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

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

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

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

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

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

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

Interview Highlights:

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

Click here to watch the interview.


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

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

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

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

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

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

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

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

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

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

Matthew Gordon: That’s great news.

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

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

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

Matthew Gordon: And these are generalists?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dustin Garrow: It will be difficult.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Interview Highlights:

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

Click here to watch the interview.


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

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

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

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

Matthew Gordon: And what’s the mood?

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

Matthew Gordon: But back to these investors.

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

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

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

Matthew Gordon: Like what?

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

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

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

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

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

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

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

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

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

Matthew Gordon: Partially westernised, surely?

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

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

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

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

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

Matthew Gordon: Solution to do what?

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

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

Mike Young: No man’s land.

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

Mike Young: We’re having those.

Matthew Gordon: So, tell us about those.

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

Matthew Gordon: Where have you gone to?

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

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

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

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

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

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

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

Matthew Gordon: And that’s your $55?

Mike Young: Yes.

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

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

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

Mike Young: There is a little bit.

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

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

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

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

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

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

Matthew Gordon: He’s right.

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

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

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

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

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

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

Mike Young: Scott Hyman.

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

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

Matthew Gordon: 50% of what?

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

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

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

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

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

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

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

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

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

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

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


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

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

IsoEnergy

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

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

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

Click here to watch the interview.


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

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

Matthew Gordon: What are people talking about?

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

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

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

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

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

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

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

Matthew Gordon: And ended up next door!

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

Matthew Gordon: They are a shareholder?

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

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

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

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

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

Matthew Gordon: What does that mean for you?

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

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

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

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

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

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

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

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

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

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

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

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

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

Matthew Gordon: How long does that take?

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

Matthew Gordon: These are all quite shallow holes?

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

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

Craig Parry: We are yes.

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

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

Matthew Gordon: Have those fund-raising conversations started?

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

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

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

Matthew Gordon: So they know this is coming?

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

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

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

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

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

Matthew Gordon: Have you been writing cheques?

Craig Parry: I certainly have been writing cheques.

Matthew Gordon: For this company?

Craig Parry: For this company.

Matthew Gordon: Just checking…

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

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

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

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

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

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

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

Matthew Gordon: Coking coal. Different. Different ballgame!

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

Matthew Gordon: Let’s say 7 years.

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

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

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

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

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

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

Craig Parry: Trading about $0.50.

Matthew Gordon: How many shares did you say?

Craig Parry: 68 million.

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

Craig Parry: Probably a little bit.

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

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

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


Company page: www.isoenergy.ca

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