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

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

Click here to watch the interview.

Matthew Gordon: Good morning Mike. How are you?

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

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

Mike Young: It is indeed sunny today.

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

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

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

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

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

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

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

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

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

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

Matthew Gordon: But that’s the game.

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

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

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

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

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

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

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

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

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

Matthew Gordon: Well do you think there is?

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

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

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

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

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

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

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

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

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

Matthew Gordon: Right. Interesting.

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

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

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

Matthew Gordon: Exactly

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

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

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

Matthew Gordon: Is this the coke can one?

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

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

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

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

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

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

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

Matthew Gordon: Meaning?

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

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

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

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

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

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

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

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

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

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

Mike Young: The next financial year.

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

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

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

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

Matthew Gordon: What about Michael Fewster?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Mike Young: All of the above. Yeah absolutely

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

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

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

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

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

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

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

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

Matthew Gordon: Wonderful. You’re on.

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