Neometals (ASX: NMT) – Transforming Battery Recycling Recovery Rates for the Electric Vehicle Revolution

Neometals portfolio of projects are progressing on schedule, so we thought this would be a good time to catch up with them. Chris Reed, CEO, talks to CRUX Investor. Click here to watch the interview in full. Neometals has converted from miners to project developers following the Electric Vehicle thematic. It’s clear that they are rather good at taking complex problems that are challenging, and work out how to commercialise it efficiently. Reed is a sharp and driven individual, who has built an eco-system of smart people around him to deliver financially sustainable solutions.

Neometals made its money with a Lithium mining project, Mt Marion in Australia, and timed their exit beautifully. They pocketed c.AUD$130M, and has returned c. AUD$45M to shareholders in the shape of dividends. And they have retained an option on the Lithium spodumene component which will be a revenue stream for them at the point the market comes back. A smart piece of negotiations. And that typifies their approach to business.

Reed views Neometals as a “project development business.” Neometals has a variety of assets with differing commodities, but the battery thematic is the key driver. There are 3 core projects with Neometals’ focus: the Barrambie Titanium Vanadium Iron Project in Western Australia, a Lithium Refinery Project and of course it most advanced project, the battery recycling business. Reed updates us on their battery recycling portion of the business. They are at an advanced stage of proving up their MOU terms with the billion dollar German industrialists, SMS Group. Reed talks us through the deliverables for this year and how they will become a significant global player in an accelerated time frame.

Neometals is valued at cash in the bank. Some investors are struggling to understand why. Perhaps Neometals need to start telling their story and investors need to pay attention. Barring a global meltdown, the battery recycling industry looks set to grow at a phenomenal rate. Having identified the growing demand to recycle Lithium batteries as a focal point, the company is working towards commercialisation of its proprietary process for recovering Cobalt, Nickel, Lithium and other valuable materials from spent Lithium batteries. Neometals’ pilot process has generated a high purity (+99%) Cobalt sulphate product at a high recovery rate (+98%).

Neometals’ management has created an eco-system of experts in their field with the ability to solve complex problems currently related to Lithium, Titanium and Vanadium. Neometals hydro-metallurgical recycling method is unique. And with strategic partnerships, supply lines and MOU’s already in the bag, the eco-system seems to be close to delivering on its ability to move the pilot in to commercial reality at scale in Europe.

What did you make of Chris Reed? Is Neometals the answer to our waste-related problems? Are they a better bet than a conventional junior mining company? Comment below and we may just ask your questions in the near future.

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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.

Battery Metals – A Shocking Introduction (pt2/7: Vanadium)

A fully-labelled cartoon diagram of a vanadium redox flow battery.

Vanadium: Longer Life, Inspired Investment?

A photo of a pile of big chunks of vanadium.

In the last article of this series, we began exploring the battery metals behind the EV economic revolution. Click here to read about the raging ethical debate that will affect every investor’s dealings with cobalt. In this article, it’s time to take a step away from the cultural hurricane of opinions and instead look at the technological tornado surrounding another battery metal.


Vanadium has been a useful industrial metal for many years. It has been used in nuclear reactors, superconducting magnets, catalysts, gears, axles and jet engines. The concept of a vanadium redox battery had been problematic throughout much of the 20th century, with Pissoort, Nasa, and Pellegri and Spaziante all being unsuccessful in their attempts to create one. However, since the first successful all-vanadium redox flow battery in the 1980s, companies have been clamouring to explore the immense possibilities generated by a battery that has a lifespan far longer than current solid batteries.

Higher than expected supply and lower than expected demand has resulted in a downward price trajectory for uranium in 2019 after the record highs and growth of the sector in 2018. However, the vanadium market worldwide is projected to grow by $17.5 Billion. (1) A primary reason is the predicted growth of iron and steel, not the green revolution. Eventually, when the technology standards for VRFB have been agreed, vanadium will find applications for longer-term energy storage in towns and cities to regulate peak-energy surges and provide domestic whole-home use and remote off-grid use. Vanadium will be able to compete in terms of cycle life, safety, and reliability for stationary applications. However, lithium-ion will continue to own the mobile energy market such as automotive (EV) and electronics.

Despite higher upfront costs and lower energy density, VRFBs potentially have a shorter payback time because of capacity retention even after many thousands of cycles. This potential also exists because of their ability to recycle core components more easily than other battery chemistries. Very few VRFBs are in commercial use so investors must take the claims of vanadium companies aligning their success to that of VRFB with a pinch of salt. However, that is the cherry on the cake. Right now, the vanadium producers’ economics are 90% aligned to the steel market.

Lithium-ion batteries will suffer a setback from the emergence of utility-grade flow batteries, which will contribute to easing the pressure on lithium resources that are more needed for electric mobility applications. One final interesting remark is that, with notable exceptions, a sizeable portion of the RFB industry is located in Europe and the US.

A photo of a large yellow vanadium redox battery inside a factory.
A Vanadium Redox Battery

Vanadium Flow is in developmental infancy relative to its older brother, lithium-ion, but is on an upwards trajectory. Wattjoule predicts an increase of 30% for the total Substantial Storage Market by 2025. (2) Vanadium-Flow offers a fully containerised, non-flammable, compact product that doesn’t degrade; therefore, it can be reused. It seems to be an infinite supply! I am attempting to understand if this is a good thing or a bad thing as an investor as scarcity drives prices up and oversupply drives prices down. Investors may also be interested to hear there is significantly more Vanadium in the earth’s crust than lithium; currently, twice as much Vanadium is produced each year.

However, investors so far have been deterred by the economics of vanadium, and commercialisation of the batteries has suffered as a consequence. The benefits are not yet understood by the retail market, so regardless of their promise, they are yet to bear fruit. Vanadium-flow batteries remain less effective than others in terms of energy-to-volume ratio and round-trip efficiency. They are also heavy, which restricts the flexibility of their application to mobile solutions. Lastly, the toxicity of vanadium oxides renders the batteries more dangerous than competitors. The industry needs to assure investors they have a solution for this or they will suffer the same push back that Nuclear energy is getting from some quarters, despite the zero-carbon claims.

Vanadium is produced in a variety of ways for many applications. Vanadium pentoxide (V2O5) always contains 56% vanadium by mass. (3) One of its uses is as a cathode in primary and secondary rechargeable lithium batteries, and in VRFBs, both of which are a key part of the EV revolution. It is also utilised in air treatment, automotive manufacture, paint, flooring materials and as a catalyst or colourant, along with many other uses.

Another popular variant of vanadium is called ferrovanadium (fEv). Ferrovanadium is a master alloy/universal hardener used in ferrous alloy production, such as stainless steel, that is formed by combining vanadium and iron; it has a vanadium content range of 35%-85%. Vanadium is also sold as a nitride that can be used in cutting materials or hard coatings.

57% of vanadium is produced in China and 18% in Russia. India, South Africa and Brazil are also large producers. The USA produces ≅3%. (4)

The spot price of ferrovanadium is ≅$31/kg in China and ≅$21/kg in Europe. The price of vanadium pentoxide flake is ≅$14.55/kg in China and ≅$10.47 in Europe. Historically venadium pentoxide flake has been as low as $2.43/kg in worldwide markets in 2002, and as high as $ in November 2018. Ferrovanadium reached a height of $143.50/kg in October 2018 and a low of $6.20/kg in early 2002. (5)

An arial photo of White Mesa Mill, Utah.
Energy Fuels’ impressive uranium/vanadium asset, White Mesa Mill, Utah.

Crux Investor recently took the opportunity to interview Largo Resources (, Energy Fuels (, Australian Vanadium ( and BlueSky Uranium ( about vanadium. They helped shed light on the expanding market of vanadium and shared useful information for investors. It is important to decipher the difference between what the CEO says versus what is a reality today. They need to paint a picture of a growth story for investors. We must work out what is real and what is wishful thinking.


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

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

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

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

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

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

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

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

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

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

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

The Uranium Cycle: I’ll be back.

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

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

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

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

Investing in uranium: the secret recipe

The three ingredients are as follows:

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

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

An Experienced Management Team

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

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

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

Sufficient Cash

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

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

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

Genuine Assets

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

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

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

The Game-Changer

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

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

An Option I Could Seriously Consider

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

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


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

Investigating The Earning Potential of Paladin Energy

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

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

Paladin Energy – An Overview

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

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

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

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

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

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

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

Langer-Heinrich Mine PFS1

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

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

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

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

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

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

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

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

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

But Let’s Be Realistic

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

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

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

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

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

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

There are a few things that could change this calculus.

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

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

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

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

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

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

Management & Ownership

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

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

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

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

So let’s focus on the CEO.

Scott Sullivan

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

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

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

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

Plus, he was also incentivised with options:

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

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

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

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

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

S. Sullivan’s salary was:

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

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

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

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

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

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

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

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

The Short and Ugly

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

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

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

(6) comment section

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

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

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

Australian Vanadium (ASX:AVL) – Hitting Milestones and Moving Towards Supplying 5% of the Market

We spoke with Vincent Algar, Managing Director of Australian Vanadium (ASX: AVL) whilst he was in London.

Highlights of the Interview:

  • Company Financials, Investors and G&A
  • Priorities and Focus
  • Value Creation for a Junior Company
  • Vanadium: the Market & Promotion

Matthew Gordon: What are you doing here in London?

Vincent Algar: I decided to come over to London to make some introductory meetings to some funds with a corporate advisory company we working with out of Singapore. So just getting to meet people, following up from our 121 meetings.

Matthew Gordon: And the purpose of that being what?

Vincent Algar: Twofold really. 1. To open ourselves to a new group of investors, primarily an institutional base, PE and family office space. But also to investigate coming here with a potential listing, probably which now looks like around March next year, if it goes ahead in that timeframe.

Matthew Gordon: We should come back to that another time perhaps. For people who are new to your story, why don’t you give us that 2 minute summary and we will pick up some questions.

Vincent Algar: Australia Vanadium is a company that’s been listed for over 10 years. Our main focus is our project South of Meekatharra, which is in the central part of Western Australia. Active mining region and we are developing a project that’ll be about 5% of global Vanadium production out of a magnetite deposit. Very similar in style and geology to that being mined by Bushveld and by Largo.

Matthew Gordon: And that’s a nice summary. So I want to start off and talk about junior miners first of all. So give us a rundown of the finances with regards to the company in terms of market cap share price etc.

Vincent Algar: Currently 1.7Bn shares on issue, which is a lot. The company’s been around for 10 years. We know that, that’s what it is. We’ve got 670,000 shareholders, which is also quite a large number for a company of our size. Market cap currently around $29M-$30M, depending on how it went this week. If we had a good week which is always good in the first part of financial new year in Australia. Sitting with about $4.5M in cash working our way through and deep in the process of doing a pilot study as part of a Feasibility Study.

Matthew Gordon: And you mentioned are you’re working towards the DFS as well.

Vincent Algar: Yes. That is definitely part of the DFS work is to do that part and we’ll spare I’ll spend a bit of time in saying why that’s important that we doing that in a particular way.

Matthew Gordon: So you’ve got $4.5M left. That takes you through to when?

Vincent Algar: Probably take us through to the end of the year. On the run rate that we are going. We are a very small team focused both in our consulting team and internally. And they were focused really on getting that work done in the best possible timeframe.

Matthew Gordon: And are you seeing any pressure from retail investors, institutional investors in terms of managing that G&A a little bit further out? Or that’s what you need to get to and you’re going to have to raise at the end of this year no matter what?

Vincent Algar: Look I think everyone looks at the capital. They look at what needs to be done and everyone will know that we have to do something to make sure that we keep on our time lines to get to the end. There’s two ways to do this. We sit on our hands and go slow, and we know where that goes. That it doesn’t get the project done. Or we push our sleeves up and get on with the work. And that will require us to have the money we need to get it done. Which is one of the reasons why I’m here as well. To make sure we understand the capital markets around what we need going forward.

Matthew Gordon: Because you used the phrase with me when we spoke. And we did this on line but previously. So the thing that can affect dilution most is not being able to raise capital.

Vincent Algar: Running out of money is the worst form of dilution the shareholder can have. That’s a very relevant thing in a junior resource company. Knowing what you’re spending. How you spending it. So being very tight on a budgetary level. Have a budget which is often quite an anathema to some people. But knowing what your budget constraints are. Knowing that you are well ahead of time how you’re going to be spending that money and where it’s going to be going. And what deliverables it’s giving you.

Matthew Gordon: You going to be raising how much do you think? You got a sense of that? It’s a long time between then and now.

Vincent Algar: We could We could finish the work we need to do down to the end of the feed study with between $5M-$10M. So that’s a additional amount of money that at some point we’ll have to put in the bank. And that’s what we were working towards, to either saving our cash to get to that point and then putting that in. But we need to deliver some deliverables to add some value along the way.

Matthew Gordon: And what do your institutional shareholders think of this process?

Vincent Algar: We don’t have a lot of institution al shareholders. One of the reasons I’m here again. We have on our register a couple of people around 2.5%-3% mark. We have people that we may think are institutional shareholders sitting behind nominee companies in that top five.  But there’s quite a lot of high net worth money in our company. And that’s become come in through my Director Les Ingraham who’s nursed the company until I joined in 2014, where he was strongly supported by people around him. He kept the company going and kept the company on its feet. A lot of his own money in and his high net worth friends’ money. That’s where we got to today. That shift of bringing the project to a new level is one of the changes we were looking to make in share register.

Matthew Gordon: I’m going to come back to overhead again, because the conversations I’m with a lot of juniors at the moment, is there are a lot of disgruntled investors. They’re looking at the salaries. They’re looking at the overheads. The way that money is spent. It’s all public information but very few people look at it. But when they do they’re stunned. Mining executives are extremely well remunerated.

Vincent Algar: I certainly can look at what we do, and I don’t turn up on the top 200 lists so I’m okay. But I think junior resource company CEOs. We’re doing something that other people are not doing. We are having a crack at something that is almost impossible to do. You’re trying to find something that is unfindable. You’re trying to then turn that into a resource; 1:100, 1:1,000 will make it to that next level. You’re trying to turn that Resource into proper Feasibility Study. We’re out there on the risk margin taking chances and when we pull that off our shareholders often benefit significantly.

Matthew Gordon: You’re taking these chances with some else’s money and they expect you to behave a certain way. When people are taking not a lot of that risk on their own shoulders. And by that, I mean taking big salary, not necessarily aligning themselves with shareholders and taking a smaller salary with more equity or shares. I can see why that stick in the throat.

Vincent Algar: No of course I can see that as well. But there’s a balance in there for everybody. I think that the best way that I see that in junior company sector is for there not to be so pointy at the CEO end. I think a lot of junior companies are CEO heavy. And they would be far better service by having a technical team at the top. Where those top players are equally remunerated and they all focused on the core objectives of the company. So for example, we just put Todd Richardson on our executive team and COO. He’s come in with a very specific objective of delivering that project and the approvals that go with it at the technical level with his team in budget and on time. My role is to make sure that he has the funds to achieve that. So that’s my role. We’re equals in every other way. And that’s really important part of our structure. I don’t feel that if I go out of the office like I am now that the ship’s listing at the back. It’s very much under control and the projects definitely working.

Matthew Gordon: But in terms of how you remunerate yourselves, are you more incentivise against deliverables, against share price, against those sorts of things or is it all front loaded?

Vincent Algar: Todd got some shares when he came in. I got some performance shares given to me on the way in when we delivered some of our Resources. We have now reached a point at the end of the PFS where we have to lock in some new remuneration for us on the incentive side. But at the same time you got that shareholder view that you don’t want to do that too early for the wrong reasons either. So it’s definitely on our cards to do so. We haven’t locked it in. You want to do that with the blessing of the shareholders and in the Australian market in any market probably other public company you do have to go to shareholders with those direct remuneration opportunities. And they have to approve. I don’t think that in our company where we’re over the top. I’ve definitely seen a lot worse. But I think the most important thing about that is that the executive team is has got a load that I can deliver in the projects. And that is strategically split across key members. I think we’ve got a very good structure in place now in our company.

Matthew Gordon: Generally, I always advise people to take a look at this prospectus and actually understand what they’re getting into to. And if the management team look like they’re keen to get as much money out as possible, as soon as possible then it’s something that you should think about twice.

Vincent Algar: I’d say it’s a good lesson for anybody from a due diligence point of view. Investors should read the accounts. Read the notes. That’s what I was taught. Therefore, you make an investment, look at everything and then form your opinion from there.

Matthew Gordon: Let’s get onto the money side of things. You’re here in London having a few meetings with some institutions and family offices as well.

Vincent Algar: And interviews as well.

Matthew Gordon: So what are you telling them? Because when we spoke last I was impressed by a lot of what you said. You seem to know what you need to do. That’s a big list. So what I’d like to understand is what you think your 3, 4, 5 priorities are? And tell me how you’re going to actually deliver those. Because we’re going to raise money, you need to be clear about that story with people. So what do you think your focus is?

Vincent Algar: But so just take you through a typical scenario when you’re meeting with one of these guys. It either focuses on the on the market. Sometimes quite heavily and what the market is like, because we’ve got a commodity here that when you look at the vanadium price chart, it’s not a pretty thing to behold. It’s very spiky. If people don’t know the commodity, why would you believe that that the price over the next 10 years would be any different than it is now. So a lot of time understanding what the market behaviour is and what we see the forward growth is. And we have to have a view on the forward growth, not only on the price but also on the market demand before you can even entertain looking at the project at all. So that’s part of the conversation. The second point is what have you been doing to get you to this point. What if what have you really achieved in terms of the milestones?

Matthew Gordon: So what are they?

Vincent Algar: I joined four years ago. We’ve taken the company through drilling it out, and pushing the resource up to 90Mt in terms of our target horizon, and getting that through the PFS which allowed us to declare that maiden reserve of 18Mt. Which looks like a first pass mine life of 18 years. If you take that from the total remaining inferred resource that gives you another 2 times that life if you like. Another 30 odd years of life after that, which really is something that people want to see. Is it a long-life project? Yes. Does it have the grade? Yes. Then we talk about the technical side. We’ve found this great Vanadium deposit. Is it special in grade? Is it special in thickness? Those are the things they want to hear. What is it like? Who’s done the same thing?

Matthew Gordon: Is it economic is where you want to get to.

Vincent Algar: Exactly. The PFS indicated that at the price ranges we gave. It’s economic. Is it’s fantastic at today’s price, which is when we look at and go, ‘well it can be a lot better’. What are we going to do to stay in business when we’re in business? And then last thing where are we going to get the capital.

Matthew Gordon: All great questions. Let’s answer a few of them.

Vincent Algar: The project itself from a metric point of view is very comparable to the Largo and Bushveld Projects in terms of the geology. So we know we’ve got tonnages. We’ve got concentrate grades, we’ve developed from our test work and we’ll be confirming in our pilot work, are in line with delivering a high-quality concentrate. Not the best concentrate in the world, not a 3% or 2% like Bushveld has, but certainly at that 1.4%, comfortably for the life of the project. So that’s a really important cornerstone of our delivery. The silica grade needs to be in a very tight space, very low. And that has implications for operating costs so you need to keep it down. We’re very comfortable with what we’ve done so far. We’ve continued to deliver far more work and again the pilot study will confirm that we can get good value at that.

Matthew Gordon: You’re looking for the $4.15.

Vincent Algar: Anywhere South of $4 is good. I think is good. Let’s say you’re looking at an operating margin of $4 on a price it’s $8.60 even if you say in the worst scenario for. So it’s the key thing in operation for us. We want to show in our study work that our operating cost can be comfortably and safely below $4 or at $4. And we’ve shown it in our PFS and we’ll continue to show that in the work we’re doing in the DFS. That is our goal because without that we’re not an option for people going forward.

Matthew Gordon: Okay.

Vincent Algar: The pilot study is about confirming everything and de-risking everything around the process route, to give people a comfort, whether it’s a bank or a small investor or institution, that the work is being done well, it’s being done properly and it reflects the feed that’ll go into the mine.

Matthew Gordon: And presumably a strategic partner? And institutions for sure on the money side, but that’s not necessarily going to come from banks or institutions. Are you having conversations with strategic investors?

Vincent Algar: So now you get to the point of the capital. So the operating cost is part of the study work. But the key thing is then we’ve got a capital number that has scared some people to be honest. And people look and go, ‘Oh it’s a big number’. You look at big projects around the world and it’s not a big number, compared to other projects. But people still look at and go. How are you going to get that money? You’ve got a $30-$40M market cap. You need to raise somewhere along the line you need to raise this to $350M. Now what we are doing in the DFS, is looking at all the options you’ve got to reduce that capital. So by taking things or not taking them away but engineering them out, they don’t have to be there. That’s the first thing. And that’ll allow us to a optimise the capital that we need to get from a strategic investor. They will also help us with de-risking the project as well significance.

Matthew Gordon: I mean that’s not a new model. Tried and tested done before. It’s a question of who you partner with and what they think of the asset that you’ve got. You’re doing something with the pilot plant. I can understand why they would find that particularly interesting because it gives them a better sense of what the economics and how hard this is going to be. So with those conversations, do you then step back let them come in on a project level and take over. Are you incubating this? Or do you think that actually, no I want to bring this into production. I’ll just take the money.

Vincent Algar: So you asked earlier about the key partners. We’ve got a target space that is cross that’s both incoming and outgoing if you like in terms of targeting people who are in the vanadium space, either as converters or as producers, across the world. We obviously we’ve got one MOU in place already. They are a converter. A converter being someone who either makes Ferro from vanadium or who makes VCN and from vanadium. So those are those are the converts space. They’re a very interesting market because they have got money, but they don’t have feed. Then you’ve got the smaller steel mills in China who are probably more likely to be ones that are going to be looking at it.

Matthew Gordon: Those conversations haven’t started yet? You know where to go?

Vincent Algar: There are conversations that we have ongoing. Conversations under CA (Confidentiality Agreement) mainly. Those are not at the MOU (Memorandum of Understanding) level. They’re at the data review level. So we have an active data room.

Matthew Gordon: Those people may have been talking to lots of people. You’re one of them, if they like what they see, they may take it up.

Vincent Algar: It’s more pointed than that. It’s one-on-one MOU review of data. We have a data room. It’s very active. We have a full financial model which is at close to or at banking level.

Matthew Gordon: What I think is interesting is that a $30M market cap company has got this full data room available, because it knows now is the time to be having those conversations. Which means that your market cap is it going up the chance to grow or how does it grow? Where’s the value come from with a small company like this, where someone’s going to come in and take a sizeable piece of the action.

Vincent Algar: Well if someone comes in and takes a portion of the project say the project. Let’s just say hypothetically a corporate comes in. They like this for whatever reason they decide and then they want to make is that the proposal for a project level in. That earn amount and their ability to go through will be at the project level, not at the shareholder level. And that’ll reflect the value that we’ve put in the company. We would say in our presentations, in our model that this is where we think the projects worth. By them coming in validates that whole project for us.

Matthew Gordon: But others I’m trying to get at. I’m trying to understand your strategy. Your model. You’ve got an asset. You’ve only got one asset. Someone going to come in with cash, a strategic., It’s not coming in at the Australian vanadium PLC or Ltd state. They are coming in on the project level, so it doesn’t affect your share price, but it doesn’t leave much room for equity growth there unless you go and do something with either the cash you may receive for their portion, if there is any. You don’t have any other assets. How do you continue the growth component to your story?

Vincent Algar: Well you asked earlier to follow up one of your other questions. Do we want to stay there and do that. So our team is ideally equipped to actually build this thing. So the value creation really sits in the team sticking around and making it happen.

Matthew Gordon: So that will be the type of conversation you want to have.

Vincent Algar: That’s the conversation. We’re saying listen guys, ‘you want to come in and do, but we know that you will not be able to find a better Vanadium team with experience than you’ll find here’, both from a consulting point of view and an internal team point of view. We know what to do here, and we know you know what we what to do here. So we’re going to go and do that. So you come in and we’ll help you do it. At some point that goes past them wanting to do it but we’re then part of the team. So it’s adding value on our side, along the way while they help us do it. So that strategic investor will soften the blow of that funding requirement. It will allow the company to grow the valuation. We just have to look at the valuations of Largo and Bushveld today. A billion dollars and half a billion pounds. That’s where you can head to. So if those valuations are even partially reflected in the share price with those partners in play.

Matthew Gordon: You’ve got to do peer analysis at this level. It’s nice to say, ‘we’re like Bushveld’, but you are where you are.

Vincent Algar: We want to be like Bushveld.

Matthew Gordon: You want to be like Bushveld. But we’ve got to talk about where you are today. And what I’m trying to get out of you is, how do you move from $30M market cap. To $100M to $300M. What are those steps that you’re going to take, apart from the vanadium price going through the roof?

Vincent Algar: No of course. I’m not relying on that because that’s not a thing you can or should rely on. You’ve got to believe that the demand is there. So then when you’re in production you can sell it in to the market.

Matthew Gordon: Give me those steps then?

Vincent Algar: So we’re right at the point where our workflow really is cut out for us over the next six months.

Matthew Gordon: You know what you are doing. Okay.

Vincent Algar: Each of those workflow items are about value. Convincing everyone around us that we have each of those milestones ticked off and moving towards production.

Matthew Gordon: They are. 1. Get the DFS complete.

Vincent Algar: Absolutely

Matthew Gordon: 2. Get a strategic on board. With the prerequisite cash to do so. Then what?

Vincent Algar: Get our environmental approvals in order. And on the table and done. Decide on how the actual final layout of that plant looks. And then start to work on who our vendors are and how we’re going to deliver it. So get down to the dirty part of the engineering as soon as possible. But the environmental approval for us is always going to be a critical path. So as much work we do on the technical side. De-risking technically is very key for us. Our pilot study is essential part of our work. It precedes the DFS engineering component and the FEED study component. It’s something we’re doing now. We’re doing it in a quite an aggressive big way. Just to touch on that point. That will be the thing that defines what the circuit looks like and what the engineering will be. How much it’s going to cost us to build it. So we have to do it properly and do it well. So that is a body of work. But the environmental approval running alongside it is a time critical issue. You might have seen we put out an announcement last week. We signed an MOU with the neighbours West Gold. They’re pretty big fishing in our area, in terms of Gold production. They’re sitting with a lot of water in their pits. Us being able to access their water for our mining operation for the duration, significantly de-risks our water supply. And also it significant risks our environmental approval process, because we’re not risking any access to a deep aquifer. And all the Australian issues around these issues and we’re trying to avoid that because that is a red flag to them. And if we don’t have to go there it’s great. So active things like the MOU with West Gold is a really positive step for us. And we have to put those milestones on the table aggressively. But the pilot and the DFS that follow it are really most important. Those are where the value add comes in, because we can do those two things I mentioned earlier. We can lock in, plus or minus 15% of the operating cost that we would expect. And we can lock in our best shot at the capital reduction.

Matthew Gordon: That’s what I wanted to hear. So in a year’s time looking back, you’ll have done all of those things. What else would you have done?

Vincent Algar: By the end of next year? We’ll have moved through the DFS and started what’s called a Feed Study, a front engineering design. That starts to count how many rivets and pop rivets and pipes and everything that you need to have in the project. That’s really an important part because it finalises down to plus or minus. And getting people involved on the on the engineering EPC itself.

Matthew Gordon: So 18mths plus a little bit, you’re in production?

Vincent Algar: That’s right.

Matthew Gordon: So that’s quite exciting people know where they are. Let’s see what happens in the Vanadium market between now and then. Something you mentioned last time, which might smooth out the spikiness of Vanadium as it currently is, and you hope it doesn’t remain spikey, was the Vanadium Redox Flow Batteries. As a market, we know about the steel rebar etc. But this battery market, everyone’s excited about it. But it’s a nascent industry. It’s early days. You’re all learning. Gives us an update about what you’re doing.

Vincent Algar: I’m in London but I’m on my way to France to the International Flow Battery Forum. That’s a collection of Flow Battery scientists and companies that are involved in this space. Obviously because of the development of Vanadium Flow.

Matthew Gordon: Remind people, these are large, long-life storage of energy which is different from lithium, which is a shorter life cycle.

Vincent Algar: They are large scale stationary energy storage battery, not for EV market. But they are ideal for true load shifting. And where they come into their own is when we are applying lots of renewables to a grid, we need to really learn, on a global level, how we’re going to shift our energy that we capture from our renewables and use it at other times of the day. So Flow Battery sweet spot is around 4hrs-8hrs. So that’s a difference from the high punchy energy that we get of lithium ion.

Matthew Gordon: But these things because the electrolytes, it’s kind of liquid, they can build these things larger and larger.

Vincent Algar: They’re infinitely scalable.

Matthew Gordon: Scalable and reusable which is which is very interesting.

Vincent Algar: And they use a lot of Vanadium.

Matthew Gordon: So vanadium companies, you should if you’re watching this, should also consider them as a battery company going forward. But early days. You are all learning. So what’s something at this conference in France?

Vincent Algar: So the Flow Battery forum has been running for about 9yrs, I believe.

Matthew Gordon: Why is only now that people are taking notice of this?

Vincent Algar: I think if you look back to the history of Lithium Ion you would have found that they had probably a few years of conferences. They took off. And as a group of electro-chemical engineers mainly lots of thesis and proposals.

Matthew Gordon: But almost all of it centred around the benefit rather than any because vanadium is the core of the flow story. We get together but vanity which is a body that ourselves Bushveld and Largo like a belong to, and we have an active promotion effort within Vanitech that is centred around the development of the Flow Battery market. It’s a subcommittee on energy application of vanadium. We promote this to the to the flow battery companies. Principally because they are the ones who will be buying our vanadium to put in their batteries. They’ll require vanadium for their batteries to run. They are our key future customers.

Vincent Algar: And that works a couple of different ways. Okay. So again vanadium companies. Some are going to be fully vertically integrated. Some are not. Depends on capital constraints and skill sets in-house. The reality is for small companies like you. That’s too early to be thinking about but I know you’re spending a lot of time learning about it. Where do you hope that goes? As a collective we would need to create a market. So that’s why as a group, we’ve decided to use the Vanitech marketing platform to promote the use of Vanadium Flow Batteries globally. We do it via aggressive work on Twitter, on social media. By telling people what these batteries are. How they work. Where they go. What they do. And how much vanadium they use. But with the flow battery companies, they need to be educated about us as potential producers. We need to talk to each other and say ‘well what I need to do today?’, that I can produce a product that you can use in your battery. If your battery is different from your friend’s battery. What is the difference in the recipe that I have to give you versus giving him? And do you want to come to me with a long-term agreement to buy vanadium from me. That validates my new market. It is not too early to do that. It validates my reason for incorporating any design. Incorporating in my planning. Incorporating my off-take agreements that I’m trying to get.

Matthew Gordon: Which you hope you’ll get some value tribute to?

Vincent Algar: Absolutely. And we’ve seen it. That’s worked. One of our best early moves in the space was when Cell Cube out of Austria. We signed a sales deal with them while we were their agent in Australia. We’ve probably got $4-$5M on our market cap just for doing that in a few years ago I saw an article about Bushveld the other day and there was a value attribute put on value Bushveld Energy. So that’s a very interesting concept that there is actually a value of this energy component in what we do. We as vanadium companies need to create a market here. And we need to know exactly what that market is. If it’s real. What the requirements are of the products we need to produce for specification for example. So they all need a 99.4% or 99.6% with none of this, none of that. Minor element chemistries are really important. So we have to do some work on that. We can’t just take it out of our plant and there it is. It’s something you have to plan for. But it’s really important because if you have a market like this. It’s worth one or two additional mines at a minimum projection of new production. Again it gives us a differentiation between steel and another market, which at the moment the Vanadium market, spiky as it is, is driven by the steel market. We need to diversify.

Matthew Gordon: That’s the market as a whole. You’re going to follow the crowd. See what happens. Make your mind up some future point. Could you, for me because I think I’ve been maybe describing a company, and I shouldn’t be. How are you describing your company? You’ve got a big asset potentially 5% of the world’s Vanadium market. Depending on what happens now then. How are you positioning yourselves?

Vincent Algar: Some of those words, as you know, because you’ve heard them all before. They’ve been used very often right.

Matthew Gordon: Be honest.

Vincent Algar: So I think you’ve got to look at being able to show is the asset different from other assets. So in this case I do believe it has unique characteristics. It’s not totally unique. But it is a valid asset to take down this path. The only way for me to validate that the best way is to compare it to operating peers. Look at their metrics. Can I match their metrics? And the only way I can do that is match that in my study work. And I believe I can do that. So that’s for me how I validate. We are we good enough basically. Are we good enough to be in production. And the answer to that in my view is yes.

Matthew Gordon: It seems you’ve got the scale. You haven’t got the grades. You’re okay but you’re not 2%-3% as you said earlier. You’ve got to work on the economics in other ways. You talked about innovating and privatisation et cetera. Which was I’m a buyer of. So tell me the second question I ask you. So that’s how you want to characterise your company. How do you characterise your ability to your own investors to deliver in the next six months… the next 18 months?

Vincent Algar: My skill set is being able to sit here and talk to you and get some sort of message across. Being able to work and build a team around the right people to get the job done. So my own experience being resource based and having a corporate history of some sort enables me to be here. But it’s all about building a team that is able to deliver and at any stage I do believe we’ve really got the core of that team in place. With the vanadium experience which is a stand. We mentioned the leadership of a company of the size is really needs to be focused on people doing the job they need to do, and being empowered to do so at the right level. So we think we’ve got a good structure in place. Daniel Harris has got over 40 years of experience in the vanadium space but more importantly as a corporate guy. He’s been in a lot of corporate situations. He’s able to give us the guidance as a mentor, as well as a director that we structure ourselves properly and that the right people are doing the right things at the right time. I’m advancing the cause of funding. Is Todd doing the right thing being back working on the pilot study? Absolutely. He’s advancing the project. Those are the right things to be doing. So it’s about that it is a totally team structure thing. Trying to keep ego out of the structure of a junior company is absolutely essential. And the easiest way to remove ego from the project problem is to share the load at the top. And if you do that you are less likely of having a myopic answer or an egotistical answer which the ore body will always beat you.

Matthew Gordon: Thank you very much for that update. I really enjoyed that.

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

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

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

Click here to watch the full interview.

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon:  Who from?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon:  What are you looking for?

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

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

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

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

Mark Chalmers: USD$3.7 billion in trust.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon: What are you going to do? 

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

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

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

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

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

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

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

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

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

Matthew Gordon: How much cash have you got left?

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

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

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

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

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

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

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

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

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

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

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

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

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

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Aura Energy (ASX: AEE, AIM: AURA) – Uranium Cash Flow to Support their World Class Vanadium Exploration

See our interview with Peter Reeve, Executive Chairman of Uranium & Vanadium Explorer, Aura Energy (ASX: AEE, AIM: AURA). Peter worked with Robert Friedland at Ivanhoe so he explains how the big company experience translates to the smaller junior side. He explains the thinking behind their Uranium and Vanadium strategy and how they intend to deliver growth for shareholders.

Interview highlights: 

  • Overview of the Company
  • Mentality and Company Strategy: Choosing Two Very Different Assets
  • Junior vs Big Company Mentality & Experience of the Team
  • Company Financials, Raising Money & Director Remuneration
  • Lack of Marketing: Reasons and Solutions going forward
  • Three Projects and strategy for them
  • Wishful thinking for the Vanadium Story?
  • Views on the Uranium and Vanadium Markets

Click here to watch the interview.

Matthew Gordon: Why don’t we kick off with a summary of the business and then we’ll get stuck into some questions.

Peter Reeve: Aura’s got three major parts to its business.  The first one is the Tiris Uranium project in Mauritania where we’ve just released the Feasibility Study.  We’ve got a Vanadium project called Haggan up in Sweden and we have some fantastic Gold and Base Metal and Battery Metal tenements for exploration down in Mauritania.  Quite a lot of work’s been done on those and that’s an interesting situation, a third off the rank, if you like, before two development projects.  We are focusing on getting cash flow out of Tiris, and with that cash flow help to build the other projects, but we’re also considering each one of these businesses to be essentially separate entities, so we’re trying to fund them separately.  So we do talk about an IPO separately for Haggan and we talk about some form of separate funding for the Gold, base and battery metal exploration. 

Matthew Gordon: What was the big idea when you put this together?  If I look at your track record, there’s some big names in there.  Big company experience, but this is a start-up.  So what are you looking to do?

Peter Reeve:  If I talk to the management team for a start, the majority of the management team and a couple of the Directors came from BHP Billiton.  In fact one of my Directors was my boss back in BHP Billiton when we were 30.   So we’re essentially from big companies and what big companies do really, really well is they do a lot of good, boring, technical stuff but they fail to capitalise on it all the time and commercialise it because big companies don’t have the financial imperative that little companies have. I left BHP Billiton and went out… I did a lot of things.  I became a fund manager, I went to a lot of other mining companies, did some big IPOs and then one of the Directors asked me to come back in.  The reason why I came back in after having run some large companies was because I believed and I still believe that these assets can deliver a very, very large company over time when we get those projects in cash flow.  So that’s probably the core thinking.  Very, very good technical people, very experienced technical people, but hand in hand probably as much commercial impetus as we needed to get these things driving. So what we want to do with the projects is we don’t want to trade shares on the stock market.  We don’t want to flip projects.  We want to cut the ribbon on production for our projects, but obviously it’s a Director’s decision.  If somebody else has a lot of money for projects, of course we’ll sell them, but what we really want to do, we believe the best way to get best value for shareholders, is by cash flow receipts.   You can do it by takeover, you can do it via other methods, but we believe cash flow receipts will ultimately give you the highest valuations.  So we want to get these things into production and make them very valuable for the shareholders.

Matthew Gordon:  That’s about what you want to do.  I’m more interested in the strategy.  You’ve selected Uranium.  You’ve selected Vanadium and Battery Metals.  They’re quite volatile, certainly in the case of Vanadium.  Uranium’s in a tricky position at the moment, but obviously people expecting that story to bear fruit, and Battery Metals, flavour of the month.   Why did you pick on those very different commodities in Mauritania and Sweden?  Two very different types of environments.  Was it a case of they were there or was it case of actually we specifically identified these commodities or these jurisdictions?

Peter Reeve:  Going back to the first comment I made about the fact that the company started and was based on highly technical people well before I joined, we had very, very intrepid geos.  They see rocks and mineralisation.  So it was 2007 / 2008 and they thought Uranium was a very good idea.  So they went and discovered Uranium in Mauritania.  A survey had been sitting there without any work, a radiometric survey without any overview of anybody external for five or six years.  Managed the expedition, went out into the desert and found the first Uranium out there. 

Similarly one of our Directors, had done some work in the Scandinavian countries as a younger geo, and knew that the alum shale ran into Sweden and eventually a long story short, that became a piece of ground they picked and cut the first Resource for Uranium and Vanadium. So the very nice thing again about our company, both those projects were virgin discoveries to us.  They haven’t cost us a lot of money.  We found them out of real geology, so we selected it.

The Swedish government about 18 months ago banned the Uranium mining, as you’re probably aware.   We had done a lot of study on Vanadium in the past.  The Vanadium price had been through low and so we put that in the background, but there are a lot of other metals in it.  When Uranium looked like it was going to be problematic in Sweden, we recut the Resource immediately on the Vanadium side.  Of course, the Vanadium price for a period of time looked sensational and frankly for good projects, it’s still okay now.  And so we recast that project, which we discovered in 2009 / 10.  We recast that as a Vanadium project with some by-product credits.

And then just to flick onto the Gold side of it. Slightly more complicated.  We had a parallel sister company called ‘Drake Resources.’  Drake Resources, under our principle geologist, had put together this Gold package in Mauritania.  Some years ago they raised $10M.  They spent $3M of that on the project and Neil Clifford, who’s my principle geo, conceived that project when he was principle geo for Drake and when Drake decided to do other things corporately, we quickly picked that project up.

So again, it goes back.  Every one of our projects is a technical genesis of our people over a long period of time and we rank our technical people very highly.  Neil Clifford, regardless, is probably one of the best geos in Australia and nobody knows his name.  He’s fantastic.  He found 20Moz of Gold in Australia.  Essentially found the Sun Rise deposit. Our technical people, have driven what we’ve done.

Matthew Gordon:  But to finish off with the strategy.  These projects have been identified and pegged by your technical team.  Was that all done before you arrived?

Peter Reeve:  Discoveries were done before I arrived here. The shift to Vanadium was done under my direction.  I sort of drove a fair bit of that.  The pickup of the Gold and Base Metals and Battery Metals was done under my time as well.

Matthew Gordon:  So on the Uranium project, would you have chosen to do that if you were starting today? 

Peter Reeve:  I’m still a believer in the Uranium price. Absolutely, definitely.  I do believe its something to do, but what I recognised really quickly was the Uranium price. You couldn’t guarantee anybody that the Uranium price was going to go up in the next 12 months, two years or three years, and that’s been right. So we quickly started to diversify.  So what you’re seeing, if you’re trying to get to where we are on strategy, is what we did decide to do, is don’t put our eggs in one basket.  Let’s broaden this out.  We started with pure Uranium.  We’ve not got Uranium, Vanadium, and we’ve got Gold, base and battery metal exploration.  We’ve broadened it right out.

Matthew Gordon:  Juniors have got lots of challenges, but you’re making sure that you’re mitigating that country risk. You talked about the team being technical.  I hear that loud and clear, a very technical team, a very good team, but what about all the other experience or skill sets required?  You guys have come from big companies.  Is there anyone in there who’s been used to running junior companies because it‘s got a whole bunch of different needs?

Peter Reeve:  Well, quite a few of us have been involved in junior companies.  Let’s just say we all came out of large companies, but five or six junior companies are mixed amongst all our experience.  Since 2006/ 2007 Bob Beeson, one of our Directors, junior mining companies.  Neil Clifford, our geologist has done a lot of consulting and worked in junior mining companies.  Will Goodall, our principle metallurgist.  I’ve probably worked now in something of the order of say, five or six junior mining companies.  I’ve been a Director of most of those, maybe investments from Ivanhoe into junior mining companies.  So we’ve got a lot of junior mining experience as well.  Nothing prepares you for a bad time in a junior mining company.  All the experience in the world you tend to run those things because the biggest bucking bull you’ll see in our rodeo is a cakewalk compared to a junior mining company in the sector.

Matthew Gordon:  So let’s talk about some of those things.  Let’s talk about finance first of all.  Obviously with the Ivanhoe you were associated with Robert Friedland.  He could open a lot of doors in terms of the finance, but how are you finding it now going from big boy stuff down to juniors and are some of those doors shut or just polite conversations? 

Peter Reeve:  Robert will go into his grave as one of the world’s best mining CEOs that’s probably set foot on the earth.  And I say that simply by the score card for the number of great operating projects that he will have to his name out there, still putting dirt through the mill.  Nobody at the top of Rio or BHP has done what he has done. 

Going with that, is Robert’s ability.  He’s got a magical offer bottle in his coat jacket and he pulls it out and he passes this little bottle and the investors just hand over money.  It’s fantastic. He’s got some magic about him where he raises money and he does it very, very well, and I haven’t got a clue how he does it.  As much as I sat next to him for five or six years, haven’t got a clue.

Matthew Gordon: So what are you going to do now?  How are you going to raise money?  How do you go about it?

Peter Reeve:  We’ve got to do it more incrementally.  We had a strategy to get the Gold and Base Metals moving through the DFS period for Tiris, but we couldn’t get those tenements granted quick enough for that strategy to come off.  We thought that would be a good strategy to sort of go parallel with that boring sort of development phase because we know investors and share prices go to sleep when you’re trying to develop a project.  But now we’re in a situation where with Tiris in particular, the strategy we are pursuing is export credit agency finance.  Not completely well known but I think perfect for what a junior mining development company does and that’s obviously where a sovereign nation lends the junior money and the quid pro for that is that buy the equipment for its project from that country.

Matthew Gordon:  So you’ve had to look at alternative financing, alternative structures to be able to get this going.  How are you funded now?  How much cash have you got today? 

Peter Reeve:  According to yesterday we’ve got $830,000 in the bank.  We are essentially equity funding all our projects via a corporate.  That’s how we’re doing it. We are looking at various deals.  The IPO for Haggan is another way to relieve Aura corporate from having to fund all their programmes.  If I could find – and we are looking for a royalty interest in the Gold and base metal part of the business in order to keep the funding off there.  So as I said initially, we’re trying to look at Aura at the moment as three distinct businesses and each need their distinct form of funding.

Matthew Gordon:  So is Aura potentially an incubator or a hold co for these assets, which may be spun out into their own vehicles?

Peter Reeve:  It’s not quite as direct as that as a strategy because if I was doing that I would have started the conversation and say, ”Hey, we’re a company incubator and we’re going to spin those things out.”  But you’re right.  It’s a correct pick up, that’s essentially what we’re trying to do.  We don’t want to keep on making shareholders who are here for our Uranium asset fund Vanadium when it might not be their flavour of the month.  We don’t necessarily think everybody’s interested in more primary exploration in Gold base metals and battery metals.  So if we can fund it separately we’ve got less criticism from shareholders.

Matthew Gordon:  So corporate, ie, your shareholders who have invested into Aura Energy are paying for this.  How do you Directors remunerate yourselves?  Are you on big salaries and big warrants, big options? 

Peter Reeve:  The Directors are just on moderate and normal Director’s salaries.  I’m on a salary that I’ve taken for quite a lot of time between cash and shares.  I’ve got performance rights.  It’s just a mix of the norm.

Matthew Gordon:  So your $800,000 is going to last you till when and what’s that being spent on?  Is that mostly G&A?

Peter Reeve:  Oh, no, it’s G&A.  We did a $2million financing, only about two and a half, three months ago, and we were very focused on putting all that money into getting the Tiris BFS finished.

Matthew Gordon:  And that’s been the bulk of the money that you’ve spent since then till now, is it?

Peter Reeve:  Yes, that’s right.  And also the work we’re doing on Haggan.  So we drilled for about three or four months in Haggan.  We’ve now been cutting the core, doing the assays because we’re trying to get a measure, an indicator Resource up for Haggan, a Resource estimate done, a mining plan done so we can release the scoping study very shortly.  So really all are corporate and that money we raised is really focused on getting the DFS done and that’s now ticked off.

Matthew Gordon:  So when do you need to go and raise more capital? 

Peter Reeve: I’m not going to answer that question in an interview because that’s a selective briefing so I’ve got to be very careful with stuff like that.  So we wouldn’t answer when we’re going to run out the money,  We wouldn’t answer when we’re going to raise money again.  We put it out in the quarterly yesterday.  We put out forecasts, the amounts of cash we’re going to spend over a period of time.  So people can make their own decisions on that. 

What we’re trying to do is make sure that every single bit of money we spend is ticking off some form of technical box in one of the projects. So really the money we raised recently was about the DFS and Haggan to that scoping study stage.  And out of that and no money on the Gold, out of that everything’s really got to flow.  Everything’s got to fund itself.  I’m not going to take any more money out of Aura Corporate to fund Haggan.  Not going to take any money out of Aura to fund the Gold and base battery metals.  We’ve got to find alternative sources of funds for that.

Matthew Gordon: You’ll find alternative funds for those two, but Tiris, you think with this export agency finance should also fund itself?  Everything’s fully funded.

Peter Reeve:  The export credit agency finance is a combined package for both Haggan and Tiris, but Haggan’s there’s a time lag so yes, it’s more focused on Tiris at the front end.

Matthew Gordon:  And then just to finish off on the team’s experience.  Uranium’s very different from Gold, Battery Metals, Vanadium.  What’s the relevant experience in the team in those commodities?

Peter Reeve:  Neil was a part of the discovery team for Tiris Uranium.  He‘s a geologist.  He found a fantastic Gold deposit as well.  So good geo’s can do both.  Tiris wasn’t particularly… It was sitting there essentially.  It was a very good survey. I’ve worked in Uranium in Australia 20 years ago. Will is a very, very good metallurgist across many disciplines.  He works for First Quantum.  He works for BHP, so yeah, we’ve got enough experience in the different areas, but what we do and we do it really well, we’ve got a great technical network.  We basically employ 60 year old people wherever we can because they’ve got the best experience and they come on per diom’s and they work for us for a period of time.  So if we need a Gold expert, a Vanadium expert, we go and find it.

Matthew Gordon:  But what about your commitment?  Are you sitting on any other Boards?  How do you spend your time?  How much time is spent on Aura?

Peter Reeve:  I’m full time, but I’m one other Board which I was on before I left. 

Matthew Gordon:  The other thing that I noticed from one of your previous interviews, you said, I think it was in November last year – “We haven’t spent enough on marketing steps, but we’re going to make positive changes.”  Think you’ve done that?

Peter Reeve:  Have we done enough on marketing?

Matthew Gordon:  You said in November that you were going to make positive step changes.

Peter Reeve:  Did I really? 

Matthew Gordon:    On film.

Peter Reeve:  I’ve been around long enough to know that when the Uranium price is sitting still at $24, $25 a pound, it’s pretty hard to go open market Uranium.  I would have said that and I do say that on the basis of commodities doing some good work.  Really at the moment the commodities aren’t doing good work.  Gold’s doing some good work.  Uranium’s not.  Vanadium’s not.  But we still believe in our projects. 

I’m a little bit of the mind where we’ve sort of tucked our baton under our arm for the last 200m, and in tucking our arm under, what I’m really saying is we’ve got all the technical steps done.  We’ve come across the finish line and now is the time to really get out and talk very broadly about getting the Tiris project understood out in the market.  But that said, again, I’ve done thousands of investor meetings in my time, you can imagine, with Robert and people like that, and I’m not going to get a super warm, “Oh yeah, come on, let’s have a talk about Uranium, it’s a fantastic commodity,” because at the moment it’s not.  But we also know the way Uranium moves, that if a few utilities decide to walk through the door at the wrong time, ie together at the same time and sign big long-term contracts, the Uranium price will pop and things will change within a week.

So my favourite saying in business is “Success is where preparation meets opportunity” and that’s what we’ve been trying to do.  We wanted to get prepared and we are so happy and relieved and getting these DFS materials completed and we’re so happy that it’s in such a great condition and it’s got such good stats, and it sits there as something we can now, if you like, park technically and now really push our mind towards the financing and getting out and marketing that completed document.  Being modestly hard to go out and market Tiris without a completed DFS.  Now we really can, nothing holds us back.

Matthew Gordon:  So that’s a long way of saying you’ve consciously decided not to do any marketing because you don’t think the market’s right.  Money’s tight, but now you will up your game in that department.  Is that what you’re saying?

Peter Reeve:  In November when I made that statement, we were looking at… if you go back then, you’ll probably see our presentation we were going to release the DFS probably in about February or March.  It was actually a February date, okay.  What happened was we came across, as you are meant to do in technical studies, we came across a clay issue within the ore and that affected the processing and that delayed the scoping study, much to the chagrin of our shareholders, but that delayed the study by another three or four months.  But it’s the same story.  I wanted to get the study done in February, then get out and market.  Now we’ve belied that by three or four months.

Matthew Gordon: In the interview I watched you were talking about a July release.  So I think it was slightly prior to that.  Let’s just finish off on that thought, which is around the importance of marketing, the importance of talking to the market because especially for juniors who need that liquidity, that increased volume of trading, that comes from retail.  I know with the Aussie market it’s a big retail market and I know you’re obviously listed on AIM as well.  Those are two very large retail markets.  So is your idea to do more promotion now?  Do you believe in it or are you just a technical team?

Peter Reeve:  I was a metallurgist originally, but I’m a very rusty metallurgist now, I like to say.  I did a dozen years out of my 35 in the field and I’ve been really pushing corporate finance since then.  I’ve done a huge amount of marketing.  I think I know how to do it. 

The issue, I suppose, around marketing for us has just been getting a really good sell of a story and I think we’re getting there with both of them.  We’ve made a change to our London broker as well.  We’ve taken on SP Angel, who’s very Resource focused and they are at the moment our joint broker and there’ll be another change coming up to put them more in the box seat for helping us.  So that’s one big change.

Matthew Gordon:  Have they produced any broker reports for you? 

Peter Reeve:  They are in the process of getting a broker report together because we only signed them up about eight or nine weeks ago.  Seven or eight weeks ago, whatever it was, quite recently.  It’s one of our announcements.  But they’ve put some quite good value reports out on us, a full research piece is in the pipeline. 

Matthew Gordon:  Again, just in summary. So you value promotion, the question was timing?

Peter Reeve:  We value promotion very much.  I learned it all the way back when I was a fund manager.  I said that western mining, I’d describe – which under Hugh Morgan was a company that essentially was a little shop front window with the blinds pulled down and we could never get the information out of them, and so that’s what made you really have to have your windows cleaned, your blinds up and your door open.  So now I’m a big believer in promotion.  I would never have been a part of Robert’s group had I not believed in promotion.  I really believe it.

Your only customers for Resource companies, I don’t care what size you are and what commodity you are, your only customers in the world are your shareholders.  We’re all in commodities. Commodities walk out the door.  The only customers we have are our shareholders.

Matthew Gordon:  Glad you said it.  Not many people recognise that. 

Peter Reeve:  It’s number one.  I mean, I’m not saying I always do it as best as I could. I’m sure I can do things better at different times, but I’m a serious believer in it.

Matthew Gordon:  The last presentation on your website is from March, it’s now August.  We’re getting an update on that soon, getting a broker report soon and you’re going to get into the market more?

Peter Reeve:  Yes, absolutely. 

Matthew Gordon:  Shall we talk about your projects?  Let’s start with Tiris.  Again, like to understand the thinking.  Everyone’s got different business models.  Yours is get into production first and then we’ll worry about building out the Resource.  Is that it?

Peter Reeve:  That’s a big part of it, absolutely.

Matthew Gordon:  Tell me more.

Peter Reeve:  We said to our shareholders on Tiris quite some ago – we’ve got a 52Mlbs Inferred Resource there.  We’ve just put basically 13Mlbs into mineable Reserve plus a little bit of inventory, but we’ve got a much bigger conversion to come from that.  But I said to them, “I haven’t got any interest in spending a lot of your precious money on pushing that Resource out to be 30Mlbs or 40Mlbs of Reserve when I can only spend 1Mlbs of it a year.” 

You think of Tiris as 52Mlbs Inferred, 13Mlbs in the reserve mining inventory for the DFS.  We have got a 1Mlbs per annum project call at the moment, 800lbs and something on average, but call it a one million pound per annum project in a production sense.  And we’ve already got some pretty interesting plans to look at expanding that to 3Mlbs per annum over time when we get more of that reserve conversion done.

Matthew Gordon:  So let’s understand where that sits in your strategy.  That’s not a big project.  It’s not particularly high-grade.  It’s Mauritania, with all that kind of risk, but it potentially gives you cash flow to focus on a project that you want to focus on, which is slightly further north, up in Sweden.  Is that right? 

Peter Reeve:  When it comes down to it, just on Tiris, we came out the other day and said that in Australian dollar terms we could make 27 million dollars per annum of after-tax cash flow.  Put that on a 10 to 20 times multiple, which are part of the cycle you’re in, and you can start seeing what a project with a good Uranium price and working could do.  So it will go some way to funding what you do on Haggan absolutely, but Haggan will then stand on its own for a proportion of…

Matthew Gordon:  Eventually it will stand on its own, but right now it’s not at that point.  Again, I’d love to understand junior mining management mentality.  That’s not a bad strategy.  Not the first time we’ve seen it.  It’s worked elsewhere.  Nothing wrong with it, not criticising it.  I just want to understand if that’s your thinking.

Peter Reeve:  That has been our thinking all the way all the way along.  However, at the moment we’re varying that a little bit by bringing in this concept of doing the IPO to fund Haggan in its own right.

One of the other issues with Haggan is that when the Swedish sun rises, we go to sleep.  That’s a pretty good analogy for what happens to projects like that.  I think unless you have a really well paid, engaged and active management team in Sweden, it’s difficult to make projects come alive.   A part of the Haggan IPO strategy is to get enough cash to set up a permanent management team who speak Swedish, who like pickled herrings, who do all the right stuff in Sweden to make projects get ahead and that’s really a part of where we are now.  We want the Swedish project to live in Swedish daylight hours, not try and make it live in Australian daylight hours.

Matthew Gordon:  We talk to management teams who think they can manage projects from the other side of the world.  It’s tougher.  It’s not impossible, it’s just a lot tougher and creates problems.

Peter Reeve:  Really hard.

Matthew Gordon:  So Tiris is in the Uranium space.  Uranium spot price is doing what it’s doing.  The utilities aren’t fully engaged yet.  I think you’ve got to buy into the macro story to get behind Uranium.  You talked about roughly 1Mlbs a year over a 15 year life of mine (LOM), but that depends on the price you can get in the market.  There’s a Resource and then there’s mineable ore and depending on the price that will determine the scale of this opportunity.  So what is your DFS telling you?

Peter Reeve:  In terms of the range of size of the project?

Matthew Gordon: Yes

Peter Reeve:  The conversion of Resource to reserve is very high and the reason is our deposit is, call it an evacuative surface deposit.  Average mine depth is about five metres.  So we aren’t looking at a pit wall which looks like a cone with the gem of a Gold deposit down the bottom and all that sort of thing.   We are in a really good situation where every piece of our ore is accessible, and I believe it’s the sort of operation that, you know, it’s one thing for us to devise us what we do in the DFS – and that’s a step you must go through for all sorts of reasons, the market, events, and Directors and everybody – but when we unleash our operating team on that project, they’re going to do it exactly the way they see the ore in the ground. 

My strong belief, and the geo’s strong belief, is that we will expand each of the Resources in the area now.  I mean, to get a reserve of course, they’ve got them off as nice square blocks because mine engineers like working in nice square blocks.  They don’t like shapes.  And so once we can start showing that there is shape to it and it does go a little deeper, it does go a little further, I think we’ll expand the Resource more than contract it.  A lot of it will convert to reserve or mineable, whatever we want to call it.  Mineable Resource.  And we still haven’t really started to do inspiration outside of the core discovery areas, and I think when we do that …

You know how it is.  You’ve got a plant built.  You’ve got a team there.  You ‘ve got everything set up. The marginal cost of then going out to get that extra bit of ore, which might just be a pot of 5Mlbs, three or four kilometres out, is a lot lower. 

We understand what happens to projects once you get them there and we’re pretty excited about what that will look like, but yeah, I would be hoping one day we’re going to mine 75Mlbs of this thing at least.

Matthew Gordon:  It’s low tech, low CapEx, low OpEx. 

Peter Reeve:  It’s not just low CapEx, by the way.  It’s sensationally low cap ex.  You want to get the odds of marketing.  You go and look at any other junior mining company or any other Uranium hopeful at the moment, and their capitals are mostly measured in the hundreds of millions of dollars.   So to get something sub a hundred with the C1 cash cost of 25, and an all in sustaining cost under 30, there’s not many of us around.  That’s why I make this nice marketing line.  I say that this is currently one of the most compelling Uranium development projects in the world as we speak.  As small as it is, it’s one of the most compelling projects because of that capital and that op ex.

Matthew Gordon:  Let’s talk about Haggan.  You’ve previously said this is the most valuable asset in your portfolio currently.  Tell us why you say that.  You’ve done some drilling recently.  How are you moving that forward?

Peter Reeve:  There’s a lot of metal in that system, just for one.  As I said, the Vanadium concentration has been equivalent almost to the Uranium for a long period of time, probably even higher than the Uranium.  We had to make this change from Uranium because the Swedish government decided that nuclear in 2040’s going to fall out of their energy balance, so they don’t need Uranium.  There was a bit of political stuff going on as you can imagine as well.

But we were fortunate that we had done enough work, we understood enough.  We’ve done a lot of good drilling, so within two or three weeks of that all happening, we recapped the Resource into Vanadium and we had it ready to go.  So now we’ve got cut off grads for our Vanadium deposit and we found what we call a high-grade zone, but it would be better to call it a higher-grade zone.  And that’s a higher-grade zone of about 90Mt of 0.42 per cent of V205. 

But again we’re fortunate.  Alum shale largely comes to surface and so that Resource will be encapsulated in a pit that starts at about 20m from surface and finishes by about 90m.  So again, a very manageable operation. 

Before we were talking about a heap leach, a Uranium heap leach that was going to be 25Mt to 30Mt per annum.  We’re now talking about a project which is Aura Clubs, and about 2.7Mt per annum.  So quite a modest scale project.   We did the capital and operating estimates last year, so again we spent our $80,000 to get one of the independent engineering firms to do the capital and operating estimates for Haggan.  ASX will not let us release that until we have the measured and indicated Resource.  We cannot release that unfortunately with an inferred Resource.  So again, it’s where preparation leads to opportunity.

We’ve got a lot of internal numbers and the project looks very, very good.  We are quite aligned to the idea of the whole battery push, but we’ll sell our Vanadium to anybody who wants it.  But I think the battery push in Vanadium is pretty interesting and when we start to look at the scale of this project, without giving too much away because I’m not allowed to, we’ve contemplated at the moment a 7,500Mt per annum V205 project, that’s about five per cent of the world’s Vanadium.  We sized it because five per cent sounded like a pretty non-disruptive sort of thing to do, but we could double the size of that if we had the right market.  We can make our cash costs go through the floor, and there’s all sorts of interesting technical things that I sort of kind to allude to just at the moment.

There’s a few proprietary things that are pretty interesting about some by-products we’re playing with there which really help that, and make it a really commercially robust project as well.  But what I’m saying is accelerate all our Vanadium, where it’s fallen to, it’s clearly not as good as $33 Vanadium.  But we can make money out of $7-$8 Vanadium and we can make a lot of money out of $7-$8 Vanadium if we expand our project.

And therefore all that then goes back to what are you doing as far as your linkages?  Who are you talking to?  Who do you want to get into bed with?  And we’ve made no secret of the point that we are talking to battery manufacturers, we’re talking to people who can be a part of us in whatever way that is. 

Matthew Gordon:  But how real is that?  All Vanadium producers are talking the battery story.  90% of the market is rebar. That’s the reality and it’s early days in terms of the VRFB.  And again, we have this conversation a lot with Vanadium producers and talk the battery story because it sounds great to shareholders, but you’ve got to have the prerequisite skills in house or you’ve got to have the right partners on board, strategic partners with the right balance sheet to be able to do that.  You’re early stages, so is this wishful thinking or is this actually a reality of what you can do because you think the scale of this will allow you to do that?

Peter Reeve:  Well, so far I’ve had three sort of pretty serious full day conversations in three different locations in the world on this particular battery initiative that we’re talking about, and we’re taking it pretty seriously. 

The Vanadium battery market, and people know that they have a cap on the Vanadium price before they say it doesn’t really work.  I think there’s some really smart things you can do in terms of partnerships to ensure that goes on. 

Matthew Gordon:  You may be treating this seriously, but what does that actually mean?   Are you at latter stage discussions with people, or is it just a process you’re going through?

Peter Reeve:  There is a particular party who we are talking to in some detail.  I would still put it at the… it’s gone beyond the concept stage.  We’re talking how things could work.  We haven’t stayed in each other’s laps yet,  we haven’t gone… You know how these things move along progressively, but it’s quite serious.  We like the story.  I’d like to make it happen. 

There’s a chart that I have in my presentation for March which you might have read.  It’s a battery storage …  At the moment I think that chart says that there’s something in the order of 15Gw to 20Gw of storage capacity.  And in 11 years, they’re saying  now 2030, and they’re saying that might be 300Gw of storage.  Now if that chart isn’t even half wrong, if it’s two thirds wrong, if that was the beer market or the underwear market, you’d want to be in that sector.  So I would just say that if that’s storage graph is even a third right, then it’s not a bad market to be in.  

So I’m a big believer, whether it’s Vanadium Redox Flow Batteries (VRFB) or not, the flow batteries are the ones that do store power for a long period of time, and that’s what interests me.  So I’m a bit of a believer in it.

Matthew Gordon:  That’s the macro.  That’s got nothing to do with you right now.  You’re at the point where you’ve got a scoping study coming out later this month, potentially end of August. 

Peter Reeve:  Yes

Matthew Gordon:  So you’re going to have an idea of what you’ve got then and you’ve got to then work out how you move that forward.  So what are your hopes for between now and the end of year in terms of what you can do, in terms of understanding what you’ve got and then what are you going to do with it?

Peter Reeve:  To push you back a little back there, we found this project ten or eleven years ago.  We spent $20 million on it.  Yes, a lot of it went onto Uranium.  We spent a lot also on Vanadium.  So we really understand this project.   We do know Sweden pretty well, very well.  We know the region, we know the local people, so this is more than just a concept project.  This is a pretty serious thing. So I do believe the next step is do something where we start to get a tie up with some of these people.

Like I say, I would be equally happy to tie up with a steel producer who needs the Vanadium.   I’ve got some people who are interested in that.  They are less interested now that the Vanadium price has gone down, clearly because they don’t feel they need it.  But no, I want to move this to a corporate stage.  I do want to get the IPO done.  I do want to do something with the battery tie up if that’s possible, and I want to do that within a reasonably short period of time.

Matthew Gordon:  So just on the IPO you’re looking to IPO on ASX or AIM?

Peter Reeve:  Because of the waking up in Swedish daylight hours, it’s got to be European time.

Matthew Gordon:  So those are the two projects.  Can you quickly go through the Mauritian Gold, battery metals project?

Peter Reeve:  What we’ve got there is greenstone belts.  All of Kalgoorlie and you’ll notice similar stuff in Canada, is greenstone belt. This is really, really an unusual set of greenstone belts because the only discovery on this greenstone belt is Kinross’ Tazius mine at 21Moz deposit.  Greenstone belts are renowned for not having a single discovery and they are renowned for once you have one discovery and you find another, there’s a raft of different sizes.

Neil, our Geo, talks about something called Zipf’s Law.  Zipf’s Law is that you have a curve from a 20Moz deposit all the way down to a one million ounce and everything in between.  So when you do Zipf’s Law on the Kalgoorlie field, you see 30 or 40 different deposits of varying size.  We’ve got one on this field and it’s Tazius and it’s 20Moz.  

We got our tenements granted and we then did a deal with another party, so we have now tied up about half of that greenstone belt.  All but for one tenement we’ve tied up half the greenstone belt and Kinross has the other half.  We’ve hit mineralisation.  As I said, we bought this for $100,000 in a royalty, but previously Drake had spent $3 million on the greenstone belt, on these tenements.  So we’re not going in there cold and the guy who conceived it and did the work is now my principle geo.

We found mineralisation – what you’ve got to get is you’ve got to get systems size and you’ve got to get grade.  We’ve hit system size with a little bit of grade and we’ve hit grade with not much system size.  We’ve just got to get the two together, but we’re talking about one drill hole.  For the money we’ve spent we’ve drilled one drill hole for every 20sq.m so far.  We’ve got a lot more work to do. 

One of the more exciting parts of it – and the reason why I put on the battery metals, is we did a fence of drilling, 1.6km long.  Again, if you go through that presentation, it’s the bright pink slide.  It was equal holes.  They were about 6m-7m deep.  Pretty well every one of them hit near per cent nickel. So we assayed one in ten and we found Cobalt and the Cobalt was as high as 0.58%. So pretty exciting to get back and look at. 

Matthew Gordon:  So again, early stages but the potential there, greenstone belts in West Africa.  So let’s go a little bit more macro.  What’s your view on the Uranium market? When’s it going to turn?  Is it your area of expertise?  What do you know?

Peter Reeve:  I don’t know anything about the Uranium market at all with respect to how a Uranium market expert knows about the Uranium market, but I make it my job to talk to… We’ve got an off-take agreement for Uranium from a group in London and I talk to them quite often and I talk to other players in London on that.

Matthew Gordon:  That’s Yellowcake presumably?

Peter Reeve:  No, no, that’s a ETF.

Matthew Gordon:  So you’re relying on them but you kind of don’t care.  If the price is right, you’re going to get into production and you’ll start producing.

Peter Reeve:  The big thing at the moment with the market for me, it’s really simple.  I seriously don’t make a habit of trying to count how many reactors are getting built and how many pounds goes into each reactor.  I let other people with a digital mind do that sort of stuff.  What I am focusing on is this big concept  of what happened in 2005.  If you look at, there’s again a chart that I use. 2005 there was about 50 – or maybe it was 2004, there was 50Mlbs of long term contracting in place and with Finn by the next year they had put 250Mlbs of contracting in place.  And that lasted for seven or eight years.  It wasn’t a fluke. 

The current coverage in 2021 and 2022 for long term contracts is four and three per cent.  They will get nervous.  I don’t know when it’s going to be, but they will get nervous.  It doesn’t matter the cost they pay for this stuff, as you well know, but they definitely cant run out of it.  So at some stage they will move. Look, the February results of Cameco, I always read the Cameco stuff.  Their marketing stuff is brilliant.  They’re fantastic at it.  They’ve got teams and teams of people who are much smarter than me focused on it all day long – read their stuff.  They also know these comments about the utilities looking like they’re coming back to the table to start with the balance of doing long term contracting. 

So what happened in 2004, 2005 that leaned to that big explosion in price was seven or eight of the utilities all decided to squeeze through the door at once and of course… I always remember I asked one of the guys in London.  I said, “What happened with that?  What was the max price paid in that clique?” He thought it was about $138 a pound.  And I said, “Do you know the guy who did it?”  And he said, “Yeah, I do. I know him.”  I said, “What sort of guy is he?”  And he said, “Well, he’s a nuclear physicist.  He’s sitting there and he basically had a manila folder and said he needed this much Uranium, and on the day when his boss had walked down the corridor and said “How’s that contracting going?” and he said, “I haven’t got much.”  Well, you’ve got to fix that.  First to bid, first to bid, and kept on going.  So a nuclear physicist running a plant is also looking at nuclear… So these are the sort of things that might happen.  I’m a believer that it’s the utilities charging through the door at once which will give us the…

Matthew Gordon:  What is your outlook on the Vanadium market?

Peter Reeve:  Outlook on the Vanadium market is probably confused, but I would say that getting up to $33 there was clearly a lot of speculation, and I think falling back down to $7, I’d say there’s a lot of play.  Some of the people who need Vanadium, they have confided to me that I don’t think they think it’s going to stay down here, but it’s not going to race back up to $33 either.  We always thought somewhere in the $10 to $15 range was more likely for it to sit and that’s what I think it will go back to at some stage.  But I don’t expect to see, $20 or $25.

Matthew Gordon:  Can you summarise your thoughts on where Aura Energy is going and why you think new investors should be looking at Aura Energy. From what you’ve told me today there’s a lot of things that you’re going to be doing. 

Peter Reeve:  Primarily start with what we’ve got in Tiris.  We’re putting together a very interesting chart just comparing the CapEx on our project, it’s C1 cash cost and the All In Sustaining cash Cost (ASIC) against our market cap.  There is no doubt about it.  We are the most undervalued of the junior mining companies in this Uranium space with a development project, with the low capital and with the low OpEx. 

For me, there’s three things.  The low CapEx means the project’s doable and the low OpEx means you’ll make cash flow and the low market cap means we’ve got room for the share price to go up.

So that’s a good enough reason for any shareholder.  If they can believe that we will deliver what we say we are, that’s a good enough reason for the shareholders to get in.  Then add on to it that if we do an IPO and we retain 70%-80% of that, we’ll get an independent counter attributed into our share price.  That’s number two.

And then number three, when we discover a 3Moz deposit on the greenstone belt in Mauritania, everybody will want to own our shares.  So that’s going to happen as well.

Matthew Gordon: I appreciate your time.  That was a great first introduction to your company.  I know the guys on Twitter are going to be really happy about the fact that we’ve spoken.  Please stay in touch.  Keep us up to date with how things are moving, perhaps later in Q4.  Thank you very much.

Peter Reeve:  Thanks for the time.

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Anfield Energy (TSX-V: AEC) – A Deep Dive Into This Acquisitive Uranium Explorer’s Strategy

How do junior Uranium explorers survive in this environment and what do they spend their money on? Corey Dias, CEO of Anfield Energy (TSX-V: AEC) believes it is closer to production than any of the currently non-producing uranium companies. They are ready to take advantage for when the market turns. The majority of its Uranium assets are in the USA, both ISR and conventional hard rock Uranium. Their Initial focus is on the Wyoming ISR project and the nearest-term asset which is the Charlie project. Long- term focus is in Utah and Colorado with their conventional Uranium assets.

The topics covered:

  • Detailed strategy discussion.
  • Breakdown of assets and focus.
  • How is Anfield Energy spending its investors money.
  • Section 232 desires and outcomes & expectation of the Working Committee.
  • Price discovery.

Click here to watch the interview.

Matthew Gordon: We usually kick off with a 1-minute summary, so if you don’t mind, give us a 1-minute summary of Anfield Energy.

Corey Dias: Anfield is a company with the majority of its Uranium assets in the United States. We have both ISR assets and conventional hard rock assets. Our near-term focus is on the ISR space and those are the assets that we hold in Wyoming. We recently closed a transaction whereby we acquired what’s called the Charlie property. Charlie property is a near-term production opportunity for us. We had the opportunity to pair that with Uranium One’s existing facility, processing facility, in Wyoming through a resin processing agreement we signed a couple of years ago. So, our near-term focus is Wyoming and ISR. Our longer-term blue-sky focus is the conventional assets that we have in Utah and Colorado.

Matthew Gordon: Right. Okay, perfect. Perfect summary. So, tell us a bit about you. What’s your background? Why are you in the Uranium space?

Corey Dias: Well, I am. My background is actually in finance. I worked as a research analyst for a number of years, for a couple of banks in Canada and some smaller firms. I had the opportunity to move to the other side of the market, on the dark side, as they’d say, to put my money where my mouth is, basically. And the opportunity was given to me by one of our directors. I was running another company at the time. I came in back in 2013 to take the reins of the company. We started off in Copper and then decided that Uranium was a fantastic space to look at because it was unloved and really uncovered at the time. And we’ve been accumulating assets from that point on, from both small companies and large companies. We’ve been able to partner with some pretty significant players in the industry, including Uranium One the fourth largest Uranium producer in the world. And with Cotter Corporation, which is actually a subsidiary of General Atomics, a us weapons defence manufacturer in the U.S., which is a private multi-billion-dollar organisation.

Matthew Gordon: Why don’t we get some of the basic numbers out of the way? Give us the scale of what we’re looking at here in terms of market cap, cash flows…not cash flows, cash in the bank.

Corey Dias: Cash flows…

Matthew Gordon: You wish right!

Corey Dias: We’re not quite in the cash flows here at this point. Our market cap in Canadian dollars is roughly, call it $13M or $14M. Our path to financials or financing is obviously through the equity markets. And we recently closed a $3.7M financing.

Matthew Gordon: Yeah, I saw that. You are a small company, but you’ve got quite a few assets, quite a few moving parts here. Give us some sense of what the strategy, what the thinking is. What are you trying to build out here? Because cash is going to be the restrictor in all of this. The quality of the assets, you’ve got to assess that, work out what you got, what you want to work on, what you perhaps want to park or flip. What’s the thinking?

Corey Dias: So, as I mentioned, we’ve got kind of a two-pronged strategy here. First of all, we have these ISR assets, which are primarily in Wyoming. We’ve recently acquired the Charlie property, but we also acquired 24 other properties from Uranium One back in 2016. So, the plan, and those 24 projects had a historical Resource of about 30Mlbs. Our aim here is to focus first on Charlie and then create a pipeline of produce to follow on from Charlie, behind this resin processing agreement we have with Uranium One in order to create a long-term opportunity in Wyoming.

Matthew Gordon: Okay. Our focus is Wyoming. Great. Charlie, a new asset. Fantastic. 24 assets. That’s a lot of moving parts. Have you any sense of what you’ve got there, you know, outside of what the historic was. Have you spent money on it?

Corey Dias: We’ve spent money. We don’t focus on exploration per se. We look for assets which have a historic Resource, because all we have to do is go back and get an engineering firm to confirm what’s there already. It’s a lot cheaper to do that, to spend $25,000 to $50,000 on a report to confirm the historic Resource as opposed to going out and drilling and spending hundreds of thousands of dollars.

Matthew Gordon: And the math being, there’s what was there, this is what’s come out of the ground, there should be a number which is left behind. Is it as simple as that?

Corey Dias: Or if the historical Resource is a Resource that’s there at the time, it just hasn’t been confirmed through a third party. We get an engineering firm to come in, as a third party, to come and say, yes, the Resource you’ve acquired is actually what is stated there. It’s not about what’s been taken out of the ground yet. It’s actually somebody has done the work already. It just hasn’t been recognised by a third party or by the TSX Exchange, etc.

Matthew Gordon: But at some point, you are going to have to spend the money to actually do a proper 43-101, or more. Is that right?

Corey Dias: Right. And that’s the $25,000 to $50,000 as opposed to getting a greenfield property where you have to go out and start drilling, and spend hundreds of thousands of dollars in order to delineate a Resource. The Resource is there already. We’re just confirming the Resource. Somebody else have done all the work and drilling.

Matthew Gordon: Okay. It seems a nice, cheap way to get to a number which is recognised. So that’s one 43-101 for all 24 assets or?

Corey Dias: No. We do for each individual. So, we’ve completed three already. We’ve done one for Charlie. And we’re now working at a Preliminary Economic Assessment for Charlie.

Matthew Gordon: Right. So, you could be at $1M to do all of them is that right? If you did a simple report.

Corey Dias: Yeah. About $1M. It all depends. And some of the Resources are much easier to delineate or confirm than others. So, you know, we’ll probably won’t go through all 24. We’ll probably look for the best 10 to 12. And then from those, figure out which ones have the best economics in order to create that pipeline that would behind Charlie. So if we get another 10Mlbs, perhaps 15Mlbs pounds out of those 24 projects to sit behind Charlie’s 4Mlbs. We have an agreement in place with Uranium One to process 500,000lbs per year. So that could get us anywhere from 20 to 30 plus years.

Matthew Gordon: Okay. Interesting. Let’s get into Charlie. Tell us tell what precisely you’ve bought. What have you got there?

Corey Dias: Well, essentially, it’s a state lease. And the important idea behind Charlie is that it sits in between two of Uranium One’s existing mines. Uranium One is mined on either side and this property is actually part of the same trend. Uranium One had tried to acquire this asset and was unsuccessful, and actually had a conversation with us about the potential of picking up the asset. And so, we spent 26 months trying to acquire this asset from Cotter and finally closed it this year. The beautiful thing about this asset is that, you know, we’ve got all the infrastructure around because Uranium One has been right there, we understand the property because it’s been mined on either side. We know what’s there. We know how to mine it. And Uranium One’s actually going to partner with us in order to facilitate production.

Matthew Gordon: And why couldn’t they do that themselves? Why did they need you?

Corey Dias: Oh, it’s you know, it’s a very interesting industry when it comes to trying to get deals done. Sometimes a lot of the parties look at it as a zero-sum game. So, we have to win and you’re going to lose in the transaction. Whereas from our perspective, we’re talking about win win. And we always ask, our first question is, what do you need? And what would you like? In order to get this deal done. And it’s worked well for us. We’ve done it with Uranium One twice. And now we’ve done it Cotter? We seem to be doing something right. And I guess Uranium One recognise our ability to get deals done and assets to pursue it.

Matthew Gordon: Okay. And what’s the split between you? How are you sharing that?

Corey Dias: Well, we’re not sharing it, it’s our asset.

Matthew Gordon: But there’s a relationship. How have you engaged with them?

Corey Dias: Well, they’re going to help us with well field development. Uranium One has all the skills. They will look at the ability to make money off of us through well field development. And they could potentially buy some of the pounds that we do end up creating at the site.

Matthew Gordon: Right. Okay. There’s an agreement in place there?

Corey Dias: Yeah, there’s an agreement in place for processing. We have to pay Uranium One to process the materials so there are making money on the property.

Shootaring Canyon Mill

Matthew Gordon: Okay. Talking of which, you’ve also got a mill. Shootaring Canyon?

Corey Dias: Shootaring Canyon.

Matthew Gordon: What is that?

Corey Dias: So actually, it’s one of only three licensed, permitted and constructed conventional Uranium mills in the U.S.

Matthew Gordon: Why is the word conventional important in there?

Corey Dias: Because it’s not an in-situ recovery. It’s a different type of recovery method. It’s a traditional type of mill. It can be used for Copper, Silver. It’s a hard rock underground milling facility, as opposed to processing for ISR is much more, it’s you’re basically shooting water into a well underground and sucking out the fluid and then separating the fluid.

Matthew Gordon: Right, and that was built when?

Corey Dias: That was built back in the early 1980s.

Matthew Gordon: 1980’s. And it ran for how long?

Corey Dias: It ran for four months.

Matthew Gordon: Okay. Talk me through that story.

Corey Dias: It ran long enough to justify final payment on the construction of the property. Then the Uranium prices fell. And nothing happened. The great thing about it only running for four months is that there’s not a lot of environmental liabilities there. So it’s the youngest mill of the three that are in existence the U.S. and it has very little, if any, environmental liability. It’s very clean.

Matthew Gordon: But it also hasn’t run. For a long time.

Corey Dias: It hasn’t run, but it has been staffed since it was built, because it has to be, because it is a Uranium facility.

Matthew Gordon: So, what were those staff doing? I mean, you can’t keep this thing in running order for 30 years.

Corey Dias: Yeah, you know, turning knobs and greasing areas where it needs to be greased and making sure that knobs turn. Making sure that there’s no seepage of anything. And it’s an old facility, and some of the parts have been removed because they haven’t been used but certainly, the building itself is still there. The conveyor belts need to be updated, but they’re still there. The control room looks like something out of Gene Roddenberry’s Star Trek from back in the 1970s, the coloured lights. But it’s still there. Everything turns on. There’s the ability to actually turn on lights but you can actually…there’s no running plant. You can’t turn on and run things all the way through the facility.

Matthew Gordon: Yeah. It’s like nearly 40 years old, right, it’s 35 years old or something like that. But how much money would need to be spent on it actually bring it up to speed. To actually work.

Corey Dias: You’d have to spend $25M to $30M.

Matthew Gordon: That’s $25M to $30M, which you don’t have right now. And obviously, the market being what it is, which we’ll talk about in a minute, you’re aren’t going to get that money anytime soon. There’s a point in the future where you’ve got the option of bringing this thing back on. How much did you pick it up for?

Corey Dias: Well, we bought that property. We bought a number of small mines and picked up some royalties for about $7.5M. And Uranium One had acquired the asset from a company called US Energy for about $100M.

Matthew Gordon: Right. Okay. But back then. When was that?

Corey Dias: That was 2007. 2008.

Matthew Gordon: Okay. Interesting. You’ve got all these various assets, so what’s the what’s the big idea here? You are a finance guy. You’re thinking of numbers. What are you putting together here? And why would investors get excited about that vision that you have? Tell us about it.

Corey Dias: Well, look, I think the important thing here is that ISR is the place where you want to be at a lower price environment when it comes to Uranium. We have and we’ve established a complex there in Wyoming. So, we have properties that we bought. We have the Charlie asset, which is a near-term production opportunity. We have a resin processing agreement in place in Wyoming, which means that we don’t have to build our own facility, which is a time killer and a cost killer. So we’re saving both time and the cost of building our own facility in Wyoming in order to get to production. So there’s a near-term opportunity there.

Matthew Gordon: When you say near-term, it’s all kind of relevant again because the market conditions. But near-term being you’re as near as anyone else is, that’s what you’re saying? But right now, we don’t know when that is.

Corey Dias: Well, look, I think of all the non-producers, we are closer to production than any of them. Other producers that are obviously in production, they have facilities in place, they can produce whenever they like. But anyone who is a non-producer in the U.S., we are further ahead.

Matthew Gordon: Yeah. Okay. Understood. Right. And the blue sky?

Corey Dias: Blue sky. Part of the transaction that we completed with Cotter Corporation included what were called the West Slope Properties. These are nine mines that are in Colorado, number of leases…the Department of Energy leases. We picked those up. They hold 11Mlbs of Uranium and 53Mlbs of Vanadium.

Matthew Gordon: Okay. You’ve got the Vanadium play here. Again, tricky space, variable pricing, etc. But, you know, how do you work out the economics around Vanadium? Given the market, or have you done any work on that?

Corey Dias: We have. We’ve done a little bit of work. I would say we’re very familiar with the battery sector. Actually, as an analyst, I used to cover Clean Tech. So I understand the battery and renewables.

Matthew Gordon: VRFB. Yeah.

Corey Dias: Yeah, so I understand the renewable space quite well. So that’s another opportunity. We can actually strap on a Vanadium circuit to our mill in order to produce at our mill, at some point in the future. So that gives us some optionality. There’s also another mill. The only running conventional mill in the U.S., which has a Vanadium circuit attached to it. There’s an opportunity for us to potentially partner with someone to extract Vanadium.

Matthew Gordon: Have you any sense of what the Vanadium price needs to be for you to to be able to do that.

Corey Dias: I think the Vanadium price, I think it’s around $7 or $8 right now and probably in and around this range, perhaps $10 is probably where we’d like it to be for us to go forward on that.

Matthew Gordon: Okay. But it’s not core focus. But maybe at some point if the price is right, you may be in the raise the capital to put that circuit in. Okay.

Corey Dias: Absolutely. And I think, an important part too, the conventional mill that we have, we have about 7Mlbs of Resource that came along with it, that you go through that mill. This acquisition of West Slope properties actually allows us to create a longer life for the mill potentially, with 11Mlbs of Uranium. We’ve got a 1Mlbs per year facility. So we’re talking about 18 years roughly right of mill life.

Matthew Gordon: Okay, so there’s another nine assets. You’ve got 24…How many assets are you sitting on in total? What’s that number?

Corey Dias: About 34.

Matthew Gordon: 34. Okay, 34. And you’re going through them all trying to work out what’s meaningful, commercial. However, you are defining that and you’re going to work out what to focus on because there’s limited funds- I know just raised another $3.7M and you’ve got to work out what to focus on. What is the focus? What is the use of the $3.7M? What’s that going on?

Corey Dias: Sure. I think that, you know, as I mentioned, our focus is on the ISR properties. The hard rock, the things in Colorado, Utah, Shootaring Canyon mill. Those are all things which are not our near-term focus. Our focus is Wyoming and our primary focus is Charlie. All of our focus is going to be on Charlie. and moving that forward. And that’ll be helped, you know, through our partnership with Uranium One.

Matthew Gordon: Totally. So how does that break down, though? I mean, is it literally all going on? You’ve got some G&A to cover. You’ve got a whole bunch of costs to cover. How much of it’s actually going on the assets and discovery around those assets?

Corey Dias: Well, yeah. I guess there are a couple of things. When we acquired the West Slope properties, there was some reclamation bonds associated with it. We had to spend…we’re using some of the funds that we’ve raised to cover off or to replace the existing reclamation bond. So, you know, we’re probably looking at $500,000 to focus, to use on Charlie in the near-term. So that, including the Preliminary Economic Assessment I mentioned. Some early well field development work that needs to be done and probably a little bit of permitting and licensing. So that’s the near-term focus.

Matthew Gordon: So that’s $500,000. What does the other $3M go on?

Corey Dias: There’s some that’s going to be G&A. And then, they are about $2.5M worth of reclamation bonds that are associated with the West Slope properties.

Matthew Gordon: Oh wow. $2.5M on reclamation bonds, wow. Okay. And that’s something obviously you’ve got to do. You can’t not do it, but you don’t necessarily see $2.5M worth of value. But if you didn’t, there would be a problem. Is that the kind of issue with it?

Corey Dias: Yes. The properties all have reclamation bonds. The state forces you to put money up in order to cover the cost of reclaiming the land should you not move forward with the project or just something happened to your company. They don’t want to be responsible for taking a mine and returning it to fallow field. They want the owners of the property or the lessees of the property to do that.

Matthew Gordon: Yes. I mean, it’s pretty tough on a junior isn’t it. I appreciate there’s a lot of moving parts here and everyone wants a slice of it. But you guys are…we talked about, you aren’t cash flowing. You have to raise equity, expensive dilutive equity every year. If I look at last year, $5.8M in cost. But you’re like $2.5M on G&A. Stock based compensation, $1.9M, which is a chunk of change right. And then gain or loss…well, gain on the exchange rate. In terms of your junior miners’ available cash, you’ve got some big choices to make as to where you spend that. On this $3.6M, you’re going to spend $500,000 developing Charlie, you’ve got the PEA you mentioned, are you going to move that PEA to a PFS?

Corey Dias: No. We’re going to keep it at a PEA. The issue with creating a PFS or a Feasibility Study in the Uranium space is that usually you have to tie it to a long-term contract. In order for us, is always a challenge to get a contract especially in the current environment. Our aim is, you can go forward into production just using a PEA. And I think that’s our plan.

Matthew Gordon: Let’s come back to G&A and your strategy because I imagine they’re intertwined. Your strategy, you’ve got a lot of optionality. Thirty-five different assets. You are working out what’s there, what’s good, what’s not. And that’s taking a lot of time, I guess a lot of bought in consultancy and services. Is that $2.5M…I mean, how does that breakdown? Is that a lot of bought in costs for consultants to tell you what you have? Is that the problem?

Corey Dias: Some of it is, but some of it is, like for example, the share-based compensation are options. They’re not shares. It’s not a cash component that would have to come back into the company in order to get more shares. We do have consultants in place because we have a very small team. Essentially, I’m here and I have a part time CFO. Everybody else comes in as necessary. When it comes to some projects, when we’re trying to close on, for example, the Cotter Corporation transaction. We need, external lawyers to come in to help us with putting together the agreements and things like that. There are some costs associated, but it doesn’t…the times when it ramps up are usually the times when we are looking to close a significant transaction.

Matthew Gordon: Right. Well, at $1.7M, nearly $1.8M of the $2.5M on the G&A was consulting fees paid by the company. Is that all around the M&A type stuff, or the deals? That’s what you’re saying, okay.

Corey Dias: I mean, we are basically an M&A company.

Matthew Gordon: Yeah. Well, that’s what I wanted to understand about your strategy. You are an M&A company. Are you an incubator? Are you saying ‘we’re never going to get into production here? It’s a case of I need to find out what’s good, then maybe someone comes along and partners, JV’s, whatever’. What type of company are you? When investors are looking at you, what are they buying into?

Corey Dias: Well, look, I think there are a couple of things. I think our aim is to get into production. I think we’ve gone a long way around trying to get to an asset that can get into production. We started off in 2015 buying the conventional assets from Uranium One, but the market at the time was actually much stronger than it is today. I think everyone had the expectation that the market would continue to move north and then it didn’t. When we saw that the market was softening and realising the differentials between the cost of producing in an ISR environment versus a hard rock environment, we realised that it would take a very long time for us to get to the point where the hard rock assets are viable. So that’s when we started looking at ISR, because that’s the only place in the nearer-term, you get the opportunity to get into production. We picked up the asset from Uranium One to start moving forward in that direction. Obviously, there’s still a cost associated with trying to get those assets in production. We started looking around to see if there’s anything that’s closer to production status than what we had in our portfolio. And Uranium One facilitated that process by introducing us to Cotter and saying, you know, this would be a perfect asset given where it sits, given the cost to actually move material from this mine to the satellite plant and finally into the final processing plant, given its location, its proximity to our assets. We started off with hard rock, high cost, and we’ve moved all our way, moved way down into ISR near-term production. We’ve kind of gone backwards.

Matthew Gordon: But you said at the beginning, we’re an M&A company and I think that’s what you are today. It is what you are today.

Corey Dias: Absolutely. Look, we’re in a low-price environment and there are assets for sale. In a high price environment, we probably wouldn’t have been able to buy any of this.

Matthew Gordon: Right. People are buying into your ability to do deals, identify deals, which potentially have value. And for you to very quickly and cheaply discount the ones which perhaps don’t meet the required levels that you’re seeking, and for you to then be able to develop those and get into production at some point. And with the mill, you’re looking at being able to have an infrastructure to look at that whole chain. Okay. I just wanted to understand what you were today. That’s okay. One thing that stood out, investor relations – $500,000 last year. What were you promoting? Because that’s a lot of investor relations!

Corey Dias: It is, we have a lot of assets. We have a lot to talk about. We’ve got Vanadium to talk about. We’ve got ISR. We’ve got hard rock. We’ve got a lot of different things that we can focus on and depending on where the market is, we’ve put out news releases on Vanadium because our Utah assets have Vanadium in them. Now we’ve got Colorado, which has significant Uranium. So, you know, we’ve got different ways to skin the cat. Depending where the market is at the time, we will spend our time focusing on one area than another.

Matthew Gordon: So that’s the thing, I’m always intrigued with the junior company mentality. So, I’m looking to you for help here. You’ve not got a lot of cash. You’ve got a skill set. You know, your position, your M&A. You told me you were M&A. You’ve got a lot of optionality, but you must know what’s going to work, and what’s not going to work. I mean, for instance, spending time in Vanadium and the environment which Vanadium sat at, certainly in the last half of last year, that wasn’t necessarily where I would have thought you’d spend your time talking to people. When you’re doing investor relations, what does that involve? Are you traveling the world to have conversations with institutional investors? What does it actually mean?

Corey Dias: Yeah, look, we do spend a lot of time traveling and meeting with investors because it’s…the interesting thing about Uranium space is that it is more of an education at this point. It’s not a well-known space. When people have very little knowledge, it’s usually pretty negative or at least the perception is negative. So, we’re spending a lot of our time trying to overcome that negativity and really explain why is this space actually important. You know, it’s not all Chernobyl. There are real viable businesses which have run for a long, long time. And there’s been no risk.

Matthew Gordon: But that’s not your job. There’re some big guys with some big pockets. We’ve spoken to a few recently. They’ve got tens of millions in their back pocket. Isn’t that their job? You don’t need to do that do you?

Corey Dias: It is their job. But you still have to educate because not everybody is going to be in the same…Not everyone gets access to Cameco. Right. They need to understand from smaller companies. They can get a lot more information from us than they can get from Tim Gitzel over at Cameco. They don’t have access.  You need to talk to others in the space to really get a better understanding and really be able to dig into, you know, what exactly are you try to achieve here. And why.

Matthew Gordon: Ok. Well, let’s finish off in terms of the company bit. Where do you sit in the market? Where do you position yourself in the market when you’re going and doing this world tour of meeting institutions, where are you positioning yourself? And why should new investors looking at you, watching this video today, why should they be looking at you vs., you know, the next guy?

Corey Dias: Well, look, I think as I mentioned, we’re probably now the next company to get the production assuming the Uranium price moves in the direction that we all hope. We’ve got an asset which has been coveted by not only us but other parties in the sector because of, first of all, its proximity to infrastructure. The potential partnership with a significantly large producer in order to move that asset forward. I think that is key. The fact that we do have these relationships are very unique in the sector. Most of the juniors are off on an island, but we’ve managed to build relationships to the point where we can collaborate not only on this asset, but on other projects going forward. I think that’s very important. We have that path to production, which is near-term. And look, that path to production has been validated by our conversations and meetings with utilities. Utilities are looking at us, especially before 232, maybe the conversation might be a bit different now because 232 didn’t quite go the way we’d hoped. But the conversations were very much about looking to secure pounds going forward from junior players, including us. And we were part of that package. I think that’s an important point too, we have a path to production that’s been recognised by the ultimate buyers.

Matthew Gordon: But don’t the rules, the basic rules of mining still apply? You need to be able to mine, not just get into production. Just because it’s Uranium doesn’t make it hallowed ground. The basic rules of mining apply. You’ve got to be able to mine commercially, economically. The numbers need to stack up. Obviously, I’m talking to someone in the Athabasca Basin, they’re going to tell me that they’ve got it made. Whoever they are, the grades are high. Your grades are not so high. They’re a lot lower. But you’re looking, I guess, at the Uranium One guys and saying, well, there’s a nice comp, they are either side of me. That gives me a sense of, for Charlie, where we sit. You’re not there yet with your 24 assets plus 9 assets. You’ve still got to work that out? And right now, you’re a finance guy running a company, where’s the technical team that’s going to help you deliver this?

Corey Dias: If you look at my board, we have over 120 years of Uranium experience. One of our board members actually did the Feasibility Study for Charlie. So he is intimately familiar with the project we have.

Matthew Gordon: Who’s that?

Corey Dias: Steve Lunsford.

Matthew Gordon: Okay. So, Steve, tell us about him.

Corey Dias: Steve Lunsford has been, he’s a local Wyoming guy. He’s been in the business for 40 years, worked for Cameco Resources, which it acquired Power Resources, which owned the asset in the past. He is very familiar with Wyoming, familiar with ISR, intimately familiar with Charlie. He is our go to person on that.

Matthew Gordon: Right. And John Eckersley, who has just joined. He’s been advising you prior to that, though?

Corey Dias: He has been. John is an attorney. He’s worked with junior companies for a number of years and spent a lot of time going through our contracts. Any kind of NDAs that we have to put together, he helps us with that.

Matthew Gordon: And does inform us that there’s going to be more M&A?

Corey Dias: Well, you can interpret it that way. You could. I think that’s probably a good way to look at it. Yes.

Matthew Gordon: Okay. That’s good. Now, let’s talk about this last week.

Corey Dias: Sure.

Matthew Gordon: You ready? Have you got the energy to talk about this last week?

Corey Dias: Yes. Yeah, it’s been a rough week.

Matthew Gordon: It’s ever been a rough week. It’s been a rough week for U.S. companies. Now you’re sitting with U.S. assets. You had a little hit as well. And you used a phrase just now, ‘232 didn’t go the way we hoped’.

Corey Dias: Correct.

Matthew Gordon: Right. I’m guessing which camp you’re in.

Corey Dias: Well, of course, we are in the loser’s camp.

Matthew Gordon: Run us through that, obviously on the run up 232, everyone’s very, very excited about what Trump was going to do. Polarising views. Very, very passionate community, the Uranium community and Nuclear community. Your view was you hoped that there would be some kind of…What? What were you hoping for? What was a good outcome for you?

Corey Dias: I think the outcome that the producers were hoping for, at least the junior producers was, U.S. based producers, was a quota- 25%. You are you compelling the U.S. utilities to buy 25% of its needs from U.S. producers?

Matthew Gordon: But that wasn’t ever realistic, was it? I mean, you can’t go from zero to hundred miles an hour that quickly. What would that of looked like?

Corey Dias: It wouldn’t have been zero to 25%, it would have been a staged step up to 25%. Because certainly, there’s no way to produce 25% of its needs today.

Matthew Gordon: No.

Corey Dias: It would take some time.

Matthew Gordon: Were you buying the security argument? Which bit of the argument were you buying into or do you think it was a conversation that needed to happen? Where were you sitting?

Corey Dias: Well, I think it’s clear that the national security risk is significant. You know, you’ve got Russia, Uzbekistan, Kazakhstan controlling 40% of the market. And we’ve seen what Russia’s done in the past with natural gas over in Europe, turning off the spigot- there’s a big risk. The U.S. uses, you know, is the largest consumer of Uranium today and imports over 95% of its needs. So, if there’s any disruption to that supply, that’s a significant risk to 25% of your power in the United States. There is a national security risk. It was looked at a number of years ago when it came to oil. You had OPEC running and controlling everything. And there was a risk in the U.S. that you wouldn’t be able to receive the oil you needed. The market turned around and focused internally. So now the U.S is an oil exporter.

Matthew Gordon: Remind me about your shareholding. Who are the main major owners of the company?

Corey Dias: The major owners?

Matthew Gordon: Well, major shareholders.

Corey Dias: Yeah. The Cotter Corporation is a significant holder. And that was part of the transaction we closed with Cotter. They became a shareholder because we provided them with shares of our company as part of the compensation for consideration.

Matthew Gordon: And they sit on how much?

Corey Dias: They hold about 11.5M shares.

Matthew Gordon: Okay. And who are the other biggies?

Corey Dias: The other one of note would be a company called Radio Fuels, which is a private Uranium company with assets in Canada. And they wanted exposure to U.S. assets and so they participated in our last financing. Those are the two major ones.

Matthew Gordon: Fantastic. Sorry for that segue. With 232, you think you believe and still believe it is a security issue? Trump disagrees. We move to a 90-day working group. What are your hopes for that?

Corey Dias: Right. Just to clarify. Trump agrees with the national security risk. He doesn’t agree with the quota.

Matthew Gordon: Okay. You didn’t get what you wanted because he didn’t…yeah. Okay. He agrees, but he doesn’t agree. So, what is the 90-day working group going to do for you?

Corey Dias: That’s the big question.

Matthew Gordon: What do you want them to do?

Corey Dias: Well, I’d like them to put the quota in place, but that’s not going to happen. I think at this point, what is more likely is that there might be potential of incentives be provided for the utilities to buy American. I don’t know how significant those incentives would be, whether it’s subsidies or something like that. Perhaps there might be monies available to Uranium producers in order to facilitate production. Whether there are subsidies available to us, or cheap money for us to move assets forward to production? There will be small measures. But I don’t see them being nearly as significant as what it would’ve done for producers.

Matthew Gordon: Right. So again, possibly we’re in another period of uncertainty. Utilities aren’t necessarily going to move forward until they know what’s going on after this working group. And then there’s a period of evaluation. The Uranium equities companies need to get on, don’t they? They’re reliant on the spot price. They’re reliant on hopefully the contract market coming back online at some point, or some line of sight to when it’s going to come back on. But this 90-day working committee, this working group, is to look at the Nuclear industry as a whole, the holistic view of it. And in there, you’ve got the…The reactors are owned by the utilities generally in the U.S? Is that right?

Corey Dias: Yes, that’s right.

Matthew Gordon: Right. And so, they’re sitting there with their mix of presumably still Coal, gas, renewable energy portfolios. Nuclear is just part of that mix. So I guess they’re slightly conflicted in some sense. I mean, they were arguing against the 232.

Corey Dias: That’s right. They were arguing against it because of the potential increasing costs to the utilities when it came to Uranium inputs. But, you know, I think it’s important to note that a lot of the utilities are working on contracts, which were signed a number of years ago, at significantly higher prices then where we sit today. Contracts in that era between the $50 and the $80 a pound. So, you know, an increase to $40 to $50 is not outside of what has been the usual practice in terms of what has been paid. I think there is a little bit of panic and screaming, which was not entirely justified.

Matthew Gordon: Maybe. I mean, there’s a lot of moving parts and a lot of influencers, a lot of people with vested interests in this, obviously. And, ultimately, the utilities don’t necessarily want to pass on the cost to their customers. Or they don’t want their customers to have to stomach the cost of subsidies at a local level. If it’s a security issue, that’s a federal issue. Right? There’s a lot of arguments to be had here. But the bigger picture around Nuclear, it’s not just about the Uranium equity play. There’s the enrichment component, there’s no enrichment facility in the U.S. anymore. There’s a lot of things that need to be discussed. So therefore, are you worried that your bit of a it is going to get parked to one side and you’re going to continue in this vacuum of uncertainty until all of this resolved. It’s a pretty big picture that needs to be looked at.

Corey Dias: It is. But I guess, you’ve got a 90-day window in which to look at it. I’m not sure.

Matthew Gordon: Well what are they going to do in 90 days? Aren’t they just going to say ‘there’s a lot of things we need to look at and we need to kind of create some more secondary working groups to look at each of those components?’. This thing could run on.

Corey Dias: It could. But I think the reality of the market, I think what’s going to happen now, because we’ve had this delay in purchasing, there is a deficit in the marketplace. When it comes to supply and demand. As much as other parties would argue otherwise, it’s clear that there is a supply demand. But I think once now the utilities start to reengage and start to look at whether they’re doing contracting, or they’re going back to the spot market, they’ll realise that the pounds aren’t there. They will have to find a way to get those pounds. And those pounds will not be available at $25 unfortunately in terms of the long-term contract. Whether it is Cameco, whether it’s Kazatomprom. Kazatomprom has now put itself in an interesting position, because for a long time it was a state company, who was not public. And now, its aim as a public company is to show high price contracts to its investors, in order to show they’ll be a profit going forward.

Matthew Gordon: It’s an interesting thing, but it’s a question of who’s going to blink first. It’s going to be, who’s going to be the first guy to go. Is it going to be from supply side or the demand side? Because no one wants to go to have that chat with the boss and say, ‘hey, spot prices at let’s say $25 today, but I’ve got an opportunity to buy it at $50. But on a long-term contract’. No one’s going to do that right?

Corey Dias: No because utilities aren’t incentivised that way. Utilities are incentivised on a quarterly basis. So, you don’t want to be the guy who… it’s like whack a mole. You don’t want to be the guy whose head is above at $50 when everybody else is $25. You want to be in the lowest quartile. Your compensation is based on being in the lowest quartile. It doesn’t fit.

Matthew Gordon: So, who’s going to blink first? It doesn’t fit. But who’s going to be the guy that says, you know what? I’ll take this one for the team.

Corey Dias: Well, that’s a good question. I don’t know who the first guy will be. I mean, I think it’s that’s the challenge. But there will be a first guy because Cameco is not coming back online at $25. Kazatomprom will have a difficult time convincing its investors that it is good sense to sign a contract at $25. So, the price will have to move in order for contracts to start being signed. As much as the utilities are now…what it has now done, is basically turn into a global market. Now, they would’ve been forced to buy U.S. at $50 or $40, whatever the price would have been. But now it’s going to be a global price at those terms, a global market at those terms. There won’t be any more more contracts signed in the near-term, certainly not at $25. I think that the price will be probably +$40 before contracts are signed.

Matthew Gordon: I guess the issue is that there’s no one, not even Kazatomprom, not Cameco, that can on their own, fill that supply demand gap. It’s vast.

Corey Dias: They could probably fill it, but not at this price. It’s all price. Right. You know, Cameco does not make money at $25. Cameco has a long number of long-term contracts in place, probably in the $70 and the $60, that’s it is fulfilling now, but it’s fulfilling those through purchases in the spot market. So even if the utilities want to go into the spot market, they’re competing against Cameco. Cameco is buying old material that’s going into the market. There’ll be no spot market available for the utilities. Then the utilities have to turn to contracts and then nobody signing contracts at $25. They’re going to have to keep pushing that number up higher and higher in to get to the point where somebody on the supply side steps in and says, ‘okay, we’ll do it at $40 or $50’. At $25, it can’t stay here and it won’t stay here because there’s no material available here.

Matthew Gordon: Yeah. It’s such a big discussion around the supply demand curves. You’re a finance guy, an ex-analyst like me. The thing that interests me is there’s got to be a point in that curve where the big guys go, ‘well, we’re happy to keep the margins low enough, for this period of time, because that means we’ll have no new entrants, a lot of these guys was sitting on big assets, won’t be able to raise the cash. We can go pick up some cheap cash and we’ll make hay further down the line because we’ll own some of the better nearer-production assets. There is that thought in my head with regards to, do the big guys think like that? The geopolitics of it all, does it work like that? But I guess one for another day. One which is for today and we’ll finish off on this, is your small company, $13M, $14M Canadian. You just raised a bit of cash. We’ve spoken to a few new entrants into the marketplace and there will be more. If the market goes the way you need it to in the way you want it to go, there will be new entrants into the marketplace. It’s just the way these things work. There’ll be a lot of noise. You’ve got a little bit of a head start, your nearest-term production compared to the rest of the non-producers. Are you concerned about these new people coming into the marketplace and stealing your thunder?

Corey Dias: Absolutely not. As I said, we’ve been able to pick up some pretty decent assets which have near-term opportunity. And our aim is not just out here to promote, we’re here to get into production. As I said, Charlie, having a relation with Uranium One. Having something in place, moves us further ahead of a number of players in the sector. I think that the Shootaring Canyon mill, there won’t be another mill built anytime soon. And obviously with the refurbishment costs, seems, it sounds significant, but when you’ve put in the context of the cost of building a new mill, and the timeframe to build a new mill, and getting over Nimbyism, Not In My Backyard, it’s going to be a big challenge for anybody else to get a mill built. I’m not sure if you know that Western Uranium last year lost his license in Colorado. It had a licensed, had an actual reactive materials license, which, you know, the state pulled away. This shows you how unique these things are and how tough it is to keep them. But the interesting thing about that one is that it wasn’t tied to a facility. So, to get a license on your own without a facility is going to be a challenge. From our perspective, we are feeling very comfortable that we’ve got something of unique value.

Matthew Gordon: But aren’t you going to see some quite big because you haven’t enough money to get into production yet? You’ve got to go and raise some money. Okay. The assets, you’re not quite sure what you’re going to be able to do with these assets yet. And when you are sure, you are going to have to go to raise a stack of money. So today, the bulk of the value of your market cap or enterprise value, whichever one you look at, is the mill and the license for that mill to operate that mill presumably. No one’s giving you value for the assets that you’ve got on the books today. They’re not worth a lot.

Corey Dias: Well, look, I think the way that we have been valued is actually, the ISR Wyoming assets are getting value. I don’t think we are getting any value for the mill.

Matthew Gordon: You don’t think you are?

Corey Dias: I don’t think we are getting any value for our conventional assets as all.

Matthew Gordon: Okay.

Corey Dias: No. We don’t think we are. We think that anybody who’s investing in our story today is focused on Wyoming. They’re like, ‘it’s interesting. What does it cost to get to production? Conventional production, $60. Well, you know, where are we today? $25. Where’s the term price? $35′. Zero value there. I think everything is because everyone who is in production right now is actually in the ISR space. The fact that we have assets in the ISR space is giving us some value. But if we didn’t have these ISR properties, I don’t think we’d have a market cap where we are today.

Matthew Gordon: Well, it’s kind of insignificant. Whether you’re $13M or $30M, you’re no nearer at production and the spot market’s doing what it’s doing. And until contract comes on board, you may as well be worth zero. It’s the same net effect, right? Which is why it intrigues me, the mill intrigues me as a USP, as a differentiator for you when things come good, you would expect to see significant re-rate. Not just because the production or the potential economic assets, but because of what you can then do. Is that part of what you would argue to new people looking at you? That you’ve got a whole bunch of zero-rated or zero-value assets. So therefore, when the clock starts ticking, you’re going to get more of an uplift than others?

Corey Dias: Absolutely. I think that it’s a significant differentiator because, when the market does move in the direction that we all hope it does, we have an asset which is very unique in that sector, which we could turn on right now to give us +1Mlbs production.

Matthew Gordon: And then you need to come up with a solution of ‘where do I get the money? How do I keep dilution down?’ You know, all of that good stuff which finance guys go to bed thinking about. Corey I’ve really enjoyed our chat. That’s a fantastic run through on Anfield Energy. It’s nice to hear the story about where you sit in the marketplace. You’ve clearly got a thought in your mind. You’ve got a bunch of stuff to do. And you’ve got a lot of assets to look at and work your way through. I hope that the market is kind to you. I hope the Uranium market sees a change sometime soon. I’ll be interesting to see how the utility guys react and what time frame they react in. Because obviously you guys need that.

Corey Dias: Absolutely. Absolutely. Well, thank you for your time. I appreciate you having us on. And I love the questions. I think your questions are relevant and insightful. Thanks again.

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Blue Sky Uranium (TSX-V: BSK) – What is the Investor Upside?

CRUX interviewed Nikolaos Cacos, the CEO of Blue Sky Uranium. They are a Uranium and Vanadium explorer based in Argentina. Their management has been working and operating in the area for 25 years and are part of the Grosso Group. This is potentially a very low-cost production project with a district wide deposit. They are yet to get a permit but the Argentine government is very supportive of Uranium with 3 reactors already with another one on the way. Hear what Nikolaos has to say.

Click here to watch the interview.

Matthew Gordon: Good morning Niko, how are you?

Nikolaos Cacos: Good morning. I’m doing very well thank you.

Matthew Gordon: Thanks for making the time to be with us. Let’s go to a summary of the projects. So we get some sense of what they’re like. I’ve been through it so maybe if I may ask some questions as we go along and not be helpful. Thank you.

Nikolaos Cacos: We have not just a deposit of Uranium / Vanadium but we have an entire district. And that’s really where the upside is. And this district spans one hundred and 45km in length over 50km wide. So again it speaks volumes to the undiscovered potential that lies within a country like Argentina. And recently just about a year ago, we announced our first deposit, 43-101 deposit, and our PEA. was announced about a month ago. So what we have, is just under 23Mlbs of Uranium, 11Mlbs of Vanadium and that’s all within a 3km by 3km area. And again this this has the potential to expand to grow to become amongst the largest deposits of Uranium in the world. And what’s key here is, the way that this deposit lies, it lies right up on surface. It’s within the first 25m from surface down and it’s also not in hard rock, it’s sort of a compressed gravel. So it means in terms of cost, this is very cheap to extract and to separate. And in fact are PEA, our preliminary economic assessment, indicates that we can produce this at $16 a pound which ranks us amongst the lowest cost producers in the world. Like those we see in Kazakhstan. And we’ve only started scratching on the surface. We wanted first to prove two things in this. 1. One that we can be amongst the lowest cost in the world. And the 2. second point to be amongst the largest. So I think we’ve been able to demonstrate now that we are amongst the lowest cost. And we’re about to embark now on an exploration campaign that can demonstrate that this 23Mlbs deposit can grow, you know 2 fold, 3 fold, 4 fold…can be over 100Mlbs.

Matthew Gordon: So let’s say even if we have a kind of +/-30% on a PEA. Which is fairly industry standard, that’s still pretty pretty low. I should say as low the Kazakh number. It’s still not quite economic at today’s prices. So you need some help though with the pricing.

Nikolaos Cacos: It’s it’s break even at today’s spot prices, around £30. But when there is… when you have a production, you don’t sell it spot. Most of the contract prices are $50 or $60.

Matthew Gordon: And you selling this into the Argentine market?

Nikolaos Cacos: Well the Argentine market is a very interesting market because Argentina, unlike other countries in Latin America, actually has a Nuclear regime. They’ve been active since the 50s. They’ve got three Nuclear reactors that they’ve got going right now. And they import all the Uranium for that. They have a number of research reactors. And they control every aspect of the Nuclear industry except for production. So they currently have to import all their all their Uranium and they’re paying between $75 and $85 a pound for that.

Matthew Gordon: Why?

Nikolaos Cacos: Because that’s the best thing… you have to remember that Nuclear reactors. The cost of Uranium is actually quite negligible to the cost of actually shutting down a reactor and keeping it on care and maintenance. So to have assurety of that import, of that price, they will pay a higher price because it becomes quite negligible. And because also that they ship it, they’re probably paying $10 to $15 in shipping costs for every pound of Uranium. So Argentina right now has definitely, it is very much encouraging would like to have a domestic source of Uranium. And we’ve been talking to them. They were very aware of who we are and what we have. They are very keen … we know we are the largest and most advanced deposit in Argentina. And we have a lot of support to become the next supplier for that country.

Matthew Gordon: But it a relatively small … we’re talking about three Nuclear plants, another one on a construction.  We’re not talking a massive amount of product.

Nikolaos Cacos: They would probably right now they import about half a million pounds a year, probably in the next couple of years that will probably be up to about a million. They likely would stockpile some Uranium. So they the way the law is written is that Argentina has first right to acquire any Uranium that’s produced, at international market prices. So there wouldn’t be anything special. So that would be a first supply and then anything left of course would be for export market. The other thing that’s interesting that we have within our Uranium deposit, is we have the occurrence of Vanadium. And Vanadium as of late, for those attuned to the mining metals markets, would know that you know we’ve seen the price of Vanadium for the last few years being $3  or $4 a pound and now it’s trading about $15 a pound. So there’s a big demand for that. And again it’s a battery metal just like lithium. It’s used for storage but that’s not the main driver. The main driver of course for Vanadium is its use as a steel hardner. And China’s recently has have mandated an increasing amount of Vanadium in steel production and that’s brought up,is currently sustaining at the higher price of Vanadium. Now Argentina has also a huge need for Vanadium, because they have an active oil and gas industry in Southern Argentina and they’re costing manufacturing pipelines and these pipelines require Vanadium to make them hard. So there would be another market there for that metal as well.

Matthew Gordon: And what I would say the Vanadium market pricing is erratic, to say the least, does the PEA. include the Vanadium component was just focused on the Uranium.

Nikolaos Cacos: It’s inclusive of the Vanadium component.

Matthew Gordon: Right. And what can you tell me about… when say significant what do you mean?

Nikolaos Cacos: Well the Vanadium contributes you know quite a bit to help offset some of the costs. And for every pound of rock that we extract to make it that much more valuable. And it’s no additional cost for us to extract it. The metallurgical process involves just scooping up the gravel, putting it through a sieve, removing the larger rocks, because the mineralization is in the dust. And then basically we we were able to reduce that by… get rid of 75%, 80% of the waste rock, which is clean. And then we put the rest of it on the leach pad and a simple alkaline solution, which is cheap and well proven throughout the world, extracts both the Vanadium and the Uranium. So it’s a very simple, low cost way to get it out. And as we expand our deposit, we’re going to see all our costs begin to come down.

Matthew Gordon: Fantastic. So hearing Argentina is a very friendly jurisdiction, in terms of not any mining now, but also it goes to Uranium. It’s seen as possibly a strategic Resource for them.

Nikolaos Cacos: Yes. I mean we have been active in Argentina like I said at the outset for 26yrs now. So I guess we can call ourselves experts in operating in that country. And no matter what country you operate in when you’re a foreigner, it takes a while. You have to acquire and understand the local needs, the local misgivings and so forth and develop your contacts and people that to a place within this industry, government. And we’ve always recognized that and we’ve been very successful at establishing… being good guests, so to speak in a country like Argentina. So Argentina right now has a government run by Mauricio Macri, a businessmen. He’s very pro-business. They very much want to see the development of the mining industry a lot further than that it has come. They want to see it as a larger component… contributing to their economy. They have approached us. They have indicated that if there’s any roadblocks or red tape that gets in a way, let them know, they’re going to do whatever they can to facilitate. And we like working in Argentina. It’s a safe country in which to work with. It’s abundant with natural resources. And with respect to the Uranium that we have, because they have the entire framework for dealing with Nuclear materials and so forth. It makes it that much easier. They already understand the language, they understand the fears, they’re members of all of the international agreements. So it’s just much much more fluid and much easier for us in which to operate.

Matthew Gordon: Tell me a little bit about this this board that you’re working with?

Nikolaos Cacos: The management team has three members on the board myself. Joe Grasso, one of the early pioneers of Argentina. He’s been recognized and awarded in Argentina. As one of the Mining Hall of Fame. One of the key persons to to open up mining in Argentina with our success. And with them our method of operating, in terms of being able to deal effectively and with respect, not just levels of government but at a community level. That’s been our modus operandi for some time. The other person on our board is Dr. David Terry, he’s a PHd geologist. Again he has an extensive experience in a number of industries, including Uranium. And most recently joining our team as a vice president of Exploration has been Guillermo Pensado, he has been very key to help us advance and crystallize the discovery that we have in the Uranium. He is Argentinian, has a long track record of mining in specializing Uranium in Argentina, which is not an easy thing to find. And he has a master’s degree from Queen’s University in Toronto. So in economic geology, so he’s been able to bring this project together. And just last September, he was awarded this Explorationist of the year in Argentina. So we have a top, top tier working for us. Also working with us is Chuck Edwards, as our technical advisor. Chuck works at a Saskatchewan and Research Council is a process engineer and a metallurgist and you know one of he’s been a consultant with the International Atomic Energy Agency. In the Uranium world he’s very well-known. I think there’s hardly any Uranium mine that doesn’t pass his fingerprints on process engineering and metallurgy. So we’re very proud to be working with him. And of course another local in Argentina is Jorge Berizzo who’s retired from the Argentinian Atomic Energy. And he headed the Exploration in Argentina and he was and still is very instrumental in being able to point us in the right direction there. So we truly have a very solid solid award winning team. And you know any any company is really the product of its people is.

Matthew Gordon: So you’re based in Vancouver?

Nikolaos Cacos: Yes.

Matthew Gordon: But working in Argentina for the last 25yrs.

Nikolaos Cacos: Yes.

Matthew Gordon: And do you sit on any other boards? Is this your core focus?

Nikolaos Cacos: I sit on this board. And we have another company called Golden Arrow, which is a Grosso Group managed company. And I sit on that board. Then that’s it. And then we have a Lithium company also in Argentina. And I sit on that board. We focus on… we manage our own shops.

Matthew Gordon: Report card for 2018. What does it look like for Blue Sky Uranium?

Nikolaos Cacos: 2018 was the year that we announced our making Resource, at that time was just under 20Mlbs. And it also that was the year that we we completed all our studies for the PEA. That got annouced actually in late February of 2019. So that was a truly a big landmark. I think we’re able to demonstrate to the Uranium world that ‘hey there is a deposit in Southern Argentina, that’s amongst the lowest cost’. It’s very similar to what they have in in Africa. Langer Heinrich or Kazakhstan Inc. Deposit. And so that’s been a really a landmark year for us going forward. If I can add, what we’re planning the next six months, we plan now to invest in exploration. Exploration is relatively cheap. So the next $2-3M worth of exploration we hope to grow our deposit, from 22Mlbs to wherever it may be. We were thinking, it has the potential to double or triple. And then by the end of the fourth quarter of this year, we’re planning to begin our engineering studies and Feasibility Studies to begin to take our project towards production.

Matthew Gordon: Fantastic. Fantastic. And what did the PEA. announcement do for your share price?

Nikolaos Cacos: The PEA announcement… it didn’t have an effect on our share price. It …we’re able to raise you know from from sub $0.15 to about close to $0.20. So you know it hasn’t been a huge huge move. The price of Uranium, although we’re seeing that in the hasn’t had last year has made a move about almost 50% has had a bit of a pull back in the first quarter and I think that’s what we’re sailing against the wind here. But we’re going to see the price of Uranium continue to pick up going forward and I think we’re good. The projects that are near production or very near production are going to be those that are going to get the biggest lift. And I think Bluesky is very well positioned for that. In the last Uranium bull market, I think one of the worst producing Uranium companies had over 2,000% appreciation. So Uranium can be a very, very profitable way to make money.

Matthew Gordon: Ok so let’s talk about the Uranium market a bit. In your PowerPoint page 5 you think. You quote a number, $65. It doesn’t say when I said I think you have. Have you and you’re going to stick your neck out and make a forecast in terms of when you think that will happen?

Nikolaos Cacos: Well I’m not a forecaster. There are others much smarter than me that read all those you know all the details that are involved in that. But I read what they write and and see what’s happening in the current Uranium market. And I think we’re going to see a Uranium price maybe not $6–$65 this year but I think once it crosses north between $30 and $35, I think there’s going to be a real rush to invest in Uranium companies. And I think that’s going to happen sometime this year.

Matthew Gordon: Well I suspect the rush will be to companies that are producing at levels which allow them to be economic at $30 or $35 because not everyone…

Nikolaos Cacos: That’s right and there isn’t that many there is that maybe most companies I think in Canada in Althabasca require a $60, $65 price at that price we would be making a very handsome profit. So we know that if we were in production today and we had an agreement with Argentina, we would be making money today. At current prices probably at best, at worst break even.

Matthew Gordon: Right. So just just help me out and help some of the viewers out here, perhaps a little bit near to this than than you. Give us a potted history. It’s been a very turbulence last 10, 15 years obviously with various events. Can you to some describe the Uranium market from then to where it is today?

Nikolaos Cacos: Sure. I mean we’ve seen the Uranium market reach about a decade ago was trading about $135 a pound. And then in 2011 there was earthquake and tsunami in Japan which knocked out the Fukushima old Nuclear power plant. And since then and what that had the effect in Japan it caused them to shut down all their reactors in the entire country so that they could examine the safety issues associated with each one so they don’t have another such type of disaster. So the effect since 2011 to now, has been that the Uranium market has been depressed because it’s been in ..the market has been in oversupply. We’re seeing a lot of the acceleration right now and a number of Japanese reactors coming back to the market. So that supply is coming. It’s been used up quite a bit. And we’re also seeing in China and India being the main drivers for new Nuclear reactors being built. I think there’s over 43 Nuclear reactors being built just in China. But beyond that, even in most emerging countries, it’s becoming very well recognized that Nuclear reactors are the best bet for creating a sustainable secure and safe supplies of energy. It’s a very efficient way how to produce electricity. So we’re seeing that in countries like even in oil producing countries like Emirates and in Saudi Arabia. So I truly believe that Argentina is another one too. So I truly believe that the price of Uranium is going to continue to rise. I think we’re going to see over $30,  $35 by the end of this year and next year there’s going to be a scramble at some point for the new Nuclear reactor utilities to acquire a steady supply of Uranium contracts. And at that point like you said, those that are either at production or very near production or those that are going to benefit the most of it. And blue sky where we’re getting very close to that stage right now.

Matthew Gordon: The Japanese market came off line after Fukushima. There was an oversupply in the marketplace, Japan coming back on line. So it wasn’t really a conception issue or a reputational issue around Nuclear per say, it was just an oversupply in the market that has effect a price in your opinion.

Nikolaos Cacos: That’s right. It was because it wasn’t… the supply became oversupply because the demand had shut down. Japan shut down, and then Germany shut down. But we’re seeing new openings now. In fact, just last week, I think even in the United States, there was an affirmation by the current government that they’d like to see Nuclear play a larger role in the US than, to bring back that  role back to a leadership role to where it used to be. So we’re seeing that if you want to produce a carbon free energy, right now, new wind and solar aren’t quite there in the efficiencies quite yet. A few years and quite a few years away, if they are going to get there. But Nuclear is definitely there. And also the cost of Nuclear building and operating Nuclear reactors is come down substantial. And they are becoming more much more viable alternatives for countries to create electricity.

Matthew Gordon: That said, you still got people here campaigning and going ‘Oh this is what we do with Nuclear waste etc..’ How do you how do you how do you counter those sorts of people?

Nikolaos Cacos: Well I mean there’s waste produced in everything. Coal produces a  byproduct of waste. There are companies that deal with that. Oil and gas produces waste their companies to deal with that. Nuclear industry produces waste. And there are new improving technologies to reduce the size of the lot of waste. They are recycling a lot of the radioactive elements and using them back into as inputs in the Nuclear reactors. There are ways to deal with that and treat with waste that are safe and secure. I think Nuclear energy is going to be playing a much bigger role in our global electricity generation in the future.

Matthew Gordon: Ok. So you have got a lot planned for this year. A few big deliverables coming… you’ve delivered a couple of things obviously with the Resource and the PEA. Got a few bit more exploration to do and then your fourth quarter activity. Do you hope that each of those things will have an effect on your share price, and positive effect on your share price, or do you think ultimately it is going to come down to the price of the commodity, the price of Uranium in the marketplace?

Nikolaos Cacos: Well the price of the commodity is going to be important. But I think as we move forward here it we demonstrate that this and prove that this deposit can grow substantially. I think when we begin our engineering studies and actually go into production at some point, irrespective of the price of the commodity, as even if the commodity is at $30, $35 dollars. But if we have a contract, and we’re producing Uranium and selling it at $50 or $60 or $70 dollars, we’re going to be priced by the earnings that we have at that point. So and I think that point will come very very soon and very quick. So all I know is yes, the environment for the Uranium price is going to be improving over the short term, over the near term. But more importantly I can’t control that. What I can control, is what we do with the company and I think we’re stepping the company in the right direction and creating definitely creating good value for shareholders.

Matthew Gordon: Have you got enough cash to deliver that activity this year?

Nikolaos Cacos: No, we’re going to have to raise funds to to embark on our Exploration. That’ll take us down to the Q3 and then at that point we’ll be raising additional funds for our engineering studies.

Matthew Gordon: And so the timing of that is what Q3, Q4.

Nikolaos Cacos: Yeah Q4 for Engineering. Yes.

Matthew Gordon: And then the fund raise itself sometime before that I guess sometime?

Nikolaos Cacos: Yeah it’s sometime probably the next month or so..

Matthew Gordon: And have you let the market and what sort of quantum are you looking for? You’re going to be raising.

Nikolaos Cacos: Oh I mean we’re we’re still putting together by their stuff but our estimates are between CAD$2-$3M. So it’s not a substantial amount of funds.

Matthew Gordon: No it’s not substantial. And obviously, the board is your significant holders. Between you you hold a big chunk of this.

Nikolaos Cacos: Yes we do. We own… between the board members insiders our families and close friends. We’ve got about 65% of the company and which is really substantial, because we’ve been funding this through a period where a lot of investors have been shunning Uranium. And we completely believe in what we’re doing. We wanted to move this along. So the biggest source of funds has been ourselves and we’ve been very good at that. I think we’ve brought it up to a very good point. I think we’re continuing to be investors and going forward. We think we’re on to something truly world class here, a new Uranium district. This is important not just Argentina, but I think in the global Nuclear world, what we have is going to be important and substantial and I think people are beginning to listen and we’re beginning to see a lot more interest from my various investors at this point.

Matthew Gordon: So yeah I think it’s you’re after the right things. You want the size of the Resource and it’s a district wide Resource, that’s what you know hopefully a world class asset. To fund that going forward that’s always going to be the difficult bit in terms of constant being on the road to raise capital and hopefully not to in a too dilutive manner. Whose the team on board that does the the hunting of the cash?

Nikolaos Cacos: It’s all that is all been internal. We have our own team here. We’ve been able… I’m confident we can raise the funds. We’ll raise the money to do the exploration program and then when we get to the engineering studies, I think at this point the engineered companies themselves will actually help fund it. Because that …the more money you raise the easier it gets. And I think we can do a combination of debt at that time and of course we’ll just look at the context of the market and see what’s best. We’re very keen I think to keep the company undiluted as much as possible because we are in turn large shareholders. I’m a very substantial shareholder of the company. We keep all our costs down. Our overhead costs. You know we don’t pay executives big salaries. My salary is absolutely negligible. You know our win is going to be showing the stock appreciation. So our interests are truly lined up with the interest of shareholders. And I think we’re getting very close to getting to that point.

Matthew Gordon: Great. And just even if you guys are sitting on 65%, there’s not a 35% floating. Is that mainly retail and Canadian retail?

Nikolaos Cacos: It’s all retail at this point. We haven’t been approaching any institutional shareholders, pre for the PEA. And I think now that we’ve got the PEA out, we’re beginning to both receive contact from certain institutions, and we’re out there marketing and making them aware of what we have. Because there are Uranium funds and other institutions that are beginning to take positions in Uranium as they can see that there’s a forecast of a near-term increase in Uranium valuation for Uranium assets. So we’re beginning to get on their radar map and I think as that continues I think we’re going to begin to see the market get cleaned up and see better valuations for our company. I mean our PEA. indicates that our current deposit has a net present value of USD$135M. Our company is valued at less than $15M million dollars so there’s almost a 10 fold disparity there. Ands I attribute a lot of that with with just being unknown at this point.

Matthew Gordon: Right. That’s interesting actually. So you think the institutional guys are starting to wake up to Uranium again and understand that the potential obviously people sort about the Section 232 in the States and I think that will have a benefit to the US Uranium producers. I can think of a couple at this point but it’s not having much of an impact elsewhere? I mean is that something which is you know it’s raising awareness in the market for companies like yourself?

Nikolaos Cacos: Well we’re starting to see that. Just last week I put participated in the town hall where there was a Rick Roll Sprott Securities. Was talking about the price of Uranium and very much a believer and some some other smart people on there talking about taking a position in Uranium now. So we’re beginning to hear more about that and beginning to see that. There’s a Uranium fund, I think that’s getting listed in London. That’s buying 10 or 20 million pounds of Uranium and stockpiling it. So we’re beginning to see these kinds of things happen right now. And so the Uranium market is definitely on the move.

Matthew Gordon: It just no one knows how quick it will move same.

Nikolaos Cacos: Well that’s that’s a million dollar question isn’t it.

Matthew Gordon: So okay you’ve got district wide asset, you’re going to raise the cash to get through to the end of the year. You think there’s a kind of general movement in the marketplace, appreciation of Uranium is this a hot topic for 2019. Hopefully the price moves along with that. You’ve got an experienced team, you’ve been in the country for a long time and you know what you’re doing and not what you know to work there. But why should anyone care about BlueSky vs. the other Uranium Explorers, whether it be Africa or elsewhere in the world. And why Blue Sky versus them?

Nikolaos Cacos: I think Blue Sky has a much better opportunity here, not just for appreciation, because we’ve got the support of the government and we can get promoted very quickly. But we plan to be in production in next year and a half to two years. So this is something that will go into production very, very quickly, relative to other markets. If you have a Uranium discovery, whether it be in an African country or even in another country like Peru or Colombia, it’ll take a long time to get permitted for production. Because the regulatory framework for Nuclear industry just simply isn’t there. Argentina has a need, a domestic need, and in fact we can we can begin to move to go into production now. But I think it’s prudent to show that we’ve got some expansion potential and then begin the move towards production very quickly. Also like we said earlier, those companies that are very, very near production or production of those that are going to get the best valuation and I think we’re very, very quickly positioning who’s Blue Sky for that. And the best time to buy Blue Sky is not at the end of the year, if the price of Uranium is moved up. Now is a great time because you know it’s undervalued. It’s unknown. I think as the year goes by and our marketing activities pick up in the price for grading picks up, Blue Sky will be on the go so.

Matthew Gordon: Well whether there’s a line this often so explain to me why you say you’re undervalued. In what context do you think you’re undervalued.

Nikolaos Cacos: Visa V are rather be the projects where we have, at the stage that we’re at and we’d PEA indicates $135M value for that. Even if it was as a PEA. if you discount that by 50% that still puts it at $60M, $65M valuation and we’re trading at $15M. That’s assets. It’s very low right now and I think we do hope to change that very quickly as you know as our marketing activities begin to pick up.

Matthew Gordon: Niko, as I said first time first time meeting you and hearing the story about the company, that’s great to hear what you’re doing down there in Argentina. Fantastic that it’s such a low cost project. I mean that’s quite exciting for you, especially with  the Uranium prices as it is. I’d love to catch up with the next couple of months see how things go, as you go for the next fund raise, and obviously moving into a bit more drilling and Exploration. So do stay in touch. And thank you for today.

Nikolaos Cacos: Great. Thank you.

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Vimy Resources (ASX: VMY) – Uranium, Cartels, Fatigue, $75, Frustration, Converts & Equities vs. Spot

CRUX had the pleasure of speaking with Vimy Resources CEO Mike Young. He says that he feels in control because of what the Utilities told him. Find out what they said to him in this interview. He also talks about his view on what Section 232 will do for the contract market and his views on US energy security and Russia. Plus what Cameco is going to do about Energy Fuels and UR Energy.

Click here to watch the interview.

Matthew Gordon: Good morning Mike. How are you?

Mike Young: Good. Well good morning for you. Good afternoon for me.

Matthew Gordon: Of course of course of course. You’re in sunny Perth I guess for you.

Mike Young: It is indeed sunny today.

Matthew Gordon: Beautiful, beautiful. OK so Mike just to just set the scene for people, can you give us a two minute elevator pitch just to describe Vimy Resources please..

Mike Young: So we’re a Uranium development company. Development and Exploration. We have a big project called the Mulga Rock project in Western Australia. That has full environmental Federal and State Environmental permits. We’re currently working through the secondary approvals now so those you’re working permits and things like that. Mulga Rock does need a $55 contract price to work that will be a 3.5Mt pound a year operation and we hope to bring that into production in about 2022. So we’re looking at going through the contract cycle through this year. This county year and then getting into financing the first half of next calendar year and FID halfway through next year. The second project that we have it. You know there’s a lot of excitement about in the short term is the Alligator River project. That sits in what’s called the Alligator River Uranium province and that’s a really unexplored province because of Uranium politics and native title issues WA in Australia and Northern Territory. But Cameco who we bought the project from has done a great job of achieving granted tenure in some of the most prospective ground in the Alligator River area. Alligator River hosts Jabiluka which is a 380 million pound deposit and also the Ranger deposit which is being have been mined for 40 years. So it’s it’s a very in fact Geologically it’s identical to the Athabasca Basin. So we like to call it the Athabasca down under. So we have a development project which we can take into production and I might add that we do have a team of experienced people who have brought mines into production previously, including myself. And then we’ve got this really exciting Exploration ground up in the Northern Territory.

Matthew Gordon: And thanks for that summary. So just to set the scene again for people perhaps new to see the Uranium space and obviously Vimy. We want to talk about a conversation we had recently with one of the American players. This sort of alleged price fixing this kind of unofficial OPEC as it were. You’ve got KazAtomProm. you’ve got Cameco. You’ve got Russia. You’ve got China. You’ve got some fairly major players with vested interests in this space and highly incentivized to keep the pricing at a point where junior Explorers may find it difficult to come into production. I mean what are your views on that.

Mike Young: Well firstly I don’t think because KazAtomProm & Cameco lie awake at night worrying but Energy Fuels. They’re very small. They always will be. They’re not a major producer. They’re not sitting on massively large deposits like KazAtomProm and Cameco are. Camerco and KazAtomProm from are on record and in personal conversations with them at wanting to see a higher price. Cameco particularly, they’re a public company, and they would they would certainly like to see a higher price and increase their margins. We all know that the McArthur River mine shut because they cannot get long term contracts at a price that will sustain production there. And Tim Gitzel has said on several occasions that they won’t open it unless the price is sustainably higher. With KazAtomProm, I think because KazAtomProm is interesting because they have come from a former Soviet republic. They obviously started mining Uranium a long time ago. In fact Kyrgyzstan right next door is where a lot of the Uranium for their Nuclear weapons program came from. So a long history of Uranium mining. You know the early part of the century they started ramping up that mine and using situ leach mining. It’s interesting you know because everyone has this there’s this mythology that the mining in Kazakhstan is actually really cheap but we know that they were capitalizing their well development and it actually wasn’t that cheap. And we saw that in the IPO. In fact we’d been saying for several years that their costs were more like $20, mid $20s and that’s certainly been the case in the IPO. So KazAtomProm come from a former  Soviet republic where they measured output in terms of volume not necessarily value. They were just pumping out material whether it be lead pipes  or ball bearings. They didn’t act like a Western nation. So what’s been really interesting about KazAtomProm is they have gone through a huge transition largely through the efforts of Riaz Rizvi to take that to an IPO. And to do that they have had to basically Westernize the accounting system and I know they had a lot of consultants in there helping them with that actually establishing what their true all in sustaining costs (AISC) were. And we know that the role in sustaining costs are are as I say in the $20s. So now they’re going to start behaving. My view is they’ll start behaving more like a western style  company and they’ll start looking at value over volume. And they certainly would like to see that price higher as well. Because as we know the Kazakh material that they get from their joint ventures they have to sell at market prices and the only market is the spot market which I actually referred to as an arbitrage market.

Matthew Gordon: Okay. But the fundamental rules of supply and demand still work. You know we saw on in the last round that you know a huge number of companies started up some numbers quoted as high as 500 companies in the Uranium space. Clearly too many. Oversupply in the market. Prices have come back down. So you don’t feel that these larger producers have the need to almost regulate, OPEC’s style, the pricing to stop that kind of surge of new entrants into the market.

Mike Young: Well I worked in iron ore last year on an iron ore mine called BC Iron in which we took from first row hold the first ore and ship it under four years. And you know BHP and Rio and Vale were often accused of the same thing. Now you know these companies they obviously are price makers because the volumes are so high that they can affect price. Are they behaving as a cartel. Well no. If people have proof to the contrary then they should put that forward. But you know it’s a case of it’s a case of put up or shut up really. So these guys aren’t price makers now. They they probably would like to see the price higher and Tim Gitzel is on record saying that his actions speak louder than words because McArthur River shut.

Matthew Gordon: Right. But when you say they will the price higher. I mean is there is there a kind of cut off or they you know they want market forces applied and drive it up as high as it will go. Where is it stop?

Mike Young: I think what you’ll find is that there was a good bit of work done by David Sadowski when he was an analyst at Raymond James. He did a paper in November 2015. Now although it’s a bit out of date, it’s still a seminal bit of work and I would suggest your viewers actually look it up, it’s available on the Internet. And what it was was it was a paper on the incentive cost of new production and he had some very detailed. David, I know David very well, he’s someone you should have on your show in fact. And he he did a lot of work. Yes some very detailed models and what he did was he showed that at a $75 there is a massive plateau of of production that could come on and so that’s to me that’s that that’s the ceiling for anybody who has the capacity to manage the market. That’s the ceiling. Now obviously you want to get close to the ceiling because you bump your head so you know maybe dial that back $10 bucks you’re looking at $65 $60. Now of course those are the numbers I like because those are good numbers for us. But when you look at the fundamentals of new supply $75 does seem to bring in a lot of supply based on the work that David did. All right now obviously with five years time gap those numbers might change a bit but the shape of the curve will probably remain the same. Now I think I think both those companies have exhibited some an enormous discipline when they could have just flooded the market like BHP and Rio did in the last iron ore downturn. I think a lesson can be taken from the iron ore space where you had FMG come in as an upstart. A lot of junior’s, one of which I ran. And so at the level we’re playing, at the level that UR Energy and Energy Fuels are playing at, the big guys to worry so much, we’re on the margins. And the important thing for us is, as with any commodity, there is a cost curve. Now the problem with our business is no one really knows what that cost curve is. And with any commodity there’s a cost curve and provided you as a producer can come inside that cost curve, then your competitors are the high the high end producers in that cost curve and those are the guys I’m thinking about. So the guys who occupy the first and second quartile, who are the big producers, and this is the same as iron ore and other commodities, Nickel is a good one. I can’t worry about them right. The guys I need to target are the guys who are higher cost producers and I am. And so what I need to do is getting under them with my costs keep my costs down and remain competitive. So you know guys like us the third quartile is the sweet spot. Now a lot of juniors won’t tell you that. They’ll say “no no we are first quartile”. Well according to our price graph which we supply, most of the first quartile secondary supply and then the Olympic Dam. So it’s not a whole lot of room there. So you know we look at that third quartile because you’ve got some buffer but that’s where you want to be and that’s what we target.

Matthew Gordon: That’s kind of interesting, you know. You’re saying that they make the majors you’re too small for them to worry about at this point. I think you’re right. If you look at other commodities, you know the majors have played it a certain way. But isn’t there an opportunity for them if they get the pricing right, they make it very difficult for some of the smaller players to get off the mark, even if they’re sitting on great assets, with a lot of pounds under the ground. They’re going to run out of cash at some point and can be scooped up for huge discounts.

Mike Young: Yes that happened in the iron ore space. Absolutely. That’s always a that’s always a concern.

Matthew Gordon: But that’s the game.

Mike Young: Absolutely. And some quality assets there. You know if you sweat those guys and you pick them up for a song. You do two things you’ve picked up a quality assets cheaply. You’ve also sequested the production for the foreseeable future. But the key thing is let’s look at the demand side. So the demand right now is dominated by America. We know that they’ve just gone through a hiatus because of Section 232. I can I can honestly tell you that the world has Section 232 fatigue. Right. But let’s look at how they manage your contracts. So what do utilities do? as they do portfolio management. So what they’ll do is they’ll layer cake and they’ll have a base load. Pardon the pun. I’ll have baseload, from the Cameco, KazAtomProms, the bigger producers. They want, they want spread of supply. They want security of supply and they’d like to see geographic and country risk spread. And so we know from our discussions because we have a guy named Scott Hymann who works in the States and has worked with Cameco and worked with Dominion. We know how they layer cake contracts and we know we know that there is space for us in that portfolio management. So while Cameco and KazAtomProm may keep the price down the utilities don’t want to buy all the material from two users. So that’s why if you’re nimble like, and I learned this in iron ore, selling iron ore into a space that was dominated by BHP Rio and vale, that if you’re nimble enough and you can stay inside the cost curve, you’re going to find customers you can sell your material. Your margins aren’t going to be as high but when you’re a small company with lower overheads, you know and the key thing is and I might add that my philosophy is pay dividends as soon as possible, you actually return a lot of value to shareholders.

Matthew Gordon: Ok. That’s really interesting. See you’re saying that there is a niche for you in there. You’re saying at lower lower prices but utilities are looking for a bit of certainty and say so they think that …You think they’ll continue with long term contracts. That’s part of their buying philosophy going forward. Nothing’s changed there because I think there’s been a few hypotheses about the fact that why not stick with just spot price going forward. You Know given that given what pricing is done over the past few years.

Mike Young: That would actually be a good outcome because if you if you actually free the market up and it became a truly free market with a clearing house, and the spot price was a true spot price, and not an arbitrage floor price, you would see the cost of Uranium move towards the marginal cost of production. Which in an all in sustaining cost (AISC) basis is $55 to $60 dollars and on top of that if you have return on it on equity, you’ve got a higher price. I would love nothing more than to see a true Uranium market but we know that’s not going to happen. Part of that is because you know the fuel cycle takes 18  months to two years and they just want to have that material waiting to go into the reactor and know that it’s going to be you know in train. Steel mill shuts down it’s costly, Nuclear plant shuts down it’s really costly.

Matthew Gordon: Yeah. So I guess given the way that you are painting this picture, you think there’s a future for junior Uranium miners like yourself in this space.

Mike Young: I do and I think it’s the miners who are ready to go now that are the ones that are gonna benefit. So no doubt. I’ve been I’ve been as I said to you earlier I’m 58. I’ve been in the industry a long time. I’ve seen lots of booms and busts and it’s always the same cycle. Right. It’s the early movers you get the advantage. The early movers you do you know corporately they get taken out. They do mergers that you’re all the things that happens when you’re in the space it’s growing. And then you know everyone comes along and the next thing you know there’s there’s 110 Uranium miners but they’ve missed the boat. Right. And so it’s the guys we’re a very small group right.

Matthew Gordon: Yeah. You’re permitted. You’ve got some drilling done. You’ve got some line of sight as to what’s under the ground. So you feel things are still in your hands. This is not out of your hands, you’re in control.

Mike Young: Yeah I feel in control. We do a lot of research. We do, you know, Julian Tapp who works with us is on the supply demand working group with the WNBA. So we have a lot of well let’s call it inside information on supply demand dynamics and you know the fact that we have Scott Hyman working for us in the states gives us on the ground intel. You know he’s he’s connected to any ice connected to WNYC. So you know we we do have a lot of confidence. But as all all good managers you should have a plan B and Plan B is basically the Alligator River. And so we there’s a full definitive feasibility study completed on Mulga Rock. So that’s technically a risk waiting for the tide to rise. Alligator River while we in Australia aren’t allowed to release preliminary economic assessments we have said that it would work in this market. Right. That is a high grade deposit albeit at the moment small. We want to do more Exploration to discover other deposits train a satellite pit scenario, if you like, but the angle early deposit at 1.3% works today.

Matthew Gordon: Well let’s come back to the asset. We are going to talk about it in some detail in a minute. I want to get on to, again just in terms of the scene setting describing the arena in which we’re playing. We talked about a second ago Section 2332. The world is fatigued by that by the topic but the world still doesn’t quite understand what it means. It doesn’t understand what it means for US. players or other, let’s say, US friendly countries and indeed how the Uranium Uranium space is going to react to it. So what’s your views on the impact of 232? In fact how is it gonna be structured?

Mike Young: Well that’s anyone’s guess. I mean in the early days of the 232, in fact from a September last year in London WNA, we were meeting with one of the fuel buyers. And and he said you know we’ve run 100 different scenarios of what it could look like and then it goes to the president. So you know the inference was it could be anything right. It could be you have to get Uranium from the moon. Who knows right. But we think we’ve done a bit of work on this. Again Julian and I’ve sat down and thought about this pretty deeply. We don’t think it’ll be too. And David Talbot at Eight Capital put a good paper several weeks ago on what the tariffs would have to look like to incentivize production in the States. And I think he, I can’t remember that I have ADHD so remembering details and I don’t mix, but I think tariffs will plus 100% to about 150%. That’s what the tariff had to be to incentivize enough production in America. So I think that’s off the table. So then you look at it’s now a 25% quota which the petitioners are asking for, depending on who you ask, is not feasibly possible in the United States in the foreseeable future. They just don’t have the production ready to go. How much could they ramp up? I don’t know. They say they could ramp up very quickly. I’ve done a lot of permitting around the world and I know that permitting Uranium project takes a long time. It would take them a long time to get up to 25%. It would take a lot of new players and you would create a bi-furcating price market. You would have us price which would have to top $100 and then you have the rest of the world price. So I don’t think that’s gonna happen. But what what can happen I think is that you have countries specific tariffs. This is this is what we think is going to happen. So I’ll just say that I think the consensus is that the president will take the full 90 days to make his determination, not surprising. In university I was the same, I didn’t study till the last minute. We’re all the same. It’s human nature right. But he has to balance keeping a Nuclear industry which in the unregulated markets is marginal because of the price of gas and subsidized wind and solar. He has to balance that against having a fuel industry in the States if they want to have mines and downstream processing et cetera. So you’ve got to balance that. And so I think I think it’ll be a form of country specific tariffs. I mean if there is truly a national security issue.

Matthew Gordon: Well do you think there is?

Mike Young: No, I don’t think there is. I think if there were truly a national security issue then US producers buying their material on spot wouldn’t be buying it from Kazakhstan and et cetera. But the issue is if there was truly an issue, wouldn’t it be better to leave the ground until you need it. Maybe that’s the outcome. That’s not the outcome the petitioners want. I think the I think the national security issue was an afterthought. From after when the petition was actually put in.

Matthew Gordon: So do you think it’s do you think that’s disingenuous?

Mike Young: Yes, I actually yes. I actually believe that the petitioners were looking to catalyze discussions with the utilities and it was a scare tactic that got out of control.

Matthew Gordon: It certainly got everyone talking for sure. But I think there’s an expectation in the market certainly with US. investors or people invested in US. equities in the Uranium space, that this will see an immediate bump. Now the reality is whatever is determined, let’s say it’s positive, it’s still going to take the company, I’m told by the CEO, five six years for them to actually optimize that decision. Do you think that the US Uranium equities are going to see a bump or is it just business as usual and this is just been a discussion which has been put out there and people are going to crack on as normal.

Mike Young: No, no it’s had a fundamental effect on the market. And the reason is that the utilities basically they’re they’re contracting cycles became frozen and that was a word that they used often with us when we visited them. That we are our contracting is now frozen because no one’s going to sign a contract with the utilities saying well we’ll agree to this price but if 232 goes a certain way, we’re going to rip up the contract. So their view was there’s no point writing the contract. And you also have to remember that the utility spent an inordinate amount of time dealing with the petition. So we know we know that there were hundreds if not thousands of man hours spent on the petition the original submissions and the DOC questionnaire.

Matthew Gordon: But doing what? Time spent spending the time spent doing what? I mean how were they trying to influence that?

Mike Young: No, no actually writing submissions to the DOC questionnaire. I don’t know if you ever saw it. Thank God we’re not an American company because I would have had to hire 20 people. I know I know that the the number of man hours, I can’t disclose it because you know these these conversations are private, the number of man hours the utility spent just on the DOC questionnaire, were who were extraordinary. You know, I mean they really were full time on this issue you know. And instead I mean the DOC now has one of the best databases on Earth in terms of all the Utilities in America now, because the questionnaire is extraordinary. The depth they were asking in there you know. They’re asking to go back 10 years on your contracts. Now imagine a company like Exelon with 26 units. We want to see 10 years of contracts for 26 units. That’s 260 years of contracts that they have to go fish out of there… whatever they keep them in.

Matthew Gordon: Right. So they saying that the DOC I’m treating this seriously. It’s a serious consideration. But in the context of all the other energy suppliers out.

Mike Young: I’m sorry. I just… there was one other thing I want to add and I think you hinted on it. So once this is finished and I’m sorry it went off on a tangent, but as I said I’m ADHD, once this is finished the certainty will come back into the market. They’ll know what the playing field is. They can see into the future say it is a 25% quota. So that’s you know that’s what comes out. Well they’re going to know that in the next five years and maybe even 10 years they’re going to have to buy that Uranium somewhere else. And so that certainly will come back to the market. Now utilities have been inactive for almost 18 months. And they’re uncovered positions and 2021 and 2022 jumped by 30%. So they’ve got to get their skates on. And so I think what you’ll see is now that we have certainly on the playing field they’re going to start writing contracts again. Now my belief is that we are never going to see a spot price surge like we saw in 2007. I think what you’re going to see is that the spot price will be dragged up by the contracts.

Matthew Gordon: Right. Interesting.

Mike Young: That’s probably because the spot price as we know is an arbitrage market. We know that it’s not a true spot market in any sense of the word. So the spot market will always follow contracts. So if the spot players can get.. you know they’ll pay whatever it is to make a margin to sell it into a contract. So I think that’s what you’re gonna see certainly return. And my view is if certainty returns you’ll see contracts getting written and we know from Cameco who’s one of the lowest cost producer on the cost curve, we know that the price has to be higher.

Matthew Gordon: Right so to a degree is also controlled by what the where the end user chooses to buy their energy from. So that’s what the Utilities have got in the back of their mind.

Mike Young: You mean the customer, the guy turning his lights off and on in the house?

Matthew Gordon: Exactly

Mike Young: I think the issue is America. You know it is right now it’s the biggest market and China’s doing what they can to catch up by I think 2030 they’ll supersede America. France has announced that they’re going to push back their Nuclear shutdown for 10 years which is you know this is a typical politician kicking it down the road for another decision. The interesting thing is that we’re seeing in some American states now that non-emitting credits, zero emission credits are now being given to Nuclear power plants. So I think I think we’ll start seeing as the. Climate change Crisis, if you want to call it that, I’m a geologist but the crisis, the Scientology, as it consumes people’s psyches and they’re looking for answers, you’re seeing more and more people turning to Nuclear or saying well actually you know when we look at it scientifically it’s not nearly as dangerous as we thought. And it’s actually really efficient and we should be looking at Nuclear power. You’re looking at small modular reactors which I think in the next 10 years will be commercialized. And way down the track, you’re looking at Fusion. I think that’s a long way off. But I think what you’ll see is that is that Nuclear energy. The OECD countries will remain static, but in Non-OECD countries, you’re going to see a lot of growth. So I think people are you know people are worrying more about how that energy is being produced, than they are really about about the cost. I mean that’s obvious.

Matthew Gordon: That’s a big topic and perhaps we come back to that another another time because it’s a very emotive subject when we know this from the feedback we’ve had from our YouTube Subscribers and on Twitter. This whole clean energy versus toxic waste coming together. You know both sides are intransient.

Mike Young: Can I just say something. I really really love the fact that you put out there on Twitter that you’re going to interview me and people engage and ask questions. I just think that’s fantastic. And I love it. I love interacting with your with your Followers but also the Followers on Twitter. I just wanted to put that out there and… I lost my train of thought completely something. I know it was there was something on Twitter that I retweeted and it was an article on how much waste is actually out there ever.

Matthew Gordon: Is this the coke can one?

Mike Young: No. That’s that’s how much a person requires for an entire entire lifetime. It’s 370,000 tonnes of waste. Now that sounds like a lot but there’s about 20 million tons of solar panels in China alone that will become waste in about 20 years, leaving that aside. So that would fill a soccer pitch to about three meters high, 10 feet. That’s how much waste is there’s nothing. You know it’s not an issue but when you look into the spent fuel. And you look into safety. And you look into Nuclear power in terms of how much power delivers for how little fuel it uses, scientifically and not emotionally. Then you start to go… Mike Shellenberger is a great example. I mean, he was he was I don’t ever you know who Michael is but he’s a great blogger, ran for governor of California to highlight the fact that they were shutting down the Nuclear power plants. But he was… he’s a convert. And like all converts, very loud about it. He was a person who who environmentalist, very intelligent wanted wind and solar started looking into it and said Gosh these things just aren’t going to give us what we thought they would. We need to look at Nuclear. So that’s happening more and more you can you can actually wear a shirt saying I’m a Uranium miner down. You know people come up and ask you questions. And the biggest response they always say is “gosh I didn’t know that.”

Matthew Gordon: And it is fascinating. Let’s say yes it’s probably topic for another conversation ….

Mike Young: Let me grab something to say on set. So this is this is a great. This is a great gimmick that I came up with a couple of years ago. OK. So you can see how big this is right I(40cmx40cm ish cube). So if this was a piece of Nuclear fuel. Before it spreads in reactor, I actually could hold it this close without it being toxic but if you would weigh about three kilograms or about seven and a half pounds which is not very big. That would power about 150 Australian homes for a year. That would offset the use of 400 tons of coal, Now 400 tons of coal would be a million of those cubes. There would be a cube like that six metres high. And it would basically offset. In fact the amount of Uranium that Mulga Rock will produce, will help to offset the equivalent of 13% of Australia’s total CO2 emissions. So when you start looking at that and you start looking at it scientifically and unemotionally, you just go “What are we doing”. You know it’s 53% of America’s non-emitting power. It’s 20% of their electricity.

Matthew Gordon: If you’ve any information you want to share with us and we can get out there, heavily branded with them and of course, we’d like to see that. Well let’s get onto what everyone wants to hear about, which is Mulga Rock and Alligator River. And I’m sure that you want to talk about as well so why don’t you kick off with Mulga Rock and tell us a little bit about that and I’ll dip in with questions.

Mike Young: Oh go back there it’s history. It’s really interesting. We discovered it in 1970 by the Japanese. Completely blind deposit. What they did was they basically bulldozed a road through the Australian bush basically in the middle of nowhere for 160km. And they drill a hole and 4 kilometres and that’s how they hit it. Didn’t know it was there. They just knew that the geology was right. They then spent 20 years working on it. Due to political pressure back home. And corporation back home and political pressure in Australia. They quit. A gentleman named Mike Fewster is one of our shareholders picked it up and listed a company called Energy Minerals Australia in 2008. In 2013 I had left the iron ore company and was running. Mainly because all we were doing was making money and I was bored. So that was a great gig but we weren’t really doing a lot of business development. We were just know hugely successful from a corporate standpoint but not what I wanted to do. I love building mines. So I got involved, back then we recapitalized the company had big debt, needed money. Andrew Forrest came in and Andrew Forrest is a 38% shareholder of Fortescue Metals Group. It’s a $16Bn, $18Bn iron ore company. And then we renamed it to Vimy. And Vimy is a town in Northern France. Where in World War 1, the Canadians had a very successful battle and my great uncle was killed there. So it didn’t translate into anything bad in Korean, Japanese or Chinese which is something you always have to check. But we rebadged it. We man up, personed up. Got a really good CEO on board who then, and we started to pre-feasibility study (PFS) feasibility study which we released in January 2013. 15 year mine life (LOM). 3.5Mlbs of Uranium a year, average grade is about 770 PPM so 0.8% but we do plan to mine a higher-grade for the first five years. This is a large open pit. This is basically an old river channel 50m deep. The ore is basically just unconsolidated river sediment organic. We have no drilling & blast. Our mining costs are very cheap, we’re basically sand mining. We’re going to mine it like a strip mine. So we’ll start at one end of this old river channel, dig a hole and as we move forward, we’ll dump the waste behind us. It actually has a really low residual footprint. Because of that. We’re actually backfilling our pits and we’re really proud of that. The ore is then treated using acid leach and resin and we then extract Uranium and form yellowcake. And it’s a really technically simple process. During the DFS, we dug to 50m deep test pits. And we did that to assess, what I call the dig-ability of the overburden, because you’re mining costs are one of your big drivers for your OPEX. And then we took 100 tonnes of sample, took that back to Perth and put that through a pilot plant. Then the thoroughness of what we did can be highlighted by the fact that we have a bore field on-site which will provide water for the operation. We have more than enough for a 90 year operation. We actually trucked 2.5 tonnes of water from our bore field to the pilot plant in Perth to make sure that we were crossing every t, dotting every i. Because normally you just use tap water you know add some salt to it to make it look like that water. But we actually we literally trucked water from 800km from Perth in the middle of nowhere, to Perth so that the pilot plant just would have no questions, all answers.

Matthew Gordon: So you’ve a DFS, you’ve got a NPV here of $500M, at $60. You need that $60. Obviously today it’s not at that. So you need something to change in the marketplace obviously to monetize that, not not least of all getting some cash into the company presumably. And that’s not going to happen again until the price moves. So I mean what is what’s the position with regards to Mulga Rock at the moment. Is it just kind of sitting around and waiting for something to change or do you continue to drill. I mean how are you managing managing things?

Mike Young: So we’ve got all the technical work is done. We’ll obviously have to go back to the DFS at some point in the next year and actually reset some of the assumptions on on costs. Cost of people. Costs and equipment. I don’t think… the costs haven’t blown out in any huge amount in Western Australia in terms of a mining boom. You know we think that the DFS is pretty valid but we need to to validate it. So we’ll certainly do that this year but I wouldn’t think those numbers would change too much. So the plan for us is this is a marketing led financing. So we need to get contracts which then lead to debt which then leads to equity. So we need to have the contracts first and that’s where a lot of our effort has gone. The section 232…Section 232 It’s been a double edged sword because, yes it has caused a lot of consternation but it’s actually pulled that rubber band back a bit.

Matthew Gordon: Meaning?

Mike Young: Meaning, if the utilities had been running contracts normally Section 232 didn’t happen. There was no hiatus in the contracting market. I think what would have happened is that a lot of marginal producers would have written, not loss making contracts, but marginal contracts to just keep going until the price went up. Whereas I think by having this hiatus, there’ll be a little bit more urgency on the buy side and I think what you’ll see is that… I think you’ll see a relaxing of what people want to pay to get that security of supply because the hiatus is actually caused some people to go by the wayside.

Matthew Gordon: That’s well that’s it that’s an interesting thought if you think that people will relax that those thresholds. You know I’m an ex-banker you know we needed a certainty on lots of different moving parts before we would consider investing into something. Mulga Rock is at that point where if you’ve done the DFS, you’re pretty much ready to go?

Mike Young: We’re working through what I call the secondary permits. So you need your mine closure plan, mine management plan. Those are those are like getting a permit house. You just go through an exercise with the government we’re currently doing that.

Matthew Gordon: It’s a  known process and I know the Australian Government at the moment isn’t necessarily pro-Nuclear but it’s letting in mine. Yeah?

Mike Young: Both sides. So so we’re about to have a federal election in May. The odds are now that the Labor Party will win but they have a policy that allows Uranium mining. So that’s not an issue. The State Government had already said that we are allowed to proceed because we’ve got all the permits that the State Government provides so they’ve said that we can move forward.

Matthew Gordon: Right. And so that’s not going to affect your secondary permits or licenses at all?

Mike Young: No, no, no it can’t. In fact it can’t. And that’s a good question because the government…when they read into Parliament their Uranium policy they made it quite clear that they could use that secondary process to frustrate our  operation and they haven’t been.

Matthew Gordon: So that brings us back to the economics here. So you know you’re going to at some point… you’ve got some cash in the bank at the moment.  How much should be how much are you sitting on?

Mike Young: We’ve got $2.4M in the bank and we’ll probably spend a million over the next quarter.

Matthew Gordon: Right and say that’ll see you through. I don’t what was the timeline?

Mike Young: The next financial year.

Matthew Gordon: Right. Okay. So that gets you through the next financial year. So there’s a lot of things I’ve got to move in the marketplace for you to be able to raise additional capital to get this thing into production. Not least of all the spot price and then it’s a question of you know how cheap or how expensive that money is. Yeah. But you’re ready to go. Obviously looking at secondary permits and from what you said earlier that also puts you in a very good position compared to a lot of the the juniors out there. Not everyone has the permits or even DFS is in place for people to be able to make the economic assessment. So you’re feeling quietly confident you can get through to the point where you think the market will move.

Mike Young: Yes well yes absolutely. And you know I’ve run junior companies. I’ve been associated with juniors for a long time and you know you do have to go out and tap the market down again. We have very supportive shareholders so the last time we do to raise both are our 10% shareholder in Paradise and 14% shareholder in Forest Family Investments, they both followed their money. So you know we have very good support from our brokers. So we need to raise money to keep the lights on if you like. That’s not a problem. So we. That’s not an issue. Now the question is you know we get asked a lot, “How does a company that’s capitalized at $30M raise that much money?”. Well there’s two answers that. 1.One is, if the market recovers to the point where we can make this work, then you’re going to have growth in your equity side. Your market capital grow. 2. And the second thing is that when you look at this project from a technical standpoint, how quite simple it is. The low technical risk of this project and you look at where a lot of commentators think the price is going to go in terms of the spot price or the consensus price forecast, if you like. It does take us up to where we need to be. So you’ve got to remember that it’s a two year build. So say, we go into financial investment decision in 2020 and we decide mid 2020 that yes we’re going to we’re gonna go on this, we’ve got financing, we’re going to go. It’s mid 2022 to before you’re producing. Now by mid 2022, the general consensus is that is that the median consensus price is around $51 and if you add the normal margin to that you would see historically on a $50 price, it’s up around $62. So those are just prices and that’s stuff we’d like to get into the market. We’ve got a lot of information on this stuff we want to get out there. But I think and that’s $62 would be a great price. $55 would work for us. $62 would be fantastic. So it’s going to be market led and as I say, it’ll be market made by us getting the contracts. We’ve done a lot of work with banks. We know what our floor price needs to be. And so that’s the trick. So get the contracts at the price that will allow the debt and that allow the equity. You know it’s hard work. It’s not, I’m not saying you know I don’t, I’m not delusional. I don’t think this is going to be easy. But I do believe that if the prices get where we need them to be, we will make it work. And we have built mines before. So that bit of it once the financing is done, that bit of it’ll be, ironically, it’ll be the easy bit.

Matthew Gordon: I understand that and I think people should appreciate the fact that you have done this before, albeit in a different space there things, there are cycles and they run they play the same way generally. You touched upon your shareholders. Obviously the Forest Family is very well known. Paradise Investment, I’ve not heard of them. Are they an Aussie outfit.

Mike Young: Yeah they’re based in Sydney. So run by you be a fund run by David Paradise. They they run, I think they basically do high net worth money. Very successful, they’ve had they’ve had very good yields, good returns. They’re..what’s the best way… a smart conservative is probably the best way. They actually like the Uranium space. They have a few investments in Uranium. They also invest in BC Iron and did very well out of that. So they and I have a history so they’re you know they’re backing, I guess, they’re backing the jockey as well as the horse.

Matthew Gordon: What about Michael Fewster?

Mike Young: So Michael was he’s a geologist. He is the founder of the company. So he’s been in since the beginning. Slowly diluted down. But Michael you know he very strongly likes the Uranium space. I mean he’s, this is his baby if you like. And there’s nothing I’m going to enjoy better than than handing Michael the scissors to cut the ribbon at the opening ceremony. Michael deserves to be there for that.

Matthew Gordon: So how much money is actually gone into the company then from the start. Well not from the start, the latest incarnation.

Mike Young: Okay. So since I got involved. It would be around $43M give or take. The DFS was about $30M, on time, on budget. I might say including two just bits. So we have we’ve had in my time I think it’s around that much.

Matthew Gordon: Right. And then I would say market cap is what it is today. I didn’t look to be quite honest says $37.3M on the presentations. Yeah, there or thereabouts. Let’s be generous and say it’s a dollar for dollar at the moment, all right.  Because it’s all price lead. The commodity prices is going to determine that it will come back as the spot price changes. What are you what do your shareholders nervous about? What are the things they talk to you about at the shareholder meetings? Certainly the larger ones.

Mike Young: They talk to me about the the government approvals. That’s always an issue. They ask about the federal government with the election coming up. We’ve made it pretty clear, there is there is a condition in our public environmental review that we can we initiate substantive works by December 21 2019, I think it is which we expect to do. So we you know we expect being on current plans, we’ll be well into construction by that point. That’s a condition of the PER that the Minister can you can roll it over to another five years if he wants. You know, there’s environmental activism. There’s groups who don’t want us to do this. It’s frustrating personally because I think when you look at clean energy this is one of the cleanest. But you know we deal with that. It’s mainly the price. Section 232 of course has been on everyone’s lips last year. And you know a lot of them are asking the question you saw on Twitter. So those are those are those that was actually a really great exercise to see people asking questions.

Matthew Gordon: Yeah I think it was and we need to thank a lot of people for the contributions. Like I say it’s a very emotive subject. It put a polarizing in a way. Your shareholders are passing on the fact that the price will come back and it’s just a question of when, not if, so they’re fully supportive financially.

Mike Young: I think I think there are also some of them will be we’ll be betting that the Alligator River Project also has some good results to tell me.

Matthew Gordon: Tell me about it. We did. We should come back to that so tell me about Alligator River.

Mike Young: So Alligator River as I said in my opening is basically a geological province in the Northern Territory of Australia. Part of it is covered by Kakadu National Parks and that’s obviously off limits. Cameco, who we brought the project from has done a great job of amassing a large tenement block over 80km long. If you were to put this tenement block and  put it on top of the Athabasca base and you would see that’s quite a large land position. It’s sitting on some very prospective geology. The geology is very similar to the Athabasca basin. That’s on conformity style Uranium deposits. And we have all the styles. We have Ranger style which would be like the basement style deposits that you have in the Athabasca. We’ve got the McArthur River style. Cigar Lake style. Those all exist. We can see the structures. The thing that’s happened is because of Uranium politics in Australia. There was three mines Uranium policy in Australia for a long time. And because of that we had three operating mines. Nobody was doing Uranium Exploration. So this area, while Exploration in the 80s, 90s was going gangbusters in the Athabasca Basin. Nothing was happening in the Alligator River Province. So we’re basically sitting on a piece of ground that’s as prospective as anything and the Athabasca basin has not been explored since 1980. That’s what we’re sitting on and that’s the value proposition right. So we’ve basically done some preliminary work. We’ve identified some walkup targets once called Suchwow and Sheba. And the other ones called Anulaalee. Those are smaller high-grade targets. And we’ve also got targets that look like Jabiluka and Ranger called Condor and South Blank and those are our next generation projects. We have what Donald Rumsfeld once called a target rich environment. So you know we have a lot of work to do and a lot of partner to come in and help us with this. You can easily spend $15M a year up there generating targets world cost targets. So you know there’s a lot of work to do. We’ve got a good team, experienced team. One of the geologists came across from Cameco. Penny Sinclair working with us doing a great job. General Manager of geology is Xavier Moreau has been in Uranium, I think before he’s born, frankly. But he loves Uranium. So you know we’ve got a really dedicated team and we’re looking forward..

Matthew Gordon: Does it frustrate you that that’s not getting valued? You’re not getting the reflective value that you think is there?

Mike Young: I think we’ve got… I think we’ve got people watching us because of it. I think there are people going “OK I can see a catalyst a short term catalyst”. You know the problem when you develop a project is that you go through the initial phase..bit  like being married you know you go through the honeymoon period it’s all great.

Matthew Gordon: I don’t what you’re talking about…

Mike Young: You know.. you got it and then that’s about a rock project right. That’s ready for an anniversary party or something. But you know Anugulaalee is the thing that’s going to really generate short term news. So you’ve got exponential thing which is the Uranium market you know the thing that we can control is know Mulga Rock we continue the permitting process but I Angulaalee is to go up and drill some of these targets right.

Matthew Gordon: I mean you said that people are watching you and you used the phrase short term there. But yeah have you been approached by people or is it just too difficult in this market for people other people other than… unless they’ve got cash, like a Cameco, is anyone approaching say discuss ‘Well why don’t we look at that project for you do some kind of joint venture.’

Mike Young: I’m trying to remember if I disclose this or not. I think …we have to disclose that. Could release this year the ASX so that would be good. I think we have talked to parties are interested parties and certainly I’ve got a good reception at PDAC. And you know there are there are people who work in Canada who know this part of the world and you know we’ve expressed interest.So we’re kind we’re pulling all the levers if you like.

Matthew Gordon: So are they would they be strategic investors or strategic partnerships who perhaps want to operate or are you looking at all the above?

Mike Young: All of the above. Yeah absolutely

Matthew Gordon: Okay okay. So I mean I asked a question a second ago about valuation. I mean how do how are you valuing your assets? Obviously you’ve got the assets under the ground. What else have you got on the books which you think is undervalued?

Mike Young: Those are the two…those are our projects. Oh actually that’s funny. We have we have a base metal project which is directly North of Mulga Rock. And what’s interesting about Mulga Rock. Mulga Rock East. Mulga Rock West. Nothing complicated. Mulga Rock East is full of base metals. We did look at extracting them but they.. the problem is they economically, they don’t stack up because base metal prices are on a completely different cycle to Uranium. So you might end up subsidizing base metal production one year and making money the next. So it doesn’t really work. But Mulga Rock West of that any base metals and we started to think why this was. And we started to do some really good geology and we discovered that the provenance for the metals that we’re trapped in this river channel at Mulga Rock East, is to the Northeast and there’s this large long lived sedimentary channel. Which is prospecting for Proasoric based metal deposits like McArthur River in Queensland. Like Mt.Isa Sullivan in Canada. Yet it’s completely covered and blind and no one’s done any work there. So what we’ve done is we’ve actually put that into a separate vehicle. It’s a wholly owned vehicle called Vello Resources and we want to the that our corporate leaders are bringing in a joint venture partner. We don’t want to get sidelined into base metals from Uranium. We are a Uranium company but we do have this asset. It’s a huge ground holding that’s sitting on this is unexplored ground. That’s prospective for Sullivan’s style. You know Mount Isa style base metal deposits. Broken Hill style base metal deposits. So you know that’s a big target for us. And so we we want to move that. We want to get some value for our shareholders. Why put that into a separate vehicle. You want to make sure that we don’t conflate the two.. the two metals but we do we do want to see general value from that. So we’re looking opportunities for that project as well. That clearly doesn’t have a lot of value in terms of valuation on the company. But I think by putting it into a separate vehicle and having someone concentrate on you know what’s essentially a new province, totally under unexplored. That could generate a lot of upside.

Matthew Gordon: Right. Thanks. I appreciate the… this is just the first time we’ve we’ve met in full time our viewers will have possibly heard the story so thanks for going through that. Can you give me five reasons why you think investors should be considering Vimy as an investment proposition.

Mike Young: Right now at our current valuation compared to some of our peers, in terms of an upturn in Uranium market, I think at the current market cap we have had some good growth in the last couple of months. We’ve slowly crept up but I still think that there’s a lot of value left. You’ve basically got a team of people who want to build mine. So we’re not about mining the market. You know we’re all people who’ve built mines. I love nothing more than a mine opening. You know, it’s a great feeling kind of ribbon at a mine you’ve built and provided several hundred jobs. It’s a great feeling. And so you’ve got people who are serious about getting into production.  The fact that we now have a pipeline of projects. I think that’s important both for the long term and short term, Mulga Rock, as I said that needs time to rise. I’ve made my state my position clear on where I think Uranium price is going. As I say it’s not technically difficult. So you do have Uranium mines around the world which do have technical difficulties. This is not one of them. We have some good shareholders. You know we’ve got very strong backing generally have been in there for a long time to support us. We have great brokers who are supporting us as well. So you know we’ve got that that foundation put aside But I think you know it’s one thing I love most about this industry and Vimy, Uranium is different. Even I like to say this isn’t the same as any other commodity. It is emotion. You’re right it is. And the people working here working on Uranium for a long time 1981 my first summer job underground at Uranium city Saskatchewan. So it’s in my blood. It’s in the blood of the GM it’s in the blood of everyone who works here. And you know that’s important to have passion and vision. And I think that’s what we have now. I’m not saying our peers don’t but when you look around there’s very few of our peers have actually built mines. And so you’ve got a dedicated team of people who can do this and people always talk about a ‘can do’ attitude. What we’re a ‘has done’ and it’s right. So I think that’s important. You know, we know the risks of bringing a mine into production yet we still have confidence that we can do this fantasy.

Matthew Gordon: I think that I think that’s a great summary and a great way to finish this interview Mike thanks very much for your time. I really enjoyed listening to you being very frank and honest about 232 and what’s going on out there.

Mike Young: Bit too honest I think. It’s actually I put it out there before

Matthew Gordon: Mike look, we look forward to catching up with you again soon and hearing more about the story.

Mike Young: And I’ll see you in London for that Beer.

Matthew Gordon: Wonderful. You’re on.

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