Transcript: Global Atomic (GLO) - 12x Bagger Uranium Junior Closest to Production
Interview with Stephen Roman, Chairman, President & CEO of Global Atomic Corp. Global Atomic aims to start Uranium production at the Tier 1 Dasa deposit, in Niger. In addition, Global Atomic has a 49% stake in the BST steel dust recycling operation in Turkey that produces zinc concentrate and provides financial leverage to minimise equity dilution.
Global Atomic owns 100% of the Dasa project in Niger, a major uranium deposit first discovered by Company geologists in 2010. A new PEA announced in April 2020 comprises an optimized Phase 1 of a larger mine development at the Dasa project.
- 1:30 - $3/Share, Who Could've Imagined it?
- 2:43 - Company Overview: The Journey & The Benefits of Mining in Niger
- 7:04 - Perfect Timing: Differentiation & Competition
- 11:45 - Forecasts for Production
- 14:19 - Valuation of Zinc & Uranium
- 16:28 - Focus & Financials: What's Next for Global Atomic?
- 17:38 - Changes to the Team: Who Came On-Board & Why?
- 19:22 - Discussions with Utilities & Mood at Market
Matthew Gordon: Stephen, how are we, sir?
Stephen G. Roman: I’m doing well, Matthew. Summer is finally arriving here in Toronto and the leaves are coming out on the trees.
Matthew Gordon: I don't think that's the only reason though -USD$3/share!
Stephen G. Roman: When we started talking a couple of years ago, I think we were at $0.25c, and we've knocked off all of the milestones that we told the market we would and we’ve made tremendous progress, both on the Zinc side with our new plant up and running and doing great, and now with the Uranium with the Dasa project. It's been a very successful past couple of years.
Matthew Gordon: And a very successful last few months - $3 - who could have imagined it 2-years ago? You can't tell me that you knew this was going to be $3 by now. Did you ?
Stephen G. Roman: Oh, I had a good idea, because we have the largest, highest-grade Uranium deposit in Africa. We moved it through the permitting process in 3-months by the end of December. We got our mining permit in January. We got our environmental permit. There's just no other Uranium project like this on the planet that's moved along that quickly with such an outstanding project.
Matthew Gordon: Can you do me a favour/ judging by the questions we've had sent in, some people are coming at this new, I suspect, having not previously invested in the mining space, and they're seeing your story being positioned as a category of 1 in terms of your ability to get into production. Give me a 1-minute overview for those new, I'll pick it up from there with some of the points that I want to focus on.
Stephen G. Roman: First of all, the big reason why I went to Africa, and particularly Niger is because they opened up the doors for new foreign investment in the Uranium field. They've been producing Uranium there for 50-years. The French have been getting 30% of their supply for France from there. Therefore, there's a good in-situ knowledge base of Uranium; the government knows Uranium. It's the big revenue source for the country, and of course, this is a new discovery that's moving along to production and it will be the preeminent Uranium project in the country because the Orano mines at COMINAK shut down at the end of March, and Somair, of course. We've signed that MOU with Orano to potentially ship the ore from Dasa to get things going and also extend the life of their project.
These are projects that have been running for 50-years now, where it's benefiting us, of course, the permitting regime there and the knowledge base is with COMINAK shutting down, we've got a complete in situ workforce, right from upper-level management, right down to the miners, equipment. operators that effectively are now talking to us about moving to Dasa. As part of our thinking, basically, companies look at contractors, they get bids and quotes from contractors to collar the portal, go underground, do the development. In our case, we're doing it all ourselves. We have the capability in situ with our own management team that have done it before, but also with the COMINAK workforce. We are now talking with various individuals to put the core team together to come in and start doing it starting in Q1 of 2022.
Matthew Gordon: That’s going to save you time in terms of finding these people, money in terms of hiring costs, and they know what they're doing in terms of training, so that's a real bonus.
Stephen G. Roman: It's a huge bonus because we actually have the people right there. They're just up the road from us, that we can bus into our site. They'll live in their own homes, we can have a rotation camp at our place, so they can come in for 2-weeks, out for 2-weeks, but needless to say, there's no big drama in finding a workforce that's ready to go on the next project either from a cost point of view or a timing point of view. And guess what else they've got up there? They've got lots of equipment. So we don't have to worry about bringing anything in at this point in time. Eventually, we want to have a green mine here, we're big on the ESG front. We'd like to turn this whole operation into an electric operation: solar, etc. We'll be talking about that a little bit more as we move along, but that's part of the plan.
Matthew Gordon: That's really interesting. In terms of your studies, you have made a set of assumptions about what the cost of equipment is going to be. You've got some equipment off the road, which is now looking for a home, do you think your economics have the possibility of changing?
Stephen G. Roman: Most definitely.
Matthew Gordon: When do we know?
Stephen G. Roman: End of Q3 this year, that's when our Feasibility Study comes out. That's our final engineering, and I think you're going to see some improvements both on the capex and the opex at this operation.
Matthew Gordon: Wow - the project just got an accelerant added to it in terms of people, equipment and expertise; I hadn't really thought about it like that and certainly not in terms of the timing, but the timing is perfect.
Stephen G. Roman: It is perfect, and our studies will be completed by the end of September then we start moving ahead and gearing up. We've now actually doubled the size of our camp there, we brought in a number of additional containers. They are C-can living accommodations. We're gearing up for our big program of drilling starting in September. What people need to realize is that the numbers that they've seen on this project: USD$200M, 26.6% IRR, etc, that's only on the flank zone. The flank zone is our initial mining area. It comes close to the surface. We can ramp right into it, but it's only 18-20% of this deposit. The whole idea with this drilling is to do a little more extension around the flanks, we know it extends on strike and close to the surface so we could extend the life of that area, but more importantly the rest of the 80% of our 250Mlbs at this deposit, we'd like to move all the inferred to measured and indicated. We've got a lot of indicated and inferred now, you can see that in our mineral resource estimate, but with some infill holes; I'm talking about moving from 50m centres to 25m centres. You can move that to M&I, then you can wrap numbers around that as you move from the flank zone into phase 2 of mining the rest of the deposit. That's going to have a huge impact on our IRR and NPV because then you're incorporating the entire deposit in your economics. This is what people need to understand: the economics that they see now, they're outstanding: mining at over 0.5% Uranium. But as I say, that's only a tiny portion of that deposit so we need to get the market to understand that we still have a lot behind that.
Matthew Gordon: You do, because I'm looking at some of your Athabasca cousins: they're looking at USD$1Bn+.
Stephen G. Roman: That's right.
Matthew Gordon: And they are not near production, they are not near cashflow revenues and they've got the permitting process to go through. The valuations in North America seem to be much more excessive compared to some of the African stories, and you're the most advanced African story in terms of getting into cash flow, or at least in control of when you get into cash flow. How do you feel about that?
Stephen G. Roman: Athabasca has a certain halo around it because it's in Canada. It's got the big companies: Cameco and Orano producing there, Denison, and it's a tremendous area with very high-grade deposits. There's no knocking that. The problem is, it's in Canada. The permitting regime here is awful. It's a very long way. When I was at Denison, we had 1 project – Midwest - that took us 30-years to permit. Whoever heard of permitting taking that long? We went through various environmental hearings and First Nations hearings and more government hearings; it's ridiculous. In Niger, they want to mine Uranium. So that's why we're there. They have elephant deposits, we found a big 1, and from the time we submitted our application for permit, it took us 3-months to get our permit - 3-months. That's how committed they are in Africa. Africa is the place to mine Uranium, and particularly in the Sahara Desert where there's nobody around, you don't have to move people. All the infrastructure is there because they've been mining there for 50-years. We have power lines, water, roads, we have towns close enough that we can bring the labour force in. It's just an outstanding set of circumstances that make this an outstanding project.
Matthew Gordon: I think people have drawn parallels between what's going on in North America and what's going on in Africa. But you're saying that people just need to understand that you are close to getting in production, so if everything moves forward as you plan, what are you forecasting in terms of production?
Stephen G. Roman: Our production is still staying the same with mining 1,000t/day, doing about 4.5Mlbs/year, but people also need to realize that this is a completely scalable project. The reason we picked 1,000t/day and doing 44.5Mlbs/year, is we felt, as a new entrant in the Uranium supply chain, that we could actually sell that amount of Uranium. Now, if the Uranium price moves higher and you have a booming Uranium market, obviously we can ramp this up to 1,500t-2,000t/day and double our output. I know there’ve been some questions about that and people were concerned that we're pre-selling a lot of our Uranium. There's no need to worry about that because the Uranium price now, the forward price by 2025, is in the USD$40-$50 range. I’m using all the metrics out there at the moment. We've done our numbers at a base case of $35, we've run the sensitivities down to $25. With these grades and low operating costs we're down to $16/lb to produce 1lb of Uranium.
We have excellent metrics here, and as the price moves up, which I expect it will because nuclear utilities need to secure supply and there are more reactors being built now. I heard a stat last week that we're producing about 120Mlbs/year from all the mines, we're currently burning between 180M-200Mlbs/year, so that huge delta has been the material that's been sitting on the side lines is being chewed up, but once that's gone where are people going to get their fuel from?
Matthew Gordon: I think the big issue this year has been the fact that the supply number is definitely nowhere near that. Obviously, with the Kazakhs and Cameco coming off for sure.
There's another aspect to this – Zinc. The Zinc is worth potentially USD$200M of the $500M market cap today – that’s from an analyst. Is that true?
Stephen G. Roman: Yes, this has come out of Cormark Securities in Canada, of course, they've done an analysis at what we have. They say that we're getting valued right now at about $1.50/lb in the ground. When you compare that with Denison at USD$5-$6/lb in the ground, there's a huge delta here between Global and the rest of the Uranium players that we need to fill.
On the Zinc side, we built that new plant in 2019. It's running at full capacity and we had an excellent quarter. The analysts there are looking at Befesa, our partner and seeing that they're trading at 13x EBIDTA, and he said: if you apply the same numbers to Global, the value of our Zinc asset is USD$200M. We definitely know it's in the $150 range. $200 may be a bit on the high side but what the heck, the Zinc price right now has been doing very well at USD$1.30+. We'll have that project paid out this year and then that cash starts coming back to us to employ at the Dasa project.
Matthew Gordon: The annuity stream of the cash for the next 40-50-years: people are excited about that. The reason I asked that question is, I was trying to work out what you or Cormack were valuing the Uranium at? USD$300M seems a bit low to me.
Stephen G. Roman: I would say that we take 250Mlbs at just over USD$1/lb in the ground.
Matthew Gordon: That doesn't seem right compared to your peers. I guess that's for you to tell the story of what you think it is worth and start showing them the next steps. When we started talking, you were at USD$0.25c. You've done a succession of things that you said you would do. You’ve accelerated some of it and moved this thing quickly through the process. What's left to do? What should we be looking for? First of all, how's cash today?
Stephen G. Roman: At the end of the quarter, we had about USD$14M cash on the books.
Matthew Gordon: So you are good for cash for a while.
Stephen G. Roman: We're good for cash right now. The big focus is to get the Feasibility work done. We've optimized the process plant, we're doing our underground mine planning right now. We've designed the box cut for the portal so we know what that's going to be dimensionally. All of the fine details are being completed so that we can give that to our local guys and say: start building this project.
Matthew Gordon: One thing I want to talk about, because we've mentioned the COMINAK crew coming through, which is great, but you’ve also been doing some hiring at board level. This is something we’ve talked about in the past: the importance of bringing people along who are able to move the company forward, not just placeholders, but people who can actually be useful to the company. Tell us about this board hiring.
Stephen G. Roman: Dean Chambers came on board. We announced him. Fabulous guy. He's got a lot of experience. He's actually an engineer, but he's been involved as CFO of a couple of big companies, including Sheritt, and I can't recall, there are 2-3 others that he was on. He's going to be chair of our audit committee and he will also be involved in our project financing initiative. At this point in time, we haven't talked too much about project financing. We notice other junior companies that are far less advanced than us are raising dollars with equity issues. Depending on how things shake out with Orano and whether they want us to ship them some ore, that could be early cashflow for us. We could actually start the project with very little money, and with the cash coming from Turkey and with the cash coming from ore sales, that will help us finance the plant. The end game is to have the plant up and running by 2024. We are talking to utilities right now about buying Uranium, starting 2025.
Matthew Gordon: You are already in discussion about that - that's interesting because we were trying to work out whether they are chasing companies like you, or are you chasing them? How has that dynamic changed?
Stephen G. Roman: Generally speaking, from all the utilities we've spoken to, they're still sitting on the fence. They haven't made the big decision to start moving into the market. I think that's why you see the Uranium price sitting at around $30. But they're definitely interested and they’re thinking about it, but sometimes it takes a bit of a bit of pressure to get them to move. As we move along here and the spot dries up, you've got Sprott Securities now starting a Uranium fund, they're going to be soaking up spot. There are 2-3 others out there doing the same thing. People know that there's going to be a big movement in price.
The other thing I'd like to say today is that in all my years in the Uranium business, I've never seen the structure that's starting to happen out there with the environmentalists now buying into nuclear and various other people buying nuclear. Of course, the net carbon zero and all of these kinds of things. I think we're into a renaissance of nuclear energy that's going to last much, much longer than previous cycles in Uranium. To have an asset that can run for 50-years, I think we're going to make a lot of money for our shareholders.
Matthew Gordon: That’s a nice point to end with.
Stephen G. Roman: Thanks, Matt.