Ur-Energy (TSX: URE, NYSE: URG) – Two Can Really Ease the Pain (Transcript)

Interview with a candid Jeff Klenda, President & CEO of Uranium producer, Ur-Energy (TSX: URE, NYSE: URG).

Ur-Energy is one of the two companies that submitted the Section 232 Petition to the US government, Department of Energy. Klenda tells us why he felt it was the right thing to do at the time. And with an announcement expected this week, he expresses his hopes for the Nuclear Fuels Working Group decision.

Klenda is a forthright speaker and doesn’t shy away from the reality of the numbers in the market and for Ur-Energy. Klenda is clear about how long Ur-Energy can run before it needs to go to market and raise more capital. We discuss the implications of cost cutting, inventories and dwindling contracts for Ur-Energy.

Klenda also opens up about his peers and some of the barriers and hurdles that they will have to overcome.

Interview highlights:

  • 2:08 – Company Overview
  • 4:08 – Section 232: Drivers Leading to the Petition
  • 10:39, 25:06 – DOE Announcement: $150M Distributed How and For What?
  • 12:52 – Business Plan: Decisions, Cost Cutting Measures and 2019 Sales & Inventory
  • 18:06, 27:17 – Contracts vs Spot and the Likelihood for Junior Company Funding
  • 19:37 – Value Creation and Moving Forwards: Where Will UR-Energy sit in 2021?
  • 37:06 – Struggles Fuelling M&A Talks: A Look at the Unfolding Situation

Click here to watch the interview.


Matthew Gordon: You are one of the big names in this Uranium space, and we’ve been keen to talk to you. Here you are today. Jeff, could you start off and give us a 1-minute overview of the business so people can sort of put that in context then we’ll pick it up from there.

Jeff Klenda: You bet. Well, Ur-Energy, we started now, come the end of the month, we will mark 16-years since I and a couple of other guys founded this company. And I don’t mind telling you, we spent the first 7-9-years as a permitting and licensing story. We finally got our record of decision in October of 2012. We spent the next 9-months building out our processing plant. We you completed it on time and on budget, spent the next 2 months in commissioning, and we’ve been producing now since August of 2013; so for the last six and a half years, we’ve not only been producing but we’ve emerged as the lowest cost producer globally outside of Kazakhstan. I won’t go into the details as to why Kazakhstan is the lowest cost producer, but it sure helps when you devalue your currency by 90%. So anybody can look like an economic marvel when they can do that and still sell into the US market.

 But beyond that of course we were, I think forward looking; our board was, and so was I. Back in 2011 through 2015, we put contracts in place that we still have and are still delivering into to this day in 2020, and a couple into the next year and 2021. That’s given us consistent cashflow, but more importantly, it’s allowed us to navigate this minefield without blowing up our shareholders. And by that, I mean blowing up the cap structure. We’ve only raised USD$22M since Fukushima occurred, and that’ll be 9-years come next week. So, I think that that’s one of the strongest points about our company.

By the way, I am the largest shareholder in this company, unlike most, or virtually any of my peers. I’ve got USD$3.5M of my own money in this, so I am the gatekeeper. I hate issuing shares and we are a very shareholder friendly company.

Matthew Gordon: Thanks very much. Good summary. Can we kick off, there’s a lot of topics to discuss and you are well known for having a view on these things, strong views on these things. Can we just kind of kick off with the Section 232 petition? You’re one of one of the two companies that submitted that petition along with Energy Fuels with Mark Chalmers, who we have spoken to a few times on this program.  I’ve read the press releases; we are talking about adversarial behaviour in the market and security and so forth. I mean, what was the, what was your actual driver for that petition?

Jeff Klenda: Well, for me, the driver was that I met with Rick Perry in his offices along with the UPA, the Uranium Producers of America, and that was in July of 2017. Before we left the building, I decided that I would start the section 232. We actually did it, we made the decision before we ever hit the curb that morning.

Matthew Gordon:  Why do you say…what had been said in those meetings that riled you?

Jeff Klenda: What was said in the meeting was that Rick Perry acknowledged that when we were making the case that, look, we’re dying. And we were formerly the largest producer of Uranium on the planet back in the early 1980s, late 1970s, producing 43Mlbs, 44Mlbs a year, meeting all of our own personal needs. Unfortunately, that changed over the years and it really changed with the accelerated production coming out of Kazakhstan. We believe that it is very, very dangerous to become this reliant on Russia, Kazakhstan, and Uzbekistan, and so we filed a section 232 basically opposing that and suggesting that we needed to preserve the fuel cycle in the United States, and we thought that the best, most benign way to do that would be by simply imposing a quota, saying to the US utilities, you can go out there and you can buy whatever you want from whomever you please, but you have to buy a 20% to 25% from domestic producers. We’ve got to keep the fuel cycle alive. And Rick Perry agreed.

He used the term, ‘this is a national security issue’, no less than a half a dozen times in that meeting. And effectively said to me, bring me a 232 Petition because he wanted something that would bypass a deeply divided and extremely partisan Congress. Of course, everyone knows that characterises our extremely dysfunctional government here in the United States and give me something that I can put on the President’s desk. We did just that with the 232.

Now, unfortunately on July 12th of last year, we did not get the outcome that we had hoped for. But nonetheless, it gave birth to the working group, and we are we’ve seen positive outcomes from the working group. Obviously, the line item that went into Trump’s 2021 fiscal year budget; that’s a good start. But we are now waiting for what we are told is going to be immediate short-term relief to come out of the working group. That was as of last Monday. The Government functions on its own timeline, so we continue to wait.

Matthew Gordon: If you don’t mind, let me just finish off the 232 component. You have given lots of reasons that, I mean you genuinely believe that this is a security issue, not an economic one. So, what is to stop the US Government going and getting everything, they need from the Australians, the Africans?

Jeff Klenda, Well, the problem is that the general belief in this, this isn’t the first section 232, the first one was brought in 1988 because we had actually gotten down to the point where we were only providing 37.5% of our own needs, down from 100% less than a decade earlier. So, we found ourselves in a position back in 2017 where approximately 93% of our fuel needs were coming in from outside the United States. And the utilities would make the argument that, well, this is not a problem because of course, we can get all that we need from our good friends; the Canadians or the Australians or others around the world. Well, sadly, we all have come to believe and understand that that’s not true. Australia’s production is really basically down to whatever BHP produces there as a by-product. And the Canadians are only producing now out of one facility, at cigar Lake. They have shut down the largest production facility in the world because the economics simply do not support it and they don’t have long-term contracts to support it.

So the sort of harsh reality is, is that now, especially after there was no action taken on 232, we find ourselves in the just dangerous position of being 100% reliant on outside sources, foreign sources for all of our nuclear fuel, and yet it supplies 20% of our base loads. So while I am I am grateful that we have Donald Trump in the White House, because he is a supporter of nuclear, and it’s nice to have that for a change, we understand we were not the constituency of the Obama administration, I don’t want this to become political, but it’s nice to have a friendly in the White House for our industry, and I think that when he is saying now that we have become energy independent – well, yes, except for that 20% that nuclear counts for our base load, which we are 100% reliant on foreign powers for.

And sadly now, because of the closure of McArthur River, whereas before we were about 40% reliant on Russia, Kazakhstan and Uzbekistan, we are now well in excess of 50% reliant on those 3 countries. And keep in mind, this something that is imperative to understand and that is that the Russians actually control and own a significant portion of the Kazakh production. So when you take a look at this, this is not just, well, we are getting the bulk of it from Kazakhstan, and they are a market economy, they are a relative friendly and so we can rely on them; well, no; Vladimir Putin owns it. He controls it and he will dictate where that material goes and when. So, this is something that is not well-understood but we like to think that we have done a pretty good job of making the Department of Defence, Department of Commerce, and the Department of Energy well aware of this. So now, as we are facing a whole new battle with the Russian suspension agreement, these things are coming into play and the battle lines have been drawn.

Matthew Gordon: Like I said, before we started this interview, I think you suggested that perhaps there’s another conversation to be had there before we get drawn into the politics and geopolitics of this. So, let’s come on to the recent announcement: the USD$150M a year for the next 10-years. The statement, to me, and the subsequent articles, they seem vague; there’s no real clarity as to who that’s going to, where that’s going to, how its being divided up. It’s just a number that seems to have been plucked from the air.

Jeff Klenda: That’s correct.

Matthew Gordon: What do you know?

Jeff Klenda: Well, here’s the situation, we had the same questions, by the way, we were taken through the process. Right now what is happening is that there are appropriation companies on the Senate and on the House of Representative’s side; they are kicking this thing back and forth, and as you, here in this country, when appropriations are added to the budget, we just normally refer to it as ‘pork’, and the negotiations take the form of, ‘My pork is better than your pork, so my pork needs to stay in, your pork needs to come out.

What we have been told is that Congress is hoping to have a joint budget. Now, take that for what it is, by some time in April but no later than May. The problem is that we are now in an election year so Senators like Mitch McConnell and others high profile have said, we will not take that up, even when we have a budget we think we can move forward with we will not take up the real intense negotiations until after the elections.

So, to paint a bit of an, unfortunately, ugly picture here, if you can imagine, we get into the first week of November, whatever the outcome of the election is, now we are really going to start fighting over the budget. Now it is more, ‘my pork has to stay in, and your pork has to get out’ becomes much more strident, becomes much more intense. So that’s okay, the problem is that you’ve got the Thanksgiving break, which we’ll send them all home for five days, and what I think will happen then is that it’s going to be a knock-down and all bloody fight all the way up until the day before Christmas Eve, and they’ll come up with something last minute that everybody thinks they can live with, and mainly so that they can go home for Christmas. So sadly, that’s the way we do things in the United States.

Matthew Gordon: I think that’s fascinating. And I do want to get into your business model, your plan. You’re working and operating in a very complex but also difficult commercial environment right now, okay. And I’ve got to admire all of the CEOs who are having to do what they need to do to survive. Well, except for the ones who are perhaps being economical with the truth; not so much them, but there’s a great group of hardworking CEOs who are trying their best to do the best for shareholders. And I want to talk about what you are doing. I’ve read you’ve been through a cost cutting exercise, you’ve renegotiated payment terms and I suspect contracts, and that’s not easy. I’ve been in that situation myself. These are commercial and human decisions you’re making. I mean, can you talk people through some of the things that you’ve had to do over the past couple of years, two, 3-years to actually get to this point?

Jeff Klenda: Sure. Let’s keep it down to a manageable timeframe; 4-years ago I was just under 100 employees. Today I’m 30 and that represents 4 reductions in force and the last one was probably the most difficult of all. And that was because you’re starting to, when you get down to that low, you’re starting to cut into guys that have been with you for 8, 9, 10-years. That is extremely hard for people.

Matthew Gordon: That hurts, that hurts.

Jeff Klenda: So, what we did, most importantly, is that we have not waited for somebody to kick us in the behind and say, look, you guys need to cut costs. We have always been way out in front of that. We’ve always been very proactive on that. When everyone else decided, look, we’ve been slaughtered because we didn’t get what we wanted. Our shares have just, you know, cut by 40%, we’ve lost 40% of our value, we’ve got to get out there. We’ve got a market. We’ve got to try and get our share price back up. We didn’t do that. Frankly, I didn’t see much point. I didn’t think there was a very big audience. A lot of folks have just been burned because they had been speculating on what the outcome of 232 would be, so we decided to stay home, clean off our own front porch.

We went department by department. We engaged in cost cutting. That was extremely severe but very, very effective. We did a reduction in force where we took down into another 12 highly experienced, long time employees that came out as well. In addition to that, we restructured our debt with the state of Wyoming, our industrial revenue bond, where we now have gone from making a quarterly payment from USD$1.5M per year, a quarter to where it’s USD$178,000 per quarter, and for the next six quarters that will save us USD$7.8M. So, it’s been things like that that we’ve had to do, but we felt that it was critical.

Matthew Gordon: That’s, just to clarify, that’s deferred, right?

Jeff Klenda: We had it out on the runway.

Matthew Gordon:  You had it on the runway; i get it. But that money’s been deferred, it hasn’t been written off ..?

Jeff Klenda: That’s correct.

Matthew Gordon: Okay. So you’d need, you’re basically saying, we’ve got some revenue coming in, which is great, and I do want to talk about that in a second, but the cost cutting is, is the bit which is, it gets you the runway, to use your phrase, down the line, so that you are not going to shareholders and asking for more money to sit around doing nothing. Okay, let’s talk about the production then and once we’ve understood the revenues coming in and the cost, maybe we can have a useful discussion about what that looks like today. So, last year, 2019 look like what, in terms of sales?

Jeff Klenda:  Well, we had a good year last year and we just came out with our financials last Friday. We ended up delivering into the market 665,000 lbs Uranium at an average price of USD$48, USD$50, just under USD$49 p/lb. We chose to purchase more than 2/3rds of those pounds and we purchased them at an average cost of USD$26 in the marketplace. And so, we were able to effectively scrape the delta out of that between the shares that we were delivering into our contracts and then our purchase price in the marketplace. So, we actually had a quite good year. We did USD$32M in gross revenues. We ended up with gross profits of USD$12.2M. And unfortunately, most of that was wiped out because we no longer have the large scale contracts moving out into 2021, we had to now write down our inventories to a level to reflect current market prices, whereas before, as long as we could say to the auditors, well, I’ve got USD$48 contracts out there, these pounds have a value of USD$48, now I have to say they have a value of USD$25 because just like Cameco and others in the industry, we’re coming to the end of this contracting cycle and so we have limited contracts moving forward, both this year; when we’re going to deliver about 200,000lbs pounds at USD$42lbs, again with a purchase price of USD$26lbs. And next year, we go down to virtually nothing. It’s under 100,000lbs we have.

Matthew Gordon: Okay. Well firstly, I like the fact that you’re being honest about the inventory levels and what it represents on the balance sheet. Again, we interview too many companies who try to deceive.

Jeff Klenda: I’ve been accused of being too transparent.

Matthew Gordon: Okay, that’s never a bad thing. Let’s talk about these contracts so that people understand them. Again, because there’s going to be a wide range of understanding here; there’s some guys who watch this thing who are wonderfully informed, and the others are coming new to it, looking at the macro story for Uranium and thinking, well maybe now’s the time, with prices as they are, to be getting in here. So, let’s try and describe the contract versus spot for those people, if you may.

Jeff Klenda: Absolutely. At the present time, spot price, let’s just call it USD$24.50. I think that that’s probably a good workable number, and while there are a number of reporting services in terms of pricing, I think that it would probably be a usable number of right around USD$31 to USD$32 now on term price. And typically, you’re going to have that kind of a delta between spot and term. Now what we’ve seen over the last several years is that we’ve seen kind of a reversal; it used to be 10-years ago that 90% of the material that was sold into the market was done so under term contracts. Of course, that’s no longer the case. You’ve seen the reports probably out of UX / TradeTech or others where now the vast majority, or the majority of the material that is being transacted is being transacted in the spot market. So sadly, that’s the situation we find ourselves in right now. And that does not lend itself to entering into any new contracts moving forward. Not for us, not for Cameco, not for anybody.

Matthew Gordon: Okay. So, break that down for me; you said obviously you’ve had a few contracts for 2018, 2019, you’ve got this 270,000lbs, which you said will be sold at your discretion. That means there’s no contracts against those and that’s more likely. Contracts typically are higher than spot price, again for the 40 and so you sold a quite significant average. Your average, your pounds were sold at about USD$60. You obviously bought in the market, you sold the delta, your average was somewhere in the 40s, so you had a good year last year, right?

Jeff Klenda: Very good year in the fourth quarter, yes.

Matthew Gordon: This year, with your 270,000lbs, that’s going to be somewhat different. So how much value are you attributing to that?

Jeff Klenda: Well, here’s the situation: the last time I gave a public presentation, I had one of our existing shareholders and say, ‘Hey, what kind of a year are you going to have in 2020?’, and I said, ‘Well, not trying to be evasive, but that depends. And what that depends on is if we sell our inventories and if we do at what price we sell them’. So, I think it’s important to understand that first of all, we do have solid cash coming into the year and we’ve got revenues from our many contracts. Those are enough to get us through to the remainder of the year. Now, once we get to the fourth quarter of 2020, the question will become, have we been able to sell our contracts? This is why we’re waiting for the most recent report that is due any time now. We were told it was going to be coming out on Monday or Tuesday. It’s Government – I don’t place much stock in that. I’ll believe it when I see it. I’ve been at this long enough to know what my government means by immediate is not necessarily what I mean by immediate, and what they mean by relief may not mean relief.

Matthew Gordon: Then I’ve got a small anecdote for you: I was working in Africa and when I was told by government officials it would be done now, they didn’t mean ‘now’; the phrase you’re looking for was, it will be done ‘now now’, which meant now. So, I have some sympathy.

Jeff Klenda: One of our Directors spend a lot of time in Africa and he said that the phrase in Africa is, ‘it can happen anytime from now.

Matthew Gordon: Right, sorry to interrupt, but yes, if we could just talk about contracts just a little bit longer here because you described earlier on in this interview, your scenario; what you think the scenario would be politically this year. There’s a lot of events which would possibly prevent Government from making any meaningful decisions. So, we’re looking towards the end of the year. I think that’s an honest appraisal. You’ve got enough money at the start of this year, and the end of some of these contracts to generate revenues to see you through to the end of the year. Plus, you’ll have your 270,000lbs at your discretion to do something with if you can get a contract or a spot price, which reflects your value, your desired value for that. Where does that put you in 2021?

Jeff Klenda: Well I think you’ve driven down to the heart of it now. It all comes down to the contracts and what we’re hoping for, and this is why when, if you were to watch, for example, Secretary Brouillette, when he was testifying in front of the Senate Energy Committee on Monday morning, we had Senator Barrasso in there peppering him with questions, asking him, well, when are we going to see this report? It’s critical to us because one of the things that we’ve been talking to these guys about is the fact that, look guys, it doesn’t do me any good if you help me two years from now. It doesn’t do me any good three years from now. I’m in a better position than anybody else in the industry, and I know that by the time I get into the second quarter of 2021, whether by that time I will have sold my inventories, I’ll need to raise money, most of the players in our industry have lived equity, race to equity race. That’s just how it is and they have done that ever since Fukushima.

We haven’t had to do that. We have only raised USD$22M since Fukushima; we have been very fortunate. But what we are hoping for, and what we have spoken to Kudlow about and what we have spoken to each of the members about the working group about; this is the fact that we need immediate relief. Now, what form might that take? Well, for the two producers, the two legitimate producers that remain: us and Energy Fuels, that immediate relief, we hope will take the form of the purchase of existing inventories. Does that solve all of our problems? No, but if you give me a higher price than spot price for the sale of those inventories, those are domestically produced pounds, they can be used to convert and enrich and become what is called, ‘unobligated material’.

That’s critical because if you’re going to use it for military purposes in any way, if our government is going to use it for their purposes, it needs to be an obligated material. So what we are hopeful of is that we will see something out of the working group that it will provide immediate relief in terms of purchasing our existing inventories and that will extend our runway and give us more time to see things like the line item in the budget for those contracts.

Matthew Gordon:  Right. Okay. Again, a lot of a lot of things in there. The question was what happens in 2021 and I think you’ve gone back to; well it depends if there are any meaningful announcements between now and then.

Jeff Klenda:  Well, our inventories are pretty good to go right on through to about 2H/21.

Matthew Gordon: Okay, fine, and that gives me a sense of what the margin, your expected margin is on the 270,000. Okay. Just on again, the USD$150M, this whole discussion and you know being, pressing the government. You said the government works on its own timeline and whatever it says doesn’t equate to a meaningful economics in any way. And so yes; until the money’s in the bank, it’s not in the bank. Right? So, what do you think you’re going to be able to persuade the government to buy from you at? Or what do you want, what price will you need for them to buy at? Because they’re taking guidance from you guys, aren’t they? They don’t really know this space.

Jeff Klenda: They’ve asked and we have provided this data to them, not only during Section 232, we provided a lot of data to the Department of Commerce, but even the working group itself, we have provided, we formed our own core working group and that included not only ourselves and Energy Fuels, but the conversion and the enrichment as well. And we presented our own white paper to the White House through Larry Kudlow, as chairman of the working group, to make our case. Now at what price they may purchase. That of course is the complete unknown. They, I think that if you talk to somebody like Tim Gitsel, over at Cameco, he has been quoted as stating, look, I wouldn’t even look at restarting production in the United States unless I could get somewhere around USD$$60lbs or greater. And so, I’m going to say that if that’s a number that’s good enough for them, that’s what’s good enough for me. But we have demonstrated that we can not only function well at USD$$60lbs, I think people have seen how we functioned at USD$50lbs.

One of our concerns quite candidly in this space, something that I don’t know if it is a bit indelicate for me to share, is that there are others out there that are not producers, and there are only two legitimate producers left in the United States. What representations they may make, and what contracts they might be willing to enter into, whether there’s a reasonable prospect for them to be able to deliver into those contracts is another matter. So, it’s a bit of a wild card for us.

Matthew Gordon: This is something that we talked about before with other CEOs. You’ve produced, you’ve sold to utilities, you sold into market. Tell me this, what do you think the chances of a utility sitting down with a Uranium junior whose pounds are in the ground and saying, I’ll give you something. I’ll give you a contract for something. Is that reality?

Jeff Klenda: I think that they may, but I think that they’re going to be very guarded. I think what they’re going to do in this, and look, I know all the utility buyers, I see them at all the conferences. We’ve done business with six of them when we had all of our contracts in place extending all the way out through the end of the decade, which by the way, in 2014/15, seemed like a long time. Okay. So 5-years went by quickly. But you know, when you talk to those guys, I think a couple of them said, well, you know, you guys haven’t produced yet so we won’t give you maybe the 200,000lbs that you’re asking for, but we’ll go 100,000lbs with you, or, we won’t give you the 300,000lbs you are asking for, we’ll go 150,000lbs. And you have to prove yourself. I mean, look, these guys have seen it all.

And one of the things you need to understand about the utilities is that the buyers are, they’re smart guys. They’ve been in the industry a long time. They’ve seen it all. They know all the players. I mean, the one thing about our industry is that the BS doesn’t go very far, and the reason being is because they know those projects as well as we know them ourselves. Not only are we getting to be a very small fraternity at this point of producers or prospective producers, but the utilities, they can look at a project and we can say, well, you know, we think we can produce this project, let’s call it Shirley Basin, and we think that we can have a cash cost thereof under USD$15lbs, and they’ll say, well yeah, but that’s in this area, in that area. But then by the time you get over into this area, don’t you expect a little higher cost by the time you get there?

Well, you wouldn’t expect them to know that much about your projects, but that’s their business; they’re supposed to. And so, I think that unfortunately, our industry is one that has survived on, I mean this has levity, I call it BS squared: blue sky times the other BS. And unfortunately, it’s been true. But I think that what’s happening here, and I think this is something else that your listeners should probably understand, while pounds in the ground may have meant something five years ago, we are rapidly entering a time where fundamentals are going to be pretty much all that matter. If you can’t demonstrate that you can produce, do it in a timely manner, do it efficiently, and remember something else; It’s not just about getting to that level. You’ve got to get there and got to stay there. That’s really tough.

I mean, you’ve got to get to 1Mlbs, and you’ve got to stay at 1Mlbs, come hell or high water, rain or shine, doesn’t matter, you got to stay there. And utilities when they’re giving you those contracts and trust me, they’re going to assess that. And so I think that you might be able to smoke them to a minimal extent, but not to a great extent. I think that, look, we’ve had utilities sit down with us recently and say, we know what you can do. We know what Cameco can do. We know what Energy Fuels can do. Anybody else? – we don’t know.

Matthew Gordon: It’s an interesting area for debate as well because again, we have spoken to a lot of Uranium juniors CEOs from all around the world, and you know, the management teams have varying degrees of ability and they are absolutely working hard. The tough bit here is walking into, not getting some fund to invest in your equity because they’re taking a bet on the Uranium space. But funding the capex to develop these things out. These are some pretty big numbers here, right?

Jeff Klenda: You’ve got to be the real deal.

Matthew Gordon: Yes.

Jeff Klenda: I think, I mean, look, I’ll tell you, for us personally, I mean we went to one of the big French lenders, right? I won’t designate who they are, but they said to us, look, you guys seem like you’ve got a great project here, great management team, but you’ve never produced before. You need to build this thing out. So they just told us quite candidly, we won’t fund you the first time around, but come to us the second time after you’ve been producing for four or five years and we’re all over it. And so we have those type of capital options open to us.

Matthew Gordon: But that’s the gap I’m concerned about in the marketplace with, you know, 50 players now, down from the heights back in the day, 500, 400 – 500 Uranium companies, but down to 50, more manageable. But I just feel that initial hurdle is the biggest hurdle. You know, of course I used to say the same phrase, we’ll give you the money after you’ve got it going. You know. Bankers offer you an umbrella when it’s a sunny, and I think it’s a little bit late then, you know.

So, some of these companies that we’ve spoken to can’t give us the answer to how they get that initial either cornerstone investor or institutional, from wherever to get this thing going. You know, getting a couple of small contracts is not going to be enough to get some of these banks to move because it’s too risky. It’s far too risky. So, do you see, how do you see these small companies enabling themselves to get funded? What do they need to say? What do they need to do?

Jeff Klenda: Well, unfortunately, first of all, I think that your numbers are a bit high; are there 50 companies out there? I would say there’s less than 50, and the vast majority of them are explorers, usually in Canada or Australia. When it comes to those that are actually capable of producing, that number gets down to a dozen or less. When it gets down to the number in the United States, that may actually have the capability of producing, and particularly for government purposes, say under the $150M line item in the budget, or something else that may come out of the working group or whatever the case might be. Well now that number gets still smaller, and unfortunately that is…

Matthew Gordon: What’s the number, Jeff?  Is it 2?

Jeff Klenda:  I think that there are potentially, and I say potentially, 4. And I think that, but now keep something in mind here; this is something that we, by the way recently received a request for information from the Department of Energy that we filled out. One of the things that we had to list in there as a caveat was, we’ll keep in mind this depends, because if the United States were to ramp up to expose production capability, you can’t do that without Uranium One coming back into production. And you can’t do it without Cameco coming back into production.

So, the question here becomes, what are we capable of producing? Well that depends on a couple of the foreign players that are right now on standby. And so, of the other guys -how did they get there? Well that’s, now you’re asking the question that every, frankly intelligent fund manager should be asking, look, you know as well as I do when you’re an issuer, I walked through a lot of portfolio manager’s doors and invariably the smart ones, the good ones anyway, ask you one question before you leave: what am I not asking? What am I missing? What am I overlooking here? What is the potential landmine you could trip on that could blow all this up for you? And what they’re not asking right now is what is your capex to get to any minimal reasonable level of production that you can sustain? And that is the question that’s not being asked.

And so what I’ve done, and what we’ve done as a company is what we’ve looked at everybody and we’ve looked at the players that we believe even have a reasonable shot of getting into production. How long it would take them to get there and we’ve just decided, okay, let’s come up with a number that we apply to everybody. Let’s call that a 2Mlbs per year run rate. Okay, 2Mlbs per year. What’s it going to cost for you to get there? Not just get there but sustain it. We know what that number is. It’s in our PowerPoint. It’s on our website. For us to get there, we can get to 1Mlbs, 1.25Mlbs per year, out of Lost Creek, I can do it for about USD$14M to USD$15M.

Shirley Basin is going to cost me about USD$25M because I have to build a satellite plant there.

So, for me that number is over a 2-year period of time. It’s about USD$40M. More than likely I would go out there, I would probably do debt financing against contracts. I won’t build out. Nobody’s going to build out without contracts and they simply will not. So, what we will do is that we can get there for about USD$40M. More than likely, at least half of that will be debt, and we would only be very selective.

Like I hate issuing shares. Everyone knows that about me. I’m very stingy when comes to that. And that’s what my shareholders like about me. I mean the last proxy, I got 99.6% of the vote. I’m not even sure Warren Buffett gets that, but they know that I don’t issue their shares willy nilly. I won’t.

So, I think that it comes down to it, I can do it for USD$40M. Now you pick a name, what’s that number for them? What’s their timeline to get to that 2Mlbs of sustainable production. So, I think that what we need to do here is, we need to change the dialogue a little bit in terms of let’s just assume, let’s just give you the benefit of the doubt and assume that you can get to this 2Mlbs per year. What’s your timeline? What’s your cost? More importantly, what’s your dilution to your shareholders in getting there? I know what mine is.

Matthew Gordon: That’s the name of the game. It’s the name of the game.

Jeff Klenda: At the end of the day, it’s the only thing that matters. Right?

Matthew Gordon: Absolutely. Well done. On that basis, some companies are going to struggle. Are you seeing, or have you had any discussions about mergers, JVs, acquisitions, asset sales? Possibly, but I can’t say, right?

Jeff Klenda: Well, in the last 5-years, we’ve had three offers for the company and of course none of them were adequate. They were all, I would classify as opportunistic. That’s fine; you would expect guys to do that. And that’s been other players in the space, and it’s been private equity. So you know, look, I mean, look, I’m a lean, clean machine. Everyone knows that I’m the lowest cost producer. I’ve got years of production ahead of me. If you’re going to make a grab for anybody in the space where you’re going to buy, well, we know who we are.

We have no illusions about that. So, for us, I think that yes, there’s always those ongoing conversations. There’s absolutely nothing imminent. And the problem is, is that over the last three, four years, as we have evaluated a number of these opportunities, the harsh reality is as well, this guy will sink me in about a year. If I merge with this guy, he’s won’t be quite as bad, he’ll sink me in about a year and a half. And this guy, he’ll sink me about two and a half years. So, but the one thing they all have in common is they’ll sink me. So, I can’t, for me it’s all about, you know, guys, I know what I can do. I know that I can sustain myself in a very difficult environment. We’ve demonstrated that and we’ve demonstrated we can do that without diluting our shareholders to oblivion. The only reason you’re interested in doing something with me is because you know, you can’t do that.

So, it’s the harsh reality of the market that we find ourselves in right now. But I like to believe that the fundamentals are actually turning, that I believe that the supply of fundamentals will begin to reassert themselves. We have a lot of new reactors starting up at a faster pace and they’re shutting down where we are. Technically we are a growth industry and, but the bottom line for us, and this is probably the most crucial to understand; is that our government, we put this thing in the national dialogue, we’ve put it on the national stage with 232 and with the working group. And the one thing that our government has been forced into it, they’ve been forced into an uncomfortable position. And that uncomfortable position is, is what are we willing to do to save the fuel cycle in the United States? Because if we don’t save the fuel cycle, we lose our seat at the table.

We’ve been the primary gatekeeper; we’ve been the primary deterrent to nuclear proliferation for the last 70 years since the beginning of the nuclear age. And what are we going to do? Countries like the Saudis, Russians are going to build their first few reactors. They’re going to build them out, they’re going to design them, they’re going to fuel them. They’ll re eventually decommission them and hey, we’ll buy and pay for the first 2 or 3.

We can’t say anything like that. The Saudis have said to our state department, well, why should we do business with you? You guys don’t even have a fuel cycle left – they are right. And so if we want to continue to be players in the game, and particularly if we want to continue to be that deterrent to the nuclear proliferation, I mean, look, the bad guys around the globe right now that are going rogue and causing a lot of trouble: whether it’s North Korea or Iran, Pakistan, or whomever, they didn’t get it from us. So, what are we going to do? We’re going to cede that seat at the table to the Russians and the Chinese? You can’t do that.

Matthew Gordon: It kind of feels like the Americans already have ceded that seat in reality, but hey, Jeff, that’s a conversation for another day. That’s a conversation for another day. Jeff, I want to say thank you very much for being so candid and refreshingly honest and straight forward about what you see is going on here. I’m interested in your timing.

Jeff Klenda: It’s funny; the utilities find my candour to be a bit off-putting. Thank you for appreciating that.

Matthew Gordon: Well I guess shareholders and buyers would have two different sets of goals. But we should catch them again and talk about that geopolitical component because that does, I think that’s fascinating.

Jeff Klenda: I’ll tell you when I’ll be willing to do that when I would feel like really getting in trouble with the utilities.

Matthew Gordon: Okay. We might have to defer then.

Jeff Klenda: Look there are a lot of positive things going on and I’ll leave your viewers with this thought: we tend to understate, we’re not overly promotional. In fact, we’ve been accused of being too transparent and not promotional enough. But the one thing I know for a fact is that I’ve given myself great runway. I wouldn’t trade positions with anybody else out there in the industry. And I know every other player intimately. I can run faster than anybody else. I can do it at lower-cost, and I can do it at less pain and dilution to my shareholders. There’s only one of us that gets to say that. That’s U-r Energy.

Matthew Gordon: Let’s finish on that note. Thank you very much for your time. Let’s stay in touch. Great to hear from you. I hope there’s some news. It looks like it won’t be necessarily be today, hopefully next week and I’d love to get your view on that when it does come out.

Jeff Klenda: Let’s do it. Yes. Once we get something from the working group, let’s hope that it’s something that’s positive, we’re hoping that it’s going to be, and doing another one of these on the heels of that would be quite instructive.

Matthew Gordon: Beautiful. Thanks for your time. Have a great weekend.

Jeff Klenda: We will. In our warm temperatures here. Thank you so much


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.

Energy Fuels (NYSE: UUUU) – Front Foot Planted, We Don’t Move Backwards (Transcript)

Interview with Mark Chalmers, President & CEO of Uranium producer, Energy Fuels (NYSE: UUUU).

Energy Fuels made an announcement last week about a $16.6M Bought Deal, which closed on Thursday, some shareholders do not seem pleased. We ask Chalmers why he did it and why on those terms.

What does Chalmers know that we don’t about the DOE announcement? What are his use of proceeds? And what is his strategy? Is there M&A planned, yes or no? And how does he plan to monetise the White Mesa Mill? Insider buying in the market for UUUU has been heavy in the last couple of days.

Interview highlights:

  • 1:31 – News Release: Why Did They Do it?
  • 4:05 – DOE Announcement: Does Energy Fuels Know Something the Rest of Us Don’t?
  • 6:33 – Financial Position at Present and Valuations of Stock
  • 7:31 – Possibilities to Sell Vanadium
  • 9:04 – Use of Proceeds: M&A and Project Focus
  • 13:17 – White Mesa Mill: Are There Talks of Other Companies Using the Mill?
  • 15:02 – $150M for the Creation of Uranium Reserves: Conversations with Miners on Price

Click here to watch the interview.


Matthew Gordon: Hi Mark. How has your week been?

Mark Chalmers: Oh, it’s been busy, with closing the financing. It’s been a very busy week for us.

Matthew Gordon: Ok so I guess I’m going to ask you the same question you’ve been asked a lot since you put out the news release about a week ago, which is Why did you do it, and why those terms?

Mark Chalmers: Well Matt, you know, it was expensive money, but as I’ve said to you and multiple times, as I’ve said to shareholders, we want to be on the front foot rather than the  back foot. We’re very encouraged that the government has announced planning to buy Uranium again, it’s the first time they’ve been planning to buy it since 1983. So we want to be as ready as we can for that because we think we’re best position to capitalise on that. But the other thing that probably a number of people didn’t understand or realise is that we had a convertible debenture that matures at the end of 2020, and it became a current liability at the beginning of this year. So we wanted to be in the position that we can show that we had enough funds to cover that on our own terms and abilities; without having the convertible drive us, we wanted to be in a position to drive the convertible.

Matthew Gordon: Ok but did that convertible contribute towards Cantor Fitzgerald being able to negotiate quite tough terms now? I get the point that if you didn’t, your negotiation stance towards the end of the year was going to be pretty difficult, you know, I’ve been there myself. But were they pushing you hard now because they could?

Mark Chalmers: Well you know, it was our decision, we weren’t being pushed, we discussed it certainly at board level quite extensively, and we just decided that it was going to be better to go now and get the funds and be ready for the future. But you know, no one wants to go and get into financing that… and I want to say that it was a bought deal, it was straight common shares, no warrants, but no one wants to be in a financing that pushes the share price down like it did for us. But again, we believe that we’re in the strongest position of anyone else, and we think there’s other people who are going to go to market probably quite soon and we wanted to be there sooner than they were. And as I said, this announcement by the government to buy Uranium, no one is in a better position to capitalise on that than Energy Fuels.

Matthew Gordon: Lots of questions. And I’m going to throw these at you in no particular order. You keep saying the word ‘front foot’, what do you mean by that? Are you talking about being able to capitalise on the DOE announcement? In which case, what do you know that we don’t?

Mark Chalmers: I think the demand…You know, we haven’t heard the whole story yet out of the working group on terms of the whole three steps of Nuclear fuel cycle, so we’re still hopeful that there’s more to come here. But we want to be in a position that right now the government’s announced that this USD$150M for this strategic reserve, we want to be in a position to get the majority or at least a large share of that ahead of… there is going to be lots of competition for it. But no one has the history, the proven history in the facilities like we do. Ur-Energy are in a pretty good spot too because they are a proven producer, but we are in the best position to deliver into that initiative.

Matthew Gordon: Ok so you’re making a bet, you don’t know anything that the market doesn’t know? Just so I am clear.

Mark Chalmers: Correct. We have released everything we know about where we are in this process and where the government is in this process. But there have been statements through Secretary Brouillette, and others, that there should be additional information forthcoming on the Working Group’s findings in the next few weeks or so. But we’ve also been waiting a couple of years for information flow, and it’s been delay, delay, delay.

Matthew Gordon: Ok, so are you expecting more money to be mentioned in these future announcements? Or more confirmation on the USD$150M?

Mark Chalmers: Well you know, we think that Nuclear Fuel Working Group, and I’m speculating a bit here…agrees that they need to do something to re-establish the Nuclear fuel cycle, the front 3 steps through enrichment. So we believe that they’ve come up with findings, but I don’t know exactly what those findings are Matt. But we, as I’ve said, what we do know is what they have released and we want to be in the best position to capitalise on that than anyone else.

Matthew Gordon: Okay, and I want to talk about use of proceeds in a second but if you don’t mind, what is your position now? Because when we’ve talked in the past you’ve had about USD$40M between cash and inventory, you’ve topped it up with another USD$16.6M..what position are you in with regards to your cash today…I know you’ve got the convert coming through, but what does it look like today?

Mark Chalmers: You know, we’re going to announce our financials in March. But yeah, in the order of magnitudes that you’re talking about…in the USD$40’s, plus this capital raise, you’ve got the convert at the end of the year. We’ve got around USD$20M of that is inventory, about half in value is Uranium that we value at around USD$25lbs, and about half is Vanadium which we’re valuing at around USD$5lbs which incidentally is coming up a little bit…last I saw it was in the USD$7s, so we’re hoping to get another kick there.

Matthew Gordon: So you are not tempted to sell the Vanadium today? Because it has been as low as USD$3 and as high as USD$30…so what do you do?

Mark Chalmers: Well exactly. I’ve said to you that we’re trying to do the Carbide plan which is to have inventories that we can deploy when we want to deploy quickly. And a big part of our plan, our strategy is to have inventories available packaged, ready to go. And that’s another reason for financing, because if you had in the order of USD$40M of cash working capital, the convert becomes a current liability, then you’re down in the mid USD$20s or so, of which USD$20M was inventory. So we believe we’re going to get a bigger bounce out of that inventory at the right time. I understand that the average person who is a shareholder may not fully understand our motives, but we wanted to keep that inventory, because whatever the government purchases, assuming they purchase inventories, you could get a 2X or maybe even more than that in flexing up on the value.

Matthew Gordon: Ok so thanks for sharing your motives with us. I appreciate that and it makes sense. Can I talk about use of proceeds? There are two strands here; one I need to deal with. Are you going to use any of your current cash available to you, you closed yesterday, to do any M&A work? Are you going to buy any of your peers?

Mark Chalmers: You know, it’s always a possibility and I’m never going to say ‘no’ because that’s an absolute. It puts us in a stronger position to do the M&A, so I’m never going to say no but I’m not going to say yes either. How’s that?

Matthew Gordon: That is very politic of you. Let me ask you another way. Today are there any plans to do any acquisitions?

Mark Chalmers: Not at this point in time

Matthew Gordon: Got it. Second strand; you talk in your press release about use of proceeds, obviously focus on the ISR project, I assume because that could go into production soonest? Is that right? What’s the order of play because you talk about all four assets but ISR was number one.

Mark Chalmers: We’ve got quite a diversified set of assets, but there’s some work at Nichols Ranch, we’ve got some work in increasing the flow capacity at Nichols Ranch, we’ve got some drilling that needs to be done at Alta Mesa, you know, we’ve got other work that we’re still doing, design work on the Canyon mine, we’ve got the shafts sunk there but we’ve still got to put in some facilities around the shafts, so. I can tell you this much, we’re not going to spend all that money until we get a little more clarity on the outcome from the purchase program, but there are things with a longer lead time that we will put some money in so we are better ready than we are now, even though we’re as ready as anybody out there.

Matthew Gordon: Yes you said you were best placed within US companies to take advantage of that announcement, but you’re not ready to go today without spending some money to get everything up to speed? So what does that mean, how much money are we talking about?

Mark Chalmers: No look, we’re ready to go today on some of our assets, they are ready to go today. But there are a lot of different variables here that we don’t know in this government purchasing programme. For example, are they going to buy inventory? And I think they absolutely should, because otherwise we’re going from a colder start, not a cold start but a colder start to build up production. And the clarity on who’s going to be able to best capitalise on that, that all will drive how much investment is required at which site or sites. So there is some uncertainty about how that will be distributed, the government did say that they thought his purchasing program would basically go to 2 mines, or maybe a little more, but its not designed to go to 5 or 6 mines. It’s not. Now, there could be few more mines potentially around our White Mesa Mill. But it’s really our focus in my opinion on…and when they talk mine’s I believe they are talking production centres where you can actually make the yellowcake, so like White Mesa would be a mine in their terms and perhaps 1 or 2 other ISR facilities. So there is absolutely no need to build new facilities with this current demand as we know it today, it should be focused on existing proven facilities that have a history of delivery that are already constructed ready to go.

Matthew Gordon: Ok. White Mesa, it’s a huge facility and you were saying its been a long time since it got near, or was processing at full capacity. Long time.

Mark Chalmers: Its actually never produced at full capacity. It has a licensed capacity of about 8Mlbs, and the best it’s done is around 4 to 4.5Mlbs.

Matthew Gordon: You’re never going to be able to fill that. Are you having conversations…there was one other CEO who mentioned at a presentation he was doing, I don’t know whether it was a slip of the tongue or has been misinterpreted, but they talked about using your mill to process on their behalf? Have you had conversations with other Uranium companies on this topic?

Mark Chalmers: Not recently no. No one but us has the right to use White Mesa Mill right now. Does that change in time? Perhaps. But no one has line of sight to use White Mesa Mill. We do have some clean-up of an idled Uranium mine that is currently going into White Mesa through an agreement there. Once that material shows up at the site we’re stockpiling it, we have the right to process that at our own schedule and desires. But we have full ownership of the Uranium from that material. So yeah, no one has line of sight. A lot’s going to depend on how the implementation process goes with this initial purchasing, we’ll see where we go from there.

Matthew Gordon: Ok. On this USD$150M, because again, there’s been a lot of numbers floating around. We don’t know the price at which the government is going to have conversations with miners, do you know?

Mark Chalmers: Well noI don’t, other than the quantum of the USD$150M. But there is a fair amount of banter around, ‘oh its USD$50 or USD$45’. Well USD$45 or USD$50 is not enough, that is not a high enough price. That is not a sustainable price. And when people say they can make comfortable margins with USD$50 in the United States, they’re full of something but I don’t want to say to you…

Matthew Gordon: Smoke?

Mark Chalmers: …Exactly what they are full of. But we need prices that are well north of USD$50. I mean sure, if we get USD$50, we are in a position at least Energy Fuels is, where we have 500,000lbs or more of Uranium that could be monetized, and that’s certainly going to be a help, and we can run projects like Canyon. This doesn’t mean we can’t run some of our projects. But USD$50 isn’t a fair price, it should be north of USD$60 is a sustainable price. It annoys me when people say ‘all we need is USD$40 or USD$50’, and they are full of it. Like I said, we have projects we can mine before that but that is at the site, it does not include the full loadings of a public company to deliver any kind of sustainability. And I think the key thing is that this USD$150M is over 10 years, so we need a sustainable solution and outcome here, not to have a flash in the pan and have people not being able to make it because the prices are too low.

Matthew Gordon: Ok so having had those discussions, and I can hear its been a source of frustration with people speculating around the price, but let’s even say it was USD$75 just for the sake of argument, that’s 2Mlbs we’re talking about, its not a lot, and they still have to go out and…

Mark Chalmers: No, and again there’s a lot of moving parts here Matt that we don’t know exactly what they are right now. And as I said, we don’t know what follows, or if anything follows with the Working Group when they get into more details. But I’m speculating here a bit, I believe that this first announcement is not big enough for somebody like say Cameco to come back in and restart their operations. And if that’s the case, and I don’t know for a fact that it is, that makes more room for ourselves and people like Ur-Energy. I think I’ve told you this, that since 2004, 2 companies have mined 85% and produced 85% of Uranium produced in the United States, and it was Cameco and Energy Fuels. So the 2 of us have the longest history of production over anyone else. Now, there are a couple of projects like the Uranium One and Ur-Energy that didn’t produce back in 2004, they started in mid-way say 2008 or 2009, or 2011 or 2012 that also contributed a material amount of Uranium. But if you include those 4 companies, 97% of the Uranium produced since 2004 were 4 companies. So there aren’t a lot of us with any kind of track record of producing a material amount of new Uranium, and we are very confident that we have that track record. And because at the moment we know the demand is small-ish, there’s no question, it should only go to those who can prove that they can do it, and have those facilities ready to go without major major capital investment.

Matthew Gordon: Ok, you sound confident. If you hear anything from up on the Hill, Whitehouse or DOE please give us a call. I’d love to hear your thoughts on how this thing’s going to progress.

Mark Chalmers: You’ve got my number Matt, you know where I’m at, and I’m always happy to have a chat with you.


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.

Western Uranium & Vanadium (CSE: WUC) – I Can See All Obstacles in My Way (Transcript)

Sunday Mine Complex

Candid interview with George Glasier, President & CEO of Uranium developer, Western Uranium & Vanadium (CSE: WUC).

Western Uranium & Vanadium is a relatively small junior miner, even amongst the few Uranium juniors it would be considered small. But it does have a very vocal and outspoken CEO at the helm in the shape of George Glasier. Glasier was one of the founders of US Uranium producer Energy Fuels back in the day. His new company, WUC, is focussed mainly on getting the Sunday Mine Complex back into production. They have 5 other projects of less consequence and certainly not in focus. We discuss how he hopes to do this in the current environment. And he talks openly in places about some of the challenges he is facing.

We don’t envy any of the Uranium CEOs at the moment. It’s a tough market. However, we expect them to do as they say and say as they do. All too many say what it takes. It’s important for shareholders to hold them to account.

The Sunday Complex, made up of 5 underground mines, is in Colorado. Previously owned and operated by Union Carbide and Denison Mines. WUC has been engaged in discussions since sept 2019 with the Colorado Division of Reclamation, Mining and Safety (CDRMS) over the renewal of the mining permits. Currently all permits are considered inactive. WUC believes it has now met the conditions set by the CDRMS and is set to attend a hearing on the 24th April 2020 to present its case. Glasier gives us his view on how that will go.

We also discuss their proprietary ablation technology, now called Kinetic Separation Technology. A lot of supporters of WUC see this revolutionary for the Uranium space, so we dig down in the commercial reality of what it is, if and when it can contribute revenue and what it is worth on the balance sheet. Again WUC is waiting on a decision about how this is categorised by CDRMS and what type of licence it will required. For now it is parked up.

We ask how he can calculate the economics with only a NI43-101, and more importantly how he hope to get funded to get the mines in to production. Glasier also gives us his view on how he thinks that works.

A big part of the economics will depend on the ability of WUC to process their ore. Glasier says that Energy Fuels White Mesa Mill is perfectly positioned to process the WUC ore and the companies have spoken. We wait to see the outcome of those discussions.

And finally we ask Glasier what he meant in an interview recently about the US Government buying Uranium ore from WUC.

Interview highlights:

  • 2:51 – PDAC Conference Observations
  • 3:42 – Company Overview
  • 4:47 – Licensing all 5 Mines: An Update. What Have They Been Spending Money On?
  • 11:35 – Colorado as a Mining Jurisdiction: Problems with Locals?
  • 14:22 – Studies Done and Further Plan of Actions: What’s to Come from Western Uranium?
  • 19:14, 52:48 – Getting Funded: What Can They Demonstrate to Potential Investors?
  • 29:42 – Market Dynamics: What Price do They Need to be Profitable?
  • 34:46 – The Mill: Promising Discussions with Energy Fuels and Other Companies?
  • 41:42 – Opinions on Timings & Talks with Utilities for Contracts
  • 47:52 – Vanadium and Uranium Cycles: How Will They Insert Themselves Meaningfully?
  • 55:47 – Kinetic Separation Technology: What is it? Looking at Costs & Testing Results
  • 1:11:08 – Drop in Share Price: What Can They do About it?
  • 1:14:51 – Large Shareholding by Management and Remuneration Principles

Click here to watch the interview.


Matthew Gordon: Fantastic. So you’re in PDAC at the moment, pounding the streets and manning the stand are you?

George Glasier: Oh, that’s right. You know, I’ve been at PDAC for a few days it is, you know, one of the big conferences. Of course, you’ve been here before, so you know.

Matthew Gordon: I don’t miss it, George, I have to say. It’s quite a big one: there’s up to 30,000 people. I mean, what’s the turnout been like? Obviously with this Corona virus? I’ve heard a few reports.

George Glasier: It’s a bit lower. I think maybe the virus has kept a few people away. The companies are here, but maybe not quite the investor group. That’s what we’re seeing. We had a booth here and there was not quite the traffic as in past years.

Matthew Gordon:  I’m hearing that resounding message. But George, it’s the first time we’ve spoken to you guys, so thank you very much for that first of all. This is a story new to our investors, so I wonder if you can give us that 1-minute overview of the company and then we’ll pick it up from there?

George Glasier: Well, a quick overview of the company: of course, we’re a US resource holder with Uranium and Vanadium in the States of Utah and Colorado. Mine’s ready to go into production. The Sunday Mine complex was opened this last summer, it is virtually ready to go. Ore was stockpiled in the mines. Last week, we finished building three ore pads; got them at the complex so that we can take the ore and move it to the outside and then truck it off site when the market is right. So, we have a fairly large resource holding:  43-101s or JORC standards on a number of our resources. Investors can get onto our website and look at that. So, there’s a quick overview of the company.

Matthew Gordon: Beautiful. Beautiful. Actually, you touched upon something there, which was the ore pads; because I think there was a little bit of kerfuffle in the market at the beginning of the year when I think that the Colorado Department for Reclamation, Mining and Safety were talking to you about the licenses on all 5 mines under the Sunday Mine complex. So, what’s happened with that? I know there’s been a couple of press releases, but if you don’t mind running us through that?

George Glasier: If I can give you a background of what happened; and this started with the mine that we own called the Van 4 mine. The Van 4 we also… a mine we acquired from Energy Fuels when we acquired the Sunday mine complex, and at that time, the Van 4 was in the first of a 5-year temporary cessations, which was granted by the Department of the State. So, several years later, that first 5-years expired, we went in to extend it under the regulations of the State. You had two five-year temporary cessations, and if you didn’t go into mining activities, then you would have to reclaim the mine. So, we went in and applied for, and were granted this second 5-year extension by the board. What happened? The ‘antis’ sued the board, and at the District Court in Colorado that the board won, the District Court said, you have followed your regulations and the company, which was in this case, Western, had a right to apply for and be granted a second 5-year extension.

Well, the ‘antis’ took that to the Colorado Court of Appeal, and the Court of Appeal reversed that decision and said, we believe that the state statute really means that you have to have physical activity. Now, the Van 4 probably wasn’t operated until maybe in the last operation in 2000. So clearly it didn’t have physical activity – virtually anything. We did some maintenance on the surface, but we didn’t do anything leading towards mining at the Van 4. So that decision, you know, basically the District Court was reversed, and the District Court ordered they, the board to revoke the operating license of the Van 4 and put it into reclamation. So that was done…that was about a year, year and a half ago. So, knowing that other mines in the state of Colorado, not just the Sunday complex, are on temporary cessation, then the Sunday Mine is in that same status; we basically said, okay, we’re going to have physical activity, we’re going to go into the mining mode.

We opened the mine last Summer and we operated it and we actually produced ore because that satisfied it clearly in our mines, that 10-year period. The mine was last operated by Denison Mines in 2009 to 2010, and then it went into this period of temporary cessation. So, we meet the physical test, okay? But again, because of the decision of the courts, the Division now is looking at all mines that are in this temporary cessation status to decide if they have to, you know, basically go into reclamation.

So again, we’re probably the first test case where the Sunday Mine will have a hearing in April to determine what we’ve done and whether we’re in ‘active status’. And we believe we’ve done everything to comply with what they say is active status.

Now, they’re actually going through a rule-making to determine going forward what active status means. They don’t have good standards right now. Active status could be just about anything based on the current interpretation. So, they are going through a rulemaking to set that down and say this is active status, and that probably won’t be finished for a year. But that doesn’t apply. We contend this doesn’t apply to us. We can’t wait a year. I mean they’re going to do the hearing now. We are active under the standards as they’ve applied it in the past, and we will be actively pursuing that at this hearing in April. So, we believe the mines will be declared active.

Now, other mines in Colorado may not be; there’s a number of them that have not been physically active, not that we own them and those are subject, potentially to the same treatment of the Van 4.

Matthew Gordon: Right. Okay, so you’re claiming you’re active because you’re physically doing things in and around the mine and underground in terms of stockpiling ore?

George Glasier: We were prepared to take the mines out and ship ore. What happened is, we were just going to take it directly from the loaders, put it into the trucks and haul it off site. Well, the mine permit basically said, before you take ore out of the mines, you have to have ore pads, even if you don’t use them. So, they said, don’t take the ore out until you build the ore pads.

Matthew Gordon: Which you have just done?

George Glasier:  – So we are not prepared to take the ore out. But again, we’ve complied with their requirements right to the letter.

Matthew Gordon: Well let’s finish off on those, George. I mean, they asked you to do a couple of other things and I noticed in the press release, you say you have done those things. Well, run through what you have done, what you’ve spent money on.

George Glasier: What we had to do, there were three things, requirements: one, we want us to cover the low-grade stockpile, and that was done even before we opened the mine. So, we did that and they signed off on it – a great job. We opened the mine, we were mining ore, and they said, there’s two other things we want you to do: we want you to, you know, things went well – the upgrading of the storm drainage system, there was already a storm drainage system there, but it needed some upgrading and some repairs. So that was one of the requirements. We finished that about two months ago and announced that and they signed off on that. And the third requirement was the construction of the ore pads to the design that was already approved. So that was done by an independent contractor, certified by an independent engineer. That report was submitted last week to the State and they should sign off on that shortly and say, fine; the ore pads are constructed according to the design that’s been approved and in the permit.

Matthew Gordon: Right. So that answers the questions which they raised last September to you. So, you spent time when you received that letter in September, through until recently getting that done?

George Glasier: Right. And clearly what we did first, we did the storm drainage; that took a while and then under the license, or the permit procedure, you couldn’t build the ore pad if there was too much moisture or the ground was soaked. So, we were basically waiting for the right conditions, weather conditions, which we had this February to construct those ore pads. That’s why we didn’t do that first: simply because we didn’t have the right conditions. But now that is all finished.

Matthew Gordon: Okay, so you feel that you have done what they’ve asked, you’re walking, or confidently walking into this meeting in April expecting to be able to argue the case that you are an active mine again, on that basis. Yes? Okay. Now you mentioned the phrase, ‘antis’; what do you mean the ‘antis’? These are people who are anti-mining in Colorado. What are they doing?

George Glasier: Yes, we’re actively mining and we’re removing ore, we put ore in the mine, and we stockpiled it in the mine because it wouldn’t let us take it out. So there was actually ore that was mined stockpiled in the mine and waiting for the conditions to be satisfied. So, we’ve done a lot of things: we went in there, we did drilling, we did all kinds of activities, but we actually mined ore; if that’s not active, I’m not sure any mine would ever be active.

Matthew Gordon: Right. No. So I wasn’t saying active, I was referring to a phrase you used earlier, which was the ‘antis’ have been petitioning and affecting the behaviour of the Colorado Mining Division. So, you know, are you being affected by these anti-mining petitions? Is that what you were talking about?

George Glasier: Well, you know, they’ll be probably somebody at that hearing that will contest whether we were active – and that’s the point. And I’m not sure what their arguments will be under the existing rules and the way they’ve administered those, you know, I’m not sure what their argument would be. They may say, well, wait until the new rules come out. But we’re basically saying, you have to operate under your existing rules. And this is a hearing before the new rules, if whatever they are, are out. So again, we believe, and we believe the new rules also will be pretty broad. There’ll be a number of activities that constitute active mining, not just mining ore, because when you’re developing a mine, when you’re doing that, that’s certainly active. And that’s why I think they have to have a broad definition and we’ll see what comes out. And that’s what they’ve had in the past.

Matthew Gordon: Right. Okay. So they’re anti-mining but they’re using the argument that you have been inactive for that 10-year period. Therefore, that’s what they’re hanging their coat on, right?

George Glasier: When Energy Fuels bought the mine, they actually put in monitor wells. And so, there was activity there. It didn’t produce any ore, but they did things there more than just maintaining. And that’s the other argument that was done in 2012 and 2013 after Energy Fuels acquired the mines from Dennison. So there was activity during that 10-year period, and certainly activity during 2019.

Matthew Gordon: Okay. You’re feeling confident. You will continue to spend money between now and that hearing in April? Keeping the mine active. So, what are the things that you’re going to be doing between now and then and how much are you going to be spending doing those things?

George Glasier: Again? You know, we are probably already active without taking that ore and putting it on the ore pad. But again, that may be something we do: open up the mines and take the ore and put it on the ore pad. We do have some places that we could ship samples of that ore; if you recall, one of the reasons we opened this mine was because of the very high-grade Vanadium. Vanadium prices, you know, a year and a half ago were sky-high. So, we had planned to do this and pull the samples of that very high-grade Vanadium ore to ship to various potential processing plants. Well, as you know, the Vanadium price has fallen considerably and there’s still a few of them, let’s say shipping samples. But you know, with these conditions, there’s not quite the demand for Vanadium. But we’re assessing what to do; ship the samples, take a little bit of ore out, ship the samples off site. But right now, as you know, there’s really no place to go. The Uranium price is not high enough, and probably the Vanadium price is not going to justify shipping the order to a processing plant, either in the US or off-shore.

Matthew Gordon: Well, explain something to me George, because I just want to understand the process, because we’ve not talked to many companies who’ve gone into formerly producing mines and started them up. So just help me – so what studies have you done? Have you got a PEA?

George Glasier: We basically opened the mine because we knew what was in there and we wanted to confirm what was in the mine; that’s why we opened it this summer. And we spent 3, 3.5-months in there, you know, with our geologists, with our production people assessing the mine and saying, okay, this mine is ready for production. You know, a little bit of repair work was done, but mostly it was some development drilling, removing waste and ore production.

Matthew Gordon: So, all right. So, tell me, what do you now know about the mines? So obviously there’s a 43-101 which exists, this was told to you, I guess some information, there’s some historic data too. But what do you know today about what you’ve got under the ground?

George Glasier: Of course, the 43-101 that was done on the Sunday Mine complex was done on a small drill-out that Dennison mines completed back in 2009, just to determine, you know, a small drill-out. So, most of the Sunday Mine complex has never been explored. So that 43-101 which you can basically see on our website, you know, it shows that there’s about 3Mlbs of Uranium in that small drill-out. Well that’s why we knew that based on the historic operation, that when Union Carbide started this mine, it basically bypassed and did not take all the high-grade Vanadium ore where the grades of the Uranium were lower. And that’s why we went in primarily, because that is not part of that 43-101; that was not even assessed when Dennison did it because it was lower-grade Uranium but very high-grade Vanadium, and we reported that on press releases and then the market could go and look at that. But the grades of Vanadium are very high and that is the first ore we would start to mine. And that has still got Uranium but it’s not as high-grade as the drill-out and the potential for the rest of them.

Matthew Gordon: So let’s come back to these studies, just so I can understand the process, because I’m learning here. So the 43-101 one is old: it’s 2009. Would you look to upgrade that, or would you move straight to PEA? What is the sequence of events that you think you’ve got to go through?

George Glasier: We could obviously do a PEA on that particular drill-out. We could do a PEA now that we’ve opened the mine. We could do a PEA on the ore that was not included in that 43-101. So, the big issue is, okay, where are we going to process it? Mining costs are pretty simple. We could go through a PEA and tell you what it costs to pull the mine, the ore out of that mine. The issue is, you’re probably going to ask me is where are we going to process? Okay, and what is the processing cost? So, there’s really no way to complete a PEA and say we can get yellow cake in the X price, because it’s unknown. First of all, the only processing plant that’s really available is the Energy Fuels plant, it’s shut down now, they’re going to start up. There are going to be other ones starting up so what’s going, what’s going to be the status? So, if you did a PEA trying to do it on the full production cost, you would be stuck with the unknown of the process.

Matthew Gordon: I wasn’t really coming at it from…eventually we would have got on to asking you about that: where do you process it and so forth. And I think, you know, that’s a topic worth discussing. But just coming back to the study component, like as an ex-banker, I’m trying to understand, you know,  what do we know about, what do you know about what you’ve got today, which would allow me, if I was financing this thing, to be able to get it financed?  And usually, I’m a conventional banker, I would be looking at those studies, those economic studies to try and understand it. And traditionally that’s PEA, Pre-Feasibility Study (PFS), Definitive Feasibility Study (DFS). But you’re re-entering an old mine and I just want to know what’s going on in your head because you’ve got a plan here. Clearly, you’ve been doing this a long time. I just want you to kind of share with me or all of these viewers, what is that go forward plan if someone like me, in my old profession of banking, doesn’t have a measure by which I can say, hey George, I totally get what you’re doing. Here’s the money. So, you know, what, what is the go forward plan to get funding?

George Glasier: Okay, well this is a simple mine, we opened the mine with the same contractor that Denison had in there when Denison was producing, and that contractor was charging Denison so much per time to take the order and put it outside the mall. And of course, then you had to haul it to the mill and Denison was hauling it to the White Mesa Mill and processing it. So, the contractor cost, and while we weren’t producing ore, we were paying the contractor a fixed fee each month because we were doing a lot more than just producing ore. But if it goes into the ore production stage of this thing and it’s producing ore, then there’ll be a cost per ton, okay?  And that basically is our, almost our full cost. There are some administrative costs, there are a few of the supplies that we put into the mine, roof bolts, matting, things like that.

So, then we take that per ton cost of production and the cost that we will pay, and we’ve got a cost per ton of putting that ore outside of the mine. And that ore will have a certain amount of Uranium, a certain amount of Vanadium, okay? So, the content, mineral content of that ore will give you the value that you have in a ton of rock, and we know the cost of that.

Now we know that if we transport it to the White Mesa Mill, we know how far it is and we can get a bid from a trucker and tell you how much it costs to truck it there, which we already have pretty much that knowledge. So, then we could have to say, okay, what’s going on? What’s the arrangement to process it at the White Mesa Mill? And of course, you’ve interviewed Mark and talked to Mark Chalmers, and again, that White Mesa Mill is ready to go, but it doesn’t have enough ore, and there’s no doubt about it.

Matthew Gordon: It’s a big mill. It’s a big mill.

George Glasier: I was with the company that built that mill, and when we started that mill, we had 1Mt of ore stockpiled at the site. That processing plant takes at least 700,000t of ore, and so they don’t have the capacity to produce that in their current developed and permitted mines. So, what’s Mark going to do? You know, and again, you know he hesitates to say, because I don’t think his plans are firm, but again, I think what he’s going to do is say I’ll take ore from the independents, the other companies, because that helps them. It helps the independents and helps us. But it certainly gives him cash flow to fill up that mill. That mill is costing them a lot of money to sit there. And I’ll tell you, I think for the good of their shareholders, and I’m still a shareholder of Energy Fuels, they need to put that mill into full operation as soon as they can. And again, it’s going to be dependent on the price of both Uranium and Vanadium, but maybe that’s coming soon with the action of the US Government.

So, the key to determining the total cost and the value of the Sunday Mine ore coming out of there, is what kind of transaction can we make with Energy Fuels? And that’s the short term.

Matthew Gordon: Okay. Okay. So, I hear you on that one. Just let me come back; I want to do these steps to kind of really make sure I get it. Okay? So just coming back to how you guys get funding, I think in September you had USD$2.7M, you’re spending or thereabouts, you’re spending, I don’t know, you were spending USD$700, USD$750 per quarter up until then. So how much money have you got today and when are you going to need to go out and raise some capital?

George Glasier: We have in US, $1.5M in the bank, you can see our burn rate without operating the mines, is a little over USD$100,000 a month. So that’s, you know, we don’t need money right now. Now, if we open up the mine again, that takes cash. Obviously, we spent cash last summer with the contractor and that, we spent about USD$100,000 on the ore pads, and we had a contractor build those and those are not complete. Now we’ve got some costs, you know, that we’re going to, you know, a small amount of cost. We’re going to basically contest, or we’re going to go into this state with all of our guns just to say, this is an active mine. We’ve got a top litigating attorney on our side plus we’ve got consultants; that costs a little bit. So, we are spending a little bit outside of our normal expenditures of holding properties and the general and administrative. So, but unless we are operating the mines, we won’t need additional cash for some time. Now, if the market turns all of a sudden, we’re going to open those mines and it’s going to take some cash.

Matthew Gordon: Right. Okay. So, you’re moving forward but trying to conserve your money. I appreciate lawyers and so forth and this hearing on the 8th April is going to take a lot of time, effort and a bit more money. But if it’s found in your favour, you would then look to move to properly being active and opening up the mine – is that what you’re telling me?

George Glasier: You know, we could get that kind of ruling soon, or it could be maybe when the Government starts buying after that new budget comes out, you’ve read the same thing. It’s uncertain when something might happen, but it could happen very soon, or it could be a little bit longer. But you know President Trump has something in mine to help the US industry, and we’re prepared. That’s why we’ve got those mines ready to go, so that we can be one of the suppliers to whatever need is out there.

Matthew Gordon: Okay. You are taking care of business, as far as the administrative side of things: you’ve got to get the permissions to be able to get back in there. Okay, so let’s kind of park that if we may, I just need to get this answer to the original question which was, how does a company at your stage, without going through the process of economic studies, get financing? When you’re ready to switch on, who’s going to step in and finance you, even if it’s for USD$5M? Not necessarily to get into production, clearly, but to allow you to get things set up and ready to put yourself in the best position to get into production, should the Government ever give clarity on what’s happening with their Uranium and nuclear plants?

George Glasier: It doesn’t cost you anything really to get the mine going. Well, I’ve turned the metres back on; the electric meters, deposits of about USD$20,000, but again, it’s not much. So again, when we start to turn the mine on for production, we’ll have some kind of offtake contract at a price and we’ll basically debt finance that possibly; whether we’ll do a placement, you know, an equity placement. But again, we’ll have the economics laid out because we’ll know what we’re going to do with the ore. We’ll know what the price is. Now, Energy Fuels has talked, you know, through the market; they just told me today, they want USD$60 to USD$65.

Matthew Gordon: Yes, I’ve heard that.

George Glasier: It’s a pretty nice price. The Sunday Mine certainly can make money at that price. Now is the Government going to step up and buy at USD$60 or USD$65? We don’t know, but if they do, you can apply the economics and so can we and so can financial plan for investors to give us the money, which is not a lot of money, depends on what kind of arrangement we have with the mill. If it’s simply as Mark Chalmers has said, they might just buy ore, you know in the first Energy Fuels, which I was part of, we bought a lot of ore from the independents. We’d ship a truckload of ore and you get paid 30 days down the road. So that is not much financing for that because you just have to mine each day and ship ore and then you get paid.

Matthew Gordon: So, you think on the basis of the old 43-101, you can convince people that you know the scale of the ore available to you underground. You’re saying that that’s going to be good enough for financiers to say, okay, we understand how much ore they’re going to be able to mine?

George Glasier: Oh, of course. In fact, we can open up the mine and take a bit of ore and show them. That’s one thing, you know, they can go right in there and they can talk to the geologists, and see what development drilling we did. So, they can see that. And obviously we’re not going to go into full production just yet. You know, if the Government decides to buy 2Mlbs, you know, that’s going to be split, spread across a number of producers. So, we could probably produce half of that the first year, but we’re not going to, I don’t think we’re going to get that much. So, we’re going to go in and do some limited production to start with because I don’t think, if that’s the program we’re counting on, it’s USD$150M, that only buys you about 2Mlbs. So that’s not a lot of Uranium. We could easily produce a third or fourth of that.

Matthew Gordon: How much equipment, how much did you inherit when you bought the mine? I mean are you going to have to go out and buy a whole bunch of, spend a bunch of money on the capex here?

George Glasier: We will use the contractor, he’s already available to us. The contractor has all the equipment, so we don’t buy anything. We’ve got a little bit of mining equipment ourselves, but he will bring the equipment. He was mining for Dennison and he’s sitting there with nothing to do. He’s already committed to do the mine for us. So, there is no capital cost in the way of equipment.

Matthew Gordon: Okay. You need a good idea of what you’re going to be able to sell at to be able to work out what the contract looks like with him, because he is obviously going to make a margin. Right? Otherwise he takes it all. potentially. What do you think your number needs to be? Are you saying USD$60 – USD$65 as well?

“We speculate, we know by rumour what might be in there, but we don’t know for sure. And what, which ones are those many recommendations are they going to initiate it? We don’t know. Nobody knows.”

George Glasier: I think the Sunday Mine, certainly, you know, if you’ve got $65 Uranium and even current prices of USD$80, it makes sense at that, maybe even a lower price. The Sunday Mine has got very high-grade Vanadium, it’s probably the best Vanadium mine in North America. Maybe in the world it’s got 2% or 3% Vanadium, and the White Mesa Mill recovers Vanadium, so it’s got that additional value that drives the cost of Uranium down. I’m not going to give you a number yet, but again, I’d like to see if Energy Fuels can do USD$60 or USD$65 at that mine, I’d shut the market -why would I want to sell at USD$40 if the market, if their production, which they are going to be the biggest producer of this, there’s no doubt about it. And they’re going to set the price and they make, it’s no secret; they want USD$60 or USD$65. That’s what the US needs to survive. Some people say it is for the best, but you really need a price that can keep this industry alive.

Matthew Gordon: But you’re talking about a bifurcated market there, with the US selling at one price and the rest of the world selling at another. Right. And you think that’s realistic?

George Glasier: Yes, I think so. We’re waiting to see what the Government program is, if that’s the program we’re going to produce to. And nobody knows; I’ve even made a suggestion that they could simply stockpile ore. They don’t need to process it. The Government would be better off buying raw ore, stockpiling it. The Government doesn’t need yellow cake. It’s easy to turn the ore into yellow cake, you just have to have them know. If there was an emergency where the US needed it, they could do that and have a mill, a new mill built within a year. The US Government could do things like that. So maybe you can mine both U308, as well as ore, and they can get a lot more for their money by stockpiling ore.

Matthew Gordon: Well, I heard an interview you did with Scott at Proactive, where you suggested that that’s what the US Government might do – is start stockpiling ore. I mean, I assume he did mean ore, and not yellow cake? Would you just help me to understand it? Why would the Government take the risk on the recovery component? Do you think it’s just all about security? So therefore, it’s irrelevant what the delta on the risk is? Why would they do that?

George Glasier: Risk is that the Government said, we’ve got to process ore; they could turn around and build a processing plant or you know, get Energy Fuels to process it. It’s not the issue that they have to have yellow cake in the can. We’re not out of Uranium in the US. The problem is the mines are going to shut down if we don’t get some relief. And if the mines shut down, then it’s going to take years and huge amounts of money to bring them back. So, what they’re going to do is, they’re even going to invest now to keep the mining possibility there.

You know, the processing plants, you can build a new processing plant that’s just a structure with tanks and pumps and things like that. You know, obviously you’ve got to get permits, but the US Government, they declare an emergency, they would just do it, you know, I mean we’d done that before in an emergency.

I’m not saying they would buy just ore, but it could be a combination: stockpiling ore as well as buying yellow cake, but they could get a lot more for their money right now, obviously then… when they needed to spend the money down the road. And that way, give the miners what they need, you’ve acquired the ore and turned it into yellow cake when you need it, but you haven’t spent the full cost of acquiring yellow cake.

Matthew Gordon: Okay. But I agree that it potentially could be a saving if they’re prepared to take the risk on the recovery for it. So I think there’s something there. But you don’t know anything that we don’t with regards to the Government’s plan to buy ore versus U308?

George Glasier: I don’t know anything. It’s just a possibility. Nobody knows anything about what the plan will be. And the first thing is there’s only a proposed budget. There are no real dollars there yet. If there’s real dollars in one of the agencies, maybe the department of energy will set out the forum, the department of energy in the past bought all of the Uranium for the US – that’s how they got it there. They were good at it in the past. They haven’t done it for a long time, but it wouldn’t take long for the Department of Energy to develop a program to buy this material in whatever form it is, but they’ve got to have basically the money to do that. They say, okay, we’ve got the USD$150 million or whatever, right now it’s a proposed budget and there’s no cash there for the department to do it.

Matthew Gordon: Yes, I mean it’s really quite vague at the moment. And I’m looking forward to, hopefully, this week’s announcement from the department of energy, but can I talk about two more things? You mentioned one of them, which is the mill; you talked about doing deals there, which obviously makes sense. So where are you in that? Have you had discussions with, you’ve mentioned Energy Fuels, who we have spoken to, are there others that you’ve spoken to? How do you process what you’ve got?  I guess, and I know you said you’re not quite sure what the cost will be, but how do you go about finding out?

George Glasier: We’re constantly talking with Energy Fuels, here at PDAC, and again, I think once their plans firm up, then they can talk to us seriously about what they can do with our ore. But again, they’re in the same position; they don’t have a contract, they don’t have an off-take. So that Mill’s sitting there virtually ready to go, but without any ore to fill. And they produced a little, and now it’s down to their La Salle project. I think they moved 6,000t or 8,000t. That’s what? A few days of processing? And they are not going to run the mill for that period of time. They need to run that for a period of time. It’s expensive to start up and shut down. So, what happens? They’re going to have their plan. They’re going to wait until they get their contract and off-take, I suppose, that would be the logical thing to do.

They’re going to be one of the suppliers if the Government buys, or if the Government does something else, whatever might be announced in the next few days. I don’t know what that is. You know, if they’re going to announce they’ve got current funds to do something, maybe they do, they can pull it from other budgets. So maybe they could do something and say we’re going to contract for deliveries right away. You know, who knows what they’re going to do? You know, the working group had a lot of suggestions, a lot of recommendations. We haven’t seen that yet, but when that’s made public, those are the suggestions as to how to save this industry that went to the President, but you know, we speculate, we know by rumour what might be in there, but we don’t know for sure. And what, which ones are those many recommendations are they going to initiate it? We don’t know. Nobody knows.

Matthew Gordon: Yes, I agree with you. I don’t think anyone knows. And the language has been beautifully politick and unclear. But going back to the mill component, I get that both sides are going to have a different view of this one. You’re of the view: I’ve got ore, you’ve got a mill which is under-utilised. I can supply it into you, or not, because you have other options. Are there other options in the US? Where do you ship it to, for instance, I mean there’s a couple of other mills, I think?

George Glasier: Other options; obviously there are a couple of other mills in the United States. They’re not in the same condition Canyon Mill and Wyoming, and there’s the Shootering Mill in Utah, which neither one of them are quite ready for production but could be, when you take a look at it. If Energy Fuels wouldn’t take ore from the other, and there’s not just Western, there’s other companies who can produce ore. So, the other companies could do, you know, Enfield owns the mill, and I know they’ve got some mines that they want to put into production. So, there are other options. Now, I think that the quickest and the least costly is Energy Fuels, right? If they say, no, we’re not going to process anybody else’s ore, then if the economics are right, it will be done.

Matthew Gordon: It’s going to come down to, do both sides make money, clearly. And so you have spoken with them this week at PDAC, it’s probably too early to have discussions on, you know, what’s happening with the Nuclear Fuel Working Group anyway, but you think that they’re open to doing a deal with you if you can, if both sides can get the economics agreed?

George Glasier: I think if the right deal comes down, I think it’s good for both Western and Energy Fuels to make some kind of arrangement, whether it’s selling more or whether it’s toll milling. I think it makes sense from both companies standpoint economically to do something right now because you’ve got to take advantage of the price when it’s there, and Energy Fuels, if they’re going to bid on, you know, a 1.5Mlbs, they’re going to have to deliver it fairly soon, and where are they going to get it? They don’t have that production capacity right now. Now, given time, they can bring other projects on and they just did it and updated their PEA on Sheep Mountain Now, as you see that Sheep Mountain is in Wyoming and it’s almost fully permitted, maybe it’s fully permitted, but it’s not ready for production and I see the market cap to bring that into production is like on USD$150M.

“I think it’s good for both Western and Energy Fuels to make some kind of arrangement, whether it’s selling more or whether it’s toll milling. I think it makes sense from both companies standpoint economically to do something right now.”

You don’t bring them on if you’ve got a contract, you know for a million pounds, you do things that are right now and you buy ore, or you let others process at the mill, and you make money off of that. Energy Fuels can make a nice profit up from buying more ore – there’s no doubt about it. We did it in the past. You know, Dennison was buying ore when they were running the mill because they couldn’t fill it with their own. So, it just makes economic sense to open that mill to other people. But Energy Fuels makes money and everybody else does. And if Energy Fuels believes that they don’t want anybody else make money, it’s hurting their shareholders as much as it’s hurting mine or Enfield’s or anybody else’s. So, you know, at some point, you have got to look after the shareholders; that’s the key. You know, don’t worry about the competition.

There’s really not a competition in this industry. We all need about the same price. We all produce the same product. It’s not like we’re trying to compete. There is no market for any of us now, you know; USD$$25 nobody’s selling, right? So, I don’t think we’re competing against each other, even we’re not competing against the world, except the fact is we’re not selling Uranium at USD$25. And you know, you take a look at Cameco; Cameco is not selling Uranium at USD$25. So, you know, we don’t have to worry about the competition, we have to worry about the world market. The competition now is, is the Russians or the Kazakhs that are keeping that price down, and the oversupply in the market; that’s got to work itself out and then the price will go up. I think the Government action, no matter what the US Government does, it’s only temporary. We’ve got to have a world price that supports mining around the world: in Canada and Australia, the US.

Matthew Gordon:  Yes, I agree. I agree with that. I think your competition in the US is also Natural Gas, not just other Uranium peer groups. Can we talk about like, thanks for that. Like, I guess there’s a whole bunch of unknowns in there. You know, you’re saying to me, if you can’t get some agreement with Energy Fuels, you’ve got options, you feel, right?  And you feel that the market is going to need to see a price of USD$60, USD$65 in the US, for people to be encouraged and incentivised to get back into production. If the market takes time to recover that, that, whether it be spot price, getting up to whatever it needs to do or your ability to put contracts in place, which typically get a slightly higher price than spot, and actually we haven’t really talked about that, have we? What does a company like you, which is re-entering old mines, need to do to be able to go and talk to utility companies? Because I think you mentioned one agreement from 2015 with the utility company, is that still an existence? What does that hold?

George Glasier: Well, it’s on track and still in existence and we have not delivered against it, you know, because they’ve deferred to delivery, simply because we said, Hey, at these prices we’re not going to open the mine. We could go out and buy the Uranium, but there would be probably very little margin, if any in it. So they’ve agreed they didn’t need the Uranium. They contracted with us. They are small quantities, and you know, we can’t give you the details of the contract as it is confidential, but we haven’t delivered into it or you would have seen that in our financial statements. And again, under the current market conditions, they’re probably out buying in the spot market. You know, there’s a lot of Uranium so they don’t need that Uranium we contracted for. So, and again, we’re not signing new contracts, we’re not even looking at new contracts because the US utilities are not prepared to pay the higher price. And I understand where they’re coming from. You know, when you can buy at USD$25, why sign a USD$60 contract? So again, I think long-term contracting will come, but we’re going to have to see that price move up. What is the term price is maybe in the low thirties now, but that’s still not enough for producers to sign term contracts?

Matthew Gordon: Forties I’m hearing; forties that’s the rumour. Who knows? Okay. So, then you’re early stage, right? You’re really kind of early days so you’re not in a position to be talking about signing contracts, even if the price was USD$60 today, you’ve got to move this project further along here; you’ve got to work out how much you can actually mine and get to surface first, so that that’s the process you’re going through at the moment. Is that correct?

George Glasier: Right, right, and until we have the economics there, you know, there’s no reason to talk to the utilities. I mean, at this point, we talked to them, we talked to the buyers, but again, the time is not right. You know, the prices are not right, and then maybe they won’t be in the next 2-years. But eventually they will be, you look at all the analysts out there and they said that there should be, there’s going to be a crossover between the supply and demand. When that happens, you’re going to see Uranium prices go up. How much they go up depends on… but the longer we wait, the higher that price has got to go because nobody’s doing anything. Nobody can get any money. You know, I’ve been here, talked to all the Uranium companies, juniors right here at this conference and everybody is just holding on.

They’re getting enough money, raising enough money to keep their assets, but they’re not developing, there’s not much exploration going on. I mean it’s just holding. Explorations are going on a little bit in Canada, obviously, you know, in Athabasca, they’re still doing exploration, because they’ve got special tax laws up here in Canada where they can get this flow-through money, and we don’t have that in the US, so we’re at a disadvantage, but we don’t need to explore – we’ve got plenty of resources already, you know, declined in US so, but you know, without companies developing, and we’ll take a look if you want to develop them, you know, the Sheep Mountain, look at their PEA: USD$150 million – Energy Fuels isn’t going to spend that unless they’ve got a contract and or insurance, you’re going to make a money on that. And so nothing is happening.

Matthew Gordon: No, I agree. I agree with you.  I like this bit of the discussion because you’re being realistic, and saying like, potentially, if the US Government don’t actually firm up on exactly what they’re going to do for us, this industry, this Uranium industry, as part of the bigger nuclear picture, if they don’t firm up on that and give us the prices towards USD$60, USD$65, maybe there’ll be price discovery in the market and maybe it doesn’t matter, but it’s going to take a couple of years for that process to run its course. You guys, you junior Uranium guys are running on vapour right now; all of you, because there’s no revenues, obviously. But hunkering down is the smartest thing to do – that’s what you’re telling me, right?

George Glasier: Yes. Well that’s right. And you know, I think the companies will hold on, they’ll have to cut their costs just like Energy Fuels did a major layoff, 60 days ago they took some steps, cut the cost, you know, companies are cutting their costs or trying to live off of the investments that they can get. But maybe they can last two years, but everybody’s going to have to cut back. And right now, there wasn’t much interest in the Uranium sector at this conference. You know, Gold -that was the big thing. But you know, if you went out to raise money, now there’ve been some small capital raises by the small companies, but nothing major. So again, this industry is holding on, barely, not just in the US but around the world, you know? And so again, we need to have a higher world price and I think that will come. Whether it goes to USD$60, I don’t know, it depends on where the production comes in to fill the demand and at what price? And again, Cameco; probably the best producer in the world, is going to take the majority of the contracts at whatever price they’re willing to do. And then the next year of production will come whether there’s some in Australia, some in the US, but again, if the Kazakhs and the Russians could put Uranium into the market at USD$25 for the next 20-years, it’s going to stay at $25.

Matthew Gordon: No, I don’t believe they want to do that either. What can you tell me, where do you think you get into this? How do you insert yourself into the cycle? Because like you say, you’ve talked in other interviews about being able to get ore to surface and let’s assume you can come up with some production agreement with Energy Fuels or another you think you can get into production quite soon, and you’re telling me in this interview, you think that you can put the numbers together in a way – it feels a kind of, a bit like, you know, back of an envelope; I’m going to do some quick numbers for you here – here’s what we think we can get. So, can you give me some money? It’s simpler. It’s simpler. Is that what you’re telling me?

George Glasier: Our mine is a two-commodity mine: Uranium and Vanadium; so, it’s not just dependent on Uranium.  To get the Vanadium price up into the USD$8 to $10, then we’ve got a Vanadium mine. So again, we’re not totally dependent on the price of Uranium, unlike virtually everybody else. Now, Energy Fuels has some Uranium and Vanadium. But take a look at the rest of the United States, the rest of the world, they’re dependent on Uranium. Maybe a few that have a little bit of Vanadium, but not high-grade Vanadium. So, we basically could be driven by the Vanadium market, which is a spot market, not a long-term market. We met with some of the analysts that cover some of them Vanadium and do some of the reports and get some idea of what they think’s going to happen with it. So again, we’ve got to be ready. Maybe it’s not your Uranium; maybe we turn this mine around to produce Vanadium.

“Nobody can get any money. You know, I’ve been here, talked to all the Uranium companies, juniors right here at this conference and everybody is just holding on.”

Matthew Gordon: But Vanadium has been traditionally quite volatile. And I see 90% of the Steel industry, and people talking about VRFB batteries and it’s coming. But you know, we saw the spike 18-months ago; back down to USD$3, whereas USD$7 today. It bounces around and it has been volatile. I mean, can you base a business solely off of that? Even with high-grade?

George Glasier: Well, you know, again, since we don’t have a large capital cost, if we basically said, okay, we could sell forward, even for 6-months or so, we could start to mine. Obviously, you have got to process some, there’s processing plants offshore, they can handle this. Okay, and that’s when the Uranium, or the Vanadium price went up. That’s why they all came to us. We could get them high grade Vanadium ore to be processed offshore. Of course, that was when the price was USD$20 or higher. If it doesn’t go way up, maybe that’s still not an option. Maybe, but we’re looking, we’re always talking to people. There’s a possibility of building a Vanadium processing plant in the United States which should recover Vanadium from these ores.

Matthew Gordon: Do you know what the scale of the operation could be? How much ore Vanadium have you got?

George Glasier: Well, you know, again, if you take a look at the small drill-out that was done, the resource of Uranium, the Vanadium resources is based on historic ratio of Uranium/Vanadium in the Sunday mine, which is about 6:1. So if you have got 3Mlbs of Uranium, you have got 18Mlbs of Vanadium. But again, we went in and when we looked at the mine, the Vanadium is actually higher than the 6:1 that Union Carbide historically produced. But again, we don’t report that, and we would just use that historic, which, you know, we have to be careful what we report to the market. Bear in mind, we’re also an SEC reporting company, not just in Canada. The Canadian rules are a little looser, the US rules are very tight. And so, what we report in the way of resources and that, have to be qualified.

And that question came up in our presentation, we call these historic resources, even though they’re compliant with Canadian and Australian standards, in the US you can’t say that. So again, we call them historic because apparently that’s what the US security law required. I can’t tell you that there’s 100Mlbs in the Sunday mine, but a lot of that mine hasn’t been mined and it hasn’t been explored. And again, how many pounds you need to start a new Vanadium plant? You know, this Sunday Mine’s not the only Vanadium/Uranium property; there’s other properties owned by other companies. There’s a lot of it in the area, and some are owned by Energy Fuels, some of them by Enfield, some owned by private companies. So, you know, it’s an area that there’s a lot of resources produced a lot in the past, and it can, at the right prices, produce a lot in the future: both Uranium and Vanadium.

Matthew Gordon: I guess it comes back to that question I asked earlier, which was, how do you get to the point where you can say, I think we can mine, you said USD$8 to USD$9 just now; if Vanadium gets to USD$8 to USD$ 9, that could be interesting for you. But how do you get that financed? I mean, what conversations do you need to have with either an investment bank, like I was part of, or a fund, or whoever? Strategic, I mean, what are the options on the table for you, really?

George Glasier: Some of the customers of the Vanadium financed the thing themselves, and I can’t give you the details, but if there’s a shortage of Vanadium, and actually, you know what the ones that cover this industry, they say there is not going to be any new production unless it gets up. Vanadium isn’t going to come into production anywhere near USD$8 or $10 or $12. It’s high cost, and it’s not going to come into production. So, you know, you’ve got Largo in South America, they can step up some production, but you don’t. And of course, then the by-product reduction of Vanadium, you know, from slags and so on, but that’s somewhat limited; how much more it’s tied to steel production. So again, where are you going to get, even if the demand for Vanadium just goes up, graduated like it has, without the battery, you know, adding anything to it. There’s got to be some shortages of Vanadium, maybe not in the next couple of years, but you know, there’s just not new production coming on. Because the prices are high. It’s not nearly the case as it is with Uranium.

Matthew Gordon: What’s the price you think it needs to get to, George? I mean, again, I’m trying; you’ve got high-grade Vanadium, which is great, but what price do you think it needs to get to before you can have discussions about even like funding something like that?

George Glasier: I think if we can get up into the USD$9 to $10, it looks very attractive from a plant and you know, the Sunday Mine standpoint of what, you know, when you look at the grades of the Vanadium, you know, 2% to 3% Vanadium; that starts to look pretty attractive at that price.

Matthew Gordon: You think you can make money at that point?

George Glasier: We can do an economic analysis, and we can do that if we need to do that. But again, financing may not be dependent on announcing an independent finance, we might be able to do it with the off take customer. But again, all those things are just possible. They’re not in place yet. I don’t want to represent that they are. But again, this is why, you know, we are holding ready for the Uranium or Vanadium, or one or the other, to move to a place where the mine makes economic sense.

Matthew Gordon: So I think that’s been clear: you are in position with both Uranium and Vanadium, waiting on price recovery, or discovery in the market to get to certain point. You know, you’re suggesting something USD$60, $65 Uranium; USD$9 to $10 for Vanadium, at which point you will do an economic study on either, or both to enable you to get financed. That makes sense. Okay. Thank you. One last thing, George, one last thing: this kind of got me excited because we have spoken to one other company about something similar and I was trying to understand it, which is the, it used to be called ablation, it’s now called kinetic separation technology – sounds much fancier. So, can you tell us what is it and what does it do?

George Glasier: The technology ablation, which we have kind of renamed kinetic separation because that kind of describes it; ablation is a medical term. The developers, or the people that developed this technology called it ablation. We acquired the technology, we went with that term, but you know, to better explain it, we just changed the name to kinetics.  And what this is, it’s a process for sandstone hosted minerals; that doesn’t mean that it is Uranium, Vanadium, it could be other minerals, they coat the sand. Okay? It’s very hard coating. And the way you remove that, you mine it, you dissolve it in an acid, okay? That dissolves all of the metals off of the sand. Well, kinetic separation takes this and does it without any chemicals. It does it with kinetic energy; by driving particles of the sand against each other at a very high velocity it releases that coating. And then what you simply do is, you screen off that sand, right? Like you would in a, you know, sand and gravel operation, and then the mineral is all contained in the fines and you basically have clean sand without mineral, that you can just leave at the mine site.

So, what you do, you reduce the amount of material that has to be processed. And the tests that have been done with the machines that we have, basically show that you can remove up to 90% of the mass and keep about 95% of the mineral. So, what happens; instead of shipping a hundred tons to the mill, you take in your mine 100t and you’ll ship 10t for process. And that’s where you are saving, and the environmental effect comes in, because the worst part of Uranium production is the milling: that creates the toxic waste. And mining doesn’t create toxic waste because we don’t use chemicals in the mine, but the mill uses chemicals and that’s why the milling process is expensive and the disposal of the waste from milling is expensive. So kinetic separation will reduce the amount of material you send to the mill, and that’s the advantage of it.

Well, we’ve proven it works now. It’s just the issue of getting it into production. And you know, you’ve read, there’s issues with it: we ran the process on our commercial machine in Colorado and of course we had a press release out about this and then the state of Colorado hired a guy said, well, we don’t know what this is all about. So, they went through a whole number of public meetings to try to determine if the department of health should get involved in licensing this lighter Uranium.

Well, after all these hearings, they couldn’t decide what it was. So, they went to the NRC, and the state of Colorado operates under the NRC rules. It’s an agreement State, but they went to the NRC and there was a staff member at the NRC who made a real quick, and as our lawyers say, unfunded or unfounded recommendation, well just consider it know, and that’s when the State came back and said, well we think, I guess it’s milling. We think that’s a faulty determination by the NRC and others. We haven’t gone back to the State because the State is relying on what the NRC says. So, what we’ve done is, it is no secret, we went to the NRC, the commission direct. We’ve talked to the staff, but we’re in front of the commission to decide what this process is. Is it milling or is it mining? And there’s a lot of precedents that say things that are done at the mines or mining.

Now this is nothing; it’s secondary blasting, and our position is, if you consider this milling, you better start regulating all mining as milling because we all blast with dynamite and this is secondary blasting done with basically air, okay? And so, it’s an interesting argument and it’s in front of the NRC now, when they’ll make a ruling on it, we don’t know. But again, we haven’t pressed it because the market right now wouldn’t justify it. So, as the price goes up, we’ll be closer to, I think to going to the NRC and saying we need a decision on this. They take their time, but it is in the process. So right now, we’re not doing anything. But there’s other options: even if it’s determined to need some kind of license, not necessarily a milling license. And I don’t need to go into the details of milling versus no, but again, even if it’s determined that you need a source material license, which is basically, to possess the Uranium, that’s easier to get. But we contend that’s not even needed because this is a mining process, it’s not a mill process.

Matthew Gordon: You’re just saying it’s admin:  it’s just a process you’ve got to go through. And even if it wasn’t a mining license or mining permit required for that, it’s just a process you’ve got to go through something that you feel you could get, but it’s time and it’s money, which you’re not going to invest now in today’s market, but at the right time you will step in. That’s what I’m hearing.

George Glasier: We’ve already invested quite a bit of money. The legal arguments have already been presented to the NRC on paper. A lengthy paper, a technical and a legal paper has been submitted to the NRC. So, we have spent the money through the attorneys in Washington DC, and the experts to do it. So, it’s already, most of the money has been spent on it, you know, so now it’s just a matter of the NRC actually taking the action to make a decision. And it takes a while, we’ve met with them several times and we’ll have follow-up meetings, but we believe that it’s a decision that doesn’t have to be made today but it should be made within the next year.

Matthew Gordon: So, you did say there that the ratio would be like a 10:1: if you put in 100t of ore, you might get 10t out. Right?

George Glasier: We’ve tested ore, there’s been more tested, not just in our mines, but other ores that have been tested extensively on this machine: ores from Africa and ores from around the United States. So, it’s not just for our ores, it could be used around the world to reduce production costs and to reduce the environmental impact of Uranium production. And most ore around the world are sandstone hosted ores.

Matthew Gordon: So, has that been all been done quite recently? Has it?

George Glasier: Yes. Within the last year or so. I mean, we haven’t touched anything more. We’ve had samples. We’ve actually tested some Iron ore, interestingly enough, you know, on that process and that’s not your Uranium, so we can use it. We could test Zinc. We had a drum of low-grade Iron ore out of Minnesota that we upgraded. Now again, there is a lot of light, low-grade iron ore in Minnesota. That’s not commercial. But again, we did a test on small quantity. Now, you know, iron ore is a huge quantity of material. Now whether it’s economic for these guys, you know, we tested it to show that this could work on upgrading low-grade iron ore. But again, you know, we’ve tested it on some Zinc. It works, which on other things, as long as they’re sandstone hosted. But again, we haven’t done any Uranium testing, simply because it hasn’t been necessary because we basically, we potentially could move the machines out of the State of Colorado; the State of Utah hasn’t ruled out what it is, neither has the State of Wyoming, but there’s no reason to do that yet. But the machines are in the State of Colorado. So the Colorado said, don’t do it until we decide what this is. And now they’ve decided maybe it’s milling and we’re not going to black run milling licenses because we don’t agree with it.

Matthew Gordon: So in your case, let me get this right; so this machine, this proprietary technology of yours has been used in the past and tested on sandstone to remove whichever commodities that you were testing for, but not Uranium yet and not anything in Colorado yet? Got it. Understood. Okay. Understood.

And again, once they make this ruling, is this kind of fairly cheap? In terms of how much cost it will add to your process, or are you going, well actually at a 10:1 ratio, that’s what, whatever it costs, it’s going to be fine?

George Glasier: It’s basically run by electricity. It’s a very small energy cost and it depends on how many machines are operated by one operator. So, it’s a couple of dollars a ton. It doesn’t cost very much. Now again, the machines that we have, that commercial machine was built to go into Sunday Mine, a small mine. So, you’ll need multiple machines because you know, it actually goes right into the mine. You can build them bigger; it wouldn’t fit into the mine. So, if you don’t operate outside the mine, you build a bigger one. But the one that we built is the size to go actually into the mine, operate in the mine, and put the waste material back into the mine. So, the cost of operation, if we build a bigger one would be less because one person can operate a small one or can operate a big one. So labour is one of the major costs, but it’s a matter of a few dollars per ton.

Matthew Gordon: And again, I guess you’re going to have to work at how many of these machines you’d need, where you locate them and how much ore you can put through them cause that’s what appear to be, you know the long pole in the tent, right?

George Glasier: Fortunately, for a small mining operation, you would need five of these. There’s 5 mines there; you would need 5 of them because you’ve got five different locations and you’d pick five smaller ones, or maybe you would just build one big one and bring the material out. But the advantage, why bring it to the surface, if you can process it underground? You just save hauling all that ore out the portals and you just back fill in the old stopes. Now, if you don’t have a mine, if it’s a newly developed mine, you don’t have anywhere to operate in the mine to start with. So what happens is, Sunday mine has been mined, so it can operate in Sunday mine easily. But you know, they can also operate on the surface and you could either take the waste back in to backfill the mine if you want to do it a little more cost or you could dispose it when on the surface. Again, you can build these things any size you want, but this one happens to be built to go in a mine the size of the Sunday mine.

Matthew Gordon: Okay, so this is your proprietary technology. Yes?

George Glasier: Patented technology. It’s under US patents. We have the rights to that. And it’s of course protected in countries that honour US patents: Canada, Australia. Yes. And it’s right there. And not only the technology, but the way you operate this thing. And so that’s so important because we’ve got the only operating machines, I’m not saying it couldn’t be duplicated. We shipped one of these to China. They could probably reverse engineer it and build one, no doubt about it. But the way you operate these things, it’s operated by computer technology and you know, quite frankly, you put this material into this machine and there’s a timing of these things; you’ve got to leave it in just the right amount of time or it’ll grind that sand to fines. And if you don’t leave it in long enough, it won’t remove all of them. So, it’s the operational issues also that are proprietary, and we’ve run it enough, so we understand it. And I’m not saying somebody couldn’t learn that, but you know, it’s going to take some time. And we’ve already done it. We’ve spent 5-years at this. We’re willing to, you know, let others use it under license. There are a number of times we’ve tested, it’s not ready to go because the economics are not there.

Matthew Gordon: But no one’s ready to go on Uranium. But you said it works for things other than Uranium. So, have you, are you looking at getting contracts or agreements in place with other miners, with other commodities, and start monetising this technology of yours?

George Glasier: No, I said we’ve tested other minerals. Again, case with the iron ore you know, it’s an issue that those are in massive quantities. Okay, and would take huge machines to do, and not the ones that we have. And for the economics again, it goes up and down. So again, nobody’s rushing in to say, I’ve got to have this machine because the economics of iron ore go up and down. And some of the other minerals we’ve tested, it’s the same thing; they’re small mines, we’ve tested from different locations. But nobody right now, the mineral market is not screaming for this because none of the commodities are high enough. You know, they go up and down. But again, you’ve got to find the right project. Some of the big mines you’d have to have great big equipment, but smaller mines, maybe it’s more economical; it doesn’t cost very much to build a small one. You know, they are pumps and pipes. Basically, what this, and the special patent and nozzle design.

Matthew Gordon: So, it sounds to me like you’re waiting until the market recovers for Uranium. You’re going to use it on your own project here. And I guess at that point, you may or may not receive phone calls from other Uranium juniors.

George Glasier: If we use kinetic separation on the Sunday Mine, you’re going to produce ore that has probably 30% to 40% Vanadium in it and 2% or 3% Uranium. And that is so high-grade; if you ship that to an existing processing plant like the White Mesa Mill, they would have to reduce the capacity because the back end of the White Mesa Mill couldn’t handle the output. So, I mean there’s also the issue of maybe you should build a new processing plant for really high-grade material somewhere. But again, if we’ve got that high grade material, we don’t have to build it in the US we build it anywhere in the world because transportation costs for a product of that value, is not the constraining issue; you could ship the material anywhere in the world because it’s such high value, once it’s upgraded. The economics; if you’ve got, you know, 30% or 40% Vanadium and 2% or 3% Uranium – that’s a lot of value and a ton of rock.

But again, you know, I’m not saying the White Mesa Mill couldn’t process this stuff; they could adjust the operation to process it, but logically we’ll probably just ship raw ore to the White Mesa Mill because that’s what it is, rather than this high-grade that they would probably have to blend down with their low-grade stuff, any way to put it through.

So again, economically we’re looking at just conventional mining, shipping the conventional work down the road. When the market goes back, kinetic separation is the way to go. And so that’s why again, we’re not pushing this through the NRC, because the decision can wait a while because the market is not there. And,  again, you would have to have a long-term contract or somebody that’s going to put in the money to say, I’m going to build this high-grade recovery plant.

Matthew Gordon: With regards to the, just on the money side of things, potentially this could go along, this could go on for another couple of years and you’ve got to hunkering down, you’re going to be fine hunkering down. I think you, like a lot of juniors, share price has been, you know, hit hard the last year. There’s not too much you can do about it, isn’t there?

George Glasier: Price goes up and down and it’s based on, I suppose how the investors are feeling about the market at any one time. We can come out with announcements, but we can’t guarantee the price. We can’t guarantee there’s going to be a contract or production next year. Now that’s the problem, you know, and the share prices: virtually everybody’s has gone down. You know, they’ve recovered a little bit, but the Uranium sector is down and yes, I wish, there was something I could do about it. You know, I’m a big shareholder of Western. I said on one interview, not long ago; if you want to make money in the Uranium industry in the next 30-days, you shouldn’t be in this industry. This is the longer term in any company, not just ours. You’ve got to take a longer view of Uranium, you know, a year or two. If you invest in this, expect profits and maybe nice profits with any of the companies, but it’s a year or two investment, not 30 days. Real profits are going to be made for the investors that can stay in for a while. And the industry is at a low point, so maybe it’s a good time to buy?

Matthew Gordon:  I think that’s been said by a few, I mean we’ve been talking to Uranium companies for about a year now, learning about the space. It’s a quite an opaque space. You know, people have been sitting on the Uranium thesis for the last three years and you know, still haven’t got it right, but they will be right one day; so, it’s good, it’s fine. But I’m always sort of intrigued by, you know, how companies react in a time like this. You know, today, now it’s Uranium and it was previously Gold, and you know, there’s lots of commodities go through their ups and downs. But for you guys, I guess you’re cutting back your G&A as much as you can. You’re only spending what you need to – that’s what you were telling me earlier?

George Glasier: We could cut back a little bit. We’ve got a lot of claims, a lot of properties, I suppose that’s one of our major costs: it’s holding the properties. We could cut back some of the, not the key assets and the we certainly wouldn’t cut back the Sunday, but we could cut that. We only got two and a half employees; the rest of the stuff we do with contractors, you know, so that’s the thing we don’t have, we could lay off all two and a half employees. You can’t do that. The two and a half employees that we have are the key people: myself, our CFO, Rob and a part-time operations guy. Okay. To take care of and maintain all this stuff. So our G&A is very, very low. Our capital, our money of holding this company as a public company is high because we have two jurisdictions, you know, our auditors have to audit to the US and the Canadian sides. They have to review our financials quarterly under US law, but Canadian, it’s only yearly. We’ve got additional costs because we’re a dual, you know, country, you know, reporting a company, and that’s a disadvantage. I don’t know what we can do about that. I keep talking to our attorneys and our accountants, but again, because we are under this jurisdiction, it costs more and you’d be surprised of our burn, how much is being public company. But we have to, I mean, we don’t have a choice. I don’t know how we can cut that other than become a private company. If this company could be taken private by a big cash investor and cash out to shareholders, you know, like the right price and shareholders are probably willing to do that, but we’ve got certain costs built into this thing a, little bit we can cut but a lot of it; the property holding cost and the cost of being a public company are pretty much fixed.

Matthew Gordon: I understand. And I noticed that you did mention that just there; you are a big shareholder. You’re sitting on something, there’s not that many shares out for a start, but you’re sitting on like…you’re sitting on about USD$4.7M, or something like that. Is that right?

George Glasier: About 5M shares.

Matthew Gordon: About 5M shares. So, yes, you’re into this. Have you been buying in the open market or is that what you did as part of the, when you did …rolling this into the shell originally? I mean, how have you done that? Acquired so much?

George Glasier: My shares, I got when we set up the company, we were a private company when we first set this up. I owned 50% of it to start with. And of course, I’ve been diluted when we brought in public shareholders and when we made acquisitions, like the black range acquisition, so you know, my ownership has gone down, obviously, simply because, you know, we’ve brought in, we became a public company, you know, we’ve issued, done private placements and we bought black range in a share transaction.

Matthew Gordon: And so obviously, that’s still a big chunk, like 5M out of out of 30M is significant, but that’s the case of being diluted down from whatever shares you issued yourself originally. Okay. Understood. And does that mean, do you pay yourself?  I know there’s only two and a half of you, presumably you’d do salaries and so forth, don’t you? Or do you just, you know, do stock options? How do you remunerate yourself?

George Glasier: Yes, I’ve got a few stock options. But now and I get a salary out of the company; that’s all public information, low as anybody in this industry with our resources. But I made an interview and I said, anybody else that wants to do this job for the same price who has got the qualifications – you can have it.


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.

Sunday Mine Complex

Pond Speak: You Say Zee

We Brits have much in common with our wonderful American cousins. But language isn’t necessarily always one of them. For instance, you put on sneakers, we put on trainers. You get in line, we love to queue. You lift up the hood, we look under the bonnet. And we can only apologise for the lack of ‘z’ in our spelling of certain words.

One of our super smart and delightful American readers has kindly helped correct us on something we wrote about yesterday. We thank him for helping us learn. Our article on the recent announcement by Energy Secretary Dan Brouillette, discussing the funding for domestically produced uranium, we used a phrase “discretionary funds”. We questioned what they meant and also what it could mean in terms of the allocation of the budget being discussed.

Discretionary to us means just that, at our discretion. In my banking days, if I had discretionary funds, I could allocate them at my discretion without seeking permission or sign off from my client as to where or how much, as long as it was in my mandate. In fact, the dictionary describes it as:

Discretionary: Adjective
Available for use at the discretion of the user.
“there has been an increase in year-end discretionary bonuses”
Denoting or relating to investment funds placed with a broker or manager who has discretion to invest them on the client’s behalf. Eg: discretionary portfolios

But in US Budget-speak, discretionary apparently means something quite different than it does elsewhere. So for the Non-US, or investors who perhaps are not quite 100% au fait with US Budget speak, buckle up. You and we are being schooled.

There are only 2 major types of budget allocations.

  1. Mandatory (a law was passed saying that funds must be used to do something enacted into law by Congress & Senate) and;
  2. Discretionary, which are budget requests that come up through the ranks from departments that may or may not be approved at the discretion of Congress.

The vast majority of budget items are discretionary, which doesn’t mean at the discretion of some politician or government employee. The budget document is broken down by Department and Agency to extent that every item is clearly defined by law there is no lack of clarity.

In our article we highlighted the questions that US producers want answered, ‘how much of this discretionary $150M is allocated to US producers and at what price’. So two questions.

And our very clever reader helps us with the first question:

1.  The description of the Uranium Reserve budget item says “domestic production” which means that the uranium MUST be produced within the borders of the United States. By definition, it would be impossible for any production from Canada, Australia or Africa to be “domestic production”. The whole point is to reinvigorate uranium mining inside the US. A question that investors ARE asking is whether Canadian or Australian based companies, like Cameco and Peninsula, would be eligible to compete for those DoE purchase contracts. Given those companies, just like Energy Fuels which could be cast as a Canadian-company, use wholly registered subsidiaries in the US to operate the mines, it seems a moot question. By definition, any mine operating inside the US where the product does not cross a federal border is domestic and would meet the requirements for a Buy America policy. So that seems clear, unless anyone else has an opinion that they would like to share. Great knowledge  shared.

The second question, which we added in a second draft:

2. A budget has been set for the purchase of domestically produced uranium ($150M x 10-years), but the price at which the US DOE will purchase? Well that is unknown at this stage. No companies that we have spoken to have been consulted on this topic by any US government department yet, either on or off the record. Yes, we asked! What we do know is that most CEO’s have said they will need $50-$55 to be incentivised, off the record some have indicated a higher would be needed. That doesn’t tell us much either unfortunately. Who and how the purchase price and contract terms are set is still a mystery. Different companies will breakeven at different levels. And who wants to just breakeven! And as we know from conventional mining AISC numbers can be manipulated to suit your argument, so the negotiations are set to be an interesting and revealing phase of the uranium saga.

So if you want to help us analyse or analyse the budget, we would welcome your thoughts in the comments below, or if you would like to come to our defence or defense, and write an article or just some wordz (too much?), we’d love to hear from you.

Love from you couzins across the pond.

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.

Energy Fuels (NYSE: UUUU) – Do you Hear What I Hear Ringing Through the Sky? (Transcript)

Interview with Mark Chalmers, President and CEO of Uranium producer, Energy Fuels (NYSE: UUUU).

It’s a bloodbath for Uranium equities at the moment. There is no news from Washington and most Uranium CEO’s have gone quiet. So we called Mark to see what he knows.

Interview highlights:

  • Continuous Silence: What is Happening in the Uranium Market?
  • Delays for the Decision and Options Available
  • US & Iran: How the Situation Affects the Uranium Market
  • The Mill: How Old is it, What is the Cost of Maintaining it and Could it be Decommissioned in the Future?

Watch the interview here.


Matthew Gordon: We are operating in a bit of a void here. I’m looking at share prices of most of the Uranium players, North American, are being hammered. What do you know that we don’t?

Mark Chalmers: Well, I think that we have is, we have investors that are just tired of waiting. They have been waiting; when we started this 232 process 2 years ago and it just drags on and on and on. Look, I share the frustrations of investors, but just remember; for every share sold, there is  one purchased, even though the price of these shares has gone down and we have all been hammered. Not just in the United States but even in some of the global equities in Canada have been hammered as well too. It certainly doesn’t make me feel good when I see these shares slipping but as you know, our company and Ur-Energy started this process 2 years ago, but we are still making progress. We are still making great progress. I think that the Government gets it. I think they get it that we have to have a nuclear fuel cycle in the United States.

Matthew Gordon: Why do you say that they are making great progress or that the Government understands?

Mark Chalmers: I think that when the tack changed from the 232 process, which is more of a  trade-focussed initiative, to national security when it comes to producing Uranium and nuclear products, you know, focussed on the military’s requirements, the Government’s requirements,  we got rid of, effectively, all opposition that we know of when we made that shift. The utilities are not openly fighting us. We’ve got good support from NEI.  We’ve had many, many meetings, I wouldn’t want to count them up. Hundreds and hundreds of meetings with people in the Administration, people in Congress.

Matthew Gordon: You are meeting these important people up on The Hill, what are they saying?

Mark Chalmers: You know, I think that we have gone through a huge education process on how dependant we are for import products in the United States and I think that when we talk to them, they are shocked at how dependant we have become. The government inventories have been there for decades, but they are finite and they are diminishing. As long as we are the largest consumer in the world, is that where you want to be, and not have the capabilities to replace those inventories because Uranium nuclear fuel products for the military, has to be unobligated products by the treaty, so it basically has to be by treaty, mined, converted and enriched in the United States of America.

Matthew Gordon: Pompeo and Trump; do they understand the scale of the problem?

Mark Chalmers: Look, I haven’t met with Pompeo, I haven’t met with Trump but I believe they both understand the magnitude of the problem. I think the people surrounding them understand the problem. I think they are understanding they need to make a decision quickly because of this imbalance of our ability to produce these very specialised products for the US Government.

Matthew Gordon: 12 months ago they had this same problem, today it is more imperative. Given the nature of some of the politics in America at the moment; we have this impeachment hearing going on, we have got Iran waivers being discussed, another 60 day extension, is it possible to make a decision in that environment?

Mark Chalmers: Look, we think so. It’s certainly been harder to get to the top of the pile. Since the original working group deliberations and the report they prepared, it’s been really hard. Every time we thought we were getting closer, it kept getting delayed. Certainly, with our discussions with people in Congress and those in Administration, we say, ‘Look, we are out of time. We need to tell our shareholders what the outcome is with this review. They need to understand, we are getting hammered with our share price and we also need to send a clear message to the world of Uranium mining and these nuclear fuel products; including the Russians, the Chinese, the Kazakhs, that the United States of America is not going out of business, in this area, at the front end.

Matthew Gordon: What are the options on the table now? We’ve been reading about Government-buying programs of US Uranium.

Mark Chalmers: Look, we try not to make it guesswork because it’s better for us to provide some guidance here. I mean, the first thing we want is, we want the Government to come out and say that the Government is supporting the nuclear fuel cycle in the United States: mining, conversion and enrichment, at a level that at least provides some critical mass so that we have the capabilities to produce our basic requirements, not all our products, but we can flex up if required. So the number one is; we want to be able to show our shareholders and tell the world, or have the Government tell the world the conclusions that they have made through  both the working group and the Section 232 investigations.  That’s number 1.  Number 2 – we want to see, or we hope to see immediate demand for Uranium mining. Uranium mining is the most challenged first step of the process. We would like to see the Government starting to buy Uranium: like now, this year -2020, and onwards to make sure that the Uranium miners can sell their product at fair prices. Fair prices. So that we can get some cashflow re-established. 

These companies that are not producing now – zero cashflow, it’s not a real good outcome; it’s not sustainable for a long period of time. And then lastly, the plan, the plan that they announce, we do realise that some of this, or a big chunk of this is going to have to go through appropriations. The expensive part of the plan is really the enrichment. Uranium mining and conversion already have a lot of the infrastructure in place on the lesser side of this re-establishment of the fuel cycle.  when you start talking about building new enrichment plants, being able to make everything from 495, 235, all the way up into 90s 235, that’s going to start costing billions. Now, the Government was already planning to re-establish enrichment without, in the early days, without looking at the Uranium and the conversion steps.

Matthew Gordon: Interesting. 20% of US energy is produced by nuclear fusion. There have been a few plants that have come to end of life, and a few due to come to end of life. The utilities have got oil, they have got gas, they have got renewables; nuclear is part of that, but for them to invest billions of dollars into building, or upgrading new plants, must be a big part of the conversations that they are having with the Government too. So, the miners are just a small part of this, but it’s got to be joined up thinking.

Mark Chalmers: Yes. And I think that there was a lot of logic when the President came up with his working group. Now granted, the working group’s main focus was just these first three steps of the fuel cycle but certainly, the Government, or the Trump administration is certainly committed to keeping its mini nuclear power plants operating, going forward, for obvious reasons. I think that the Government, like the DOD and the DOE, are also getting increasingly optimistic about the micro reactors and the small modular reactors. You know, this new Haleu fuel which is 20% 235, is also becoming a product that the Government thinks they will need for the SMRs particularly. And then, lastly, space travel – you know, that’s coming back on to the horizon. Now that is not probably a large consumer, and takes some time out, but again,  I’ve said this to you many times, it is not time for the United States to not be in this business.

Matthew Gordon: What is your view on this Iranian waiver issue at the moment. It’s a real political hotbed. The Europeans don’t want it. I know there’s a lot of discussions internally between Pompeo and Mnuchin about it. They are in disagreement about it. Is that a big distraction for you?

Mark Chalmers: I think it helps us because I think it shows how sensitive and inter-related this fuel market is outside of the United States. Even this morning I was hearing that Trump and Pompeo were wanting these waivers to go away. I also heard, and I heard this on the radio, Fox News, that the utilities, they don’t want it to go away because they have such a dependency already on the former Soviet Union, Russians, for fuelling their reactors. So it is all interconnected. People talk about, we’ve got all of these stockpiles, we’ve got all of this Uranium. We don’t need it for another 5 years, 10 years so obviously, the business couldn’t ever be healthy, and I know that’s not the case. But then, if you start looking at when you remove or let these waivers expire, and it starts to create issues where Russia cannot import into the United States, or cut back on that, a lot of these utilities are going to start running out of fuel, like within a year and that is sure going to shock people. What happened to all of those inventories? Where are all those products? You know, we thought we had 5 to 10 years of those products available: we don’t.

Matthew Gordon: How much inventory is available to US ultilities today? What are they sitting on? A year? Two years? Three years?

Mark Chalmers: Look, the utilities: I understand they want the lowest cost fuel to keep nuclear as competitive as they can. We know that fuel is such a small part of nuclear generation, but nuclear generation is struggling. But, you know, Uranium is in all these different shapes and forms and you’ve got to make sure you keep those in to balance with what your requirements are.  I think that this just highlights the fact that the United States doesn’t have the ability now, you know, URAMCO is fore-owned, in New Mexico, and they can do enrichment there up to 495. But we do not have US-owned capacity for enrichment. We do have US-owned capacity for conversion but that is shut down right now. I think it just highlights the fact that you do not want to be overly-dependant on all of these other countries and you do not want to be in a position where you have to fight with  one or both of your arms tied behind your back the Iranians and with the relationships they have with the Russians.

Matthew Gordon: Can we just talk about your mill, White Mesa. You know, ‘he who controls the mill, controls the district. So people are saying, hang on, the mill that he has got has a huge capacity which you can’t possibly fill. How do you maintain this mill? What’s the cost of keeping this thing going? At what point do you decommission something like that? Or is it a case of, you just replace the bits; its ongoing maintenance as you start processing stuff through the plant, you just constantly upgrade.

Mark Chalmers: I think the mill was originally built to operate for like 20 years and now it has been around for over 40 years. There have been a couple of campaigns of modernisation, you know, with control systems and automation. We have replaced a lot of the tankage, we’ve built new tailing cells. There’s been an evolution in technology over the years. So the mill, even though it’s an older facility, is in very good, excellent condition considering its age. So it is unique; as we know, it’s the only one that is operable, licensed, fully-staffed right now. It has the Vanadium circuit, hey, Vanadium is starting to get a bit of life in it. The price of Vanadium is starting to go up. Granted, when it was USD$30, dropped to 5, up to 6, we never thought that would look good but we are hoping that the price of Vanadium continues to go up here this next year or two and we can capitalise on a fairly substantial inventory of Vanadium that we have at the mill. But no, it’s in good shape, as I said, it’s basically, largely staffed. We did lay off a number of people in the last week or the week or so ago. We shut down the Vanadium recovery process because of prices. But it’s in good shape and we are ready to go.

Matthew Gordon: You’ve let some people go, where they permanent staff or temporary staff?

Mark Chalmers: Yes, most of the people that I let go were temporary staff. When we have to spool up the mill, we try to keep a core group of full-time employees and then we spool up with temporary people where possible. It’s our ultimate objective though to offer as many fulltime jobs as we can in the region.

Matthew Gordon:  We’re days away from a decision, but we have heard that before a few times before.

Mark Chalmers: I can assure you, I will let you know and the rest of the world and we have put a lot of our skin and sweat and money, we have worn out, I don’t know how many pairs of shoes I’ve worn out walking the halls of Congress and DC. But we’re excited it is finally going to happen and I know there are the nay-sayers who say it is never going to happen, they don’t think it’s going to happen, but I think we have done a fantastic job when you look at our company, because we have been doing most of the lifting, Energy Fuels has been doing most of the lifting, probably 75% of lifting here. I think it’s remarkable that we have got this thing elevated to where this is at this point in time.


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.

Brandon Munro – When the Needle Starts Clickin’ it’s Where I’m Gonna Dig (Transcript)

uranium yellowcake

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

Munro gives us a detailed response to the question, ‘Last year was another uranium trainwreck. What is happening?’ Uranium investors are desperate for some good news; it’s been all too long since they heard any. However, Munro explains in this interview that beneath a surface of squalor lie plenty of reasons for investors to feel a little more chirpy. However, there are also some reasons investors need to stay grounded.

If investors buy into the uranium macro story, they simply need to keep their faith. Munro argues all the uranium market requires is a sentiment shift in order for investors to begin seeing results. However, there are a few more substantial pieces of verifiable information; there are signs of things moving behind the scenes, and indications spot price could decide to awake from its prolonged slumber. Industry insiders claim UF6 reserves, held by utility companies, are all but gone. EUP conversion price has risen by 400%, unbeknownst to many investors. The price of uranium enrichment has also risen from US$30 to a more sizable US$50.

The information presented by Munro is positive for investors, but let’s stay calm and pragmatic. Nothing has changed just yet. Additionally, Munro, like many industry experts, explains uranium is very unlikely to reach the US$150/lb peaks of the previous cycle. Instead, a sharp peak of US$90/lb is seen as more feasible, followed by a fall back to a stable and consistent US$50-60/lb. There is no nuclear renaissance hype in the present day to drive prices to their previous highs.

Munro also touches on some issues that have been doing the rounds in the Crux community as of late, specifically the Sahel terror situation and the disastrous impact it is having on some mining companies.

Bannerman Resources itself hasn’t seen a great deal of share price movement this year, but Munro claims it is primed for growth in an imminent bull market, given its strong, experienced management team and solid portfolio of assets in favourable jurisdictions.

Interview highlights:

  • Difficult 2019, What’s to Come in 2020?
  • Uranium Inventories: A Historical Overview & Problems Arising
  • Markers for Investors: When is the Market Going to Recover?
  • Joint Comprehensive Plan of Action: What’s Changing in the Geopolitical World?
  • How will Political Turmoil Affect the Uranium Market?
  • Return of the Peaks: How Quickly Could it Happen and is it Outright Possible?
  • Future for Uranium Juniors
  • A Look into Bannerman: Importance of a Seasoned Team and a Mining-Friendly Jurisdiction

Click here to watch the full interview.


Matthew Gordon: Hi Brandon. We last met at the World Nuclear Association event in London where you sit on a couple of committees.

Brandon Munro: I sit on a working group that is producing the next nuclear fuel report. It was released in September, in 2019, so we have now started kicking off with the 2021 report. So I am involved in three of the working groups and I chair the working group that determines the demand projections for nuclear fuel projections out to 2030.

Matthew Gordon: You have had a few meetings in London this week, a few working group sessions this week, you kindly agreed to come and tell us a little bit about what you are discussing. So, last year – difficult year. Another difficult year for Uranium. I’m not quite sure anyone knows what’s going on. Do you?

Brandon Munro: I can hopefully share a couple of insights with you: what we have got is an extraordinary situation where the visual part of the market, which of course is the spot price and the non-existence of any real term volume.  There is no real price discovery, but the extent to which this exists in the spot market, we’ve got something that just looks dull, boring, disappointing and that’s had a corresponding effect on most equities.  It has been carnage out there for the last year for many, many companies. But what we can see taking place under that visual surface veneer, I think is very positive for the sector.

Matthew Gordon: Let’s look at a few of those moving parts:  behind the curtain, because people talk about the macro story. There is billions and billions of dollars of nuclear reactor infrastructure being built across the world, in multiple jurisdictions and countries. And people focus on Germany, reigning things back, the French did, now they are not. But there is more to it than that in terms of that infrastructure build out, but I don’t want to talk about that today because I think that is well covered. Can we talk about the inventory side of things because I think you have talked in the past about different piles of U308 and UF6 and EUP, what is happening there?

Brandon Munro: What we are seeing is inventory tightening.

Matthew Gordon: What does tightening mean?

Brandon Munro: The sector always exists with a lot of inventory. That’s been the case for the last 30-years. It is not helpful to look at the absolute total amount of inventory that is calculated throughout the sector.  You need to understand where that inventory is held. Inventory that is held by the Russian government or the US government or Chinese stockpiles, that is kind of interesting, but it doesn’t dictate anything in the market, because that material is just locked up for strategic purposes.  The relevant part for investors and the price, is mobile inventory; what inventory is available either to supress demand or to be sold into the bid when price goes up. Because that is what is interesting to an investor; is that going to suppress a price rise?

Matthew Gordon: Absolutely.

Brandon Munro: And what we have seen there is a tightening. In U308, we have seen tightening, largely because if the deficit that we have got at the moment. So even after allowing for secondary supplies, we have run a 20Mlbs deficit for the last couple of years. So that is being drawn down, predominantly by utilities underbuying. But what I find fascinating, as you mentioned, you have got three forms of Uranium in the nuclear fuel cycle. And for the listeners, you have got: U308, which is the mined concentrate. That has been subjected to conversion and conversion is a service that is applied to the U308, that the utility pays for, that turns U308 from a powder, or yellowcake, into a gas; Uranium Hexafluoride. And that is still a homogenous commodity because it is just UF6. From there you get enrichment, again, typically a service paid for by the utility where the Uranium that they have bought off a mine, then goes to enrichment, to the specifications required for their particular type of reactor technology.

In the old days, that’s how it worked. The utilities would buy the Uranium and they would pay for the conversion service, they would pay for the enrichment service. But what’s happened since Fukushima, when we had reactors come down, particularly in Germany and Japan, is inventory started to build up, not only in U308 but also in UF6 and in EUP; the enriched Uranium product. And that has been a problem for our market because you have a substitute ability between those three forms of nuclear power. And not only can the utilities arbitrage between those three forms; if they don’t like the price they are getting in U308, then they can go to UF6 or EUP. But they can also ignore the time criticality of planning before in the old days, they would have to have bought their U308, two years before they needed it, because it takes a lot of time to transport and move through that cycle.

Now, if they sort of mess up on the planning, well that’s okay because there was UF6 available that they could buy one year out from when they needed it, or EUP which they can buy 6 months out from when they need it.

And that has contributed to the utilities being able to hold off on re-starting the contract cycle.

Back to what’s relevant today and why I am saying that the sector in the market is tightening in a very favourable way. First of all, UF6 has tightened almost entirely. So I have just been to a room with people who plan in this sector, and what happened, as you know, a couple of years ago, Covidien put the Metropolis conversion facility into care & maintenance, and cleverly, they bought all of the UF6 they could find. All of the mobile inventory they could find in the form of UF6, they bought up.  And they did that because they had conversion contracts. And when they closed the doors on Metropolis, they would have to continue delivering into those. So UF6 is very tight. Even so much so that a few months ago, we saw Uranium Participation Corp. swap out their UF6 for U308 and take advantage of that arbitrage.

We’ve also seen a tightening in enrichment and that has been exacerbated by geopolitical concerns around Iran sanction waivers, and maybe we can come back to that. Se we are seeing a UP tightening: U308, we are also seeing tightening but not to the same extent, hence why we have got $25 Uranium, or $24.50 Uranium.  But if you look at what happens when those markets tighten, UF6, in the time frame I have described, that has gone up 400%, spot conversions. So conversion is the price of the service, so the difference between what you pay for UF6 and what you pay for U308. 400%. And that has been a wake-up for the utilities because many of them forgot that those sorts of increases are possible.

Matthew Gordon: So that tells us something. What about the enrichment component? Has that gone up?

Brandon Munro: Yes, also. Not to the same extent but it has gone up from mid-thirties, so it is measured as USD per, the SWU price, the Separative Work Unit, gone up from mid-thirties to about USD$50. So, that is also a healthy increase.

Matthew Gordon: This is what you mean by ‘behind the curtains,’ there are things going on which are indicative of a movement, or the need for a movement, relatively soon. So, why weren’t these conversations happening at the beginning of 2019? Because the numbers were starting to move in 2019, but they haven’t had an effect on spot, obviously there aren’t that many contracts being written, so how do you work out where the threshold is? Where is that critical threshold that these numbers need to get to. Where are the markers for investors to actually know when this market is going to go? It feels like not too many people know what’s going on in the Uranium space at the moment.

Brandon Munro: I’ll tell you all that it needs, because, as you know, I’ve been in meetings in London for the last couple of weeks and I get asked the same question: what’s the catalyst?

You only need a sentiment switch for this market to tighten. And that sentiment switch can come from anything, so if we use the examples now of UF6 and enrichment; in UF6, when sentiment was low, Covidien were able to buy all the UF6 that they needed to buy, and they did that. The moment the price started to go up, the mobile inventory disappeared.  And that is a fact in this market; there is an inverse relationship between the mobility of inventory and the price; as the price goes up, inventory disappears. And we even saw that, talking to some of the traders as I have over the last couple of weeks. We even saw that in November, October, November when we started to see a bit of an increase in the Uranium price, it went up by 8% in a couple of weeks, and the inventory, the availability of U308 vanished. It only started to come back when the price softened again and the various parties who had it to sell figured that there was no time value in money at that point.

Matthew Gordon: Sentiment of utility buyers?

Brandon Munro: Correct

Matthew Gordon: Nothing to do with retail, nothing to do with institutional buying?  

Brandon Munro: So let me try to explain that a bit further and put some numbers on it.

So, maybe sentiment is a little bit wishy-washy, but what we are really talking about is their view of the medium-term price and what effect that is going to have on their immediate actions, okay. So, some numbers: we are running a 20Mlbs deficit in the U308 sector at the moment, after taking into account secondary suppliers.

So, to put some numbers on that: 2016, the sector was knocking out about 160Mlbs of U308 production. Mined production. That’s now come down 25Mlbs because of care & maintenance in McArthur River, the Kazakhs producing and various other supply disruption that has taken place in the sector. Secondary supplies – all of the various forms: running at about 25Mlbs against a reactor burn up of 180Mlbs. Rough numbers. So, so far, there isn’t enough demand at the U308 level to put pressure on the price. So what we know, is that there is about, instead of 180Mlbs worth of demand, because that’s the amount that’s being burnt up each year, it’s about 160Mlbs of demand. Caused by two things: preferential buying of UF6 and EUP over U308 and utilities wearing down their inventories. So 20Mlbs, if I now translate that into numbers in the US for example, in rough terms, the US nuclear fleet consumes about 50Mlbs of Uranium and they have been underbuying in the last few years by about 20% – so 10Mlbs per annum.  All they need to do is make a decision that they are going to change their policy from under-buying to full coverage, and that’s 10Mlbs. That’s a dramatic effect on that 20Mlbs deficit. Or we could see financial plays into the marker again. In 2018, about 10Mlbs was taken out of the market by Yellowcake and UPC topping up. Again, that’s a 10Mlbs swing. A swing like that, particularly if it goes up to 180Mlbs and starts to expose that supply and demand deficit in U308, that’s enough to generate a very sharp price response which will then have secondary effects in terms of secondary buying.

Matthew Gordon: Do you think that there will be a financial impact from players like Yellowcake in the market? Yellowcake have got their own issues at the moment. I don’t see any generalist funds wanting to back it – another team buying up Uranium at the moment, are you aware of any?

Brandon Munro: Yes. But it’s private. We are aware of Family Offices clubbing together. We are aware of banks and hedge funds. But it is not the same model as Yellowcake. Yellowcake is a buy created market instrument with liquidity and hold into the long term. So the other buying in the financial market that we are starting to see is not a sequestration of that Uranium in the way that UPC and Yellowcake is.

Matthew Gordon: It is such a small market; it’s a USD$10Bn market, it’s nothing so the big institutions – it would surprise me if they were to create teams to take advantage of the Uranium space.

Brandon Munro: Yes. And look; let’s face it; investor sentiment is desolate at the moment in Uranium, so for generalists to get involved in the commodity, we are going to need a movement in price. I don’t think we are going see a change in investor sentiment until we see a change in price. I don’t think there is enough potentiality visible in the market for investor sentiment to change price.

Matthew Gordon: Talk to me about the JCPOA please.

Brandon Munro: So Joint Co-operative Plan of Action.

Matthew Gordon: Who are all of the parties involved in that?

Brandon Munro: So it is Iran on the one hand and then you have the UK, France, Russia, China and the US; so they are the co-operative parties. Put in place in 2015 because as you know, Iran was showing signs of building a military nuclear program. The plan was designed to hold off sanctions on Iran in return for Iran complying with certain obligations. Predominantly they were obligations of maintenance and monitoring, unfettered monitoring of their facilities and obligations designed to go further than non-proliferation obligations that go further than everyone else, to put a big spacer between Iran defaulting on its obligations and having the capacity to produce military grade Uranium.

Matthew Gordon: Before Christmas, things started getting more complicated; the US pulled out, plus the actions of a couple of weeks ago by the US, further complicated relationships with Iran. So, can you talk to us about your view on the US and European, well, generally European and allied with Russia as well and how you see that going forward.

Brandon Munro: It’s good to step back a little bit to try and work your way through the detail in the complications here. So, the JCPOA was set up, one of the first things that the Trump administration did was to withdraw. And they did that in a way that withdrew unilaterally. There was a diplomatic scramble by the other co-operative parties to try and keep the agreement on foot.  And what that enabled the Trump administration to do was to re-establish a whole range of sanctions on Iran that were being held off because of their commitment to the JCPOA: oil sales, access to the US financial markets etc.  But what they didn’t do, they didn’t allow those sanctions to extend to the provision of services and fuel to the US nuclear industry. And there was this thing created called the ‘Sanctions Waiver’. And the sanctions waiver needs to be re-evaluated every 90 days. So every 90 days, the Trump administration sits down and decides if they are going to give another 90 day waiver or, are we going to withdraw the sanctions waiver? Importantly for the sector and for the utilities and for listeners, the next sanctions waiver consideration date is 31st January.

Now, what happened, November 15th, Mike Pompeo announces that the Trump administration is withdrawing the waivers in respect of Fordow enrichment facility that was being used initially under the JCPOA to create medical isotopes but one of the progressive breaches of the agreement, the JCPOA that Iran announced, was enrichment of civilian grade Uranium rather than just for medical isotopes. Now, Fordow is a tailor-made facility for the electorate in the US, built into a mountain, real James Bind stuff. Clearly it was set up to produce military grade enrichment; when you look at the configuration of the cascades and that sort of thing, so it is an ideal target for the Trump administration to show that they are really serious about this.  December 15th coming up, the utilities become very concerned because no-one was particularly clear who was involved in the Fordow facility and when the waiver gets lifted on December 15th, it could have been mayhem. Now, to understand why the utilities are concerned, half of the enrichment services provided to US utilities comes from Russia; some of it directly from TFEL and TENEX and some of it is effectively resold by other enrichment providers. And the excess capacity in the Western world of enrichment, isn’t enough to fill that gap. Not only that, but RosAtom, as the Russian nuclear giant, it is involved in absolutely every aspect of the civilian nuclear power cycle. As it turned out, TFEL withdrew from its involvement in the Fordow plant because it was providing assistance with its medical isotopes and according to them, any civilian enrichment creates contamination which makes that program impossible. So that one sort of washed over: December 15th came and went and all was okay. So now we fast forward to what you were talking about with the huge escalation of tensions in Iran – a month before the next sanctions waiver. So, there is a lot of concern from US utilities, but also European utilities that if that sanctions waiver, or the entire deal falls over, the Russian nuclear providers are going to have to make a decision; do they back Iran and continue to support Iran? And be restricted from providing a whole range of services.

Matthew Gordon: It’s not just the Russians here; you’ve got the Brits, the French, the Germans, there’s a lot of superpowers in the G7 who are involved in this. G7 plus Russia. They don’t agree with the American stance and position – certainly not what happened two weeks ago. And I think there has been a lot of posturing going on, and I don’t want to get this into a political conversation, I want this to be about Uranium, but the reason why Europe hasn’t followed the US is that they think the Iran deal is a good deal.

Brandon Munro: Correct.

Matthew Gordon: It’s working and I think a lot of people in the US think it’s working, but it’s rather unfortunate timing, because again, there is the perception, but the perception is that in an election year, going to war has traditionally been quite a good vote-winner. So, you know, that whole mess has been slightly discredited with the timing, but what impact is that going to have, if any, I’m going to bring it back to investment, okay – is what’s going on in Iran going to have an impact on the ability for equities, Uranium equities to move forward, or is this something that is actually going to be another negative impact, another negative event in the world of Uranium equities? 

Brandon Munro: Let me just clarify one thing before I answer that question, yesterday, so until very recently, all of the other parties, ex-US, were declaring their support for the deal and doing their upmost to keep the deal on.

Matthew Gordon: Thanks for giving me an update, good,

Brandon Munro: Just yesterday, they invoked the dispute clause under the JCPOA.  Article 36.

Matthew Gordon: What does that mean?

Brandon Munro: That basically means that there is a 14-day dispute resolution and what Boris Johnson has said is that he would like to see a new deal which he aptly named the ‘Trump Deal’.  So, I think what they have realised is that they need to try and get Iran to come back to the negotiating table and renegotiate the whole JCPOA.

Matthew Gordon: So that is hot off the press.

Brandon Munro: Hot of the press. Which helps to contain or to eliminate the sanctions exposure of the other countries.

So how that unfolds; we have got absolutely no idea. And what effect that has on the sanctions waiver that is considered on the 31st, if such a thing still exists – so that has created a new layer of uncertainty. Now to go back to your question, it’s a difficult outcome to pick because it depends, let’s just ignore the dispute that has been called for the moment, it depends on Russia’s reaction. I think they are so dominant in the nuclear sector and it is such a profitable, effective business for them that they would throw Iran under the bus, but you can’t put a significant probability on that because it is so wrapped up in Russian foreign policy which has been extremely successful in the Middle East.

Matthew Gordon: It has. Most people don’t understand that.

Brandon Munro: That would then, so if they were sanctioned, if Rosatom as a whole were sanctioned, that would lead to a period of chaos in the nuclear supply chain, because they are so pervasive in everything, particularly what the traders are doing; much of the supply of U308 these days is coming from carry trades and so forth that the traders are involved in, but they often have so many chains of custody with those supply chains that most of the time you have got Uranium 1 in there or Rosatom in there somewhere, and there’s a chance that it could invalidate all of those. As well as the effect on enrichment.

Matthew Gordon: Why is the US taking a risk on this? It is a no-size industry, it is negligible compared to oil. Obviously, Iran is sitting on a lot of oil, again, this is a conversation for another day, 50 million barrels discovered last year, new barrels discovered last year, and this sector, geopolitically is the messiest thing I have ever seen in any investment class because it is a very emotive topic, why? Why are people so wound up about it? Investors get wound up about it. Countries get wound up about it.

Brandon Munro: Gets you and me pretty excited.

Matthew Gordon: I’m excited because I think there are some great opportunities. I think there are some great companies just sitting here waiting for people to just get back to doing business and stuff.  For sure. Again, maybe we should talk about that, it is another big topic that, that’s another geopolitical component that I know we did talk about way back.

Brandon Munro: You asked me what effect this is going to have for equities. So, there is a period of, if it unfolds that way, there is a period of confusion and chaos and hard to know what equities would do. Into the medium term though, it is going to be beneficial for U308 and beneficial for equities. Number one: it is an important reminder to the buyers in the sector, the utilities that geopolitics does matter and geopolitical risk does play a role. So they can’t just hoover up all the material from Kazakhstan that they want, at whatever price they want, they must have a diversity of supply which leads to a stacking in the price that they pay for Uranium.

Matthew Gordon: Because the supply chain may break further down the line, they need to get certainty.

Brandon Munro: Yes.

Number two: if we see a break in the chain of custody amongst all of these trades, then it is going to push the utilities back into dealing directly with producers which in the medium term is a good thing for transparency in the U308 price and it is also going to lead to more price discovery. Whilst the traders argue that they play a very important role in ensuring the efficient operation of the markets and so on, where we are at the moment is that they are playing a role in suppressing price discovery through the various instruments that they have got.

So positive in the medium term, unknown in the short term. But with any unknow, we could see a very sharp price reaction in U308 which would be extremely positive in the short term.

Matthew Gordon: I think people would have argued that at the beginning of 2019 too, wouldn’t they? So what lends you to feel that it is more the case today than it was a year ago?

Brandon Munro: Because we are talking about the scenario where we have sanction waivers lifted and we have chaos in the sector.

Matthew Gordon: We get a lot of commentary from retail investors, family officers, fund managers, CEOs of Uranium Juniors and they are talking about a return to the peaks of $130, $140 Uranium, sitting at $25 today, I’d love your view on that one. But the other thing they talk about is the speed at which that returns, the speed at which the share price returns and it’s a hockey stick, of course. Those are great stories. I don’t believe them. But they are great stories. What’s your position? Do you think we are going to see a repeat of the last cycle? Honestly?

Brandon Munro: Yes. I don’t think it’s realistic to expect a repeat of that degree of volatility.

Matthew Gordon: Why?

Brandon Munro: Well, when you look back at that volatility and I was in the sector at the time but I was working as an M and A lawyer, so we are on the M and A side; take-over defences and so forth and I can remember, there was a lot of commentary about Uranium going to $200. And it was a great unknown. The extent of reactor builds was an unknown. Obviously an up-side unknown; there was a nuclear renaissance, there was a huge amount going on. It was a demand story in those days. And when there’s enough people saying Uranium could go to $200, as it sails through $100, it still feels like a viable buy to keep buying it up.

And we still had some other dynamics in terms of Chinese being very early in their procurement cycle, they had big plans which are now back on track, but back then they were significant. Those dynamics don’t exist at the moment. Instead of being a demand story, what we’ve got today is a supply story. A lack of supply story and a lack of incentivisation. I do believe there will be volatility and I think the opportunity for this market to slowly balance out at the right price, I think that opportunity has slowly been dissipating over the last 12 to 24 months.

We would need price signals today, and really over the last 12 months, to incentivise enough new production to create a balanced market. So an overshoot is certainly likely but I don’t see it being likely that we will see an overshoot $120, $130, $136 that we saw last time. It shouldn’t be part of an investor’s plans.

Matthew Gordon: Lots of companies talking about the need for a $50, $55 spot. Just to be able to break even. Then you have got to incentivise to actually make some money, because that’s the name of the game  

Brandon Munro: Yes.

Matthew Gordon: Whatever that number is: $65, $70. It feels like today, a long way away.

Brandon Munro: It feels like it.

Matthew Gordon: But it may go quickly. So you were saying that it may quickly go up to those sorts of numbers but then the controls in place or moderation in the market, or a little bit more savvy investment strategy now compared to then, will temper that growth point? Or are you saying that this is a slow and steady growth there? Again, because we have seen some numbers from various analysts which suggests that this may hit $40 by the end of next year. Which obviously doesn’t do anything for anyone. So what’s your thoughts?

Brandon Munro: Yes, that’s right; $40 doesn’t do anything for the sector.

Matthew Gordon: It might as well be $25.

Brandon Munro: Correct – but that is exactly the point; in terms of fixing the supply disruption that we have got today but coming down the barrel particularly when Kazakh production starts to taper off, it could be $25, it could be $15, it could be $40. It doesn’t incentivise anybody.

Matthew Gordon: The Kazakhs have just announced that they have over-produced by 4%.

Brandon Munro: The Deputy Minister, are you referring to that announcement?

Matthew Gordon: Yes. They don’t seem to be following their own guidelines, are they?

Brandon Munro: I don’t know.

Matthew Gordon: Okay.

Brandon Munro: There’s a number of statements; I did ask Kazatomprom that question over the last couple of days and they didn’t know either.

Matthew Gordon: So where does that leave the rest of us?

Brandon Munro: What we’ve got, we have this situation where we need a significant escalation in the uranium price to even start to put new projects into the game, and as you say; is it going to be enough for them to get financed and constructed and built? So the ranges that you are talking about – I’ve got no problem with Uranium prices getting there and staying there. And I think there is capacity for an over-shoot. I just don’t see $136.

Matthew Gordon: What do you see?

Brandon Munro: I can see an overshoot to $90.

Matthew Gordon: Okay, sustained?

Brandon Munro: By definition it is an overshoot, so not sustained.

Matthew Gordon: Because at the beginning of this conversation, you talked about some of the controls in place and some of the people who can control the market to a degree. And I have asked this question continuously over time and people say it’s impossible for any big players to control the market. That may or not be the case, personally I think it is in the interests of people like Kazatomprom, like Camaco, not to let the market go too crazy because no one wants 500 entrants in the market place like last time round. At the same time, we have had conversations with CEOs, talking about roll ups and consolidations and so forth, listened to Rick Rule saying there are perhaps 6 to 10 players who will run in the market. There are 50 today. So obviously, people are expecting a lot of change in the structure of Uranium producers. What’s your take on what the horizon will look like? How do you see the junior mining space playing out? Because there are like 5 biggish boys and then there’s a bunch of others.

Brandon Munro: Well, if we talk about capacity of the market, volatility and capacity to overshoot.  I think for an investor, they have to be saying, is there investment in the category of producible pounds in the next   cycle, or is it something that could come on in the cycle afterwards. Because if we do see an overshoot, it’s only the companies that are in a position to benefit from that overshoot that are going to produce a superior result. Sure, there might be a little bit of a bubble amongst all Uranium companies with an equity’s response, but at the end of the day, particularly for institutions and investors who need liquidity, if it is not producible pounds, then in a sense, whatever the price is doing in the next cycle is irrelevant. Perhaps it will help their cost of capital which might mean that they are diluted a little bit less, but you’ve got to be able to produce pounds into the next cycle.  As you know well, there are very few companies in that small universe of Uranium investment that can do that.

Matthew Gordon: To me, that is some big red flags across the market. People need to understand what good looks like and what not so good looks like. Previously we have talked about teams who have produced and sold into market. We think that is really important because it is a lot more complicated than other sectors. We have talked about the need for the asset to be of a scale; scale is really, really important here and to be able to mine economically because again, the basic rules of mining still apply. Companies with a sense of what the economics looks like. This gives you some cues as to whether to invest in them or not.

But, you guys for instance? What’s your team’s structure? Have you got people on board who have been there and done it before, in a cycle?

Brandon Munro: Absolutely.

Matthew Gordon: You have? Okay.

Brandon Munro: And for us, that has been extremely important. So if you look at who we’ve got in the team. So in Namibia, our chairman is Mike Leech. He was the Managing Director of the Rossing mine at a time when it was the largest Uranium mine in the world. But before that, he was for the last 15 years, he was CFO so he was involved in all of the marketing and contracting and knew everything about that, to do with Rossing, which was a dominant player.

Matthew Gordon: Let’s take that; you say that, when you go and have conversations, sorry for swinging it back to Bannerman and I’m putting you on the spot here a bit, but I want people to understand the mindset of the junior miner board, okay. You’ve got an experienced team, when you are talking to – whether it be funds, I know that you have a lot of talks with people in China because the scale of your project would suggest that that is probably where you are leaning but I’m sure you can tell us another time. What are they looking for? Is that an important factor to them? I certainly think that it is, but do they?

Brandon Munro: Absolutely. Because as you say, you say; Uranium mining is a little different and I know there’s a lot of understatement in that.

Matthew Gordon: Yes.

Brandon Munro: It’s critically different. You need two things at a senior level: you need that understanding of Uranium; there’s people who have done it before, but you also need to know the country.

Matthew Gordon: Okay.

Brandon Munro: So we’ve got Mike Leech; so in terms of knowing the country, former President of the Chamber of Mines in Namibia and former Chairman of the Namibian Uranium Association, the list goes in. In my opinion, he is one of the most senior mining executives in the country.

Matthew Gordon: So Namibia is known for mining. What is the main mining output?

Brandon Munro: Uranium and Diamonds. It does have Gold, it does have Copper, Lead, etc. Mining is extremely important to Namibia. It’s a big chunk of its GDP and the majority of its foreign earnings and Uranium is half of that equation.

Matthew Gordon: So it is important that you get into production and generating cash and employing people.

Brandon Munro: And it’s not just Mike, our Manging Director in-country, Verner Evault, he was our manager at Rossing, he was born Namibian, very well known in-country. Very great reputation. Dustin Garrow is our marketing advisor.

Matthew Gordon: We have interviewed him a couple of times.

Brandon Munro: Dustin sold Namibian Uranium for Paladin, he obviously knows Namibian Uranium because he has been in the industry for more than 40 years. But, he knows Namibian Uranium, he knows exactly what needs to be done to get it out of the country. We are not going to have a mishap in our first shipment and all of that stuff that can go wrong in that sector.

Matthew Gordon: I had forgotten he was involved with you guys. We like him a lot. He just talks common sense. I encourage people to watch the interview with Dustin.

Brandon Munro: And as you know, I lived in Namibia myself for more than five years so I know the set up in Namibia.

Matthew Gordon: There’s a lot of things going on in Namibia like unemployment is quite high. You sort of look at what’s happening in various other countries in Africa, is Namibia a really benign environment or should people be worried about the jurisdiction?

Brandon Munro: From a living their point of view, it’s entirely benign. I lived there with my family, with my four kids for more than five years and I never even had my car broken into. I’d liken it to living in large parts of Australia.  Good infrastructure. Very strong development agenda, as you know, because of unemployment and fiscal reasons, etc, etc. But the other thing is, because the country is largely built off diamonds and then Uranium, there’s a very strong not only acceptance of Uranium but respect for Uranium. You go into Swakopmund, which is the coastal town near our project and half of the infrastructure has been built by Rossing. People remember, appreciate and value that. And that is so different to so many different Uranium mining jurisdictions. Even the little NGOs, the interest groups that we have got there that oppose nuclear power and oppose  and Uranium mining, we let them have their voice, I’ve been in debates with people there; it’s all very respectful but they don’t get any traction with local people because people value and are appreciative of what Uranium mining has done for the whole country.

Matthew Gordon: You are going to come back and tell us the Bannerman story properly.

Brandon Munro: Okay. I’d love to do that.

Matthew Gordon: In the next couple of weeks, probably online when you are back in Oz. It’s good to see you over here. Really is – it’s always good to see you over here. Perhaps you can share some of your WNA conversations with us as well, when we talk.

Brandon Munro: Great. It’s always good to catch up. Thanks for making the time.

Matthew Gordon: I appreciate it. See you soon.


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.

uranium yellowcake

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.

  1. https://e360.yale.edu/features/why-nuclear-power-must-be-part-of-the-energy-solution-environmentalists-climate
  2. https://www.energy.gov/ne/articles/nuclear-power-most-reliable-energy-source-and-its-not-even-close
  3. https://www.world-nuclear-news.org/
  4. https://www.nucnet.org/

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.

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.

  1. https://www.iaea.org/newscenter/news/uram-2018-ebb-and-flow-the-economics-of-uranium-mining
  2. http://www.energyfuels.com/
  3. https://youtu.be/uj1VG8V3igs
  4. http://www.energyfuels.com/white-mesa-mill

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.

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

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.

PALADIN ENERGY LTD
  • 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)5.25.25.22.72.72.7
AISC$33$33$33$33$33$33
Long Terms$52.5$52.5$52.5$52.5$52.5$52.5
Of Sales50%50%50%50%50%50%
Spot$45$55$65$45$55$65
Of Sales50%50%50%50%50%50%
Revenue ($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)6.56.56.53.43.43.4
AISC$29$29$29$29$29$29
Long Terms$52.5$52.5$52.5$52.5$52.5$52.5
Of Sales50%50%50%50%50%50%
Spot$45$55$65$45$55$65
Of Sales50%50%50%50%50%50%
Revenue ($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
Debt$132$145$160$176$183

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)5.25.25.25.2
Spot$50.00$60.00$70.00$80.00
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
Interest$19.9$19.9$19.9$19.9
Depreciation$20.0$20.0$20.0$20.0
Taxes$6.4$12.2$18.1$23.9
Net income ($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:

2018201720162015
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. https://www.wiseinternational.org/nuclear-monitor/847/paladin-energy-goes-bust, Paladin Energy goes bust
  2. Paladin Energy, Annual Report 2019
  3. https://www.youtube.com/watch?v=IFHo8eblsA4, Scott Sullivan’s Proactive interview 27 September 2019
  4. Paladin Energy, New York 1-2-1 presentation, 17 October 2019
  5. https://www.paladinenergy.com.au/announcements/deliver/2053, PFS1
  6. https://www.youtube.com/watch?v=tJoz8xkp5TY, Scott Sullivan’s SmithWeekly interview 27 august 2019
  7. https://www.paladinenergy.com.au/announcements/deliver/2043
  8. https://hotcopper.com.au/threads/ann-board-and-executive-changes.1869301/
  9. https://hotcopper.com.au/threads/ann-minbos-board-changes.2193085/, Minbos board changes
  10. https://hotcopper.com.au/threads/ann-rights-issue-close-subscriptions.2179697/, Rights Issue Close & Subscriptions 12/2/2014
  11. https://wcsecure.weblink.com.au/pdf/AYA/01595284.pdf, Attila Resources, Quarterly Activities Report December 2014
  12. ttps://wcsecure.weblink.com.au/pdf/AYA/01608070.pdf, Attila Resources Interim report 2014
  13. https://wcsecure.weblink.com.au/pdf/AYA/01681040.pdf, Attila Resources, ANNUAL REPORT 2015
  14. https://www.asx.com.au/asxpdf/20140430/pdf/42p9qblsmtnjpl.pdf, Attila Resources Quarterly activity report March 2014
  15. https://www.asx.com.au/asxpdf/20151030/pdf/432mrfxz04tlmc.pdf, Attila Resources Quarterly activity report September 2015.
  16. ttps://www.asx.com.au/asxpdf/20150730/pdf/4304stv37fhhqh.pdf, Attila Resources Quarterly activity report June 2015.

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

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: http://www.energyfuels.com/

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