Many investors started this little upturn
with unrealistic expectations, who think that
this is like an absolute catalyst, and it's
not that. And so I think that the setup is
very, very strong for 4th quarter this year.
And so for patient investors who can sit and
buy these little mini dips along the way,
I think there's going to be great times.
Welcome to Crux Investor. First of all, thanks
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We speak today to Brandon Munro for our weekly
catch up in the world of Uranium. He is the
CEO of Bannerman Resources, and Uranium market
commentator. We talk about how COVID-19 continues
to affect production and productivity around
the world. We talked about Kazakhstan in particular,
there's a bit of a development there, Namibia,
Australia and Canada of course.
And then the big news of the week is the fact
that AOC is open to nuclear as part of the
US energy solution; and that's quite a big
deal. We did talk about that, why that is
important and the reasons for that. We also
look at the world of Rare Earths, now, a lot
of parallels between Uranium and Rare Earths.
We talk about some of the players in the market
and some of the moves that they've made this
week.
Take a look at description below at any of
those topics. Anything interesting in particular,
click on the number. That's called a timestamp
and that will take you to that part of the
video. Otherwise, enjoy what he has to say.
Hey Brandon, how you doing, Sir?
All good, Matt. How are you?
Yes. Nice. Yes. Good. It's been a long week.
It feels like a long week already and it's
definitely the end of your week. So, thanks
for touching base. But it's been a quiet one
all round, hasn't it?
Yes. It's got that feel about a week that
has just consolidated after probably six,
seven, eight weeks of fairly busy news and
quite a lot of spot price activity. And you
know, we have just had a very gentle uptick
in the spot price, Uranium news, companies.
It's just been one of those weeks that has
meandered along really.
Meandered along. This is going to be a short
one, and I mean it this time, but it is just
worth kind of going through some of the things
which are affecting the macro component because
those things aren't changing too much. If
we look at Kazakhstan, obviously some numbers
came out there. I mean, what's your take on
that?
Well, we have seen increasing COVID-19 cases
in Kazakhstan over the last week, which is
not always a trigger for relaxing restrictions
as they've done. So you can expect from that
that they will be cautious going forward.
We have seen cases of, you know, 1,500 a day
type thing, sorry, 350 a day type numbers
coming through. And interestingly, Kazakhmys,
which is the largest copper producer in Kazakhstan,
they've now had to close one of their very
big mines near Qaraghandy, and that's the
Nurkazgan copper porphyry mine. So, I think
they had 35 cases out of about 1,100 workers,
so it became a little hotspot for them and
they expect to have it back into production
with new shift rosters and all of that type
of thing in June. But still, that's a bit
of a warning sign for Kazatomprom and anyone
else in the industrial complex in Kazakhstan,
that with rising cases, the chance of becoming
a hotspot does increase.
So, we have seen continued high cases in Russia,
although it is tapering off over the last
week. So, I still see that as status quo.
I don't see any reason for the Kazakhs to
be popping the champagne corks anytime soon
there. And I'd expect to see no reason why
we won't have the Kazakh assets down for the
three months that they're expecting. And we're
a little bit more than halfway into that process
now.
Right. Okay. But again, as far as the macro
story is concerned for Uranium, that continues
to be good news in terms of its reduction
of the supply into the marketplace. Should
we touch upon some of the other countries
as well? Obviously, we have talked in the
past about Australia, Namibia and Canada.
What are you hearing from them?
So, with Canada, first of all, we are still
seeing quite a high caseload in Canada. It
is tapering off in Saskatchewan; they're starting
to open up again. I think they've put down
8th June as the date for restaurants and bars
and gyms and so on opening up. But the Northern
territory still tells a different story there.
So, La Loche, the village or the settlement
that Cameco highlighted in their earnings
call, they are seeing some level of reduction
in cases, but it's still a community in crisis
and there's little spot fires popping up around
the place. There's another settlement nearby
that's now had 35 cases in a first nation
settlement. So I, again, there just isn't
any call for a relaxation of what Cameco has
done there until we really see those first
nation communities come through this and get
over it.
Then Australia, all fine there?
Yes, it's almost embarrassing to say it, being
in Australia; we seem to have really come
through this well. South Australia, which
is the home to most of our Uranium production
with the Olympic Dam and Beverly, they haven't
had a case since 7th May, and I think the
last case before that was a couple of weeks
before then and they don't have any active
cases left in the state. So, you can effectively
declare South Australia free of COVID-19 for
now. I mean, of course there's risks about
what will happen when they open up their internal
borders into other States and there's the
chance of, I want to say a second wave, but
it's really still a first wave that we would
be exposed to. Their main border is with Western
Australia to the West and we have also got
things pretty much under control; just a couple
of cases each week. So, I don't see any prospects
for COVID-related supply disruption, or dramatic
supply disruption at those Australian centres.
I would just say that there is still a lot
of caution around interaction with indigenous
communities, so that is affecting the way
that ERA goes about its business. So, they've
got different restrictions on their fly-in,
fly-out and their drive-in, drive-out workforce
to try and mitigate that. But the miners generally
have adapted quite well now to all of these
different ways of handling their shifts so
it's probably just in the irritant category
now for ERA and for Olympic Dam.
Okay. And then your territory in Namibia,
are you back to work?
Yes. Namibia is back to work. The mines in
Namibia have been ticked through that. What
they needed to do was present a COVID-19 management
plan to the Ministry of Health before they
could resume full production. They've done
that. What we're hearing on the ground is
that neither of those giant Namibian mines
are back to full production, but they are
back at work. So that's a good sign for Namibia,
which has had fairly devastating economic
ramifications from the shut-down, when the
shutdown has been very effective at controlling
the virus, they only had 16 cases that they're
aware of and now there's a couple that have
popped up in one part of the country. But
again, if the testing is an indication of
what's going on in the population, they've
effectively eradicated it for now. But at
some very dramatic cost. And I think it is
really heart-breaking to see what that's done
to a lot of the people there who are already
on the poverty line or below. You definitely
see a lot more impact on people from starvation
and other related issues there compared to
what they might've been facing with the virus
itself. Into the longer term that's going
to promote a heavy development agenda and
obviously incentivise the government to do
whatever it can within its powers to bring
on employment and development. So, in the
medium term, that's good for the Uranium industry
there as well.
Okay. So, what does all this mean? Okay. So,
we have talked before, you know, in the past
few shows about the macro stories, flight
amount, et cetera. There continues to be disruption,
and people are trying to get back to work.
But what does it mean for the Uranium sector
as a whole? And what's it going to mean for
some of the equities? You know, companies
like Bannerman, companies that we, you know,
in North America and Africa, what should people
be looking for from these companies? Is it
just more of the same, or how are you viewing
it?
So, I think what's relevant here is this supply
disruption has contributed to accelerated
destocking. Inventory has been the issue for
our sector making a price break out for several
years. So even though we have had fairly deep
deficits, structural deficits, in terms of
what is supplied in the world, primary and
secondary versus what's consumed, it's destocking
or under buying or working off inventories,
whichever one of those terms you'd like to
use, that's what's filled the gap. And that's
what has been necessary in order for the utilities
to return to fully buying what they consume.
So, if nothing else, this event or series
of events, is probably going to take 20Mlbs
out of the market. So, there's 20M lbs of
additional destocking. To put that into some
sort of context for the viewers, in the US,
which is the largest single market for Uranium,
they destocked in 2018 to the extent of about
10M bs.
We will shortly have the numbers for 2019,
but we think it was pretty similar. So, it
has created the equivalent of two whole years
of destocking in the US. And most people who
look really closely at these numbers, and
I'd consider myself in that category, believe
that inventory has now returned to historically
normal levels. And in certain pockets, it's
less than historically normal. And as we discussed
last week, that comes in the context where
there's numerous reasons why utilities would
ought to be preferring to be slightly on the
heavy side for their commercial inventories
right now. And what I was referring to for
viewers who didn't see last week’s show
was Euratom and security of supply comments
where they were very strong and advising their
Euratom member utilities to maintain significant
levels of inventory in order to risk manage
a variety of different issues: transportation,
bottlenecks in the conversion cycle and also
in increasing geopolitical risk and potential
for mine supply to be unavailable.
So that's the immediate effect. The secondary
effects of this go to sentiment. Now, investor
sentiment - yes, that's one thing, and I think
we're seeing Uranium stocks perform okay.
They've sort of slowed down in terms of expectations
and liquidity and volume and so on. But they
have still recovered everything that they
gave up to the market after COVID-19 spooked
junior resources, at least. But what I really
refer to when I say sentiment, is a reason
for utilities to revisit their procurement
strategies. In particular the procurement
strategy of burning off their inventory or
selling down their inventory. And at a simple
decision, if it was taken more or less across
the entire industry to buy what they burn,
not to de-stock, not to underbuy any further,
that's going to put a lot of pressure on the
structural deficit that without COVID-19 related
disruption is still 20Mlbs. That's more than
10% of the production in the market.
So I think if you look at those two things
in combination; the destocking has occurred
to an extent now where there is genuine tension
and all it requires is the utilities to decide
that that destocking has gone far enough and
now it's time to be a genuine buyer of material
to cover what they're burning in their reactors.
And from there, demand growth will take care
of that as we continue to see supply deficits
at a structural level.
So, do you think that people perhaps got a
little bit too excited a couple of weeks ago
with Uranium equities. The spot price, you
know, has seen a significant recovery over
the past couple of months. It's sitting at
around what, USD$34/lbs today or yesterday?
Do you think that that needs to move much
more to give the market further impetus to
kind of move forward, or are we going to sort
of see it sitting around these levels for
some time to come?
I don't think people got too excited, necessarily
,because if you look at where equities are
at the moment compared to not only the spot
price in absolute terms, but the setup that
we have got for the rest of the year, I still
think they're deeply undervalued. What I do
think happened is that many investors started
this little upturn with unrealistic expectations
of what would happen in the very short term.
And that's been a recurring theme in our conversations,
for example, and some of the others that you've
had as well. The expectation that this was
the boom, and some of the exaggerated numbers
that we have seen in terms of the extent of
the supply disruption, we have seen a few
commentators either get their numbers wrong
or describe them in the wrong way. That's
been caught onto by some retail investors
and others who think that this is like an
absolute catalyst, and it's not that. It has
not had an effect on spot.
So, I think what we have seen is a slowing
in equity prices, partly because there's been
some great profits for anyone who bought the
dip, and as they have seen the spot price
growth slow, that has been an appropriate
time for them to consider taking profits.
And also, for those investors who bought with
just totally unrealistic expectations of what
the trajectory is really going to look to.
And so, I think that the setup is very, very
strong for fourth quarter this year, and there's
probably going to be a few plateaus in the
spot price. It's going to have a few more
lurches. It's going to come back. But on fundamentals;
fourth quarter this year, probably leading
in from third quarter, are going to look fantastic.
And so, for patient investors who can sit
and buy these little mini dips along the way,
I think there's going to be great times.
Yes, I think that's right. And we have sort
of said that for the past 2 or 3 conversations
in the past 2 or 3-weeks. I want to talk about
something else that happened this week: Alexandria
Ocasio-Cortez, she is a representative from
Eastern New York, US Representative, very
vocal. She is a very young dynamic Democrat.
And she seems to know how to use social media
to great effect. And she's come out and said
that she would consider, or she's open to
nuclear as part of the green solution, which
I think is big. And then the other thing that
happened at the same time was that you had
10 across party or bi-partisan senators also
call for the extension to the Russian suspension
agreement. So, there's a lot of noise happening
in nuclear and therefore Uranium this week
in the US, so that is not going away because,
and the reason I say that, I think a lot of
people were slightly disappointed with the
Nuclear Fuel Working Group report. I think
others latched on to it and said it was the
next great thing. So, it's definitely, there's
a discussion going on. What's your take with
regards to what's happening in the United
States on the topic of nuclear at the moment?
First of all, with the bipartisan comments
and call for not only the Russian suspension
agreement to be extended or continued, but
also to be enhanced and strengthened, I don't
really see that as big news. From my perspective
anyway; I thought that was a quite natural
next step. It has made news because of its
links with the Nuclear Fuel Working Group
report that the DOE released a few weeks ago.
And when you look through the list of provocateurs
there, you've got the usual suspects who've
already been quite vocal: Lindsey Graham,
Senator Barrasso, et cetera, et cetera. I
don't look at that list for example and say,
‘Oh my goodness, that person, that's interesting.’
On the other hand, AAC, her comments really
are quite a watershed moment I think. And
that is big news that perhaps has been underreported
or under-recognised.
And so, if we take a step back, she has represented
the vocal radical left and has very demonstrably
excluded nuclear from any consideration under
the green new deal with a fair bit of support
from Bernie Sanders when he was still running
at the time. And so, the green new deal was
seen as, because that exclusion was seen as
a real threat to, well, a threat to the nuclear
industry and a threat to logic really, and
certainly a strong threat to the achievability
of its objectives. How can you possibly exclude
what still is by far the largest source of
clean energy in the US, and represents 22%
of the grid? Now she's had reason to change
that and it'd be really interesting to know
if Biden's influence there and having a more
moderating influence has played a role in
that. And her comments itself for anyone out
there, they should go to it directly, not
only did she say that the door is open to
nuclear, but she also emphasised that it is
a critical part of the discussion, which is
about as close as you can get to a backflip
there in terms of her policy. And emphasising,
I think 3 times in her comments, that the
door remains open. That's from my read, very
much about allowing nuclear to come back into
that conversation and start the new green
deal. And there's been a number of lobbyists
and even community groups and employee groups
from nuclear reactors who have proposed an
alternative green deal that just has a bit
more reality and allows nuclear to play its
role.
So, for me, that's important. It's important
because it is moderating the Democratic position
as they start to get closer to the election.
It means that one of the most attractive,
if we can put it that way, like the most appealing,
is perhaps a better way of saying it, one
of the most appealing voices on that far left
end of the Democrat party is now relatively
aligned with the moderate view that Biden's
got towards nuclear. But it also goes to the
capturing, I think, a realistic perspective
from the younger generation when it comes
to looking at what nuclear can do. What we
typically see is a progression along many
lifetimes where people start somewhat radically
socialist and they go through university and
they wave flags and they do all of that sort
of stuff and they tie-dye their shirts and
whatever else it was that you and I did when
we were there. And then as reality sets in
in life and they realise the hard grind of
raising a family and paying bills, they sort
of move more moderate and potentially out
to the right. So, this is good for assisting
the part of the constituency who are still
going through that experiment with liberal
socialist ideals and had made those ideals
synonymous with anti-nuclear. Because the
other thing to bear in mind is that subsection
of society, they haven't grown up with the
fear of the bomb. And when you talk to many
young people, and the stats bear this out
in terms of when they segment their surveys
about support for nuclear power, in many cases
it is a reliance on things that Greta Thunberg
is saying, or the AOC is saying, and just
wanting to fall into line with the cult or
with the movement, if I can put it that way.
So this is important, and it's important for
shifting the generalised voter base in favour
of nuclear power, and going into the election
in November, it is moves like these that will
create a really strong positive foundation
for nuclear in the struggling US market, regardless
of who gets in.
I think it's a very interesting time. And
I think timing has been really important because
if you look at people like Bill Gates, he
has been banging the drum for a few years
now about nuclear, you've got the t-shirt-wearing
Michael Schellenberg who has been telling
this story for a long time now. And then you've
got things like the Michael Moore film which
came out - Planet of the Humans, which I don't
know if you've watched, but you should watch.
You have? Okay. You know, it's kind of interesting,
the narrative is interesting in terms of things
slightly anti-renewable and what the implications
are for a nuclear, there's a kind of realism
about what it takes to put all of this, these
energy requirements together. And then you've
got someone you know, young and dynamic like
AOC and You know, telling a story to a different
audience in a different time. It seems to,
That's why it's interesting, what your thoughts
were. So, it seems interesting that now 10
senators are coming together across party,
bi-partisan coming together and pushing the,
you know, ‘Made in America’ story, protectionism,
security and all of that kind of stuff. And
then you've kind of got a very sort of liberal,
you know, Michael Moore, AOC type approach
to this. Nuclear is getting support from a
lot of different sides in terms of age groups,
you know, institutional versus the kind of
social media type thing. So, it is a very
interesting, interesting time in that people,
I think would better understand what nuclear
is capable of. And of course, not everyone's
going to buy it or love it, but certainly
the fact that it's been talked about is good
and it's healthy.
The other thing, so, again, it's possibly
worth coming back to and seeing how that story
plays out and develops. But another little
thing, I said this would be short, but we
always have an interesting conversation, don't
we? I don't know how we do it. There was an
announcement with Energy Fuels this week,
because they have, we have previously talked
to them about Rare Earths, you know, and it
seems to be sort of intertwined with Uranium
in terms of the, you know, radioactive material,
etc. High value, the security component, strategic,
geopolitical importance of it, you know, China
being a big consumer of it and processor and
et cetera. So there's is a lot of parallels
here, but Energy Fuels announced this week
that they had engaged with, I'm going to have
to look at this because this is a name which
I'm going to struggle with: it says Constantine
Karayannopoulos, who for those who don't know,
originally sold MolyCorp for about USD$1.3Bn.
He is very big in the sector. I think he then
sort of bought out when Molycorp then subsequently
went bust and they then bought out Neo from
it. And that's Neo, Linus and Mountain Pass.
Those are the 3 big players in the Rare Earth
space, so that alignment with a US based company,
with a US facility is interesting to me because
of the parallels with Uranium. And I'm wondering,
you know, what's going on there? What are
your thoughts on Rare Earths as a strategic
mineral like Uranium is for the United States?
Is that an important move for them or is that
just, this is what happens in this industry?
No, most definitely. I mean, the parallels
are really interesting with Rare Earths. First
of all, at a geopolitical level they have
similar consequences to industry that Uranium
does. So, the dominance, particularly in the
heavy Rare Earth sector that China has, and
China's willingness to weaponize it as well.
So, if you go back to 2010, you might recall
that there was an incident where an illegal
Chinese fishing vessel was seized by Japan.
And in one of the most interesting, blatant
weaponizations of trade, China basically said,
send them back or we're not going to let any
of our REEs cross the border for your technology
industry. So that's a reminder for people
in the Uranium sector, just how important
geopolitics can be. And whilst the concentration
of Uranium is not as concentrated as Rare
Earth elements, it's not that far off when
you think that four countries produce 80%
of the world's Uranium and the top 8 produced
95% of the world's Uranium. It's certainly
not Copper or Zinc or something else that's
distributed pretty much anywhere.
The other interesting parallel is that, as
you've noted, there's a very strong coexistence
of Uranium and Thorium in most REE minerals.
So, most REE players need to have a good awareness
and some understanding of Uranium and Thorium
and radionuclides and all of the risks associated
with that. And we have seen a little bit of
the uphill battles that we face in the Uranium
sector leaking out into the REE sector, such
as Linus’s problems in Malaysia with local
communities not having enough to do on a Thursday
night and banding together to oppose the plant
there and so on. So, there is a natural nesting
if you like, of Uranium and REEs and I think
any strategy that's designed to safely extract
the Uranium out of REE minerals for beneficial
use rather than expensive storage just has
to make sense.
Yes, I'm intrigued by it and I'm going to
try and speak to the CEO, Mark Chalmers next
week, but I'm intrigued. It's just, it feels
to me there's a kind of critical minerals
story, a USA critical mineral story building
here because the importance of Uranium, the
importance of these Rare Earths, etc. I kind
of feel that the stars are aligning there,
because they, again, they'll have very similar
support in DC, in terms of Senators, or even
in Capitol Hill itself, because these are
very similar problems that they're trying
to solve. So, but look, one for another day.
There are further parallels as well that we're
thinking about very much in the context of
what the Nuclear Fuel Working Group report
is driving at. You might recall that basically
China said to a number of technology companies,
the only way we can assure you access to heavy
rare earths is for you to produce in China.
And there they were successful in implementing
a significant shift of technology production
out of the US, out of South Korea, to a degree
out of Japan. And all of those countries that
just didn't have heavy Rare Earths were enormously
vulnerable. And so, China has got form, and
I don't see any reason why that form of influence
on industrial bases won't be exerted from
Uranium. But here's the interesting catch:
China, the boot is on the other foot for China
when it comes to Uranium, because unlike REEs
where they control 95% of the market, it's
almost precisely the opposite. That will be,
over time, they'll be capable of producing
only about 5% of their own Uranium domestically,
absent some big discoveries. So, it is just
fascinating to look at where the parallels
and where the analogues are between those
two sectors, so we should come back to it.
We should definitely come back to it because
I think that the language, that weaponizing
is starting to be seen more. I think the USA
is starting to use that language on a lot
of topics, not just in the mining space. And
I think, you know, the geopolitical component
is always fascinating. It's always interesting.
I am sure there is a great book to be written
on it as well. But look, Brandon, thanks so
much for catching up with us this week. We
didn't think there was much to talk about.
We were wrong.
Yes. Well either we are very interesting,
or I just waffle too much. We'll let the viewers
decide that
None of the above. So, we're not, none of
them. No, it's not that you're not interesting
and you don't waffle. I really enjoy it. Okay,
well, I better let you get back to your weekend.
You've got to get home, see the wife and kids,
enjoy yourself. Anything planned for the weekend?
Fun stuff?
Just a quiet one here. I have got a fair bit
of work to catch up on. It's going to be rainy
on Sunday, so I have told the kids they can
watch a movie and I'll disappear back into
the office.
Beautiful. Good man. Okay, well keep at it.
We'll speak to you next week and see how the
world has changed then.
Great. Okay. All right. Enjoy your weekend.
Cheers, Matt.
