Energy Fuels (NYSE: UUUU) – Uranium Investors Looking to Critical Minerals Hub (Transcript)

Energy Fuels Inc
  • Shares Outstanding: 115M
  • Share price US$1.78 (01.05.2020)
  • Market Cap: US$205M

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

Energy Fuels is America’s leading producer of uranium and vanadium and is venturing into the rare earths space. All critical and strategic minerals in the US. So who owns the only processing plant in the US?

We caught up with Chalmers to get the latest on how he is re-shaping Energy Fuels into a tantalising value proposition by building a critical and strategic minerals hub at their wholly owned White Mesa Plant. There have apparently been plenty of catalyst moments within the uranium space over the last few months, predominantly surrounding the destruction of inventories and tightening of supply caused by COVID-19. But nothing has touched the sides. The US House of Appropriations Committee recent decision to block the funding of a US uranium reserve appears to be another minor setback for uranium bulls, but Chalmers doesn’t see it as a definitive “no.” He experts the topic will be revisited one the DoE can provide a little more clarity on how exactly the reserve would be implemented, at some point in the next 180-days.

Courtesy of its strengthened balance sheet, Energy Fuels has been able to redeem half of its C$20.86M convertible debenture loan, with the rest of it due at the end of this year. The company will avoid approximately US$350,000 in interest payments in 2020 as a consequence. Uranium juniors across the land are currently running up big debts to fund exploration programmes for assets that are as yet not proven economical. Energy Fuels seems keen to set itself apart as a logical option for new uranium speculators.

Their real key differentiator is their White Mesa Mill in Utah. The only remaining fully-operational conventional uranium mill in the US is coveted by many, but some investors have not yet recognised the full extent of its capabilities. It is able to process uranium, obviously, but it is also able to process vanadium and Rare Earths. Which, Chalmers argues will be crucial as America might see REEs as strategic commodities and is attempting to build a new global REE hub to rival the status quo of Chinese dominance. 5 companies have recently told us they will be using White Mesa Mill to process their uranium, but Chalmers says he has had no discussions and has signed no agreements with anyone. In fact, he has blunt message to uranium companies claiming that they will be tolling at White Mesa: STOP. Energy Fuels is likely to enjoy a monopoly over Northern American uranium juniors who face the choice to pay a toll fee to Energy Fuels’, or ship ore more expensively to South America. The competitive tension is palpable.

With consolidation in the industry becoming more likely, especially to make the utilities take producers more seriously, Energy Fuels could well be looking at M&A in the future. We challenge Chalmers on what exactly he could be looking for.

We Discuss:

  1. 3:50 – Opinions on the US House of Appropriations News
  2. 6:17 – In Control: What Have They Been Doing?
  3. 7:53 – Relationships with the Government: Agendas and Capitalization
  4. 12:12 – RSA Deadline: News and Views
  5. 16:22 – “Cheaper for Longer”: Utilities, Producers and Timings
  6. 22:37 – Paying Down Debts: Why Pay Early and What Happens at the End of the Year?
  7. 24:30 – Possibilities of Selling Inventory
  8. 26:30 – Get in Line for the Mill! Companies Allegedly Partnering with Energy Fuels
  9. 28:10 – ASX Junior M&A in the USA: Why Didn’t US Companies Pick Those Assets?
  10. 31:02 – Viewer’s Question: Any Plans to Buy Uranium?
  11. 34:47 – Rare Earth Possibilities: Discussions with Constantine Karayannopoulos

CLICK HERE to watch the full interview.

Matthew Gordon: Mark Chalmers, how are you doing, sir?

Mark Chalmers: Very good, Matt, how are you?

Matthew Gordon: I’m excellent. I haven’t spoken to you since we were at AUSIMM online virtual conference together. How did that go?

Mark Chalmers: It went really well, Matt, and I’ve mentioned to you that that’s an event that I’ve chaired for 15 consecutive years, and I was very pleased that we got it up this year. 15th year in a virtual format, and we had a very good attendance and some really excellent speakers.

Matthew Gordon: And that’s tough, going from an actual, in-person type conference to doing something virtual. But you had some amazing people on there. We have been watching back some of these sessions. It was a good session. So thank you for putting that on, first of all,

Mark Chalmers: My pleasure. And we tried to broaden it out a bit more this year with things like the small modular reactors. And that was popular, broadening that out a bit.

Matthew Gordon: Yes, definitely.  it’s quite good, we try to do it as well, which is trying to help educate people about Uranium. Because what we’re seeing now is a lot more well, new investors coming into the world of investing, but also generalist investors who perhaps haven’t considering Uranium before. All of them are asking questions, which it’s easy for people like yourself, or certainly even us to forget that people are coming into this new. All of this is good, good information. But we are not here to talk about AUSIMM. We are here to talk about Energy Fuels. I want to start specifically with the recent announcement by the US House of Appropriations to say no to the funding of the Uranium reserve. How do you feel about that?

Mark Chalmers: Well, look, it was something that we didn’t want to have him say no to, but it’s not like no-no. They zeroed it and they basically said they didn’t have enough information from the Department of Energy on how the program would be implemented. And the belief that DOE is trying to answer those questions as we speak. The DOE is also looking for other sources of funding the reserve. Secretary Brouillette has been out publicly saying that he has very strong support for the Uranium reserve. The Senate is behind it, or at least the Republicans in the Senate are behind it. So, it is a setback, but it really reflects on the differences between the Republican party in the United States and the Democrats. But we are making progress with the government bipartisan-wise, because of the dependency on Russia for Uranium products and in China. There is progress being made it just isn’t every day that you make a step forward, but we are making steps forward, more steps forward than backwards.

Matthew Gordon: Are you saying that the House turned that down purely on political reasons or did someone not do their homework and provide the information that had been requested?

Mark Chalmers: Yes, it is a combination of those things. We are certainly doing everything we can you to get it back into the House bill and ‘unzero’ it. But, these appropriations are like trading exercises between the both parties and different people’s interests, but we have very strong support in the Senate and the DOE and this increasing threat of Russia and China, particularly Russia for nuclear fuel products. So a lot of, or a number of Democrats are recognising that, but some of the Democrats are opposing it for other reasons and that’s politics

Matthew Gordon: That’s politics. So, talk to me about, so that’s not in your control, it was never in your control. It was something that you highlighted, but you have got to focus on things that are in your control. What are you doing that you can manage?

Mark Chalmers: Well, let’s look at a lot of the work we have done through the Section 232 process of the Nuclear Fuel Working Group, in the strong policy statement that the nuclear working group report that came out of the working group, that is still helping us on a lot of fronts, not just in appropriations, but also in some of the negotiations on the Russian Suspension Agreement. Basically, the Working Group said that it is a national security issue, receiving so much of our Uranium from imports and particularly from Russia, so that is helping us in other areas. And, we’re still pushing on all fronts: appropriations and our participation in the negotiation of the Russian suspension agreement. But we are managing the company on the company basis alone, not dependent on government support. We have seen some increases in Uranium prices over the last couple of months. They have flattened out lately. You’ve got to multitask in this business, if you don’t multitask you will not survive, but we are in very good position amongst our peers, and we are very excited about the future.

Matthew Gordon: Sticking with the government components, if we may, you have, over the past couple of years, been talking to people in DC, up on the Hill, as the phrase goes. Have you made relationships, or have you made useful relationships? And at what point do you start cashing in on those? Because at the moment they’re not giving you what you want.

Mark Chalmers: Yes. The cashing in is the difficult part. We certainly have the strong relationships in the push of the administration. There there’s some indirects here that we are cashing in on, and the Nuclear Fuel Working Group is one of them. Take the Russian Suspension agreement; that expires at the end of this year. And there are active negotiations on that front. But for example, one of the key issues with the Russian Suspension is that the Nuclear Fuel Working Group says that we’re overly dependent on Russia and state-owned enterprises. So that’s a very strong policy document, basically prepared by about half of the president’s cabinet. And, that’s something very powerful to use in those negotiations. It is not always completely clear to particularly, some of our investors, but we are punching above our weight in DC on a lot of these fronts. It is frustrating because it has taken a lot of time and we haven’t seen the money in hand yet, but it is getting through people’s minds that we are overly dependent on critical minerals, particularly Uranium, Vanadium and Rare Earths in the United States right now.

Matthew Gordon: The strategic minerals, the critical minerals component is really interesting to me. There are relationships that are being formed or have been formed, they are recognising this. But my view on this is, politicians – they always want something from you. They aren’t necessarily going to give you anything back. You’re making them, you’re giving them a topic that they can promote themselves and their own agendas on, but do you seriously think that Energy Fuels is going to be able to capitalise on this? For instance, you have been talking about Rare Earths recently, are you hearing things which make you think we need to lean a little bit towards Rare Earths, because those are the sorts of noises coming from the Hill?

Mark Chalmers: You’ve heard me say it many times that we are first and foremost a Uranium production company, but we do think that the Rare Earths sector fits very nicely in what we do, our core business, because we can recover the Uranium from a lot of these Rare Earths. A lot of our political supporters on the Uranium reserve and the nuclear fuel cycle are also the exact same supporters for reducing our dependency on China for Rare Earths. It all fits nicely together. And there is no company out there in the United States. None. Not one that has got the optionality, when you deal with these critical materials as Energy Fuels, with the mill and the Vanadium and the potential for us to be, we believe, commercially producing Rare Earth concentrate in the quite near term.

It’s a lot of these indirects. But that a lot of the people that have been supporting the Nuclear Working Group and the production of nuclear products in the United States, when they see that White Mesa Mill could have multiple uses in the critical area they’re delighted. They’re actually delighted to know that.

Matthew Gordon: For people who are new to this, you’re talking about the White Mesa Mill, which you control. And it’s the only mill in the district which actually can cope with Uranium, Vanadium and Rare Earths.

And before we skip away from the RSA, the Russian Suspension Agreement, the date is 31st of December, end of this year. A decision needs to be announced. or any time between now. Have you heard anything about what is being discussed? Are they going to come up with a decision anytime soon or are they going to leave it to the last minute? And if so, what type of deal do you think we are going to see as a result?

Mark Chalmers That’s the big question. Look, there is, and I can’t go into details because a number of people that are participating can only go into so much detail, but I can say this: there is a push by the government to reduce quantities of Uranium coming into the United States, where there is a push by the Russians and the utilities to increase the quantities of a Uranium coming into the United States. So those are completely, oppositely opposed. Okay. And that is a rub. And as I said earlier, the Nuclear Fuel Working Group report says that we shouldn’t be increasing or dependency on Russia. There was a preliminary administrative review that was completed a month or so ago by the Department of Commerce, and they basically said that the conclusion of this agreement, what has largely been  gained by some of these people that want more Uranium coming into the United States, and  that shook up the utilities and it should shake up the utilities and the Russians.

It is moving forward.  it is a high priority for the government.  it’s a high priority for all the stakeholders in those renegotiations and negotiations. But I will say: watch this space, because it is probably, well, without a doubt, getting the most attention, in my opinion right now in the, in the Uranium space globally. And  that the preliminary administrative review that said that even though the agreement that’s in place right now was, people were abiding by it, the fact that it was expiring and that a number of utilities and the Russians were over-contracting greater than the 20%, is creating some ripples in the water right now.

Matthew Gordon: You say watch this space. Do you mean watch this space in terms of timing? Do you think it’s imminent? Or watch this space because you think the terms will change.

Mark Chalmers: Well, look, the deadline is the end of this year, 31st of December, 2020, but the administrative review process is ongoing and it was supposed to, I believe, terminate in early August, and now that’s been extended by another couple months. It’s just very much in the works right now. And, the outcomes are not certain, but it is getting a lot of attention. And, there’s really 2 camps:  to reduce the quantities coming into the United States or increasing the quantities, and the Nuclear Fuel Working Group is basically saying it shouldn’t be increased. It should be extended or decreased. These are the kinds of things that indirectly are pieces to the puzzle, that we were very much drivers of, as Energy Fuels, and it is helping us right now on other fronts that are less transparent because of the nature of the negotiations.

Matthew Gordon: But it is now also apparent the battle you are fighting, because you’ve got an argument of national security; critical minerals to the US, being self-sufficient, which is one position. And the other position, where one of the parties in all of this was not aligned and that’s the utilities, taking a commercial decision, and you would argue short-sightedly, because they wanted the cheapest possible product. They want more of this, more and cheaper, for longer. So that was the battle that you were fighting. And these guys had big, deep pockets in terms of their lobbyists. That seems to me a big part of what was going on and all of this.

Mark Chalmers: We have very good relationships with many of the utilities and I’ve delivered Uranium to many of them for decades. But yes, the utilities are looking at cost and they are trying to manage their businesses as they have to. So, that for a small company like Energy Fuels, and the Uranium industry, because it’s not just Energy Fuels fighting this battle, but mainly Energy Fuels has taken the biggest position, in pushing it forward. We have, as I’ve always used that phrase of, we punched above our weight. These utilities are very significant organisations with multiples and multiples of billions of revenue per year. So that’s why I said, we’re going to keep pushing on all those fronts. We’re not going to give up. We are not going to give up. But at the same time, we’re going to manage our business based on the market fundamentals.

Matthew Gordon: Big discussion. Lots of unknowns: timing is, well we know that there is a stop date at the end of this year for the RSA, and that seems a big moment for utilities, as is the US election, and that’s another big moment. And I know that there’s a consensus that nuclear is part of the solution for both sides of the house, but the Democrats a little bit less so than the Republicans,  I’m hearing from you. So even the utilities will be wanting to understand what the outcome of that election is, but that then has an impact on timing because the dust doesn’t usually settle from a US election until February, March, and then maybe there’s a shakeup, even if the incumbents stay in. So, what does that do for timing around utilities’ decision-making, term contracts, et cetera, how do you feel about that?

Mark Chalmers: When you look at it, there’s a lot of uncertainty, and uncertainty is uncertainty. So we’re preparing ourselves for any eventuality. We did pay down half of our convertible debt and we’re looking at the other half on how to best address that. We’re increasing our inventories. But we do think that, there’s uncertainty, but that if there’s an administration change, they are talking more negatively about hydrocarbons than they are nuclear, and to a certain extent that is supportive of nuclear as being important to get to zero carbon emissions. So, I don’t want to speculate, over speculate here, Matt. But you’ve seen over time that we are a company that positions ourselves aggressively but not recklessly when it comes to the overall picture of the company and we will be the survivor or one of the survivors in this space because of the way we manage the company now and going forward.

Matthew Gordon: And so one last macro point. So you producers. You’re a producer, right? The largest in the US. The Cameco’s of this world, and even the Kazatomproms of this world; you have relationships with utilities all around the world, and you can’t bad mouth them. You’ve got relationships, professional relationships with these guys, but it’s been a deeply frustrating process for all producers for the last couple of years, has it not? To have this fight, this debate around pricing. You need a certain price to be able to get back into production and you need to be incentivised to do so. So, going back to the question, which is, what do you think the timing is for what utilities recognising that if they don’t push the button soon, you guys aren’t going to be able to get back into production and give them the pounds that they need when they want it?

Mark Chalmers: Yes, those are the trade-offs. And some of the utilities understand that and appreciate that. Some of the utilities don’t think that total dependence on the Russians is fine. Even companies like Cameco. Some think, ‘well, we’ll be totally dependent on our allies, and we have no Uranium production in Canada right now’. The production is dwindling in Australia with the shutdown of Ranger; well, it will be at the beginning of 2021. So, the Western world, that’s the clash. It really is the state-owned enterprises vs the Western world – that’s the clash. You need higher prices, substantially higher prices for the entire world, including the Western world to continue to survive in the Uranium industry. Some of the state-owned enterprises may be a little less so, even though a lot of them are not as a low-cost is people want to think. So that that’s the clash. Do you want a diverse supply chain, or do you just want to get all your products at state-owned prices? So, yes, that’s the uncertainty there.

Matthew Gordon: Let’s talk about something you just mentioned, which is, obviously you’ve partly paid down the convertible which is due at the end of this year. You paid down some USD$10.4M, USD$10.3M. You have got the same  due at the end of the year. So why did you go early on the payment and what are you going to do about the end of the year payment?

Mark Chalmers: We wanted to show the market that we were managing that convertible debt, and that was about $10M Canadian. And we thought it was a prudent step to pay half of it. We are still looking at how to best address the other half. We have the ability to convert that into shares. And it’s like a 20-days VWAP at about a 5% discount at the end of the year, if we elect to do that or pay it off in cash. But, Matt, I’ve told you; having been in this business over 40-years, I’ve seen these companies get in trouble because of debt on a number of occasions. And that is an area that is close to my heart, to not get over-leveraged on debt. And at the same time, there are a number of the Uranium guys that are taking on more convertible debt, and we’re going the opposite direction, which is a differentiator. No one else that I know of in our space has actually been paying off debt. They have been taking on more debt as they go forward. So, watch it. We will pick our moment and we will address the debt no later than the end of the year, maybe sooner. But we want to make sure that we do it on our terms

Matthew Gordon: Is selling down some of your inventory a possibility? Because looking at the numbers, if you’ve got about USD$21M to USD$23M worth of Uranium, you’ve got about USD$8M to USD$9M of Vanadium. I know the prices are low, but if needs must, would you consider selling that down?

Mark Chalmers: Anything is possible. We like holding the inventory because we think the market is poised to reward us for having that inventory. By the end of this year, we’ll have in the order of close to 700,000lbs of inventory close. So, it’s our objective not to sell the inventory down until the prices are at higher levels. Yes, look, there’s a number of ways to address the debt, but we would really like to see the continued increases in Uranium and Vanadium prices, particularly Uranium prices to get a bigger lift out of the out of that inventory.

Matthew Gordon: Do you think it would be cheaper to refinance your debt rather than pay it off or sell off inventory? Because the upside on inventory could be more significant?

Mark Chalmers: The inventory we carry, it is the like, for Uranium, it is like USD$23/lbs, and currently price is around USD$33/lbs. That is how we carry it on our books for counting purposes. So, we’ve got about a $10/lbs lift you just on the Uranium price itself. That’s material to us. We think there is more upside for inventory than downside. You don’t get any money in your accounts, any more interest bearing on your account, so we’re pretty comfortable having this inventory that we can liquidate quite quickly if we need to when the time is right.

Matthew Gordon: But there’s some good news, Mark. I’ve solved your problem because I’ve spoken to, for cashflow, I have spoken to 5 companies who are going to be tolling through your mill, which is great news.

Mark Chalmers: Yes. That’s very interesting news because none of them have called us to ask us about that.

Matthew Gordon: Oh.

Mark Chalmers: It seems like every week I see another, press release or something that shows a picture of our mill and they didn’t even ask permission to use the picture of the mill. I need to clean this up because it is not right for people to just assume that they are going to have access to the mill, because they don’t have access to the mill. We have no milling agreements at this point in time. In the event that we do decide we’re going to give, we probably won’t give out a milling agreement, we will announce that, but for all of our investors or any investors in any of these other companies, no one has access to the mill except for Energy Fuels. So yes, it’s amazing how they all chime in and show pictures of the mill and how it’s close by, inferring that they have access to it, but they don’t.

Matthew Gordon: I just wanted to put that to you, because you’ve spoken to it least a couple of times before, you’ve been very clear with me, but we keep seeing it, and I just wanted to give you the chance to respond. And that’s the most direct you have been with us, so I do appreciate that as well. One more thing, if I may. The other thing that is happening is there is a lot of Australian ASX-listed juniors coming and picking up Uranium assets in the US, and they’re getting funded. They are raising money off the back of this. Why haven’t all of these Uranium assets in the US been picked up before?

Mark Chalmers: Well, there is a lot of Uranium assets in the United States and a lot of these properties that people are picking up, they’re not permitted. Now there may be 1 or 2 that are permitted, but a lot of them are not permitted. And over the last 20-years or so in our case, we’ve picked up… well, many of our projects are permitted, have a long-term production history and recent production histories, there’s only so much space in the market. Getting permits is very, very difficult. And there are other companies that do have some permitted assets. I don’t know. To pick up unpermitted assets, to not having access to the mill, very speculative investments. They have been raising money on it. And frankly, a lot of projects on the Colorado Plateau are of lesser risk and probably easier to get to market than a lot of these other Uranium deposits that some people are promoting outside of the United States. There’s a long production history in the US. So there’s different investment risks for different groups of investors. So, just, all I would say is people need to know what they are investing in. If they are comfortable with that, that’s fine. That’s their choice.

Matthew Gordon: It is always their choice. Why didn’t you pick them up?

Mark Chalmers: We don’t need any more assets. We have assets in about what?- 6 or 7 different States. Most of our assets are permitted. Most of them recently had been worked and the underground workings are in good shape. The mill has been operable. Nickel’s ranch has been operable. Alta Mesa. So, we don’t need to own the Western United States. It is costly and there’s a point where, it just makes absolutely no sense to have more assets.

Matthew Gordon: “Some questions sent in: wouldn’t it make sense for Energy Fuels to now step in as a buyer. They need ore at the White Mesa mill. They want Uranium, they want Vanadium. The Sunday mine complex is basically next door. This might be a fun ride going forward.” Any plans?

Mark Chalmers: I’m not going to say we are not going to buy Uranium in the future, because that’s the history of the district. But to put it in to perspective, over the last 10 or 15-years there have been times when we have had milling agreements and we have perhaps bought some ore from people, but it turned out to be just a very small percentage of the production that came out of White Mesa mill. And I don’t know the exact number, but probably in the order of maybe 10% of the production that came out of White Mesa came from other mine that were not owned by our company. So now look, that that can be variable, but the reason why we haven’t paid a lot of attention to this market is, 1) the prices are too low, and 2) historically other people may have, the aspirations of becoming producers, but very few can actually really contribute in a material way in the mill. Now, the price Uranium is USD$75/lbs or something like that, that could change to some extent, but we already have a number of mines ready to go, that we have operated within the last year. And these mines that were mined 30, 40-years ago, and nobody has mined them since; I hate to think of the condition they’re in.

Matthew Gordon: Is that a no?

Mark Chalmers: So, look, we still control the district with our White Mesa mill, 100% owned. And that’s because we have spent the money to keep it in good working order over all these years. Anyone who wants to build another mill, they can go out and get the permits and construct another mill for several hundred million dollars. That is always open to the realm of possibilities.

Matthew Gordon: So that a ‘no plans anytime soon to go and have a conversation around M&A with Western Uranium and Vanadium?’

Mark Chalmers: Well, it’s subject to change: if, for example, if the US government decided, or the price of Uranium increases to a level where it’s economic to have those discussions, I’m not saying we’re not going to have those discussions because if we can get material into the mill and that helps us, we’re not going to,why would we turn our head to that? We will not turn our head to that, but I’m just saying that right now we have no agreements with anyone. Still, no one should just assume they have access to the mill right now. They should not assume that. And, but things can change. And we are absolutely in the driver’s position with the mill. And the material from our projects will take first priority over anybody else’s material.

Matthew Gordon: Mark. Good catch up. Thank you very much for that.

Mark Chalmers: We didn’t talk much about the Rare Earths.

Matthew Gordon: Oh, yes. Sorry, you’re right. Let’s do it.

Mark Chalmers: It’s a great spot for us, Matt, and a huge differentiator. So we’re still advancing our efforts on the Rare Earths. I hope to have more news flow on that front in the coming months. It has by no means gone away. People that I know say, ‘Oh, they’ll never do anything there’. I tell them – they are full of baloney. We’re going to do things in the Rare Earths space. And, it is certainly getting a lot of attention, it certainly has by-partisan support, the Rare Earths and the dependency on China. So, all I can say is, watch this space. But we are advancing things, but we can only unveil things as we close them out. But we’re still testing material at White Mesa and we’re getting a lot of interest in it.

And so if you talk to people in the Rare Earth sector, those that know about what we are doing and our aspirations you’ll find that many of them will say that we are in a very unique spot here. Very unique spot. The market is recognising that right now.

Matthew Gordon: And I have got to ask you, only because I’m so pleased at the way I can pronounce this, which is, how our discussions with Constantine Karayannopoulos?

Mark Chalmers: Well Constantine is an advisor to us. He just recently went from non-executive chairman to CEO of Neo Performance Materials, that’s a company that he founded and developed back in what, 25-years ago? Constantine and I talk on a routine basis, and Brock O’Kelly, and so we’ve got a very good relationship with those 2 gentlemen, and both of them worked for Mountain Pass and Moly Corp. And if you saw, Mountain Pass Materials announced that they’re going to list a USD$1.5Bn Rare Earths company on the Mountain Pass deposit and operations. And that, that got some attention in the market, and that’s why that we’re not getting any differentiated value with our peers in the Uranium space, but then we have this. What I consider a very significant opportunity in the Rare Earth space and still be able to recover Uranium from those streams.

So, basically what we’re proposing to do is exactly what CNNC is doing in China right now; trading monocyte streams of material, recovering the Uranium and going through the stream of further downstream Rare Earth processing. And White Mesa is the only other facility that I know of in the world, outside of that facility that can do effectively the same thing in given some time. So, watch it, watch it. And I am extremely excited about this, and this is one of the best opportunities I’ve seen in my entire career in the Rare Earth space and how it blends in with Energy Fuels, so watch it.

Matthew Gordon: We will, we will watch it. We are excited by it. We have spoken to enough Rare Earth companies. We know the restrictions that they have around processing outside of China. So, I do get that. I’m eager to see what does happen over the next few months, this side of Christmas, hopefully, in terms of how you are moving that one forward and who you are having those conversations with. So, keep us up to date. Pick up the phone like you always do.

Mark Chalmers: We will keep you up to date. And as I have always said, yes, some exciting times ahead. It’s a tough business, but you have got to know how to navigate it. And I won’t say that I know exactly how to navigate it at all times, but after over 40-years in this business you got to be tough. You have got to be tenacious. And you have got to be aggressive, but not reckless.

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Brandon Munro #17 – US Utilities Want Russian Uranium (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price A$0.035 (16.07.2020)
  • Market Cap: A$37.06M

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

Based on questions that were sent in by viewers, it is clear that there are a lot of new investors coming into the uranium ecosystem. So Brandon and i cover a little bit of old ground but with new data. We start with the relationship between spot price and term-contract in today’s environment. We also look at the effect of supply and the effect on Russia v US tensions. Does Russia care about the Russian Suspension Agreement. Should they?

And we get his thoughts on the timing of the US utilities coming back in to the market to help drive equities. Are US uranium juniors without a cash buffer getting nervous.

We Discuss:

  1. 3:22 – How is Spot Price Determined
  2. 6:49 – Relationship Between Term Contracts and Spot Price
  3. 10:43 – Importance of Kazakhstan: How Long Can They Withhold Production
  4. 14:57 – Utilities Globally: How Do They Work?
  5. 19:49 – RSA: Why Should Russia Care About the US Market?

CLICK HERE to watch the full interview.

Matthew Gordon: Brandon Munro – how are you doing, sir?

Brandon Munro: I’m well, how are you, Matt?

Matthew Gordon: All good, well actually, I am not all good; my 12-year-old took me swimming for non-stop lengths of the pool, then made me tread water for 5-minutes, then made me do pull ups and I can barely move. I am incapacitated like the old man that I am, and I can’t sleep. So that’s me. Woe is me.

Brandon Munro: Oh, geez. That’s tough. Were you able to do the pull ups all on your own or did you need to get pushed a little bit?

Matthew Gordon: the problem was I did do them on my own and I’ve literally just ruined my back. That was 3-days ago. Too old. I’m too old. Let’s get into something I can manage, which is asking questions. It’s another week in the world of Uranium and this week we would change it up a bit. We have got loads questions coming in every week, which people want to put to you. We have put some down on paper at some broad headings. we might do some more next week because there’s a lot, even if we do consolidate them to broad headings. You’re ready for this? You’re okay?

Brandon Munro: Yes. Sounds exciting to me.

Matthew Gordon: I’m going to start with an easy one, which we have covered off in the early days, but there’s some people who don’t necessarily have time to go back through the series, but let’s just talk about an easy amuse-bouche for you, which is, ‘how is spot price determined?’

Brandon Munro: Okay, well that is a nice warmup one, isn’t it? The first thing to understand is that it is not like a clearing house spot price that we see in certain other metals. It is a reported spot price. So there’s a handful of reporters, and the best known of them are TradeTech and UX Consulting, and what they do is they basically keep their finger on the pulse in the best way that they can to understand who is buying what, in what volumes at what price. The first limitation is it’s not going through a clearing house or an exchange. There is some capacity for partial accuracy. And that has been improved. It’s been improved first of all, because there is a quoted futures exchange, which gives, a more accessible level of information to investors. And that’s a NYMEX futures exchange, which you can look up, say on bar

And then the other thing is we have seen the emergence of traders who are very transparent, such as Numerco. So well-worth looking up Numerco, following them on Twitter, and they have really had a positive impact on that level of transparency.

The second thing to understand about the spot market is it’s not an immediate delivery market. In fact, spot can be anything up to 12-months delivery and it’s still categorised that way. So that is much to the irritation of some of the larger producers, the Cameco’s, KazAtomProm’s, for example, who want to move this market to a more realistic, immediate delivery or short-term delivery market. The other thing to understand is, as investors we see the price, but it does differ depending on the delivery point. The spot, or the price that’s quoted for say two-week delivery at Cameco might be different to the price that’s quoted for 2-week delivery at COMERX, for example, or in the US. And we have seen that play a big role just recently because of a disruption in both conversion and Uranium coming out of COVID, we have seen a lack of storage capacity at COMMEREX in France, and so a very big swing between what is being paid for delivery in Cameco, the Blind River and COMEREX in France. Normally the location swaps in this sector have been very, very fine, but that’s now changed, temporarily, no doubt, but that’s a big swing and a big arbitrage if people are able to move material, move in the sense of the location swap at the moment. They are the key downsides of what we have got at the moment we spot. It’s lack of accurate transparency. It’s a multitude of different delivery forms and locations.

Matthew Gordon: For people coming into Uranium, investors coming into the Uranium space and looking at it as a potential investment, that’s the first thing they look at. They think of, like other commodities, you look at the spot price and that determines the market. Once you move slightly further up that knowledge curve, you start to appreciate that. And in fact, term contracting with long-term contracts have a more significant role to play. Let’s just try and understand, if you may, the relationship between spot and term-contracts.

Brandon Munro: Yes, very good question. Particularly for people coming new into the sector Traditionally, this business was done almost entirely on long-term contracts between the utilities and the big producers. And that situation continued well into 2004, 2005. And the spot market such as it was, was really used for settling, say, overproduction by a mine that couldn’t be delivered into contracts or sometimes buying back production if there was a disruption or for some reason they had oversold who got over called on the production limits in their contracts. Now what happened in the last Uranium boom is financial players came into the sector. There was a huge increase in volume generally, and that made the spot market fulfil a number of other functions, not just that form of settlement of overs & unders, under contracts.

Then what we saw after Fukushima was a sustained period of low contracting, relatively speaking, and much higher spot volumes. So, instead of spot accounting for say 5% to 10% of the movement of material in the market in some years it’s been as high as 50%. We have seen an increased role of traders; there’s the concept of churn in that spot market. It’s not necessarily one pound being pulled out of a mine and sold to a utility, but that pound can be churned many, many times to create additional volume. But what we have also seen is the emergence, in particular of Kazakh production, a fair of which went into the spot market until fairly recently. So that’s important to understand, as well as you’re taking a little bit of an introductory trip into this sector, the important news is Kazakhstan has stopped selling into spot. They haven’t sold into spot since, the beginning of 2018. So no longer is there that pressure. And if we now bring that right back to a contemporary setting, one of the impacts of the COVID disruption in Kazakhstan is that at least one of the, let’s call it major culprits who sell their mined material into the spot market, derive the majority of that material from their joint venture in Kazakhstan with KazAtomProm. So even though KazAtomProm, isn’t selling into spot, their joint venture partner was.

So what we’re likely to see coming out of COVID disruption is both an increased demand, particularly if KazAtomProm is forced into the spot market to compete with Cameco and other producers, but also a lot of the supply will be cut off at the needs because those parties who traditionally sold their joint venture material into the spot market can no longer do that.

So, term contracts, whilst there’s a low relative volume of term contracts at the moment, they are such an important part of the risk mitigation and supply security that utilities rely on in this business, that they will come back. Spot probably won’t go into the dormancy that it was in the 2000, but its relative position will reduce as the importance of term contracting increases.

Matthew Gordon: Let’s move further up that knowledge curve. We talked last week at length, and possibly the week before actually, about the importance of Kazakhstan and KazAtomProm to the Uranium market. Kazakhstan represents about 40% of production globally. KazAtomProm has 24% of that. They occupy almost the entire bottom quartile of the cost curve there. They are very, very important. People new coming into this, recognising that some of the questions we have had are how much longer can KazAtomProm hold off from getting into production; either forced or unforced, and how can they mitigate that?

Brandon Munro: Okay, so let’s be clear on what we’re talking about: KazAtomProm and Kazakh production is still continuing and that’s because before their 7th April announcement that they were needing to curtail activities, they’d already done wellhead development and acidified their in-situ recovery wells. The acid that they pumped in in January, February, March for example, is still producing Uranium today. It is starting to deplete. It’s becoming less potent, if we can put it that way, but nonetheless, they are still bringing solution up to the surface and extracting Uranium. What we’re really talking about here is not production per se, but their ability to start again with the drilling of these extraction wells and the pumping of the acid in so that they can allow it to acidify the ore and start bringing that solution up. And finally, the point to understand here is, there could be a gap where the current production from January, February, March acidification tapers off to such an extent that there is effectively a full, a significant or majority break in production.

To answer your question, you’re working in scenarios always with this type of thing. What cause KazAtomProm have said publicly is that they will start slowly to recommence wellhead development from the beginning of August. And now we are all waiting for their third August quarterly update, because in the meantime, and since they gave that guidance, the lockdowns in Kazakhstan have been extended and there’s an awful lot of commentary and news flow coming out of Kazakhstan that things will get extended again, but be that as it may let’s work with what’s in the public domain right now. That wellhead development will be slowly reinitiated from August. I read that, to me, that the most optimistic scenario we’re dealing with here is that they would spend, let’s say 4 to 6-weeks slowly mobilising, and the wellhead development itself, in the most optimistic scenario, would be running at full steam by, let’s say mid-September. That will then take some time, several weeks, and it’s not like they can play catch up across all of those different 13 mine sites. And then there’s a process of acidic acidification and in the optimistic scenario that would all take place before the winter sets in and then they would be back to normalised solution recovery by, let’s say November. And we would still see the dip in production because of that lag effect. And that dip would still carry on into 2021 to an extent. But you could probably realistically see them back to normal production levels by, let’s say the second quarter of 2021. That’s the most optimistic.

Matthew Gordon: Which answers the question that we were sent. That’s something that people are going to watch very, very closely: what will KazAtomProm do? What will Cameco do? The 2 big players in the marketplace.

Let’s move it forward. So, again, for all levels of ability watching this show, it is quite clear from the questions that are sent in, and we need to make sure that everyone is comfortable and learns with us. We’re all moving forward towards the same place. And the next question is around, now that we understand some of the players a lot of people are recognizing that US utilities are very important. They are important because they represent 25% of the world’s global demand for Uranium. And the question is: do different utilities from different countries have a propensity or a favouritism to go to certain countries. So, do the French utilities always look in Africa? Do the US utilities always favour Canada, for instance? How does it work when you are a utility buyer?

Brandon Munro: Well, the answer to that is one of those classic yes, and no answers: if we talk about the French, for example, Électricité de France is the world’s largest utility because it is responsible for a 75% of France’s total electricity demand. And so EDF have had a long-standing relationship in Niger, which has been effectively backed by the French government. It’s a bilateral relationship, not purely a commercial one. They have derived a large proportion of their Uranium from Niger, but they’re also in a joint venture in Kazakhstan. They have production coming of Canada in joint venture with Cameco. And because of their comfort in Niger, they have also been happy doing exploration and development work in Namibia, for example, as well as Australia and elsewhere.

And they have been rationalising in recent times, trying to reduce the expense of their Uranium business. And there were a couple of spectacular examples of that, but that’s a story to tell another day. Now, they do also have trading businesses. They do also buy and sell in the spot market and to contractors and with others and so on, but they are something of an outlier.

Then let’s look at China: the Chinese model is a lot closer to the Orano/EDF model. They are buying heavily in the market and they have been for quite a number of years, back all the way to 2006. They also have a strong preference to deal in Namibia, and that’s for a range of reasons that would include the preference that Western companies would have in Namibia. And also the fact that because of the extent of their investments in Namibia, they are obviously able to have a relationship with the local Namibian community and the Namibian government that gives them a lot of comfort.

And one Chinese utility, CNC has the Rossing Uranium mine, and a 25% interest in Langer-Heinrich, which is the Paladin energy mine that’s on care and maintenance, and the other Chinese utility CGN owns the Husab mine, that they paid USD$2.4Bn for from extract resources back in 2012. The 3rd Chinese nuclear utility, SPIC has not yet acquired a mine in Namibia, Africa or anywhere in the world.

They’re the 2 major outliers. Then you’ve got the US industry. And as you’ve said, they are important. They still comprise roughly 25% of Uranium demand around the world. What happened is back in the late seventies, early eighties, a few utilities clubbed together to buy mines and got their noses bruised and broken, doing that. US utilities buying mines and operating mines is not a very popular thing at the moment and it is a bit frowned upon. It’s all commercial relationships and they buy across the board. And that’s all publicly available. You can go to the EIA report that came out a couple of months ago. You can see that the US utilities buy from Canada. They buy from Australia, they buy from Namibia, they buy from Kazakhstan and they buy from Russia. And there is a propensity to buy it from closer allies, such as Canada and Australia, but there aren’t any explicit limits other than the Russian Suspension Agreement on how much Uranium they can buy from anyone else.

Matthew Gordon: Well, that leads nicely onto a topic we discussed last week and a few weeks ago as well, which is the RSA (Russian Suspension Agreement). We had Dustin Garrow on earlier this week. Very well-known character, a Uranium consultant to many in the industry. And he’s been around the block a few times and seen the highs and the lows. He was talking to us about the RSA agreement, that Russian Suspension agreement. And it’s a very important topic, which the US government is in the process of making some decisions on. And the expectation is that, well, you talked about this last week; the decision needs to be made before the end of the year because we’re not quite sure what will happen if they don’t.

He put a very interesting thought forward, which is, at the time that the Russian Suspension Agreement was put together, back in the 1990’s, it was a very different world. There were very different demands in terms of the volume of Uranium used. And that Russia felt the US market was a very important to get into, and obviously the US didn’t want them flooding the market either for a variety of reasons, national security being one of them. Dustin thought, or he put this forward, which was, why should Russia care now, in today’s environment, when there is a much bigger demand story, there are new markets why keep banging down the door of the US market?

Brandon Munro: Well, that is an interesting question. And Dustin is certainly the guy to come up with those questions, with have such a vast amount of experience in the industry, including back in the old days when there was a bifurcated market with Russian material and non-Russian material and what was allowed into the US and so on. He’s got some insights from those days that not many people have got anymore. Here’s the thing; first of all, the Rosatom group of companies are extremely effective in this industry. They build plants on time, on budget, all of the time. They are in every aspect of the nuclear fuel supply chain, and they do it well. And they pride themselves on their delivery. They would not want to be the instigators of any breach of supply. They wouldn’t call force majeure. They wouldn’t withdraw unilaterally or voluntarily, but Dustin’s question and comment probably goes more to the situation where they are not allowed into the market by US government or by negotiations between the US and Russia, and how would they react? And Dustin does make a good point in that for Rosatom to lose their access to the US market with their enrichment in particular, sure, it would be a shame for them, and it would affect them, but it wouldn’t be a disaster. Russia has got very significant demands on Uranium for both its domestic requirements, but also its export program. And if they were left in a hole with their capacity for enrichment or SWU, they could redirect that capacity at re-enriching tails and other forms of secondary supply that would still have a happy home in their Uranium requirements now and going forward. It wouldn’t be a disaster for them. It would have an impact, however, on US utilities and depending on how far you want to go down this in terms of geopolitical posturing and how much of a conspiratorial approach you want to take to this, it would have the effect of putting a splinter in the finger of the US nuclear fleet, because it would make their enrichment quite a bit more expensive. The utilities would then have to very quickly recover that enrichment from non-Russian sources and non-Chinese sources, and there isn’t an awful lot of that. It would have two effects on the Uranium market as well as increasing the utilities fuel costs and their efficiency of producing energy.

The first effect on the Uranium market is it would quite quickly absorb the excess capacity in the non-Russian enrichment sector, which means less underfeeding, which means less secondary supply of Uranium that can make it into the market. Now, the second effect that it would have is, let’s say that we saw spiralling SWU prices. SWU is a separative work unit, which is the way that enrichment is priced. A spiralling SWU price would create an incentive for not only underfeeding to stop, but if Uranium is still relatively cheap, what the US utilities could do is they could overfeed. In other words, they pay a lot less SWU and they buy a lot more U308 so that they can push a lot of U308 through at higher tails assays. And for people new to this, probably the best thing to do is to go back to some of our discussions where we really talk about the nuclear fuel process and the whole cycle as it relates to conversion and enrichment. But for everyone who’s not coming here for the first time, that could create a situation where we see increased demand from the US utilities, and in the timeframe that we’d be talking about, what that probably means is very accelerated draw down on existing inventory of U308 and UF6 to fill that gap. That will affect different utilities in different ways: the utilities who counting more heavily on Russian enrichment would find themselves needing to act more quickly and more decisively. And of course, for someone who might not have been concentrating as much, this is a speculative scenario that we are answering. This is a scenario where there isn’t an agreement reached. There isn’t an act of Congress that comes to a resolution where there is a limitation, and the existing currently suspended dumping investigation resumes with the imposition of some very serious tariffs onto the Russian industry, and they decide, look, that’s just not worth it. We’re going to withdraw

Matthew Gordon: That’s a very interesting scenario that you’ve described, because it would suggest it, one could argue that the US can’t do without some Russian supply. And if that is the case, , what is the number? Is that 20% number reasonable? Because, obviously, if the price goes up for utilities, it’s not significant in the scheme of the total investment in terms of a reactor, but it’s significant in terms of ongoing costs, given that the capital expenditure is a sunk cost now. And when they’re competing against gas and renewables, it’s meaningful to them. But the problem has been that some utilities are not sticking to that 20% number. Isn’t that just a case of, so why are we focusing on the Russians and not on the utility buyers who are not regulated or not sticking to that 20% number?

Brandon Munro: Well, it’s a global number. So, presumably, those utilities were looking to get out ahead of each other and speculatively scoop the cheap material away from each other. And I guess they’re just taking their chances on the extension of the Russian Suspension Agreement and their material being available to them.

Matthew Gordon: Can I just clarify the terminology: when you say global, you mean a global US utility number?

Brandon Munro:  I beg your pardon. Yes. It’s an aggregate number amongst –

Matthew Gordon: So, first come first served is the attitude?

Brandon Munro: Yes. But your point, what I take from that point that you make is, it’s not going to be a total disaster for the US utilities, but it will increase their costs and it will increase their cost quite significantly. They pay about 20% of their operating costs as the total nuclear fuel. Now, that’s your U308 through to your conversion, through to your enrichment, your fabrication and storage and so on. But enrichment at the moment is a relatively minor component of that. But if you saw a market suddenly rebalance because all of the Western enrichment capacity is removed by US utilities filling the gap and putting their finger in the dyke, well, then you’ll see proper price discovery and probably market prices in SWU, which will increase that little component that’s enrichment and possibly have a 3% or 4% increase in the cost of electricity delivery for many of those utilities.

Matthew Gordon: Brandon, we are going to switch over to the Crux Investor Club section for Crux Investor Club members. We have got 2 quite good stories, this week; quite insightful, and impactful in terms of investment decision-making. I’m going to do that. Thank you very much, everyone for watching the show this week.

Brandon Munro: It was quite fun answering all of those random questions. Normally with our weekly chat, we have got like a nice thread and I’ve had a bit of chance to think about it and so on. And so, yes, that’s fun.

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

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

Energy Fuels (NYSE: UUUU) – Old Timers said, “You Own the Mill, You Own the District”

Energy Fuels Inc.
  • Shares Outstanding: 118M
  • Share price US$1.50 (01.05.2020)
  • Market Cap: US$176M

Energy Fuels is America’s leading producer of uranium. The company’s portfolio is unique within the North American uranium space, with more production capacity, licensed mines, licensed processing facilities, and in-ground uranium resources than any other US uranium producer. While it is small on a global scale compared to other companies, it remains a significant player.

Chalmers is quick to point out that they are focussed on uranium. That said, the cash flow opportunities available to them are not reliant on mining uranium. The company offers up some diversity of revenue in the form of vanadium production, uranium recycling/clean-up operations and REE processing (rare earths); more on that later.

We’ve spoken with Chalmers on many occasions and the uranium picture has become more and more bullish each time. There have been numerous catalyst moments in recent months, predominantly revolving around the destruction of uranium inventories and the tightening of production generated by COVID-19 lockdowns the world over. We were interested to hear what Energy Fuels’ latest update would entail.

Matthew Gordon talks to Mark Chalmers, July 2020

Let’s start with the commercial side of things. After a year spent strengthening its balance sheet, Energy Fuels has told holders of its floating rate convertible unsecured subordinated debentures that it will be redeeming 50% of the C$20.86M total. The remainder is due at the end of this year and the company will need to address this. Chalmers discusses the options available to them in the interview. This is a smart, decisive move that will allow the company to avoid c. US$350,000 in interest payments for the rest of 2020. This decision sets Energy Fuels apart massively from most other uranium juniors who are currently running up debts to fund exploration programmes or to keep the lights on whilst the market lurches from one catalyst to the next. Instead, Energy Fuels is on the front foot, logically and systemically managing its cash position as it prepares for the uranium renaissance, whenever that may begin.

The US House of Appropriations Committee recently took the decision to block the funding of a US$150M US uranium reserve. This is a setback for North American uranium bulls after several months of positive news, but Chalmers is pragmatic; he is anything but surprised. Moreover, he doesn’t see this decision as definitive. It seems likely that the topic will be revisited once the US Department of Energy can provide more clarity about how exactly the reserve would be implemented at some point in the next 180 days, about 90 days after the US Elections take place. Chalmers is under the impression that the DoE is hard at work to address these questions right now.

Let’s get back to what I mentioned earlier: vanadium and rare earths. This is when the White Mesa Mill, Utah, serves as a real trump card. The only remaining fully-operational conventional uranium mill in the US is the subject of much discussion, but some investors may not yet have recognised the full extent of its capabilities. It is licensed to process uranium, but it is also able to process vanadium and rare earths. Uranium, vanadium and rare earths are all potentially strategic commodities on the critical minerals list for the United States, and this can only be a good thing. Now, the question is can the US govt help? If the Section 232 fiasco is anything to go off, advancing their own agenda through partnerships would see them retain control of their own destiny.

In fact, based on what we are hearing, America is aiming to build a new US-based global REE hub to rival the status quote of Chinese dominance. Supporting a cause that could rival a monopoly is usually something to be quite excited about… Energy Fuels has recently been actively pursuing the rare earths processing capabilities of the business as it looks to further monetise the White Mesa Mill, driving capital into the company’s bottom line. What partnerships with Constantine Karayannopoulos and Neo Performance materials do for them? It feels like a new Mountain Pass in the making.

A total of 5 uranium juniors have told us in recent interviews that they will be using White Mesa Mill to process their uranium. However, Chalmers hasn’t heard even the faintest whisper from any of them, and he’d quite like them to stop making such claims. This exemplifies exactly what we have been saying about the White Mesa Mill all along: it gives Energy Fuels a monopoly over other North American uranium juniors. Uranium juniors face the choice to pay a toll fee, at Energy Fuels’ leisure, or ship ore more expensively to South America. It’s an incredibly competitive situation and it is clear that Energy Fuels holds all of the cards.

We recently discussed an intriguing topic with Brandon Munro and John Borshoff. As this deep uranium bear market has dragged on year after year, expertise has been attracted away from the industry. This means there is a shortage of technically-proficient, experienced uranium minds out there. Projects will struggle to get into this production without expertise. Moreover, with a flood of new entrants, there are currently too many uranium companies for too few high-quality projects. As a consequence, the utilities aren’t taking uranium producers seriously yet. Consolidation is absolutely necessary to swing the struggle back in favour of the producers, and Energy Fuels could be an excellent candidate for this. It has a dominant position and is surrounded by many uranium minnows. It could well look at M&A in the future and appears to be the best-positioned North American uranium junior to hoover up some smaller players.

What did you make of Energy Fuels and Mark Chalmers? Comment beow and we will respond.

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

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

Brandon Munro #16 – No to US Uranium Reserve Fund (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price A$0.035 (16.07.2020)
  • Market Cap: A$37.06M

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

It’s been a big week for uranium investors. The US House of Appropriation has blocked the idea of funding of the ‘US uranium reserve.’ What is the right of reply? What does this mean for US uranium equities? How should uranium investors interpret this information? We will be asking some of the main players this week how they intend to respond. Brandon gives us a precursor to what happens next.

We then take a look at the supply market in general, with news of the latest lockdown extension in Kazakhstan, with the world’s largest uranium producer, KazAtomProm, extending its initial 3-month production reduction by a further month. Cameco and the other uranium majors are following suit.

We Discuss:

  1. 3:05 – US House of Appropriation News: What Happens Next?
  2. 10:50 – Geopolitics of Nuclear Energy: Should Politicians Be Involved?
  3. 13:18 – Impact on Retail Investors: Looking for Catalysts and Getting Deflated
  4. 15:34 – Kazakhstan’s Extension of Lock-down Continues: The Impact on Market
  5. 18:12 – Your Questions Asked: What if COVID-19 Continues for Another Year, What Could the Impact Be?
  6. 24:24 – COVID-19’s Impact on Investors: Blue Sky Opportunities
  7. 27:29 – US & Russian Suspension Agreement Debates and Potential Results

CLICK HERE to watch the full interview.

Matthew Gordan: Brandon Munro. How are you, sir?

Brandon Munro: I’m well, how are you, Matt?

Matthew Gordon: Good. Feels like a long week if I’m honest. But we have got to get on with this. We have got another exciting week of Uranium conversation, we discussed some pretty big things this week. We are going to discuss some of them in this forum, and then we’re going to go and talk about some quite interesting stuff in the Crux Club for a moment, won’t we? Looking forward to it.

Brandon Munro: Looking forward to it.

Matthew Gordon: Let’s start off with the big one. People started talking about it last night, but they haven’t really got into the detail of it. The US House of Appropriations Committee have come up with something which is probably not too good news for the Uranium juniors in the US. What did you make of it?

Brandon Munro: Yes, I think it could be pretty discouraging for some of those companies that have really pushed the Section 232 process, and were hoping to obtain shorter term benefits. For the viewers out there, the House Appropriations Committee, whose job it is to take the recommended budget proposals, mark them up, and then submit them to Congress for approval. And that’s for the budget commencing in October 2020. They jettisoned, really, the proposed US Uranium fund. So if we go back for a moment to the report that came out of the Nuclear Fuel Working Group, which came out of the Section 232 investigation all those months ago, the report recommended a USD$150M per annum Uranium reserves that would acquire between 17Mlbs and 19Mlbs over about 10-years, and also convert a proportion of those so that the US could improve and enhance its stockpiling capability.

At the moment, the US Department of Energy maintains only enough strategic reserves for about seven reactor refills reloads. And that was seen as not enough. Now what has happened is that the House Appropriations Committee said, nope, we’re not going to fund that. We’re not going to approve that. And they cited a lack of detail, in fact, from the Department of Energy over that. They basically said, we’re not too sure about the justification for this Uranium reserve. And in fact, we didn’t really get our questions answered on how it would be implemented, et cetera, et cetera. So, a bit of a discouraging setback for many of those US producers, but of course, for the broader market it is just really a blip.

Matthew Gordon: Does it surprise you? Was this a shock to you?

Brandon Munro: No, and in fact, you and I were talking about it, if it wasn’t last week, it was the week before, where we were saying the DOE really seems to have its head space in nuclear technologies, particularly SMRs and advanced reactor technology. When you look at where the money is going, most of the funding has gone to R&D for those different technologies. They can see how it can more directly benefit the US industrial complex. They did appear to be quite slow in getting their head around the nuclear fuel cycle during Section 232. And my impression, and we talked about this as well, was that the reserve looked a little bit like throwing a bone to the US mining industry. Quite an attractive bone if it had come off, of course, and if that had been spread amongst only two or three of the miners, so it doesn’t really surprise me to see this, given how distracted DOE has been and where its focus has been.

Matthew Gordon: Given that, what’s the timing on all of this? What happens next?

Brandon Munro: The Committee itself basically told DOE to go home and do its homework. What they asked for was they directed that the Department of Energy needs to come back with a plan, including costings, within 180-days of the Act passing. They want them to tell the House Committee how they are going to go about procuring, converting, storing. They want information on the legal processes that allow them to do this type of thing, and all of the associated costings to that within 180-days. Now, that is obviously half a year from now. And presumably what would happen from there is that that then gets tipped into next year’s budget appropriations process. My take on this and my read is that unless the Republicans pull a rabbit out of the hat in the Senate during this appropriations process, we’re now looking at that money potentially being available from October 2021. It is a long way off, and there is a long period of lobbying that is going to be required to see this one through from here.

Matthew Gordon: If I’m a US Uranium junior I’m going to be pretty pissed, because someone has dropped the ball here. They haven’t done the homework. They haven’t put in the hard yards to actually provide the information which was asked for. And, quite rightly, the Committee has said, no.

Brandon Munro: Well, I don’t know where the breakdown has occurred. I honestly, I’ve got no idea. And there’s a number of people who come on your show who probably would have some good insights as to that. It would definitely be disappointing for Uranium juniors or Uranium producers who are eyeing off this potential source of demand. The opportunity to contract directly with the US government would be very attractive to them. I would look at it a bit more holistically though; which is the market is going to do the heavy lifting here anyway. By the time this all gets sorted out the numbers that they told the DOE that they would need in order to effectively resume production, the market is going to navigate and gravitate to those numbers anyway. I will be astonished if in 2 or 3-years’ time, we are not above USD$60/lbs, USD$65/lbs on a term contracting basis. It might be that when we finally get there, and the US finally starts procuring this material from US production, the market has solved the problem for them in any case. And we now look back at all of these delays and this great long process that has certainly put a wet blanket and a damper on a lot of the utility activity, we will look back at all of this and say, well, what was that for?

Matthew Gordon: I agree with you, but we have had conversations, probably back in the early days, where we were trying to explain to people the importance of US utilities, because it is such a big market. But the reality is that it is 25% of the market. And, the market will, well, we said at the time, it will have to sort itself out. It looks like it is probably is going to have to do that. It is going to have to find its own pricing in the market because it is not getting much help from the US politicians at the moment.

Brandon Munro: Yes, and look, I think some would justifiably ask the question, whether it is the US politician’s role to be helping in that instance. And that is a whole different discussion that really comes into what, philosophically, is the right level of government intervention and so forth. And there is a broad range of views on that, of course. But you’re quite right: we know what supply and demand needs to do, and if utilities want to buy diverse supply from anyone except, say, the Kazakhs and the Russians, for example, well, they are going to have to be prepared to spend a proportion of their portfolio of contracts at those prices and above over the coming years.

Matthew Gordon: But it does come back to this whole geopolitical component around energy, around Uranium and nuclear energy. We are going to chat in the Club member’s club about Nord Stream 2, but it is just a real reminder that, , whether politicians should or should not get involved with decision-making like this, they are because we have got various sanctions: Russian sanctions, we have got Iran sanctions. And, the US’s allies are even feeling a little bit ostracised about the way that the American politicians are approaching this at the moment, especially around Iran, for sure. It is hard to separate the politics, politicians’ activities, and the utilities decision-making in this environment, and in an election year too, so it is as complicated as ever. But, coming back to my point, the US junior Uranium companies are going to find this a little bit hard to swallow.

Brandon Munro: Well, you are absolutely right on the political and geopolitical implications. And this is in the counter argument to the one that I referred to a moment ago, which is that nuclear energy is inextricably linked to geopolitics. And even in the US free-market environment. In Russia and China, it is entirely absorbed into the political apparatus and the political industrial geopolitical apparatus in those countries. And as came through really clearly in the Working Group report from the Department of Energy is that the US has dropped the ball on that. The counter argument is this is a special form of energy, as we’ve always said, it is so closely integrated into geopolitical ambitions of the world’s major players, that it should be integrated into the political process as well. So that’s the counter argument, and the one that incidentally I favour. And we have talked so much about the role of geopolitics, and you can’t really understand the Uranium sector unless you have got a reasonable grasp of geopolitics. And as we have talked many times on the show, that is where we tend to navigate when we’re looking at the bigger picture of this.

Matthew Gordon: What is interesting to me about what you have said earlier is that this announcement, and obviously it is not going to faze utilities, but for investors, retail investors particularly, looking forward to these large catalyst moments over and over for the last couple of years, since Section 232 started, this will be a huge disappointment because it is a huge inertia yet again when they are looking for salvation in spot price and rising support from the US government. And to see that the short-term impacts won’t be there. There won’t be any movement in Uranium equities off the back of this, but your view is that it doesn’t matter. The market will sort itself out.

Brandon Munro: It doesn’t matter for most of the sector. So, when I look at my Twitter account, and some of the responses that I’ve had to this news, it has largely been comments like, ‘Oh my God, the whole sector is going to be done down’. And it is like, no, it won’t be the whole sector. It is a handful of companies who stood to benefit from this. We need to be really clear that for 90% of Uranium juniors out there, those exposed to Africa, those exposed to Canada, those exposed to Australia and elsewhere, this makes very little difference. Sure, it would have been nice to have another source of demand coming in there, it is always nice to have a government buying material out there that others can’t buy. But it is not even the same as the effect that, take the Ranger mine coming off stream that ERA is closing – that is far more impactful on the market than what the source of demand is. We just need to put that in perspective. I don’t want to downplay the disappointment for the key players here. But by the same token it doesn’t really make much difference to the broader industry here.

Matthew Gordon: That is true in terms of pounds out of the ground. It doesn’t really add up to a lot in the scheme of things; That is what you are saying. Let’s talk about Kazakhstan. Kazakhstan, we heard last week, and we interviewed KazAtomProm last week and we heard from the horse’s mouth, but this extension to the lockdown period, it really is big. They are handling things really well. They are handling things, as per Cameco… they are doing the right things for the right reasons, but the impact on that could be significant because there is no end in sight.

Brandon Munro: That’s right. We have seen the 2-week extension extended by another 2-weeks. And to us, and we talked about this on the show 2-weeks ago, I think it was, that was very apparent that that was going to be the case. The Ministry of Health’s own numbers in terms of the number of daily pneumonias by the end of August, the number of beds that would be required, they pointed very, very directly at 4-weeks of necessary lockdown, assuming an improving trajectory. Now, we haven’t seen that improving trajectory and yet there were those numbers that were still presumably valid projections. So that’s now been extended, I think KazAtomProm would have been forming a very similar view to what you and I formed a couple of weeks ago. They would have expected those lockdown restrictions to carry on.

Now, how much longer do they carry on? Well, that is anyone’s guess. I mean, in Australia at the moment in Victoria, they had 100 cases a day and they slapped a six-week lockdown onto the city of Melbourne, which is 5M people. And we’ve seen a far escalating problem compared to that in Kazakhstan and its neighbours. There is no end in sight. Obviously, there will have to be an end at some point, but is it 2 more weeks? Is it 4 more weeks? Is it 6 more weeks? Very hard to judge, and I think it’ll be very interesting now to tune in on the 3rd August when KazAtomProm has their quarterly results, because now they are obviously under some pressure to address production guidance. But equally they’ve also got now a change in circumstances; they have got this extension of two weeks, so they have the justification now to address production guidance in a different way. I’m very interested to see what they come out with on 3rd August,

Matthew Gordon: Someone sent in a question, which was (I had absolutely no idea, I couldn’t even begin to come up with an answer for), which was: what happens if this COVID situation carries on for another year? And before we get some vaccination solution here, what does that do for these producers? Because obviously, utilities have between 2 to 3-years’ worth of inventory in reserve for situations like this. They don’t want to run out. But these companies, the longer they are offline, the longer it is going to take to get online. The question was this: can those companies come up with a protocol which allows workers to get back in? And given the size of some of these, like KazAtomProm has about 20,000 workers, obviously not all of them are essential workers, they are not all in the field as it were, but how do we, as the world, how do we get back into production on these Uranium sites, these Uranium assets without endangering lives?

Brandon Munro: It is an interesting question, isn’t it? Because the scenario in which the world is still grappling with COVID in a year’s time without a vaccine; that’s a very realistic scenario. Most of the medical information that I’ve seen on a vaccine, is that we are looking at least that timeframe before a vaccine is developed and is safe and available to the public. And then there’s a whole lot of questions about affordability. There are questions about what are the attendant risks with the vaccine. This is a scenario that I have very firmly in front of my planning from the Bannerman point of view and so forth. But having said that, I don’t think it is realistic to expect that these big production centres will remain offline for that long, even if we’re seeing an escalated issue at a societal level. And there’s a few reasons why I’d say that. The first one is that we learn, we get better. The mining industry is incredibly adaptable. It probably adapts as well as any other industry, perhaps including military. It comes up with various techniques. Now that doesn’t mean that, if we’re talking about Kazakhstan, just for argument’s sake, it doesn’t mean that they’re going to be back at 100% production necessarily, but over time they would work out how they can do that.

The other thing is that, let’s say, again with Kazakhstan, that it continues to really battle COVID over that period of time, there is going to become a proportion of the workforce that develops immunity through having recovered from COVID. So, in addition to whatever other mitigating workforce steps implemented by KazAtomProm, they are going to be able to draw on people who won’t get sick. But the other thing is, what we’re talking about here is, both in KazAtomProm and Cameco situation, and some of the other companies that have been affected in other commodities, we are largely talking about preventative measures. Companies that are making tough, difficult decisions to prevent adverse circumstance answers, not only for their own workers and their families, but for the society at large, particularly in Cameco’s situation who are very keen to preserve or to avoid any contribution to the difficulties in Northern Saskatchewan. The society’s tolerance for those preventative measures will wane over time. We are seeing it wane already in the US in many different ways at a societal level. So over time, the balance will move more towards getting production and getting dollars in the door. The question becomes, in that scenario, while we’re playing this one out and role playing it out, where does that balance kick in? Because for a country like Kazakhstan, we have said it before: Kazakhstan is incredibly important to Uranium, but Uranium isn’t that important to Kazakhstan. , 20,000 employees across the country there isn’t massive compared to other hard rock commodities, such as Copper and Gold, and it is very, very small compared to oil and gas. The government, the society, the communities, we will see them accept that risk sooner, particularly in hydrocarbons and other forms of industry, than they will with Uranium. Would that be six months would have been nine months? That’s very hard to guess, but I think the idea that Uranium could be shut down for a year is unrealistic.

Matthew Gordon:  It is also quite interesting in terms of the supply story. Again, we’re going to have some old ground here, but this new data allows us to do that. The longer the current situation goes on, the less supply there is in the market, the less pounds there are on the market, and there is this undertone we’re getting from Cameco and KazAtomProm about sweeping up pounds in the spot market. It is really good news. I have got to bring this back to investors; it is good news for investors in Uranium companies. And the longer this goes on, the better is for the Tier-3, I’m calling them. I’ve got my Tier-1 producers like KazAtomProm and Cameco and the like, and then the Tier-2 are people that have formerly produced, and the Tier-3 is coming through. The longer this goes on, it is better for those Tier-3s, and lower, in terms of, there will be more need for them. There will be huge pressure on price the longer this goes on. And that can only be good for investors too. What’s your take on it from that angle? Because we talked in the past about the possibility of, if this goes on for a long time, people without cash are going to struggle, but at the same time, it is fantastic news for the supply side of the market. So how do you weigh those things up as an investor?

Brandon Munro: I absolutely agree. What we’re seeing here is the drawdown of inventory, necessarily by utilities and others, while the supply deficit widens. And that will carry on to the end of the year and even into next year because of the existing structural supply deficit, but also the guidance that’s coming out of KazAtomProm now seems pretty clear, to me, that it is going to affect 2021 production as well as 2020, as it takes time for them to reassess their wells and develop new wellheads and so forth. But here’s the rub: the more disruption that we see and the longer we take for a market to rebalance, the more volatile it is going to be. So if, for example, at the end of 2018 we had seen a market rebalance, we had seen a series of term contracts written, we had seen price discovery, and we had seen the utilities meet their requirements out to 2026, 2027, 2028, and so forth. We would have seen prices go up, no question. That was absolutely necessary to preserve existing production, let alone to incentivise new production.

But if the steps had been taken back then, it probably would have brought on enough new production at that price to avoid serious supply scarcity. But here we are two years later and that hasn’t happened, and the deficit has only got worse. And now we’ve got a serious supply disruption taking place right now. So that means upward volatility. That is great news for all producers, really, particularly good news for some of the, you used the term Tier-3 and Tier-4 producers, who can get into business. But it also becomes very important to understand as an investor; are you investing in a company that can produce producible pounds during that volatility period? Because if we go through a huge amount of volatility, like we did in 2006, 2007, and then the market settles down again by 2030, and your investment is only looking at that timeframe to get back into production, it will see some benefit, no question. Its cost of capital will go down, but it won’t be putting money in the bank as a result of selling pounds into those volatile price events.

Matthew Gordon: I think it needs some careful thinking about where you place your bets, depending on what your strategy. We have talked about it a lot before. We will talk about it again. But for the sake of today’s conversation, I do want to talk about utilities. We understand from last week’s conversation why utilities are inactive. You explained that. You articulated that last week. In terms of this Russian suspension agreement, it is just worth getting into in a bit detail about what the debate is. What is the US wrestling with. What are these politicians who are affecting the price of Uranium and the nuclear industry? What are they wrestling with?

Brandon Munro: I think we need to remember that there is a debate – sure. And there’s a lot of grandstanding and there’s a lot of political posturing and that’s what we read about because it comes out in the media. But what we’re actually talking about here is a negotiation; this is a negotiation between the US and Russia, where the US is seeking to get Russia to agree to the restrictions, and in return, Russia is seeking to get the US to agree, to allow it, to sell its Uranium, but in particular it is enrichment services, without forms of trade restrictions such as tariffs. I saw some commentary out of, it was Energy Fuels, and their view is that if there isn’t an agreement, that the resulting position will be the suspension of the trade action falls away, which we’ve said before. And they are saying that the result would be that tariffs would come in at 115%. So very, very significant tariff on Russian enrichment and Russian Uranium supply until the trade action can be re-established and resolved.

I am just repeating what I’ve seen there. I haven’t gone into the detail to understand that, and it might be that they have got access that I don’t. But of course, if that is the result, you can imagine why the utilities are just so nervous about this; because they could see those tariffs imposed on their existing contractual obligations with Russia, and unless they’ve got some a force majeure or other option to get out of it, that is going to make them pretty nervous about the cost that they will be paying for their nuclear fuel. So that is what is at stake. And there are various provisions where, for example, the US could unilaterally withdraw, giving a certain amount of notice. We’re hearing that perhaps they are playing tough with Russia, or attempting to, let’s just see how all of that plays out. But the word coming out from the US that I’m hearing is that this thing is still a long way from being resolved. We are likely to have a resolution in December, perhaps even late December. And so that gives viewers an idea of why the utilities are so distracted from what we are seeing.

Matthew Gordon: What happens if we don’t come up with something in December? Can they extend the negotiations, or does the resolution come into effect?

Brandon Munro: The resolution comes into effect. There’s no automatic extension. Effectively, what happens is that the 1998, I think it was, when the initial action, the trade action was brought, it was a dumping action that was brought, that’s the action that was suspended and why this whole thing is called the Russian suspension agreement -so that suspends that action. The status quo at that time of that action would then kick in. I’ve read from commentary from Energy Fuels that that involves 115% tariff that would be automatically applied on anything caught by that action, which is Russian Uranium and Russian enrichment services.

Matthew Gordon: We are now going to switch to the Crux investor Club. So thank you very much, everyone for watching this. I hope you enjoyed this week’s show with Brandon. We are now going to segue over to the Crux Investor Club members where we are going to talk a little bit more about the geopolitical component and the impact on investors. So for instance, what’s happening in Iran; there has been an explosion. We’re going to talk about what’s going on, and should we be worried? We are going to talk about Russia a little bit more, with Nord Stream 2. And, how that potentially influences what is going on in the nuclear Uranium space, especially for investors. Thanks very much for watching.

Brandon Munro: Thanks to everyone out there who is supporting us.

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#14 Uranium Sector Shutdown Excites Investors – Brandon Munro (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price A$0.035 (16.07.2020)
  • Market Cap: A$37.06M

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

A “fantastic week” for uranium? We run through Kazatomprom’s possible shutdown extension and the huge impact this could have on the available pounds in the market.

Then, we look at the political side of things. With the Democrats no longer discriminating nuclear power from other forms of green energy, the November election no longer carries any uncertainty for uranium investors.

We Discuss:

  1. 3:34 – News from Kazakhstan: Implications for Kazatomprom and Uranium Investors
  2. 16:49 – Parallels with Cigar Lake Flooding: What’s to Expect from the Uranium Market?
  3. 23:43 – The Great Unknown of US Politics: Democrats to Support Nuclear?

CLICK HERE to watch the full interview.

Matthew Gordon: How are you, sir?

Brandon Munro: Well, thanks, Matt. How are you?

Matthew Gordon: Yes, good here. End of the week. Busy week in the world of Uranium this week. It started off by I did that AUSIMM conference, online conference on Monday. Finished at 4:30AM. I must admit, my thinking and functioning was not particularly good on Tuesday, but we got through it. And then a lot of news, which we’re going to talk about now. Shall we do it?

Brandon Munro: Let’s do it. It has been a great week for Uranium, actually.

Matthew Gordon: It’s been a fantastic week.

Brandon Munro: Nice for the conference organisers to come out with the online conference. It is a lot more accessible during a week like this.

Matthew Gordon: Yes, true. And we will talk about it in the Crux Club afterwards. We’ve got a few topics that we are going to talk about today. And a few topics which we are going to save for the Crux Club members at the end of this conversation. Let’s kick off with, I think, the news that people are talking about most online, which is what’s happening in Kazakhstan, and what are the implications? So, what are you hearing?

Brandon Munro: Yes, well, there is chatter online about Kazakh’s shutdowns and extensions, but, you know, I just don’t think this topic is getting the eyeballs and getting the chatter that it deserves. We’ve been talking about this every week, so anyone who’s been tuning in will be well across this issue. And I guess we have been talking about it and giving lots of bandwidth to this topic because it’s just so important. So here we are on the eve of KazAtomProm needing to announce an extension of their three-month shut down. And unless you are deep into a Uranium group on Twitter or talking to analysts who really cover the space, it’s just not out there. No one is really talking about it. So great opportunity for people who are well-informed and who are looking to coincide other events like Australian tax loss, selling coming to an end, et cetera.

What’s happened? Well, the Kazakh government has announced that from 5th July, they’ll be reinstituting a hard shutdown for initially two weeks. And the 2-week period was a midpoint of 3 scenarios that were put to the Kazakh cabinet. People who have been following this would know that on 29th June President Tokayev instructed the Ministry of Health to come up with a proposal. Now, the recommended path was in fact a four-week shutdown. And what the minister of health did is he laid down a few scenarios, or projections, as to what the daily hospital admissions would be by the end of August, according to either not taking any action, taking a two-week shutdown or taking a four-week shutdown. And he recommended the 4-week shutdown, which incidentally would have had 2,500 hospital admissions daily, and the requirement for 30,000 hospital beds capable of looking after people with severe COVID-related illness.

Now, the president announced a couple of days later that they would go down the 2-week path, but certainly reserved the possibility of either a two-week extension or further tightening, if they don’t see progress, basically. And that was a position that was reemphasised by the deputy prime minister who emphasised again, that extension would be reviewed. And I think the implication here is it’s quite likely unless they really see good news during those two weeks. And the rationale for the 2-weeks was a little bit… they attempted to base it in medical science; saying that that is the gestation period. It seems to me to be, here is a minimum amount of lockdown that they can take, and partway through that lockdown the Kazakh health authorities will look at where their case load is and then decide if it needs to be extended.

So when you apply lessons that have been gained from other countries, for example, where a lockdown doesn’t have an immediate effect; it’s not a silver bullet in a 2-week period, unless you’ve got highly localised breakouts that you are looking to contain. I do expect that it will be extended in some form. If you look at where we are at with their case numbers, when KazAtomProm announced on 7th April, that they would be initiating a 3-month production disruption, the cases were somewhere around 50 new cases a day. You know, we’re talking 1,500 cases a day now in Kazakhstan, and that is after some significant lockdowns back in May.

Plus, what we’ve got is a range of measures that the state commission discussed in conjunction with this announcement. And one of those measures is that 80% of workers in national companies should be working remotely. So that also correlates quite closely with what KazAtomProm is doing. They have got about 80% of their workforce, probably a little bit more, who are at home at the moment, either working from home if they’ve got corporate roles, but mostly on some sort of a furloughing arrangement. So, of course, they won’t be able to come back to work, and they’re not going to want to bring people back to the fields, start acidifying new wells and doing wellhead development and then being told on three days’ notice, no, the caseload is back up too high. Sorry, you’ve got to go home again. You would expect that KazAtomProm management are going to have to look for some level of stability before they would want to start bringing workforce back.

All the writing is on the wall for an extension here. I feel for the KazAtomProm executives and I feel for the employees and shareholders, but in terms of, for shareholders, you have got to remember that the last time that KazAtomProm announced this production disruption their margin went up significantly with the Uranium price. I think shareholders aren’t going to do too badly. They’ve got a nicely inbuilt hedge here for the extension that we’re going to see.

Matthew Gordon: Obviously not only KazAtomProm and the board and the workers, but also the people of Kazakhstan, because it does feel a little bit compromised – the decision-making. As you say, 2-weeks, it suggests to me that when the world of politics and science collide, you don’t necessarily always get the right answers. And, it would seem logical that there will be an extension based on the data around the world, but we shall see.

But let’s get back to KazAtomProm. What will this mean technically for them? With the fields, there’s been again, conversations online, on Twitter in chat rooms, people trying to understand – nice mug, by the way – trying to understand what could happen technically if this extended period of lockdown continues, will they be able to just have the fields ticking over? Will the Uranium be, I think the phrase was ‘frozen in’, as it were? What are their options? How do they keep this thing going so that when they do get a chance to, you know, get things back up into production, the ramp up time isn’t more extended than it needs to be?

Brandon Munro: The Uranium production has been ticking because, as I think everyone who has been following this show for a while would have gathered, the fields were already acidified when the initial wellhead disruption was announced. And so those solutions that are coming out of those in situ recovery wells initially weren’t affected, but of course the recovery starts to drop and that ticking starts to tick at a much slower pace. And that varies according to the different assets. The better quality assets will have a longer period in which they tick along than some of the poorer quality assets. The important thing here though, is that after three months of no forward wellhead development, many of those assets would be ticking really quite slowly now. And if the production disruption is extended for any length of time, you would expect, materially, that many of those assets will stop ticking. We will see production coming out of those wells that don’t have a forward trajectory of wellhead development to look forward to, will stop production.

Now for your question on getting back into wellhead development, well, there are a couple of things about that. The first one is just sheer logistics; KazAtomProm employs more than 20,000 people, and the majority of those will be involved in this type of field-related activities in one form or another, whether it’s doing the wellhead development or logistics associated with it, et cetera. It’s a very big exercise just to simply remobilise that many people. And you might expect that they’ll do it in phases, et cetera, et cetera, particularly, which seems very likely for the foreseeable future, if they need to be doing that conforming with all sorts of social distancing rules, transmission rules, et cetera, et cetera.

KazAtomProm, in this part of Kazakhstan where most of their development is, it gets pretty cold by about October. They can start having decent-sized snow in October. That doesn’t stop well head development. But what it does do is it does make logistics that little bit more difficult. They are probably keeping an eye on the confluence of seasonal factors, logistical factors, but primarily it’s about health factors and the government policy.

Matthew Gordon: At times like this, you have got to be mindful that people’s lives are at risk. You can’t play with that. And I think the board of KazAtomProm, like many, many others, are making the right decisions, but at the same time in the background, you’ve got a cheering mob of Uranium investors who are absolutely delighted for a different set of reasons: that this supply to the market is being drastically affected. And the hope is that that will drive price discovery in the marketplace. I guess what the question is, you know, what are you hearing with regards to when you think things could come back online in Kazakhstan? Or is it just unknown at the moment?

Brandon Munro: It’s unknown, it’s unknown. And what will be really interesting is what guidance KazAtomProm chooses to give. They will need to give some guidance because they are listed on the London Stock Exchange. And they are very aware of that. And they’ve provided what I think has been good, accurate reporting to LSE over this period. But from about 7th July, that’s when the three-month period, since they first announced this, an estimated three months comes to an end. So somewhere around that time, they will need to be thinking about updating investors. The real interesting question is, what timeframe, if any, does KazAtomProm put on the extended production disruption? Do they take the path that Cameco has taken, and just say, look, we are down for an indeterminant time? Or do they try and play it the way the government has, and says, look, it’s this much, but it could be extended?

It’s the uncertainty of this that I think will have the biggest impact on the minds of fuel buyers in particular. The cheering mob, I don’t think they are going to be too influential in the equation here. It is obviously important for equities and equity sentiment, but in terms of the actions of KazAtomProm, or Cameco for that matter, or fuel buyers, that’s not a relevant factor at all. That’s just a side show. And people within the industry aren’t exactly cheering at moment because no one who is on the supply side here really revels in a competitors’ misfortune when it’s like this, when there are lives at stake, as you say.

What what’s going through the mind of fuel buyers right now is still COVID distraction. It’s still, we are not hearing about any real level of contracting taking place or mobilising for long-term contracting at the moment. We’ve got this pause in operations for fairly understandable reasons. What will be interesting to see is if KazAtomProm leaves a very wide-open scenario here, whether that’s enough to get the attention of fuel buyers and then to start realising, as you say that we’ve now got a situation that’s likely to lead to price discovery. And if you’re too slow in that situation, you can be on the wrong side of price discovery.

Matthew Gordon: Yes, it’s interesting. And we’ll talk about it in the Crux Club on the topic of what is holding fuel buyers back. We talked about it during the AUSIMM, but we will save it that for the Club. I just thought it was a brilliant answer. And one that I really hadn’t kind of understood in that way before, but we’ll come back tomorrow.

Now, so let’s just stick with Kazakhstan again for a second because the implication, the big, ‘so what’ I want to get to, the, ‘so what does this mean’ component of the conversation, I want people to understand why we are talking about Kazakhstan, why it’s important to understand that this is. If I look at Australia, who have handled this COVID-19 disruption extremely well, you have had about 100 deaths in a population of, what? Over 24M? You have handled it extremely well. You have taken it extremely seriously, as has New Zealand. The Qantas CEO came out with a statement last week and said, we are not going to get back to international flights until July 2021. That’s how seriously they’re treating it. That was a statement from a CEO of an Australian company. KazAtomProm, if they came out with a statement like that, that would send the industry into a tailspin, wouldn’t it?

Brandon Munro: Well, it would. Yes. It is 40% of the world’s production and the world’s lowest-cost production, with the exception of one or two bi-product streams of Uranium. It would absolutely set the world into a tailspin, but I do think that a statement like that is very unlikely. It is a good one reserved for your Uranium dreams between about three and four in the morning, when you are not officiating conferences on the other side of the world, but I don’t think we will see that level of announcement coming out from Kazatomprom.

Matthew Gordon: But we don’t know when. The point is that no one knows when. Uranium investors don’t know when, utility buyers don’t know when, and until that answer, that certainty can be brought back, or at least some sort of certainly can be brought back, it continues to be the great unknown for the supply-demand story in Uranium.

Well look, let’s talk about the ‘so what’ component here: given what we are hearing out of Kazakhstan, what do you think people are going to start doing? I think, you know, people looking at Uranium as an investment proposition, it is getting more and more attractive because the supply side is just being hammered every day that this continues. The story becomes more and more positive on the supply side. The demand side, I think, is well understood. For investors looking at Uranium as an investment proposition, looking at this, I guess they must be pretty intrigued, confused, and maybe excited in equal measure. What are you seeing? What are you hearing from your investors?

Brandon Munro: Yes, I think that is a good way to look at it. I mean, intrigued because of what we’re talking about; who knows where this is going to go, who knows when it’s going to end? Who knows what the implications will really be in terms of KazAtomProm joint venture partners and what they need to do? And there’s lots of speculation about what some of those joint venture partners who’ve been selling forward into the spot market, what they might need to do if they completely run out of production for an extended period of time. We could see multiple producers entering the spot market to buy back pounds that they’ve already sold in the next 12-months. There’s an enormous amount of intrigue. The confusion really comes from price response. Why haven’t we had a more interesting and assertive price response right now? Both at a Uranium price level where the Uranium price has sort of settled into a comfortable zone at circa USD$33, but in particular from Uranium equities. And whilst there has been an overall negative macro backdrop, and Uranium equities have still done okay in that context, we’re still looking at our cousins who are gold developers and so on, who have just been enormous runaway success stories right now, thinking, well, yes, we deserve at least that much. I mean, the gold bugs are crowing about USD$1,800. And you look at where Uranium’s going to go to on fundamentals, let alone on supply disruption, and we are going to take that sort of price performance and rub it in the dirt. There is confusion as to why we are not seeing a stronger response. And of course, the excitement; well, that comes from a number of things, but more and more the shareholders and investors and fund managers that I’m talking to are starting to draw comparisons between where we are now and where we were in 2004, 2005.

Multiple comparisons are being made between say, the Cigar Lake flooding event. That was only a three-month flood. So that was a pretty short disruption. But what it did was it created uncertainty. There was an uncertainty about whether this giant new development in the form of Cigar Lake was going to come on at all. Were they ever going to solve the problems that were leading to the flooding? And the fact that there were multiple flooding events, created that fear that one of the enormous, new high-grade projects that was banked as filling Uranium demand for many, many years was suddenly in doubt. So that is a parallel that we do have here with this production disruption. And of course, it’s not just limited to Kazakhstan, we’ve got Cigar Lake itself that is off production at the moment in Canada, with no line in sight as to when that’s going to come back on.

So equal measures – yes, I’d agree with that. I think all of those things are running through Uranium investors’ minds at the moment. And what I would say to that is you need to take those 3 equal measures and give yourself enough patience that they all become relevant in a positive way. If you are investing with just a little bit of patience at the moment, up to the end of this year, then the intrigue will play out, most likely positively, I believe. The confusion becomes irrelevant because we will have to have some degree of price discovery by then. And the excitement; well, we’ll know by the end of the year if the excitement was justified or mis-founded, but it will definitely be there. And for equities investors, that’s a chance to take advantage of the volatility that will follow.

Matthew Gordon: It’s kind of interesting. I’m thinking back to the last run, and I think the Uranium price popped before Gold, and this time it’s the other way round: Gold has got a little bit more exciting than the Uranium space this time round, and it perhaps distracted people from what’s going on the Uranium space in a way, in terms of the generalist investors. I will be interested to sort of see what the parallels are that we can draw from around those times. We are going to do a little bit of work on that one. I’ll come back to that one.

But let me talk about the other great unknown here; we have always talked about politics in this, okay. There is geopolitics going on, but there’s also the politics of the US. They have got the elections in November this year in the US. It has been an exciting 4-years for sure, certainly. I always call it TV gold, because it has never been so polarised. I don’t think in the US, I certainly haven’t felt it in my time anyway. I think it was earlier this week? Well, at the beginning of this week, end of last week, the Democrats have come out with a document. It’s called ‘Solving the Climate Crisis’. Let me hold it up here – Solving the Climate Crisis. It is fairly involved; 540 pages of involved ideas for how they are going to, well, how they’re planning for a clean energy economy for America. It is a fantastic read. You can get it online. I will make a link to this below in the description section, but you’ve also had a read of the section talking specifically about nuclear, and nuclear’s involvement as far as the Democratic Party are concerned. What did you make of it?

Brandon Munro: No question that it’s a positive for nuclear power. And we don’t have to go back that far to a time when there was a lot of uncertainty around what the Democrats’ position would be on nuclear power. Bernie Sanders was vehemently opposed to nuclear power, and AOC of course, was saying all sorts of things about everything, but including criticising nuclear power. All of a sudden, what does this mean? It means that it removes the uncertainty of the US election in November from the mind of both nuclear fuel buyers and also Uranium investors. So no longer is there a scenario as there would have been if Bernie Sanders was running with heavy support from AOC. No longer is there a scenario where the Dems could get in and that would send nuclear power progress in the US back by years.

What does the report actually say? Well, it says a raft of things, and I agree that it is well worth a scan through and a read. First and foremost, nuclear power is recognised alongside other traditional renewable forms of low-carbon energy with hydro. And so that discrimination against nuclear power has been removed from this solving the climate crisis document. They strongly recommend the implementation at a federal level of federal support for low-carbon energy sources, including nuclear power. And they highlight the fact that a number of States have already introduced zero-emission credits and so on to assist with nuclear power. There’s no talk of removing or discriminating against nuclear power at a subsidy or support level. And they go further in saying that that is at a federal level and States should be able to go further and produce their own initiatives, which means that the States who need the base-load resilience of nuclear power can still go with the zero-emissions credits and other forms of support to nuclear power to keep it going.

The report does have evidence of a little bit of compromises in the drafting, and there’s a little bit of the old-fashioned rhetoric about risks and so on. But by and large they’re founded in, I think, a logic, and generally quite fair. There’s a lot of calls for the regulator getting tougher, et cetera, et cetera. And the nuclear industry, as long as that doesn’t impose unreasonable levels of red tape and green tape, the nuclear industry would welcome that by and large. So, very positive. And now November becomes less of an important attribute for what Uranium investors need to look forward to. Now it’s back to the sit-com, as you say, we can just observe it for its pure interest and entertainment value, and not for its effect on our Uranium holdings.

Matthew Gordon: What I took from it, and it really is quite comprehensive, and if you look at what people’s expectations were from the Nuclear Fuel Working Group, they couldn’t go far wrong by taking a look at what is in this document, for some of the joined up thinking that I think we are going to be hopefully going to be seeing from them in the near future to bring some level of certainty into the you know, the nuclear ecosystem and for Uranium equities, some certainty around how this all comes together to provide a zero carbon, you know, cleaner and greener, or clean-energy economy for the US. It is quite nice to see documents like this, but then it becomes, because this is entirely the Democratic position. There is no kind of cross-party components to this. No doubt, if there is compromise within the party, it is going to have to be even more compromised if it becomes a cross-party platform, whether it be through the Nuclear Fuel Working Group or something even bigger. But that all takes time. I’m not quite sure how to view that as an investor. It is positive, but how many more steps do we need to wait for to get an idea of how the US is going to react?

Brandon Munro: Well, it does take time. And I think that is why the strong bipartisan support for nuclear that is now confirmed by this document is important. We are no longer looking at the Nuclear Fuel Working Group report that was released two months ago, and just wondering, you know, how much of that is really going to get implemented before November, if there’s a change of government. Now we can look at it and say, look on its merit, we are going to see those steps being implemented.

Another thing that came through really strongly in the Democrats’ position is strong support for SMRs and the technology development associated with the SMRs. There weren’t so much unconventional new conventional reactors, and there wasn’t a lot of foreign policy emphasis in the way that we had from the Working Group, but equally there wasn’t any debate about that topic. They just decided that this is a domestically focused document that is about emissions control. It’s not about the industrial platform, so there was no need for them to comment one way or another. I would say all of the best bits of the Nuclear Fuel Working Group report have been preserved in a bipartisan way by the platform that the Democrats have put out on this.

What does it mean? And what for Uranium investors? Well, it’s part of the slow burn demand growth that we’re seeing in nuclear in the Western world. Nuclear is still driven by China, Russia, India, and the developing nations; you know, let’s not forget that for a moment. But the Western world is projected to grow modestly. And more importantly, we’ve seen a number of years now of the US reactor fleet deteriorating, and that’s been a drag on the nuclear industry and therefore Uranium industry really since Fukushima. The reversal of that deterioration is important because it stabilises what still represents 25% of demand for Uranium today, and in a very dynamic part of the sector in terms of leading long-term contracting and so forth.

It does matter in today’s terms. And at a micro level, decision uncertainty at a utility level, in other words, does the utility have confidence that they’re going to be buying for a reactor that’s still going to be operational in 4 or 5-years’ time? That decision uncertainty does filter through, into contracting decisions and the general performance, particularly amongst a larger utility that’s got a fair portfolio of reactors. If they’ve got a portfolio of a dozen or so reactors, and they’re looking at some of them coming off in a short period of time through an early retirement or an end of life retirement, they can manage the risk within that portfolio. If they suddenly look at that dozen or so reactors and say, actually, nothing’s coming up to end, and we’ve just got two 80-year extensions through, they have to buy for that entire portfolio. And that affects the way that they think about long-term contracting, which does dovetail now into the next several months. And what I see as a number of, a confluence of a number of factors, coming together for them to re-evaluate their procurement policies and probably get more active in that part of the market.

Matthew Gordon: There’s a lot to unpack in that. A lot of moving parts. I do think we should come back to the SMRs, because I think it’s going to be really, really important across the world. Lots of companies and lots of countries are getting involved in that. And we talked to Ben Heard about that, and maybe we can talk about that in a couple of weeks. Actually, the Ben Heard interview came out yesterday, where we do talk about it, and I’ll put the link again below here. But the interesting bit to me in all of this is that the US, the politicians seem to be coming together, having the same thoughts about nuclear assets, you know, as a zero-carbon solution, which is great. It’s an evolving narrative. I think you’ve got activists as well who are now coming around to this way of thinking. A few have come out in the last 2 or 3-weeks as pro-nuclear as a solution. I think that’s kind of interesting.

We should probably now segue over to our Crux Club members and talk about a few other topics. Thank you, everyone who has been watching this. If you are at all interested in getting into some detail on a few of the topics, you can go and have a look around Crux Club and get that at Shall we jump ship and go and talk to the members?

Brandon Munro: Let’s get in the speedboat.

Matthew Gordon: Let’s get in the speedboat.

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#15 Investors Excited, Kazakhstan Lockdown Continues – Brandon Munro (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price A$0.035 (16.07.2020)
  • Market Cap: A$37.06M

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

The extended lockdown in Kazakhstan impacts KazAtomProm’s, the world’s largest supplier of uranium U308 (24%), ability to get their employees back to work. This in turn means that so far as much as 8Mlbs of uranium has not been produced. However, despite this news, the company has maintained guidance with regard to being able to supply their term-contract customers. They are 6 to 7-months of inventory with which to draw on, but indicate that they will probably need to go in to the spot market to acquire uranium pounds to fulfil order (at still low prices) and maintain their stockpile position. What are the impacts for utilities and uranium investors. We discuss.

As COVID-19 continues to restrict production in Canada and impacts production in Australia and Namibia, we discuss the implications for junior uranium companies. Investors and potential investors take note.

And for members only, Brandon and I discuss why utilities remain inactive. What are they focussed on instead? And what has happened to the price momentum? We look at some of the factors. Please join the waiting list for Crux Club if you want to get more insight in to the uranium sector and other commodities from our expert contributors each week. All for less than a dollar a day

We Discuss:

  1. 3:43 – KazAtomProm’s Announcement: Implications and Opinions
  2. 6:12 – News & Announcements from Uzbekistan: Struggles Dealing with COVID-19
  3. 9:28 – A Look at Australia, Canada and Namibia: COVID-19 Update and Impact on Businesses
  4. 13:05 – Get the Calculators Going: Growing Supply Deficits and What it Could Potentially Mean for Investors

CLICK HERE to watch the full interview.

Matthew Gordon: How are you doing, sir?

Brandon Munro: Yes, I’m really well, thanks, Matthew. How are you?

Matthew Gordon: Not bad. Not bad. I have a busy week. And got a lot on today so thanks for joining us from the cottage, it looks like?

Brandon Munro: Yes. It’s the school holidays. It is that big test. I feel like I am in a reality TV show – will I get the kitchen done in time? We have had trades people wandering around doing all of that. I’ve been doing a little magic with my hands. Or claiming to. Hoping it will be fixed up by someone else but saying that it was me. You know, one of those jobs. We have got a little bit of freedom here in Western Australia and I think when we can’t travel anywhere else it just really pays off to have a place of your own where the kids can just unpack and unwind and run around and do all that sort of thing.

Matthew Gordon: Yes, you guys in Australia and Canada have got so much in common: you have got so much land that everyone gets to have a second home. It is a very unusual thing here on our tiny little island of Great Britain. Very jealous. Very jealous.

Brandon Munro: Well, we have got something else in common because this little town I’m in, Bridgetown. It is beautiful. Fabulous place. But it has the record for being the coldest place in Western Australia. And as many of your people know, it is kind of hard to find cold places in Western Australis, it is normally the other end of the spectrum. So being the industrious people that they are, they even market that fact. Its tourism claim to fame is that it is called, ‘Fridgetown’, and so we start these days at the moment at about 1 or 2 degrees, which is a little bit fresh for the tootsies, but we manage, we adapt, we survive.

Matthew Gordon: Wowsers. I didn’t realise it went down that low. There you go – I have learnt something. But today we are going to talk about Uranium, as usual, for our weekly catch up. A new announcement from KazAtomProm.

Brandon Munro: Yes. Totally not unexpected. And we have been talking about it on our show for several weeks now and I think we drew similar conclusions. But it is helpful. It is good to have it out now. It is good that the market is now informed. And as people would know who have read the announcement, KazAtomProm have said that it is a month that they will be delaying the resumption of wellhead development and other operations. And that is pretty consistent with what was expected and what we were thinking. But the little gems in the announcement, I think, are in some of the side comments and what may or may not be able to be read into those. There is lots of the use of the word ‘initial’, ‘if safe’, ‘resumption’, and so forth.  They have left the door open quite clearly for an extension. Also, what is quite interesting is when the time comes to ‘resume’, whatever that means, it is quite clear that it is going to be a softly-softly approach here. KazAtomProm have said in their announcement that they will be gradually returning to wellhead development. And it seems like they are even going to test the waters a little bit with their logistics by resuming exploration first rather than wellhead development. I find all of that quite interesting. I think what we are looking at here is a company that is positioning for a real possibility, perhaps even a likelihood that this one-month period is going to have to be extended, if not in fact, at least in substance.

Matthew Gordon: I think the Uranium bulls are getting quite excited about that: the implications of an extension or a possible extension there. Are you hearing the same sorts of things?

Brandon Munro: Not really. Obviously, people are excited about what continued disruption can do for the tightening for the market and the Uranium price. But like many things, this is an announcement that was anticipated. It was expected. There isn’t anything that is a catalyst as such, and so we haven’t seen lurching prices on ASX etc, etc. I think the market has just kind of taken it in its stride for now.

Matthew Gordon: I couldn’t help but notice that Shell also made an announcement this week with regards to Kazakhstan. What do you know about that?

Brandon Munro: Well, they have announced that they are withdrawing all of their staff. They have chartered a couple of jets and they are taking them all back to the Netherlands and then they will be distributing all them around the world. That in itself is very telling; the word is because they cannot be absolutely sure that their people there will get adequate medical care, which isn’t a slight on Kazakhstan at all, I mean, that is exactly what has happened to any country that has really grappled with either a first or a second wave COVID problem. But what is says to me is that in their judgement this isn’t a problem that is just going away in just a couple of weeks. They can’t just simply tell their staff, stay at home, lock yourself down. Take full-paid time at home for two or three weeks and then we will ride this one out. They have probably already been through that thought process, and now they are saying, look, we are better off taking the hard pill and actually moving everyone out. And you wouldn’t really do that for a matter of two or three weeks. There seems to be some longer-term thinking. 

And the moves that big, enormous majors, particularly in the oil and gas sector in this part of the world, make are always a leader. It is always influential to both private and public enterprise. I think it is significant that Shell have made this decision. It will be really interesting to watch what some of the other partners, Chevron and others do in its wake.

Matthew Gordon: And the other thing I noticed was Uzbekistan – they put out a press release. So that whole region is really grappling with how to deal with what’s going on there with COVID-19?

Brandon Munro: That’s right. Uzbekistan is now back into lockdown. Not quite as rigid as the initial lockdown, but for all intents and purposes the same. So now we get to watch what Navoi Mining, the Uzbek state-controlled Uranium miner does in response to that. Do they just carry on, or do they take the lead from KazAtomProm? The dynamics are very different here – we need to be clear on that. Navoi Mining, they sell mainly off the market: to the traders, to the Indians, to the Chinese. They aren’t a market participant to the same extent that KazAtomProm is. They are not the dominant player. Whilst they are still firmly in the Top 10 of Uranium producers, and any significant disruption there is going to affect 2020 supply, they are not going to be thinking about the market in the same way that KazAtomProm might be, or Cameco might be for that matter. I think they will be more reactive. But I think that just illustrates what a regional issue this timing of this second wave that is being experienced in central Asia.

Matthew Gordon: That’s what strikes me about this: I think that Uranium bulls looking at this will be just encouraged; it is just another story around supply that they can confirm their beliefs about. Why don’t we just do a round up and then maybe have a conversation about supply and then have a conversation about Australia, Namibia, Canada, if you may? So, Australia – all good?

Brandon Munro: Australia is all good in South Australia and Western Australia. And to a lesser extent, Queensland, which are the major mining centres, Northern territory included. But we are experiencing our own second wave in the State of Victoria which doesn’t have any Uranium mining or exploration or any Uranium influence whatsoever. But it is just a healthy reminder to the rest of the country that these things can escalate very, very quickly, and that is what we have seen. Victoria has just announced a fairly hard lockdown of all of Melbourne, the capital city there of 5M people, for 6-weeks. So South Australia has got its border closed with Victoria. Western Australia has got its border closed with everyone at the moment and probably for some time to carry on. But no foreseeable disruption to mining. Just a reminder that a second wave of COVID can potentially be more painful than the first.

Matthew Gordon: And news out of Namibia?

Brandon Munro: Yes. Namibia, the Erongo Province, or the Erongo Region, as it is called in Namibia, they are back in an extended lockdown for another 28-days. It was announced earlier this week. That is very difficult for the local people. Very problematic for many, many reasons. Mining has been exempted as an essential service, so Rossing and Husab can carry on. But as we have talked about many times, it is still that element of greater difficulty that is involved as a result. And there has been a bit of press about increasing industrial relations tension at Rossing. You might also see the interplay between those two things. I am still expecting disruption at the edges of both of those giant Namibian projects.

Matthew Gordon: We have an analyst based in Namibia. We were talking to him this morning. And he was saying, you know, obviously with youth unemployment quite high and poverty levels as they are the dependency on mining is there, but at the same time they have got to manage this in a responsible manner. And I think they are doing that, the Namibian government. Interesting. And then Canada – what is happening at Cigar Lake?

Brandon Munro: Well, nothing is happening but what is very noteworthy is that Northern Saskatchewan is still grappling to get COVID under control. And it is an outlier compared with most of Canada. And that is really the driver here. I don’t see Cigar Lake coming on anytime soon. I think it is entirely feasible that we could see Cigar Lake remaining off until the end of the calendar year even. And what always happens in these situations is that when you put a project into care and maintenance, as effectively Cameco has, it is a little bit like jumping into a cold swimming pool or a cold river – it is damn painful at first, but you do adjust. You do acclimatise. And there is probably an element of that going on corporately. All the while, we haven’t seen much of a spot price response and we haven’t seen the utilities bashing the door down with Cameco to start term contracting. Whilst there are health and safety concerns as we continue to see persisting in Northern Saskatchewan, I don’t see Cameco sort of chomping at the bit to change the situation at all. 

Matthew Gordon: The supply side of this macro story, is certainly… I think we are able to work out some numbers now. We are starting to get a sense of how much disruption there is going to be on the supply side. You are talking about end of year for Cigar Lake. That is all of a sudden vey meaningful. The implications of Kazakhstan’s operations being delayed a month and potentially more – that is 4-months now, right. That has huge implications. I am hearing, you are saying that Namibia may be having minor disruption, and the same for Australia, which is something. But are you starting to get a sense of the deficit in the marketplace as a result?

Brandon Munro: Absolutely. If we go back to our discussions in April, for example, I was projecting a 20Mlbs 2020 disruption. So, in other words, forecast of 2020 production I was predicting 20M lbs short compared with what the case would have been at the beginning of the year. Now, that was prefaced on Cigar Lake being off for 4-months, Kazakh operations being disrupted for 3-months and relatively minor disruption in most other centres ranging between about 5% and 8% of annual production. Now, the only one of those areas that has outperformed my expectations is Australia. But Olympic Dam had significant disappointment on the production side for unrelated reasons. So that was largely evened out.

So, now we look at it, it is not operations are down for 3-months, it is notionally 4-months, and every chance that with the slow resumption of wellhead development, that is going to look lie 5 or 6-months. Cigar Lake, which is in care and maintenance for 4 months and counting and quite possibly going to go to the end of the year. Namibia and others that are dealing with second waves. So that 20Mlbs is locked in now, and the question is, how much does that grow? Does 20M lbs go to 30Mlbs of disruption? If these significant players stay off to the end of the year, we could be talking about 50Mlbs of disruption.

This is still brewing as an astonishing supply side event for a sector that is already very tight on the supply side. And all the while utilities and intermediaries are distracted with other issues and other matters. So we have seen a little bit of a recovery in the spot price, but given the risk here to the supply side for the rest of the year there has been no price response to talk about, which just stretches the ‘lacky band’, or the rubber band even further, and it makes for an even better close to 2020 or 2021 if you are sitting in the seat of a Uranium investor.

Matthew Gordon: Well, this might be the perfect point to switch things over.  I am just going to say to our regular viewers, I hope you enjoyed what Brandon had to say. We are now going to move into the Crux Investor Club section where we will go into a bit more detail about price, why it hasn’t moved and what utilities are doing and what the implications are for investors. So, thank you very much for watching.

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

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

#13 Uranium Investing Made Simpler – Brandon Munro (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.04 (30.06.2020)
  • Market Cap: A$39M

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

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

Uranium Market Commentator & Bannerman Resources (ASX:BMN) CEO, Brandon Munro gives us an exclusive run through on the World Nuclear Association (WNA) Nuclear Fuel Report – Extended Summary.

This is the first document of its kind by the WNA. The summary lays out the nuclear fuel cycle and macro thesis for the need for nuclear (and why uranium investors should feel comfortable), in easy to understand format and language. And most appealing is the plethora of charts, tables and diagrams to make the numbers easy to access and extrapolate. Good work WNA.

As ever, Munro masterfully breaks it down so that we can appreciate the moving parts and why the Extended Summary has been put together like it has. Munro was also co-Chair of the Demand Side Sub Group and contributor to the Fuel Report and Summary. Good work, Brandon Munro.

We Discuss:

  1. WNA Report: What is it and What’s its Purpose?
  2. WNA Expanded Summary: A Long-Time-Coming Tool For Investors
  3. Giving Nuclear Energy a Voice: Conservative Promotion Based on Past Experience
  4. Recent Events’ Impact on the Nuclear Space: Time for the WNA to Step Up?
  5. One Tool for Many Users: Who is The Target Audience?
  6. Can This Report Hold an Impartial and Balanced View on the Space?
  7. Hope For Harmony: Lack of Investment Needed for Nuclear to Shine

CLICK HERE to watch the full interview.

Matthew Gordon: Brandon, how are you doing?

Brandon Munro: I’m very well. How about you, Matt?

Matthew Gordon: Well, I’m a bit excited. I’ve seen this report this morning from the WNA and I suspected that you would know a thing or two because you’re one of the co-chairs of the Demand Committee. So, this is the WNA putting out an expanded summary of their report from last September. So, it’s for a point in time, up until that time. There are no new data points in there from September to now, but it looks pretty exciting to me because it seems to be quite a nice summary of you know, what’s going on in the supply-demand side of things in this market.

Brandon Munro: Yes, it’s just hot off the press. We’ve been working on it behind the scenes for some time, but now it’s just been made public. And for people who haven’t followed the WNA’s Nuclear Fuel Report, it’s put out every two years and it looks in detail at the whole nuclear fuel supply chain. So, there’s a demand subgroup which I co-chair, and that determines what the demand for nuclear fuel will be, in this case from 2019 out to 2040. And then it looks at the different aspects of the nuclear fuel supply. So, there’s Uranium supply, conversion, enrichment, fabrication, and it finishes off with a little bit of discussion about how they all come together with supply and demand graphs, which I think are some of the most interesting aspects of this report for investors in this sector. So that’s the document that comes out in September and it’s available first of all, to WNA members and otherwise it’s available for purchase at a price that I think is very reflective of its value, but it’s not particularly accessible to, for instance, retail investors. It is something like £800. So, it’s quite an impost on a retail investor trying to get behind the information there.

Matthew Gordon: Okay. But you’ve now decided to put out this expanded summary, which covers most of the, I mean, not all of the juice has been given up on this, on the main report, but you’ve highlighted and gone through the micro-ecosystem that nuclear and Uranium inhabits. And I actually think you guys have done a good job. I mean, for someone who is coming new to this, whether they may just be interested parties or investors, it’s a really concise summary of that ecosystem. So, I think, well done for that. I mean, I got asked the question, so, it’s nine months later, so, 1 – why does it take so long? And then 2 – what were you hoping to achieve with this document?

Brandon Munro: Yes. So, look, first of all, the credit needs to go to WNA Secretary. They are the people who have done all of the heavy lifting. As you know, I’ve played a role in the report itself, as a member of some of the committees and co-chairing the demand committee. And I also played a review role and a little bit of touch ups on this summary. But the hard graft has been done by WNA in August. Olga Skorlyakova in particular, so all credit to her and the team there.

So, it is staggered, I’d say. I wouldn’t necessarily concede a delay because it has been intended to be that way. What WNA were trying to achieve is that the main report, in all of its detail and glory, is available to members and those who are prepared to pay for it. And obviously there is media and others who receive complimentary copies. And then this comes out with a staggered approach so that the information is available for free without diminishing the value proposition for the main report. As I say, for members and those who are paying for it.

In terms of what it’s achieving – well, it’s the first time that WNA has done this. So, we’re feeling our way a little bit. Some of the things that are motivated initially with the concept when myself and Olga and some others were throwing around ideas as to how we can add value to the main report, was for the investor community, which is one of the audiences that the Nuclear Fuel Report is designed for, what it enables is people to get behind the key graphs. So, the key graphs have made it into the public domain through WNA presentations, and you would have seen some on Twitter and some companies that picked up the key graphs in their own promotional materials. So, the Bannerman corporate update, for example: Uranium 2020, that’s on our website. That includes one of the graphs. And it’s very useful for us, but it’s harder for people, or it has been very hard for people to get behind what’s the methodology? What are the three scenarios and what’s behind them? How exactly has WNA gone about constructing the supply side, constructing the demand side? What’s the thinking behind why some projects are in one category and other projects are in another category? And for the people who really want to get technical, there’s quite a lot of discussion about load factor methodology, and exactly how WNA builds up their demand projections. So, it’s most of what you would need to be able to construct a model. Now, if you buy the full report, then you can of course check the WNA numbers at a granular level against your own model. But for somebody who’s looking in detail at the space, this is now a fully accessible and free version that they can go back to.

And whilst it is nine months late, or staggered, as I’m prepared to say, look, we’re talking about a horizon that goes all the way out to 2040 so I don’t think its lost value because of that. You know, people aren’t accessing this information and using this information to understand where nuclear is at in 12 months’ time. This is the industry’s view for 3 different scenarios as to where nuclear can be at all the way out to 2040. And that hasn’t lost any relevance through the passage of that time.

Matthew Gordon: I hear what you’re saying there. And I like the fact that it’s the WNA for the first time making more information accessible. That’s great. And I like, I particularly like sharing the methodology by which they have created these different scenarios for nuclear electricity generation. So, all that is good and to be commended. You know, my notes about the WNA, they are, this must be quite a move for them because they are quite conservative in terms of approach to the market. If I look at the way that the renewable sector comes and bashes them regularly, and there’s no kind of repost from nuclear; they are a kind of a quiet voice and perhaps I’d like to see them turn the volume up somewhat, if I’m honest. But how is that affecting their ability to promote nuclear? I mean, do you think that this document is the first of many, or a renewed, or invigorated approach to getting the story out there? Is that also the point of this document?

Brandon Munro: No, it’s not designed to be a point of the document. The WNA, they are very graceful and poised in the way that they approach things. And you’re not the only person who’d like to see the volume turn up a little bit. And bearing in mind that the nuclear sector is one of the most unfairly attacked sectors of any industry in the world. And the people who have been in this industry for a while, they’re just punch drunk to it, to be quite frank. So, increasingly, I think you will see advocates from both inside and outside of the nuclear industry, having a bit more to say about where renewables cannot provide the entire solution, and where it needs to sit side by side with nuclear. But we are not anti-renewables. That’s a point that needs to come across. And that’s a lot of the reason why WNA doesn’t want to be perceived as being an us and them type thing. It’s an us together situation. For the planet to deal with climate change challenges and all of the implications that come with that we need to have every available energy source, particularly the carbon-free energy sources like nuclear and the low carbon energy sources like renewables, they need to be working hand in hand in the appropriate circumstances and in the appropriate places. And the opposition that I’ve got to a lot of the renewables’ lobbying, is the ill-conceived and dishonest advocacy around renewables being able and capable of providing a hundred percent solution in all situations. It just isn’t true and it’s totally unfeasible. But WNA, as you pointed out, they are a lot more gentle about how they go about things. And so, they’re more careful about making those statements in that way.

Back to your question, this is not designed to be a lobbying document. It’s not designed to be an advocacy document. It’s designed to be a document that puts the facts out on the table as best as the industry can produce those estimates and those facts. So that’s why when you read through, you made the comment that you found the explanations quite helpful; that’s what we’ve tried to do with this document. And WNA does put out some excellent publications for those looking for a brochure that they can give to their neighbour who is a bit concerned or confused about nuclear. There’s an excellent one called The Sleeping Giant that you can download from their website. There is a bunch of other material there. And someone looking for a policy document or an advocacy document should go to some of those. This is about information. This is about economics. And that’s the value of the full report. And to a slightly lesser extent, that’s the value of this expanded summary in a more accessible form.

Matthew Gordon: Okay. So, I think we’re agreeing with each other. It’s a great explanation of where Uranium and nuclear kind of sits today, using the data from September. So obviously it’s nine months later, quite a few events have happened since then, which have affected the market. Does the WNA feel that it should update its data, given these quite extreme and extraordinary events, and what it could mean, certainly on the supply side? Because as an investor, I’m looking for guidance from someone. I kind of like that there is a kind of sober approach, a conservative approach from the WNA to this, because I hear lots of commentary from, they could be funds, interested parties, commentators, company CEOs, and they need to tell a certain story because their model is different, right? They either need shareholders to believe what they’re saying, or they need to raise capital, and they need to believe, or people to believe, that this market is going somewhere soon. The WNA numbers, along with some of the trade people are, I think, a little bit more realistic. So, I like this, but don’t you think in light of what’s happened recently that WNA should be leading from the front: talking about some of these events, what it’s going to do to the numbers? This nuclear report comes out every 2-years, don’t you think it’s time for it to, you know, step up and say, well, look, everyone, don’t worry. Things haven’t changed that much, or they have? But at least give some kind of guidance.

Brandon Munro: Yes. Look, you’ve got to ask yourself, what is the WNA role here? This is one of the functions of the organisation. They’re not a full-time information provider or consultancy like a Platz or one of the other S&P, or one of the other specialists in the industry. And the moment WNA starts updating this information for a particular event, well, where do they stop? You know, where do you draw the line as to something that’s so significant? So, I’m not advocating within an inside WNA at all for updating. I think people just have to be patient for the next edition to come out. However, having said that, one of the advantages of now putting out this expanded summary with a great degree of additional detail versus what’s in the public domain, is somebody can get behind these numbers and formulate in their own minds their own adjustment for some of these more dramatic events.

So, my expectation personally is that the COVID-related supply disruption will take about 20Mlbs out of supply for this year, and as per our discussion last week. I think that could well go up if we see certain disruptions extended beyond their initial estimates. So, you can look at the key graphs on supply and you can quite easily understand what 20Mlbs less for this year is likely to do to that. And you can get behind the methodology. So, whilst it’s not quite handing over a model so that you can just plug in the new numbers yourself, it’s pretty obvious looking at that, what that supply disruption is going to do. And I think that’s the value of this tool for not only investors, but all of the other stakeholders and members of the audience that this is trying to reach.

Matthew Gordon: I buy that. I think it does make it accessible from that point of view. And you can do some very simple maths there. Because there’s different types of investors going to be watching this, from those who are not yet invested but are slightly curious about this noise that Uranium market is creating. But they won’t quite know how to go about it. I think the charts in here are, well, it’s great. It is generous to share that with the public for the first time. Great. There’s going to people who want to be told what to do. There’s going to be people who use it and sort of reach around and do their own numbers. And some of these newsletter writers can produce some interesting content around that based on some real numbers. And then there’s going to be sort of other market commentators who, as usual, have their own view on where this is going and their timeframe. So, yes, I think it is a very interesting document. I did want to speak to you about what you set out to try and achieve with it and whether, well, here’s the question – do you think you’ve achieved everything that you wanted to achieve when you started writing this?

Brandon Munro: Well, I don’t think we can answer that until we’ve had some feedback. A large part of what WNA was trying to do with putting the expanded summary out was to provide information to people. And if the feedback starts coming back that it’s very helpful and it’s useful, well, then we can get a lot closer to saying, yes, we’ve ticked those boxes and we’re happy with the extra effort involved, which of course is quite substantial. So, let’s wait and see. I’m happy with the end product. And I hope that it ticks those boxes. But a large part of it is getting eyeballs onto this document, getting it explained in addition to the text, and getting people to go through it and start a conversation around it.

Matthew Gordon: But that’s what I’m trying to get at here. Who did you design this to go to? We have talked about a bunch of different audiences, like I’m focused on investors, right. But there’s obviously a wider audience that perhaps that are there help or influence, or you know, update with this. All those different audiences will have different needs. So, you know, when you write these things, you’ve got to have in mind who is reading it and what you think they want from it. And then, you know, getting feedback. Because there are 2 ways to come at it:  you can talk to them and say, what do you need from it? And write it to suit that. Or you can say, actually our remit is just this. We are just providing raw data for you in a slightly different way. And all of you will get something from it, but not any one individual will get everything they need from it. So, you know, getting feedback is kind of, it’s a little bit horse before the cart, isn’t it?

Brandon Munro: So, it’s a good point, because this is not a document that was written or prepared primarily for investors, and that on the one hand, is very helpful because it makes it impartial and it makes it balanced. And it makes it a document that offers you something different to what you might get from a bank or someone else who is advocating on the investment side in the sector. It is written more for members to understand what’s happening in the industry and do their own planning according to trends and form their own view. It’s written for policymakers, both within countries that already have nuclear power and countries that are considering nuclear power. It’s written for journalists to help straighten out a lot of the facts and hopefully address some of the mistruths about nuclear power. It’s written for academics, it’s written for students, and it’s written for the nuclear power supply chain. So if you’re a company who makes widgets and you’re hoping to sell X number of these widgets to a company that makes pipes, that’s hoping to build nuclear power plants, well, this is probably the best document out there for someone like that to understand what their market is likely to look for.

So, it cuts both ways. It has not honed in on what an investor wants to understand from this and what an investor requires, but equally you’re not getting the varnish that you do on many reports that are written for investors. And your point about balance and being impartial; I think there’s a point for people to understand here: this is a very balanced document because it has been written by committees who are predominantly composed of utilities on the one hand, who have got an interest in ensuring that this doesn’t overstate some of the dynamics for Uranium. And on the other hand, there’s a number of people from the supply and the development side who have got an interest in making sure that the document doesn’t understate the case for Uranium. And the same can be said for conversion and enrichment and fabrication. So that tension, which I know well after chairing one of those committees, that tension has ensured that we’ve come out with a really balanced outcome and something that can be relied on as a very good starting point for investors. And more sophisticated investors will then go and try and apply their own judgment having full understanding and knowledge of what the methodology is behind these numbers.

Matthew Gordon: You kind of answered my next question, which was a to be, given that the clue is in the title; it is the World Nuclear Association, you know, everyone talks to their own playbook. Do you think that you genuinely achieved an impartial and imbalanced view of the world, of nuclear, as people should see it? You know, I say this in the context of, I don’t think you are combative enough compared to everyone else, and compared to gas, compared to, you know, other forms of renewable you know, even coal, quite frankly. These people have lobbyists and they are talking a very aggressive game and fighting their corner. We’ve seen that played out with some of the conversations that we’ve had with utilities who are multi-energy source utilities. Nuclear seems slightly humbled by its past, or slightly nervous about its past in having these conversations where because of events like, well, not necessarily Fukushima, but certainly Chernobyl, or Three Mile Island, et cetera, you have to apologise slightly before you start a conversation. Is that the way it feels?

Brandon Munro:  That is very Canadian. Sorry. I just couldn’t resist it. They’re our closest cousins on humour, the Canadians to the Australians.

And you’re right. So, to answer your question – yes. I do think it has come out in a very balanced and impartial way. But remember, we’re dealing with the future here. It will necessarily be wrong. That’s the only thing it can be. We’re hoping it’ll only be a tiny bit wrong because by and large we’ve made solid assumptions, and more importantly, people can understand those assumptions. And with any economic forecast, as long as the assumptions are stated correctly it’s up to the reader ultimately to interpret those assumptions, see if they agree with them or not and make adjustments. So, it’s a forecast. It is delving into the future based on a set of circumstances. But each of those three sets of circumstances, which we’ve grouped into the scenarios: the reference, the lower and the upper scenarios, they are based on realities, forward-looking realities. The reference case is based on the current reality not improving and not getting worse. And the current reality, as we all know for the reasons that you just talked about, particularly since Fukushima, has been tough on the ground, tough with slow policy changes, still a fair bit of taboo at a political level. Communities are just starting to come around. But to be fair, nuclear just isn’t getting the chance to show even a small fraction of what it’s capable of doing for the world and achieving in the climate change challenge. So that’s the reference case. The lowercase means that those demands get harder and the reality is a more difficult reality. And then the uppercase assumes that the world and the nuclear industry makes improvements at that. Improvements in a policy, improvements in economics, and achieves at least some of the things, positively, that the industry is trying to achieve. But it is grounded in reality. It is not a wishful document. It is not an aspirational document. It’s not a, but only if we could achieve this, or with all the will that we could do this. So I contrast it very, very heavily with many of the documents and policy rhetoric that I see in some of our competitive forms of industry.

There are other both industry and non-industry groups who are putting out much higher scenarios for nuclear demand growth, you know, including the likes of IPCC, IAEA, WNCE. And in fact, the nuclear industry has a harmony project which is not based on moving from where we are with the current reality, that is based on the industry changing, or having an influence on the reality in a positive way to enable it to make a bigger contribution to climate goals. So, I do think it’s impartial and I do think it is grounded in reality, but we are talking about the future so it’s necessarily never going to get everything right.

Matthew Gordon: Okay. I agree with that. It is grounded in reality. The data points are excellent. And the way that, again, come back to the charts, people should look at this document, look at the charts. You know, it allows you to very quickly see the state of the nation, as it were. There was a flicker, there was a moment in this document where I thought there might be some selling. There might be some upside that, you know, some sort of ray of sunshine. And maybe it’s a discussion for another day, but you talked about harmony. Okay. So harmony is a, it’s kind of hope. It’s a moment of hope, and you go, well, can nuclear provide 25% of global energy needs at some point in the distance, right? And then the hope was crushed because they said, well, we’re going to need to treble our current production, infrastructure and so forth. In the same breath they then talked about the lack of investment in Uranium mining since 2016, actually 2014, to today. The lack of investment in any of the required infrastructure to get the Uranium sector, let alone the nuclear sector, moving again, which is obviously the supply side of the document. And I encourage people to look at that because that’s fascinating; the drop off in investment and the access to capital to do that, as we know it in today’s market. And then it goes very quickly onto the billions and billions of dollars which are going to be needed to be raised, and the infrastructure built in a market, which is again, struggling, I think, in the Western world and the places that we talked about. You know, USA and Europe investing in new plants or upgrading plants, et cetera, compared to what’s going on in China, or even the middle East, quite frankly. So, I just thought there was a moment there where the WNA might try and propose a way forward, bring other associations in, energy associations in, governments in, and try and get some sort of collective movement. But that I know is a big task. It would be a big effort required and maybe it’s not within the WNAs remit. But I think it would be really interesting to talk about between you and me, what we think it would take to deliver harmony, as described by the WNA.

Brandon Munro: Yes. And there’s a lot in that. There really is a lot in that, and there’s a lot that’s being done. This isn’t the document for explaining fully what needs to be done with harmony. And I think I’m glad that you asked me and we discussed the audience before you asked this question, because whilst you said that we are crushing hopes with the way that that’s been written, it is also a little reality check for policymakers that if you want to deal with climate crisis, these are some of the things that we need to be dealing with. We need to be, as policymakers and as global citizens, we need to be addressing some of these things that make nuclear more capable.

We know that the technology is there to be able to provide 25% of the world’s electricity. We know that industry can respond. It just needs the same build rate of nuclear power plants that we had in the 1980s. That can definitely be done. It is policy enablers predominantly; it is levelling the playing field. It is ensuring that there is, for example, some of the design specifications there, you don’t have nuclear power plants needing to have one design for the US, another designs for California, another design for Canada and another design for France, et cetera, et cetera. Those sorts of things can be addressed relatively easily in the context of the challenge that the world is trying to respond to. So, let’s pick that up in a separate conversation. It is a good one.

And the other thing that you said that I’d just like to pick you up on is you said, ‘the little ray of sunshine with harmony.’ I reckon you need; I know that you’ve only had this for a very short period of time, this document, but go back and have a look at those graphs. If you are a Uranium investor and you’re looking for sunshine in this document, you’ve got enough there to get sunburned Australian-style, really. Like you look at the concept of unspecified supply and how much Uranium is going to need to come on, particularly from 2025 onwards, by 2030, by 2040, there is a lot to be excited about as an Uranium investor, set out in an impartial, balanced way from deep within the industry itself with a whole bunch of utilities sitting across the table who’ve got no interest in paying more than they need to for Uranium. There’s plenty of sunshine here. I think maybe what you’re referring to with the harmony is that it’s gone beyond sunshine and it’s, you know, you are looking for the sky to open in a very heavenly way. And if we can achieve harmony as an industry, well, that’s exactly what will happen, I guess.

Matthew Gordon; We shall see. We shall see. You know, congratulations to everyone involved in the report. I had to rush through it this morning to be able to get you on the line to be able to get this out today. I suspect this will be our weekly catch up because it is a good meaty subject. I’d love to come back to the harmony component. I think I’ve learned a few things in there, just in terms of, you know, the order of play, quite frankly. And honestly, the charts are fantastic. And to be sharing that with the public for the first time, I hope it’s the first of many. And as you say, I’ll be sure to give you my feedback once I’ve read it again. Because like I say, I would love to see WNA kind of doing more than it is doing now. Isn’t that the name of the game?

Brandon Munro: Yes, look. I think you have got to be a bit fair. They are doing a lot and they’re doing some great work at a policy level.

Matthew Gordon: I know, but you’ve got to ask for more, if you don’t ask for more, you won’t get. So, they can choose not to, we’ve got to be demanding as investors.

Brandon Munro: We always want more.

Matthew Gordon: Exactly. As investors we always want more. You should know that by now, Brandon.

Brandon Munro: Okay. More to come. I will look forward to that.

Matthew Gordon: I will look forward to that. Thanks for making time to run through this. We will catch up with you next week. Maybe on Harmony, maybe on something else. Hopefully there is more news and more feedback on social media. And once everyone’s had time to digest this over the weekend.

Brandon Munro: Yes. Terrific. And look, it’s been wonderful to come on, and I think, you know that I’m in no way a spokesman for WNA. That’s not my role here. I’m an industry participant who is privileged to have been quite involved in the process and just passionate about what I’m doing. So hopefully I haven’t overstepped the mark there or crossed any lines. But it was great to talk and great to talk about something that’s been quite a big part of what I’ve been doing for the last couple of years.

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#12 Parallels with Last Uranium Cycle Mean Consolidation – Brandon Munro (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.04 (30.06.2020)
  • Market Cap: A$39M

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

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

Uranium Market Commentator & Bannerman Resources (ASX:BMN) CEO, Brandon Munro, calls in for our weekly catch up about the world of Uranium and Uranium investing. How do new investors in uranium play this cycle & which companies are set up to win?

We Discuss:

  1. New Entrants: Parallels With the Last Cycle
  2. Dangers of Believing in Promotional Material: How NOT to be Left Holding the Baby
  3. US Government Initiatives for SMR’s: Uniting Various Energy Sources
  4. Spot Price: Volatility Incoming?
  5. Kazakhstan and Significant News on COVID-19

CLICK HERE to watch the full interview.

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

Brandon Munro: Yes, I’m really well thanks, Matt. What about you?

Matthew Gordon: It’s all good. I’m liking the backdrop. So, you’re obviously up at the cottage again?

Brandon Munro: Yes, yes. Getting a few more things done. So, we’ve got school holidays coming up in a couple of weeks and there aren’t a lot of options as to where you can go from Perth, so we’re just very lucky that we’ve got this one. But it comes at a price; my wife has said that the kitchen wasn’t quite up to scratch. So that’s what we’re doing at the moment here.

Matthew Gordon: Oh boy. Oh boy. We’ve all had that conversation, haven’t we? We have all been there. I see the river from there – that’s absolutely gorgeous. You’re a lucky, lucky, man. And I bet, can you smell the eucalyptus?

Brandon Munro: Yes. And some of the gums are in blossom at the moment so there’s almost like this gentle honey smell around. It’s been a beautiful day today. It is been embarrassing to call this winter to be quite frank. It is a nice sunny day and really lovely down here. So, you’re right – we are very, very privileged,

Matthew Gordon: Privileged indeed. Well, look, we’re here for our weekly catch up. It feels like it’s been a quiet week, but no doubt I think we’ll find one or two things to talk about. I was particularly interested in some of these new entrants coming into the marketplace. There have been a few fundraisings as well, little bits of money here and there. And some of these new entrants coming in and, you know, and I’m not going to name names here, but I am kind of interested in the parallels between the last cycle and this, where we saw lots of young, new excitable start-ups looking at the Uranium market and going, Oh, maybe there’s some money to be made here, and not necessarily focusing on the quality of the asset or the target. I think there are some mistakes that are going to be made. And I think, you know, what we’d like to do is maybe help investors recognise what good and bad looks like and not make the same mistakes as last time around.

So, I mean, are you seeing that? Is that your sort of sense of what’s happening in the marketplace? So, with these new entrants coming in, that there is some kind of ground swell, there is the ability to get financed. There is the ability for these companies, who perhaps don’t necessarily know what they’re doing, to kind of enter the market and position themselves as an option?

Brandon Munro Yes. I mean, that is clearly what is happening. Usually what happens in a cycle, of course, is the longer you run in the cycle, the poorer quality assets not only make it to market but succeed initially in market. So, we are at the beginning of that, and time will only tell how these assets are in terms of quality and longevity and whether they can make it. But it is the early part of that run. What is interesting is some of the names behind the company. So we’re seeing not only Uranium tragics bringing product to market, but we’re seeing some in ASX, we’re seeing some big names in terms of promoters, brokers who play right across the commodity spectrum, who have had big wins in a number of different commodities: precious metals, base metals, minor metals, even tech. And clearly, they think that now is the time for them to start positioning in Uranium, because they’re putting their energy behind these backdoor listings and start-ups. So, on the one hand, it says very good things about the market. And on the other hand, it is obviously getting Uranium out there, giving investors a lot of choice. And they’re going to need to find ways of exercising that choice wisely.

Matthew Gordon: Yes, I think that’s right. I guess what I constantly try and make people aware of, or slightly rail against, is the promotional component to these stories. And that’s not to say some people can’t make some money through this, it’s just a pure promotion play, but unfortunately, it is usually the wrong people and someone at the end of it gets left holding the baby. You coined my phrase that I use regularly. And you know, it’s got to come back to fundamentals, surely? I am looking at some of the assets that people are purporting to be able to build a company around, they just don’t stack up. And not only that, but something which we got a lot of feedback from the conversation we had last week, which was the point that you made: that the skillsets necessary to run Uranium companies are in short supply. It’s not easy. It’s not mining. It’s ‘mining plus, plus, plus’, I think you once said to me, where you’ve got to know what you’re doing if you’re coming into this space. So, I think people suddenly realise the importance of what you said there. And I think again, unfortunately, I’m seeing a little bit of that over the past two to three weeks.

Brandon Munro Yes. There’s a lot in that. And I think we talked a lot about the special challenges and the complexities of Uranium last week. And for anyone who didn’t hear that, it’s really worth going over again. The promotional side is interesting as well: used incorrectly, or perhaps too aggressively, there’s something quite distasteful about over-promotion, but it does have its role as well. We’ve been in a bear market. Many Uranium companies are capital starved at the moment. There’s a lot of developments that aren’t going forward because the cost of capital is just way too high. And we’ve talked before about how fortunate Bannerman is and I am because all of that work was done during the last boom. So, all of those thousands of metres of drilling were funded at a much better cost of capital than what we could ever hope for right now.

So, good promoters and people who can really bring a lot of attention to a stock and good support behind a stock, they do have a role because they are going to enable projects to move forward a bit faster and at less cost to shareholders than if they’re sort of limping along and making the best of the current market conditions. So, you know, I’m slow to criticise good promoters. It is more about how they do it, how honest they are about it. And as you say, whether there is a real end game, or if it’s all just making sure you jump out of the train before it hits the cliff.

Matthew Gordon: Well, there’s the skill, right? There is the skill, if you want to play that game. I personally, you know, maybe it is a necessary evil, but it does leave a bad taste in the mouth. And, you know, I, again, a phrase that I’m going to repeat, because I know we’re going to be dealing with this soon, which is: getting the timing right is nigh on impossible. I’m not sure anyone has got that scale, whether they’re trying to find the bottom or the top, it’s hard to do. But at the end of this peak, which whatever that ends up looking like, someone is going to be left well out of pocket. You know, it’s usually the retail guys. That is my constant fear and battle and, you know, desire to educate. So, I think, you know, I agree – necessary evil. Some are better than others, but promotion is something you need to be careful of because it has pros and usually many, many cons to it, in my humble opinion.

But look, maybe we should stay away from that and talk about some of the more positive things that have happened recently. So, there’s yet again more US government initiatives. And by that, I mean dollars being lauded about on offer. What’s your take on that?

Brandon Munro: Oh, it’s all good news. It’s all grist for the mill. And we’re seeing more direct involvement from the Office of Nuclear Energy and also the Department of Energy themselves. There are some very good spokespeople for the industry within those offices, which I think is really positive. And they’ve got a fairly steady news-flow in terms of grants, forms of support, other government initiatives. What is interesting is that it’s all focused on the downstream. So, 90% of what we’re seeing is focused on SMRs, on competitiveness of conventional reactors of the nuclear supply chain as such. And so, it’ll be interesting to see what they’ve got backed up for Uranium miners. And if we start seeing more of the news flow and for the front-end fuel cycle.

Matthew Gordon: Yes, yes. I mean, obviously it’s just a drop in the ocean compared to what’s needed. I mean, you know, we talk obviously every week and we’ve spoken to a few other Uranium market commentators who don’t necessarily buy the SMR, the US SMR initiative in terms of its ability to meaningfully impact the economics of the US, based on international sales, which I thought was really interesting. In fact, I thought it was so interesting that after you, we are speaking to a guy called Ben Hurd. Who’s an eco-modernist. Okay. That’s a phrase I’ve never heard before. And basically, they’ve done various studies and reports, and it’s a quite interesting group actually, who are talking about can we actually ever achieve zero carbon energy, globally? And you know, there’s lots of people who advocate yes, and lots who say, no. Not ever will that happen. And they looked at and they studied, I think, over 34 different reports from various large groups, and made their own conclusions. But I’m going to find out about that. But one of the things that he talks about is SMRs. So, we’re going to maybe do a little deep dive there because he seems to know quite a lot about it. Maybe it is worth exploring where the US sits today and, you know, whether its hopes of regaining its seat at the table using SMRs is a likely possibility.

Brandon Munro: Yes. And look, I’m delighted that you’re talking to Ben. He is an incredibly intelligent individual. He has done a huge amount of work across the entire energy sector. He is an environmentalist at heart. A very good advocate for SMRs in the Australian context. And anyone listening should follow him on Twitter – he talks across the spectrum of environmental social issues, which obviously is extremely important for our industry, that we have strong credible pedigreed environmentalists who see the virtues and the value of nuclear energy. And given that he’s operating within the Australian context where conventional reactors have effectively been ruled out, it’s wonderful to have his focus on SMRs. So, well done on reaching out to him, and I really look forward to seeing what he’s got to say.

Matthew Gordon: I’m fascinated. I mean, we read a couple of the reports that they produced. I mean really, really interesting. I mean, just unconventional thinking, and pulling people up as well, you know, because everyone talks their playbook, right? So, different groups create different reports, but it talks to their own playbook rather than genuinely in an unbiased way. And he’s looking at how do we deliver a smart energy nexus? I just thought that’s a kind of interesting way of looking at it. You know, because if I look at…I won’t name it, but a report, which I read where it talks about nuclear competing against other energy sources, and I was like, well, it’s not necessarily competition. I think there is maybe room for all of the above if you look at the energy forecast requirements coming down the line that I’ve seen. So, how do they work smartly together? Because I guess different geographies will have different abilities, you know? If you are living in Australia or Spain, maybe solar makes a lot of sense. If you are off the coast of Scotland, wind makes a lot of sense. And clearly nuclear plays a big part of this or should play a very big part of this going forward as well. So yes, it should be an interesting conversation. You obviously know Ben well, and yes, anyone listening to this should listen to that.

Let’s sort of talk about one other thing: with regards to the spot price. I mean, again, we said last week that it’s kind of in the doldrums, but do you see any kind of volatility in the price coming up?

Brandon Munro Yes, I think we will see more volatility. It’s very flat at the moment and there isn’t much volume going through at all. There hasn’t been a lot of momentum coming from utility buyers, but we are getting to the end of a quarter, we’re getting to the end of the month. And what we have seen in the past is the capacity for it to be volatile. Single market players, or a couple of market players acting with a sense of singular motive, can affect the spot price when there isn’t a lot of volume, and there isn’t a lot of buying on the other side. So, I’m watching for that, probably expecting that. And let’s just see how it goes.

Matthew Gordon: Yes, well yes, let’s all see how it goes. Okay, the last thing I want to talk to you about before we move over to the Crux Club members, is Kazakhstan. Two of the senior members of government have contracted the coronavirus, and two people who are quite relevant to the production of Uranium. So, what do you know?

Brandon Munro: Yes, look, this is really the most important thing to watch in the Uranium sector at the moment. And people who follow us each week will know that we’ve dedicated time to this topic every single week; following what’s happening in Kazakhstan with COVID. What is the likelihood of the Kazakh production disruption ceasing early? Ceasing on time, or being extended? And for the first time, I think we’ve got a fairly clear indication that the chance of an extension is significant. So, you’re right; there’s been two high profile members of the current and former Kazakh government who have tested positive. First of all, Nursultan Nazarbaev who was the founding president of Kazakhstan, former PM, he’s reported as now having COVID-19, or Corona virus.  He is well into his seventies, he might be 79 now, so the country will be very concerned about that. He’s still obviously revered in Kazakhstan. He only recently handed over power, probably less than a year ago. And so, there’s not only a heightened awareness factor in Kazakhstan at the moment, but there’s also a respect factor that will be playing a big role. You wouldn’t want to be the company announcing your return to full business if something unfortunate was to happen to the founding leader of the new nation. And now the other one is the country’s health minister, also is reported to have had COVID-19. And so, these 2 things, plus what seems to be a bit of a second wave really in Kazakhstan has led to numerous shutdowns and new measures. And it seems to be that they want to really curtail all forms of activity this weekend, and that has the potential to carry on.

So, we are only a couple of weeks away from the end of the three months that was initially prescribed as being the anticipated, or estimated period of production disruption, where wellhead development and so on, wouldn’t carry on. I would call it quite likely that we’ll see that extended or if it does stop, it’ll probably stop in a fairly gentle way.

Matthew Gordon: Yes, I think the Uranium bulls we’re quite excited by that news because it’s everything that they’d hoped. Because if the supply side of things carries on as it has been for another quarter, or another period of time, they’re counting the pounds which are missing from the market. They are counting on Cameco and others actually signalling their intent. And for utility buyers, we don’t know what they think. We don’t know what they think. Because I still hark back to the US utility numbers, which came out a couple of weeks ago, which kind of caught everyone on the hop. And I guess that they’re the most important ones, but I think generally for Uranium bulls, they’ll see this as a signal to be piling in. And I think that seems to be the noise that we’re hearing. It’s like, obviously we talked about earlier: new entrants coming in, the ability to get bits of financing away. There’s a lot more commentary in mainstream press. We’re seeing reports on TV. So, I think that the ground swell is there, it’s just still that lack of clarity on how, and when we start to see movement on spot price again, and what that does for equities?

Brandon Munro Well, that’s right. As I say, I can see things being fairly flat for the rest of this month There is no a particular timeframe in which I’d expect an announcement from KazAtomProm over this. So, there’s every chance that they’ll bide their time until next month when there’s even further clarity and they know exactly what’s going on. I know they have announced that they’ve returned to wellhead development, or announced that they haven’t, in which case the market will expect some level of guidance over how long they expect the extension to carry on for. And that’ll be the trigger that I think bulls will be looking for.

We have talked before about the compounding nature of any extension of the Kazakh production cuts, and I think that is really important for people. So, for anyone who’s tuning into our show for the first time, this is the important thing to understand: first of all, it’s been 3-months at the end of this month that production disruption has affected all of Kazak production, including their joint ventures. And what that means is that they haven’t been able to do wellhead development. In other words, the already acidified horizons that were developed 3 or 4 or 5 or 6-months ago, they’ve carried on with production. The pumps have continued running. They have still operated their recovery facilities. So, it was the work that was done between three and 6-months ago that’s been yielding the Uranium that’s continued to be produced and sold. And also, KazAtomProm – the main player in all of this who is the majority owner of these assets, they flagged that they could still comfortably ride through about three months of disruption whilst tapping into their inventories that they maintain as a producer. And that would have put them into a slightly more comfortable position by being able to work down their inventories to more manageable levels.

The moment we go over those 3-months, if that is in fact what happens, not only do these assets start reaching the tail of their productivity; in other words, the work that was done a few months ago, except for the very best of those assets, the recoveries will be starting to taper. They’ll be getting right down. So, the amount of Uranium hitting the recovery plant and then being able to hit the barrel will be tapering quite significantly at this point. Also, the amount of Uranium that’s capable of being delivered, not only by KazAtomProm, but by its partners will be tapering as well. So, we’ve said before that for the first few months, the market hasn’t really felt this production disruption, and it’s now that they will feel the first 3-months of production disruption and also any extensions which will compound on that.

The other thing to bear in mind is just the effect that it could have on the utilities, traders and other market players’ sentiment. They could look at 3-months and they could see that as perhaps absorbing some of the excess inventory that existed, producer inventory, absorbing a little bit of utility inventory that they could rely on to see them through. If we do see an extension, particularly if there isn’t very clear guidance as to how long that extension is going to last for, now there aren’t available producer inventories that can simply fund these disrupted pounds. It’s going to need to come from somewhere. And back to your question about spot price: well, in terms of Cameco, they will need to come from the spot market in terms of KazAtomProm, they’ve told us in public forums in interviews that in fact, if it goes much longer than 3-months, they’ll also need to consider coming to the spot market to buy the pounds that they can deliver into their contracts. And that’s not to mention the other joint venture parties who whilst some of them won’t need to buy in the spot market in order to deliver into long-term contracts, there will be a similar effect because they won’t have the pounds available that they can deliver into the spot market.

So, it’s a very significant time. It’s a very significant time to be monitoring what’s going on. And yes, I agree with you – the Uranium bulls are looking to start placing their bets right now at a time when we’re going to see probably another couple of weeks of equities under pressure for those investors who are investing purely on what the spot price is doing at this point. So, it’s a great time. It’s a great time to be watching. And for those investors, it’s a great opportunity, I think.

Matthew Gordon: I think it is a great opportunity. I think it’s great opportunity if you pick the right company and know what you’re doing, and don’t bet on this, you know, bother to maybe go through some of the transcripts of our conversations, that would make a lot of sense. Understand what you’re playing with before you put your money down. So, but yes, it’s definitely opportune times for sure. And to that point, I think, just for the viewers, we’ve managed to nail a date down to actually speak with KazAtomProm. That was something that’s been a long-time baking, but we finally managed to do it. So, we’re speaking to them in a couple of weeks and we’ll be able to talk to them about their strategy and what they think of the market currently. So quite excited about that one.

I think it’s time to move over to the Crux Club. We’ve got 2 quite exciting topics to talk about in there, actually. Two quite big things. So, we can say goodbye to our regular subscribers, and move over there.

Brandon Munro: Great. Thanks, Matt.

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Brandon Munro #10 – Uranium Geopolitics Starting To Influence Market Price? (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.03 (22.06.2020)
  • Market Cap: A$33M

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

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

Uranium has always been very political. Munro covers some extremely important topics that retail investors can’t ignore.

Nuclear Intelligence Weekly interviewed the CEO of Kazatomprom, Galymzhan Pirmatov, in May, but it is only now receiving mainstream coverage. Munro discusses Pirmatov’s comments and sees the interview as an in-depth version of the UxC interview we have previously discussed on our platform. Kazatomprom’s team has created a complex strategy that looks very smart. It is positioning the company well for a new uranium bull run.

Moving deeper into Kazakhstan related issues, we talk geopolitics. We’ve previously discussed how much pressure Russia could put on Kazakhstan’s uranium production, but this week we touch on the opinions of U.S. uranium producers, who have become increasingly frustrated at Kazakhstan flooding uranium into the market at zero margin to keep the spot price compressed. They are demanding more transparency this time around.

Munro then touches on vanadium: he actually sees a more compelling national security argument under which a section 232 petition could occur than uranium ever had. Predicting the trajectory of the uranium price is far from an easy task; it’s likely to be very volatile. Munro isn’t forecasting anything. He’s still bullish, but he is aware of just how volatile global markets currently are.

What did you make of our interview with Brandon Munro? Did you enjoy his pearls of knowledge? Comment below and we will respond.

We Discuss:

  1. Nuclear Intelligence Weekly interviews Galymzhan Pirmatov: Opinions and Implications
  2. Uranium One Numbers: Our Take and Interpretation
  3. Kazakhstan’s Sovereign Wealth Fund, Samruk Kazyna, Sells Stake: Why and What Will the Impact be?
  4. Kazatomprom’s Dividend Policy Challenged
  5. Geopolitical Chess Game: US Rhetoric on Kazakhstan and Russia
  6. Potential Strategies for US to Assure National Security and Save Their Nuclear Industry
  7. Vanadium to Get a 232 Petition? Is it Necessary?
  8. Choppy Spot Price for Uranium: Predictions and Trends
  9. Peninsula Energy to Raise $40M: What’s Happening on That Front?

CLICK HERE to watch the full interview.

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

Brandon Munro: Well, Matt, what about yourself?

Matthew Gordon: All good here. All good here. Desperate to talk to you for our weekly catch up because there’s been a lot happening. Again. Geopolitics at work. So, some of the things that I have noted: well, let’s start with Kazakhstan first of all, because I think that the geopolitics is the theme for this week, right? So, and the impact it’s going to have on utility buying. And the little bit of update with regards to production as well. So, I think it was Nuclear Intelligence Weekly who had an interview, which was, I think, back in the end of May, but it’s only sort of come out recently with Mr Pirmatov, who is the CEO of KazAtomProm. Quite a few interesting points came out of there. So, first of all, what was your take on the interview? It seems quite smart to me.

Brandon Munro: It was a good interview. Yes, it was probably the next level of depth after the UXC interview that we talked about a couple of weeks ago. And we should tell everyone that this is normally subscription-only material, but fortunately KazAtomProm are putting it up on the media portal in their website, so good folks like us can go and look at it. So, good depth, good level of questions and indicating I think a very sophisticated, outward facing approach now coming out of that corporate team in KazAtomProm. There were some things that I think are important for the market generally to understand out of that. The first one that I found useful is that there has been a bit of speculation about what happens if KazAtomProm comes on earlier than the three months where they’ve had their reductions and their suspended well head development.

So, I think as at 22 May, when this interview was first recorded, I think they have well and truly put that to bed. He said that you are right in assuming that it’s going to be throughout the second quarter, and he certainly left the door open for it extending beyond that. And the one comment that was made in the context of how they draw down their inventory was, well, if it does go on longer than the three months, we certainly can’t rule out needing to buy on spot to meet our deliveries. So, I found that aspect really quite interesting as well.

Matthew Gordon: Well, it’s huge. That’s a huge statement if it comes to be, obviously, but the fact that he’s leaving the door open for it; one, I think to me that it shows responsible governance in terms of staff, employees, etc. It’s responsible reporting in that it kind of gives the market a little bit of guidance as to how they are thinking. But the bit that I was quite interested in was where they talked about where they are. They have always been a big, big, big producer, but in the section where they talked about sales into the market, I mean, it goes back to like 2015 to today. I thought that was extraordinary because it wasn’t the kind of the well-run oiled machine, they were kind of trying to work out how they actually got product into market. So again, what did you think about the way they described that and what are the implications for it today?

Brandon Munro: So, people can go right to the end of the interview to see that couple of paragraphs. You are right; it was really interesting and very useful context, particularly for someone who perhaps hasn’t followed KazAtomProm, over the last several years like we have.  Essentially, what CEO Pirmatov said was between the three years from 2015, 2016, 2017, KazAtomProm wasn’t actually able to sell all of its Uranium. And he said that they only sold about three quarters of it and a lot of that was through traders. So, when you go back and look at the Uranium price during that period, it starts to make a lot of sense; if KazAtomProm was struggling to get rid of their material, no wonder it was sold down to that extent. But what’s important then is that he confirms that through THK and I think just becoming a lot more commercial and a lot more sophisticated, they’ve got a lot better at that and they’ve been able to, for 2020, actually oversell. And I think that was one of the comments that came out in our discussion when they did release their results a few weeks ago. So what they’ve seen is a period of a few years of underselling building up producer inventories, obviously being a very motivated seller, if they can only get rid of three quarters of it, to now moving to a point of not only balance, but before the COVID disruptions, they were already overselling to reduce their inventories down to the target level, which he mentioned there.

So apart from just having, you know, good data for people to get hold of and read and understand and contextualize, I found it interesting because you get the impression that there’s been this open tap of material that the utilities and the traders and others have just been accustomed to loading, you know, pulling out the bucket and filling it whenever they needed to. And that’s really changed now. And I’m not sure that the market at large of Uranium bias fully understands what this means if that tap suddenly slams off. And you can’t just blow the bucket up there, you’ve got to go and start buying your water in small bottles. So it’s that type of a movement or change or shifting in market dynamics that I think of when I read that paragraph, and if that’s the way it plays out, I think it’s very telling about how much this market is going to tighten up.

Matthew Gordon: I think so. I think so. And the other component to this is technical, because this is an ISR operation predominantly, and there’s some technical limitations to that. They can’t just switch off ISR or, you know, the whole thing effectively, it freezes up, you know, the glue solidifies as it were. So how are they, or are they maintaining, you know, bare minimum run rates to kind of keep this thing going so that when they do switch on, there’s not such a huge, again, another delay in getting up to full operational capacity?

Brandon Munro: No doubt there’d be some work being taken place at a desktop level in terms of planning as to how they will recommence wellheads. And there’d be lots of smart people within KazAtomProm gaming through just how they can operate with the logistics and so on to get everything moving. But don’t forget, this is a company; they’ve got something like 22,000 employees in KazAtomProm. So, it’s not just about getting started again at one single operation, one mine. They are going to have to do that all over the South part of the country. So the other thing that probably relates to what we were just talking about is that the market hasn’t felt these production disruptions out of Kazakhstan yet because where we’re at the moment is all of those we’re only halfway in or a bit more than halfway into this three month period. And most of those assets would still be producing more or less what they were producing before, because they’d be working off the pregnant liquor or the material that the solution that’s got.

The acid in that dissolves the Uranium, that was a result of the wellhead development that was done several months ago. They will only the best quality assets will still be producing. They’ll still be pumping that solution out more or less how they have perhaps the more challenged geological assets they’ll start to sear a tapering off. So, they’ll see it in their solution numbers, they’ll see it in the permeability rates and the amount of solution that they’re able to actually to draw for a given level of pressure and so forth. But even once they’d started wellhead development, this is a several month lead time process. So if, if they’ve operating a, let’s say a lesser quality asset, that’s already tapering now, well, you’ve got to take the day that they start there and add three months before you’ll start seeing that laden solution coming back at the level that they used to. So, you’ve got this lag effect that will only come into effect a few months after the decision is made to get back into it and to re mobilize the bulk of those 22,000 employees and get them working productively again.

Matthew Gordon: Absolutely. So, it’s not binary, it’s not on-off. There will be a lag again that impacts the market again, that affects access to U308. And again, that’s very telling for that for the marketplace. Now, one of the other companies too, you’re sticking with the Kazakhstan theme for a little bit longer, a Uranium one, they put out some numbers. I, again, interesting. I think production is down slightly but profitability up, because you know, they’ve been able to sell it, sell at higher rates. So, you know, swings and roundabouts though, but I suspect we’re going to see a, you know, different sort of set of numbers from them. I have seen the next quarter, but again, what was your take on the Uranium One announcement? What did it tell you?

Brandon Munro: So, on the face of it, on the face of it, what we saw was on a seasonally adjusted basis. So, this period versus the same

Matthew Gordon: Year on year, yes.

Brandon Munro: Their production levels were down by 5%. Now, what I think is interesting there is, I don’t think that number has taken into account what’s happening in Kazakhstan yet because Uranium One has got amongst the best of those Kazak ISR assets. So the ones that I would expect to have the most resilience, the assets that would carry on producing at nameplate for the longest after the wellhead development stops are that portfolio of Uranium one, two together with 1 or 2 others that are in joint ventures with a rhino and also you know, in kinds of fantastic project as well, but chemicals got, so I don’t think we’re seeing the effect in those numbers. And yet they’re already down 5% for either just reasons of those assets depleting. We’ve talked before about how ISR mines do have a long tail where they start to run off and they start to deplete. They’re not as binary as the conventional mind that you know, essentially runs out of all one day and, and grinds to a halt. So presumably what we’ll see is continued reduction. And regardless of that, it’s just indicative of what we’re seeing across the whole market, whether it’s the Olympic Dam or whether it’s the Namibian giants or whether it’s Uranium One, it just seems that there’s 5% to 10% being shaved or for everyone’s production numbers at the moment, assuming that they’re still producing.

Matthew Gordon: Okay. You think that’s a case of well head decline v deliberately reducing production, because the price in the market is, you know, if there was access to product and market, why pump it out there and sell it for a low price?

Brandon Munro: I just haven’t seen any evidence of Uranium One operating in that way. They’ve got low production, low cost assets. What I have observed is they’re quite willing to sell at the prevailing market price. And they were quite willing to do that even when the spot price was in the low twenties. So maybe there’s an element of that, but I it’s nothing that I have been able to pick up.

Matthew Gordon: Okay. I’m sort of intrigued to see how these numbers play out in the next quarter because there’s, there’s again, harking back to conversations we’ve had previously. And I think something that I want to end on with, you know, the US impression of what, what Russia and its allies are trying to do to Uranium prices. I just, I just would like to understand that at some point right now it’s all speculation, but again, I think the final kind of Kazakh focused story for this week as if we haven’t had enough already was Samruk-Kazyna they have put up, well are offering up to 5% of KazAtomProm. They’re big holders, but I think the number talks about is for it’s about $150M for about 4.5%. Again, why, why would they do that now? They are $75Bn fund. So, I guess this is inconsequential to them, but even so it’s a, it’s a bit, a big, bold move. What does it say to the market?

Brandon Munro: So, there’s a couple of things here that are quite interesting. So yes, there are a very big sovereign wealth fund, but this is very important for them. A few years ago, Kazakhstan created a roadmap of privatizations, predominantly assets through Samrat Casona, but you know, also other privatizations as well. And cause that prom was seen as being the flagship. It was the first ship out of the harbour with significant telco airline privatizations backed up behind it, et cetera, et cetera. So, they obtained an, a plan or an approval back then to reduce their holding down to 75%. A as everyone knows, there was the initial IPO where they reduced their holding to about 85%. Then in September last year, they did a secondary sale, which brought their holding down again by a few percent and that four and a half percent that you mentioned that was actually what they were intending to do.

And they ended up upscaling it taking about $206M rather than the $150M and reduced themselves all the way down to the 75% target. There’s a small retail component back into Kazakhstan. But if you assume that that’s all fully subscribed, and they will be bang on 75%. And that’s box ticked. In terms of the timing. I think if you look at the share price graph of KazAtomProm in London, that probably tells the story here that the secondary place in September last year was at $13 per depository receipt and they’ve traded below now they’ve popped up above it and it just looks to me like it was their first good, solid opportunity to get the job done without doing it at a lower price and the previous price it was set so well done to the sovereign wealth fund, I’d say, but what it also means for the broader market is quite interesting because there’s another $200M worth of stock that’s been placed predominantly institutionally generalist investors have picked that up.

So, one of the things that the Uranium market has suffered from is just being so small, very important as we always talk about, you know, it’s an incredibly important energy source, but the investible universe is very small. It’s hard to get banks interested. It’s hard to get analysts at broking firms and, and so on interestingly, to get enough volume going through their desk to them investing in coverage. So, here’s another $200M out there. They, they did a switch rule on their advisers. I saw. So, there’s another couple of advisors who are incentivized to get out there and talk about the story and all of that just has to be positive for the market. It’s just extra eyeballs, extra reason to talk about Uranium and cause Adam prom. So, I think it’s a good development and now it’s brought that whole cycle to an end.

And now KazAtomProm is the entity that we were waiting for it to become. Now, the other thing that I find quite interesting is just getting back to that interview for a moment, quite a bit of discussion about dividends. And they’ve got a very generous dividend policy. And I must say the folks that Nuclear Intelligence Weekly are very astute, do you know, I like them a lot and they’re, they’re good, intelligent journalists as the name would suggest, right? So, they pressed and prodded and it to be on the dividend policy for two, from 2 angles, really, first of all, and the dividend policy is to pay out 75% and KazAtomProm made a commitment to pay out $200M. The first angle is, well, you’re going to need a fair bit of capital to get this wellhead development started up again. How are you going to go with that?

Is there enough there? And cause I don’t prompt said they would, but you know, I think the fact that those questions were being asked is interesting, but the other element is the Tenge certainly is very helpful for KazAtomProm it’s really dropped a lot because they’ve got Tenge costs and a US dollar selling price. So, in terms of running business, that’s fantastic. Except when you’ve made a commitment in U S dollars to send $200M out the door. So that was the other line of questioning, which is starting to pick apart a little bit at well, if the Tenge continues to fall, how’s that going to help your capacity to pay dividends? And when that, the importance of that and the relevance back to the whole market is that’s going to create further incentives that are commercial level for cars that impromptu allow this market to continue tightening and to allow the Uranium price to generate better margins for them, just so that they can keep topping up the bank account and to be able to both pay that dividend out as well as have the capital available to get started again.

Matthew Gordon: Yes. I mean, it’s a very generous dividend. I mean, I I’m stunned that they were set up at that and if I’m stunned that they would set it cause they, they don’t need to. Do you think it’s under pressure from back home with the, the sovereign wealth fund?

Brandon Munro: I’m not sure pressure’s the right way. That’s just how it was set. The sovereign wealth fund is there for generating money out of its sovereign assets and deploying them into other parts of the country. So, it has been a cash cow and they want it to stay that way. Undoubtedly, that’s what it’s all about creating those expectations to generate a point of difference, I think on the LSE.

Matthew Gordon: Yes. Well I think that’s my, my next point is that is the need for their parents of transparency because there’s one group of people who are not buying it. And that’s, I think the US Uranium producers & juniors who are saying, well, actually you are undermining our markets. You have been constantly selling into the market at zero margin gains because you’re trying to undermine what we’re doing over here. You’re trying to take over our energy business. And there was an article to that effect this week from The Hill. It was okay, a lot of politics involved in the narrative and the wording and the way they crafted that message. But do you, do you think that Kazakhstan is trying extra hard to be seen as a proper company, Western standards? There’s now 25% of shares in the open market? Are they concerned about their reputation?

Brandon Munro: Yes, I think they are. I think they are trying hard. I think they’re as best as they possibly can. They’re adopting quality governance seeing the way that they behave behind closed doors as I get the chance to, I can never fault any of that. Their inner process of commercializing their mentality and their culture in the organization. And that can be a slow ship to turn around. Not only for businesses that have emerged from a Soviet sphere of influence, but the same thing happens in privatizations in countries like the UK and Australia, you know, you take, what’s been a government entity and you try and get those that empower organization to think culturally like an entrepreneur and it’s, it’s hard work. So undoubtedly, there’s a bit of that that’s going on, but I just, I struggled to buy some of the, some of the accusations that are coming out at KazAtomProm in the US it just doesn’t add up for me.

Like they’re only selling 10% of their own product into the U S so they’re certainly under selling into what is still the world’s largest Uranium market. So, this concept that they’d sort of flooding it, it just doesn’t the numbers don’t support that. And when you look at the report that we talked about last week, the EIA report it wasn’t the Kazak material. That was the cheapest, it was the Russian material. So, the material coming from KazAtomProm also from Uranium One. So, and when you put that Kazak material against Australian material it’s more or less the same price. So, the numbers don’t support the type of rhetoric that you just described that is coming out of some corners of the industry. So, I struggled to believe it, and I struggle to agree with it.

Matthew Gordon: So, but aren’t, they are falling under the umbrella of Russia. They, they are being positioned as a puppet for Russia. They are, will do exactly what they’re told by Russia. And there’s this very aggressive national security stance on, on multiple fronts in the US at the moment. And I think we’ll need to stay up, stay away, maybe from what’s been happening on the streets of America this week. That’s a, that’s a very hot topic, deliberately deservedly, slow, hot topic, but for today on Capitol Hill in lobbyist groups, we’re seeing this very aggressive language. We’ve got another Section 232 coming up for Vanadium, which we’ll talk about in a second. But this whole national security issue as a justification for a lot of these industries. Cause they’re seeing it as a route to maintain the you know, the America’s position in the world and be self sufficiency. And, you know, for lots of reasons, people are using that as the headline banner for their argument, national security don’t you think that the US is justified in taking that position? Why, why should it be beholden to Russia? Why should they let Russia come in and take over there that energy or nuclear energy requirements, because this is the, it’s the game of political chess, isn’t it?

Brandon Munro: Yes. I think there’s 2 parts to the question that you’ve just asked. The 1st one is the concept of lumping Kazakhstan and Russia together. It’s a convenient thing to do. And I think for let’s say a readership or an audience who maybe haven’t spent much time thinking too carefully about a lot of this stuff or haven’t followed the history or haven’t been to those parts of the world. It’s an easy thing just to lump more together. They were of course, very close they’re all in the Soviet Union together. Still a lot of Kazakh commerce and spoken is done in Russian, et cetera, et cetera, but it’s a sovereign nation. It is its own country. And whilst, possibly Russia still got a lot of influence there. And we’ve talked before about what would happen if really, if push came to shove, push isn’t coming to shove at the moment, and I think they are operating fairly independently.

They certainly regard Uranium One and Atom (inaudible) as competitors and certainly behave as competitors. And until something happens where the geopolitical deck chairs get moved around a little bit, I think it’ll continue that. So that’s the first part of the question.

The 2nd part of the question is I think what you’re asking about is it is the US enabling itself or making itself too vulnerable to Russian dominance in the energy sector, which is nuclear. So, and this, it goes to the whole Russian suspension agreement and discussions to a lesser extent, Section 232, the answer is, in my opinion, the US does need to be careful of that. They need to be very careful and their solution needs to be, to get their own industry to the point where it can compete as a viable alternative, and not only for the Russian suppliers, but also the European suppliers.

And that came through in the nuclear fuel working group report. There’s an understanding that that is the case. The article that you’re referring to that was published in The Hill, and they talk about it, some of the more extreme views in the industry about what levels of enrichment and contracts and so on might be expected should the Russian suspension agreement not be renewed. And they’re probably realistic. I think there was a number there are 40% of US demand after the end of this year. And when you look at how well the Russians compete well, that’s probably about right. They probably would be able to fill that amount in, just on producing a very good product reliably at a very good price. Now, where does that leave the US well, yes, it does leave them quite vulnerable and the best way out is for them to have their own domestic alternative that’s viable and competitive.

Matthew Gordon: Yes. I think if you look back to how Russia has used gas or weaponized gas in Europe and with their NordStream 1 and NordStream 2, I think that seems to be what the Americans are fearing. That if he, if you let the Russians come in and control 40% of the nuclear energy supply in the US they take the lead, they start dictating, and the utilities will be at the behest of what the Russians decide. So, it, I think the fear seems to be Russians producing at a not-for-profit basis. And in, in a way where it’s a lost leader effectively, they’re saying we don’t mind losing money here, but we’ll, we’ll play the long game. We don’t mind we’ll subsidize it from elsewhere because it’s not a lot of money in the scheme of things or cripple the US ability to produce because companies are independent that there’s nothing nationalized in the US although they’re having some calls of the past couple of weeks to nationalize a number of commodities, Vanadium being one of them, which like, I guess we should talk about.

So I think that’s the fear from that, but I’m not quite sure from what you said, whether you, whether you believe that those fears are valid or you think that the strategy is that the Russians are employing is misunderstood, or indeed, maybe, maybe they are valid. It’s just commerce, it’s not geopolitics, it’s commerce.

Brandon Munro: Look, I think those fears are valid and you see them expressed in rather shrill terms from time to time. So if I’m being a bit cagey here, I’m just being very careful what fears I’m agreeing to, because there is a fair bit of console out there, but in the way that you’ve just described it, I’m quite happy to, to agree with you there, that there is a legitimate risk here that needs to be fundamentally mitigated, and it can be mitigated in a couple of ways. The first one is what I talked about in terms of establishing the American industry as announcing quite determined to do, but it also needs to be mitigated at a utility level or at a reactor by reactor level. And that exists amongst many of the US utilities. Many of them have their own risk mitigation policies where they can’t be more exposed to X percent from Kazak / Russian material.

They group them together and, and so on, but it’s not uniform. And the risk mitigation, what we would regard as sensible risk mitigation when prices are really low. Number one, it’s pretty tempting to look past some of those risks when you can mock-up really cheap pounds. And secondly, when prices are low, that risk just doesn’t seem so real. It doesn’t seem so acute. You know, when there’s 2015, 2016, when there was so much material around, as we talked about is it really realistic that Russia could turn off the taps? You know, there’s all of this around fast forward to 2025. When we do know that there’s going to be a real crunch here, that’s when they’re at their most vulnerable. And that’s when the mitigation needs to be both at an industry level, at a government level and at a reactor level.

Matthew Gordon: And I think that’s what people were certainly Section 232 was about you had these companies begging their government to help them fight against what they saw as you know, a state competing against a company, which, you know, has, it has a balance sheet, which, which looks like it. They, whatever it was for, for those 2 companies at the time, they couldn’t possibly hope to win. What they needed to do is kind of create this recognition that this was a potential problem and what the rhetoric we’re starting to see off the back of a nuclear fuel working group. And even prior to that, and certainly some of the press was coming out now. And, and I appreciate these are possibly pay for a lobbyist type articles, which is a little bit, you know, sensationalist. But the point, the point is there’s a mood in America.

Now Trump has created a mood on several fronts, but businesses, I think, want him there, he, he is pro business. He’s telling people what the success rate for some of those industries is another matter. And the fights he chooses to fight is another matter, but Uranium and nuclear have got the attention of, of the hell. We still haven’t seen any announcements around. We’ve seen lots of announcement, non no announcements around the commercial component. What is the government going to step in and do, how much money are they going to put forward? We talked last week; it’s going to take billions of dollars. We’re still not hearing that kind of conversation. It’s just all competent without any substance. So, do you think it’s coming down the line or again, a key convert? This question, is this just a lateral rhetoric?

Brandon Munro: So, two things there, the first one is America’s vulnerability to Russia. If we can just lump the whole concept of Russia together, when it comes to Uranium is very different to their vulnerability, to Russia when it comes to enrichment. And Section 232 was about Uranium. So, I’m not so willing to take what is a genuine vulnerability when it comes to enrichment services and extrapolate that to Uranium. You know, they’re still Canada, they’re still Australia, they’re still Namibia. For it, for at least the foreseeable future there’s Kazak material that will be reliably available there. So, it’s just a really different proposition. But the second point that I’d make is that the strategy adopted that was articulated in that in that report, I think is very sound. They’re saying we we’ve got a fairly limited strategic reserve at the moment. It’s what they’ve got at the moment is only enough for about 7 reloads.

So, if they did find themselves becoming too vulnerable, say to Russian enrichment, and there was a spat, and that was withheld well, they don’t, you know, and there’s 90 reactors there, right? So, seven reloads doesn’t really buy them very much time. So, the strategy then a building up that reserve from seven to what really needs to be more like 22. It needs to buy them in a good solid year, if not to have buffer time, that’s a solid strategy. And that’s something that I can really get behind and agree with. And the idea is they want to take that Uranium that’s talked about, then they want to make sure that they’ve got conversion that is re-established in the US so they can then that Uranium push it through the conversion cycle to create the demand, to get convert on up and running again at metropolis works facility. And then they’re talking about, we need to enrich that material so that their stockpile for strategic reasons, as a primary form of mitigation against this vulnerability that we’re talking about is sitting there in AUP. And then it’s just fabrication. And the US exposure to geopolitical interference in fabrication is actually very small.

Matthew Gordon: Okay. I buy that argument. You mentioned that something that you said, US needs friends. You’ve still got Canada, you’ve still got Australia, still getting them. Maybe they need friends. It’s very combative environment at the moment. Doesn’t seem to be a lot of French friend making going on at the moment, because it was bringing on a topic. Again, we talked about last week, which was the Iranian sanctions, right there has, at the time, there hadn’t been a response. I think there was a response by Russians Senator, but that was it. But now we’ve got the French, the Germans and the UK of command said, we regret the US has position on the Iranian sanctions. China has come out and effectively said, forget it. If anyone wants to, we’re cracking on us normal, and if anyone wants to join us, we would welcome them.

The Russians, I think there’s no official statement from them, but I can imagine that’s going to be something along the lines of the Chinese. So, if the America American is to deal with this. We talked last week said it’s not a big enough deal commercially for countries to go to go to economic war with the US and we’ve, and we’ve seen Trump’s temper tantrums in effect that China, even the Chinese wobbled a bit there. So, Europe’s not going to do too much about it, but it’s pretty strong language that they’re… well for Europe… they’re using there about their belief that the US has called this wrong. So, is the US going to back down or is, or is it going to encourage you it’s convictions and carry on as normal?

Brandon Munro: Well, that language has been used consistently, right? That to May 2018, when president Trump unilaterally with, during the first place. And it doesn’t seem to have swayed the decision making too much. In the meantime, we’ve seen a willingness, I think, from the administration to rub up against its allies and its friends as it suits them. So, I don’t think that’s going to be particularly persuasive. It is strong language but there was a huge diplomatic effort back in 2018 to try and dissuade the administration from leaving the JCPO way. And that ultimately was ineffective. We don’t know just how much they manage to slow the process down. And perhaps they did, perhaps there was enough discussions behind closed doors, but it ultimately didn’t succeed in trying to pull that deal back together. And we haven’t seen it succeed in any way in terms of renegotiating or bringing your new deal to the party.

The other thing to bear in mind with China is they can’t really do anything in the US in the nuclear sphere at the moment, either because they’re largely unable through either the trade dispute or through direct sanctions in, on some of those Chinese nuclear entities. So, they don’t have much to lose in the way that Russia does. So, it doesn’t surprise me that China’s basically saying, well, you know, around sits at the, towards the end of our belt and road initiative, a large part of our export strategy is about rolling it out through there. So, if the US is going to make open up those pathways for us, but we’ll jump into them.

Matthew Gordon: There has been this week by the US Department, of Commerce they said it was going to open an investigation into whether inputs of vanadium, which are the metals used in aerospace and defence and energy applications. They’re looking at a potential section two, three to probe. Another one as we alluded to earlier is, did we, did they need this? Is this just another move by the vanadium lobbyists to try and get noticed? Cause they’ve seen what’s happened with Uranium?

Brandon Munro: Well, I think you could probably argue that in vanadium there’s a bigger cause for concern than Uranium in many respects. Not only does it have those technology related applications that are used in directly in national defence and national security, but vital in steel production and becoming a lot more important in storage as well. And certainly, my opinion that vanadium redox flow batteries are the only currently viable commercialized technology and storage, if you don’t have access to pumped hydro. So, this, the supply of vanadium is very choppy. An awful lot of it comes from pork quality magnetite. A lot of that is in China. And so there’s a geopolitical aspect where China and Southern Africa dominate the supply and Russia dominate the supply of the Vanadium, but there’s also a commercial choppiness as well because in many respects, the supply of the Vanadium operates not according to the vanadium price, but according to the iron ore price and how much of that lower grade magnetite is being pushed into the market. So, you’ve got compounding geopolitical and commercial vulnerabilities there. What makes it interesting for us in this conversation is an awful lot of the vanadium that’s been mined in the States has been mined together with Uranium and as we’ve seen with energy fuels, for example, and so anything that benefits or helps along the Vanadium is presumably going to help along a number of different traditional Uranium deposits as well, conventional mined Uranium deposits as well.

Matthew Gordon: Yes. And I can imagine that Energy Fuels be feeling a little bit perky about this one, given that they’ve got the White Mesa Mill. They need to feed… it’s a beast. They need to feed the beast.

Brandon Munro: I think I might’ve given the template for the petition, huh?

Matthew Gordon: Yes. Well, it, it, it feels, it feels the same as there have been lots of conversations. We’ve had this conversation around rare earths as well. So, I wonder if you sometimes wonder if these guys have energy fuels in particular, just as you say, here’s a template and off you go again, but it’s, it’s certainly an interesting conversation. Vanadium has been very volatile in the marketplace. There are some very big producers out there all over the world, you know, not just, just the U S you know, so I’m not sure supply as a big issue, a big issue really it’s 90% of the steel market at the moment, but there are say these other applications, which are very niche and, you know, you know, aerospace, air engineering, et cetera, et cetera. Also, VRFB the, the that looks huge to me in terms of long-term storage capability.

So, but we shall move on. And talk about that another day. I want to ask you one last question, and then I’m going to want you to sum up what it means to the market, which is obviously spot price at the moment. This is the thing that people look for. I know there’s a lot of other moving parts as we’ve talked about multiple conversations last 10-weeks. But spot price is a thing that people look at. So, it it’s been an interesting week. What’s your take on the movement of the spot price at the moment, and, you know, can you, can you sort of forecast what you think is coming up on the basis of what you’ve seen over the last couple of weeks?

Brandon Munro: And the only thing that I’ll forecast is it’s going to continue to be choppy. I think that’s, that’s fairly clear. We just, aren’t seeing a lot of volume in the spot market. So, whenever we don’t have much volume, it’s vulnerable to impact of traders and we’re coming up to a significant milestone at the end of June. So, there’s, there will be parties who are motivated to impact that number. And if there isn’t enough buying that might happen, and we’ve got a swing buyer in the market, Cameco who can sort of make this dynamic work for them either way, in terms of allowing the price to come down or pushing it up, or just doing it, being happy to participate with whatever it does. And we’ve got a number of players who are sitting on the side-lines just to see what happens particularly in Kazakhstan.

No doubt that response in that interview was directed at utilities and others to say, look, we’re not going to come on early, so don’t try and wait out this market. Don’t game it to see that if we come July one, are we, are we back in action? Are those pounds just pouring out again? So, what does all that mean? Well, it means that until we’ve got a greater level of buying in the spot market there will be parties who are sitting on very healthy paper profits at the moment. Just to remind everyone, the spot market is not an immediate delivery market. So, there will be parties that financial players, traders who bought Uranium in the $24 to $25 range back in March. They won’t have taken delivery on that material yet. They won’t have paid for it yet. And now they’ve got the chance to take a $24 pound and sell it at a $30, $32 $33, $34/lbs.

And if they’re under a little bit of a squeeze in, for other reasons related to covert and the various financial ramifications of this pandemic, that’s going to be tempting for them to tip that out. And if there isn’t a lot of buying that way, we might we’ll see the price, come back a bit. So happy to predict a little bit of volatility around the edges. But I think what we do have here is a broader trend, which is moving up and for all of the things that we’ve talked about, all of those reasons that the market isn’t feeling the disruption yet, that disruption is going to be felt in the latter half of this year. At the time when the genuine buyers will be coming into the market, particularly as the utilities are able to come out of the direct distractions and difficulties that they are facing with covert.

Matthew Gordon: Okay. I guess we shall see what happens in the next week or so. With regards to that choppiness. Final thing is we note that Peninsula Energy an Aussie company with assets in the USA. They have really gone for it. They’re raising A$40M. That’s a chunk of change. That’s one of the biggest raises that we’ve seen recently. So, I wonder what they know.

Brandon Munro: Ah, look, I don’t want to get too involved in commenting on other company’s balance sheets and that type of thing, but it is a little bit like what we’ve seen with the KazAtomProm raising. It’s good to have a broker drawing feeds out of this type of thing. Good to have advisors drawing fees. It’s paying for the wheels to go around in the sector. I think we both agree that the folks at peninsula are really good people there they’re very competent and good operators. You know, I respect Wayne a lot and I also know what it’s like to have a big dominant player on the register. When I took over this, the helm of Bannerman, RCF was a 38% shareholder. And whilst I have only ever had very good dealings with them and, and it’s been a very positive relationship it is something that can be a turnoff to a lot of investors to see a private equity fund having a dominant position. And we didn’t have to deal with debt, not by then anyway, not by the time I came in. So, without commenting specifically on what peninsula has done I think it’s, it’s positive for the sector. And, you know, I think they’ve put themselves in a really strong position to go forward now.

Matthew Gordon: Yes, I think, I think it’s a, it’s good for the market that they believe they can get that over the line given, given that their starting point today. I think it projects a lot of faith in the financial market, where I have come from that they think they can get a deal that size over the line for the company of the size. Cause it’s, you know, it’s a really big percentage of the, as a percentage of, of the company, so good luck to them. And I’ll be speaking to them later to find out, get the, get it from the horse’s mouth from Wayne. So, I’ll say hi for you. Brandon, thanks very much. I think it’s these, these little movements in the, in the market, they all kind of add up, and I think the it’s moving, moving the market and the positive market sentiment forward. I think generalists are now paying attention to this. We’re seeing a lot more coverage of Uranium with articles, with interviews. It’s exciting times for you guys.

Brandon Munro: You know, also Matt, in terms of what we’re doing with these weekly chats, I’m getting really great feedback. I think more and more people are seeing this as a regular opportunity to learn about the sector, the intricacies of it in real time. So, while some of the topics that we talk about aren’t dramatic catalysts, the fact that we’re following threads on some big issues is a great opportunity for a lot of investors and others who are interested in the sector just to develop a solid understanding. And I know that you’re passionate about educating investors, and that’s certainly where I’m coming from. So really gratifying to get all of that feedback and long night continue.

Matthew Gordon: Well that continued Brandon go have yourself a fantastic weekend. I have still got a few hours to go here. I’ll be finished in six hours. I think, I hope. But we’ll catch up with you next week.

Brandon Munro: Great. Okay. Thanks again for having me on

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Uranium Space is CRYING OUT for this… #11. Brandon Munro (Transcript)

Bannerman Resources Ltd.
  • ASX: BMN
  • Shares Outstanding: 1.06B
  • Share price: A$0.03 (22.06.2020)
  • Market Cap: A$33M

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

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

For access to the UN-CUT interview go here.


Brandon Munro is back and he’s ready to share the latest and best insights into the uranium space with our Crux Investor viewers.

First, we take a look at the impact COVID-19 has had on Kazakh uranium production. We all know the pounds are down and won’t be made up, but is the virus going to extend the 3 months shutdown?

Namibia is a country that has classified mining as an essential service, so the uranium sector there can continue at close to fully-optimised production.

We then talk about how well Australia has dealt with the COVID-19 crisis and the positive impact this had had on BHP’s Olympic Dam: it’s still open as usual.

After taking a look at Paladin Energy’s fall from grace off the ASX300 and what this could spell out for all Australian uranium juniors, we talk about the need for consolidation in the uranium space. With projects, capital and expertise spread thinly, uranium companies need to band together if they hope to prosper or even survive come the turn of the uranium market. What did you make of Brandon Munro this week? Comment below and we will respond.

We Discuss:

  1. COVID-19’s Impact on Countries: Looking at Kazakhstan
  2. Production in Namibia: How Did COVID-19 Affect it?
  3. Cameco and Kazatomprom: Independence of Market and Production Clues
  4. COVID-19’s Affect on Australia’s Olympic Dam
  5. Paladin Energy Removed from ASX300: Implications and Opinions
  6. Business Models Galore: Survival of Uranium Companies Lies in M&A

CLICK HERE to watch the full interview.

Matthew Gordon: Hey, Brandon, how are you doing, sir?

Brandon Munro: Well thanks, Matt. How are you?

Matthew Gordon: Ready for our weekly catch up? It seems like a quiet week though, compared to what has been going on.

Brandon Munro: It has been a quiet week. Quite a bit was happening in equities this week, but in as far as the market goes, I think it was just one of those weeks where it just did its thing; not a whole lot of market defining announcements, no big catalysts, nothing that had Twitter running hot, or my email clogging up, or my phone running off the hook – just a week in Uranium.

Matthew Gordon: Well, I think the interesting thing that happened yesterday was the fact that the market had a little bit of a shock. The US Fed made noises about a potential second wave of COVID-19. It was coronavirus which got people nervous. I think it got people, perhaps younger investors, nervous. I mean, I have not sort of seen this thing before, and we, you know, we had all sorts of numbers thrown out as a result from market experts. So maybe, and again, you know, we perhaps should stay away from all things medical as to whether we believe that to be true or not in the US, so maybe we should talk about COVID-19; how it is affecting countries around the world. So why don’t we start with Kazakhstan, because that’s something we have talked about over the last couple of weeks. Any new news there?

Brandon Munro: Yes. So, the public information obviously is that Kazakhstan’s cases have reduced, but they’re still significant. So, they’re at about 250, a bit below 250 new cases a day. And if we put that in a little bit of context, when KazAtomProm announced that they would be suspending wellhead development at least for an estimated 3 months, their cases were averaging 50 per day, so still five times up from when they decided it was appropriate to take that action. And it is worth thinking about Kazakhstan, because I think a lot of the market is looking at that 3-month estimate, wondering if they would potentially come on early, which they would have to do in the next couple of weeks, or if it can go longer. And we have talked at least a couple of times about why that production disruption extending would have such a compounding effect on both sentiment as well as the pounds available in this market.

So, we have got still quite a few cases coming through. They’re not out of the woods yet. Karaganda province, which borders the most important production centre of Uranium in Kazakhstan, there was a New York Times article that talked about a number of towns being shut down, or shut in. Various restrictions because of outbreaks there. Someone who works in the mining sector in Kazakhstan that I deal with, not in Uranium, but in another commodity, they told me a story during the week about how there was a case in their office building and so they have all had to go home for another two weeks, and how disruptive that is. So, there is that sort of disruption going on. And so, we have had the guidance that the three months is likely to take its full course. And what would be really interesting is, at the end of this month, to have a look and see what guidance KazAtomProm gives going forward. And when you talk about the sort of numbers that we have, I think it is very open to them to play it safe, be a bit cautious and stay offline.

Matthew Gordon: And let’s just remind people what the implications of that are, which we talked about this last week: Mr Pirmatov talked about the possibility, or at least they would consider coming and buying in the open market, not something that they had envisaged a couple of months ago, certainly not discussed a couple of months ago. So, the implications in terms of availability in the open market are potentially quite big.

Brandon Munro: Particularly if they don’t have a firm idea of when they’re going to come on again and how long it could go. Because if these decisions are truly being made on medical grounds, nobody knows, nobody knows. And you know, the scare that you referred to about second waves in the US, well, Kazakhstan starts hitting winter as early as October on the steppes there. And they could well be looking at well, what would the implications of a second wave be? Would they do a couple of months of wellhead development with the risk that they’d have to shut in again and delay and see winter out? So, there are a lot of uncertainties there. And just because of the sheer volume of their production in the market, and the fact that the 4th month of a production disruption will have a much bigger impact than the first 3-months because of the ISR mining. This could really have quite a big effect once they start coming into the spot market.

Matthew Gordon: Okay. So, the implication for Uranium investors, or people thinking of investing in Uranium, is that the macro story just builds and builds. It is accelerating. If KazAtomProm has to come into the market, there’s going to be less supply around. So therefore, when this thing pops, it should pop quite quickly.

Brandon Munro: Correct. And what has slowed the Uranium recovery down for the last 3-years, in other words, we had fundamentals that 2.5 to 3-years ago were very attractive, but the market hasn’t reacted to it. And it has been the presence of inventory, primarily, that has done that. It has enabled utilities to defer buying decisions and various other mechanisms within the market that has disconnected the price from some very, very strong fundamentals. Once that inventory goes, and particularly if it starts going backwards because you’ve got large spread producer buying of Uranium in the spot market, plus a nice little sentiment lift coming from either financial investors or utility to realise that they need to restock, then you’ve got the ideal conditions for the fundamentals to match up to price and price has got a long way to go before it matches fundamentals.

Matthew Gordon: It certainly does. I mean, again, it is something we have discussed on many of our previous weekly catchups. Okay, well, let’s kind of move it on because I think that what we’re trying to understand is, you know, what’s happening in the world of Uranium in terms of production? So let’s go for your home from home: Namibia. What is the news from there?

Brandon Munro: Well, Namibia has locked down the Erongo province, or Erongo region. Again, the Erongo is the region in Namibia that has hosted all of the Uranium mining. Bannerman’s Etango project, Deep Yellow, Langer Heinrich, and Paladin’s Langer Heinrich project. And of course, the giant Rossing and Husab projects that are owned by two of the Chinese utilities. So, they’re in lockdown, they’re in lockdown for 14-days at this stage. But importantly, during the first lockdowns, Namibia ironed out all of the details around mining and what’s allowed. And as a result of that, mining has been classified as an essential service. So, mining carries on. If we go right back to our first discussions about COVID-19, you can still operate a full workforce and you can still operate a mine, but you can’t do it perfectly easily when the rest of the society around you is shut down. So, it will just make it hard for them to hit targets and do so for the next couple of weeks, but essentially full production.

Matthew Gordon: Okay. And so, when do we start understanding or hearing about the numbers? Will it be a 5%, will it be a 10% reduction in their operating output?

Brandon Munro: We will get that through the Bank of Namibia figures. That will only come through at the end of the year.

Matthew Gordon: Okay.

Brandon Munro: We’re talking about utility-owned mines here that have got no direct disclosure obligations in that way. They obviously need to keep the IAA informed and the Namibian government informed. But there’s not an awful lot of transparency there. And for that matter, not all of that Uranium is hitting the market in any case, a lot of it goes directly back to those utility owners for absorption into their own supply chain.

Matthew Gordon: Okay. The net effect being the same. So, do you think, given the conversations we have had in the past couple of weeks, and I think some other market commentators have commented too with regards to the position that Cameco finds itself in. It is closed down, for the right reasons, but it is going to open up for the right, different reasons. And KazAtomProm saying that they may potentially need to come into the market to buy. Are there any clues that whether the Husabs of this world would also, you know, keep production at a level which may help global prices?

Brandon Munro: I don’t think the two things are related: Husab and Rossing are operating according to things that are essentially independent of market. You know, Rossing is operating to deliver into contracts that will have some market mechanisms. So, you know, they have got a bit of an interest in seeing the price increase, but essentially, whatever they don’t deliver into a contract goes back to CNNC. And with Husab, that’s largely the case. So, I don’t, I think they will be operating according to a vacuum as far as the market goes. And the things that are worrying them are far more operationally based on the ground.

Matthew Gordon: Okay. So, let’s move on to another group who perhaps care even less about the price of Uranium, which is Olympic Dam, BHPs production, because it is a by-product there. It is just part of what they’re doing during the normal course of business while mining Copper. So, what’s happening in Australia, are they being affected? Are you seeing any signals or signs there?

Brandon Munro:  No, they’re not being affected at all in fact. South Australia, the state in which Olympic Dam and Ranger are based. ERs Ranger mine, it has had, I think, two new cases in the last 6-weeks. They have got no active cases in the whole state. And in fact, just this afternoon, the South Australian government announced that it would be opening its interstate borders. So, its borders with Western Australia, Northern territory and Victoria and new South Wales on 20th of July. So as far as they’re concerned, they don’t have a problem in South Australia. And so, the chance of it affecting either of those minds, particularly once they have now made all of the relevant adjustments; blue team, red team, et cetera, et cetera, bus in bus out, all of the different things that they have done. I just don’t see any capacity for disruption in the short term. Of course, there’s a chance of a 2nd wave in Australia. That’s what has people concerned – what happens when we have to open up international borders in a more substantive way? But for the foreseeable future, I just don’t see any substantial potential for disruption there because of COVID.

Matthew Gordon: Well, I think the Australian policy, I mean, you are world leading. I mean, the number of incremental deaths due to COVID-19 is extremely low. So yes, that’s a big moment if the borders open up, if international flights do start coming in, and I guess we shall see when you guys decide to open up the borders.

Can I talk about one other thing Aussie? Because, potentially, Uranium just lost its seat at the table in a way, in that Paladin has just been removed from the ASX300. What’s your reaction to that? I know we want to stay away from commenting about companies specifically, so I want to talk about this in the context of Uranium as a sort of leading commodity in the world.

Brandon Munro: Yes, it is significant. So the S&P runs a series of indexes on ASX. People would be familiar with the All Ordinaries, then there’s the ASX-100, ASX-200, and ASX-300. So, essentially, the ASX-300 are the 300 largest stocks on the Australian stock exchange that meet certain liquidity requirements. There needs to be a minimum pre-float, et cetera. But for all intents and purposes, it is the 300 largest stocks. And if you fall below an acceptable market capitalisation, or if the rest of the stock market goes up and you maintain your market capitalisation, but a bunch of other companies push in front of you, then you get delisted out of that. So, for anyone who doesn’t understand that. So yes, indeed. So, S&P announced they’re rebalancing today, which will take place next Friday, the third Friday of June is one of their quarterly rebalancing dates, and Paladin and unfortunately for them and their shareholders, has been pushed off. It is not a massive immediate effect for them, but that will limit some of some of the investment funds’ capacity to invest who are mandated according to ASX-300 requirements, et cetera, et cetera. So there probably will be some selling to come out of it. But what is relevant and what is important is that now there isn’t a pure play Uranium company in that ASX-300 that isn’t closing a mine. You have got ERA there, that’s got a large market cap, but it probably, because of its liquidity requirements and the fact that Rio now owns 89%, is not investible.

So, if you were to define ASX-300 as an institutional grade, for argument’s sake, there’s nothing of institutional grade left in Australia. That’s, on the one hand, you know, rather sad given where we were before this bear market started, but on the other hand, it is a very interesting opportunity and it will certainly entice consolidations. For example, if Paladin had consolidated or merged with another company in the last six months, they’d still be in the ASX-300. And there will be companies that will see the opportunity to, 1 plus 1 equals 2, but that 2 gets you into the ASX-300, and therefore 2 goes to 2.2 or 2.3, when you see both the capacity for index buying, but also the appetite that’s building amongst institutions that we know is there, where a number of these investors, they love the Uranium setup. They love the fact that it is so asymmetrical at the moment. That it is a very good hedge against broader macro risk because nuclear power doesn’t march to the macro tune at the moment. Plenty of very, very credible commentators, writers, analysts who are saying, look, it is Gold first of all, of course, but Uranium second, in terms of an excellent metals hedge against macro-economic concern; that’s just elevated in the last day in the States as we saw.

So, once you see a company re-emerge, which could be Paladin, or it could be some other group, into that institutional investment grade, I think they will get a big lift under the wings. And that’s going to drive a number of things into the sector and something definitely worth watching.

Matthew Gordon: Yes, I’m fascinated by some of the business models out there. You know, like I say, we don’t want to talk about companies specifically, so let’s just talk about the model. So, you’ve got groups here, and we have spoken to a few recently who are talking the language of M&A. Others who are talking about joint ventures, and others who are just, you know, obviously they believe they have got what it takes because their single asset is big enough to be a leading producer at some point, subject to financing and a lot of things going right for them. Do you think that, like I say; we’re dancing around an area here that I’ve got to be quite careful about, do you see mergers happening in this space? Because the macro story is building, but at the same time, it has taken a long time to get here. We have seen a few raises in the market to deal with different problems, and they have been varying degrees of expensive and varying degrees of, well, let’s just keep the lights on and keep going to the end of the year. Do you see some companies needing to merge, needing to come together? Not any because they’re running out of cash, but to be a much more interesting story, to be a bigger story in what is a sort of dwindling market.

Brandon Munro: Yes, I do. And in fact, I’d go even further than that and say, this sector is crying out for consolidation. And if you run through, first of all, there’s the point that you made just about efficiencies; so, there’s too many management teams and too many overheads for too few assets at the moment, basically. But you then need to look at expertise. That’s an even tighter commodity in Uranium than money is. You need people in Uranium who have dealt with radiological issues, who have built mines, who have run minds, who have dealt with regulators, who have dealt with the IAAE, who sold the stuff, who understand how the nuclear sector operates, who can make strategic decisions on all of this. Who can gain the credibility of the buyers, which are utilities, which are a totally different animal to someone who is prepared to take a Copper concentrate or something like that?

There’s just so much to understand in the Uranium and nuclear sector. And this is a sector that’s essentially been in a bear market for 30-years and has been in a very deep bear market since 2011. You don’t see that the flood of young talent that’s come through this sector, and the people who were leaders in it, a few are still fantastically still hanging around and still in the sector, like Dustin Garrow. And thank goodness that he is. But he is working because he loves to work. He’s not working because he is of a working age. And so many of his compatriots have made the decision just to retire. Some of them aren’t even with us anymore, sadly. So, there isn’t enough expertise for the number of projects. So that’s the second thing.

The third thing is that capital is becoming more difficult. And as we were just explaining, if you can bulk up, you’ve got access to deeper pools of capital who are more suited for a commodity like Uranium. Uranium is capital heavy. It is not like little CIP plants in Gold or, you know, buying the plant down the road that’s just stopped operating in Kalgoorlie to punch out 10,000oz p/a, or something like that. Uranium is capital-intensive by its very nature. So, you need to have access to more developed pools of capital. And then from an operations point of view and at a more global level, when a utility looks at the Uranium space right now, what they see is they see a couple of dozen Uranium companies who are all assuring them that we will be ready in production in three, four, five years. And it is not a utility’s job to go and do the detailed analysis on the environmental implications and how realistic that is, or try and second guess what their technical processes are, or even understand that there’s daylight between a Scoping Study and a PFS and a DFS and what that risk profile really means.

So, the utility sees this array of projects that seem to all be very likely to come on stream. And so, what’s the big deal? Where’s this supply crunch? They just think that we’re lying to them or exaggerating, or we have got confirmation bias because we love our own project or something like that. What this sector needs is the better projects to consolidate into a handful of lumps. And those leaders then go to the utilities and say, look, we’re here to build a long-term Uranium business. That’s what we’re passionate and invested in here, but you need to understand, Mr. Utility, that we will only bring these projects on sequentially, as you demonstrate, as the market, that we need those pounds. So, all of a sudden, this array of projects that are all declared to be fantastic, separate into a few stragglers, which will be found out by then, and a few clients of credible projects in the form of Uranium companies that are serious about building. And that’s a natural progression in this sector and it will happen.

The problems that we have got, I guess there’s a fair bit of management who are clinging onto their jobs at the moment. There are shareholders that are a bit reluctant to enter into even a scrip for scrip consolidation at the bottom of the market. You know, as much as company A might merge with company B on identical ratio to what they do at the top of the market, they’re still a sentiment-driven thing because merging at USD$0.20, not USD$0.50 that happens at the top of the market. So, shareholders are more likely to support a merger in an elevated situation. And when we were just getting a little bit close, because the Uranium price was really going down and desperate, and we were seeing a few, certainly I saw a few CEOs who maybe saw this is their opportunity to exit and go into Gold or Copper or something more fun. Then it picked up again, and so they’re in there for a little bit longer. So, there’s a bit of a long answer for you, Matt. But I do think that this sector requires consolidation from both a push and a pull factor perspective, from both a top down and a bottom up perspective.

Matthew Gordon: Great answer. I love that answer. We spoke with Dustin, actually yesterday, and it was fascinating. He echoes a lot of what you’ve just said, because like I said, you know, he has been around the block. He’s worked from all angles in the industry. So, he does have a view. And the interesting thing he said was that, one, with regards to management, that the people just aren’t around who had been there and done it before. And he said, you cannot underestimate that factor because he said, I saw it in the last cycle, there were lots of names, lots of conversations, lots of pitching, lots of promises made, and very few companies actually got over the line. And he’s talking about companies in the Athabasca Basin. He’s talking in Australia, he knows Namibia. He saw what worked, he saw what didn’t work, and more didn’t work than worked, This is not necessarily a direct correlation to share price, because there was sentiment in the last cycle which was very positive with anyone who mentioned the word Uranium. If they walked into our bank and said the word Uranium, we were interested. But the reality was very, very different. And he said, it is going to be no different this time around.

In fact, here’s an interesting thing: and I’m looking at them here, he gave me, he’s got a couple of handfuls of companies that he thinks will make it, based on his knowledge of what’s happened in the last couple of couple of cycles. And it is kind of fascinating, you know, his view, having been there and done that. So, I enjoy that conversation with him and saying, you know, what people say and what they’re capable of doing are two very, very different things. And he kind of, again, off camera, gave me examples of, you know, companies who he thought talked a good game, but had no chance of actually getting over the line. So, a lot of what you just said makes a lot of sense to me. And again, Dustin’s explanation of how the utilities were, how the buyers think, what they’re looking for, what they actually believe. Some of these utilities’ companies are and are not capable of delivering. It is it is obvious to them. It is perhaps a little bit less obvious to us Uranium investors, but it is essentially getting an insider view on that one. As usual there are always many, many unknowns.

But as a Uranium investor, I think the mood seems to be positive. We are seeing companies who are coming into the Uranium space who are applying for permits and licenses. We’re buying into companies with permits and licenses, which haven’t really done anything in there, and I think that’s always kind of indicative of the mood. They feel that they’re going to be able to get financed. I know they’re sort of jumping on the bandwagon, but nevertheless, it is one of the early indicators that this is a market which perhaps is moving in the right way again. We’re having brokers approach us, you know, talking about, are we aware of any companies or projects, which would like money for this space? And we’re not talking big money. These are the obviously very, very early stage, barely even exploration, just I think asset hunters.

And so, Brandon, look, I think we started this talk thinking that not much happened this week. Nothing really to discuss. We have done it again. We have perhaps gone off in an impassioned speech about several topics there. But look, I appreciate your time. Have a great weekend. Are you up to anything fun this weekend? What’s happening?

Brandon Munro: Ah, just chilling this weekend. I’ve been really busy this week and I was pretty busy last week as well. So, I’ve got a few things to catch up on, on the home front. No bees, unfortunately. So, nothing quite that exciting, but hopefully I’ll keep myself busy with my daughters; that will be enough for me.

Matthew Gordon: Beautiful. Beautiful. Yes, me too. I must check up on those little bees. It is been wet. Very, very wet here. It is terrible. In fact, you know what I’m doing? I’m going up on the roof. We have got a leak. The lead work on the roof somewhere is not working. So, I’m obviously a man of many skills – that is so not true. I’m at least going to try and spot where the leak is and then maybe call a man who can. But these days it is very hard to get anyone to come out because they don’t want to be in contact with us. So yes, that’s my task for the week. Okay, well, Brandon, thanks so much again. Let’s talk next week. Hopefully some exciting developments. You never know.

Brandon Munro: You never know. But we always manage to find something to yabber on about, and from my understanding, your audience doesn’t mind it either. It was great to chat, thanks for having me on again.

Matthew Gordon: And it is time to say goodbye to our regular viewers from, as we join Crux Club. We are going to be talking now to Brandon and get his views on China’s influence on the Uranium market and Uranium investment by association. We look at how China affects companies and countries in terms of how they interact with China, what China’s drivers’ goals and ambitions are and how they think they’re going to get. It should be an interesting conversation. We are also looking at the NEI blog recently, which talked about the number of reactors in the US applying for an operating extension; what the impacts could be for US utilities, and of course, for our investments? But before we go, if any of you are interested in understanding what Brandon has to say on Uranium, and indeed what other market commentaries have to say about a variety of commodities and investments, go to You can find that at, where you can sign up for the waiting list, but in the meantime, goodbye.

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