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

Energy Fuels' White Mesa Mill

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

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

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

Interview highlights:

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

Click here to watch the interview.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Mark Chalmers: Not at this point in time

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

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

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

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

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

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

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

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

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

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

Matthew Gordon: Smoke?

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

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

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

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

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

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

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Energy Fuels' White Mesa Mill

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

Sunday Mine Complex

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

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

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

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

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

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

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

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

Interview highlights:

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

Click here to watch the interview.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon: Which you have just done?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon: Yes, I’ve heard that.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

George Glasier: About 5M shares.

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

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

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

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

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

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Sunday Mine Complex

Energy Fuels US$16.6M Deal – What Does It Mean?

A wide photo of U.S President, Donald Trump, in a suit and red tie, making a speech.

Yesterday (February 13th 2020), Energy Fuels, the leading U.S. producer of uranium and potential producer of vanadium, announced an agreement with Cantor Fitzgerald & Co; the ‘innovative global financial services firm‘ has agreed to purchase, on a bought deal basis, US$16.6 million of common shares of the Company at a price of US$1.47 per share. We’ve studied the business model of Energy Fuels before, but what does this latest development mean for Energy Fuels investors and the uranium space as a whole?

Price Discovery On The Horizon?

A man we’ve sat down a lot with recently is Energy Fuels CEO, Mark Chalmers. He has found himself in the Crux hot seat in January 2020, December 2019 and October 2019, and this is just some of our encounters with the uranium veteran. He’s been very transparent with us throughout this bear market and we hope to talk with him next week to get the inside take on this agreement. So, in the meantime, we only postulate as to why Energy Fuels has done this now; what could this mean for the company?

President Trump’s apparent commitment to replenishing uranium reserves and adjusting the American military’s uranium purchasing habits towards full coverage in 2021 has got commentators excited. It proposes a budget of US$150M per annum for the creation of a US uranium reserve, as the administration seeks to help struggling producers of the fuel for nuclear power reactors. What this means precisely in terms of who and where the uranium will be purchase is still unclear. Given the security argument has been used as the main thrust of most discussions, the US uranium producers hope that the entire budget is US only and would not include Canada, Australia, European and African uranium producers and other US-friendly jurisdictions. The one certainty is that it is eventually unlikely to include Kazakhstan and Russia.

In a recent interview with us, Bannerman Resources CEO, Brandon Munro, explained that a behavioral switch by the U.S government could be a catalyst for a uranium market sentiment switch and, therefore, price discovery. So, is Energy Fuels getting into position early and readying itself for action in the near future? The press release seems to suggest so, but we will need to dig deeper than that. Why a bought deal? Who is at the table? Why not use their current cash drawdown facility?

Is this US$150M budget for the creation of a uranium reserve the beginning of uranium price discovery? Do they see a 2-tier system being created? What have they heard that has made them pull the trigger now?

Our Maths:

Munro stated in our interview that the U₃O₈ sector has operated a 20Mlbs deficit in the last few years. His logic went something like this:

  1. The United States military fleet consumes c. 50Mlbs of uranium per annum.
  2. It has been underbuying for the last few years by around 20%, or 10Mlbs.
  3. If it chooses to change its policy from underbuying to full coverage, 10Mlbs of extra demand for U3O8 will result in the current U3O8 deficit being halved.

In all our previous interviews, the absolute minimum spot price uranium CEOs have stated they could produce at (with a very small margin, if any) would be US$50/lb.

Based on this figure, US$150M of investment equates to 3Mlbs total of U₃O₈; not exactly a lot, but it’s a start.

While this clearly won’t be as significant a deficit reduction as Munro speculated, could this decision create momentum and a sentiment shift as we edge towards the next uranium bull market? Could it combine with other industry movers to create great change? We look forward to asking Chalmers. If you have any questions or thoughts, leave them below in the comments, DM us on Twitter (@CruxInvestor) or leave us a message on one of our uranium video interviews on YouTube.

The Early Bird Catches The Worm?

The announcement has certainly caught the market by surprise. It would appear that Energy Fuels may be positioning itself to get producing as quickly as possible. Will it have caught some of its peers out, and will it be able to close the deal? It could be a really valuable weathervane as to what the generalist market is thinking.

In the press release, Energy Fuels states the US$16.6M deal will be used to fund various activities required to increase uranium and/or vanadium production in response to the President of the United States’ budget for the fiscal year of 2021. How does the use of proceeds differ from what was originally planned?

Energy Fuels appears to think this announcement is a big moment. What will Chalmers have to say?

What do you make of all this? Comment below! We want to hear your take.

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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.

A wide photo of U.S President, Donald Trump, in a suit and red tie, making a speech.

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.


Company page:

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

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

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

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.

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

Investigating The Earning Potential of Paladin Energy

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

  • 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 (Transcript)

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 (Transcript)

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

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

Click here to watch the full interview.

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon:  Who from?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon:  What are you looking for?

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

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

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

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

Mark Chalmers: USD$3.7 billion in trust.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon: What are you going to do? 

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

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

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

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

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

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

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

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

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

Matthew Gordon: How much cash have you got left?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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