Fission Uranium Corp

You must be logged in to create new topics.

Fission Uranium Corp

  • Profile photo of Jonathan Kitay
    Jonathan Kitay

    The purpose of this study is to valuate Fission Uranium Corp (FCU). As Matt Anderson pointed out in the UEC discussion, it would be highly useful to have multiple company studies going on in multiple threads. Participation from all members is strongly encouraged. Before we begin,

    FULL DISCLOSURE: This is my very FIRST attempt at valuating an uranium company. In fact, this is my first attempt at valuating any resource company. Since this is my first attempt, feedback from more advanced investors/speculators would be greatly appreciated.

    I will try to make this thread easy to follow by breaking up this study into categories. Some of the categories may include:

    Management Team
    Share Structure
    Properties and Ownership
    Location
    Cost structure/Financing
    Projected Growth
    Valuation at various Uranium Prices

    If you have a category you would like to add, simply begin your post with it’s name so other members can quickly navigate. I’m going to start with Management Team and Share Structure.

    You must be logged in to reply to this topic.

  • Profile photo of Jonathan Kitay
    Jonathan Kitay

    Management Team

    When it comes to management teams, I think we want to know three things:

    1) Is the team an “exploration and development” team?

    2) Do they have the ability to build a mine and have they done it before?

    3) Are they investor friendly?

    My answer to question 1: Exploration and development companies find, build, and sometimes operate their own mines. This gives them the ability to build a small company into a big company, which is very attractive to investors such as you and I. According to the corporate overview section of Fission Uranium’s website, they are an exploration and development company: “Headed up by CEO, Dev Randhawa, and President & Chief Geologist, Ross McElroy, Fission is one of the most successful exploration companies in the uranium sector. Management’s goal is to grow shareholder value through continued exploration at the large and highly-prospective PLS project and further development of the Triple R deposit.”

    My answer to question 2: I read the biographies of Fission Uranium’s management team on their website and overall the team looks like they have solid experience in exploration (I copy and pasted key info from each bio below for quick reference). However, based on the information found on their website, I don’t see much experience in development. Keep in mind that I do not know enough about Mr Randhawa’s experience at Strathmore Minerals to suggest there is an experience gap here, I am just pointing it out because the website says they want to “develop” the Triple R deposit. Furthermore, I am not sure if Fission wants to operate a mine or if they want to be taken over. As I said, the website states they want to develop the Triple R deposit but top resource investor Rick Rule suggested that the big boys will likely have to step in (the area lacks infrastructure). If FCU wants to be taken over, then development experience wont really matter will it? More experienced investors will have to chime in here.

    NOTE: I have a question for more experienced investors. I read in “How to Invest in and Gold and Silver” by Don Durrett, that when a project is sold just before it’s time to build a mine, it could be a big let-down for investors, because instead of a potential 500%+ return, they could only end up with around 50%. If this were true for gold stocks, would it be also true for uranium stocks?

    BIOS

    Chairman and CEO: Dev Randhawa. “Mr. Randhawa founded Strathmore Minerals Corp. in 1996 and remained CEO until September 2008. In 2007, Dev Randhawa spun Fission Energy Corp. out of Strathmore to focus on uranium exploration in Saskatchewan. He remained as CEO and Chairman until the company sold its Waterbury Lake discovery and a large selection of its assets to Denison Mines in 2013. Fission Uranium Corp. was spun out with the remaining Fission Energy assets as part of the agreement with Denison.”

    President, COO & Chief Geologist: Ross McElroy. “Mr. McElroy has held positions with both major and junior mining companies, which include BHP Billiton, Cogema Canada (now AREVA), and Cameco. He was a member of the early stage discovery team of the MacArthur River uranium deposit. He headed up the technical team that made the discovery at Waterbury Lake, SK and Fission Uranium Corp.’s PLS discovery.”

    CFO: Paul Charlish. “During the course of his career, Mr. Charlish has also played an instrumental role in a number of mergers, acquisitions, spin outs and divestments for mining companies, including Fission Energy and Fission Uranium.”

    Head of IR and Marketing: Rich Matthews. “He has a strong track record in the mining sector, with a particular emphasis on uranium.”

    My answer to question 3: According to my research there are several ways to assess whether or not a management team is investor friendly. One way is to look at share structure and figure out if share dilution is low. Another way is to find out if the management teams own more than 10% of the shares. I think share structure should have it owns section so I will only focus on share ownership here.

    Here is the management team’s ownership according to SEDI.

    Ross McElroy

    Common Shares: 1,839,834

    Options (Common Shares) 5,878,333

    Dev Randhawa

    Common Shares: 4,148,819

    Common Shares RD Capital Inc. 28,199

    Options (Common Shares) 5,891,667

    Paul Charlish

    Common Shares: 0

    Options (Common Shares) 1,530,000

    When I looked at SEDI there are more than 10 people on the list. How can there be more than 10 people who own 10% or more of the company? Well, this list includes options and warrants and some of these people may no longer be “insiders.” With that said, is there a way to figure out if management currently owns 10%?

    You must be logged in to reply to this topic.

  • You must be logged in to reply to this topic.

    Profile photo of Jonathan Kitay
    Jonathan Kitay

    Share Structure

    When it comes to share structure, I think we want to know two things:

    1)   How many fully diluted shares are there?

    2)   How many fully diluted shares are outstanding?

    Here is Fission Uranium’s share structure according to a document I found on their website.

    Issued Share Capital (January 31, 2017):  484,597,994

    Options Outstanding: 48,450,000

    Fully Diluted (January 31, 2017):  533,047,994

     

    My answer to Question 1: I trust the information I found online but I am not entirely sure how to interpret it. For help I turned to Don Durret, a gold mining investor/speculator, who said in one of his presentations that when you’re buying gold stocks, “you want to try to own companies that have less than 100 million fully diluted shares (although it is more realistic to average around 150 million fully diluted shares in your portfolio). Try to avoid companies with over 300 million shares, because the share price will not have explosive potential to rise. It is okay to invest in a few highly diluted stocks, if the valuations are very attractive. Just don’t make it a habit. Upper limit is about 400 million. Once stock dilution reaches 500 million shares or higher, companies often do a 5 to 1 or 10 to 1 reverse stock split in order to raise the company’s stock price. A reverse stock split never seems to be good for shareholders. Although it is good for investors who purchase after the reverse split, because they get a tighter structure.” If Don Durret’s logic can be applied to uranium stocks, does this mean we should wait until a reverse split before investing in FCU?

    My answer to Question 2: Again, due to my lack of experience, I turn to Don Durret’s work for help.  “Always check to see how many fully diluted shares are outstanding. The market cap is calculated using shares outstanding multiplied by the current stock price. However, if a company has a lot of warrants and options, the true current valuation is much higher when you include fully diluted shares. When you buy a share of stock that has a lot of warrants or options, you are really paying closer to the fully diluted price, because those warrants and options eventually dilute the stock price. The invisible hand of the market tends to account for that valuation.” In the case of Fission Uranium, is 48,450,000 outstanding options too much?

    You must be logged in to reply to this topic.

  • You must be logged in to reply to this topic.

    Profile photo of Michael O Keeffe
    Michael O Keeffe

    Hi Jonathan

    I personally have no overall problem with a high number of outstanding shares when buying a stock, market cap is main for me not outstanding shares. The risk of further share dilution once you become a shareholder is a key consideration  in my view

    I’m personally not a fan of fission uranium(nothing against the company but I feel there is better investments in the uranium sector available) the main deposit is under a lake, huge capex  costs involved, fission have no access to a mill, there share price rise has underperformed several competitors in the recent rally

    I would also urge you to research the failed merger of fission  and denison mines

    Options are a pet hate of mine I don’t like them being issued to management as I see it as being unfair to retail shareholders, I must back the my horse at the start of the race but option holders can back the horse after he wins and in turn take some of my winnings 😔 this issue is one that must be overcome as it’s rampant across the junior resource sector

    Hope you keep researching and enjoy learning with us all here on liberty.me

    You must be logged in to reply to this topic.

    • You must be logged in to reply to this topic.

      Profile photo of Jonathan Kitay
      Jonathan Kitay

      Hi Michael,

      Thank you for taking the time to read my post and for your warm welcome! I agree that Fission is less desirable than other companies (Denison is my favourite so far), but I volunteered to contribute to a Fission/UEC comparison study after Rick Rule suggested such a study would be useful to all of us (see UEC thread). I felt it would be a good learning experience for me if I contributed. Perhaps I should start a Denison Mines discussion as well?

      I did notice that other companies operating in the basin outperformed Fission in the recent rally and I figured it was because their discovery was nowhere near production. However, Nexgen’s massive deposit is close by and performed much better than Fission during the rally. So I was left wondering what happened there. Perhaps it was because the Tripple R deposit is under water?

      Your comment about share dilution makes perfect sense. How do retail investors protect themselves against dilution? Is debt the only way to determine if dilution is inevitable? Hopefully more members can comment.

       

      As for options, I can see why you would hate them being issued to management. Below is a link to the Options and Warrant summary for Fission. 13,300,000 of the 48,450,000 options belong to Ross, Dev, and Paul. In your opinion, what is the acceptable level of outstanding options?

      http://www.fissionuranium.com/_resources/financials/FCU-Option-Summary-2017-01-31-v1.pdf

      You must be logged in to reply to this topic.

      • You must be logged in to reply to this topic.

        Profile photo of Rick Rule
        Rick Rule

        Hi All

        Nice start to a discussion. Note that what follows are thoughts on Fission, not investment advice.

         

        First off note that all the uranium juniors have had a dramatic uptick.. Oversold I guess, and seller exhaustion, because none of them stand a chance in the current uranium price. As to the uranium price, forget most of the narrative, pro and con, just watch the pace of Japanese reactor restarts, that is the driver for the next three years.

         

        As to Fission vs Nexgen, the answer is… YES. They are in remote territory, the Fission discovery is tier one, a world class discovery, and Nexgen is even better, hence the market cap differential. When they get built ( when not if, but later, not sooner) that will be built together, the area is too remote for standalone development.

         

        Both management teams know that the p;promised day ( a takeover) is a long way away, and so both are active on other investment vehicles.

         

        As to shares out, a minor distraction, money is made on the delta between market cap and value. Options??? what matters is the incentives to management , if most of their position is owned shares ( they have their own blood on the table, a healthy options position is OK, if not, then not

        You must be logged in to reply to this topic.

        • Profile photo of Jonathan Kitay
          Jonathan Kitay

          Thank you for taking the time to comment, Rick. I will start to monitor the pace of Japanese reactor restarts. As the restarts accelerate, the supply problem that is currently suppressing uranium prices will dissipate. The resulting increase in uranium prices will increase the value of the Triple R deposit, thus, increasing the delta between market cap and value. My question is how do we calculate the delta? I suspect I will come across various methods as I continue my research. If nobody else responds I will post my findings here. Thanks again for your thoughts!

          You must be logged in to reply to this topic.

          • You must be logged in to reply to this topic.

    Profile photo of Matt Anderson
    Matt Anderson

    Hi Jonathan,

     

    Rick has taught us the best way to value a mining company is through net present value per share. It’s a complicated discussion but briefly, in regards to mining it takes into account the assumed extractable mineral reserves in a project, the costs associated with bringing those reserves to the market, an assumed commodity price, and a cost of capital.

    Here’s a brief description on how it’s used to value mining companies. http://www.theel1tetrader.com/2014/03/mining-companies-net-present-value.html?m=1

    You must be logged in to reply to this topic.

    • You must be logged in to reply to this topic.

      Profile photo of Rick Rule
      Rick Rule

      note that in the above referenced illustration the author uses pre tax NPV. I don’t like this methodology, in that very fw of us spend pre tax money. A post tax NPV, with reference to the jurisdiction is what a lender, or an equity investor would consider.

      You must be logged in to reply to this topic.

      • You must be logged in to reply to this topic.

        Profile photo of Jonathan Kitay
        Jonathan Kitay

        According to the Fission website, the property has a Pre-Tax Net Present Value of $1.81 billion (10% discount rate) and a Post-Tax NPV of $1.02 billion (10% discount rate). The price of uranium used in this base case was $76 CDN or $65 USD.

        I attempted to recreate both NPV calculations in the attached spreadsheet using the values found on page 18 of the Preliminary Economic Assessment. As you can see, I calculated a Pre-Tax Net Present Value of $1,814,796.30 (CDN) and a Post Tax Net Present Value of $1,019,893.75 (CDN).

        For those of you interested, this is how I calculated the Pre-Tax and Post-Tax Cash flow for each year.

        Pre Tax Free Cash Flow = Net Revenue – (Total Operating Costs + Total Capital Cost)

        Post Tax Free Cash Flow = Net Revenue – (Total Operating Costs + Total Capital Cost + Corporate Taxes)

        Since the PEA did not include zones R840W, R600W, or R1620E, my next step will be to learn how to incorporate these zones in the Post Tax Net Present Value calculations.

        If somebody could please recommend more steps I should be taking in regards to NPV, it would be greatly appreciated! Thanks for you help!

        You must be logged in to reply to this topic.

        • Profile photo of Jonathan Kitay
          Jonathan Kitay

          Sorry gentlemen, I forgot to divide the NPV by Issued and Fully Diluted shares. Which is more useful for our purposes?

          Issued Shares

          Pre-Tax Net Present Value of $1,814,796.30 /484,597,994 = $3.74

          Post Tax Net Present Value of $1,019,893.75 /484,597,994 = $2.10

          Fully Diluted Shares

          Pre-Tax Net Present Value of $1,814,796.30 /533,047,994 = $3.40

          Post Tax Net Present Value of $1,019,893.75 /533,047,994 = $1.91

           

          In your opinion, now that I have NPV calculated, is this the appropriate time to apply Ben Graham’s margin of safety rule?

          You must be logged in to reply to this topic.

        • Profile photo of Matt Anderson
          Matt Anderson

          Hi Jonathan,

          I would assume fully diluted would be better since management will more than likely issue many more shares in the future as part of their funding requirements. Hopefully their deposit will continue to grow and keep pace with future share dilution, all things being equal.

          Also, your after tax net present value of  $1.91 is based on a $65 uranium price, which is a long way off from current spot and term prices but not unrealistic since that is the number the industry needs to stay in business.

          My guess is as good as yours as far as a resonable margin of safety. The stock does appear to be undervalued but it may take a long time for the value to be realized by the market.

          You must be logged in to reply to this topic.

          • You must be logged in to reply to this topic.

    Profile photo of Jonathan Kitay
    Jonathan Kitay

    Thank you very much gentlemen! I will get started tomorrow morning before work!

    You must be logged in to reply to this topic.

  • You must be logged in to reply to this topic.

    Profile photo of Jonathan Kitay
    Jonathan Kitay

    Properties and Ownership

    “Properties and ownership” is a huge area of importance and I quickly discovered that there are many questions that needed to be answered. The following is my attempt at answering some of the main questions (in no particular order). Feel free to add to the list or make revisions.

    1) Is there a flagship property (at least 70m lbs)? 

    Fission uranium has a flagship property that is not in production called Patterson Lake South located in the Athabasca Basin in northern Saskatchewan. PLS contains the massive “Triple R Deposit” estimated to be at 108 million pounds (2015).  This deposit has been growing with every drilling season. They made another new discovery in 2016 (R840).

    Flagship properties are an important consideration because once they are put into production the cash flow they generate can be leveraged to expand further production. However, as Rick pointed out, Fission’s property is too remote for standalone development and will likely be taken over by one of the big players down the road. The question is, when will this happen and how does this affect the way we play this stock?

    2) How many pounds are in the ground and what percentage is indicated?

    As mentioned, the deposit was estimated to be at 108 million pounds in 2015. 81,111,000 pounds (81.6%) are indicated and 26,890,000 pounds are inferred (18.4%). According to an interview with Dev Randhawa, we can expect a resource update in Q3 of 2017. It will include results from the R830 West Deposit and the 1620 East Zone Deposit. Both will become part of the “Triple R deposit.”

    3) What is the ore grade of the deposit?

    According to Dev Randhawa, the deposits range from 4% to 20% concentration. Fission’s website states that Indicated Resources range from 1.83% to 18.22% concentration and Inferred Resource ranges from 1.57% to 25.06% concentration. High-grade mineralization starts at just 50m below surface but a substantial part of the “Triple R Deposit” is under Paterson Lake. As Rick pointed out, diking is feasible.

    4) What is the size of the mineralization zone?

    Total strike zone length of mineralized trend is approximately 2.63 km and the length of the triple R deposit is 1.05 mm.

    5) What is the current exploration program?

    According to Dev Randhawa, no program has been announced for 2017 but they expect 12,000 meters of drilling this year. They plan on drilling more to the west of the R830 West Deposit in hopes of expanding the deposit on land.

    6) How much of the property has been explored?

    I can’t find an exact figure but the website contends: “Majority of Patterson Lake South remains unexplored – it’s still early days.” Perhaps this map can help illustrate?

    7) Does the property have a PEA (Preliminary Economic Assessment)? If yes, what is the IRR at $65 Uranium?

    The PEA was filed in September 2015 by RPA Inc. The Basecase 2 within the PEA provided a pre-tax Internal Rate of Return (“IRR”) of 46.7% and a post-tax IRR of 34.2% (NOTE: Exchange rate of 0.85 USD was used). In your opinion, what is considered a low IRR?

    8) What is the recovery rate?

    The PEA cites a recovery rate of 95%: “Process recovery of 95%, supported by metallurgical testwork.” Does 95% recovery rate seem high to anyone?

    9) Does Fission have 75%-100% ownership of the property?

    According to the website Fission owns 100% of the PLS property: “Fission Uranium has 100% ownership of the PLS Property, which comprises 17 mineral claims totalling 31,039 ha located on the southwest margin of the Athabasca Basin.” However, according to the Condensed Interim Financial Statement I found on SEDAR, CGN bought 19.9% interest in Q4 of 2015. Does this mean Fission now only owns 80% of the property?  “On January 11, 2016 the Company executed an offtake agreement with CGN Mining Company Limited (“CGN Mining”). Under the terms of the offtake agreement, CGN Mining will purchase 20% of annual U3O8 production and will have an option to purchase up to an additional 15% of U3O8 production from the PLS property, after commencement of commercial production.” (Page 8) “The Company completed a private placement with CGN Mining of 96,736,540 common shares at a price of $0.85 per share, for gross proceeds of $82,226,059 equal to19.99% of the issued and outstanding shares of the Company upon closing.”

    On a side note, of the $82 million in cash injected by CGN’s purchase, roughly $64 million remains. Do resource investors typically calculate the burn rate to predict when the next financing will take place?

    10) Is the estimated mine life longer than 10 years?

    Long mine life is important because once a mine stops producing, cash flow dries up.The mine life for the Triple R Deposit is estimated to be at 14 years (source: PEA).

    11) What is the cash cost of mining the deposit?

    Current estimated CAPEX is $1.1 Billion. Michael O Keeffe described this figure as “huge.” For my own education, at what point does the estimated CAPEX become too high and is there a way to calculate this? Thank you!

    You must be logged in to reply to this topic.

  • You must be logged in to reply to this topic.

    Profile photo of Michael O Keeffe
    Michael O Keeffe

    Hi Jonathan

    In relation to grade of uranium high grades (as in to high) I know that 20% grades bring issues of having to fully automate the mining process, if anyone can confirm the industry cut off grade (where humans are removed from mining process please confirm)

    The capex of the project 1.1 billion is much larger compared to similar type companies both with the athabascan basin and elsewhere, I’m pretty sure that capex doesn’t include a mill for processing

    If you add up the total market caps of the top 10 or even 15 of the publically traded uranium companies you will probably not break 10 billion, or 10% of the capex cost of fission

    If fission can find more resources on dry land I would see this as a huge positive

    I know other companies have successfully mined lake bed properties in the past via diking however cost overruns in capex of these projects are normal, add in the time it will take to develop the project and there’s a lot of potential headaches for a company looking to take out fission

    Should nexgen continue to expand their resource will they even need fission to attract a take out from a major,

    Regards Michael

    You must be logged in to reply to this topic.

    • You must be logged in to reply to this topic.

      Profile photo of Rick Rule
      Rick Rule

      Michael

      The industry has no standard cut off grade, with a mandate to go robotic, and please note that 20% is a peak grade, not an average grade at both Fission, and Nexgen.

      The projected capex is preliminary, but does include the mill. My belief is that the Nexgen and Fission deposits will share power generation and processing facilities, and will likely be owned by the same owner.

       

      I further believe ( but of course don’t know) that both the Nexgen and Fission deposits grow considerably from here. I still believe, even if both deposits grow, that this remote location will require them to be developed as a unit.

      You must be logged in to reply to this topic.

      • You must be logged in to reply to this topic.

    Profile photo of Michael O Keeffe
    Michael O Keeffe

    Hi Rick

    May I ask from your experience if you feel fission current resources can be mined without the use of robotics, my concern is diking, robotics, water, there is alot that go wrong with that combination of factors.

    On the topic of diking Rick from your experience are cost overruns the exception or the norm when it comes to diking large quanities of water in an environment with large temperature swings

    In relation to a takeover of fission would it be fair to say a merger of nexgen and fission would appear to be the logical first step  (in the future ) with nexgen being the A side of the deal and the new entity being bought out by a major. Would Fission management failure to get the job done with the merger with denison be of concern as to the quality of there negotiation skills in the future

    Regards Michael

     
    <p style=”text-align: center;”></p>

    You must be logged in to reply to this topic.

  • You must be logged in to reply to this topic.

    Profile photo of Rick Rule
    Rick Rule

    Michael

    The questions you ask are substantially above my pay grade! I’m a credit analyst, a loan shark really, not an engineer. That said, I suspect this deposit is minable with minimal use of robotics. As to diking, we will need to see a feasibility study to predict that.Managing water inflows is tricky business, even involving freezing side walls. Given the extraordinary grade, one must be able to completely contain and treat water that has come in contact with rock of this grade.

    A bigger near term impediment to the share price is the fact that the mine is likely uneconomic at these uranium prices, and years away from being built as a consequence of it’s location.

     

    These factors do not deter me, the years have taught me patience where tier one, irreplaceable deposits are concerned, and Nexgen’s success in my mind guarantees that the district has critical mass, even if the individual deposits do not.

     

    Our data indicates that the global all in cost ( including the cost of capital) to produce a pound of Uranium exceeds US$60. If we don’t see the price of uranium exceed the cost of production in the intermediate term (3-5 years) , you will see supply destruction ( mines shut down) on a massive scale.

     

    $60 Uranium ” skates” this district ” onside” economically.

     

    As to who acquires whom, it is too early to speculate. The Denisson merger failed because the Fission team had done too good a job convincing investors of their deposits merits, and investors wanted a higher premium. There is lingering bad blood between the management trams at Nexgen and Fission, but booth are financially competent, and I believe a combined solution will be found. Meanwhile both deposits will expand, and hopefully, the recent Sky Harbour success will result in a third deposit being delineated in this camp.

    You must be logged in to reply to this topic.

  • You must be logged in to reply to this topic.

    Profile photo of Michael O Keeffe
    Michael O Keeffe

    Rick

    Loan shark or not you can’t buy your experience in a shop and it ain’t your first rodeo so I value your opinion and thank you for sharing them with us on this forum it’s very much appreciated on my part Rick

    With your research into the 60dollar all in cost of uranium worldwide are you concerned that the numbers may be shall we say difficult to crunch when it comes to Kazakhstan, there recent supply cut seemed to be primary catalyst for this recent rally, Japan may be the main catalyst on the demand side however from a speculators point of view how greedy are our Kazakhstan friends likely to be on the supply side should uranium spot reach 40bucks.

    That’s a very interesting take on fission unsuccessful merger with denison Rick, looking back I actually agree with you however management still failed. Bad blood with nexgen doesn’t help either as the salt and pepper are on nexgen side of the table and denison are unlikely to ask fission to dance again.

    Regards michael

     

    You must be logged in to reply to this topic.

    • You must be logged in to reply to this topic.

      Profile photo of Rick Rule
      Rick Rule

      Michael

      The Kazakhs framed their action as market related. In fact, it was a deferral of sustaining capital investments that would be simple to reverse. The younger managers in particular, realize that at today’s Uranium prices, even after time value of money calculations, that leaving uranium in the ground, makes better economic sense than extracting it.Supply destruction won’t take place in the bottom quartile of the cost curve, like the Kazakh ISR fields, it will take place in the top half of the cost curve.

       

      While the Kazakh cuts were useful psychologically, and provided a convenient narrative to accompany a price swing from $18 to $24, they were functionally meaning less. both in quantum,  and in the ease in which they could be reversed.

      Past failures will have little bearing on future occurrences. The Fission shareholders made a mistake in rebuffing the merger, and the numerate ones recognize it. as to Fission, and Nexgen, both teams understand that each needs the other.

      The dream scenario is Denisson, Nexgen and Fission, so that the resulting company had the mass and the access to capital required to build the mine, and then the good sense to auction themselves off to one of China Nuclear, Kepco, Areva. Cameco or Rio.

      You must be logged in to reply to this topic.

      • You must be logged in to reply to this topic.

    Profile photo of Michael O Keeffe
    Michael O Keeffe

    Hi Rick

    Point taken on the Kazakhstan supply side, I believe our Kazakhstan friends also had 2 substantial currency devaluations over the past 3 years so perhaps they are now seeing sense on the supply side and that winning the last man standing contest by depleting valuable resources makes no sense

    With regards to renewal of contracts between uranium producers and utilities companies have you seen in past uranium market cycles, standoffs between buyers and sellers regarding long term contract pricing, for example I would be upset as a shareholder if a company I held entered into an off take agreement below 60 bucks a pound (as that’s the sustaining price currently) if the utilities don’t like it well they gotta get on the dance floor before things really heat up.

    Companies however are still entering off take agreements well below 60 bucks

    This doesn’t put me off the uranium space as I believe nuclear power is here to stay , in the words of a wise loan shark”either the price goes up or the lights go out”

    Regards michael

    You must be logged in to reply to this topic.

    • You must be logged in to reply to this topic.

      Profile photo of Rick Rule
      Rick Rule

      Michael

      In the near term, people forget that markets work, and people, including managers, can be expected to act in their own self interest. The fact that the uranium  price must go up in five years is of less consequence to a management team than the prospect of generating enough cash ( even at an operating loss) to pay their own salaries. Their interests, are often not your interests. You see them as your managers, they see you as a source of capital. They think of their own interest, in the context of the company all day every day, you are involved one or two hours per week.Keep this in mind when you forecast rational outcomes… rational for whom?

      You must be logged in to reply to this topic.

      • You must be logged in to reply to this topic.

    Profile photo of Michael O Keeffe
    Michael O Keeffe

    Rick

    Amen your preaching to the converted here (with me) in regards to markets work, iirationally must of the time but markets always seem to sort themselves out in the end with regard to supply, price and demand

    We’ve had the cure for low prices in uranium that being lower prices. Let’s hope Mr market is just as irrational and messy on the up side

    Rick without any hint of disrespect here on my part as I know you like the company and I respect and admire their ability to raise funds in a bear market but could your take on management teams seeing us as sources of capital rather then what we are owners of the company and our interests above theirs in an ideal world be reflected upon UEC, the only thing they have mined in the last 3 years is capital markets.

    They do not have a tier 1 asset, they have a mill which at 2 million  pounds capacity per year seems small, the south texas district play does not seem to be elephant country for uranium deposits, possibly the most interesting uranium play linked to Mr adnani is in the old Brazil resources and not UEC

    Rick cutting to the chase UEC to me does not seem to fit the usual Rick rule playbook of buy big mine potential preferably in a bear market, I agree with UEC stance of currently not mining however management is still milking alot of milk from technically a dry cow.

    Regards michael

    You must be logged in to reply to this topic.

  • You must be logged in to reply to this topic.

    Profile photo of Rick Rule
    Rick Rule

    First, in an honest and candid discussion, there is no disrespect, always” fire away”!

    As to UEC, I believe that their Hobson processing facility puts them in effective control of a uranium district,with 2,000,000 pounds per annum of current production capability, but the capacity to increase that production to 4-5,000,000 pounds in the right circumstance. As my cut off is US$100,000,000 per annum in mine revenues, at a 24% operating margin, I believe UEC qualifies.

     

    Further, UEC has put in place the administrative and capital markets infrastructure to become a consolidator of Uranium assets, particularly in the USA. These ” bear market” consolidation strategies have been very lucrative for me over the last three decades, and I believe that UEC might play this game absolute perfection.

    While their G&A is high, it supports an extraordinary team, including Scott Melbye, a true insider in the uranium game ( and a personal friend) and Spencer Abraham, a former energy secretary, and Senator.

     

    It also has created a 40,000 shareholder retail investor cult, giving UEC the lowest cost of capital among it’s peers, and excusing them of excessive reliance on traditional capital markets.

     

    Readers note, I am long, both the equity, and the secured debt, and am not impartial.

     

     

    You must be logged in to reply to this topic.

    • You must be logged in to reply to this topic.

      Profile photo of Craig Spencer
      Craig Spencer

      Do you really think a political crony like Spencer Abraham is an asset for an otherwise legitimate business? If so, is that because of a cynical valuation of his connections and corruption or do you think he can actually add any economic value.

      You must be logged in to reply to this topic.

      • You must be logged in to reply to this topic.

        Profile photo of Rick Rule
        Rick Rule

        Craig

        I save my ideology and narrative for liberty.me. My preferences are not investment fundamentals. Political and social risks are the two largest risks in mining, a particularly acute factor in Uranium mining. The commercial reality may be u uncomfortable, but my job, in that part of my life, is to make money for my clients.

         

        Yes, Mr Abraham is an asset, particularly with a republican administration. I may ( and do) wish it were not so, but my wishes are irrelevant to commercial reality.

        You must be logged in to reply to this topic.

        • Profile photo of Craig Spencer
          Craig Spencer

          Thanks for answering my question as to the nature of the contribution Mr. Abraham might make to UEC..

          You must be logged in to reply to this topic.

          • You must be logged in to reply to this topic.

You must be logged in to reply to this topic.