Interview with Jim Paterson, CEO of ValOre Metals (TSX-V:VO)

ValOre Metals is a Canadian explorer with a PGE + gold asset in Brazil, Pedra Branca, and projects in Canada. ValOre is part of Discovery Group. The company is focussed on exploration, discovery and project advancement in minerals and mining.

We wanted to start by learning more about the Discovery Group. The purpose of the group is not to build a "power structure," but is instead intended to build a framework to attract knowledgeable individuals into the group, both technically and corporately. The group has allowed ValOre to cooperate and benefit from some excellent minds and strong companies. It has also allowed ValOre to make acquisitions that it perhaps wouldn't have been able to make alone. The Discovery Group acts as the colonel, but it does not affect the day-to-day operations of individual mining companies.

We always hear about 'strong management teams,' but how are good managers actually defined? First and foremost, absolutely "no assholes". We like the bluntness. The other criteria are slightly less hyperbolic. Paterson looks for "quality" people who are better at their jobs than he is. He also ensures not to seek too many management staff and not to allocate them excessive levels of power.

ValOre metals is a new vehicle, but not a new company. Originally a spin-out venture, founded in 2008, the company's current strategy is clear. At present, ValOre holds Uranium, precious metals, and base metals projects. The goal is to locate large scale mineralization with significant exploration upside and to make such projects relevant and meaningful to major global mining groups. ValOre focussed on projects that have benefited from substantial investments by previous owners. This appears key to minimising CAPEX and maximising margins. The share price flatlined in 2019, but Paterson is candid: this was an issue created by a stock rollback, in addition to a flawed rights offering. The share price started showing signs of life in 2020, but COVID-19 and the market reset have put a stop to that for now.

What do the numbers look like? ValOre, as it is described today, has raised C$7M including recent warrant exercises. The company paid C$3M "cold, hard cash" and will end up issuing 25 million shares for the 100% acquisition of Pedra Banca. Paterson thinks that ValOre has obtained "a lot of data," and has recently put out a 43-101 resource around this data. There are 5 zones that make up a little over 1Moz of palladium and platinum. Several of those zones have exploration potential. Palladium, in particular, is really hot right now, and modern technology had allowed ValOre to evidence the palladium potential in black and white.

ValOre has two years of exploration ahead of it. Will it need to raise capital? Paterson is clear: ValOre needs to go to market but is very used to this being a uranium explorer. The company only has several hundred thousand C$s today, so a financing looks on the cards very soon.

Does the management team have any skin in the game? Paterson has a huge 18M shares out of 90M total. The last 1M shares he bought were at 35%! He is strongly aligned with shareholders and states he will "never" ask people to put money into a company unless he has put money in himself. The threat of losing a salary is far from enough risk for a management team to be truly aligned with shareholders. We love this.

What did you make of Jim Paterson? Is ValOre resources a company you will investigate further? What did you like and, more importantly, what didn't you like about this interview?

Company page: http://valoremetals.com/

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Interview with Alex Molyneux, CEO of Galena Mining (ASX: G1A)

"Blockbuster economics?" Let's unpack this.

Galena Mining is a relatively new ASX-listed mineral developer (listed in Sep/19). The commodity focus is Lead with a small Silver by-product and Zinc. The company has several outstanding exploration permits at the base-metal-prospective Jillawarra Project, but Molyneux's message is clear: the focus is on the flagship 86%-owned Abra Base Metals Project, discovered in the early 80s.

Galena Mining completed a BFS for the development of a mine and processing facility at the Abra Base Metals project. What are the headline stats? A 16-year life producing high-grade Lead-Silver concentrate containing c.95kt of Lead and 805koz of Silver per year after ramp-up. Based on a pre-development CAPEX estimate of A$170M, the BFS modelled a pre-tax NPV8 for Abra of A$553M and an internal rate of return of 39%. Lead and Silver investors are definitely listening.

The plan when Molyneux joined was always to created blockbuster mining economics with a reduced technical risk via 10Mt at 10% pa lead, with an extended life-of-mine. This was "proven" in the scoping study. Galena appears to be decisively treading the path towards production.

Galena Mining had a great 2019: why? Is it because of silver-induced excitement? Molyneux thinks not, given that silver comprises only 10% of Galena Mining's total revenue. Investment by Japanese Zinc manufacturer, Toho Zinc, is said to have been a real catalyst moment. Galena secured US$90M to develop Abra. Toho Zinc will rise to hold 40% equity in Abra upon the conclusion of the arrangement. Molyneux is honest; up until the Toho investment Galena Mining was "just another junior." Securing such a noteworthy strategic partner appears to have greatly assisted Galena in convincing institutional investors it can get things financed. This is exactly what Molyneux was brought in for, and he has worked from day 1 to ensure the project is being developed in a way that will allow it to be attractive to the financing market.

What do the numbers say? A$27.5M with 0% debt. Impressive. The regular burn rate is A$400,000 per month; however, Galena is currently spending A$10M on a series of de-risking tasks at Abra. What is there left to do before Abra can get things rolling off the production line? The project is "approximately 10% complete" today. Galena now has a site ready for an EPC contractor and an underground mining contractor to be able to mobilise. Other necessary construction includes the construction of the tailings storage facility. These are the primary tasks that drive towards. The EPC contract has been awarded for A$74M. The contract is sitting on the table, waiting for Galena Mining to start the procurement and construction phase. However, the main thing that is missing right now is debt-financing, and this will need to be completed before Galena Mining receives the final tranche of Toho's investment. Could the deadline on debt have been negotiated better by Molyneux? Was A$90M too much, too soon? He thinks not. The Toho deal had a valuation at a high-premium, and it added vast value. The A$30M tranches allowed Galena to carry out work to massively derisk Abra, which can only have been a good thing.

Have reduced lead prices affected margins significantly? No. The cash flow margin has only reduced from 48% to 41%. The cash flow appears very robust.

What does the share register look like? The largest shareholding is 19.6%, beneficially owned by Tim Roberts, an HNWI who came in through a placement and subsequent market purchases. The board & management combined have just under 25%, institutional hold around 20-25%; the rest is retail, with a total of 900 shareholders. Is liquidity and marketing an issue?  

Company page: https://www.galenamining.com.au/

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Interview with John Borshoff, CEO of uranium company Deep Yellow Ltd (ASX:DYL)

A minnow turning into a shark? Alright, you have our attention.

Deep Yellow is a uranium explorer now entering a pre-development phase, listed on the ASX. Deep Yellow was founded with a focus on growing the existing uranium resources across its uranium projects in Namibia. However, the company emphasises M&A as a means of developing a geographically diverse asset portfolio, a "global multi-asset strategy." Deep Yellow promised an announcement of an acquisition last quarter, but this never materialised.

After listening to Borshoff's contrarian take on the uranium market, we wanted to hear about the main challenges faced by uranium juniors. Long-term uranium prices need to rise from the twilight zone of mid-US$30/lb to something more substantial that an industry can be built on: US$40-50/lb.

Borshoff is widely acknowledged as being the "father" of the uranium industry. His enormous US$4Bn success at Paladin Energy collapsed just as quickly as it was built after Fukushima, but we have no doubt of his expertise and experience. However, what will happen to the inexperienced uranium juniors who are currently hunkered down? What challenges will they face? Will they be take-out targets for larger uranium producers? The main issue for juniors, as Borshoff sees it, is a lack of "swallowers." There used to be a great deal of capital in the market, and many majors circling juniors ready to pounce. This has now changed, and while there are majors like Cameco and Kazatomprom that are still positioned strongly, juniors no longer have the safety net of being a near-guaranteed takeout target, and the majors that do exist are nowhere near as aggressive. The juniors are "eternal optimists," but, realistically, some of these companies are relying on "2+2" equalling "8." Juniors must think pragmatically. Borshoff thinks the uranium sector needs some of the juniors to act aggressively and grow in order to support the industry in a new bull market.

Moving onto Deep Yellow, specifically, the company promised global acquisitions but is today sat on just one asset developed asset. It is conducting a PFS and things are going well. The resource is large and has doubled initially indicated projected production. It has a +20-year life-of-mine, and this is only using a 20km radius of the 50km orebody. Any project that is adjacent will be supplementary added pounds. Borshoff argues he doesn't need to make acquisitions right now because he has enough lbs in the ground. He comments on Marenica Energy's' property, stating Deep Yellow withdrew from it because "it didn't suit" them.

Borshoff states that Namibia has its problems as a mining jurisdiction, but he states the Namibian authorities realise they need mining to improve their economy and try to minimise taxes as much as possible. He thinks Namibia is a genuine, honest jurisdiction with sophisticated dialogue paths. Nothing happens "at the whim." It appears stable. He thinks uranium will save the Namibian economy in the next 3-years.

Borshoff expects to have a PFS completed by September/October. It will be a platform for Deep Yellow to stand on, look at the market, and plan its entry point. Then it's a case of permitting and marketing. Hypothetically, by mid-2022, it will be a good time to make a development decision.

Why has Deep Yellow changed its tune on acquisitions? Can they deliver an acquisition in Q3/20. The company's Namibian play isn't the high-grade powerhouse most would expect to propel them into the global acquisition strategy. Borshoff disagrees. He thinks the Namibian asset, the Reptile Project, has a good chance to be a tier-1 asset. It's a solid project that, at the right price, will produce.

What did you make of John Borshoff? Does Deep Yellow stand out at all from the other uranium juniors?

Company page: https://deepyellow.com.au/

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

We like the uranium space. It's been nearly a decade of hardship, but there are now signs of life. Uranium has the potential to make investors significant multiples of their initial investments; that's if they pick a winner rather than a loser. Risk mitigation is key to this, and one of the most important components of certain uranium stories is commodity diversification. Energy Fuels, has mitigated risk with multiple cash streams: vanadium, milling and cleanup operations. Chalmers talks about another potential revenue stream: rare earths processing. This week the company announced it was entering the rare earth element (REE) space.

The first thing Chalmers makes clear is that this is a serious commercial venture. The White Mesa Mill is the ace up Energy Fuels' sleeve, and if it can process rare earths, it makes sense to monetise this ability.

Energy Fuels believes the fully licensed and constructed White Mesa Mill (the only uranium and vanadium mill in operation in the US), can play a key role in bringing the rare earth element supply chain back to the U.S. from China. Energy Fuels' primary focus remains on uranium and vanadium, but it believes it can leverage its existing licenses, infrastructure and capabilities at the mill to also produce REEs. Smart.

What exactly is then mill capable of? It is primarily licensed to treat vanadium and uranium ores, but over the past 20 years, Energy Fuels has taken a variety of other feed streams that the company has permits to receive. Most of those are low-level natural uranium streams. The company has licences for 17 other streams, and can also recover uranium from other rare earth producers. White Mesa Mill is extremely large, capable of processing 2,000t per day. The mill will be operated on a batch basis. Material from a variety of different streams will be generated, collected, stored, collated, then processed. The feed arrangements are still in their early days, but Energy Fuels is mainly looking at this from a toll processing standpoint. Energy Fuels has all the tailings storage facilities necessary to make this work. The company is ready to move.

The US government is also on board with the rare earth elements play and has encouraged Energy Fuels' venture. This is extremely positive news.

We then move to Energy Fuels' priority. Energy Fuels has plenty of material in inventory (over 500,000lbs), waiting to be processed, so has much greater control of its production timescale than other uranium producers. As the spot price increases, so does the value of the inventory. The company is constantly working on mineralogy and pilot testing to ensure that when the time is right, Energy Fuels can move swiftly to capitalise on a resurrected uranium market. Energy Fuels is clearly ahead of the curve. They know what they don't know. The company looks like it has the scale to attract strategic partners and the best minds in the uranium space to propel the company forward.

Chalmers doesn't think US$40/lb will even be enough for uranium-giant Cameco. there are some projects in Kazakhstan that could be profitable, but for the rest of the world, they need a higher uranium spot price: north of US$50/lb, closer to US$60/lb to take "full-loading on cost." Companies like Kazatomprom would like the price to stay down so they can maintain a monopoly, and their inflated currency has also given them an advantage. The spot price has risen 25% in the last month or so, and these disruptions may start to shake utility companies up. "There is less uranium out there than people think."  

Company page: http://www.energyfuels.com/

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Interview with David Reeves, MD of Calidus Resources (ASX:CAI)

Calidus Resources (ASX:CAI) is an ASX-listed gold exploration and development company. Its single focus is on the 1.25Moz Warrawoona Gold Project in the East Pilbara district of the Pilbara Goldfield in Western Australia. A PFS has been completed on the project, and an FS is currently underway. Reeves hopes that next year the company will be in production with a 100,000oz gold per annum gold mine. Calidus Resources is trying to take advantage of such positive gold market conditions. To put this into perspective, since the release of the PFS, the NPV of the project has tripled because of the gold price. The big growth opportunity appears to be a potential re-rate from Calidus entering production.

Reeves himself has qualified mining engineer with 30-years of experience in the mining industry. The remainder of the team has a variety of financial, mine construction and gold mining experience. It's a small team but appears to pack a punch.

How does Calidus Resources plan to finance the Warrawoona Gold Project off the back of a PFS, and how will it manage to get into production so quickly? Reeves thinks the FS (due to be completed this year) will solve any investor confidence issues and de-risk the project. In terms of financing, Calidus Resources has "started the debt process," and is looking at conventional banking debt, private equity debt and streaming/royalty companies. 70-90% will be funded via debt. Will an FS be enough to get things over the line on favorable terms?

Moving over to permitting, Reeves states Calidus is close on its environmental work after conducting 3 years of monitoring. Calidus has been dealing with referrals with the EPA and the Federal Government of Australia to deal with. The boards of the EPA has been given full responsibility for the decision, and should get back to Calidus in the next 4-months with a decision. The next permit will go to the minister to sign off, which will take a further few months. Then, Calidus resources needs to obtain all of its safety and operating permits through the Department Of Mines. Then a water license, full water license and construction license will need to be obtained. Reeves states the permitting timescale is outside his control, but Calidus is controlling everything they can to ensure a smooth, faster process. He hopes everything will come together by the end of 2020.

Calidus Resources has plenty of cash, and further cash available from 13% institutional shareholder, Alkane Resources. The project is relatively small, so does it have the excitement to deliver growth for shareholders? Is there enough to explore and develop elsewhere, or will it be time for M&A? Calidus Resources "certainly" wants to be part of something bigger, and is putting plans in place to grow its portfolio. Dinner or diner? Reeves is coy; his main focus is on getting the Warrawoona Gold Project into production, making cash, and getting things flowing. Everything should become a little easier then, as it usually does when cash gets moving.

Reeves himself holds 7.5% of Calidus Resources and obtained his shares through heavy cash investments. He bought more shares a few weeks ago, because COVID-19 discounts were "too good" an opportunity to miss. Several members of the senior management are also invested. Is the project undervalued because it is under the radar, or does it lack the excitement needed to attract investors? Reeves states this will all change once things get up and running at the Warrawoona Gold Project.

No field work currently needs doing and desk work is the order of the day. Waterboard drilling and additional exploration will need to be conducted later this year, but Calidus should have little trouble financing these operations.

What did you make of David Reeves? Is Calidus Resources under your radar, or has it climbed up to detection altitude?

Company page: https://www.calidus.com.au/

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Our man in Havana, Brandon Munro, discusses the week's news. Cameco shutting down Port Hope - the reasons why and the implications. The latest news from Namibia - Rossing and Husab. The $30 psychological barrier and what it means or could mean. We talk equities. And a little bit about Bannerman Resources. It will be out as a Podcast within the hour. Hope you enjoy it. Do let us have your thoughts and feedback.  

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A conversation with the lovely Simon Catt about the world in investing this week. We discuss the Bank of England’s unprecedented Quantative Easing (QE) this week and what is means for investors. We hear about his conversations with mining CEOs behind the scenes and the realities of what they are and can do, and of course, what it means for retail investors. Simon updates us on what is happening in Australia and how the Australian governments restrictions of foreign Investment are loosening. This is the podcast version of hanging up on someone or we'd still be talking now. You'll see what I mean if you get to the end...

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Interview with Scott Trebilcock, President & CEO of KORE Mining (TSX-V: KORE)

KORE Mining is a TSX-listed portfolio gold company with assets in California and British Colombia. A gold developing cookie-cutter? KORE Mining has four 100% owned gold projects and recently announced a promising PEA on its flagship Imperial Project; the current focus is on conducting exploration to grow its gold resource base and development. The company will develop Imperial for the next 3-years until it can enter a JV or be taken out by a mid-tier gold producer. KORE Mining has attracted notable strategic investors in the form of Macquarie Bank and Eric Sprott. The company's management owns c. 50% of outstanding shares: a really encouraging figure.

Trebilcock's background is working as a process engineer in the Canadian mining sector. He also has experienced generating shareholder value at base-metal miner Nevsun Resources, which was taken out for US$1.8B by Zijin Mining Group Company Limited on Dec 29, 2018. Trebilcock has been through the process of exploration, development and sale before. Reassuring.

The initial thought process behind Kore Mining was coined by Executive Chairman, Jim Hynes. The plan was to find a sector where assets were cheap, acquire and build up a portfolio of assets, develop and de-risk the assets to add value, then sell them to a mid-tier miner. Production isn't on the cards. This is a clear business model and we appreciate the transparency and logical approach.

The Imperial Project was acquired from Goldcorp for a surprisingly low price of US$150,000 for 2.2Moz (in an up gold market!). However, there are also a series of mandatory payments to Newmont Mining (the new owner of Goldcorp): US$1M of KORE Mining shares and US$1M cash when the mine goes into production. KORE Mining has put US$2.5M into the ground at the Imperial Project. The project has been previously carried through to a feasibility study in the 90s, so Trebilcock is confident KORE Mining can accomplish this affordably and in a reasonable timescale. While it is difficult to do much off the back of a PEA, what were the key findings? CAPEX: US$142M, 28km exploration space, a simple run-of-mine heap leach process (low-cost), 146,000oz gold per year, 1.2Moz LOM production, 44% IRR at a very pragmatic US$1450/oz gold price, and a US$343M NPV 5% after-tax at the same gold price.

Will any federal regulations be a barrier to KORE Mining? Trebilcock sees the issues as nothing more than social licensing issues that mining companies will always have to face.

Looking at the numbers, KORE Mining had US$2.6M towards the end of February, with a planned raise in 2020 provided COVID-19 becomes less disruptive. Trebilcock believes the market will wake up to the opportunity the company offers; thus, KORE's 2020 budget is higher than its current cash. Could Equinox Gold see the Imperial Project as a potential target? Trebilcock is coy on the issue, but it might make logical sense considering its proximity to Mesquite.

Is the c. 50% ownership, combined with Sprott's 12% and Macquarie's 5% a liquidity problem? Trebilcock is clear that this is one of the main problems KORE Mining faces. Retail investors have very little to play with and expect imminent dilution.

What did you make of Scott Trebilcock? Is Kore Mining's gold portfolio an investment opportunity you might consider? 

Company page: https://www.koremining.com/

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Interview with Stephen Roman, Chairman, President & CEO of Global Atomic Corp. (TSE:GLO)

Roman calls us to update about the announcement of their PEA results. They plan to mine a higher grade flank zone in Phase 1 at their Dasa project in Niger, which is what this PEA relates to. The results are impressive for many reasons.

Firstly the economics an AISC of just $18.39. That is world-class. And a cash cost of just $16.72. Also world-class. The number which caught our eye though was the steady-state production of 4.4Mlbs. Global Atomic become a meaningful second tier player at that level. At $35 per pound the NPV8 is $211M with an IRR or 26.6%. However if the price of uranium goes to $50 (where most producers and developers expect and need it to go), the NPV8 leaps to $485M with a 46.3% IRR.

That in itself is a good company. But remember this is Phase 1 of the much larger, albeit lower grade, Dasa ore body.

The key to this is the speed at which Roman believes they can get into production. He says by end of 2022. What that means is they can get in to supplying U308 in to this contract cycle and start relationships with utilities for long-term contracts while other are still seeking financing.We discuss the winners and losers and the realities of the time lines involved.

We also discuss their Turkish zinc JV which gives them a 40-50 year annuity stream of cash. This could be used to finance the capex requirement for Dasa.

Interesting times ahead. Let's see if this experienced uranium team can deliver. We fully expect it to quietly go about its business. This one is leading from the front.

Company page: https://www.globalatomiccorp.com/

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Interview with Roger Lemaitre, President and CEO of Uranium Explorer, UEX Corporation (TSX:UEX).

After lying in a coma for what seems like an eternity, investors have been hoping a white swan moment could make the uranium space has show signs of life. A slightly rising spot price has been driven by perceived tightening of uranium inventories and supply. However, uranium securities still haven't been rallied by the events. Yesterday, Cameco announced its shutdown of Cigar Lake would be extended for an indeterminate period, and this still hasn't invoked any kind of significant uranium revival. This adds to the expectation that had already been built up by KazAtomProm's operational update, which stated that annual production would fall by up to 4,000t uranium from previous expectations. While UEX Corp. has no control over the market itself, how is it positioned to take advantage of a potential uranium renaissance?

UEX is the "only portfolio company... you can get in the uranium junior space right now." Lemaitre is honest; UEX probably has more assets than any junior needs, with 21 cobalt and uranium projects in the prolific Athabasca Basin. UEX has 4 flagship projects: Christie Lake, West Bear, Horseshoe-Raven and Shea Creek. The company specialises in mid-stage assets, with 5 projects with mineralised holes, and c. 15-20 targets for UEX to make its next discovery. Lemaitre claims that through uranium up cycles and down cycles the next discovery company always performs better than existing producers and developers. Confident words. He is similarly confident about the buying habits of utility companies changing in the near future. Drawing on his experience at Cameco in the last cycle, he states that historically utilities need a supply shock before modifying their purchasing behavior. Could the COVID-19 induced tightening in supply be a catalyst moment for uranium's next bull run, or will another supply shock be needed? That depends on how the next 3-4 months unfold.

So, UEX Corporation. How is the company holding up? UEX raised US$1.6M at the end of November '19, and has entered 2020 with a cautious program. Lemaitre is trying to spend money slowly and frugally. UEX is on target to satisfy its plans for 2020, which, in this environment, is no easy feat. Lemaitre has been delicately developing all the puzzle pieces of UEX's enormous portfolio, in the hope that when the bull is unleashed, UEX is primed to finance its operations and get moving. It doesn't appear there is a great deal uranium juniors can do right now other than batten down the hatches and hunker down, but we like Lemaitre's systematic plan of exploration and risk reduction. He is also aware of the possibility of conversations regarding financing, something he'd previously had to put on hold. UEX knows it can only control what it has control over, so uranium investors will need to continue to be patient for the time being.

In terms of cash position, UEX is covered until the end of 2020, but will need to come back to market in 2021. UEX has avoided any predatory deals and has avoided dilution as much as possible.

The board has not added any more stock to their portfolios, even when the share price was down at C$0.07.

Where does UEX slip into a future uranium bull cycle? Lemaitre sees UEX as in something of a "weird space" between grassroots uranium explorers and uranium developers. However, this niche could be advantageous, and the portfolio of opportunity is the real USP for UEX.

What did you make of Roger Lemaitre and UEX Corporation? Will uranium finally see the sorts of movements that investors are craving or is this a false dawn? What are your top uranium stock picks? 

Company page: https://www.uexcorp.com

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