) and KazAtomProm (Kazakhstan) have the highest-grade and largest-resource available, and even they have had to reduce production as the spot price has been between $20-$25 for the past couple of years, so they are losing money mining for uranium. Most Uranium producers need $50-$60 to mine economically, and obviously would prefer prices even higher than that. As I said, the issues on the supply is multifaceted and the subject for another article. It’s a small, $10Bn, market but evokes high emotion.

As a commodity and as an equity Uranium has been stagnant since Fukushima Daiichi in 2011. We all know it, and until the buyers, the Utility companies, come back into the market for new material, rather than relying on their stockpiles, not much is going to change. This interesting to note, but none of this is relevant to IsoEnergy yet as it is nowhere near a producing asset. That is easily 5-10 years away. And as an investor this is important to note, because the management need to tell us if and how they are going to make shareholders money in the next 5-10 years.

We were keen to know where Parry sees IsoEnergy in the Uranium cycle and indeed if there is a business plan. Not sure we got much clarity on either point and maybe they just don’t want to comment on the cycle as they don’t actually know what they have yet. Fair enough. What I do have a problem with is not being able to clearly articulate a business plan. What are investors buying in to? What exactly is this quite senior Board of Executives, who are well paid, planning to do with the business? Are they setting themselves up as the exploration arm of NexGen; is NexGen viewing them as purely an equity investment which they will cash in on when the need is there or time is right; or has IsoEnergy got plans to acquire more land packages in and around the Athabasca basin. What is the strategy and who is going to deliver and fund all of the above?

IsoEnergy recently raised around CAD$6.7M, of which CA$3.5 was flow-through dollars to support exploration programs for the “next six months.” The remaining CAD$3.2M “hard dollars” was provided mainly (CAD$2.9M) by NexGen Energy, a sizeable Uranium Development company also based in Vancouver. Is that long enough for price discovery in the market? We don’t think so. Both companies share some of the same board members and NexGen holds about 50% of the IsoEnergy. IsoEnergy has managed to raise capital “relatively” easily says Parry, which is of some comfort especially of you look at the institutional holders of the stock: something many uranium juniors struggle with, but it’s now a matter of what they actually do with it.

IsoEnergy has options. We ask Parry what he is going to focus on. Parry is confident of the quality of the asset, and claims their upcoming “aggressive” drill program is likely to provide positive results, thus growing the company. IsoEnergy’s assets are based in a prolific uranium region, in a highly stable mining region, but is this doesn’t mean it is going to work. A lot of hard work need between now and then.

One thing is for sure Parry seems quite relaxed. We’re not sure how to read that, but that is all we have to go on for now. Not enough data to analyse or do meaningful diligence on. For us this is a watch and see scenario. IsoEnergy is lucky the institutions seem to be valuing their Board members from NexGen and the company’s Athabasca basin focus. It is certainly not based on the amount of data gathered.


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

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Global Atomic Corp: Primed for Growth in the Next Uranium Bull Market?

  • TSE: GLO
  • Shares Outstanding: 145.44M
  • Share price CA$0.49 (15.01.2020)
  • Market Cap: CA$71.264M

Global Atomic Corp (GLO) was formed in 2017 when Silvermet Inc. (owner of Turkey’s Zinc operations) and Global Atomic Fuels Corporation (Private Uranium company) merged. (1)

GLO has two divisions. Base metal division which owns 49% of a Zinc recycling plant in Turkey and Uranium division that explores and develops Uranium assets in Niger.

Uranium Development Underpinned by Cash Flow From Zinc Production

Global Atomic Q42019 Corporate Presentation

It is the only Uranium junior with positive cash flow and net income.

It has a large and high grade multi decade asset (DASA) in Niger. “Largest High-Grade Uranium Sandstone Deposit Globally.”

It has a large insider ownership with the CEO Stephen Roman owning >8% of the company. He has also been actively purchasing more shares from the open markets (2):

Stephen Roman also has a track record in Uranium mining and he sold a Gold company (Gold Eagle) to Goldcorp in 2008 for $1.5B. (33)

These are the things you want to see in a company. Great assets, great management with large ownership, insider buying and better yet, GLO looks cheap even just based on the Zinc operations.

So let’s take a deeper dive.

Zinc operations

GLO owns 49% share of Befesa Silvermet Turkey (BST) which owns a Zinc recycling plant (Iskenderun) in Turkey. 51% of BST is owned by a Spanish company, Befasa. Befasa was purposefully brought in as an operational JV partner. It’s a large Steel dust recycling operator and knows this business extremely well.

Steel mills produce Electric Arc Furnace Dust (EAFD) which contains a Zinc. Steel mills have to recycle this material. BST collects the EAFD, recovers zinc from it and produces a high-grade zinc concentrate which is sold to smelters.

Befasa Company Presentation November 2019

BST had a capacity of 65kt (equals roughly to 30Mlbs Zinc pa.). In 2019 the plant had an upgrade and was re-opened in early November 2019 with a capacity of 110kt (c. 60Mlbs Zinc pa.). This was done on time and in budget.

OPEX for the pre-upgrade plant was about $0.45/lbs and after this upgrade, based on what S. Roman (11) and Merlin Marr-Johnson have said in their interviews, OPEX will fall to around $0.37 – $0.4/lbs range.

BST has been a profitable operation for almost 10 years now. It’s a great cash flowing business with an extremely low break-even. Not taking 2019 into account, BST is a lean and profitable operation with high margins and low overhead.

In 2018 BST made a net profit of CAD$21.4M. GLO’s share of these profits was 49% CAD$10.5M. GLO received c. CAD$7M in dividends. (3)

CAPEX for this upgrade was $26M. It was financed using debt ($2M from Turkish bank and $20M from Befasa (Libor +4%)) and part of the cash flow generated in 2018.

“The Befesa funding is expected to be repaid out of operating cash flows or refinanced during 2020/21.” (4)

So GLO’s share of the Debt is $10.8M and interest payment will be around $0.65M in 2020.

If BST doesn’t refinance (which I doubt) GLO has to pony up c. $6M in both 2020 and 2021 to be able to pay down its debt.

BST, luckily, is a cash machine. Even in with a 90% utilization and $0.8/lbs Zinc price it can take care of the debt.

Zinc price $/lbs $0,6 $0,8 $1,0 $1,2 $1,4
Capacity utilization 90% 90% 90% 90% 90%
Mlbs of Zinc 54 54 54 54 54
OPEX 0,39 0,39 0,39 0,39 0,39
Smelter 3% 3% 3% 3% 3%
Revenue $32,4 $43,2 $54,0 $64,8 $75,6
Cost of Sales $21,1 $21,1 $21,1 $21,1 $21,1
Smelter $1,0 $1,3 $1,6 $1,9 $2,3
EBITDA $10,4 $20,8 $31,3 $41,8 $52,3
SG&A $2,0 $2,0 $2,0 $2,0 $2,0
Depreciation $1,5 $1,5 $1,5 $1,5 $1,5
Tax $2,1 $5,2 $8,3 $11,5 $14,6
Net Income $4,8 $12,1 $19,5 $26,8 $34,1
GLO’s share of NI $2,4 $5,9 $9,5 $13,1 $16,7
OCF $6,3 $13,6 $21,0 $28,3 $35,6
GLO’s share of OCF $3,1 $6,7 $10,3 $13,9 $17,5

In the short term there are some important risks. BST collects the EAFD from 7 (soon 8) local steel mills. Because the 8th mill isn’t in production yet, BST will not reach 100% capacity in 2020. There just aren’t enough EAFD. If any of these steel mills close, BST will not be able to have enough feed stock to operate in full capacity.

As a base metal Zinc has a history of falling off the cliff when a recession hits. This combined with closures (or production cutbacks) of any of the local Steel mills would mean lower revenue and lower capacity utilization and could affect GLO’s ability to pay down its debt.

Nevertheless, I think that BST is a great asset. I think that a $1/lbs long-term price for Zinc is a conservative number. With that price BST can pay close to $10M pa in dividends to GLO. If they can refinance and pay the debt down in 5-years, GLO can expect to receive a dividend of $7-$10M from BST pa from 2021 (when the 2020 dividend is due) onwards. There will be no dividends in 2020.

DASA and Niger

In short Niger has had a long history as a Uranium producer. It was a French colony and from the 70’s the French have been operating in Niger mining Uranium. Uranium is >70% of Niger’s export proceeds and an important source of foreign currencies. (5)

Niger has a fast-permitting schedule of just 6 months. It also has a problem as Orano is closing its Cominak mine in Niger. And so both Uranium juniors GoviEx and GLO seem to be getting the message of “get to production ASAP” from Niger’s government.

GLO owns 100% of DASA. DASA is a large and high-grade deposit. It is also open to multiple directions and GLO’s management believes that with more drilling they can show it’s a >300Mlbs resource. (6)

Global Atomic Q42019 Corporate Presentation

Depending on the interview GLO’s management might talk about 210Mlbs or 150Mlbs asset. Needless to say, either way DASA is large. By changing the cut-off grade companies can make it really hard for investors to compare different assets to each other’s. So few examples of peers.

GoviEx’s Madaouela uses a cut-off grade of 400ppm and has c. 140Mlbs in MI&I. Average grade is around 1300ppm. (7)

Bannerman’s Etango project uses a cut-off grade of 55pp for its reserves of 130Mlbs and resources of 165Mlbs in M&I and 62.5Mlbs of Inferred. Average grade is around 190ppm. (8)

Besides DASA GLO owns:

  • Tin Negouran Deposit, 10Mlbs U3O8
  • Dajy Deposit, 17Mlbs U3O8
  • Isakanan Deposit, 34Mlbs U3O8 that has “Significant ISR potential” and is next to DASA.

There are currently no technical studies, so we cannot say if the deposits are economic.

GLO has said that it will begin a Feasibility Study (FS) on DASA imminently. But like me fixing my wife bike, this will likely mean in a few months. GLO has few options going forward.

It can try to summarise the Memorandum of Understanding (MOU) signed with Orano in 2017. According to the MOU, GLO can deliver it’s ore directly to Orano’s mill. Orano will pay GLO a spot price, times the amount of Uranium pounds in the rock delivered.

The good point about this is that based on GLOs low AISC, it can start operations fast and with small CAPEX ($35M). It can start creating cash flow and use this for example build its own mill.(9)

It can also build its own mill (probably in a 5Mlbs pa range) and start with an open pit and then go underground. With this strategy it will be mining its lowest-grade materials at the start but it can use this cash flow to finance the underground mine.

This is close to what their 2018 PEA studied. Initial CAPEX is $320M and Post-tax NPV goes up around $130M for every $5/lbs rise in Uranium price after 50$/lbs. (9)

After the PEA, GLO has grown its resources by a meaningful amount.

Lastly it can go underground, using semi-automatized mechanical underground mining. CAPEX would be a bit higher but it could start mining the best materials it has straight away and maximize the value of those first 3-tax free years. This would also probably end up meaning lower costs per pound in the long run.

But we have to wait to see what they will do. GLO has to make the decision before starting the FS process, as FS will study the option GLO chooses.

In a CruxInvestor interview, Roman said “in the next 10 years it’s going to be a very easily mined open pit, right from surface, low strip-ratio. No nasties in the Ore. I’d say our costs, we would be able to mine a pound, process it and put it in a drum for under $20/ lbs.” This is with their own stand-alone plant. (10)

This might be an indication on what they are planning.

Timeline-wise Feasibility Study will take 6-9 months. After that permitting will take another 6 months.

2019Q4 Corporate Presentation

Roman has mentioned in his interviews that they could be mining in early 2021. But it’s more reasonable to say that even if everything works perfectly, they need another 2-4 months to secure financing, 2-4 months to hire the right people and 3-6 months to do some pre-stripping/ stripping exercise

Then if they do decide to build their own mill, another 12-24 months to build it (this stage can coincide with pre-stripping). Hence if they go with the Orano MOU plan late 2021 is the earliest moment they would be mining and if they go with their own mill early 2023 seems reasonable.

GLO’s earnings potential

When the Feasibility is done and a company receives its permits, the Government of Niger gets a free 10% share of this newly formed mining entity (i.e. of DASA). It can also opt to purchase another 30% but this is in my opinion unlikely.

Niger has a corporate tax with a tax-free period of 3 years after mine starts operations. There’s also a sliding scale royalty of 5.5%-12% that is dependent on the profit margin. (9)

So taken those factors into account let’s just look at the PEA option.

AISC, Global Atomic Corp 2018 PEA

This is a simple ‘what-if’ model I built:

Stand alone
OPEX $29,15 * +10% as a contingency
Production Mlbs 5,25  
Uranium Price $40,00 $45,00 $50,00 $55,00 $60,00 $65,00
Revenue $210 $236 $263 $289 $315 $341
COGS $153 $153 $153 $153 $153 $153
Margin $57 $83 $109 $136 $162 $188
Margin in % 27,1% 35,2% 41,7% 47,0% 51,4% 55,2%
Royalty % 9% 9,0% 9,0% 9,0% 12,0% 12,0%
Royalty in $ $19 $21 $24 $26 $38 $41
EBITDA $38 $62 $86 $110 $124 $147
Depreciation $25 $25 $25 $25 $25 $25
Taxes in $ $3 $8 $14 $19 $23 $28
Net Profit $10 $28 $47 $65 $76 $94
GLO’s share of NP $9 $26 $42 $59 $69 $85
Sustaining CAPEX $11 $11 $11 $11 $11 $11
OCF GLO’s share $20 $35 $50 $65 $74 $88

Well that is just wonderful. It’s even better taken the tax-free years and the fact that the Government of Niger start to get it’s 10% only after the project has fully paid itself into account.

We can create a “ballpark” consolidated P&L by using the above as a basis and adding in the BST numbers. I also added $220M in debt, $8M in SG&A and a 100M new shares to dilute the EPS numbers. I use $1/lbs for Zinc with 90% capacity utilization. Average Uranium production is the same as in the previous spreadsheet i.e. 5.25Mlbs. The PEA uses LOM production of around 5.5Mlbs.

Consolidated P&L for Global Atomic
Uranium Price $40,00 $45,00 $50,00 $55,00 $60,00 $65,00
Revenue $215 $239 $263 $286 $310 $334
COGS $149 $149 $149 $149 $149 $149
Royalty $17 $21 $24 $26 $38 $41
SG&A $9 $9 $9 $9 $9 $9
EBITDA $41 $60 $81 $103 $114 $135
Debt $220,00          
Interest (8%) $18 $18 $18 $18 $18 $18
Depreciation $26 $26 $26 $26 $26 $26
Taxes 30% $0 $5 $11 $18 $21 $27
Net Income −$3 $12 $27 $41 $50 $64
OCF $23 $37 $52 $67 $75 $90
Shares (M) 250 *Added 100m to current share count
USD to CAD 1,32          
EPS in CAD$ −$0,014 $0,062 $0,140 $0,219 $0,262 $0,338
OCF per share C$ $0,122 $0,197 $0,276 $0,355 $0,398 $0,474

I know that looking at a hypothetical what-if-EPS model isn’t a “proper” way to do analysis but for me it is relevant. I want to know what the company could really make per share because I own shares. NPV models are, to me, more of a mutually accepted stupidity. We know that commodity prices are highly cyclical and that company level profitability doesn’t equal project level profitability.

But these scenarios are just a thought exercise to get a ballpark understanding of the potential earnings in different price environments. GLO shows extremely robust numbers.

Dilution, no dilution?

Dilution is the rule for pre-cash flow juniors. GLO is unique because it has cash flows. In his SmithWeekly interview (11) Stephen Roman said:

37:26 “I don’t think we need to ever actually come back to the market to develop the DASA project.

38:08 “We don’t really foresee having to issue more shares”.

Can it be?

Based on GLO’s Q3/19, they had CAD$5.2M in cash.

Their burn rate is around CAD$1.2-1.5M per Q. They need to finance a Feasibility Study in 20/H1 (CAD$3-5M).

They also, in their newest Presentation, brought up Isakanan deposit that has 34Mlbs of U3O8 and “Significant ISR potential”. I couldn’t find an older presentation with even a mention about Isakanan.

Isakanan is located in Adrar Emoles 4 exploration permit. To be able to hold exploration permits companies need to show that they aren’t merely sitting on them but actively exploring.

Global Atomic Corp Annual Report 2018

Based on GLO’s 2018 Annual Report GLO needs to spend USD$4M before 28th of January 2021 to keep Adrar Emoles 4. And this figure is just for Adrar Emoles 4, not Tin Negoran 1-4.

Seems logical to think that if a company starts to bring up an asset in their promotional materials they have the goal to hold it.

So in 19/Q4 we have a cash burn of CAD$1.5M. In 2020 c.CAD$10M and 21/Q1 another CAD$1.5M. That’s CAD$13M in total before spending the required CAD$5.3M to Adrar Emoles 4 (In fairness they will not lose 100% of the exploration permit area if they don’t spend the required sum but this is a meaningful discrepancy nevertheless).

Thing is there’s no dividends from BST for 2019. There can be some dividends for 2020 if they refinance the debt that is due for 2020 and 2021. But dividends for 2020 are paid in 21/H1.

So there will be a raise and a meaningful one in 19/Q4 or 20/Q1. They need, in my opinion, CAD$6-8M. This will mean around 12-16M new shares. I wouldn’t bet my farm that there wouldn’t be another raise in 2021.

The statements Roman has given are to me somewhat irresponsible and worrisome.

Another detail I want to point out from their 19/Q4 Corporate Presentation is this one:

This P/E of 2.5 on forward basis is simply false.

Management team and Stephen Roman

Stephen Roman is the son of the founder of Denison Mines. He’s to my knowledge the only Uranium junior CEO with a background of working in a mine as a miner. He has worked in multiple positions and made a long career in mining. He has built mines and sold them.

His compensation is a bit much taken the early stage of the company. George Flach is also extremely highly paid.

What is worth pointing out is that during these years Roman was a part-time CEO (and President and Chairman). He was also the CEO (and President and Chairman) of Harte Gold and was paid handsomely.

Here are the compensations Roman earned from Harte during the same period. And if you look at the names you will notice another familiar one. Rein Lehari works as the (part time) CFO for both GLO and Harte.

In fact GLO’s George Flach also works in Harte Gold as a Director. So does the VP and secretary of GLO, Timothy Campbell. He’s, you guessed it, the VP and secretary of Harte.

Until a few months ago GLO’s board members Richard Faucher and Fergus Kerr were also Board members in Harte Gold.

The reason why Faucher and Kerr “resigned” is because an activist investor ANR Investments B.V. came in and started a “ Plan To Bolster Management”. This plan also included Roman resigning the CEO post and he will soon resign from the post of the Chairman. (11)

I will also note that Messrs. Roman, Flach, Lehari and Campbell are also currently directors in Romex Mining.

These things in and by themselves aren’t necessarily red flags but they are a sign of a bad corporate governance. It’s also sign of bad governance that Roman seems to always be the CEO and Chairman at the same time.

Compensation Committee should always be an independent entity. Yet Messrs. Roman, Faucher and Rance are all part of the Committee. Derek Rance is not a director in Harte Gold but he was a director in Gold Eagle back in 2008 and hence close to Roman.

Global Atomic Corp Annual Report 2018

Good Corporate Governance is about checks and balances. It’s hard to see them in companies where Roman is involved.

This could be one of the reasons why it wasn’t a first time Roman “resigned” after an activist investor came in.

In 2010 Roman was the CEO, President and the Chairman of Belo Sun (then called Verena Minerals) when “Stan Bharti, through his private equity firm, Forbes & Manhattan, Inc., has agreed to subscribe for the majority of the private placement financing”. He also requisitioned a shareholder meeting where “Mr. Bharti will be appointed Chairman of the Board replacing Mr. Roman, Mr. Eaton will become President & CEO, replacing Mr. Roman”.

Also “Mr. Helio Diniz, based in Belo Horizonte, Brazil, will become VP, Exploration, replacing Mr. George Flach.” George Flach should ring a bell because he’s is currently Director in GLO, Harte and Romex. (13)

In 2009 S. Roman (Chairman) and Douglas Willock (President and CEO) founded Polar Star Mining Corp. The company had internal disagreements. On Jan 26th Willock requests for a special shareholder meeting to remove the current directors including Roman.

On 29th Polar Star formed a special committee which includes Messrs. Dellelce, Rance (board member of GLO and director of Gold Eagle) and Douglas Scharf (also director in Verena Minerals/ Belo Sun).

On 30th Polar Star terminates Willock from the posts of the President and CEO. (14)

On Mar 9th 2009 D. Willock launches an Information Circular where he calls

“I am accordingly providing to you a proxy circular and a form of proxy that I have prepared in connection with the April 17, 2009 shareholders’ meeting. At that meeting, I will nominate a new slate of highly qualified individuals for election to Polar Star’s board of directors. (15)

Willock send his proxy form (16) and Polar Star offered up their Proxy that was for Roman and the incumbent board (17).

Willock won and Roman and Rance lost their positions. (18)

I bring these up because I think it’s interesting to see this kind of actions happening around S. Roman. I think it’s also a bit concerning to see these same names connected with S. Roman, time and again and losing their positions with S. Roman.

And a Proxy fight has happened in Global Atomic too. Some owners of Silvermet felt that the merger was not beneficial and that there were conflicts of interest due to the fact that S. Roman was the CEO, President and the Chairman for both of the merged companies. Other directors like Mr. Campbell and Mr. Lehari were also directors in both of these companies.

The proxy fight ended up losing but some of the things I was able to dug out were also mentioned in the “Greyling Information Circular”. (19)

There’s three more specific cases I want to mention in S. Romans history.

A mine builder: Harte Gold

I already mentioned that there’s a “Plan To Bolster Management” ongoing in Harte Gold. Besides the bad Corporate Governance and the officers paying themselves multiple full salaries, Harte is also a sad example of a case where almost everything went wrong.

2019 is the first year of operations.

On November 1st Harte Gold Provides Third Quarter Update and Guidance for 2019 and it was bad. “full year 2019 guidance has been adjusted to 24,000 to 26,000 ounces at an AISC of US$2,000 to US$2,200 per ounce. Previous guidance was 39,200 ounces at an AISC of US$1,300 to US$1,350 per ounce.” (20) Production estimate cut by c. 40% and costs up by almost 60%.

Besides this Harte Gold did some “clever” financial engineering by announcing Feasibility Study after the mine was built. This means the FS doesn’t include initial CAPEX and the IRR and NPV numbers look better than they should. (21)

To make things worse, debts starting to come due. Harte Gold is between a rock and a hard place.

If things can be worse they usually are. And although Gold prices are up Harte has “successfully” capped a lot of that upside by using a hedging strategy that in the current environment is detrimental for the company.

I’m not impressed. I am – to say the least – concerned on the implications this might have for the shareholders of GLO.

Exall Energy and the Board that resigned

Exall Energy was an Oil E&P. Roman served as the Executive Chairman and a Director. Exall’s oil production was miniscule and falling.

Exall Energy, Annual Report 2014

This didn’t prevent the CEO Roger N. Dueck from saying in their 2014 Annual report that “Exall is positioned with a strong asset with light oil and good cash flow in distressing times.”.

Nor did the fact that Exall Energy had a negative equity of CAD$25M, liabilities of c. CAD$65M and it was losing money. (22)

Exall had maturities and interest payments coming due and it was tapped out. It was trying to arrange financing which, taken the situation it was in, was challenging.

On 9th of March Exall released a news release which said

“In addition, Exall notes that the next semi-annual interest payment under Exall’s outstanding $23 million convertible debenture is due on March 31, 2015, in the amount of $888,808.22. Absent closing of the Bond Transaction, and other financing arrangements, Exall will not have proceeds available to make this required interest payment.(23)

On 19th of March 2015 Exall released a Press Release of their 2014Q4 results and mentioned that:

on March 9 Viking Investments Group, Inc. (“Viking”) (OTC: VKIN) had advised Exall that given the current timing, it was considering dispensing with a bridge financing arrangement as a means to retire Exall’s existing facility with its current senior Canadian lender (the “Facility”) in full (24)

On 25th of March 2015 Exall went into receivership “the Court of Queen’s Bench of Alberta appointed MNP Ltd. (the Receiver) as receiver and manager over the assets, undertakings and properties of the Issuer in an order dated March 25, 2015 (the Receivership Order)” and put the company into a trading halt. (25)

On 26th of March 2015 Viking “Opts Not to Proceed With Opportunity Involving Exall Energy Corporation”. The company was unable to pay its debts. (26)

What makes this story interesting is not the fact that the company failed. Oil prices fell and Exall was not a unique in failing. But when the company went into receivership they didn’t inform the shareholders. “A publicly traded company has the responsibility to issue a news release when there’s a material change in its fortunes, such as going into receivership. “ (27)

To make things worse is that shortly before the announcement of going into receivership came the board stepped down.

Harte Gold where Roman was the CEO and Chairman made sure to mention in their 2018 Information Circular that:

“Stephen G. Roman was a former director and the former Executive Chairman of Exall Energy Corporation, having resigned prior to it entering into receivership on March 25, 2015.” (28)

While company was struggling between 2011 and 2014, Exall Energy’s directors and members of the executive committee received over $4.6M in compensation.

So to wrap up with Roman’s career history with the biggest win Roman has delivered, the sale of Gold Eagle to Goldcorp. It is boldly said in every interview and in every Bio of Roman. It’s the main attraction. The PDAC award in 2016 is also related to Gold Eagle because it was given for the Bruce Channel discovery that made Gold Eagle the success it became.

Global Atomic Corp Corporate website Bio (15.11.2019)

The Big Score: Gold Eagle 2002-2008

“The first big success I had was a discovery of a gold project in Northwestern Ontario called Gold Eagle. I sold Gold Eagle in late 2008 to Goldcorp for $1.5B” – Stephen Roman. (11)

Gold Eagle had been a producing Gold mine that had operated from 1934 to 1941. It’s located in the famous Ontario’s Red Lake district. After the mine closed the property had multiple owners, last in line Exall Resources (led by Roman).

Besides limited exploration nothing happened until “In November 2002 a 50/50 joint venture was entered into between Exall Resources Limited and Southern Star Resources Inc.”.

Some success was achieved in 2003 and 2004 but “in 2005 drilling east of the old Gold Eagle Mine intersected significant gold mineralization beneath the Bruce Channel”. (29)

In 2016 Roman (Exall Resources) received a PDAC Bill Dennis Award for Bruce Channel discovery with Robert Cudney (SSR) and John Whitton (Chief Geologist/ Project Manager). (30)

After the 2005 drilling season, financing more drilling became easy as the share prices soared.

In December of 2006, Exall Resources Limited and Southern Star Resources Inc. merged to create a new Gold Eagle Mines Ltd. (29)

This new company was led (President and the CEO) by Simon Lawrence. (31)

Roman and Cudney both continued as the Co-Chairmen of the company. (32)

Gold Eagle was a success. There’s no two ways about it. But how much of this success is truly attributable to Roman? It is almost impossible to piece the real picture out from public filings, but the facts are that it was a joint-venture and there were multiple key persons. The discovery hole was made when Roman was the CEO of Exall, but after 2006 the new company was led by Simon Lawrence and they drilled a lot, proving the size of the project.

When in 2008 Goldcorp made the buyout offer of $1.5B Roman was a Co-Chairman of the company with Robert Cudney. (33)

Gold Eagle was also a pure exploration play. I’m not trying to take anything away from the success but it truly was, until 2005, just a few explorers drilling away and hoping to hit big. And they did. In 2008 Gold Eagle had no technical feasibility studies, no mine, no permits.

The company was also lucky with their timing. Gold was trading at around $450/oz in 2005. In 2009 Gold had reached $900/oz range and was even courting the $1000/oz level. It was an excellent environment to make a discovery.

I can say, for a fact, that the way Gold Eagle story is told leaves purposefully an impression that Roman spearheaded the company from discovery to the sale and he was the most important individual. Based on my reading this doesn’t seem to reflect reality.

Summary of Global Atomic

Let’s start with the assets. I truly believe that GLO is uniquely positioned. It has a cash flow positive business BST. It has a large and high-grade asset in Niger, in a jurisdiction where, although they don’t have permits today, I don’t feel it is a meaningful risk.

BST gives them a lot of options when it comes to financing DASA. They can sell their 49% share of BST to Befasa or use it to secure loans more easily than other juniors. DASA has multiple option and each of them work pretty well on paper, even after adding some contingency. It is one of the few companies that can work even without an overshoot in Uranium prices. In a case of M&A I think that DASA would attract a price multiple times higher than the current market capitalization of the whole company.

But the Management is a concern. I think that multiple members of Board don’t add any value. I think they sit in the Board because they support Roman. I’d love to see them being replaced by independent Board members. I don’t think that Roman should be the CEO and Chairman at the same time. It is bad Corporate Governance. Neither do I think he should sit in the Compensation Committee.

There are things in his history that make me highly uncomfortable. But to give a balanced opinion I will say that Roman always has skin in the game. He’s almost always a large owner and purchases shares from the open markets. There are CEO’s who don’t own anything and pay themselves outsized salaries while the companies are standing still and living on raises. This is not the case with Roman. The red flags he raises are different in nature.

I think that he wants to make a lot of money with GLO and his main way to make that happen is by getting the share price higher.

He has also been a successful explorer with multiple meaningful discoveries under his belt including DASA. After everything I’ve said I fear that, he still might be one of the most capable mining CEO’s in the Uranium junior field. I hope that this sinks in.

There’s also a bright spot in management, namely the very intelligent and capable Merlin Marr-Johnson. I’d love to see Roman taking the backseat, offering advice as and when required, and let Merlin drive for a change.

So the main question here is if GLO is cheap enough for me to bite? I think it is. It’s not without risks, but I truly think that the assets GLO has are so much more valuable than its current market capitalization that it is a great way to position oneself for the Uranium bull market.

  1., Silvermet and Global Atomic Fuels Merger 2017
  2., Insiders 15.11.2019
  3. Global Atomic Corp Annual Report 2018
  4. Global Atomic Corp 2019Q3 MD&A
  5., Wikipedia Economy of Niger
  6., Global Atomic reports significant new mineral resource estimate for DASA project
  7. GoviEx Corporate Presentation 2019
  8. Bannerman Corporate Presentation 2018 & Etango 43-101 Technical Report
  9. NI 43-101 Technical Report, Preliminary Economic Assessment – November 16, 2018
  10., CruxInvestor interview: Global Atomic – Largest High-Grade Uranium Sandstone Deposit Globally
  11., Discussion with Stephen Roman, SmithWeekly interview, 16 April 2019
  12., Harte Gold Accelerates Plan To Bolster Management and Provides Financing Update
  13., Verena Minerals Announces New Board and Management Appointments and Significant Private Placement
  14., Frosty times at Polar Star
  15., Polar Star Information Circular, 9 Mar 2009
  16. (, Polar Star D. Willock Proxy
  17., Polar Star S. Roman Proxy
  18., PolarStar Newsletter 20th April 2009
  19., Greyling Proxy
  20., Harte Gold Provides Third Quarter Update and Guidance for 2019
  21., Harte Gold Announces Positive Feasibility Study For The Sugar Zone Mine
  22. Exall Energy, Annual Report 2014
  23., Exall 9th of March News Release
  24., 19th of March 2015 Exall released a Press Release of their 2014Q4 results
  25., 25th of March Exall goes into receivership
  26., 26th of March 2015 Viking “Opts Not to Proceed With Opportunity Involving Exall Energy Corporation”
  27., Exall Goes into receivership, doesn’t tell shareholders
  28., Harte Gold 2018 Information Circular
  29. 2007 Annual Report Gold Eagle Mines
  30., 2016 PDAC Bill Dennis Award Winners
  31., Southern Star Resources Inc News Release 21 Dec 2006
  32., Gold Eagle 2007 ANNUAL INFORMATION FORM
  33., Gold Eagle strikes it rich with Goldcorp acquisition

Energy Fuels: I need your clothes, your boots, and your uranium mill.

A picture of the face of the Terminator, Arnold Schwarzenegger, who wears sunglasses and holds a gun up.

If, like me, you are a budding investor, you likely spend hours each night scouring the internet for the latest and best opportunities to make money. From economic revolutions instigated by futuristic technology, to trade embargos plummeting the prices of certain commodities, the world of investment is a complex minefield, which incites fear and excitement in equal measure.

In recent days, a commodity that has captured my focus is uranium; certain American economic news regarding it has intrigued me, in addition to the international surge of attention towards climate change. Following national news coverage in the last few weeks, it has been impossible not to notice seething commuters warring with Extinction Rebellion protestors. What could possibly cause smartly dressed commuters to devolve into a primitive mob? The answer is the increasingly intense climate change debate.

A colour photo of a crowd of colourfully dressed Extinction Rebellion protestors holding a large green banner stating: 'REBEL FOR LIFE.'

This event was one of many occurring in England’s capital in recent months. Additionally, Greta Thunberg’s damning climate change speeches have navigated themselves into the centre of international discourse. An individual wouldn’t be nominated for the Nobel Peace Prize unless their cause was especially relevant.   

One of the key components of the raging debate is nuclear energy. Nuclear-based electricity production avoids carbon dioxide and other greenhouse gas emissions. However, it has been suggested radioactive gas can cause health issues to workers and individuals from communities surrounding power plants. Furthermore, the disposal of nuclear waste is an even more controversial subject, and if one so much as utters the words ‘nuclear weapons’ they can expect a flurry of opinions to be launched at them more explosively than the warheads in question.

One of the primary materials involved in nuclear energy production and military use is uranium. In the wake of a tsunami striking a nuclear power station on the shores of Fukishima, Japan, the energy sector held a review on reactor designs and safety procedures. The resulting financial and psychological tidal wave had a detrimental effect on the industry, one which it is only slowly recovering from. As a consequence, despite offering vastly lower energy costs, uranium seems to have reached a political and environmental impasse and demand has plummeted. When combined with a lingering sense of distrust generated by incidents in Chernobyl, Ukraine (1986) and 3 Mile Island, U.S.A. (1979), and its association with nuclear proliferation throughout much of the 20th century, I was beginning to view uranium as a commodity too contentious to consider investing.

A colour photo of the dilapidated Ferris Wheel in Chernobyl's infamous abandoned playground.

However, after conducting my own research, I have concluded it is an area that can bring big returns to patient investors. The macro story is positive and encouraging. There are billions of USD being spent building new reactors across the world. New technologies mean small, more mobile reactors are being commissioned by countries who previously would have found themselves priced out. High profile individuals are vocal in their support, from Bill Gates to Elon Musk, and the vast scientific community adds additional endorsement to nuclear power being critical to the energy solution. Our current energy sources are not sufficient to cope with a rapidly increasing population and I feel nuclear power can be a green, affordable solution. 

…many of the world’s largest uranium mines are in care-and-maintenance mode.

The Uranium Cycle: I’ll be back.

Uranium is fundamental to the production of nuclear energy. However, current uranium spot prices remain far below what is economically viable to mine and produce ($23.90 as of 31/10/2019). Such market activity has depressed investment. Most of the (≈50) remaining uranium companies are struggling to stay afloat; many of the world’s largest uranium mines are in care-and-maintenance mode (1). These cold, hard facts lead prospective investors to one conclusion: why on earth would I want to invest in uranium? The answer remains the same as any other investment: it can make you money if you play your cards right.

I have studied numerous articles detailing different investment approaches to goods experiencing a low equity price. To me, the most attractive attitude towards uranium investment is the contrarian approach. After recognising where uranium is in its cycle, and the potential for an uptake in the future, this method seems prudent.

However, I can’t exactly go out and buy large quantities of uranium for myself; I wouldn’t want MI5 knocking on my door in the early hours of the morning. A wise investment will require choosing the right companies to invest in.

From an investor’s standpoint, there are 3 crucial elements a company requires to instil confidence in me, or any other investor. If any of these aspects are missing, I think the company is likely to falter and investment should be avoided. 

Investing in uranium: the secret recipe

The three ingredients are as follows:

  1. An experienced management team who have a proven track record for every process: mining, refinement and sale.
  2. Sufficient liquid assets to enable the company to survive until prices take an upturn.
  3. A genuine asset(s), not something purported to be an asset (such as a licence) that in reality is more restrictive to a company than beneficial.

Energy Fuels, the leading U.S. producer of uranium and potential producer of vanadium, has all three, but, perhaps most interestingly of all, it has an ace up its sleeve that is likely to be a real game-changer.

An Experienced Management Team

Uranium is an incredibly complicated commodity to work with. From permits, licences, safety, legislation, regulation, transportation to refinement there are numerous difficulties, not to mention the difficulty of mining itself. The sale of uranium is also far from straightforward, because the buyers are utility companies with long buying cycles and complex purchase criteria. If a management team has not already been through this process from start to finish, they are learning on the job with my money.

A colour photo of Energy Fuels CEO, Mark Chalmers.
Energy Fuels CEO, Mark Chalmers

Energy Fuels has a management team with an impressive résumé. Their CEO/President Mark Chalmers has been involved in the uranium industry since 1976. His vast experience would impart confidence to most investors. As a company, Energy Fuels has been operating since the 70s, and has nearly 40 years of experience mining and refining uranium. I find Energy Fuel’s established industry-related relationships and experience with uranium production/sales impressive.

Sufficient Cash

The brutal nature of the current market has created a tough environment for uranium companies. Murmurs from funds surround the need for price discovery: the spot price for uranium will need to start increasing before they will invest meaningful cash into companies again. It seems clear to me that utility companies have complete control of the timescale of any potential uranium price uptake. In the meantime, if a company lacks the cash to maintain their facilities, they will not be able to survive.

Handily, Energy Fuels has $40-45 million to see them through until uranium prices rise.  In a recent interview with Crux investor, Chalmers expressed a reason for investors to be hopeful of a price increase in the near future.  Energy Fuels and Ur-Energy are hopeful their petition to the United States Government under section 232 and the subsequent announcement of a 90-day Working Group may bear fruit.   

If the group’s report is favourable to the nuclear industry, it is possible President Trump could subsidise U.S. uranium companies via tax breaks and other federal financial boosts, thus allowing prices to rise and profit to be made for investors who climb aboard while prices are still low. However, despite Chalmers stating he would be “shocked” if the government doesn’t rule favourably towards the uranium sector, the judgement currently resides in a realm of definitive uncertainty; the group’s report may not be completed this year as other events take centre stage on the U.S. political platform.

Genuine Assets

A company’s assets are an excellent indicator of if my hard-earned cash will be worthily invested. Energy Fuels have a portfolio they regard as ‘truly unique.’ (2). They have ‘more production capacity, licensed mines and processing facilities, and in-ground uranium resources than any other U.S. producer.’ Energy Fuel’s 100% ownership of numerous promising mines across Arizona, Utah, New Mexico and Wyoming gives them an excellent list of valuable assets.

Furthermore, in an interview with Crux Investor at the WNA, Chalmers explained the versatility of Energy Fuels. The company tries to ‘diversify,’ to ‘keep a strong balance sheet’ and ‘protect shareholders.’(3) The quantity of projects being undertaken by Energy Fuels helps reduce the risk of investment, as if one goes horribly wrong, there are plenty of alternative options to steady the ship.

The diversity of Energy Fuels is further exemplified by their status as the largest U.S vanadium producer. Vanadium has a variety of uses in engineering and redox flow batteries to name but a few. They also provide ‘low-cost environmental cleanup and uranium recycling services, including potential involvement in the EPA clean-up of Cold-War-era uranium mines.’ Investors can find their risk reduced because the company is clearly not a one-trick pony. Energy Fuels is not completely reliant on uranium.

The Game-Changer

When first mined, Uranium isn’t functional for nuclear energy or military use; it needs to be enriched to ≈20% for power and ≈85% for military use. The enrichment process requires the mined uranium ore to be processed in a mill. Energy Fuels own the only ‘fully-licensed and operating conventional uranium mill in the United States.’ (4). This means in the event of a uranium price increase they are the only company ready to go into production immediately. It also means that any competitor will be restricted at their leisure; companies will have to pay Energy Fuels for use of their mill, or face expensive shipping expenses to mills in foreign countries. Energy Fuels will also have control of the timescale of other companies’ uranium production. Chalmers has positioned the company strongly with an undeniable leg-up on the competition.

A photo of three nuclear cooling towers in action against the backdrop of a clear blue sky and a woodland area.

An Option I Could Seriously Consider

Upon conclusion of my research into the world of uranium companies, I have reached the conclusion Energy Fuels would be a potentially sensible investment. I don’t think any other American uranium producer comes close when the management team, business model, cash and bonus mill of Energy Fuels places them in such a commanding position. In the near future, I am likely to invest. I feel my money would be much better served waiting to grow with the sleeping giant of uranium than comatose in a bank account with less interest generated than a taxidermist’s dating profile.

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. We provide paid for consultancy services for Energy Fuels. 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.

Investigating The Earning Potential of Paladin Energy

The case for Uranium is simple, yet convoluted. In today’s environment, almost no-one is making money producing Uranium. A lot of mines are on Care & Maintenance (C&M) and old mines are depleting. But for those who understand the underlying Uranium Supply / Demand case, and accept higher-than-today Uranium prices thesis, we now need to start identifying the winners and the losers.

  • ASX: PDN
  • Shares Outstanding: 2.03B
  • Share price: AU$0.09 (15.01.2020)
  • Market Cap: AU$: 180.482M

Paladin Energy – An Overview

Paladin Energy, for those familiar with the recent history of Uranium equities markets, brings to mind meteoric gains. Paladin stock went from a low of A$0.01 in 2003 to A$10.80 on 2007 (1). Paladin wasn’t the only Uranium company with huge gains during the last Uranium bull market, but it led the way and was the poster boy for how do things right.

Paladin Energy … brings to mind meteoric gains …But the house of cards fell as quickly as it rose

But the house of cards fell as quickly as it rose. There were multiple reasons that lead to the fall of Paladin, but the huge debt load Paladin was the main culprit. In 2017 Paladin entered administration, or in layman’s terms, Paladin went bust, leaving behind many upset shareholders. But what it did allow them to do was to start anew with a much clearer balance sheet.

Paladin Energy’s flagship asset is a 75% stake of Langer-Heinrich Uranium Mine (LHM) in Namibia. In 2018, LHM was put in Care & Maintenance (C&M) and is currently undergoing a PFS2 which, “ is expected to be completed by March 2020 and involves a more detailed study, including process optimisation aimed at lowering costs, recovering Vanadium and potentially increasing production in the later stages of the mine life.”

Also, a Maiden Vanadium Mineral Resource of 38.8Mlb V2O5 has been declared.

Paladin also owns an 85% share of Kayelekera Uranium Mine in Malawi. Kayelekera, like LHM, is in C&M. On 24 June 2019, Paladin entered into agreement to sell Kayelekera to Hylea Metals. This sale is subject to approval from Malawian Government (3). But for simplicity let’s assume the sale will go through.

Finally, Paladin also owns a few exploration projects in Canada and Australia. The combined Resources of these assets are 320Mlbs (4). Paladin carries USD$132M in debt and has a cash balance of c. US$41M (4).

Langer-Heinrich Mine PFS1

Pre-Feasibility Study (PFS1) which focused on a rapid, low-capital and low-risk restart was published on 14 October 2019. It lays out two rapid restart plans.

  1.  5.2Mlbs pa production for the first 8 years with Life of Mine (LOM) AISC of $33/lbs and CAPEX of $80M. From years 8-20 LHM would produce 2.7Mlbs pa.
  2. 6.5Mlbs production for the first 6 years with LOM AISC of $29/lbs and CAPEX of $110M. From years 7-16 LHM would produce 3.4Mlbs pa. (5)

Neither of these plans takes into account the potential to recover Vanadium, but we could assume that with a modest CAPEX a Vanadium circuit could be added and they could produce Vanadium as a by-product. Scott Sullivan, CEO of Paladin, stated that, “we are hoping to produce it at a few dollars (?) per pound or less” in his SmithWeekly Research interview (6).

There is a one noteworthy asterisk in these assumptions: “PFS1 has delivered a further optimised plan for the restart with a level of accuracy of +25%/-15%.”.(5) So let’s call these numbers the best case scenario.

From the production, approximately 30% will be sold to CNNC at spot-price. Sullivan also stated that they want to be more conservative than the last management and sell 50% of the production with mid-term or off-take agreements. So that’s another 20% they may sell into spot-market (6).

What I gather from Sullivan’s interviews is the need to see Uranium prices in the range of $45-55/lbs before they would get in to production. He also states that they would be happy with $50-60/lbs Uranium prices. This means that it is reasonable to expect them to start locking in some of their production before $50/lbs and that 50% of their production is sold before Uranium goes to $60/lbs. So it would be realistic to assume that the average price for their long-term contracts would be in the $50-55/lbs area. The preferred plan is the first plan with 5.2Mlbs, although it would be interesting to know what CNNC thinks.

After laying down a few base assumptions, let’s study these plans with ‘what-if scenarios’, in the simplest terms:

Scenario 1
First 8 Years Years 8-20
Production (Mlbs)
Long Terms$52.5$52.5$52.5$52.5$52.5$52.5
Of Sales50%50%50%50%50%50%
Of Sales50%50%50%50%50%50%
Revenue ($M)$253.50$279.50$305.50$131.63$145.13$158.63
Costs ($M)$171.60$171.60$171.60$89.10$89.10$89.10
EBITDA ($M)$81.90$107.90$133.90$42.53$56.03$69.53
Paladin’s share of EBITDA$61.43$80.93$100.43$31.89$42.04$52.14
Scenario 2
Plan 1First 8 YearsYears 8-20
Production (Mlbs)
Long Terms$52.5$52.5$52.5$52.5$52.5$52.5
Of Sales50%50%50%50%50%50%
Of Sales50%50%50%50%50%50%
Revenue ($M)$316.88$349.38$381.88$165.75$182.75$199.75
Costs ($M)$188.50$188.50$188.50$98.60$98.60$98.60
EBITDA ($M)$128.38$160.88$193.38$67.15$84.15$101.15
Paladin’s share of EBITDA$96.28$120.66$145.03$50.36$63.11$75.86

Compared to Paladin Energy’s $117M market cap, LHM can generate a lot of EBITDA. A good start

But Let’s Be Realistic

Mine level profitability does not equate to company level profitability. In my humble opinion, it makes sense to look at Uranium companies with an assumption that we still have to wait another 3-5 years before we will see materially higher Uranium prices. If this assumption proves to be overly conservative, we make more money, if it proves to be realistic, we avoid misallocation of assets.

At a corporate level, if Paladin can burn less cash per annum than it’s currently burning, this might be realistic:

USD:AUD : 1.462019Q42020202120222023
Burn Rate$5.4$15.0$10.0$10.0$10.0
Environmental Bond$4.0$1.0$2.0$3.0
Sale of Kavelekera$0.1$1.2$2.1
Cash at the end of the period ($41)$40$27$19$14$4

The debt has maturity of January 2023, and the interest is deferred. If they restart LHM for example in 2022, they would have $14-$19M in-hand. They would need to refinance the debt, finance 75% of the $80M CAPEX (=$60M) and would need minimum of $20M in working capital.

In total that would mean they would need to finance $220-240M. In the “best case” this could be done with debt, but more likely a combination of debt and equity. Then an entity like CNNC may come in and finance the whole CAPEX in exchange of a low-cost, long-term contract. Again, for the sake of simplicity, we assume that the whole thing is financed by debt with 8% interest rate.

Restart in 2022
Production starts in 2023
Debt $248
Production (Mlbs)
Ave. price per lbs sold$51.25$56.25$61.25$66.25
Revenue ($M)$266.5$292.5$318.5$344.5
Paladin’s share of EBITDA ($M)$71.2$90.7$110.2$129.7
Corporate Overhead$10.0$10.0$10.0$10.0
Net income ($M)$14.9$28.6$42.4$55.9
OCF ($M)$36.9$50.6$64.2$77.9
Shares (M) 2020
EPS (AUD)$0.011$0.021$0.031$0.040
OCF/s (AUD)$0.027$0.037$0.046$0.056

There are a few things that could change this calculus.

  1. Vanadium production. With $20M CAPEX, production of 1.5Mlbs, AISC of $2/lbs and Vanadium price of $12/lbs Paladin would earn extra AUD$0.005 per share. With production of 2Mlbs pa, AISC of $1/lbs and Vanadium price of $15/lbs, we get an extra AUD$0.01 per share.
  2. Using internal debts of LHM to Paladin and accrued losses from previous years, Paladin might not need to pay any taxes for quite some time.

Combining 1 & 2, Paladin’s earnings could look more like this for the first few years:

Spot (Uranium)$50.0$60.0$70.0$80.0
Net Income (AUD)$45.7$74.2$102.6$131.1
EPS (AUD)0.02260.03670.05080.0

This is the maximum EPS Paladin “could” be making if all the circumstances play out perfectly, but this wouldn’t last for long.

I have run multiple DCF models, but in reality there are so many variables that they do not add a lot of value. The interesting thing is to try to understand how much OCF Paladin could make over the 20-year LOM of LHM. $600-$900M range could be reasonable. Out of this Paladin needs to pay down its $250M debt, mine closures, etc.

If this is the true value proposition of Paladin Energy, I’m not impressed.

Management & Ownership

John Hodder, a non-Executive Director “as a co-founding principal of Tembo Capital Management Ltd controls 223,589,744 shares through its holding in Paladin under the entity Ndovu Capital XII BV.” (2).

Beside John Hodder, management doesn’t own a lot.

In Australia, there is no register of interests, so you have to search press releases as every Director buy & sell is reported in 3Y declarations. From what I can find, in total, excluding John Hodder, management own 320,000 shares. On 23rd October 2019 Paladin’s share price was AUD$0.085. So the total value of these shares is AUD$27,200 (i.e. $18,600).

I usually focus mainly on the CEO and the Chairman of the Board. But in Paladin’s case Rick Crabb, the Non-Executive Chairman has resigned and will be replaced by someone on 31st December 2019 (7).

So let’s focus on the CEO.

Scott Sullivan

Sullivan served as the Managing Director for Minbos Resources from 2nd November 2012 to 21st February 2014. He also served as interim Executive Chairman from 6th August 2013 until he resigned from both of these positions on 21st February 2014. During this time the company didn’t have a CEO and the duties of CEO were performed by the Managing Director, Scott Sullivan.

Minbos had two phosphate projects, one in DRC and one in Angola. Both had scoping studies and good economics. Like so many junior mining companies, Minbos was not making any cash flows from its operations and needed to raise finance from time to time.

Just a few weeks before Sullivan resigned, Minbos failed to raise capital (10). Was this the reason for his resignation? When he started in Minbos the share was trading at A$0.20 (8). When he resigned the stock was trading at A$0.006 (9). That is a whopping 97% decline in 1 year and 6 months. Based on annual reports 2013 and 2014, Sullivan didn’t purchase any shares of the company.

His salary in Minbos was $300,000 pa. So he was paid c.$450,000 during his short tenure:

Plus, he was also incentivised with options:

Due to the fact that his tenure started at November 2012 and ended in February 2014, he didn’t work any full fiscal year. For fiscal year 2013 he worked 8 months and his compensation package looked like this:

In April 2014, after leaving Minbos, Sullivan joined Attila Resources (now New Century Resources, a zinc tailings play in Australia) as CEO. During that time Attila’s flagship was their 70% interest in the Kodiak Coke Coal project. According to their PFS the project, with $140/t coal, had an NVP of USD$166M and IRR of 48%.

In 2014 the company was in the midst of a DFS when they received an offer “to purchase Attila’s 70% interest in the Kodiak Project” from Magni Resources. This was a cash offer of A$68m. At this time Attila had a market cap of A$22.6m (11). They suspended work on the DFS and waited (12). But the deal fell apart due to Magni’s inability to finance the deal (13). Soon after Sullivan resigned.

At the start of his tenure Attila had a market cap of A$28.8M and a share price of A$0.40 (14). They also had a cash balance of A$5.9M. At the end of his tenure, September 2015, the company had a market cap of AUS$14M and a share price of A$0.16 (I don’t have the exact share price for September 2015. Share was trading at 0.16 on 30th of October (15) and 0.16 at 30th of July 2015 (16). These are the dates of the closest Quarterly Activity Reports). The company had a cash balance of A$1.2M on 30th July 2015 (16) and A$0.678M on 30th October 2015 (15).

The company was running out of money and had failed to seal the deal. According to Attila’s Annual Report 2015 Sullivan didn’t own any shares of Attila Resources during his tenure.

S. Sullivan’s salary was:

He was also vested 1,000,000 options in 2014 and 500,000 in 2015 with “Value of options at grant date of AUD$177,000” (13).

Last sample of Sullivan’s career is his tenure as the General Manager of Newcrest’s Telfer Mine. He worked as the GM from November 2015 to October 2017. We can’t comment his performance in Telfer. Based on Newcrest’s Annual Reports 2015-2018, Telfer’s track record looks like this:

Ore mined 20,321 15,686 17,547 17,262
Gold head grade 0.71 0.7 0.8 0.88
Gold production (koz) 425.5 386.2 462.5 5203
AISC ($) 1,262 1,178 967 791

During Sullivan’s time the AISC went up and production dropped. After his tenure ended, tonnage and gold production went up. But it would be hard to say if this was due to Sullivan performance. We don’t know why his work in Newcrest ended.

Sullivan has also been a Managing Director in a consulting company Impact Strategies from 2012 to today.

In Paladin Energy Sullivan’s earnings are as follows (2):

Why was a performance bonus was paid, let alone one of this size, given Paladin Energy’s share price has dropped nearly 30% during fiscal year 2019. It would be hard for Directors to claim to be aligned with shareholder interests.

It also worth noting the lack of insider ownership at Paladin. Do they know something shareholders don’t?  Is the scale of Directors compensation appropriate given that LHM is in C&M, it is loss-making and the is no share price appreciation? Like previous companies headed by Sullivan, it is clear is that shareholders are starting to question his effectiveness and ability to lead.

The Short and Ugly

Paladin can be profitable in a reasonable $50/lbs spot price environment, as can many other Uranium players. I also think that LHM is a good asset. With Vanadium production, it reasonable to expect an EPS of A$0.01-A$0.02.

Valuing the exploration assets would be anyone’s guess. There may well be value in them as you can buy companies like Vimy, Bannerman, Forsys, etc. with permits and technical studies done with extremely low valuations. Uranium bulls may point to the last cycle and value the exploration assets at Lbs/EV value of $3-5/lbs. This would give the exploration targets a value of $1B. It’s hard to credibly argue that ‘pound in the ground’ valuation makes sense. Yet Sullivan often says in his interviews that based on the EV/lbs ratio, Paladin Energy is cheap (3 & 6). This cheap promotional rhetoric.

With $80/lbs Uranium price and fully unhedged strategy, Paladin could be making a cool A$150M in net profits, slap a P/E of 15 (although the production will drop drastically in the year 8) to that and you end up with a value of A$2.25Bn for LHM and A$1.5Bn for the exploration assets. This would equate to A$1.70 share price.

(6) comment section

For some, even this value, is on the low side.

Comparably, Paladin doesn’t offer a great value proposition. There are better deals on offer for investors. And when combined with a management’s track record, especially the CEO, this is not an investment story that makes me feel comfortable.

  1., Paladin Energy goes bust
  2. Paladin Energy, Annual Report 2019
  3., Scott Sullivan’s Proactive interview 27 September 2019
  4. Paladin Energy, New York 1-2-1 presentation, 17 October 2019
  5., PFS1
  6., Scott Sullivan’s SmithWeekly interview 27 august 2019
  9., Minbos board changes
  10., Rights Issue Close & Subscriptions 12/2/2014
  11., Attila Resources, Quarterly Activities Report December 2014
  12. ttps://, Attila Resources Interim report 2014
  13., Attila Resources, ANNUAL REPORT 2015
  14., Attila Resources Quarterly activity report March 2014
  15., Attila Resources Quarterly activity report September 2015.
  16. ttps://, Attila Resources Quarterly activity report June 2015.

Energy Fuels (NYSE: UUUU) – Picking Winners & Identifying Losers

A conversation with Mark Chalmers, CEO of Energy Fuels (NYSE: UUUU) about what Uranium investment targets are going to need to have to make it in this cycle. Without contracts in place some Uranium companies will not get funded. So price discovery is important but that does not equate to immediate financial relief for some. Don’t be left holding that Uranium stock.

There is lots of money to be made if investors focus on the fundamentals and are not distracted by rhetoric by Uranium company’s that won’t make money even at $100 a pound. Pick companies with the right business model. Management teams experienced in bringing Uranium companies in to production and selling in to a contract market.

We discuss our investment thesis with several Uranium CEO’s. If you believe in the macro story of the Supply Demand story for Uranium then you need to know how to pick winners in this section. Not all boats will float on this high tide.

What is clear is that if the management team has not worked in mining Uranium before and produced and sold uranium in to the market, they don’t know what they don’t know. Cash is King – In a market short on institutional funding, some companies are running on vapour and struggling to find money and if they can, it is expensive and dilutory. Quality assets – the basics of mining are the same. Companies that can get Uranium out of the ground cheaply will do better than others. Investors need to understand a company’s ability to mine economically.

If you buy in to the macro story, we encourage Uranium investors to start looking at which companies are most likely to make it. It is apparent to industry insiders and veterans which companies and which assets will find it more difficult than others. We are listening to them and forming our thoughts.

Interview Highlights:

  • 90 Day Working Group Announcement Expectations
  • Importance of Management
  • Cash is King: Who Won’t Survive?
  • Who Should I Consider as an Investor?
  • Energy Fuels: Rebuilding the Share Price, and The Mill – A Means of Standing Out
  • The Market: When Will it Change and What’s The Plan if it Doesn’t?

Click here to watch the interview.

Matthew Gordon: Good to see you, albeit online. We caught up at the WNA Symposium in London last month. What was your take on it?

Mark Chalmers: Well it’s a good event. I really enjoyed being there again. And I caught up with a lot of people.

Matthew Gordon: There was a lot of excitement around the WNA Fuel Report as possibly being a catalyst for change. And we agreed at the time that it wouldn’t be. But the next catalyst for change is President Trump’s Nuclear Energy Working Group. It’s a week or so before that is due to announce.

Mark Chalmers: We don’t know exactly what timeframe the president will act on the report. Or what announcements will be made.

Matthew Gordon: There’s been various speculation as to what it could entail. But you’re not expecting it to focus necessarily on the uranium market, but the nuclear market as a whole. It’s hard to forecast what the impact could be for US uranium companies.

Mark Chalmers: There’s no guarantees, but I believe the working group gets it. I think they get it. I would be absolutely shocked if we get nothing here. The question is what will be proposed and what will the President decide is appropriate. It’s not very often you get on the President’s desk twice in 90 days. And I’m very proud that we’re able to do that. We’ve got this focus on the front end, the fuel cycle. The focus is absolutely required by the United States government, the largest consumer of uranium in the world, the United States of America is one quarter of the world’s uranium. We cannot go to zero.

Matthew Gordon: done a lot of interviews now with uranium CEOs over the last 3-4 months. As an investor, we’re starting to build up a picture of what the market looks like. I am a believer in the macro story in terms of the supply / demand story and what those numbers look like. I don’t have a sense of timing. I don’t think many people do. I’ve heard from 3 months to 24 months in terms of timing from people. I wanted to speak to you about some of the thoughts that we’ve had, and get some affirmation of some of those thoughts, if indeed you agree. There are lots of different companies at different stages and different positions financially, who may or may not make it, depending on how long this goes on for. But it was clear to me that you need three things. 1. You need a management team who’s been there and done it before. And I don’t mean mining. I mean getting uranium out of the ground, getting it to where it needs to be in terms of being able to process it and sell it and to market – that’s one. 2. Cash, because a lot of companies are running out of cash. And 3. Fundamentals of the asset itself, you’ve got to come back to that, because mining is mining. Start off with the management component with you first?

Mark Chalmers: Oh, absolutely.

Matthew Gordon: You is because you have been through a couple of cycles. You have produced. What would you say to investors about the importance of why the experience of having been through, not only a couple of cycles, but you’ve actually produced product and got it into market. Why do you think that’s important?

Mark Chalmers: Uranium is very unique. And it has a number of dynamics. When you start looking at uranium projects, it has the mining risk, and processing risk. It also has a lot of risk because it is uranium and that is obviously connected to the nuclear fuel cycle. A lot of people underestimate how all those things meld together and how one of those elements can really throw a monkey wrench into any project. When you look at other mining industries like gold and copper, silver, zinc, whatnot. They’ve had a lot more continuous operations over the years. They haven’t had the hiatuses that the uranium market has had. We go through these peaks and valleys. And the valleys, often are very pronounced and very long lived. And you lose a lot of that expertise and the knowledge. So there are similarities, but also many differences.

Matthew Gordon: Your last point about a lot of the expertise has been lost, because the sector has been in the doldrums for a while. People have got to make a living and they go off and do other things. I’ve spoken to only four CEOs who have ever managed to get companies into production. The rest are learning on the job. And as an investor, my problem is I don’t necessarily want them to learn with my money, because things can go wrong if you don’t know what is coming down the line. To coin your phrase, “you don’t know what you don’t know”. And that’s fine with someone else’s money, but not with mine. I just thought it was interesting with some of the conversation’s that we’ve had, it became obvious that these companies were just hoping that the market would come back and there would be enough money sloshing around. And some of these mistakes would get hidden by all the money that would be thrown at them for investment. But when things are tight, like they are now, if you don’t have the cash to be able to cope with this market, you’re in trouble.

Mark Chalmers: It’s pretty hard when these companies get to the point where they’ve gone to the equity markets multiple times. The share price continues to decline. The market just gets tired of the story. And so that’s why it’s important to maintain a healthy cash balance. And I think the one thing that is really a problem for a lot of these really small mining companies, juniors, micro caps, and it is pretty chronic in the entire industry, is that people get down to that last $100,000, or $1M and then they go out and try and raise money. It’s expensive or impossible to do. We’re not in that position. We’re a lot more complicated than a lot of these other companies. Other companies may have one project or it’s not constructed. So, the holding costs may be lower. But you just don’t want to get against the rope, because when you’re against the rope, people know you’re against the rope.

Matthew Gordon: I’ve gone through a period of learning about Uranium equities, speaking to some great influencers in the market, some fund managers. I’ve managed to speak to a couple of the utility companies. And I had a conversation a couple of weeks ago. It made me really nervous, actually, for the first time in this space. And it comes back to that line, ‘not all boats will float on a high tide’. They just won’t. I’ve been approached by a couple of groups to ask for my advice on a couple of junior uranium companies, who are struggling for cash and who are speaking to these finance groups to take them out. It’s like they’ve had enough. They’ve fought their fight and don’t want to go on, or don’t know how to go on. And that made me nervous, because it reinforced my thoughts. I’m a buyer of the macro, there’s going to be winners, but not everyone’s a winner. It’s clear because there are people struggling right now. And the longer this goes on, the more problematic it becomes. So, if this thing goes on another 6 months, I can see more than a couple of companies struggling because they don’t have the cash, or the ability to persuade a generalist fund to put money in. And the specialist funds have made their bets and they can probably see better than some of generalist funds, as to who is going to make it and who’s not.

Mark Chalmers: With a lot of these companies. Not only do they have no money, but they also have projects that are not proven. And in many of those projects need hundreds and hundreds of millions of dollars of capital investment, if not billions of dollars.

Matthew Gordon: When you start talking about things like getting some debt into the company to be able to be in a position to build out whatever it is that they’ve got, or be able to even pay for the Feasibility Studies (FS). Again, there’s no real plan there. Mark, you’ve been around the block. You’ve seen a few things and some of the companies I’m probably talking about. What’s your take on the market?

Mark Chalmers: I don’t envy them. I don’t envy them, because when you’re at the bottom of the bucket and there’s no water coming in to fill up your bucket, what do you do? And it goes back to, ‘there’s no shortage of uranium’. Uranium deposits out there in the world have not all been created equal. And if they don’t have any money for just daily operating expenses… In a lot of cases, those projects are not proven yet, they’ve never been commercialized. So, there’s a lot of technical risk for those projects. In most cases, it’s going to be far, far more difficult, costlier and take more time than they expect. And then you throw on top of that a new project. It’s going to cost hundreds of millions of dollars. In most cases hundreds of millions of dollars, if not billions of dollars. It’s a hole hard to crawl out of. And so, I don’t envy these folks at all. You’re at a huge disadvantage if you don’t already have proven projects, if you don’t already have projects that have the capital investments made. You’re way back in the back of the bus and when you’re in the back of the bus, and you don’t have any money, you’re not going to get up to first class.

Matthew Gordon: What I’m hearing is that exploration companies are some ways away. Certainly, not in this cycle from getting into production. So as an investor, do I put my money into those now because money’s cheap, but risk is high. There’re some companies with a possibility of being funded to get into production. But again, they’re not going to get into production anytime soon. The next 2-3 years, maybe if they’re ready to go today. But not many are. Would you talk to producers who are armed and ready to go?

Mark Chalmers: If you’re playing a sector like uranium, your safest bet is to play probably 2, 3, 4 of the better, more established companies, and you can do that in a way that manages your risk. We’ve seen the damage, or collateral damage, that’s happened to a lot of people back in about 2010/11 after Fukushima. With the deterioration in share prices. That hit us all. That hit Cameco, that hit Energy Fuels and everybody else. So, there is not such thing as no risk, but there is such thing as having less risk. And there is a saying, if you believe in a macro, which I agree a 100%, that you can play certain companies that have less risk and have probably the same upside as a lot of these riskier plays.

Matthew Gordon: You guys got hit, July 11th/12th with the Section 232 announcement. You guys got hit big time on your share price. You dropped off a cliff. You’ve recovered about $0.45 – $0.50 cents since then. What should that tell investors?

Mark Chalmers: That’s an example that certain events can clobber these stocks. I believe that there people were certain of a positive outcome on the Section 232. We thought, as well as many others, even that we talked to the government, that there was a high-likelihood that that was going to happen. It didn’t happen. We got hit, as did most others, particularly those in the United States. It’s a sector that in the up markets, it’s multiple bagger. In a down market, it can be a multiple bagger in the opposite direction. It is a tricky sector, but it still goes back to sophistication in how you make your investment. It shocks me sometimes that people come to me and say “oh, I’m getting in the uranium business and I picked X, Y and Z” and those are exactly the products that I would never have recommended to these people. Now, even in some of those cases, in the right circumstances, people can make money on those stocks. I don’t think there’s any absolute 100% the best plan. But I also think that a lot of people making these investments, they don’t like the super high volatility. And that there are just different elements of risk. And what people do, what percentage of their assets that they’ve invest in high risk returns, compared to what their ultimate horizon is and how they’re diversified, that is down to them.

Matthew Gordon: Can I just talk about your mill, because this the other bit, which it’s not one of my tick boxes, but it’s definitely a massive plus for you guys. It’s one of the only operating mill in the US. Is that right?

Mark Chalmers: Correct. If you go back like 30 years, there were like 35 mills, And White Mesa has basically been in good standing, has been completely operable since that point in time. There are two other mills. There’s a Shooter Canyon mill that ran for a few months or something back in 1979/80 or something, then shut down. And then there’s the Sweetwater Mill in Wyoming that ran for maybe was a year or two, also shut down 30, 35 years ago and hasn’t operated since.

Matthew Gordon: Looking at your mill, it gives you certainly optionality in terms of what you do. But for people without a mill, what are their options? How do they go about processing their ore?

Mark Chalmers: Well, they either have to build their own mill, or if in the region, they have to basically strike a deal with us to have access to our mill. And there are some examples of work that’s been done in the past with toll milling agreements or joint ventures. So, if you don’t have the mill, and you’re a conventional miner, you don’t have any options, you have to make some choices. I’ve had people tell me they don’t need to mill. They can ship it to China or to Brazil or somewhere like that. That’s farcical. It’s farcical. You’ve got the costs of transportation. The mill was correctly positioned for sustainability. And that’s a big issue that investors should feel comfortable that our mill has been around nearly 40 years and has survived these peaks and these valleys because of its flexibility. And, it’s been able to cash flow, and many times, even though the uranium price were too low to run it just for uranium production.

Matthew Gordon: What are your plans for the next 6 months if nothing happens in terms of the price discovery in the market or 12 months?

Mark Chalmers: If we don’t get relief through this government working group we will manage our expenses as tightly as we can. We’ll continue on with the macro environment we think is alive and well. We’ll continue pushing these different parts of our business that are less uranium price dependent like the alternate feed and the clean-up of abandoned uranium mines. Everybody needs higher uranium prices. This is really a critical crossroads that we’re at with the working group. We’ve survived the test of time. We’ll continue to survive the test of time. But it will be more difficult until uranium prices recover.

Matthew Gordon: And I keep asking every time I see you because I’m not quite sure what the answer is going to be each time.

Mark Chalmers: Well, I liked your comment that a lot of people have quit speculating on that. And I think that’s one of the reasons that these uranium share prices have been suffering. I think a lot of people are tired of speculating, including investors. Everybody seems to be wrong. You know, like you said, six months or two years or one year or whatnot, people been saying that…

Matthew Gordon: If you’re a fund manager, you don’t care if it’s one year, two years or three years. You’re getting paid your 2% and 20%. It’s okay. You can afford to be wrong for another three years, If you’re an investor like a Joe Schmo like me, where you’re putting your own cash into this stuff and you’re underwater and you don’t know what’s coming, you’re unsure. People have been telling the macro story for so long that you’re beginning to doubt whether that’s true or not. You jump up and down and go, hurrah, every time you hear someone talk about the macro story. But maybe you start having doubts. So, getting some sense of timing is important because it’s our hard-earned cash here we’re talking about.

Mark Chalmers: Absolutely. And I always say that whenever people have the most doubts, as is when you should be investing more. People like Rick Rule, it’s quite interesting to listen to some of his discussions and when he started getting interested in uranium. And it was the late ’90s. And he’ll tell you how many doubts he had. But then he will also tell you that he had multiple investments. So, I think the worst was like a 20 bagger or something. So, it is a very unique sector and frustrating. But when it comes, it comes and it comes big. And, there are there a lot of people that made a lot of money in this over the years and there is going to be a lot of money made again.

Matthew Gordon: I just want to make sure that people aren’t being misled and that they focus on the fundamentals, what’s important with regards to the company, assuming the macro is true. I want investors to make the right bets in the right companies rather than have their money frittered away by companies perhaps that are just struggling with G&A, let alone getting into production.

Mark Chalmers: There are companies out there, I won’t name names, that even if the uranium price goes to $100 dollars, they will not be successful. And I think that’s what you’re alluding to. You don’t want people to get in investments that will have no possibility of ever really making it. They might get a bit of a bounce off of an up market. But investing in broken business models isn’t a really good long-term strategy.

Matthew Gordon: I’m not alluding to, I’m trying to shout from the rooftops that in our assessment, having looked at these companies, looked at the numbers, done the analysis. I agree with you, whether $100 bucks or $70 bucks, there are uranium companies which are just not going to make it. They’re not designed to make it. They don’t have the people on board to show them how to make it. People need to ask the right questions.

Mark Chalmers: Being in the space, I have to be a little more careful when it comes to pointing out some of the shortcomings.

Matthew Gordon: I wanted to speak to bounce our thoughts off you. I’m not sensing any pushback. Appreciate your time and taking the call as well.

Mark Chalmers: It’s always a pleasure, Matt. I enjoy talking to you.

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. We provide paid for consultancy services for Energy Fuels. 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.

Small Uranium Companies May Need to Change Strategies to Survive – Dustin Garrow

Dustin Garrow, former Paladin Director, and industry advisor to Uranium companies, Uranium ETFs and Uranium Funds, was involved in writing the WNA Nuclear Fuel report, especially the uranium chapter. A lot of investors on social media are seeing the findings of the report as a signal for a recovery in the uranium price. We ask Dustin Garrow if this a realistic assumption.

Analysts say there needs to be production at higher price. This report says ‘yes there needs to be more investment in the fuel cycle and particularly uranium. So everyone is saying the same thing. The Demand forecast marginally positive. Dustin tell some of the factors for altering the data from companies to show a more realistic outlook.

Will some of the junior uranium companies fall off the cliff if the price discovery takes longer than hoped. How will their strategies need to change?

Certainty is still not here, but the mood is more positive. Dustin Garrow saw 10-12 investment groups which is more than have attended more many years. Not a lot of the US utilities. He talks about conversations with generalist investors. And also an update about the 90 Day Working Group.

The report has previously had a reputation of being vague. But a lot of hard work has gone in to making it a little bit more commercial. But still avoids talking about the economics! It doesn’t talk price. Surprised, we were. But it does now discuss long-term contracts and term market.

Did you know that the EU and US represents over 50% of the uranium requirements. 1.9 billion pounds of uranium, and 90% was on long-term contracts.

Interview Highlights:

  • WNA Expectations
  • WNA Fuel Report: What Will it Do For The Market?
  • Current Mood in The Market: When Will Price Discovery Happen?
  • Struggles of Raising Funds in The Junior Space
  • Investment Hacks: What Should You Look Out For Before Investing?
  • Buying Physical Uranium: What Should You Know?

Click here to watch the interview.

Matthew Gordon: It has. We, like you, have been trotting around, meeting people, interviewing people at the WNA Symposium London, getting a sense of what the mood is. What do you want to get out of it?

Dustin Garrow: I think an important part is the biannual market Fuel Report from the WNA. I happen to have been involved in the uranium chapter. And the initial reactions have been very positive from outside organizations and people. I think the report reflects more of the concern of some of the fuel cycle participants. And it goes not just to uranium, but also the conversion side. I think the industry perspective now is more in line with what I’ve been seeing, particularly in the uranium side, on the supply issues that are looming.

Matthew Gordon: The WNA Fuel Report comes out every two years. It has had a reputation of being just a little bit vague. It paints a broad picture. But this year, a lot of hard work has gone into it. And we’ve met some of the authors of that. You were involved as well. It’s just that little bit more commercial. It’s getting to where it needs to be. You were involved with the uranium component. What was the brief?

Dustin Garrow: I’ve been involved in the report for many series of it. It was originally designed as an internal communication document. It wasn’t nearly as critical as to how it was put together. And the other thing is you can’t talk economics, can’t talk prices for anti-competitive reasons. But then it became the industry position, as particularly more investor groups, began to look in the uranium side. So, there’s been that lengthy transition. Still can’t talk economics. But it now it addresses things like the need for long-term contracts. There is still a big hurdle at this point. A lot of companies are at the starting gate in various forms, but without the utilities committing to more than a 2-3 forward year agreement, they can’t raise financing. It’s now being recognized, the term-market, it’s role in this industry. I looked at the US and the EU deliveries since 2000. There’s really good data on both the regions, which represents more than 50% of uranium requirements. Over that period, they’ve taken delivery of 1.9Bn lbs of uranium and 91% was under long-term contracts. So, the idea that the utilities rely on the spot market just doesn’t reflect reality. They still buy about 20Mlbs a year in the spot.

Matthew Gordon: It talks about long-term contracts which is a really important part of the industry for sure, but it’s not giving any indication around price because it can’t be anti-competitive.

Dustin Garrow: So you say things like ‘adequate’. And that depends on the specific company. What’s adequate for a Cameco is not adequate for a new build project somewhere else. But it’s a crucial element in the progression of the production facilities.

Matthew Gordon: If I look at people like TradeTech or UXC, they can get into this. And I think is important for commercial reasons that they can get into this. They sell those reports into utilities funds etc. But these interviews are for the ordinary guy like me and you, who want to buy shares in equities. What does this report do for them? Does it give certainty to the marketplace so therefore, people start behaving in a different way and therefore the equities react?

Dustin Garrow: What’s important is a lot of the investment analysts have concluded that there is a need for more production and it will be at a higher price. It has to be because of the economics of the new production facilities. The WNA, without talking the economic side, is saying, y’es, there is a need for more investments in the fuel cycle and particularly uranium’. So now everyone is saying the same thing. Now the contrarian would say, ‘well, now it’s time to look over the other direction’. I think one thing that was brought out in the WNA Fuel Report is the demand forecast. Recently the WNA had a low-case which had demand eventually dropping off. Well, now even the low-case is a positive I think it’s 0.1% growth. But it’s not a drop off. So, across the three cases, the reference case is about 2% growth per year and the higher one is 3.5%

Matthew Gordon: How did that how did they marry this up with the supply case? Most companies will overstate, will be a little bit hopeful about what they’re going to be capable of doing, but they are restricted by a number of factors.

Dustin Garrow: I think what what’s another important thing is there’s more judgment being put into the WNA Fuel Report. In other words, you can take the public statements of all these companies and say, ‘well, his history suggests that it’s going to take longer, it’s going to be slower’, or whatever and more of that’s going in the report.

Matthew Gordon: That’s great news.

Dustin Garrow: So, it’s not like, ‘oh, no, you’ve got to say just public information’. So, there’s some judgment that goes into it from people…Frank Haney, who ran the working group. He’s retiring next year after 50 years in the industry. So, we have some long beards involved.

Matthew Gordon: So that’s the WNA Fuel Report. Generally, very positively received. It’s certainly an upgrade from where it’s been, a lot of hard work gone into it and a lot more realism. Let’s talk about mood. I’ve been speaking to people and I’d say the general mood is positive, without necessarily being certain. It’s better than it was 6 months ago when we first started discovering the world of uranium. I’ve had some fantastically wide-ranging views on when price discovery happens from 3 months through to 18 months. Now everyone’s got a different business model, and everyone has different needs. But the people sitting in the middle are thinking maybe it’s going to happen next year. What are you hearing?

Dustin Garrow: I thought it was interesting that at the WNA symposium I think there were ten or twelve investment groups represented. We’ve never had that before. We’ve had maybe 2 or 3.

Matthew Gordon: And these are generalists?

Dustin Garrow: These are these are the guys that are either going to buy physical or buy inequities. They’re the guys that are going to put the money up for the industry. And someone said last night at a dinner I attended… when you’ve been around in this business so long, you walk in a room and you sense the mood, and it is on that positive side by the producers, either real or those that plan to come into production. The meetings that I’ve had outside of this symposium had been very positive. It’s not, ‘oh, well, what about the Japanese? They’re never going to’…It’s more like, ‘I’m on board now. When is it going to happen?’. The Section 232 in the United States… we had the July 12th memorandum from the President, which some people interpreted as, he had no interest in helping the domestic industry. But if you read his statement, it was ‘at this time’. And now the 90 Day Working Group will come out with some kind of remedy. But it will be uranium conversion, enrichment and probably be pretty neutral regarding the utilities. What’s going to be their exposure? But the point being, it’s not going to affect the general market. It’ll be kind of played out in support of the US government. But I think some of the utilities, particularly in the US, have the big unfilled needs, are saying, ‘well, I still don’t know what’s going to come out’. We’ll have that answer by mid-October. And then I think that they’ll start making their procurement decisions.

Matthew Gordon: We’ve had similar conversations. I think quotas, tariffs, subsidies. No-one knows.

Dustin Garrow: I think that’s all off the table. There will be some form of government support just directly. It won’t limit imports of other origins or anything like that.

Matthew Gordon: Let’s step back and see what happens there. But I think that’s going to be very interesting, obviously, for the US uranium companies. One of yours, Energy Fuels, obviously waiting to see what’s happening there.

Dustin Garrow: I think that activity in the term-market is what’s going to help raise the spot price. So, it’s not going to be the spot price goes up and then there’s term activity. The utilities are already doing their due diligence. They’re contacting suppliers. How much have you got? What timeframe? What kind of pricing are you looking for? That’s a precursor for them coming out. And like one of the US utilities was just in the long-term market, 2021-2025… So, again, they’re starting the process that they’ve not been willing to do because of the price differentials for a number of years.

Matthew Gordon: So, you were at the Eight Capital dinner last night. What were you hearing? What were the questions that are being asked?

Dustin Garrow: Well, no one’s saying, ‘well, is the price going to drop?’. What are the factors that are going to move it up and when do we see those asserting themselves? Now, some of us, we are die hard optimists. We could start to see it before the end of the year. But I think by first quarter, keep in mind, there’s a big conference in Nashville at the end of October, where there’s only like 3 US utilities here. They’ll all be in Nashville; the producers will be there. I think there’ll be much more discussion because we’ll know what the working group recommendation is or outcome. So, we could see some of them will say, ‘well, I’m going to get out there now. I’m not going to wait’. And we could start to see an uptick in term-contracts.

Matthew Gordon: Based on your assertion that you think it’s pretty soon, a lot of companies are going to like that news. Not saying it’s going to happen, just that they’re going to like your view. If that doesn’t happen… we’ve been speaking to a few people and we’ve been interviewing a few people. So, we’ve got a broad sense of what’s happening with it with a junior uranium space. A lot of them are needing to raise capital to keep going. They may get to the end of the year, but that’s it. Do you feel that the funds or the institutions that you’re talking to are ready to have those conversations with these juniors or are they going to struggle?

Dustin Garrow: I think some, because they have a good business plan, good projects, they’ll be able to maybe live on the drip for a while. They’re not going to get that big multi $100M financing done without term-contracts. I think they may be optimistic on how long that takes. It’s not that the price goes up, the next day the phone rings and all the utilities sign big contracts and by the end of the week away you go. It can take months and months. And at some point, the Cameco’s enter the market. And at some point, you’re going to see a lot of activity once you get to a certain degree.

Matthew Gordon: That’s great saying that because I think if I look at the retail following that we’ve got within uranium. Very passionate, very optimistic and patient group of people, very knowledgeable too. But they shouldn’t expect an immediate pop in price. There’ll be a gradual escalation on price. Is that what you’re saying? That could be as well as long as 12 months before it gets to where it needs to be? When does it get to $50?

Dustin Garrow: Well the term-price at $30 we could see $40 very quickly, because I think that’s the next plateau. A bit of contracting by some, then another pop up to $50. Well, how long does that take? Are we dictated to by the utilities when they come on the market? So, yes, by some time. First half of next year should you see a lot of term-contracting activity. And it’ll affect the spot-price. I think we’re within a 6-month window.

Matthew Gordon: I’m going to go back to my institutional days. I’m looking at price, if it hits $40. Most of these companies are still under water at $50-$55. So, in a meaningful way, it doesn’t matter if it is $20 or $40, but for the funds, if they see contracts in place, they have security. They still have to take a guess on what the future holds. And that the company can get product to the utilities. They’re got to say this will get to $55. That’s only break even for some of these companies. Some these companies need to make more than that to be able to pay back anything they have borrowed. So, there’s still a lot of uncertainty in terms of ability to raise capital. Is there not, at this point?

Dustin Garrow: Yes. That’s why some of them are out meeting, a lot of meetings, a lot of discussions and preparation for them. Then you go out and you do your whatever amount of term-contracting. I think the financing is available, but with the right conditions.

Matthew Gordon. We’ve been meeting and talking to a lot of the funds and institutions, and they’re generalists who, as you say, are coming back in and having a look at what’s going on. They’re having to get back up to speed, to understand what’s happening in the market, and they’ve going to take a view on what the future looks like. But, yes, I think the money is there, under the right conditionas. But that is going to come down to 2 quite important things that I’ve discovered in the past 6 months, management teams who have produced uranium and got it into market. Not many of them, right? And then, of course, the basic fundamentals of mining, is this a good asset? Can you get it out of the ground, let alone get it into market?

Dustin Garrow: Well, as you know, we’re having more specific questions. In other words, will a rising tide lift all boats? I think some of the investors that have either been in the space or more sophisticated, whatever, are saying, well, now of this group of companies, where should I place my funds? I think probably the primary question that I’m getting back is, ‘I’m on board, I think it’s great, next year. But where do I place my funds?’ And part of it is, like you say, management teams, the experience. And that’s hard to come by these days. Very difficult. There’s just not many veterans left. And uranium is a unique commodity because of the political, social issues surrounding it.

Matthew Gordon: I’ve been calling it in the past few days ‘Mining +’. Mining’s hard enough. Then you have the uranium component, which is a political hot bed. And some of those geopolitical concerns. But without getting at the macro, we all agree that the general consensus is it’s positive, a huge infrastructure needs filling. But if we come back to the management team. There’s about 50-55 companies in the uranium space at the moment. As the market recovers, you’re going to have new entrants coming in. It’s hard to imagine that any of them are going to have relevant uranium experience.

Dustin Garrow: It will be difficult.

Matthew Gordon: So, again, for our Subscribers, that’s something that they need to consider when making an investment decision. A new story doesn’t necessarily equate to capital appreciation, because these new entrants are unlikely to get into production with new management teams with no experience. Not impossible, just unlikely.

Dustin Garrow: During the last uplift, there were like 400 / 500 companies. I was at PDAC and everybody was tacking up a sign. ‘We also do uranium’, on top of everything else. And geologists with some drill logs they were they were getting funded. I think this time around it will be more difficult, because the questions will be asked, ‘who is behind it?’, peal it to the next layer and. And who’s going to do this? I want names. And that’s going to be a difficult part of the equation for some of the companies to convince funds. And it goes into the term-contracting. The utilities will say, ‘I’ll do a 200,000lbs /300,000lbs contract. I’m not going to do 500,000lbs. I don’t know you guys. I don’t know your project. It’s not built. So, I’m going to be cautious’. So, that means junior companies have to even do more contracts than maybe an established producer, of which there aren’t many left.

Matthew Gordon: Yes. A few things going on there. If you don’t have anyone who’s produced or been involved with producing uranium before, as an investor, you’ve got to think twice because it’s complex. It is not just drilling holes in the ground, finding it, digging it. It’s not that simple. There’s what happens afterwards. The bit that you’ve got a huge track record on was, I’m not selling you by the way… I’m just referencing that you have huge experience in this, the contract side of things. That’s not easy because, time comes into this. There are buying cycles. Term-contracts are 5, 7 years, aren’t they?

Dustin Garrow: They come in cycles. And just as a quick side note, when we did the bankable contracts for Langer Heinrich, the banks laid out very specific requirements. How much volume? At what price? Over so many years. So, we had to then construct a contracting plan that met all those needs. And sometimes you have holes and the banks go ‘fill the hole before I’m going to press that release of funds’. So, there’s more to it than like I said, the phone rings and you pass around contracts and you’re done. Won’t happen that way. It’s not to say these other companies can’t be successful. It just may take a bit more time. They may have to be more flexible in contracting.

Matthew Gordon: I think the phrase I heard yesterday was that ‘they don’t know what they don’t know’.

Dustin Garrow: And it’ll come to their front door.

Matthew Gordon: And that takes time. And that takes money. And sometimes they can’t fix it. So, a lot of things to be cautious of as an investor in the uranium space, unless you get a team that’s been there, done it before. I think that’s important because a lot of people, generalists, I’m not talking about the wonderful uranium crowd that have been in there through thick and thin over the last two years. I’m talking about generalists coming back home when uranium does kickback, will need to understand that. It’s not a case of all boats float on a high tide. I fundamentally disagree with that statement. I think all boats float for a while. And then the inevitable happens, they sink. So that’s great if you get it on the way up. But if you’re if you’re left on the boat, you’re in trouble.

Dustin Garrow: TradeTech, one of the two long time industry consulting firms has just put out a study on production. And it goes beyond, ‘well, here are the costs’. They look at full cost because a new project’s not going to be built on cash costs only, but then they try to look at what are the impediments? What about the secondary licensing? What about the mine plans? What about contract? Have they gone out and approached the market? Are they ready to do that? So, it’s kind of a guideline, a cookbook, to look at and go, ‘well, you know, just because you’ve got the best technical project, you may not be in the first mover group. You may not veto the third’, because of where the projects located for a number of reasons. So, the industry is trying to help some of the consulting firms in that regard.

Matthew Gordon: But that’s fine for people like you and me. We can afford that report. I saw it yesterday. Great report. And we can interpret that and extrapolate what we want from that for retail, family office, high net worth. They’re not going pay for that report. They don’t have access to that. They’re going to have to trust the information that they’ve got access to. And that’s why I’m interested in talking to people like you, you’ve been around the block a few times. You’ve seen a few cycles, influencers who understand what’s going on in the uranium space. But it can also help bring to light some of these issues. What the company says and what the company is capable doing are sometimes polar opposites. They’re very far apart and that’s the difference between making money and losing money. And that’s important. This is investor’s money. That’s what I care about.

Dustin Garrow: I think money will be made in this space again. I think it will probably be on a more selective basis.

Matthew Gordon: Pick the right team. The right boat.

Dustin Garrow: Yes. And a lot of it’s the right team that can get things done.

Matthew Gordon: Are you seeing any good stories out there? Over the past 2-3 days and over the past six month I’ve heard different business models and I don’t mean physical or ETFs or equities. I just mean companies which are up or coming at it in a different way, which makes sense, or companies which have got all the fundamentals in place. What type of company would you invest in? Or advocate in investing in?

Dustin Garrow: I think you’ve hit the high points, those that can demonstrate some experience in the commodity and mining in general. That always helps. If they’re not totally cash starved at the moment, that’s a plus. It gives them a little more breathing room so they can go out and meet with utilities and lay the groundwork. And if it’s like, ‘well we can’t go out, we can’t talk to anybody, we don’t have any money’, then it’ll be tough for the utilities to put you on their supplier list. When they don’t see you and you may have the best widget, but they can’t see it. The utilities need yellow cake in the can. They aren’t that interested in your share price. They can’t stuff shares or certificates in their reactor. They want to make sure in 2023 on June 1st you’re going to deliver that 100,000lbs, because they work it into their fuel plan. So that’s what they’re after. And so it goes beyond just the investor side. You’ve got to convince the customers that you’ve got credibility, particularly with new projects. If you’re a new person on the block it’s it can be a challenge.

Matthew Gordon: I just talked about something which was buying physical uranium. There’s a company in the UK called Yellow Cake. You’ve got one in North America which is called Uranium Participation Corporation (UPC). How does that work? What is buying physical uranium?

Dustin Garrow: There’s really more than one model and I’ll talk UPC, Yellow Cake. They’re being characterized as sequesters of the uranium. UPC has held their inventory for 15 years. And Yellow Cake, the business model, as you know, I’m chief commercial officer for Yellow Cake. Is to accumulate that inventory at good acquisition cost. The current 9.4Mlbs we acquired at under $22. Buy it and hold it for an extended period, add to it when the stars are aligned correctly to where we go out and raise money, buy more. We’ve got the option with the Kazakhs. And it’s an investment that the investor can make up a bet on the market. In other words, ‘I think it’s going to keep going up. I will accumulate shares’. At some point they may say it’s $45-50, could come off. Then they’ll take a different decision. But it’s basically that store of value that they can make decisions on.

Matthew Gordon: And it’s based purely on the price of uranium spot that that day. ‘I bought it $25, it’s now at $40, I’m checking out’, because it just happens to be in the form of shares. You’re buying and selling physical product.

Dustin Garrow: But the material doesn’t like come in the market. Now there’s a different group, which there’s 6, 8, 10 investors that have bought physical. Now that means they hold the U308 at a conversion facility. They come in, they add to that when they think the price is going up. And at some point, I think when they say, ‘well, OK, I’ve doubled my money in six months and I’ll sell some of it off’. I think that happened earlier this year. So, that’s a different model.

Matthew Gordon: One is physically selling off, but that’s a group of institutional guys, presumably. The first one you described was there’s an inventory sitting there. So, you can you can buy shares in that. It will continue to sit there. And once you want to sell your share, you can sell it someone else. But the uranium still remains there. It’s not going into the market per se. It’s a security.

Dustin Garrow: Yes, it’s a lot easier than if you buy physical because then you get into the storage accounts. There’s fees, there’s all kinds of things. Not to say that’s a bad part of a three-legged stool, but it’s different. And I know the analysts are really struggling with ‘how do you model that?’. Cameco has mentioned it on their calls. But apparently late last year, that group bought 8-10Mlbs. Could have been more, could have been less. And I’m asked how and when will they sell? At what price? Some might sell at $35. They go, ‘hey, I bought it at $25 I’ll sell it’. That’s a great deal, I’ll go do something else. Others may say this thing’s rate going up quickly. I’ll hold to $50. They may sell at $35 and come back at $40. So, it’s a growing part of the spot market that to some degree you can’t model. It’s like, ‘well, how do we model this? We know what the utilities are going to do. We know the producer buying’. I contend you can’t model it. If it was one person you go, well, I can kind of figure out what they’re doing, but it’s now a diverse group all over the world. South America. Australia. North America.

Matthew Gordon: Right, so if I’m looking at something like Yellow Cake. You buy at $22. If the price goes down. There’s nothing you can do about that. So, the value of what you bought is less than what you paid for it. But your expectation by investors buying shares is that it’s going to go up. So, there’s no equity risk per se, it’s just purely on the products above the ground sitting in containers, Cameco’s facility or wherever it’s held. Whereas equities, a bit more exposure to all the risks below the ground and management decision making and availability of cash. So, it’s just a different risk profile.

Dustin Garrow: So, it allows you to participate in the uranium space by either Yellow Cake, UPC or physical. I understand one of the large banks that’s been involved in buying physical has been providing that service. You don’t have to get a supplier or storage agreement. We’ll do it under ours. So, there’s the entrepreneurial side of that, for a fee. So, then that takes some of the goodness out of it. And then it’s the equities. Everybody says, well I’m going to buy Cameco. Well yes. They’re a fundamental part of the business. But actually their upsides are limited by ceiling prices and defined price contracts. So, if the price goes to above $100, if you look at their sensitivity table, they start to hit a ceiling. Now, on the downside, they don’t go down below about $30. So, they’ve got a collar. And that’s part of their business model. I’m not sure everybody looks at that. They think, well, if the price goes to $200 it great but  in reality Cameco will hit their ceiling.

Matthew Gordon: It’s also not good because there will be a lot of entrants, new entrants in at that point.

Dustin Garrow: I mean but then the different strategy, different risk.

Matthew Gordon: So, to finish off because I know you’ve got places to be, you’re meeting lots of people today. You think uranium people should be looking at it, should be considering as part of their investment portfolio. General consensus is quite positive.

Dustin Garrow: Yes. More and more people are looking. I did a roadshow in April with yellowcake and it was mostly North America. And certainly, we did Boston, New York, but out on the West Coast. Los Angeles. San Diego. So, we see a broader spectrum of interest. And I think it’s waiting on the Section 232 though, we don’t know what that kind of means. But once the green light goes, even if it’s a pale green. I think there’s going to be a lot of investment.

Matthew Gordon: People will be waiting until then, I think generalists are waiting till then, see what that outcome is, whatever it is, some degree of certainty about how to move forward.

Dustin Garrow: Figure out what does it mean and then the utilities will react so you’ll see that term market start to pick up.

Matthew Gordon: Dustin. Good to see you face to face here in London. Enjoy the rest of your time here. I think you’re diving on aeroplane tomorrow. We’ll catch up hopefully in October.

Vimy Resources (ASX: VMY) – Production in 2 Years with 2.9Mlbs!

Interview with Mike Young, CEO of Vimy Resources (ASX:VMY). Vimy is on a non-deal roadshow in London meeting investors and potential investors. They report that the mood in the market is good because the macro story is well understood.

Mike Young is great value entertainment but he also knows a lot and is very well connected. He does a very good job of explaining the short-term micro and how the financing in the space operates. As well as what is happening with the supply deficit.. Do both sides of the Demand/supply equation understand each other? Mikes doesn’t think so.

Vimy is doing a refresh on the cost-side and they have been talking to debt providers. How are the conversations going? How are they going to market to finance their project? Mike says they are looking for strategic partners, but where? And what does that look like?

Interview Highlights:

  • Mood at The WNA
  • Overview of Vimy Resources
  • DFS: Going to Market and Transport Costs
  • When Will Vimy Resources Go Into Production? When Will We See Contracts Being Signed?
  • Some Juniors Aren’t Going to Make It: Why and How is Vimy Different?
  • Message to Investors

Click here to watch the interview.

Matthew Gordon: You’re here at the WNA Symposium London. What are you here for?

Mike Young: We’re here for the World Nuclear Association Symposium. But we’ve also spent a couple of days on the road with Bacchus Capital.

Matthew Gordon: You’ve been talking to a few institutions, family offices about the potential of raising some money?

Mike Young: Well, it’s called a non-deal roadshow. So basically, what you’re doing is just introducing Vimy to these people in the event at some point the future you might raise money. What’s been good is that the calibre of people we’re seeing is high.

Matthew Gordon: And what’s the mood?

Mike Young: The mood is actually good. I think we’ve come out of a couple of years where the mood’s been bad. And what’s interesting is that the mood of the investors is quite independent of the WNA, because most of these people won’t be at the WNA. But the WNA itself is releasing the WNA Nuclear Fuel Report is the best one that’s come out in the last seven.

Matthew Gordon: But back to these investors.

Mike Young: These investors are people who understand the uranium macro story. Some of them already own uranium shares, and some of the people we saw have small uranium funds. We picked Bacchus Capital on purpose because they did the Yellow Cake float. So, they understand uranium.

Matthew Gordon: So, these investors that you’re seeing, they understood the macro situation, the supply / demand and the economics. What were most of the questions about?

Mike Young: When’s the price going to go up? The constant theme was when are you going to write a contract? They understand the uranium macro. But unless you live in the industry, you don’t understand the micro and there’s a lot of different micros that are pushing in different directions.

Matthew Gordon: Like what?

Mike Young: Well, for example, contracting. I think people expected the Section 232 petition decision to have some sort of effect on the spot price, like it would have in, say, gold, copper, nickel, where there’s a market in a speculative market and it just didn’t. The spot price is basically a reflection of the contracting that’s going on. There was just no contracting. Nobody wrote contracts the day after the Section 232 petition. Now, part of the reason was it was August and it was North America. I mean, the place closes down.

Matthew Gordon: Did you have to explain that to them? Or were they aware of what had been going on there?

Mike Young: A lot of the discussion revolved around exactly how the utilities operate. Why they’re taking their time. The timing and what our expectations were. And as we explained to them, the early contracts aren’t going to be much more than the current term price. And that’s because you’ve got lower cost producers. There’s definitely demand, and we know that open requirement has to be filled.

Matthew Gordon: Well, you say there’s definitely demand, but there’s still timing issues on that. There is no demand today.

Mike Young: No, they’re burning material they bought three years ago.

Matthew Gordon: Demand is coming. The demand story is understood. But did these investors understand that?

Mike Young: No. A lot don’t. A lot of investors are commodity investors. And I made the same assumptions when I started in this space that there’s more immediacy in most other commodities than there is in the uranium.

Matthew Gordon: There’s a lot more understanding of other commodities than uranium?

Mike Young: Correct. And uranium is more like LNG (liquefied natural gas), which are long term contracts. In fact, I was having a discussion in Perth with someone in government and I remember one of the policy advisers say, ‘hey, that sounds just like LNG’. And I went, ‘well, it’s kind of like LNG’. There’s a very small spot market and there’s this time lag. So, I think I think there’s a couple of things at play. People have uranium fatigue. I heard it all before. It’s going to come. It’s going to come. And this is what I mean about the micro. So, some of the things like Yellow Cake, for example, we’ve never seen that before, where a group comes in and buys that much uranium and sequesters it. It’s basically parked. Because they trade on net asset value. You’ve got KazAtomProm which is now Westernised, so two years ago they were behaving…

Matthew Gordon: Partially westernised, surely?

Mike Young: Well, but they still have they still have an accountability to their guidance. They never had before.

Matthew Gordon: Ok, let’s say that’s true.

Mike Young: Well, Riaz Rizvi who’s their chief commercial officer and does the marketing says that’s true. He says that we have to be careful now because we have a responsibility. But not only that, they have westernised their accounting. I mean, when Riaz went in there, they had old Soviet style accounts and they were just churning out the pounds. That’s how they measured it, they weren’t looking at margins. So that’s different. I think the utilities; their buying habits may change. They used to write these 10-year contracts. I think I think that may change. The contract cycles may come down lower. So, there’s a lot of a lot of different things that are interconnected, and some aren’t that are different this time. But the thing is, the Section 232 really focused everyone’s attention here or outside the industry on it, because it was got a lot of airplay. But in terms of the contracting cycle, what will happen over the next 18 months as they fill their forward requirements? The early bird will get the worm, right? The early contracts will get the cheaper prices and they’ll basically climb up the price curve. And because we sit in the third quartile, happily, we’ll be one of the people getting contracts as they creep up the curve and the price increases, because as they continue to write contracts, the lower price material will start to disappear. And as Julian will talk about, the long-term macro. There is a supply deficit. We can see it. We talk about investors not getting part of the or any market. What’s interesting is people in the uranium side don’t get investment side now. What people on the buy side of uranium are missing is just how long it takes to put new production into the marketplace. And that’s really fascinating that both sides don’t quite get the other.

Matthew Gordon: I want to talk about you. You’ve got a couple of assets, Mulga Rock etc. Where are you with those very quickly for people, because I want to talk about them.

Mike Young: Ok, Mulga Rock, DFS finished. We’re looking at a refresh. We want to try and get our capital costs down. Particularly on the mining fleet side. So, there’s S100M there of Australian mining fleet. And we think we’ve got a solution to that. So, we’re working with people on that.

Matthew Gordon: Solution to do what?

Mike Young: In the DFS, we assumed that we would manage and own the mining fleet. Now, that has inherent risk. It’s the cheapest option on paper. But if you have problems in your mining fleet or mining, then it becomes a more significant problem. Whereas you can you can put that risk onto an earthmoving contractor, but you pay a bit more. And it goes onto your operating side. So, things like that, you know, staffing levels, cost of people. 18 months ago, a mine manager was different price than he is today. Things like that. So, we’ve called it a refresh, if you will, that we’re doing that. There’s not much else to do on that. That’s just going to be market driven. So, you know, you get the contracts, you get the debt. We have talked to debt providers on this trip.

Matthew Gordon: This is what I want to talk about. I want to get into the numbers, because you’ve got a couple of good assets. You’re at DFS stage. You know what you’ve got you got a sense what you’ve got your refreshing that. But you’re in this waiting period, this twilight zone, like everyone.

Mike Young: No man’s land.

Matthew Gordon: You’ve now got a sense of the economics of this project. Have you made decisions about how you’re going to go to market? You’ve got lots of options. The DFS tells you a lot of stuff. It doesn’t necessarily mean you’ve got to follow that path as laid out because the market changes, prices change and financing will drive this, the type of financing you get can drive this. You’re having some debt conversations at some point and have some equity partner, strategic partner type conversations too.

Mike Young: We’re having those.

Matthew Gordon: So, tell us about those.

Mike Young: We have put feelers out there saying, if you would like to partner with us coming on as a JV partner.

Matthew Gordon: Where have you gone to?

Mike Young: Everywhere and anywhere you can imagine. China mainly. The US utilities don’t do that. That’s off the table. They just don’t take that risk. They tried it once. They took some shares, but they don’t do that sort of partnership. So, you know, China’s the main one for strategic partners. But we’ve basically started the process of just letting people know that if you’re looking for a strategic partnership, that could be a large equity group, it could be a PE fund. I mean, they do that in gold.

Matthew Gordon: Is this a case of I’m going to hand the keys over this is a strategic partner?

Mike Young: Yes. For example, you earn into 40% of the project through a sale on a fair evaluation and then you have 40% of the offtake.

Matthew Gordon: So where are you with these conversations??

Mike Young: We’re not that far down. In terms of pure debt, we did announce some time ago that we had SOC Gen doing some work for us. Nataxys is now upping their presence in Australia. They’ve just done a merge with a boutique advisement firm. They’re a French bank so they get uranium. We talk to Australian banks all the time. And then there’s some non-traditional style debt here in the city that we’ve said, look, this is our model. We have a minimum contract price. We’ve made it public. It’s fifty-five dollars. We need 55. That’s our floor. We get more. The study was done at 60. The feedback from the utilities is that your price expectations for 2023, when you would likely be in production, are realistic. That’s the feedback. Now, they’re not signing contracts today for that, but they do the maths as well. So, what we do with that is we say, here’s our financial model. Here’s the numbers that we’re inputting. This is the debt we need. And then we sort of flex, how much offtake will you have? Will it be 50%, 75%? And the answer is, well you tell me because you’re lending me the money, we need to know what they payback is. And they’re not things that are announceable. Anybody who understands the space would assume I’m having those conversations.

Matthew Gordon: So, help me understand a little bit of it technically around what DFS has got in it. I imagine it tells you what it’s going to take to get the uranium out of the ground in terms of cost in terms of cost, economics around that. Does it factor in transportation from port to end user? He’s nodding. He says yes. That’s the economics guy.

Mike Young: That’s right. So, he that you’re pointing at, Julian Tapp. He’s sitting way over there because his brain is too big. We couldn’t fit him at the table. So basically, the ownership transfer is at the converter. So, we deliver to the converter and then they take possession and pay us.

Matthew Gordon: And that’s your $55?

Mike Young: Yes.

Matthew Gordon: So how do you do that? Surely it depends where they are in the world and what the cost of getting there right?  Like, you can’t say it’s $55 if you’re selling to China. It’s going to be different price if you’re selling to…

Mike Young: There’s only three places it can go. And that’s France, Blind River Ontario, which it’s delivered at Halifax and then railed.

Matthew Gordon: There’s got to be some variation but not meaningful.

Mike Young: There is a little bit.

Matthew Gordon: I know you’re keeping a really tight ship. You’re not hiring people. You don’t need to hire now, you’ll hire them when you need them. If the price hits $55 and you can get some contracts in place and you can press the big green button, how quick are you to production?

Mike Young: Two years. FID to production is two years.

Matthew Gordon: Build and spitting out product at the other end?

Mike Young: Yeah. So, I think the first year 2.9Mlbs, in year one and then we ramp up to 3.5Mlbs by the end of year two.

Matthew Gordon: So that’s kind of quick into production, there’s no kind of ramp up stage?

Mike Young: To me It’s not. There is a ramp up but it’s because we pre-dig some of the pits and stockpile because the pits will become the tailings facilities. So as part of a build, we actually dig some of the pits and we have stockpiles sitting on the surface so that that assists with your ramp up. So, we’ve got the ore ready to go. So, two years to me, it seems really long, because when I ran that iron ore company, we went from our very first drill hole to ship in four years. Our previous COO, who’s still on our board, Tony Chamberlain, shook his head at me and said, this isn’t an iron ore mine.

Matthew Gordon: He’s right.

Mike Young: I know he is. But, you know, we have to build a camp. The plant’s relatively small. It’s a big mine. It’s 8KM long, 2.5KM across at its widest. We’ll mine it a strip mine. You know, since there’s a lot of dirt to move. But the plant itself is actually relatively small because the front end, we do beneficiation. We wash sand at of the ore, reduce the volume by 50% with no loss in uranium. And so suddenly you’re dealing with a relatively small amount of material.

Matthew Gordon: Relatively compared to a lot of people, two years is a short time just to let you know I haven’t heard anyone today say less. And for some of the juniors who are not producers, it’s three years. So, you’re ahead of the curve there, that’s actually something people should take note of. But what does that tell you in terms of timing for the conversations that you do need to have? I know you’re speaking to utilities, but you can have a different conversation with them today than you will maybe in a year’s time. They’re giving indications about what makes what makes sense to them. But at what point do you actually start talking about contracts?

Mike Young: We’ve been doing that for two years.

Matthew Gordon: No, I mean meaningfully talking about contracts.

Mike Young: Let me let me take you through the process. Let’s go back to our strategy. So, we had to think about where do we want to sell uranium? So, you look around the world, you go, ‘who are the five top countries using this stuff?’. Well, it’s the US, France, China, South Korea and Russia. So, of those five, Korea only buys at spot. And they have some pretty arduous contract requirements, so they’re gone. China and Russia, they’re sourcing their material from the stands. So, they’re not real unless you have a strategic partnership. You’re not going to be selling a lot of material there. And China’s probably going to buy on the spot anyway. So, to be frank, the two countries you want to be looking at are France and US. EDF fuel buyers have told us we’re only going to buy from people in production. So, now you’ve got the US. What’s interesting about that is they’re about 28% of the market. So that’s a big part of the market. So we’re going to do the US. Is there a market for our material? The way the US utilities manage their portfolios is they like to spread the risk and they actually layer cake it. They baseload it with a Cameco and then they’ll actually have these little tranches that are that are absolutely set for juniors from Australia. So, what we did, we went around to all utilities and we said, price being no object, what’s your requirement from Vimy?

Matthew Gordon: Who’s your guy in the states?

Mike Young: Scott Hyman.

Matthew Gordon: He’s full time? You have been thinking about this. You have been having these conversations. You’re readying yourselves.

Mike Young: Correct. And one of the things we’ve addressed previously is our DNA and our overheads. And what was interesting is that conversation came up. What’s your spend? What’s your burn rate? And what we did recently was we had an AGM where we voted. We got permission to do salary sacrifice. The reason for that is I wanted to buy shares in the company, but I don’t want to reward someone for selling them. And this keeps money in the Treasury. And some of our staff, some of our directors have gone to 50%. So that’s one way of saving money.

Matthew Gordon: 50% of what?

Mike Young: Of their salary, they actually receive in shares. So, we’ve done that as a way of saying to people, you can buy shares in the company, but the money stays in the company, which is a really good win-win. It’s a way of saving money. One of the things we had to look at was, how ready do we want to be? To answer your question, when can you push the big green button? You can’t downsize to a point where it’s going to take you two years just to person up again right before you press the button. You want to have your team ready. So, we that’s why we’ve got Scott on board. That’s why we’ve got Julian working part-time. Scott’s working part-time. So, we’ve sort of struck a balance. We downsized the office. We’ve done a lot of cost-cutting, cost savings. We’ve got the team ready to go because this is the sort of market that’ll flip very quickly. One day we’ve got a contract and they’ll cascade.

Matthew Gordon: It may well flip quickly, but the point at which it flips is undetermined at the moment. Today I’ve heard very different views as to where it’s going to go from people inside the industry. And you’d think they would have a bit more of an insight. What’s your take on when this thing starts to motor because some junior companies won’t be able to make it through to the end, because either they need to raise money and can do that, or, because investors are getting better at understanding of the fundamentals of uranium, perhaps that company had their moment in the sun when they could raise money, may not be able to do now.

Mike Young: That’s a really interesting question. And one of the things that Fuel Report does talk about is who is ready. Think of a Formula One race, who’s in grid, who’s in pole. And when you look at that, there’s not very many. And that’s our point of difference. That we have kept the guys on board ready to go. We’ve got no reserve. We’re going through those secondary approvals, the building permits, if you like. Those will be done well before we have all the contracts we need for the debt. My window is the next 18 months. We get contracts and we move into if FID towards the end of next year. That’s my working hypothesis.

Matthew Gordon: We’ve been asking people of the 55 old companies which are around. Do you think many will be around if this thing does go on another 12 months, let alone 18 months? What do you think?

Mike Young: I think some people will fall by the wayside, partly because they were in it for a speculation, not to build a long term mine. And we’re about building a mine and building long term value. When I ran BC Iron that was a $13M listing. And by the time I left, it was a $650M company and it got up to $800M before the iron price fell. We generated a lot of value and that was by getting into production, paying dividends. You just bring on a different class of shareholder. So, we’ve got some major shareholders in Andrew Forest, Sachem Cove, Mike Elkin, Paradise. They’re all there all long. They’re not in this to make a quick buck.

Matthew Gordon: What’s your message to existing shareholders?

Mike Young: Thank you for supporting us and continuing to support us. And we’ve always said this is a long story. And you know, the people that are in, they get that. We’d like to get some share appreciation along the way. That’s what Alligator River does for us. So that’s a shorter-term exploration play with a longer-term development play. So that was part of the reason we brought that in. Because I know through my experience that if you’re building a project, there’s two years of not a lot of news. Isn’t that sexy?

Matthew Gordon: But your point is, so existing shareholders, they’re in it for the long haul. It’s going to be fine. You may get a bump with Alligator River or not, depending on how the market reacts to what’s going on. And it is a question of waiting for this price discovery. That’s the only way you can affect share price, because the reality is it’s out of your control.

Mike Young: It’s existential. Absolutely. Thanks mate.

Matthew Gordon: Good to see you. We love talking to you every single time we speak to you, over here.

Mike Young: Well, hopefully it’ll be more because I hope we get some of these London groups to come in and that’ll give me an excuse to pop by.

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IsoEnergy (TSX-V: ISO) – What are they doing in the Next 12 Months?


We spoke with Craig Parry, CEO of Uranium explorer IsoEnergy (TSX-V: ISO) to give us his view of the WNA Nuclear Fuel Report. He agrees the Demand story is growing and performing but that the Supply side is lagging. Cameco needs to buy 12Mlbs by the end of the year. Or if they delay, they will need to buy 22Mlbs in 2020. Expectation is that this may drive the the price discovery in the uranium space.

IsoEnergy is an Athabasca basin project. NexGen is a major shareholder, as is Cameco. For NexGen, IsoEnergy is effectively an exploration arm. Whilst Cameco may just see them as optionality.

They have done some drilling and defined a mineralised zone with good grades. Next year they will have 2 drill rigs operating, will look at Uranium exploration and also infill work. We wait to see how they tackle the work programme and what results look like. With only $2M in the bank they will have to dilute shareholders some more to raise cash. NexGen will put some money in which helps. But this will be an expensive dilution given the lack of movement in their share price. The money will allow them to assess results and work out what to do next. Craig says they could look to add properties to their portfolio. We aren’t sure this should be core focus given capital constraints. Their share price is static. He feels he can raise money easily. They haven’t got a clear plan yet but they will be working out what they want to do in the next couple of months. So far 30 holes drilled; 17 holes recently. This a very early stage project. They want to spend $5M on drilling in the next 12 months. So they will need to raise at least that. Useful data for investors to calculate dilution vs. upside. Craig says IsoEnergy is constantly talking to institutional investors about raising capital. Or they could sell some of their non-Athabasca Basin Uranium assets for cash. This would be low cash contribution or will, dependent on structure of the deal, take a while before cash comes so it is not realistically going to contribute to the next raise.

Click here to watch the interview.

Matthew Gordon: You’re at the WNA Symposium London meeting people. What are you trying to get out of it?

Craig Parry: The WNA Symposium is the premiere industry event. You’ve got everyone from explorers through to operators and customers here. It’s the event to be at. And there are different dinners and social events to attend. Also being in London, we take the opportunity to go and see some of our investors here.

Matthew Gordon: What are people talking about?

Craig Parry: I suppose on the supply side, there’s a sense of cautious optimism.

Matthew Gordon: Did you see the WNA Fuel Report be presented?

Craig Parry: We saw the WNA Fuel Report. And at the heart of that is that the supply side is probably pretty challenged at the moment. Demand continues to grow very strong, So that’s a real positive. But the supply side is where the challenge is and where the issues are.

Matthew Gordon: The macro story is understood. That’s coming very, very quickly. On the supply side, there are some games being played in terms of price discovery. The market is working out how they deal with that. We we’re talking, before the cameras started rolling, about Cameco’s need to supply quite a large number of pounds to customers.

Craig Parry: That’s right. That’s one of the great reasons to come to the WNA is that you hear so much of what’s going on in the marketplace. And Cameco has confirmed to us yesterday that they need to buy 12Mlbs before year end. And in the last half of last year, they bought 4Mlbs and that was enough to drive the price from $17 a pound to $29 a pound. So, this year, they’ve got to buy four times that. The spot price of uranium is currently $25 a pound. So, I think at some point late this year or early next, assuming they go ahead with that program, which we know they have to because they do have long term contracts that they need to put that product into, we should see a much higher price. And if they delay that, they’ve got to buy 22Mlbs next year on the open market. Because it’s a very shallow market at the moment, there’s been very little trading there for the last six months. So, that’s probably the most positive thing I’ve seen for a long time.

Matthew Gordon: Let’s talk about you. When we last spoke, some good things going on but still fairly early days. You spun out of NexGen. You’re in the right part of the part of the world. What have you been doing since we last we spoke?

Craig Parry: When we started the company, we cast the net far and wide all around the world looking for uranium deposits and assets.

Matthew Gordon: And ended up next door!

Craig Parry: That’s right! We keep coming back to the Athabasca Basin because it’s home to the highest-grade uranium deposits, the biggest uranium mines in the world. So, we always end up back there. And in May last year, we acquired our La Rocque property from Cameco.

Matthew Gordon: They are a shareholder?

Craig Parry: Yes, they are a shareholder. At the end of this interview, I’m off to see a couple of guys there. Big shareholder, 5.4% of the company. And they got that holding through deals we’ve done with them. So, they’ve been willing to do deals with us. We acquired that La Rocque property in May last year. We had a drill rig out there. Six weeks later, we announced the discovery hole two weeks after that. So, we went from sort of conceptualization deal to discovery within eight weeks, which is a tremendous outcome. And we’ve been there drilling ever since and putting out some very, very good results. We just completed our summer campaign. We drilled another 17 holes on the property, some very, very good results. Probably the best of those holes was 7m of 5.4% so really spectacular high-grade Athabasca style uranium mineralization. So we’ll just keep working away at that. We’ve now defined a mineralized zone there. That’s 500m long, 40m wide. On average in 5m thick. So very much typical of those sort of conformity related deposits. And the plan going forward, come winter, we’ll have probably another drill rig out. This will go from moving up from one drill rig program to two drill rig programs.

Matthew Gordon: You’ve identified targets. Are they near each other or are they separate?

Craig Parry: Good question. We’ve got some infill drilling to do. We haven’t closed off many of those sections. And we’ve got a 250m gap between the eastern-most hole in the heart of the deposit. So, we’re going to do all of that infill work. So one rig will be working on that. And then very nice to my mind, possibly the most promising thing we saw from the program. We got the results of a resistive survey back, we which we did earlier in the year, and that shows about 500m to the East of the hurricane deposit, a very large conductive anomaly, typically associated with the graphite that hosts these deposits. We drilled one hole on the edge of that, got some very elevated radioactivity 50m up above the sandstone. And very strong geochemistry, very strong alteration all the way up the sandstone in that hole. So, we’re very excited about that. And we think we could be on the edge of something very, very significant. That hole looks a little bit like the discovery hole at Hurricane.

Matthew Gordon: So how much cash are you sitting on at the moment?

Craig Parry: We’ve got about $2M in the bank.

Matthew Gordon: What does that mean for you?

Craig Parry: We finish the year with a little bit under $1M in the bank. At some point we’ll have to come back to the market and raise some money. At this point in time we’re pretty well funded. We’ve still got NexGen there supporting us. NexGen is the mother ship, if you like, with 54% shareholder.

Matthew Gordon: They’ve got their own priorities, though haven’t they?

Craig Parry: They’ve got their own priorities. But plenty of cash as well.

Matthew Gordon: So, NexGen will follow their money, they’ll retain their current position? And then you’re going to go to market or are you going to Cameco?

Craig Parry: We’ll certainly talk to them, Lee from NexGen likes to say that ISO Energy will pay for the CapEx of the Arrow development. That’s a $1Bn. Lee’s very, very happy with what we’ve got here. And of course, when we started Next Gen, we wanted to become a major player in the space. You need more than one deposit to do that. So, having sort of options and alternatives is important.

Matthew Gordon: You’ve got to raise some cash. Have you any sort of sense of what you might do next? What’s the plan for the next six months?

Craig Parry: Good question. We have to sit there and assess those results we’ve got from this project. We only just put out our final announcement from that last week. So, we will look at all of that data and then work on a plan and a budget that approaches the deposit optimally. Between a mix of infill resource delineation, drilling and then on to exploration to find out some of those other targets. That’s the focus for us at the moment. We’ll continue to try and pick up other properties in the…

Matthew Gordon: I’m trying to get an idea of how do small companies survive? Either by keeping drilling. How do they pay for that? Do they rein things in until the price discovery comes back in the market place? Because you’re nowhere near exploration, you’re going to have to raise capital, but it’s going to be slightly cheaper if you get some sort of bump in your stock. So what are you doing to influence share price that reduce your cost of raising capital?

Craig Parry: Very good question. And I guess in our corporate presentation, you’ll see one of the most prominent slides early in the deck is NexGen share price chart, we started that company to $0.05 capital rise and it’s now trading around $2 a share. The point of all of that is discoveries still matter. And I think ISO Energy is one of the very few uranium companies that is in positive territory in terms of share price for the last 52 weeks off the back of that discovery. So, it’s not going too bad on that front. We’ve got to get out there and explain what we’re doing to the market. There’s a little bit of apathy…

Matthew Gordon: They’re going to ask the same questions I’m asking you, which is what are you going to do to be able to capitalize your program. Whatever you decide, is that for the next six months, or if you want to raise enough for 12 months, because there is no certainty about price discovery. It could be 3-6 months, maybe 18 months. No-one knows. What are you planning to do to get you through, or to be able to raise capital to get through to whatever point in time you think price discovery comes back to market.

Craig Parry: We’re in a fortunate position in that because of our association with NexGen and the fact we’ve got Lee on the board, we don’t have much trouble raising capital. We’ve got very good support by the market. So, we’re okay on that front.

Matthew Gordon: So, you can go into the market regularly, so you’re not diluting unnecessarily. Now, that’s expensive. And you’ve got NexGen in there for circa 50%? So, that’s good and Cameco’s a good brand. You’ve got all these good brands and you’ve made a discovery. So, lots of good things. I want you to tell me what you’re thinking is for the next 12 months to help people understand why you versus someone else.

Craig Parry: We’ve got to assess all of that information before we have a clear plan. So, you’ve got to do that work before you start coming up with that.

Matthew Gordon: How long does that take?

Craig Parry: We’ve got the full exploration team coming to Vancouver in a couple of week’s time. We’ll sit down and go through everything in detail and work out an exact plan and budget. We’ve now drilled about 30 holes on the property. We did 17 holes this last program, that program costs us about $2.2M.

Matthew Gordon: These are all quite shallow holes?

Craig Parry: Quite shallow, down to 350m or thereabouts, 400m max. We drill a little bit deeper into the basement than some of our competitors because we are looking for that basement hosted arrow type of deposit below everything that we’ve got. Another one of those would be fantastic. But I’d say, look, we want to have two rigs on the ground. I would think that, you know, a two-rig program, we probably want to spend somewhere of the order of $5M over the next 12 months on exploration through to the end of next year. So, we’ve got to raise that sort of level of money at some point.

Matthew Gordon: That gives us a sense of the quantum involved. Clearly there is dilution involved, that’s what people are looking at. But at the same time, you’re talking about the opportunity of creating value. Are you entirely independent of NexGen. I know you speak with NexGen, you’re ex-NexGen, but what you decide to do, that’s your decision?

Craig Parry: We are yes.

Matthew Gordon: Even though they’re 54% shareholder?

Craig Parry: Completely independent, arm’s length. Notwithstanding the fact that we’ve got a number of board members in common. Lee Courier our chairman, is the CEO of Next Gen. We’ve got Chris McFadden, Richard Patricia, Trevor Healy, all on the board of Next Gen. I’m a senior adviser to NexGen. I stepped off the board to focus on ISO Energy. There’s a little bit of crossover there. But we are we operate completely independently. We present our plan and what we’re doing to the board, every board meeting. That gets supported and quick queried and supported on an independent basis. We have all of those correct governance structures in place. Having NexGen there and being part of that brand and following those processes, that helps.

Matthew Gordon: Have those fund-raising conversations started?

Craig Parry: Well, they’re happening all the time.

Matthew Gordon: You’re talking to people about raising money all the time?

Craig Parry: You’re always out there talking to the banks and investors. That’s what we’re doing in part in London. One of our more significant shareholders is CQS. We’ll be seeing them tomorrow. So, you’re out there talking to people all the time on that front.

Matthew Gordon: So they know this is coming?

Craig Parry: Yes. There’s always that expectation. We do have a number of other opportunities. And I think when we last spoke, we talked about ‘are we at all concerned that when the uranium prices rise and equities start to bounce back that you’ll see a flood of other junior companies, ex cannabis companies change their name to Uranium ‘Something. And as I said then, we look forward to that. We’ve got a bunch of other properties, both in the Athabasca and another deposit outside the Athabasca that’s up in the Northern part of Canada. And, there’s an opportunity to sell those projects for cash and stock and sort of taken a less dilutive approach to raising capital there as well. We’re thinking about all of those things all the time.

Matthew Gordon: Juniors uranium Explorers need to show that they can build a mining business and develop it in to a uranium company. With Cameco and NexGen as shareholders, is that why you feel it’s going to easy to go to raise money because the market appreciates your connection with these guys?

Craig Parry: No, it’s never easy to raise money. I guess we look forward to a time when it becomes easy to raise money.

Matthew Gordon: That’s what I’m asking because you said earlier, “we find it easy”. But the truth is it’s difficult. I want to understand what you’re saying that other companies can’t say.

Craig Parry: You just got to do all of that prep work. And, it helps if you’ve got a discovery. It helps if you’ve got a team with a track record. There’s a bunch of challenges to do to get be able to get there. We’ve all personally supported the rights of financing. So, we’re all involved. And as Richard and Patricia was telling me last night, when you see the CEO writing a check for financing, something’s going on. You want to you want to back that one.

Matthew Gordon: Have you been writing cheques?

Craig Parry: I certainly have been writing cheques.

Matthew Gordon: For this company?

Craig Parry: For this company.

Matthew Gordon: Just checking…

Craig Parry: So, you’ve got the major shareholder there doing the same. So, Lee and the team of NexGen have backed us heavily, which is fantastic. And with all of that going on, we’ve got tremendous relationships with some of the Canadian banks, so Cormark and PI Financial, they gave us some $5.5M bought deal. First bought deal of any size in the junior uranium space for some years. Apart from having the capital to do what we need to do. That was a bit of a feather in our cap.

Matthew Gordon: Do you think you are moving on from the shadow of your big brother NexGen? You’ve now got to stand on your own two feet. You’ve now got to start showing that you’re capable of doing this yourself. I know you’ve told me some things that you’ve got planned. You want to make two-rigs out this year. What’s your expectation of where you need to be at the end of next year? What would you need to prove?

Craig Parry: Very good question. I would expect that we want to see that deposit grow substantially. We want to be well on the way, with all of that resource delineation drilling well on the way to having a resource defined. And then it wouldn’t hurt to see a bit more scale to what we’ve got there. So, we’ve done some aggressive step outs that support the next phase of work. I’d like to see us where we’d really need to be is well on our way to having a resource.

Matthew Gordon: And do you get that for $5M?

Craig Parry: A really good question. This sort of Athabasca unconformity related mineralization is typically quite drill intensive, a little bit like vein gold deposit. You do have to have a lot of tight sized drilling. But with about $5M of drilling we’re going to know very clearly where we stand. And hopefully we’ll have another discovery. Of course, these deposits occur along structures in a sort of string of pearls. You’ve got down to our South, West Cameco’s, La Rocque zone, very high-grade. They drill a hole there, 7m at 30%. You’ve then got a La Rocque North zone. Our Hurricane deposit and then these other mineralized intercepts along that structure. So, we want to get out and test some of those as well.

Matthew Gordon: You’ve only just started. Usually it takes 10 years to build a mine.

Craig Parry: You can do it quicker than that. We were talking before. We built a coal mine in Far Eastern Russia. We took that from discovery to production in 4 years. So, you can you can do it faster than that.

Matthew Gordon: Coking coal. Different. Different ballgame!

Craig Parry: Well look, uranium, that’s sort of a bit of a controversial topic at the moment because, you’ve got some of our competitors, NexGen’s competitors, out there saying it will take 10 years to permit and build that mine. I think that that project will get built a lot faster anyway.

Matthew Gordon: Let’s say 7 years.

Craig Parry: I think it’ll be faster than that.

Matthew Gordon: But you’re only at exploration stage. You’ve got a lot of things to prove to the market by the end of this coming year. $5M might get you there. But before then you’ve got to explain to shareholders the process of how you are going to get from where you are today to production. It’s a long time away. So why should investors come in now? Why look at ISO Energy when they are lots of other Athabasca juniors at the same place as you?

Craig Parry: Good and tough question. You see what the guys are doing are at Arrow. That’s our approach. We’re following that NexGen template, plus It took about two years to get the Maiden Resource on it. Then another year or so before they moved into that development phase. We’ve been working on this project for six or seven months now. So, we’re at the earliest stages. The deposit has to stack up as something that is an ore body that can be mined. So, we’ve got to get to that point before we understand that. But we know beyond that, those next steps, I’ve done it before. I’ve got a track record with every company I’ve been involved with and started and we’ve always taken the approach that we’re not only explorers, we are developers and operators. And that’s what we did at the coal mine in Eastern Russia, now in production. So, we take that approach. We’ve got that track record of doing that. So, we’re pretty well positioned to do well.

Matthew Gordon: That is a differentiator for sure compared to some of the people we’ve been speaking to who have not done it before. Mining is mining, but uranium mining is something where you need a team who have been there, learned what works, and you’ve got a lot of the right people around you because of NexGen. I think that’s what a lot of people are giving you a lot of credit for.

Craig Parry: We I think our track record speaks for itself. The reason to come on board as an investor now is that we’ve got a $35M market cap and we’re the only junior with a high-grade uranium discovery in recent years. Look at that NexGen share price chart, $0.05 and got as high as $4.60. That’s the ride we’re taking investors on.

Matthew Gordon: What are you at the moment, trading at $0.50?

Craig Parry: Trading about $0.50.

Matthew Gordon: How many shares did you say?

Craig Parry: 68 million.

Matthew Gordon: You’re going to have to dilute a bit to get through the next 12 months.

Craig Parry: Probably a little bit.

Matthew Gordon: Price appreciation will do a little bit for you. And then you’ve got to deliver results. So your message is you’re happy with the asset that you’ve got. You need to understand more. You are going to raise some money to get you through the next period. You still got the support of the big guys, NexGen and Cameco. This outlook is quite positive!

Craig Parry: Very, very positive. The thing I’m most excited for and we’ve got a little bit of news flow to come out over the next couple of months. So, we’ve still got some more assays to come out. And then, the rest of the news flow for the year will be about planning for that next drill program. And then look out for some more results early next year.

Matthew Gordon: We like your approach and we like the people you’re surrounded by and the fact you’ve been there done it before. Why don’t we get back in contact when you’ve got your plans laid out, had some of those results back through. We’d love to hear from you again.

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

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

Fission 3.0 (TSX-V:FUU) – The Strategy for Uranium Explorer Spin-off from Fission Uranium

Interview with Ross McElroy, Uranium COO and Chief Geologist of Fission 3.0 (TSX-V: FUU). Another small Uranium explorer speaks to us and tells us how they think they can make it. Fission 3.0 are in the Athabasca basin and believe they have picked up some quality assets.

We interrogate them about how long it has taken to get to where they are today and why they think that investors should think about investing on this Uranium exploration play.

Interview Highlights:

  • Overview of the Company & Birth of Fission 3.0
  • Relevant team experience with Uranium exploration.
  • What’s been done in the 5 years the Company’s been running?
  • M&A and their financing options.
  • Their strategy for growth and their model to make it attractive to shareholder.
  • Targeting projects: uranium winners vs picking up scraps in the Athabasca basin.

Click here to watch the video.

Matthew Gordon: So, tell us about Fission 3.0.

Ross McElroy: You know, really it was all about still wanting to be able to be an explorer. Fission Uranium, the big company, is really all about developing the PLS project, RRR deposit. That’s a project that the legs and the ability to go through to, ultimately, a production story, quite different than the exploration arm. Really that’s why Fission 3.0 was set up several years ago, and was spun out of Fission Uranium Corp. Just to be simple about it, what we did is we’ve acquired a lot of grassroots projects, primarily in the Athabasca Basin. Our goal in Fission 3.0 is really to go out and make a new discovery, similar to what we’ve already done several times.

Matthew Gordon: So, let’s say this is a new story to everyone here. Tell us a bit about you. What’s your background? What’s your skill set relative to this exploration play?

Ross McElroy: I’m a geologist. I started working in the industry back in the mid-1980s. Interesting enough and relevant for this story. My first job was with what’s now Cameco. So, I worked with a uranium major. That was my first real job out of school. I’ve spent the good part of my early career in the Athabasca Basin hunting for uranium, looking for those high-grade deposits with Cameco. I ended up working with the French conglomerate as well, currently called Orano, and they were really in the same space and looking for deposits in the Athabasca Basin. So, that’s really where I got started. I spent about 14 years with BHP, mostly in gold exploration – gold and diamonds. So, I’ve been a mining geologist with them. So, I guess you could say my career has really spanned everything from grassroots exploration, through to mining and multiple commodities. But really, uranium is my main focus.

Matthew Gordon: Tell us a little bit about Paul Charlish, what does he do?

Ross McElroy: Paul Charlish is our CFO. He’s been the CFO with Fission Uranium Corp and has the same role with Fission 3.0.

Matthew Gordon: Dev’s the market guy. You’re the technical guy and you’re driving the business, but you’ve been doing this for five years. So what’s happened in five years?

Ross McElroy: What we’ve done and probably I guess the whole history of the company, really, since I got involved working with Dev back in 2007. We’ve been acquiring our own ground. So, we’re kind of set up to do our own staking. Do our own investigating of where we want to be. Staking ground organically. So, we haven’t done any acquisition deals. We like to pick up the ground early because that’s the least expensive, but you have to have the expertise to do it. We’ve got a team that been acquiring good ground that way and we’ve been successful. And ultimately, if we are successful, we’ve been able, at least in the past, we’ve sold projects. We’ve been a project generator. We’ve been able to get other people to invest in our products. And really, that’s been the model that we that we do.

Matthew Gordon: I’m looking through the presentation. There’s a lot going on in there, there’s a lot of ground. What’s the strategy? You’re looking at a lot of optioning or building out a lot of options here. At some point, you’ve got to make decisions because you need to finance this.

Ross McElroy: It is, very much so. You know, first of all, we start with the Athabasca Basin. That’s the premium uranium district in the world. Certainly, the home of the highest-grade deposits. It’s where I spend a good deal of my career looking for deposits. I’ve been very successful at it. What we’ve been able to do is build a team of experts, geochemists, geophysicists, structural geologists looking for these deposits because although the rewards are tremendous, when you find a high-grade uranium deposit probably more valuable than any other commodity. They’re hard to find as well. So, you have to apply the sciences of geochemistry, geophysics. So that’s really what our team is built around. And that’s how we go about starting to explore and make these discoveries.

Matthew Gordon: Not all uranium plays are born equal. Even in the Athabasca Basin. So, what is the process that you’re going through to identify the targets which you’re going to focus on? We’ve spoken to a lot of juniors in the Athabasca Basin and they’re saying because we’re here, it’s a home run, no problem.

Ross McElroy: And that’s not true. I mean, it’s a home run if you make that discovery. But the failure rate has been pretty high among juniors. Even with the majors. If you make a significant discovery in the Athabasca Basin, about 1 in every 5-10 years. That’s sort of when you look at it as a whole. I’ve been fortunate enough when I first started, I was working with Cameco. We made the discovery of McArthur River, which is the world’s largest high-grade uranium deposit. So, that was a pretty good experience. You learn the things that you’re looking for. Because these are deposits that occur below the surface, with no surface exposure. So, you’re really trying to use the science of vectoring in with geochemistry and geophysics. And so, it does take a pretty multidiscipline team in order to be successful at it. And I think that, having spent time with the majors, learning how they do it, I think that’s boded very well for us and that’s why we’ve been successful at what we do. So, there’s nothing easy about it. There’s nothing fast about it. But if you learn how to select the right ground, you’d know the techniques to go through discovery. You sort of know when you’re in the right area. That’s what’s important.

Matthew Gordon: So how many projects have you got at the moment?

Ross McElroy: Fission 3.0 has 16 projects.

Matthew Gordon: That’s a lot of projects. So, you’ve got to know what you’re looking for or else you’re going to spend a lot of money. So, how quickly do you get to the point we can decide and 16 goes down to 10, goes down to 8 etc. How do you play that? How does it actually work?

Ross McElroy: That’s always it’s a bit of an iterative process. You have a land tenure, sort of always in a state of flux. We picked up new ground. We shed other ones. That’s part of the overall strategy. Because you’re right, otherwise you’ll be spending money where you don’t need to. And I think what we try to do is, first of all, we have a pretty good idea where the key areas are. And one of the strategies that we’ve used successfully with other companies in the past, Fission Uranium being a good example, Fission Energy, the predecessor of that, is we pick ground that’s very shallow, where we expect to make a discovery within about 3 or 4 hundred metres of the surface. In the high-grade uranium business, that’s shallow. It decreases your cost., it makes exploration actually somewhat easier and less expensive. And it’s just that the whole process is really about evaluating. Ultimately, you want to get to a drill target, so you do your geophysics, you do some chemistry studies, understand soils etc. If you get to the point where you do a drill target, then you’re really looking for the subtle clues. You’re trying to read the tea leaves that allow you to vector, vector, vector, vector, vector. What we’re always looking for at the beginning is “smoke”. All these high-grade uranium deposits have an aura around them of what we call “smoke”. And we’re really looking for the fire, which is the prize, right in the middle of that is the high-grade uranium. The dimensions of it are probably not big, they never are. Even the biggest, best mines have relatively small deposits, a lot of uranium packed into that. So, you’re really trying to get yourself focused, focused, focused and make that hit.

Matthew Gordon: Obviously, market cap at $14M. It’s not huge. You’ve been going at this for 5 years. How long have you been going at it properly in terms of this, Fission 3.0, proper?

Ross McElroy: Well, we spun Fission 3.0 out of Fission Uranium back in 2014. But at that time really the market in uranium had been very slow. So, one of the things that we did during that period from 2014-2017 is we’ve been quietly getting ground, staking ground, picking areas where nobody’s looking. And a lot of companies have not been all that active, because the uranium market’s been slow. So, it’s given us an opportunity to pick the best the best places. So, we’re picking the best fruit off the tree in the slow times. And then towards the end of 2018 we were starting to raise money into the company that allowed us to get those dollars into exploration, money into the ground. And so very quiet, lean time for the first few years. Now we’re starting to get to work.

Matthew Gordon: People will say “they’ve been going 5 years and they’ve not done anything” but the reality is, it’s only been just over a year. When you raised money, the share price was around $0.30, people got excited. It’s around $0.09-$0.10 cents today. I’m sure you’ll say “undervalued”. But I’m more interested in the stage that you’re at and it really is about these projects and understanding what’s there and vectoring in on which ones are more important to you than others before you the move the company forward to the next stage.

Ross McElroy: Yeah, that’s right. My kind of group are projects, although we’re in the Athabasca Basin, where all of the products are fairly shallow and kind of go around the edge of the Basin, where you would expect the shallowest deposits to be as you move toward the middle of the basin, deposits could be there, but they tend to be pretty deep. So, our ground is around there, but we are focused in areas where you would have historic mining district in the Key Lakes side in the southeast part of the basin, there’s been a lot of discoveries and activities for the last 40 years there. We have property in and around there, using new models to look for uranium that people haven’t really used before. But in a historic area of known uranium. We also have a really good land package up in the Beaver Lodge, Uranium City district in the North West corner of the Basin. And that’s where uranium mining first gets started in the province of Saskatchewan. Everybody forgot about it. That was in the 1950s-60s. And we went chasing stuff around Key Lake and forgot about those areas. So, they’re really under explored by modern exploration techniques. The third area that we focus on is around in the South West part, around our PLS project. This is where the newest, best discoveries in the Basin have been in the last 10 years. In Fission uranium we’ve made the RRR discovery. NexGen made the Arrow discovery. These are big high-grade deposits in a brand-new area. And so, our land package sort of focuses mostly in those key areas.

Matthew Gordon: I’m trying to work out was the timing from where you are today to that point where you’re just creating DFS, BFS? What’s that timeframe? So, do I come in now, get in early? Do I wait? Do something else and come back to you later? What do I do?

Ross McElroy: Well, let me give you some perspective. With Fission Uranium in the PLS project, for example, that was a grassroots play, very similar to the sort of projects we have in Fission 3.0. In 2010, we did our first airborne survey of radium metrics and we found radioactive anomalies. In 2011 we made the discovery to figure out what those were, that was a high-grade boulder. In 2012 we were drilling along the trend and made the discovery. So, it was really a 2-3 year period of starting to look at that project to making that discovery that was an absolute game changer. I think that’s the kind of model that we’re looking at. When we start looking at these projects, to me it’s probably about at least a 2-4 year window for when you start getting something really interesting that you might tag into. It generally never happens in your first pass on a project. I’ve never seen anyone stake ground and make a discovery the first year just started. It doesn’t happen that way.

Matthew Gordon: And you’ve also got something in Peru?

Ross McElroy: We do. It dates back to the predecessor of all of them, Strathmore minerals. That was the first project in the Strathmore in the 1990s. Now, Strathmore was various versions of Fission out of that. That was a first project put into the company back then, the government released ground. Prior to that, you couldn’t stake for uranium as a public company. So, it was government’s held strategic mineral titles. So, they opened it up and we acquired some ground down in that area. There has been an interesting history down in Peru. We’ve focused more on the Athabasca, in our life. But others have made some great advancements down in Peru and the Machu Stanley Plateau Energy

Matthew Gordon: Are you parking that for now?

Ross McElroy: No and the reason we don’t park is it because we’re also a project generator. We’ve been able to attract an investment group that’s interested in advancing properties down there. So, we’re looking for uranium and lithium in a partnership with a private company right there. So that really follows our preferred model of a business that we do in Fission 3.0, which is we acquire the ground, bringing in others to spend money and jointly together we explore and make discoveries.

Matthew Gordon: There will be other starters there. It happened that last cycle. It’s going to happen again. There’ll be more people coming to the party. Do you think that you’ve hit this at the right time? Do you think that people coming in are going to be left with scraps? If you’ve spent five years looking at stuff, surely you and others will have picked up the good stuff. What does it mean for all of these new entrants coming in?

Ross McElroy: Well, you’re absolutely right. We saw that in the last bull run, that started in 2003 & 2004. I remember seeing the entire Athabasca Basin stake dust. Prior to that, the whole eastern side of the Basin was state that had been sold for 30 years and that was mostly Cameco’s holding. You’re right, there wasn’t a whole lot of ground available, but even the big guys dropped ground. The ground that we picked up in the old Fission Energy was a throw away from Cameco called Waterbury Lake. And it’s just part of the process. They hadn’t made a discovery there, they shaved off some ground. You could look at it as scrap. We picked up a significant package in there, made a discovery, right beside where a company called Hathor Uranium had made their discovery. That was part of the same thing. So that deposit crossed the boundary. So, you can still look at these same areas, 40 and 50 year out, exploration and still make a significant discovery. So that does happen. I think the key to everything is not thinking whether you got the scraps or not, but it’s whether you have a technical team capable to look at something in a new way and make a new discovery and have the guts and the capital to be able to go out and explore. I’ve seen that too often. Now, PLS is another example where we just used a brand-new idea, thinking outside the box, doing something that majors hadn’t even done, nobody had really done, which was look for uranium in a new area outside of the Basin and we were successful. So, you know, you can win both ways.

Matthew Gordon: Sounds like you’ve got a great team there. You’re in the right part of the world so it’ll be interesting to see how these projects develop. You’ve got to stay in touch with us and let us know.

Ross McElroy: We’d love to. Where we think that this is just the start of a new uranium market. And now that we do have an established land package, we’re not new to the game. I think that really gives us a leg up on what everybody else is doing. We’ve got the team, we’ve got the land. We know what to do. We know you start bringing people back into the uranium market and it will become a bull market again, once the price of the commodity continues to work its way upwards. I’m not going to get into the supply demand story, but once the price of the commodity moves up and there is every reason to believe it. Well, that does create excitement for exploration companies in the uranium sector. We’re so well positioned to take advantage of that.

Matthew Gordon: We look forward to hearing all about it over the next few months. Appreciate your time, Ross. We’ll speak to you again real soon. Thanks again.

Ross McElroy: Thank you very much. A pleasure.

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.

UEX Corporation (TSX: UEX) – How Does a Junior Uranium Miner Monetise 21 Assets?

We spoke with Roger Lemaitre, President & CEO of Athabasca Basin located Uranium company UEX Corporation (TSX: UEX). Roger says the mood is starting feel like the Uranium space did back in 2004. UEX formed in 2001 and they have 21 projects, 18 in Uranium and 3 in Cobalt, all in the Athabasca Basin. Their strategy is to develop the resources for when the market moves. Focus is on two main projects.

Roger positions UEX as a Uranium company but they want to see if they can create value with their Cobalt project. They have talked about a spin out last year but got hit by the significant drop in the Cobalt price. So how does a CEO mitigate risk and create value in difficult markets? Why didn’t they get the spin out? How much money have they spent developing the cobalt asset? And how does UEX plan to recoup that capital. Roger explains.

Interview Highlights:

  • WNA Expectations
  • Company Overview
  • Cobalt, Nickel & Uranium – Strategy, Thinking and Focus: What Are They Building?
  • Shareholders: What Can UEX Do to Increase Their Share Price?
  • Management Remuneration

Click here to watch the interview.

Matthew Gordon: Hi Roger. So you’re in London for the WNA?

Roger Lemaitre: We are in and around the WNA and meetings around it as well.

Matthew Gordon: And what are you hoping to get from it?

Roger Lemaitre: Well, we’re just hoping, honestly, for our shareholders to a little more exposure to what we’re doing in the Uranium and Cobalt sectors, outside of the Canadian market. Uranium interest is starting to pick up again.

Matthew Gordon: Have you got shareholders over here in Europe?

Roger Lemaitre: We do have a few shareholders here in Europe, but we’re predominantly Canadian and American shareholder base.

Matthew Gordon: What’s the general mood? Have you picked anything up?

Roger Lemaitre: General optimism. People, I think, are starting to sniff value at the bottom of the Uranium cycle. And over the last few years, there’s been a whole lot of hype. And it reminds me so much of 2004 when I was in the Uranium space 20 years ago. People have heard it’s coming, it’s coming. It’s coming. They get tired of hearing it coming. And now I think people are trying to believe it might be coming. So we’re just trying to talk to people what we’re doing so that when that comes, they know who we are.

Matthew Gordon: A lot of people talking about the macro story and nothing but, to the detriment of telling their own story, but no one’s quite sure of when it’s coming. So I think we’ll leave it leave it to people smarter than me.  Let’s talk about your project. Can you give us a minute summary and then we’ll get stuck into some questions?

Roger Lemaitre: UEX is one of the older junior companies out there. We reformed 2001 and we’re probably the third or fourth oldest junior company in the world. We have 21 projects, 18 in Uranium, 3 and Cobalt, but we have four flagship product. A lot for a junior company. And our goal really is… we have two projects that are on the wings waiting for development that under today’s Uranium prices, even in being hosted in the Athabasca Basin, all our projects, just won’t move ahead like any other company that’s in the Athabasca Basin. So our goal short term is to build the pie, as much resource we have in our portfolio, when that time comes. And then when that time does come, we’ll be able to move those other two projects towards construction.

Matthew Gordon: You’re an interesting story to me, because you’ve got a lot going on. You pick the tough commodities, Uranium and Cobalt. And Cobalt is coming back up a bit,  there’s a Nickel component to that. And then there’s the Uranium stuff. So can we just talk about what your thinking is and what you’re trying to build out here? Because there’s a lot of moving parts. You can’t fund them all.

Roger Lemaitre: No, true.

Matthew Gordon: And there’s a lot of resource required to actually get these things moving. So let’s talk about what you’re trying to build first. So talk to me about the management plan.

Roger Lemaitre: We’re definitely a Uranium company. So first and foremost is moving  our two core Uranium projects forward. But because they’re at the study phase and ready to move forward, in the current market, it’s not feasible, nor does it makes sense to try to build something that’s not ready for the market. Or the market’s not ready for. Meanwhile, on our Uranium projects, we had a Cobalt prospect and we realised into late 2017 that it was a pretty significant Cobalt prospect by world standards outside of the DRC. And so the plan has always been to get shareholder value for those Cobalt assets that are non-core to the company. And eventually move them out somehow. And there’s multiple ways we can do it. And last year, we’re looking at a spin out and unfortunately that timing for the spin out, by time we did the work we did, hit the downswing in the market. So we have some shareholders that are very unhappy that we didn’t do the spin out. It makes no sense for us to do something with those Cobalt assets.

Matthew Gordon: So that’s off the table?

Roger Lemaitre: No, we’re still we did lots of work on the Cobalt this year, but on a temporary basis. We are defining a deposit. So we put some resources into that this year. Our plan is still to create value for those assets for our shareholders.

Matthew Gordon: So I just want to be clear, because like you say, there’s a lot of kind of discourse in the marketplace. What happened? We were promised this. The timing of the Cobalt price wasn’t with you when you were thinking of doing that?

Roger Lemaitre: It actually imploded all in the same one week period.

Matthew Gordon: There you go. And your job, apart from mitigating risk across the organisation to maximise value. All of these lovely cliches. But what does that mean for shareholders? We decided not to do that project, to spin that out, because we’ve been the wrong thing for shareholders.

Roger Lemaitre: Absolutely. And I think the only reason to do a spin out is that the spin out creates more value than having it inside the company in the short-term. And when we were ready to do the spin out, got our NI43-101 report together from a program that we started only in January. By the beginning of June, we were ready to start to spin out with resource. The market price cratered and then being in Canada and Toronto focused in terms of the markets. There was a financing done in Toronto in the Cobalt space that did not go really well. Not our financing, it was another company, and that commodity became a four letter word in Toronto for a period of time. So we could have done it, no matter what and forced it to happen. But I think there was a strong, strong risk that we would have orphaned the Cobalt assets or imperiled the Uranium company. And at that time, we said, ‘OK, we’ll put it off temporarily and we’ll see when the market demands value for that Cobalt’.

Matthew Gordon: Do you know what you’ve got with that?

Roger Lemaitre: Yes, we do.

Matthew Gordon: You know exactly what you’ve got. What data do you have?

Roger Lemaitre: So we’ve done just a little under $5M worth of work over the last two winters on the Westborough Cobalt-Nickel project. And we’ve defined resources over a strike length of 650m, pittable starting at 30m  depth, going down to about a 100m depth. We fully defined it and we’re in the process of putting together a final resource on that. We did an interim resource on it last year. While that was not big enough to be moved forward last year. the deposit was open ended in all directions. I think we’ve defined the limits of this particular single deposit. At this point in time, and now we’re ready to start moving forward.

Matthew Gordon: So you’re a $60M market cap. How much should we think of that is attributable to Cobalt-Nickel?

Roger Lemaitre: I would say probably about 20%. But if you asked any investor, they’d have a very different view on that. Some would say higher. Some would say lower. I’m going to say about 20%.

Matthew Gordon: So it’s not worth a whole bunch of money right now. So what you going to do?

Roger Lemaitre: Right now. I think it comes down to whether investors want to be in the Cobalt. And when we look at the assets, if it’s going be spun out or find a partner. It has to create value. So the last thing we do, say we went to spin out route and spun it out. How does it financed? Is it financing? The question would be,.

Matthew Gordon: What’s your liability?

Roger Lemaitre: Absolutely. And so you’re sitting here going, ‘well, maybe we can spin it out and maybe we can raise six months worth of money to keep it floating’. What happens in six months? Is it orphaned? And then there’s no value to that property to a current UEX shareholder.

Matthew Gordon: So what’s happening. You just going do nothing with it this year?

Roger Lemaitre: We are still looking to move forward. I think the market in Cobalt is changing, as we watch it every day. And the moment the time is right. We have been contacting people other people, not just the spin out route, to see where the value is. So we’re very active on it, but it is very quiet because negotiations and discussions and talking with bankers isn’t something you put in the public domain.

Matthew Gordon: But there are conversations going on and you are evaluating it. But there is no sense of timing yet?

Roger Lemaitre: Not not yet. But our goal has always been to do it as soon as it’s feasible, in our opinion, feasible from the board point of view. But, you know, in the Canadian market and North American market for Cobalt particularly, we’re seeing a lot of M&A activity right now. What I see particularly happening over the last year, is a change in the way that that Cobalt future is valued by investors. There is a lot of rumours out there about Cobalt not being used in EV batteries, which is driving all the interest, it’s engineered out. And we think we’ve seen that that’s not the case and it’s not going to be the case anytime soon. And then we’re seeing a global ticking global market and turning into a regional market. Here in Europe people are really busy trying to build regional Giga-factory. We’re seeing the same in North America. We’re seeing, of course, China dominates things now and everyone’s trying to get into this sort of, I think, what Benchmark Minerals calls the EV arms race. And so there is definite interest in seeing Cobalt projects that aren’t DRC based and groups jump to those challenges with the sourcing out of the DRC?

Matthew Gordon: Yeah, it’s a much told story. But like you say, making it happen is another matter. So you’re parking that for now. How much money if you spent on it in total?

Roger Lemaitre: In total in the last two years, just a little under $5M. We’ve drilled the about a 175 drill holes. So we’ve done a lot of work for a little bit of money.

Matthew Gordon: So you’d want to recoup at least that.

Roger Lemaitre: I think it’s fair for shareholders one way or the other. And the form may differ. Could be cash up front if bought out sale. Our company was founded on a dividend to shareholders through a spin out. The shareholders of the parent company received our shares in exchange and that we would look at that as well.

Matthew Gordon: So it’s very early stage. You’ve got to re keep your your capital. Are you viewing it as a distraction?

Roger Lemaitre: I think, for some shareholders. Yes. And for another is not. And I think that’s one of the key reasons why our company feels that eventually they have to be separated from each other somehow.

Matthew Gordon: Let’s leave that. Sit back and wait and see. You’re not sure on timing and you’ll let us know when you know.

Roger Lemaitre: The market will actually probably let you know more than us.

Matthew Gordon: We’ll see. So that’s about Uranium, because that’s why I’m here. WNA is happening this week, as we said. You’re meeting a bunch of people, shareholders, funds, trying to get everyone gee’d up and get a sense of what’s going on. So if 20% percent of your $60M market cap is Cobalt Nickel, there’s $48M, just under $50M, which is you think this company’s worth based on its Uranium play? There’s a lot going on with the Uranium assets. You’ve got a lot of assets. You’re a small company. How much cash you got?

Roger Lemaitre: We have just a little under CAD$5M right now.

Matthew Gordon: And again, back to the strategy. Back to what you’re thinking. You’re going spend $5M to do what. What’s the first thing on the list?

Roger Lemaitre: The first thing on the list is grow the Uranium resources in our inventory.

Matthew Gordon: That’s your strategy. Grow the resource.

Roger Lemaitre: That’s correct. And now we do have two projects or Shea Creek Project and Horseshoe-Raven Project, where we have Resources. We’ve have PEA level type studies on them that are ready to move forward in the next stage. We know that for example, Horseshoe-Raven Project, it’s going to take $48 Uranium to break even. So we could sit there and try to pretend to match this project forward. But the market’s not ready for it, and nor is the signal there that we’re going see that price imminently in the next few weeks.

Matthew Gordon: So it’s $48 bucks to break even.

Roger Lemaitre: Which is pretty comparable to what you see in the Athabasca project.

Matthew Gordon: People talking $50-$60…

Roger Lemaitre: That’s a Horseshoe-Raven. And then our Shea Creek project is on the West side. It’s the first of those West Side discoveries. Done back in the mid 2000s, when we were the market darlings of the Uranium world back then.  And we’re partner is Orano and Orano has been going through their challenges and that that project’s been put on their shelf short-term while they reorganize their their operations.

Matthew Gordon: So how do you prioritise what you’re going to do? You’ve got a project. You’ve got to wait till price discovery happens and starts moving. Utilities start buying, doing contracts and it’s going to get to $48 bucks. That’s a break even level for you.

Roger Lemaitre: So you need a little higher to be incentivized.

Matthew Gordon: Yes. That’s what I’m saying. So I said we wouldn’t talk macro. Now I’m going to talk macro! So what’s your company’s view on the timing of this? Again, are you sitting back and dependent on what’s going on in the marketplace or what level of control you’ve got, but you move forward?

Roger Lemaitre: So on the Horseshoe-Raven project, we have complete control about how we work on that. It’s on 100% our project. And we can move that as we see as we see fit. We have been doing little things with that project over the last couple of years. Doing some heap leach studies to change the processing methodology. And that’s going along and continuing to move along. But at a pretty slow pace, because we’re not spending huge dollars was on it. We don’t feel it’s appropriate to dilute shareholders and spend tens of millions of dollars on a project at this point in time in the market. So yes, when we see momentum in that direction, we’ll start to move on that project. It’s a relatively simple project in the Uranium space in that part of the world because of its location, its grade, and the fact that we literally have infrastructure crossing over the deposits; power, road, et cetera. So it’s a relatively easier project to move forward than some of the other ones. We don’t have water issues. It’s conventional mining. So we think while there’s no such thing as fast tracking in the Uranium space, it’s one of the ones that can move quicker.

Matthew Gordon: And when you say maybe quicker…if you got to press the button. How much money would you need? How quick would you get into production? And how quick would you be able to get into the market?

Roger Lemaitre: Our PEA from from a few years ago shows it’s about $225M to get to the finish line.

Matthew Gordon: So it sounds like you’ve got to do some more studies and more economic studies above the PEA.

Roger Lemaitre: Correct.

Matthew Gordon: Totally understand that and optimise that. So what’s the timing?

Roger Lemaitre: You’re probably looking in the seven year window.

Matthew Gordon: Seven year window. So you know where you fit in the cycle, as it were. So as soon as the cycle moves, you know where you are, and how you win.

Roger Lemaitre: Yes

Matthew Gordon: That’s project number one.

Roger Lemaitre: And Shea Creek, that ones, unfortunately, in control of our majority shareholder Orano. And I think that will be part of what happens on the west side. But we’re not in control that and we will participate in the best we can. Encourage our partner to do more. And we don’t feel that the deposit has been fully defined. In fact, we’re pretty comfortable, it’s not even close to being fully defined. And we’re gonna be pushing them to make that bigger, in the meantime, to incentivise something to happen in that part of the world.

Matthew Gordon: What are they doing in the moment and what’s the financial relationship?

Roger Lemaitre: Well, we’re joint venture partners, right? And so they. But they’re also the operator. So they get to pick and choose when projects get done. And because they own the majority they have the ability to say yay or nay to projects.

Matthew Gordon: What are you obligated to do financially?

Roger Lemaitre: We don’t have to do anything we don’t want to. So we can dilute on any project we so desire. We have 8 joint venture projects with them. Shea  Creek is by far the most important one. And we can decide whether to dilute on each individual one. At Shea Creek, we’d like them to propose some more programs. It’s been idle for a couple of years. So we haven’t had to make any decisions on that.

Matthew Gordon: So the trouble with partnering with big companies is they’ve got lots of options all around the world, and lots of different priorities to you.

Roger Lemaitre: Correct.

Matthew Gordon: So you can try and push this on, but they aren’t going to move to your drum beat. They’re going follow their own strategy. So this is a project which would you say you’re slightly out of control of? Or what are your options, when you say, ‘we’ve got options?’ What can you do?

Roger Lemaitre: I always like to put ourselves in the other person’s shoes and say, what do they have for options, when you look around the world of what they have. This is actually one of their better projects. I kind of think, quite frankly, they just need to be reminded about the potential above and beyond what they already have. And I think that’s one of things we can do to help them out. And help them move the story.

Matthew Gordon: Why do you say it’s one of their better projects?

Roger Lemaitre: Because of 1. it’s location. 2. the fact that there’s going to be infrastructure built up in that part of the world from some of the other companies that have success in that area? When you look at what they have around the rest of the world, some of their stuff is in more difficult terrains and probably at higher cost, to be very honest, than what they could do here and there. Other good project in a similar jurisdiction, they just put on the back-burner.

Matthew Gordon: Jurisdiction. Get it? Infrastructure, get this. Some more isolated projects which they may have and the cost of getting that to a port, let alone out of the ground, is prohibitive. But what do you know about this in terms of grades.

Roger Lemaitre: At Shea Creek. We have almost a 100Mlbs deposit there, at a little over 1.3%, which is road average for the Athabasca Basin or a little bit above average. It’s located 22km South of their former Cluff Lake operating mine that they ran themselves. So they’re familiar with the neighbourhood. We have a road going right over it. It’s a classic  unconformity deposit with basement roots. Similar to what was mined at Key Lake in the 1980s. So technically, this isn’t as much of a challenge. It’s a little deeper than some of the Athabasca projects. And that’s probably the biggest challenge.

Matthew Gordon: Good margins? What do you need to get? 

Roger Lemaitre: Sorry?

Matthew Gordon: It was $48 bucks for the other project?

Roger Lemaitre: I would think it’s probably a little bit North of that, closer to the $50-$55 range.

Matthew Gordon: And then what’s the next project?

Roger Lemaitre: So the next project on our list is Christie Lake. And Christie Lake is immediately on strike North of McArthur River, 9km away. The structure that hosts every pound at McArthur River crosses onto our property. And there’s 3 known deposits there to date. We’re the only junior that has land package between the two worlds largest, highest-grade mines, Cigar and McArthur. And in 2017, we made a discovery there that grew the resource at Christy Lake. And it’s we picked this up on an option we vested or option now to say we own 60% of the property and our partner is JCU Canada and the Japanese private company. That’s actually one of the bigger players in the Canadian Uranium industry that nobody knows about. They own chunks of several deposits and our JV partners with all the big players, Cameco, Dennison and Orano as well as us.

Matthew Gordon: You’ve got a lot of moving parts there and some of it and control some of it you’re not. You can spend some money building out resource. You got partners who are not playing ball. How do you reassess or how do you assess your current strategy? And how often do you reassess that in terms of what’s going on in the market with price, whether JV partners want to do something or not. You’ve got this sponsorship with Orano, but you say you’ve got options there to dilute. Is that something you considered doing sooner rather than later?

Roger Lemaitre: Hard to build on resources when our goal is to grow the number of pounds we have in the portfolio.

Matthew Gordon: But there’s got to be other projects, which…

Roger Lemaitre: Yes, we are. And we have been on some of our grassroots project. So of our large number of products, we have the 14 or 15 grassroots projects we’re not working on we actually vended one out a couple of years ago. And my goal would be to see more of that portfolio working for us. But not necessarily using our resources so finding partnerships. One of the advantages that we have over everybody else in the basin is that we were there in 2001 before the last run up. And so we have a monstrous land package and there are companies have monstrous land packages. The difference is where our land packages are located in the primaries, in the Western Basin and in the eastern part of the basin around the infrastructure. And quite frankly, we’re sitting on projects that… there’s one project we have called Real Lake. We have three mineralised drill holes. And I’ve never followed it up because it’s not the priority in our portfolio. So the things that we have in the wings would be flagship projects for other juniors of similar or smaller size us. And when the market does turn, will engage them to take on some of these projects for us. My view is it’s better to have 50% of something than of nothing.

Matthew Gordon: It comes back to this strategy. What are you what are you thinking? How are you having to change and adapt to market conditions? Sitting on a large land package is like a liability quite frankly. It’s a cost, right? How do you monetise it?

Roger Lemaitre: So monetising it with. We did a deal with a company called ALX to have them work some of the property and work it for it. And so we are spending their money to decide whether we want to be involved in that product or not. We have a handful of those other projects that we want to do exactly the same thing with, that are not our core projects. On the core projects. We have two that we can we can’t move forward now because they’re ready to move forward. So the idea is to make those other ones move forward. Grow the pounds and then move the most appropriate projects forward when the market does change. We can’t control the macros, but we can’t control discovery. And what’s clear in the Uranium industry over the last 5-6yrs is that even in tough markets, a good discovery in the basin creates great value for shareholders. And so that’s our goal. Create the next discovery in advance of being able to move our project forward.

Matthew Gordon: So you’ve got some institutional shareholders in there?

Roger Lemaitre: We have a few Cameco are still our largest shareholder. They’re one of our founding shareholders when we first started the company. They contributed to a whole bunch of land packages, our Hidden Bay and Westbear, Horseshoe Uranium projects were their projects at one point in time, they contributed to them. And then we had a junior company called Pioneer Metals contribute to cash and the rest in the management team, that founded the company back in 2001-2002.

Matthew Gordon: So they got their own problems right now.

Roger Lemaitre: Cameco does. yeah.

Matthew Gordon: So are they picking up the phone and going, ‘what are you doing’, or are they just focused on themselves?

Roger Lemaitre: Well, I think if you asked anybody in the industry right now, Cameco is completely focused on themselves and rightfully so. They used to have and a right to participate in our financings when things got really tough for them. They had to make a choice between theirs or ours. And they, of course, chose theirs. It made the most sense for them to do so. They have a fantastic plan package because they’ve been around the longest and things that made a lot of sense for them. We do keep tabs with them. We do you talk to them regularly so they know what we’re up to? And they’re very happy with what we’re doing. So they tell us anyway.

Matthew Gordon: You’re still taking their calls. That’s good.

Roger Lemaitre: I think as much as they’re taking my calls as well.

Matthew Gordon: You’ve got $5M left. When does that run out?

Roger Lemaitre: We can refinance through to the end of next year without much trouble. What the level of activity in next year will be dependent upon what we decide to do. And I think that we’d like to be a little bit active at least. But we’re not going to go out there and try to do something crazy to dilute shareholders.

Matthew Gordon: So what you are saying to shareholders is ‘I need to be a bit fluid because the market bit flat at the moment and we need to keep our options open’. But at some point, you’re going need to go back to market, right?

Roger Lemaitre: Absolutely.

Matthew Gordon: You don’t have a whole bunch of shares.

Roger Lemaitre: 381M shares give or take few hundred thousand.

Matthew Gordon: You seen worse.

Roger Lemaitre: It’s not bad for a company’s been around since 2001.

Matthew Gordon: It does come back to what your plans are for next year. How much you’re going to raise. That’s a finger in the air time.

Roger Lemaitre: The key reason we don’t know about what we want to raise really comes down to what we do with Cobalt assets. And our goal was to get that out.

Matthew Gordon: You’re not expecting any money from that are you? The stage it is at?

Roger Lemaitre: Hard to say. It’s one of the only two only four in North America project with a resource to date. Sure. So it’s unique. It’s jurisdiction is unique. And yes, it’s still early stage. But I think what we’re trying to do with the Cobalt thing is also tell people, Cobalt deposits the Athabasca Basin are unknown. It’s a new style deposit no one’s ever seen before. And despite the fact that Cobalt Nickel is commonly associate with several deposits in the basin, what we’re finding are Nickel Cobalt deposits that aren’t associated with Uranium. And that’s not been looked for, despite the long history of exploration there, and despite the fact that several people have probably drilled a hole into one of these things and not realized it, because it didn’t sample it correctly. So what we have is a little bit of a knowledge and we’re willing to sell that along with whatever that process is, because we think we can turn the Athabasca, a global world class Uranium district, but it could be a significant Cobalt district as well.

Matthew Gordon: Potentially.

Roger Lemaitre: But it’s early stages. It’s very early days.

Matthew Gordon: It’s very early days. People have got to work out if they can mine it economically. So what the economics look like, what the metallurgy looks like. And indeed, if it’s worth doing. But again, you’re not in control in the sense that you’re own the asset. But in terms of any negotiations, if you’re going to just do it for cash, it’s not going to be a whole bunch of cash. If you sit and go along for the ride with them, it’s gonna be a while before they run into the money. So you can’t rely on that as a contributing factor for your Uranium?

Roger Lemaitre: It could be. I wouldn’t count on it. And I would agree with you there. To count on it would be silly.

Matthew Gordon: So with Uranium, you’re number one priority is Christie Lake, how much money would you need to raise and how much would you raise? Well, you’re going say that’s dependent on what what the price gets to because you’ve got to start somewhere.

Roger Lemaitre: We’re in the process of just doing a $2M program right now. And we look into 2020. I’d say we look to do somewhere between $2-$3M on our whole portfolio of assets. We will do an extremely small amount of somewhere around $400,000 on the Cobalt angle, because we believe that we have the next prospect right on our property. It’s easy player to get into with really short drill holes. And so we’ll put a little bit of money into that if we need to. And then the bulk will go into doing work at Christie Lake. We do have coming up this in probably in November. We’re going to do an extremely small drill program about 2,000 meters, right next door to the McClean Lake mine. We border up to the Riou Lake deposit and in fact the boundary the pit is within metres of the property boundary. We’ve looked down the trend and not found anything, we’re looking at a concept that our exploration team, including myself, were involved with discovering mineralization at the Eagle Point mine. Could be that extension at Eagle Point that they did back in the mid 2000s for a cross linking feature to actually right across the property boundary. And we’ve done some work to test up that theory and now we’re going to grow some holes in there. So it’s one of the few juniors companies that can look at true brownfield style exploration. And we’ll do a little bit of work on that. But what we’re trying to do is maximize every dollar we have.

Matthew Gordon: I get the idea that’s coming across loud and clear. I think you’re what you said is smart, intelligent in terms of the planning. I think you watch the cents and the dollars and you’ve got a low G&A, and we’ve looked at your numbers. It looks good. Your shareholders, though, so they’re waiting for great things. And they’re either they’re all in or they’re not. What would you say to them in terms of how this thing grows? I mean, price will bring some sort of bump and return here. How are you affecting share price? How can you affect share price? Can you?

Roger Lemaitre: Oh, absolutely. We’ve seen it with some of our peer companies, with the with no discovery. So the trick is, what land do you have? Is it really perspective? And are you looking for pure grassroots stuff or are you looking for stuff what we call mid-stage exploration projects? So at Christie Lake, for example, this year we’re following up old PNC, which was the previous operator back in the 1990s, where they hit mineralization and didn’t follow it up. What we’re not doing is saying, ‘here’s a chunk of moose pasture. Let’s go drill some holes and see if we’re lucky.’. What we’re doing is saying, ‘here’s a target that hasn’t been tested, up deep or down dip’, depending on whether we’re looking for classic unconformity. ‘Is this the right place to be looking up and down dip of’. Hey, on our Christie Lake project, we had that discovery at Aura on the North end of the three deposits and then suddenly that spot the trend dies. How did it die? This is kind of unusual because our experience, our team has extensive experience in the Athabasca. We haven’t seen this before. And we did some work and went ‘Oh’. We did resistivity survey. Looks like it’s offset the trend by 125m-150m. Let’s test that offset to see it continues like we think it might. So we’re not just hoping to find something on moose-pasture. We’re following up hot leads that would be flagship type projects for most of our peer companies. And I think that’s what separates our portfolio of opportunities. When we sit on opportunities like that on 4-5 other products, we’re not even be able to work because we don’t have the resources. We’re not starting from ground zero, we’re starting from a base of something that we know. And our team’s expertise isn’t so much about, ‘I can drill holes’, as how do we play these Uranium exploration mid-stage products to a T.

Matthew Gordon: So give me an example of that, because to me, I’ve seen so many companies do some drilling, get a report on a study done and expect that to radically change people’s perception of the company. Quite frankly, the market doesn’t care.

Roger Lemaitre: No, and I would agree.

Matthew Gordon: So I hear what you’re saying. And that’s, again, smart use of time and money and using data to make decisions. I think a lot of companies would claim that. What do you what do you what do you want to tell shareholders about what you’re doing, about making sure that, 1, you’re gonna be around long enough to see all this out and 2. how you’re going to see a significant bump? What’s the thing which gives them a significant bump. Why the market will react?

Roger Lemaitre: The only thing we can control is how we execute our portfolio to make any discovery. That’s clearly what we can do outside the market dynamics. And I love to say we’re going to move Horseshoe-Raven forward today, but this is not realistic. So all we can do is make discoveries on the portfolio. But looking at that lowest hanging opportunities we have on our tree. And what we do differently than everybody else is that we’re not bound by the models. So if you were in a Uranium explorationist, there’s the classic unconformity model. And what a lot of people do is follow the model to a T, and no matter what they see, they’re going to follow the model. What our team does differently is we say, no, ‘what does the rocks tell us we need to do? Where do we need to go?’ So, for example, that target we’re talking about to set the McClean Lake is something that nobody else would do. But we’ll do it because we’ve been involved in a discovery that actually did one of those. When we looked at our Christie Lake project, we had a plan about what we wanted to do starting it. And we started doing the work on our project at Paul Bay, and growing that we realized something that the previous operator didn’t understand. And so, for example, a classic unconformity deposit, where the fault structure in graphite comes to unconformity surface, and that forms a trap. And that’s where’s the Cigar Lake and Key Lake deposits are found. And it was almost a religion in the 1980s, 90s and even 2000s and even some companies today. What we realized is that we need to follow the structure, which sometimes is in the graphite and is something does not. And not only do we have the follow structure, we have to be at the bottom of the structure, and not projected somewhere differently than what was drilled in the past. And we went out and drilled where we thought was the right place. We made the Aura discovery. We’re applying that thinking across the rest of the property. So we let the rocks tell us where to go. We don’t let model tell us where to go.

Matthew Gordon: You’re agile thinkers technically. So you adapt according to what the rocks tell you. I get that. What are you doing in the market? You’re here at WNA. You’re meeting a few funds, a few investors. What are you doing other than that? Are you be bothered? What do you think it’s like? We’ll sit. Now’s not the right time. We’ll see where we are in the New Year and we’ll talk to the market then.

Roger Lemaitre: Always bothered me. If you’re not bothered, then you shouldn’t be in the public company. It should bother you. And it bothers me. It bothers me every day. But I think when it comes to what we do. We’ve varied. our strategy over the last few years, depending upon whether we thought the traction was right or not. We believe now with interest being a little bit different than it’s been in the last couple of years. Now it’s time to push and hear our story and show people what is different than what our peer company are doing. We’re not a project play per say. We’re a portfolio place. If you want a portfolio play on a bunch of Uranium opportunities, then we’re one of your best players. If you want to invest in a project specific thing, And want to see where Project A gets to in the next development cycle. Then that’s where you should be. What our difference is, is we’re a portfolio of opportunities that includes potential for projects because we have them in the wings.

Matthew Gordon: Gives you optionality, Ok I like that. I’m going to finish up with something which I talk to CEOs about, remuneration. How do you guys reward yourself in this market when no one’s making money, because you’re not producing. Shares are flat. You’ve got shareholder money. You’s got to prove you’re creating value, and it’s difficult in this marketplace. How does your board decide how to pay yourselves or remunerate yourselves?

Roger Lemaitre: Well, you’ll notice in our group there’s been very little changes in terms of the salaries for the executive team and the board over the last several years. And that’s market related. Our board doesn’t believe that in tough times that they should be giving out our company’s money. And personally, I would have been recommending that we don’t over last few years. We do stock options. And that’s the primary way we’re rewarding people today.

Matthew Gordon: What’s the average stock option at?

Roger Lemaitre: Probably for the board members you’re looking at about 300,000 – 500,000 in a given year.

Matthew Gordon: At what price?

Roger Lemaitre: At whatever the market prices is at that time. At that point in time. And the same thing for executives. The CEO’s getting a little bit more than that, but not much. We’re not giving away much. We have a 10% threshold allowed in North America, in Toronto. We’re trying to keep well below that. In the 8% or so range.

Matthew Gordon: It’s all public information. People should have a look. I think it’s very telling statistic.

Roger Lemaitre: We don’t see a lot of salary raises. And in this particular year, I wouldn’t be counting on salary raises for anybody as well, because it’s tough times.

Matthew Gordon: It’s tough times for everyone who has given their money to you. How much money have you put into the company or how much money has been put into the company? Well, I’ve been going back a while….unfair question.

Roger Lemaitre: My shares are definitely under water. So I hurt like everybody else at this point in time. I’m just a little 180,000 shares right now. But I’ve had to fund that out of salary since I started. And I haven’t been given any shares, which is appropriate.

Matthew Gordon: Thanks very much. That’s a wonderful first run through. We’ve not spoken to you or anyone in your company before, so our subscribers will get a good sense of what you’re about.

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