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)

Energy Fuels' White Mesa Mill

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/

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.

Energy Fuels' White Mesa Mill

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

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

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

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

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

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

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

Interview Highlights:

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

Click here to watch the interview.


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

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

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

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

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

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

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

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

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

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

Matthew Gordon: That’s great news.

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

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

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

Matthew Gordon: And these are generalists?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dustin Garrow: It will be difficult.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Interview Highlights:

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

Click here to watch the interview.


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

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

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

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

Matthew Gordon: And what’s the mood?

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

Matthew Gordon: But back to these investors.

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

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

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

Matthew Gordon: Like what?

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

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

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

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

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

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

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

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

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

Matthew Gordon: Partially westernised, surely?

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

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

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

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

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

Matthew Gordon: Solution to do what?

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

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

Mike Young: No man’s land.

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

Mike Young: We’re having those.

Matthew Gordon: So, tell us about those.

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

Matthew Gordon: Where have you gone to?

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

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

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

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

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

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

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

Matthew Gordon: And that’s your $55?

Mike Young: Yes.

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

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

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

Mike Young: There is a little bit.

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

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

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

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

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

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

Matthew Gordon: He’s right.

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

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

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

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

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

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

Mike Young: Scott Hyman.

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

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

Matthew Gordon: 50% of what?

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

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

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

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

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

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

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

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

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

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

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


Company website: https://www.vimyresources.com.au/

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

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

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

IsoEnergy

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

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

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

Click here to watch the interview.


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

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

Matthew Gordon: What are people talking about?

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

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

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

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

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

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

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

Matthew Gordon: And ended up next door!

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

Matthew Gordon: They are a shareholder?

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

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

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

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

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

Matthew Gordon: What does that mean for you?

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon: How long does that take?

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

Matthew Gordon: These are all quite shallow holes?

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

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

Craig Parry: We are yes.

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

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

Matthew Gordon: Have those fund-raising conversations started?

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

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

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

Matthew Gordon: So they know this is coming?

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

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

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

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

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

Matthew Gordon: Have you been writing cheques?

Craig Parry: I certainly have been writing cheques.

Matthew Gordon: For this company?

Craig Parry: For this company.

Matthew Gordon: Just checking…

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

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

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

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

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

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

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

Matthew Gordon: Coking coal. Different. Different ballgame!

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

Matthew Gordon: Let’s say 7 years.

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

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

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

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

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

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

Craig Parry: Trading about $0.50.

Matthew Gordon: How many shares did you say?

Craig Parry: 68 million.

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

Craig Parry: Probably a little bit.

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

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

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


Company page: www.isoenergy.ca

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

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

IsoEnergy

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

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

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

Interview Highlights:

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

Click here to watch the video.


Matthew Gordon: So, tell us about Fission 3.0.

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

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

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

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

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

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

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

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

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

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

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

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

Ross McElroy: Fission 3.0 has 16 projects.

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

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

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

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

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

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

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

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

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

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

Matthew Gordon: Are you parking that for now?

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

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

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

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

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

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

Ross McElroy: Thank you very much. A pleasure.


Company page: https://www.fission3corp.com/

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

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

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

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

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

Interview Highlights:

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

Click here to watch the interview.


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

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

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

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

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

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

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

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

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

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

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

Roger Lemaitre: No, true.

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

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

Matthew Gordon: So that’s off the table?

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

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

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

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

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

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

Roger Lemaitre: Yes, we do.

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

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

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

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

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

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

Matthew Gordon: What’s your liability?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon: People talking $50-$60…

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

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

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

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

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

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

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

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

Roger Lemaitre: Correct.

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

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

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

Roger Lemaitre: Yes

Matthew Gordon: That’s project number one.

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

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

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

Matthew Gordon: What are you obligated to do financially?

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

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

Roger Lemaitre: Correct.

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

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

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

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

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

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

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

Roger Lemaitre: Sorry?

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

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

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

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

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

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

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

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

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

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

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

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

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

Roger Lemaitre: Cameco does. yeah.

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

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

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

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

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

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

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

Roger Lemaitre: Absolutely.

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

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

Matthew Gordon: You seen worse.

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

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

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

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

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

Matthew Gordon: Potentially.

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

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

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

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

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

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

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

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

Roger Lemaitre: No, and I would agree.

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

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

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

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

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

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

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

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

Matthew Gordon: At what price?

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

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

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

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

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

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


Company page: https://www.uex-corporation.com/

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

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

Global Atomic Corporation (TSX: GLO) – The Largest High-Grade Uranium Sandstone Deposit on a Global Scale (Transcript)

Global Atomic started in 2005 and focused on Niger, which is one the best performing regions for Uranium outside Kazakhstan and Canada. By 2007 they had tied up 6 assets and have developed 4 of them before settling on their main asset. The Uranium development has been supported by their share of a Zinc producer in Turkey. Last year they rebuilt the plant to almost double the production. This has been highly attractive and has allowed Global Atomic to grow the Uranium business whilst others have struggled.

They have a highly experienced Uranium management team who has produced and sold Uranium in to the market. We think this is critical to the success of any junior Uranium company. Not many junior companies can claim to be end to end and that is why so many fell over in the last cycle.

Stephen Roman tells us about doing business in Niger. The area that they operate in has been a producing Uranium for over 50 years. They have done 140,000m of drilling so have good picture of what the deposit looks like. Stephen talks about the grades and size of deposit which is the largest high-grade sandstone deposit in the world. 250Mlbs at today’s price of $25 is c.$6Bn. Stephen talks about the economics of how much it will cost to get it out of the ground.

Interview highlights:

  • Overview of The Company
  • The Turkish Asset
  • The Management Team, Their Experience and Roles
  • Running a Business in Niger: Government, Obstacles and Advantages
  • Getting into Production: What Do They Have? What Does The Timing Look Like? What’s Their Strategy?
  • Why Should You Invest in Global Atomic?

Click here to watch the interview.


Matthew Gordon: So you going tell us about the Global Atomic story. Why don’t you give us the 1 minute summary and we’ll pick it up from there.

Stephen Roman: Global Atomic started with an ex-partner at Denison Mines, Clifford Frame, back in 2005. And we were out basically looking for Uranium around the world. Our background with Denison Mines, of course, one of the biggest producers in the world was started by my father, as a matter of fact. So we got that going. And at the time we wanted to look in Niger because Niger is a producer, it didn’t have a lot of international investment. It had been tied up by the French for many years. My associate, George Flach, who I’ve worked with for many years, was in Niger at the time working on a Gold project. And I called George and I said is there any Uranium potential properties that we could start doing exploration on? And he said, ‘yes, you should come over. The government is just opening up the the doors for foreign investors’. So we went over in 2005 and by 2007, we put together a nice package of six really high profile properties, started our exploration program. So since then, we’ve developed four Uranium deposits there with one major discovery called Dasa that we discovered in 2010.

Matthew Gordon: So we’re going to get into that in a minute. But you’ve also got operations in Turkey.

Stephen Roman: Turkey, yes that’s another company Clifford and I started in 2005 at the same time to actually look for base metals around the world. And we ended up in Turkey on a primary Zinc deposit. And then the crash of 2008 happened, financial crisis. So we didn’t want to leave the country empty handed. So we found a shutdown plant in a place called the Iskenderun right on the coast of the Mediterranean. And it had been processing electric arc furnace dust. So waste from steel mills. And so we bought that plant and refurbished it, got it going again by the end of 2009. And it’s been making money ever since.

Matthew Gordon: It has been making money. And I think that’s one of the attractive features that investors of Global Atomic are looking at. Is the fact that this thing is quite a simple process in many ways. And having looked at the economics, it’s quite profitable.

Stephen Roman: It’s very profitable.

Matthew Gordon: Talk about some of the numbers that because I think it has a big impact.

Stephen Roman: Last year our EBITDA was $13M, and we have currently at 49% share, we’ve turned it into a joint venture. So because that wasn’t our primary business operating a plant like this, it’s a 56m long kiln that’s like a cement plant. You put the waste in there with some feedstock, coking coal, et cetera. And you volatize the Zinc that’s left in the waste and then you condense it and you make a very high grade Zinc concentrate. Running at 70%. Our biggest customers are NyrStar and Glencore. So we ship right out of our own port facility in Turkey that we have with the steel mills there and ship this concentrate to Europe.

Matthew Gordon: So the presumably the 51% shareholder is local?

Stephen Roman: No, the 51% shareholder is the world’s biggest company in this space. It’s a company called the Befesa Zinc. They trade on the Frankfurt Stock Exchange. So we brought them in. They were always interested to get into Turkey. And the fact that we were already there operating and we actually accelerated their plans to get in the country. And they didn’t have to do stand alone that would have taken five years. So they came in and they paid us to buy into the project. And we agreed to make them operator. And so now we have a very, very good joint venture with them.

Matthew Gordon: And what’s that throwing off for you?

Stephen Roman: In total our share was $13M. So out of $49M. So let’s say $26M-$27M total EBITDA last year. Now what we’ve done in 2019 is we shut the old plant down. We completely demolished it and we built a completely new plant, that’s now running. So within 6 months, we tore down an old plant, built a new plant. And so this is now doubling our capacity from 30Mlbs a year of Zinc to 60Mlbs a year of Zinc production.

Matthew Gordon: When does that pay back?

Stephen Roman: That pays out in about eight months.

Matthew Gordon: And then it’ll be free cashflow after that?

Stephen Roman: That’s right.

Matthew Gordon: What sort of quantum are we talking about in terms of the free cash flow component for you?

Stephen Roman: That’s 60Mlbs at $1 per pound, that USD$60M a year. Your costs are going to be in the 30%-40% range. The rest is free cash flow.

Matthew Gordon: And net contribution… So you’re not running or operating that business. It’s something that you started, you monetise and someone else is operating. Sounds smart to me. It’s throwing off cash. What are you gonna do with that cash?

Stephen Roman: Well, so what we did. That was in a company called Silvermet. Started by myself. Global Atomic was a private company. So between George Flach and myself, we raised about $60M from this company. And we really use that to develop the big Dasa project. So what we needed is, of course, liquidity for our shareholders. So we decided since nobody really cared about a small Zinc recycler, we would merge the two companies. So about a year ago, we merged them and gave everybody liquidity. We gave the Silvermet shareholders a big asset in our Dasa project, and gave the Global Atomic shareholders liquidity on now the Toronto’s senior board, Toronto Stock Exchange. But also the cash flow from that Zinc can help us develop the large Uranium asset.

Matthew Gordon: So I think that’s well understood. And that’s when you even took on free cash flow position there is obviously a lot more around. Can we talk about Global Atomic? I want to get into the detail of it. It’s in the Uranium space in Niger, which is a very well known space for Uranium.

Stephen Roman: One of the largest producers.

Matthew Gordon: Absolutely. And high grade for Africa. Let’s talk about the team. Because I’m a strong believer and strong advocate that the team needs to know what they’re doing. Be able to talk about what they are doing, be able to deliver that. Who’s on the team? Who have you brought on board?

Stephen Roman: George and I really got things going. George is a professional geologist, has been working in West Africa since the 80s. We started working together in Ghana on a Gold project that Denison and I had in 1985 called Bogasu. The fact that I my roots are with Denison Mines, I had a lot of talent from there that actually came and joined us. So now one of our prime consultants is a mining engineer, Royal School of Mines named Fergus Kerr. He was running all Denison’s operations in Elliot Lake.

Matthew Gordon: So he’s got Uranium experience?

Stephen Roman: Big time.

Matthew Gordon: So he was the guy you brought in.

Stephen Roman: And we brought in another guy named Dr. Peter Wallenberg. He was the head of Areva’s Uranium department in North America. So Peter is a geologist and he was credited with the discovery of a number of uranium deposits. One of the big ones is in the Northwest Territories and Canada. So he is also on our team working with us. Then we have people in Africa that have been there working with us and with George, some senior Uranium geologists that are part of our team in country. And then we have our CFO, Rein Lehari ex- PriceWaterhouseCoopers (PWC), that has been involved in the mining business for a long time. And finally, the last gentleman I can name here as part of our team is is Merlin Marr-Johnson. He’s a geologist. He’s worked with many companies, mineral companies, exploration companies, and he’ll be our London liaison. And helping us with our feasibility process and management who aren’t based in London.

Matthew Gordon: And who of that team actually manages the in country relationships?

Stephen Roman: George Flach is our VP of Exploration. He’s also a Vice Chairman of the company. But he spends a lot of time in Africa. He lives in Africa. And so he manages that. Merlin is now helping him with that whole aspect as well. And so what we’ve done as a foundation with a couple of individuals, of course Clifford Frame was a mining engineer and he was the President of Denison Mines. We put together a real core team. And as we move along and complete feasibility study, we add to that team as we go forward.

Matthew Gordon: I need to kind of point out to people here is the importance of what you just said, because I would say mining is tough. Uranium mining, that’s a whole other ball game.  If you haven’t done it before, it’s a case of you don’t know what you don’t know. Because not only has it got all the mining risks associated with it, it’s also got all that geo-political risk to it, regulation around it, safety etc… And so you need to been through that to understand what you’re getting into. So if you’re making investments, you need to consider if you think this team understands what it’s doing. So that’s a big deal. You’ve deliberately gone about putting a very well versed and experienced Uranium team together.

Stephen Roman: Absolutely. I started working underground as a miner at Denison at 19. So I’ve been in the Uranium business most of my life. Denison was the biggest Uranium producer in the world from Elliot Lake. My father built the town there and we employed thousands of people. Our big customers were initially the Japanese, various utilities there. TEPCO was one of our biggest customers. I was involved with the price negotiation, sales on Uranium, mining Uranium, exploring for Uranium. So we’ve been in this business a long time. And then the big contract we made was with Ontario Hydro, for 126Mlbs. It was one of the biggest contracts for Uranium ever in the world.

Matthew Gordon: That’s amazing. So what I’m hearing is that you put a lot of store by having the right team of people who’ve been there from exploration and actually selling product and market. I would argue from what I’ve been hearing over the past few days, in the past few months in speaking to Uranium companies. Getting out of the ground is difficult. But that’s where that’s where the difficulty actually gets even harder from there. Getting it into market, on time, buying cycles. Understanding logistics and physically moving Uranium around the world and getting it to where it needs to be and all of the cost issues, because you don’t necessarily get paid the second it comes out of the ground. Managing that is quite complex. So it sounds like you’ve got a team and that’s what they’re doing. But let’s let’s get into the project itself, because I want to understand your impression of Niger. Doing business there. How are you gonna go about doing it? What are the barriers? What are the things that you’re seeing that you’re dealing with to be able to do business in the Niger? Tell us about the country first?

Stephen Roman: As I mentioned before, we’ve been working in West Africa since the mid 80s. And we’ve got a lot of experience in all the West African countries. Niger is primarily desert. So from a point of view of logistics, it’s quite easy to get around. We happen to be located in an area called the Tim Mersoi Basin, which is like the Athabasca Basin in Canada. It’s got good infrastructure. So that’s that’s a good thing. Well, highways, power lines, towns. There’s there’s the main core production for New Year comes from the Tim Mersoi based. And so around all mining formerly called Areva started mining there in about 1970. So the two mines that they, Cominak, and Somair have been running that long, our deposit is located just about 100 kilometers south of those two mines. Then we have another mine operated by CNNC, the Chinese National Nuclear Corporation bought one hundred kilometers to the southwest of us. So we’re in an area that’s very well known for uranium mining. We we’ve particularly zeroed in on that area because obviously good geology and the fact that we did have interest.

Matthew Gordon: So why haven’t the French picked up this land package.

Stephen Roman: Well, the French owned all of this land. But because of what happened in 2005 with the government effectively telling the French, ‘listen, we’re not going to allow you to own the entire basin’,.

Matthew Gordon: And just sit on it.

Stephen Roman: And sit on and land bank it? So we want other companies in here. We want other companies spending money, developing projects. So we’re gonna leave you with eight concessions and we’re gonna divvy up the rest to people that are interested. So that’s what we picked up our six.

Matthew Gordon: If I look at the Athabasca, it based on the stories we’ve heard, there are some great stories and amazing stories. High-grade, fantastic, but some very deep assets. That adds to costs. Can you describe the base in here and where you sit on that and why you’re saying it’s a great place to be?

Stephen Roman: We we went to an area that had previous work done on it by the Japanese. We developed as a surface deposit.

Matthew Gordon: Meaning he inherited data from them?

Stephen Roman: The areas that we picked up were known to host uranium. So there had been limited amount of work. There were outcrops. There were drill holes. There was data available. So we went through all of this data and we picked the areas specifically that were exciting. When we went into follow up on some of them, we found deposits that could be exploited. So we did a lot of drilling on one of our concessions. But it was it was a typical lower-grade African surface uranium project. We were looking for something bigger. We’re an elephant country here. So we followed our nose. We did a lot of prospecting on surface, hand Geiger counters walking across the ground and beside one of our other projects called Dajy, about a mile away. We found a blowout. It means that from down below. Something has percolated up a crack. It’s left a blob on surface. And that blob in surface. The Geiger counters went crazy. So we took this material, brought it to Canada, assayed it. It was running at 30% uranium. So we said holy smoke. This is this is something unseen in Africa. We need to start working around this area. So we laid out a drill program. And we outlined a lot of lower-grade material like a halo around this blowout. And it was going down to about 20m or 30m and it was a reasonable amount of uranium, but the grades weren’t there. So we said, where is this coming from? In Niger, they had a preconceived notion that when you got to a volcanic to horizon in your drilling called the event formation, they stopped drilling because they said there’s nothing below it.

Matthew Gordon: So what sort of level are we talking about?

Stephen Roman: That was probably 50 or 60 metres down. So we said, there’s gotta be more to this story. So we said, ‘we’re going to forget about what all the local geologists think and what the preconceived notions are, where we’re going to drill through this Abinky’. And when we drilled through this Abinky, we hit the mother lode. So this a Abinky had created an impervious cap. It’s on top of it a mudstone. So a down faulted block, covered the mudstone and Abinky. It totally sealed this deposit from the surface, except for that little chute.

Matthew Gordon: So you’re able to paint that picture of what was looking like underground quite easily as a result.

Stephen Roman: Yes. So we’ve done about 140,000m of drilling. We did the shallow drilling, but we also drilled right down to about 700m. So that whole graben. And now what we discovered, it’s got a large deposit sitting under that Abinky formation. That is spectacular. So far we’ve drilled off about 250Mlbs. We’ve got grades in it running over 20% uranium. We’ve got large areas that are running at 1% to 4% uranium. But overall it’s just a spectacular deposit.

Matthew Gordon: It’s more significant than most other Uranium deposits in Africa.

Stephen Roman: This is right out of Peter Wallenberg’s mouth. It’s the largest, highest-grade sandstone hosted Uranium deposit in the world. This is this is quite a statement. And he said that at a PDC talk where he had the room full of people and very technical people.

Matthew Gordon: Let’s qualify that. Because we’re trying to educate our audience about uranium and which investments to look for and why they should look at certain companies, not others. So most people understand the Athabasca. Very, very high grade deposits there. You’ve got Australia, you’ve got Kazakhstan, you’ve got Africa. They’re all slightly different deposits with their own attributes and their own negatives to in a sense some people are pro-mining and some aren’t. And some are not necessarily free trading, as it were. But what exactly do you think you got here in Niger? It’s one of the better regions for African uranium mining. But what do you think you’ve got if you got a numbers that you can share?

Stephen Roman: Just to give you a bit of a numbers on our project. So we have currently about 250Mlbs in the Dasa deposit. If you take it at the current metal price about $25 a pound. That’s about $6.5Bn metal value sitting there at the moment. So that’s a big number.

Matthew Gordon: There’s a big chunk $6Bn-ish number which is great. But 1, you need to be able to a mine economically.

Stephen Roman: That’s right.

Matthew Gordon: And 2, I think the obviously the whole market is hoping that the uranium price recovers. And then you’ve got to work out what you can get out of the ground for at the point you just want to go back into market. So all of the usual mining rules apply there. But that’s a big number is still a big number you’ve got pounds in the ground.

Stephen Roman: Yes, absolutely. And, it all boils down to economics. So I think the Dasa stands out in that regard, because the mineralized material comes right to the surface. We can start mining right from the surface open pit.

Matthew Gordon: Keeps the costs down.

Stephen Roman: Keeps their costs down.

Matthew Gordon: But at some point you can opt to go underground aren’t you.

Stephen Roman: Well, I would say eventually as the deposit goes deeper, you have to make that decision from an economic point of view. Many cases you’ve mine an open pit down to 300m and then you go in with a ramp from the pit and you continue mining down to 600m-800m. Chuquicamata the big copper project in Chile, they’ve mined that thing down to 800m to 900m. It’s a massive pit. So these things are capable but that’s something that will happen 30yrs or 40yrs from now. So for the next 10 years, it’s going to be a very easily mined open pit, right from surface, low strip ratio. We’ve done all the metallurgical test work on the material, the uranium leaches with typical sulfuric acid leaching. There’s no nasties in the ore. So it should be a very low-cost producer. Kazakhstan currently has the lowest production costs with in-situ leaching. I would say that our costs typically we would be able to mine a pound a process and put it in a drum for under $20 a pound. That would be a typical open pit with a stand alone plant. A plant would be in the $300M range. So we’ve been looking obviously at that option as a base case, but we were looking at other options of actually starting with a heap leach operation, which could significantly lower your costs because your CapEx would be much lower, your production costs would be lower processing. So we’ve estimated for an initial heap leach operation, very low strip ratio, we’d be in the $10 to $15 a pound range. I think even at $25, we can show a very healthy profit from initial operations. The mine wouldn’t actually get into production. We’re doing the feasibility over the next 12 months and then applying for our mining permit. We should have that by the end of next year, early 2021. So this could be a very profitable initial start up operation with a low CapEx number.

Matthew Gordon: And a contribution coming from Turkey.

Stephen Roman: That’s correct. The turkey aspect. And people ask like, why did we do that? With that very solid cash flow coming out of Turkey, it gives you many financing options. We don’t have to dilute the shareholders. We can we can do some sort of a note that’s backed by that cash flow from Turkey to actually build a mine.

Matthew Gordon: You can leave leverage? That becomes very interesting. Well, in a non-diluteory sense. So let’s come back to Niger. There’s a study going on?

Stephen Roman: Yes.

Matthew Gordon: So what type of study is this?

Stephen Roman: It’s a feasibility study. That will be the one that we would present to the government in order to get our mining licence.

Matthew Gordon: There are a few of the players in and around you. I note you have had conversations with them.

Stephen Roman: Well actually we’ve signed an MOU, a memorandum of understanding. with Orano mining. So we did that in July 2017.

Matthew Gordon: For what?

Stephen Roman: So the idea there was that we would be jointly studying the ideas of potentially shipping ore to their plants in Arlit. So they have the Colinak mine, the Somair mine both up there. The idea was that by us shipping ore it could of course get us started very quickly without a plant. And it would augment the supply of ore that they have at their operations so they could extend the life of those operations.

Matthew Gordon: So that you signed an MOU to be able to access and share information which allows you to make an assessment as to whether you want to do that or not at all. All the economics need to be decided as part of a feasibility study. That’s interesting. So that whole tolling relationship, given the amount of pounds you’ve got on the ground. Getting into early cash flow, I guess is the bit that interests you. You just got to work out and see if that makes sense for you.

Stephen Roman: Exactly.

Matthew Gordon: Because the CapEx for building plant…your own plant would be quite large plant.

Stephen Roman: A heap leach wouldn’t be as much as a conventional uranium plant, but it’s still a fairly significant Capex. I would say in the $100M. A conventional plant, you’d be in $300M. So all these are things that we have to take into consideration. We thought as a value opportunity. Doing something with Orano at early stages, could start generating cash flow. So we’re in discussions with them about doing something like that.

Matthew Gordon: So when’s the study actually due?

Stephen Roman: We won’t be finished until June of next year.

Matthew Gordon: So at some point you’re going to make some commercial decisions based on ‘how much money you need going in the ground’. And ‘what relationships you want to form’ and ‘what you’re going say to the marketplace’. So June next year?

Stephen Roman: I would say that we would have all the decisions by then. Of course, we’re going be putting up updates throughout the next 6 to 12 months. The other component is the government. The government wants to see us in production tomorrow.

Matthew Gordon: But their considerations are on employment, taxation, royalties.

Stephen Roman: Absolutely. This is their number one revenue generator in the country. Uranium mining. So that’s one of the reasons we’re there. I mean, in Canada, these are fantastic deposits in the Athabasca Basin, but it takes minimum 10 years, maybe up to 20 or 30 years to permit those mines. In Niger 4-6 months. It’s a whole different thing.

Matthew Gordon: They have some different drivers, haven’t they?

Stephen Roman: They have different drivers. But it’s it’s the only game in town, really. And now they have some oil there that the Chinese are developing. But really, uranium is the mainstay of that country.

Matthew Gordon: This comes down to the question we touched upon earlier with regards to buying cycles. Let’s not get into the macro story. But what it means for you and your shareholders and new shareholders coming in, is understanding how quickly can you get into production? And that’s there’s a bunch of factors… your at feasibility study. You can make an economic decision at that point. You’ve then got apply from mining license. You’re saying that’s a relatively quick process because there’s a lot of uranium mines already operating.

Stephen Roman: Well, there are in Niger. But on top of that, it’s a quick process, a very well-defined process in Niger.

Matthew Gordon: So that happens. And then is a question of which option you choose to go with in terms of how you start producing or processing your ore. What’s that timeline look like, you’re getting into production by when?

Stephen Roman: I would say get into production by, if Orano would like some feed by 2021, we could start then. If we have to build a plant, it would be probably 18 to 24 months later. Depends what scenario you go with.

Matthew Gordon: That’s your decision.

Stephen Roman: Well, we have to look at the economics at the end of the day. What can you do to move it ahead quickly and make money for shareholders.

Matthew Gordon: But that’s what this interview is about. It’s about making money for shareholders, which is where I’m coming at it from anyway. Let’s understand what happens next. What are the options? I want us on what’s happening in your head. What are you thinking about? You’re building something great here in Niger by the sounds of it? You believe you are. You’ve also got some optionality at what point you check out, right? You could get a strategic partner. You could hand the keys over, say, ‘there you go’. And say we’ve created value. Or you can build this thing out. What are you thinking?

Stephen Roman: Well, we’re mind builders. I just finished building a mine in Ontario in Canada, a gold mine. the company is called Harte Gold. And it’s it’s Ontario’s and Canada’s newest gold mine, probably in the last 10 or 20 years. we can take projects. From exploration to production. I had a project in Northern Ontario, a company called Gold Eagle Mines. So we made a big discovery in Red Lake, Ontario, and we were already working on sinking an exploration shaft, buying equipment for that. And we were approached by Goldcorp. So they were interested in buying our project. And we assessed the situation. And I made a deal with the Gold Corp for $1.5Bn for that gold deposit.

Matthew Gordon: It’s a great day at the office.

Stephen Roman: It was a good day at the office. All of our shareholders were very happy. Many of them made tens of millions of dollars on that transaction. There are a lot of those shareholders are now in a Global Atomic. They backed me on the next deal. So I have a track record of making money for shareholders. You have to assess things as they come along. We would like to develop this project because they’re really, frankly, is none other like it in Africa. There are very good projects in Canada, but the time-line to develop those is very long. So I think ours is exceptional from that point of view, both in the size, grade, value and time that you can actually start making money. To answer your question, we have the French in Niger, we have the Chinese in Niger, we have the Russians in Niger, we have the Indians in Niger. Everybody’s looking for something like this. So you know what? If a deal comes in the door, you have to assess it. You have to talk to the shareholders, ‘Would you like to have a buyout at some premium? And everybody get a big dividend, big payout’. You have to assess these things as they come along. In the meantime, we continue to create value by moving this ahead. We  derisk this project.

Matthew Gordon: That’s the answer every CEO has got to give me. They have to say we’re gonna build this thing, because you get that discount when you say, ‘we’re just developers’. We’re going take it to a point. You’ve got to be able to show that you can deliver those, don’t you?

Stephen Roman: Absolutely.

Matthew Gordon: And you would argue with the team that you’ve got, it not only is it about finding it but building mines is something that you’re very comfortable with.

Stephen Roman: Absolutely. Done it before many times.

Matthew Gordon: So I got to ask you’ve got the right team for exploration, development and production. You’re telling me you’ve got a great asset I’m hearing. Finance. Are you going to need to raise any capital or are we going to use all the money from Turkey to develop this thing?

Stephen Roman: Well, I think at this point in time, we’ve raised a little bit of money because there’s been a lot of institutional interest in this project. We have about $5M cash on board now, and Turkey is starting to kick out cash as we speak. So our new plant is just being turned on now. So we get management fees and sales commissions every month and then annually we get a big dividend payout.

Matthew Gordon: Is it enough?

Stephen Roman: Oh, yeah. That would be enough to move this project ahead.

Matthew Gordon: Depending on route you go with. I presume there’s a caveat there.

Stephen Roman: Yeah.

Matthew Gordon: But that decision is not made until June year.

Stephen Roman: That’s right.

Matthew Gordon: What are the other barriers? What are the other obstacles that you need to. You can see coming which you’re going to have to deal with or manage because it’s all about risk mitigation. Every day little fires to put out. What are you seeing as some of the things that you need to be dealing with between now and the point at which we get into production in Niger?

Stephen Roman: Well, I think in Niger one of the big issues that comes up is security in the country. So we’ve been there operating and running projects for many years now. We have a good security system in place. The Niger government wants to attract foreign investment. So they’re really clued in on the security situation. The Tim Mersoi basin and is seen as a strategic area. So they have a lot of military there. The Americans have built a new military base just 100km South of us. The French have one 100km North of us. So the area is very well patrolled. Niger is totally aligned with the West as far as being the hub of security for West Africa. So there are sporadic attacks from from various al-Qaida factions in West Africa. But Niger is managed to keep things fairly under control for some time now. AnWe expect them to continue that. And particularly with the American presence there and uranium being the material that they don’t want that being jeopardised.

Matthew Gordon: So thus it has always been with the Americans. That’s it for sure. But what else?

Stephen Roman: There’s there’s good trained labor force there because there’s been uranium mining going on there for 50 years. So I think we have a lot of people interested in coming to work for Global Atomic. It’s really getting the feasibility done and getting the capital organized, whether it’s through some sort of a leverage facility. Using our cash flow from from Turkey or coming up with potentially a JV partner. Maybe the French or the Chinese or the Russians are interested in farming into the project. These are all things we have to look at over the next year or two.

Matthew Gordon: Now talk about the markets, Your shareholder will want you to be talking, giving guidance, directing them as to what you’re up to. But you’ve got new investors looking to come in, pick a uranium team to go after. What are you telling them? Why is it Global Atomic versus the other companies?

Stephen Roman: Well, I think it’s a Global Atomic. Number one, we’re a profitable company. We’re not coming to the market every few months. That’s very unusual. Number two is the size and quality of the asset. There’s just nothing like it out there with a short timeline to production. So that would be that it would be the top qualifiers. I would say is excellent projects, good jurisdiction. Very quick permitting timelines. Definitely growth potential there. This thing could get even bigger than it is. And the profitability of the company as we currently sit.

Matthew Gordon: Plus the team has done it before.

Stephen Roman: We’ve done it a few times.

Matthew Gordon: Not many people can say that. I buy all that.  You do have your points of differentiation and what is it has been a difficult market for the last year for uranium players. What are you seeing happening in the next 12 months in the uranium space? I know we said we wouldn’t talk about macro, but just with regards to some of the companies and players in this space, what’s your sense of how they’re going to fare?

Stephen Roman: Well, the companies that have really outstanding assets. They may not be able to move them along very quickly, but they’ll always have value there. They’re the lower grade projects, I think are going to slowly fall away. Uranium is going to stay reasonably flat for the next couple of years. It’ll move a little bit. In the last three years, four years, there’s been and including this year, about 45 new reactors built in the world. Now there is another 150 scheduled to be built in the world. Uranium is going to be in big demand.

Matthew Gordon: There is a need. I mentioned specifically about the type of companies you think or what companies need to be able to survive. Because you’ve given a timeline which is quite interesting. I’ve heard all the last three days, last few months, since 232 about the timing of that, right? There’s lots people that needed to be before Christmas, right? Price discovery. And real quick, because they have cash flow issues. And that comes onto one of the points you’ve made. If you don’t have cash, you got to work out what business model you employ to survive. If it’s a two year timeline for this slow recovery, that’s going to put a lot of pressure on a lot of companies. And they can have to think about how they raise this capital, what they have to give away, what it’s going to cost them, the cost of that money. So that’s very important. So whether the asset is good or not. But the ones with lesser assets, they’re going to have a tough time, aren’t?

Stephen Roman: They will have a very tough time.

Matthew Gordon: That’s good for you. It’s good for people like you.

Stephen Roman: Well, the good thing about our company is we have very solid cash flow stream that is basically not reliant on a deposit.

Matthew Gordon: You’ve almost mitigated the risk there. It’s in a separate commodity, a separate country, separate company. So there’s no correlation anyway in terms of the risk.

Stephen Roman: That’s right. And even if things take a little bit longer on one side, you don’t have to come to the market to keep the lights on.

Matthew Gordon: You’ve got optionality.

Stephen Roman: You’ve got optionality. It’s very important. And I think people are starting to realise that now that sort of sets a Global Atomic apart from a lot of companies.

Matthew Gordon: But do you think that’s been priced into your market cap now or do you think there’s a ways to go?

Stephen Roman: I think our market cap right now is around CAD$70M.

Matthew Gordon: Where are people attributing the value? Is it the Turkish asset or is a what you’ve got on the ground in Niger?

Stephen Roman: Based on the way our partner Befesa trades at about 10 times EBITDA. Yeah. If we take the same for us, we should be trading at a $1.50.  And that’s without any value to the uranium asset at all. You get the uranium for free. As this new plant now cranks up and we start kicking out, you know, $20M- $30M EBITDA annually, our shares are going to move up just on the zinc asset alone. The uranium is a huge bonus for our shareholders.

Matthew Gordon: Perhaps maybe getting a slight discount because there’s a liability there. There is a cost of getting that in to production. People are thinking, does that mean dilution or these guys going to come up with a way of getting that finance, which doesn’t dilute me. So until you can answer that question….

Stephen Roman: Well, I’m a big shareholder. I continue to buy shares and put money into the company and I sell, you know, what I think says a lot? We’ve kept the share capital and the dilution very low. So we expect to continue to have that strategy. Low dilution and leverage what we have in order to develop something that’s that’s worth billions of dollars.

Matthew Gordon: So you don’t think it’s worth like getting a just a little bit in and give you a little bit of headroom for the unexpected?

Stephen Roman: Well, there might be…

Matthew Gordon: But there won’t be a lot.

Stephen Roman: No. There’s a couple of institutions that have approached us that have expressed an interest to have a position. We’ve said, well, that’s something we’ll consider at the right price.

Matthew Gordon: So you might facilitate that to get the right people on board. Again, to give you optionality going forward. But it’s not we’re not talking a huge amount of money.

Stephen Roman: No.

Matthew Gordon: Interesting approach. Well, I really appreciate the story. First time our viewers have heard this story. We know a lot about it because people talk about it. It’s an unusual position you’re in. And I think investors considering uranium as part of the portfolio should look at Global Atomic seriously, because the reasons we stated. The management teams experience, the cash flowing, very unusual, the scale of the assets in Africa. And all of those mitigating risks that we’ve just gone through in terms of how you going to manage this thing going forward. Impressive. Thanks very much for your time, sir.

Stephen Roman: Thank you.


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

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

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

Energy Fuels (NYSE: UUUU) – Grabbing a Tiger by the Tail. Uranium Market Goes Wild (Transcript)

Mark Chalmers CEO of Energy Fuels tells us that the Section 232 Petition was an unwanted but necessary process. Speculation is abound as to what the The 90 day Working Group has been asked to do.

What exactly will be decided in 90 days? Will US Uranium production be used only for Department of Defence needs? What does “Domestic Uranium Production Concerns to be Addressed” mean?Plus just how many friends do Mark and Jeff have left in the Uranium community for submitting the Section 232 Petition and paralysing the contract buying market? Is Energy Fuels prepared? Will it use the White Mesa Mill to bend others to its will? Let’s see what Mark Chalmers has to say.

Click here to watch the full interview.


Matthew Gordon: Mark, we spoke back in April.  It feels like a long time ago, and a lot of things have happened, including the Section 232 Petition.  What’s your reaction to all of that?

Mark Chalmers:  I think that firstly when we thought that there was going to be a decision on 12th July, we were expecting a positive decision for good reason, and we didn’t get that immediate relief that we had hoped for, but we’re very encouraged with the fact that two new companies in Colorado, UR Energy and Energy Fuels, filed a petition that now is going in to a new review which is looking at the entire nuclear fuel cycle in the United States at the highest levels of government.  Probably the most extensive review done in three or four decades on the front to the back of the nuclear fuel cycle.

Matthew Gordon: We’re talking about the 90 day Working Group, which was announced in the Presidential Memorandum by Donald Trump.  It wasn’t what you wanted, but are you seeing that as a positive?

Mark Chalmers: Two small companies couldn’t tackle the whole nuclear fuel cycle.  It was too big for us, so we’ve focused mainly on the Uranium front end.  We certainly did mention that other portions of the fuel cycle were challenged.  There’s a number of positives here.  We thought we had line of sight to relief little lead within 24, 48 hours for good reason.

Some of the positives is the Secretary of Commerce said it was a national security issue.  The President agreed with that.  A remedy was put forward. We don’t know exactly what that is, but the report from Commerce will be public in this new review group that’s getting started as we speak.

Matthew Gordon: Donald Trump did say in June 2017, he announced an initiative to revive the nuclear sector.  And this memorandum does talk about nuclear fuel production rather than specifically Uranium.  There’s a lot of moving parts here.  It’s hard it’s deliberately hard for us to all interpret exactly what it means.  I think the language is vague, but let’s try and see what you read into some of this. I think everyone’s claiming a win here.  Everyone’s opinion has changed over time.  Lots of people are claiming wins here, but I want to understand what you think. 

Mark Chalmers: I think that the Department of Defence requires US produced Uranium by treaty.  I think that the memo itself indicates that the complete fuel cycle for defence and our power plants is challenged.  It’s broken.  We don’t have the ability to basically chase… We’ll deal with it in terms of a lot of infrastructure, but our ore infrastructure, but we do have ability to mine Uranium right now and run it on through conversion enrichment, and up into the more highly enriched products with our existing infrastructure.

Now with regard to the Department of Defence they have to purchase Uranium from the United States.  The utilities do not currently have to produce the Uranium from the United States and that’s the differential between it.  And as we know, 99% is being imported into the United States right now, but I think the key grabs from this review is, as we said, we started off with a focus on Uranium mining.  It’s now a larger focus.  The audience, the members of that Working Group are secretary level, Secretary of Defence, Secretary of Interiors, Secretary of Treasury State Department, NRC.  These are all the top of the tree.  It’s basically the President’s cabinets minus a few people like Homeland Security and Health and a few things like that. So it’s floated to the top here.  It wasn’t a no-no.  It was “No, we need more time.”  And I think that was a key element.  They needed more time.

Matthew Gordon: There are a lot of big names involved – Secretary of everything important that’s involved with this and that, but they’re involved in a nuclear fuel production review.  That’s the top line.  I think we’d all agree that there needs to be a lot of discussion around the reactors and subsidies that reactors are receiving.  Where does Uranium fit into that review?  Is it a big piece of this?  They talk about addressing concerns, they don’t talk about addressing US Uranium production in anything other than in relation to the Department of Defence supply.  So what’s your expectation of what this 90 day review’s going to give you versus the rest of the world?

Mark Chalmers: I think that the memorandum and the flavour is that it’s got to be a holistic review.  I think the other thing is that certainly we’re going to pull out where we can participate, is that again the United States consuming one third of the world’s Uranium products, at the front-end Uranium less than one per cent, but then we have conversion on standby.  We have foreknown enrichment. We don’t have ability to go to these higher ends, but at the same time – and this is the important thing that needs to be drawn out. Russia, China are building up their capacity which is well in excess of their requirements.  So here we are not being able to produce a per cent of our requirements, where our foes are going to be able to produce many times greater than they need, so that they can create a global business to take over the entire fuel cycle in the world, including the United States.  This is where the national security issue is very significant. 

There is a huge focus by the United States government on critical minerals which Uranium is one, and okay as a company we also produce Vanadium – which is a critical mineral – and so this is right up the alley of that initiative. So separate from the nuclear fuel cycle you have the critical minerals too.  So look, there’s no certainty on the outcome but we’ve certainly elevated it to a level that it really needs to be at. 

Matthew Gordon: But what do you want out of this review?  Do you want certainty around your position? Do you want certainty for the market?  Do you want to understand what it means for you financially?  What are the specifics around, what do you want from these guys?  They’ve had an initiative for the last two years, but I don’t know what they’ve been doing in the last tow years.  What will they do in 90 days which they didn’t know before?

Mark Chalmers: We’re still looking for that 10, 12 million pounds, up to 10 or 12 million pounds of production under contracts.  We’re not looking at Tirus.  Maybe you don’t call them quotas.  There’s other ways of doing that, but we want long term contracts.

Matthew Gordon:  Who from?

Mark Chalmers: Still a good position to ask for long term contracts.  We are not materially changing what we’re asking for in terms of the certainty and relief at the front end for the Uranium mining side of things.

Matthew Gordon: Who do you want these contracts from?  Do you want them from the Department of Defence or the utilities being made to buy from you?  What are you looking for?

Mark Chalmers: We want long term contracts from utilities, from he Department of Defence.  The Section 232 was a trade initiative. It was focused on trade.  Well now that we’re in this larger Working Group there are other potential fixes that aren’t trade related.  It doesn’t mean that the trade issue’s got to go completely off the table, but it opens up the opportunities on where this could go and how it could potentially be funded looking forward.

So it’s still early days. You’re right, 90 days goes by very quickly.  But we agree with the President’s decision.  Yes, sir, it’s painful, the shares got hit like they did, and not just our shares but everybody in the United States, but we actually agree with the decision and we think the President made the right decision by opening it up to the entire fuel cycle.

Matthew Gordon: At what point did you recognise what could happen?  You started a series of events.  I said to you way back then, I thought it was a really bold, big move for two small companies in this space to go for. But at what point did you recognise that actually this may not go the way you wanted it?  Was it literally the day the memorandum came out or did you know anything before then?

Mark Chalmers: I can’t say publicly but I had for good reason up until the last 24 to 48 hours that we had, very positive signals that we had a good chance of receiving relief of this material for us and the United States Uranium mining industry.  And as said, we had nothing to confirm that. Actually we didn’t have anything positive to confirm it until that memorandum came out.  There were rumours starting to fly.  They were not consistent with what we believed and were we were at, but when the rumours started to fly and people were saying, “Oh, I confirm this or I confirm that,” we didn’t know.  We did not know.  One thing that we do know, and as I said, this got into the White House.  I think that they basically run out of time when the topic of Uranium mining and the other parts of the fuel cycle started to convolute things in terms of really where they should be focused and what decisions they should make.

Matthew Gordon: So you made a statement to me the last time we spoke.  You said you’re a winner and you’re going to make this thing work.  I believe that you believe that and that’s great.  But do you think winners do everything and anything it takes to win?  And if you do, do you think the 232 is the right move for you then and do you still feel that now?

Mark Chalmers: If I had the opportunity to do it again, I would have done it again.  I think that 232 was the right step.  I think it’s right in line with… I said it many times that we will be aggressive but not reckless.  I think that from my perspective and again for good reason we got this thing very, very close to going across the line on our petition.  We’ve got the support of columners.  We’ve got this national security determination.   We knew it wasn’t going to be easy.  In hindsight it’s been more difficult than perhaps I had thought at the beginning of the process, but that’s life isn’t it? 

Matthew Gordon: I think the uncertainty is still there, but we can come to that in a minute.  Do you think you’ve made some enemies along the way?  Your share price has been hit.  Your US colleagues companies have been hit. Utilities weren’t for this move at all.  Who’s out there that’s friendly and who’s talking to you?

Mark Chalmers: I don’t have people that I consider enemies.  I think that the utilities, yeah, they didn’t agree with it.  Everybody has to vote their pocket book, and that includes the utilities.  I’d had a number of utilities tell me “Mark, t’s not personal.  We understand why you did what you did.”  And to this day, with all the number of shareholders I have talked to, yeah, sure, they saw the shares drop by 40% and so.  37% on the day.  No, I’m not happy with that.   No, they’re not happy with that, but I have not had an angry shareholder.

Now, after this video maybe somebody’s angry.  They want to come talk to me, and I welcome them to call me. I welcome them to call me.  I’m an approachable guy and I’m looking for big opportunities for our shareholders, not status quo.

Matthew Gordon: Do you think you’re going to be punished by utilities as a consequence of this?  I know you just said, “Look, it’s not personal,” but will that be reflected in terms of their buying behaviour with contracts going forward?

Mark Chalmers: Absolutely not. There’s a lot of rumours and as I said, when you look at the other Uranium producers in the world, you look at Canada, if you look at Australia – if they had the opportunity to take in a Section 232 route, I will bet you they would have taken that route themselves if they had that opportunity. 

Matthew Gordon: With regards to the narrative, I remember talking with you, I’ve talked to a lot of CEOs of other Uranium companies, talked to funds, talked to a couple of utilities – the narrative obviously knowing what we now know with regards to President Trump’s memorandum, the narrative’s changing.  Everyone’s claiming a win.  Everyone’s claiming that they called it right.   Who do you think actually called it right in all this?  I know you said it wasn’t the outcome that you wanted, but did you see anyone get this right?

Mark Chalmers: You’re right where a lot of people are saying, “Oh, it’s a win for me.”  Everyone says it’s a win and here we are still waiting another 90 days.  I think we’ve called it right because we brought to the attention of the government a fundamental flaw in our fuel cycle and in our national defence with the front end of the fuel cycle.  So I think that in the absence of us filing our Section 232, where would be today with regard to the focus on the fuel cycle?  I think we did what we needed to do.  As I said, I don’t regret doing what we did and there still is uncertainty – and even on the day, I said on the day the rumours start flying, I kept saying to people around me, “This is not consistent with President Trump.  It is not consistent for him to say, “”No, I’m not doing anything.”  So when the memorandum came out, I couldn’t accept that what was in that memorandum was consistent with what I would expect from President Trump and his administration that they would need to look at this in a more detailed way.

Matthew Gordon: He didn’t say no.  He didn’t say yes.  He just bought some time.  It’s part of a much bigger review.  Do you think that review is going to finish in 90 days or probably a bit less than that now?

Mark Chalmers: You’re right, it’s a large review.  All I can say is in the 232 process, they met all of their time constraints.  They were on the day on just about everything that they did.  Now this is a bigger group…

Matthew Gordon: With bigger collective problems, Mark.  You’ve got the utilities with a multitude of different energy sources as well as nuclear.  You’ve got the gas guys.  You’ve got big lobbyists who have been fighting the good fight and they’ve got to appease all of those people.  I guess there’s room for everyone.  It’s a question of who gets what slice of the pie. 

Mark Chalmers: I think we’ve got a tiger by the tail.  There’s no question.  But not all these things have to be solved in a day, and they can’t be solved in a day.  I think that the key things that they need to look at is a phasing of things.  You take further down in the enrichment cycle of the fuel chain.  You’re not going to solve that in a week or month or six months, but we do have things like the conversion and the Uranium mining that can be solved quicker because a lot of the infrastructure…  Well, the infrastructure, a lot of it is in place, a lot of the people are in place. 

Matthew Gordon: Who’s problem is that?  You’re saying they can look at that, but that’s the problem of the company, isn’t it? Why does the review become responsible for getting those companies up and running again?  They can’t affect price other than give uncertainty to utility companies to be able to put some contracts in place.  Is that the way it works?

Mark Chalmers: The one complication with the United States compared to Russia and China, is the US basically privatised the vast majority of the front end of the fuel cycle.  There is no nuclear fuel cycle in the world that doesn’t have government support in virtually every step of that fuel cycle, and that goes with the Russians and that goes with the Chinese.

I think what we have found that privatising the front end of the fuel cycle doesn’t work.  It’s that simple.  So the government has the ability to facilitate in different ways if they think it is a priority of national significance.  It is complicated, as I’ve said, because we’re now not just tied to the Section 232, there are other aspects of it.  If you look at it right now, many of the nuclear utilities have received and are receiving substantial support in the various states that they operate in, substantial support.  We’re talking 100, 150, 200 million dollars per year for two or three reactors. 

Matthew Gordon: That’s at a state level, not a federal level.  Is that right?

Mark Chalmers: That’s the state level.  Look, we’re not trying to unduly burden the fuel cycle with our costs, but I can tell you that when you look at what we asked for, what we’re asking for is very, very small in the scheme of the fuel cycle.  We’re small businesses.  It’s very small.

Matthew Gordon:  What are you looking for?

Mark Chalmers: All of this is taken out of context on what the true costs are.  Now the other thing that’s taken out of context with the true cost is what is the fair value of a pound of Uranium produced by westerners?  It’s not the current $25 per pound of the spot price.  That is a depressed what we call happier pound.  So there’s a lot of ways the maths can be distorted here.

Matthew Gordon: What are you after?  They can help you in different ways.  What are those ways that you would like them to help you with?  Is it around permitting and licencing or is it subsidies?

Mark Chalmers: The main thing we want is contracts.  This is where we haven’t changed our position.  We want contracts.  We want to buy American.  Certainly the Department of Defence has to buy US Uranium.  We’ve got government reactors.  There’re different ways that it can be incentivised.  In the case of our company, we’re unique.  We have Vanadium.  We also do recycling of low level products.  We do one to three reactors a year recycling and we also have been pursing clean up of a nation. 

Matthew Gordon: You’ve got a lot going on.

Mark Chalmers: USD$3.7 billion in trust.

Matthew Gordon: You’re at the front line.  With regards to whether it be state or federal level, subsidies or a bifurcated market or permitting made easier, what precisely do you need?  You’re a producer.  You’ve got a lot of moving parts, a lot of assets.  You’ve got explorers.  They’re all going to need different things because they’re at different stages of evolution.  You’re going to focus on your company. What is it that you want for you and what do you think explorers are going to need? 

Mark Chalmers: There’s a difference.  We have a lot of critical infrastructure that is constructed, that is manned, is operable.

Matthew Gordon: And it’s costing you money today, right?

Mark Chalmers: We need to get money into our coffers and that can happen in a variety of ways.  As I said, I prefer long term contracts.  It’s important to keep producing.  Uranium is a very unique commodity, the technical skills required to find it, to develop it, to process it, are rare to find and if we don’t get supporters to preserve and continue at some level, we will lose those skills.

Now, just for an example, even with the Department of Defence when it comes to things like submarines, aircraft, they continue to build at a certain level just to maintain critical infrastructure and the skills that are necessary for that infrastructure to operate efficiently.  Those are themes that could be followed. And as I said, the one distortion that happens is people assume that Uranium is going to be available forever for $25 a pound and that’s not the case.  Cameco will be gone and the Uranium production in Australia will largely be gone, perhaps with the exception of Olympic Dam.  We need a higher price.  So you’ve got to kind of differentiate between the state-owned enterprises and the western production.  Western production needs to be at $50 a pound or greater to continue. 

Matthew Gordon: But that is determined by the market usually, right? Are you saying that the Government needs to step in and affect price or pay the differential between whatever spot is. I know you want a contract, but you want a contract at +$50.  If the market isn’t at $50, how does the state or federal government help you?

Mark Chalmers: It’s probably a combination of things.  It could be a combination of the Government, it could be a combination of the utilities wearing some of that load.  They’re receiving subsidies as we speak.  We’re not asking for something that others aren’t already receiving here.  We know there’s a challenge, but you’ve got to get back to what I said before – we are the largest consumer in the world and we have zero capability right now.  Is that where we want to be? Now some people will say “I’m fine with that” and I say, “No I’m not fine with it” and I think the average person in DC understands this.

Matthew Gordon: 24 of 60 operating nuclear reactors in the US will struggle to cover their operating costs this time next year.  So they need help and they are getting help now, and you’re saying “I just want a piece of that”.

Mark Chalmers: Correct.  I talked about these state-owned enterprises in Russia and China.  If they didn’t have state support, would they be able to function from the beginning to the end of the fuel cycle and the answer is “no”. 

Matthew Gordon: I just want to ask you about your views about Cameco’s conference call press release last week.  What’s your read on what they had to say?  It hasn’t really moved the market; it hasn’t done anything for equities or buying, so what’s your take on it?

Mark Chalmers: I think my take on Cameco is that they’re challenged right now too and losing, or getting a very small settlement on this lawsuit that they had, it hurt them big time.  I think they’re just reiterating what I’m saying – that they need higher prices or they’re not going to restart. What they’re not saying is if their contracts roll off they’re looking at serious outcomes with Sagar Lake.  Sagar Lake has also got a finite life on it, so it doesn’t have 20 years of life. 

Look, I think Cameco is a great company and I know the management of Cameco.  I think they’re doing the right things and I respect them, and I always say that to anyone that asks me about the Uranium sector.  I say “you’ve got to own some Cameco”.  But, they’re also very challenged right now too, and I think that they recognise the importance of western world production.  I think they kind of suddenly talk about that and they recognise things like critical minerals and having those capabilities. 

So, I guess what I want to say is: they’re doing the right things, they’re challenged like everybody else but, in their benefit right now, they’ve got two things helping them – mainly their longer-term contracts and they’re also benefitting from the foreign exchange right now too.

Matthew Gordon:  We need to remember the macroeconomics for this industry, the Uranium industry, nothing’s changed.  It doesn’t matter Section 232 didn’t give you what you wanted.  It almost doesn’t matter what came out of the 90 day Working Group, because the fundamentals don’t change.  There’s a massive supply/demand gap and it’s getting bigger by the day.  Billions of dollars need spending on infrastructure, so I think people need to just remember that.

Mark Chalmers: I just want to say something else too.  That’s absolutely right and the fundamentals are what the fundamentals are, and everybody kind of over-focuses on Section 232.  I told our shareholders that, “Look, I asked for Section 232 because it is bigger than that.  But I understand why people did bias for Section 232 because it was looking…

Matthew Gordon: Everyone wants that catalyst moment. It’s Section 232, it’s their Working Group, it’s the WNA.  When you’re down, you reach for anything you can.  But I’d say people need to think just a little bit longer than that and it doesn’t matter if it takes another six months, another nine months, another 12 months – it’s coming and it’ll come quickly when it goes.

Let’s talk about your mill. You said the mill is something you can use to leverage your position as the US’s number one Uranium producer.  You think that people will have to come to you and there will be discussions to be had at that point.  Is it one of three potential working mills in the US?

Mark Chalmers: Well, look it’s the only operable, manned producing facility.  There are two other facilities, but both of them haven’t ran for like 40 years.  They’ve been partially reclaimed or, in some instances, people have taken a lot of equipment out, so they’re very dilapidated and not able to come online in quick order.

Matthew Gordon: So that’s good for you. But what does it mean for the other players in the US market?  Do you feel that some of them are in a slightly weaker position?  Are you looking at mergers?  Are you looking at takeovers or JVs? 

Mark Chalmers: The mill puts us in a strong position, particularly with the conventional miners, particularly if anybody wants to produce Vanadium or some of this recycle.  There was a phrase that was used 40 years ago and it says: “he who has the mill owns the district”.  Well, then there was something like 25 mills out the in the United States; well today there is one that operates and functions.  So, you could use that phrase 40 years ago, well you could certainly use it now when you’re the only one who can actually process Uranium today.

Matthew Gordon: What are you going to do? 

Mark Chalmers: The strategy is the same.  We need higher prices for conventional mining.  We’ll always give the main priority for that to be out mines, our ore.  We’re still producing Vanadium right now.  We’re actually shipping low grade ore from a mine that’s on standby in New Mexico right now.  So we’re actually doing some recycling of low grade ores from idle Uranium mines.  We’ll continue to use all those various arrows to improve our cash-flow optionality. 

And that is why that mill survived, because it has that ability to do these side businesses when the price of Uranium was low.  When it comes to others who want to use the mill, we’ll consider that on a case-by-case basis.  It is our facility, it’s probably worth $300-$400M if you replaced it.  We’ve got 70 or 80 people there right now working there.  We’re not going to do it for free. If we consider processing somebody’s ore, we want a fair margin on that and that is entirely reasonable.

Matthew Gordon: You can push that margin out because you know what it’s going to cost them to move it somewhere else? It’s easy maths, right?

Mark Chalmers: Yeah, there’s no place to move it to.  If somebody thinks “we’ll ship you some material and you can get a 10% margin on that and we can use the mill whenever we want to” – no, we’re not doing that.

Matthew Gordon: If investors buy into the macro story, then surely now is the time to go and talk about acquisitions?

Mark Chalmers: In the Section 232 process, with the remedy that we asked for, we were staying away from M&A activity because we were looking for an industry solution.  Not just a solution for UR Energy and Energy Fuels and we are trying to allow enough critical mass for there to be competition amongst the various fuel parties that remain in the United States.  Well, if we’re not going exactly that route and you’re more focused on critical infrastructure and what-not, that direction may change. 

So, we are not opposed to M&A activities if it makes sense and maybe a little less or so than perhaps when we in the actual Section 232 process.  But, I can’t stress, we were looking for an industry solution and a lot of other producers or producer wannabes were riding on our backs hoping we would get that across the line.  So, we’ll be open.

Matthew Gordon: Okay, but you don’t want competition though do you?

Mark Chalmers: Some level of competition is healthy.  We’re certainly not trying to come up with a monopoly. Some people said we’re monopolised by owning the mill, well we’re monopolised by owning the mill because we own it and we pay for it.  If somebody wants to go out and permit and construct a mill somewhere else in the United States, they’re free to do that.

Matthew Gordon: How much cash have you got left?

Mark Chalmers: I can’t say in complete accuracy, but we should have a $40M working capital.  We’re still in a strong position compared to our peers and that’s by choice.  We’re glad we have that position right now.

Matthew Gordon: When you told me you need to cash position, you want to have a cash position, it makes you feel in control, are you going to need to go and raise any more money any time soon?

Mark Chalmers: Well, look we don’t want to raise money at these prices, but it is important in this business to not get too close to the wire, and I think that a lot of people own us because of the fact that we don’t sail too close to the wind.  Particularly when you have the permanent facilities that we have.  They are expensive and you don’t want to get that close, because you can have an event like we saw with how the stock reacted on Section 232.  So, we’re going to try to maintain our strong position as much as possible.

Matthew Gordon:  Do you think your shares were inflated before the 232 announcement?  Do you think people were thinking this could go your way and you’re back down at the level you should be?

Mark Chalmers: Well, I mean that’s debateable.  Personally, I think that we got over-punished, but obviously people were in the shares because they thought there was going to be a positive outcome, the story was so strong.  So, I think if you look at right now, even after the 12th of July, a lot of the Uraniums have come off globally.  There were people who were in the stock, you know, they thought that we had line of sight to positive cashflow and profits.

Matthew Gordon:  What’s next – do you wait for these 90 days? What are you doing during that time – is it business as usual?

Mark Chalmers:  The focus is on what potentially can get us to cashflow quicker, faster inflection points, so we’re going to focus extensively on these working groups.  We’ll spend a lot of time in DC.  We’ll spend a lot of time working with the administration and these various groups that will be participating in, the working group. 

We’re still working on the Hill – we had very strong support on the Hill with Sarah Bruckto, Liz Cheney.  We had 50 Congressmen sign a letter in our support, they sent to the President.  We had 39 of our Native American employees that work at White Mason Mill, on their own initiative, wrote a letter to the President.  We’ll keep pushing every angle we can push but, at the same time, we’re going to be looking at our cost and our burn, and how to best manage our balance sheet to give ourselves plenty of runway here.

Matthew Gordon: You said earlier on, you don’t regret doing it, you would do this again, but has it been a distraction?

Mark Chalmers: It took a lot of our time but, as you pointed out, we’re trying to come up with an inflection point.  We’re trying to make our luck, we’re not trying to just sit on our seat.  There’s a lot of people there that all they’re focused on is just doing nothing and preserving their capital and that’s not making you luck, that’s just waiting. That’s just hope as a strategy. 

We will always try to make our luck and, Matt, as you know I’ve been involved in this business for over 40 years, I’ve produced Uranium all over the world.  Our assets are the best in the world for the size that we fit into in terms of these junior companies. I voted with my feet, I came back from Australia for this opportunity – I’ve no regrets that I did that either.  But it’s a tough business, it’s a tough business and if you’re not tough you shouldn’t be in it.

Matthew Gordon: Well, that’s a great point to finish on – that mining is not easy and it’s been particularly tough….

Mark Chalmers: The whole resource sector is challenged, there’s no question, and certainly with the Section 232 petition, we certainly got some attention on it from all sorts of angles.  As I said, it’s been a big challenge, but I can tell you I sleep well at night, I’m confident but, again, I will not be reckless.


Company page: http://www.energyfuels.com/

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

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. 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.