Global Atomic (GLO) - Setting Up For Uranium Revolution

Global Atomic Corp. is a Canadian resource company advancing the large, high-grade Dasa uranium deposit in the Republic of Niger. The company benefits from the dividend stream generated by its share in the Befasa Silvermet zinc concentrate production facility in Turkey. The company provides a combination of high-grade uranium mine development and cash flowing zinc concentrate production. The company operates through two segments: the uranium business and the EAFD (Electric-arc furnace dust) business.

Matt Gordon caught up with Stephen Roman, CEO, Chairman, and President, Global Atomic. Mr. Roman has over 4 decades of experience in successfully identifying, financing, developing, and commencing production at multiple mining and gas projects. He previously served as the Founder, Co-Chairman, and Director at Gold Eagle Mines Ltd. He has also worked as a Policy Advisor to the Canadian Minister of National Defense. In 2016, he received the Bill Dennis Award for Canadian Mineral Discovery from the prestigious PDAC (Prospectors & Developers Association of Canada).

Company Overview

Global Atomic is a mineral exploration company founded in 1994 and is headquartered in Toronto, Canada. The company's flagship asset is the Dasa project in the Republic of Niger, a high-grade, low-cost uranium project with a PEA (Pre-Economic Assessment). The company also produces zinc concentrate from recycled steel dust in Turkey. The company is listed on the Toronto Stock Exchange (TSX-V: GLO), and the OTC markets (OTCQX: GLATF). Global Atomic was among the top 25 companies in the OTC markets in 2020.

Global Atomic posted Q1, 2022 results yesterday. It had a profitable quarter from the Befasa Silvermet project in Turkey. The Dasa project is a major asset for the company that is advancing as per expectations. During this quarter, the company got a letter of interest from Export Development Corporation (EDC) in Canada for up to USD$75M as part of the company’s overall financial package. As per the Feasibility Study, the estimated build cost for the project is $208M. EDC’s letter of interest will help the company put together a syndicate. The company is looking to get all the work completed by the end of 2022. It is also in advanced discussions with a couple of groups for project financing.

Ongoing Operations

Global Atomic is looking to commence construction by Q1, 2023 on the milling end of the operation. On the mining side, the company is well advanced. In fact, it recently completed the construction of a big camp in Turkey. The camp has now arrived in the port of Cotonou. The company is currently in the process of completing the paperwork for the same, following which the camp will be shipped to the site. At the same time, the company is also developing a lot of infrastructure, including facilities for maintaining equipment, housing, water supply, and sewage supply.

The company has completed the excavation of its box cut. In this process, the company excavated an area in order to gain access to the solid rock face. It has plans to initiate drilling and blasting in this area in order to move underground with its portal and ramp.

A 40-truck convoy will be moving from the port of Cotonou to the Dasa project site. This convoy will be carrying all the required supplies. Following the loading of material onto trucks and customer clearance, the material is expected to arrive next month. The mining equipment is expected to arrive at the Dasa project site by June or July. The company plans to mobilize the tractors in August or September. In the meantime, the company is training its workforce through state-of-the-art simulators. Training is essential here as most of the equipment that the workforce knows how to operate is now obsolete. The company is on schedule to start working and build the plant in the first quarter of 2023.

The import of Russian steel and various Russian products is seeing a consistent decline due to the ongoing geopolitical situation. The company anticipates that Turkey will pick up a lot of slack when it comes to these materials. The Turkish steel mills are currently running at 75%-80% capacity. In order to meet the growing needs, steel mills would need to operate at 80% or higher capacity in order to ensure that the company has its plant all year round. The Befasa Silverment project was put under maintenance shutdown for 3 weeks in Q1, 2022, which caused a temporary dip in production.

In Q2, the company expects to run the plant operations uninterrupted. The Befasa project will be paid out and dividends will resume for the project partners in the second quarter.

Global Atomic has been in talks with various banks that are a part of its consortium. As a cash-flow generating asset, the Befasa Silvermet project provides assurance. In a case where the current zinc prices remain consistent, the project would generate a significant cash flow for the company. As the dividends resume, the cash flow can either be used for the Dasa Uranium deposit’s debt or become a part of the equity component.

Global Atomic is currently working on a deal with Orano. Both companies are developing economic models that are mutually beneficial. The deal is in the final phases and is very close to being completed.

Once the terms with Orano are finalised, it will generate a second source of cash flow for Global Atomic. The deal is expected to close by the end of next year, following which the company can directly send shipments to Orano, which is 2-2.5 years ahead of Global Atomic’s Yellow Pig production. This development will also help the company keep the banks on its side and potentially provide a better cost of capital.

Cost Considerations

Due to the growing inflation, the prices of raw materials such as coking coal, and natural gas are increasing. It is important to note that while the material prices have risen, the zinc prices have also increased substantially. The company hasn’t observed a major impact from rising costs and is still generating projected revenues. It has a modern plant that is largely automated. As a result, the operation does not have a large labour component. These factors greatly influence the overall profitability of the project.

Global Atomic has shortlisted a number of groups for the EPCM (Engineering, Pyramid Management, and Construction) contract. The companies that are under consideration are big engineering firms that have previous experience in building plants. The company will finalise an EPCM contractor next month, following which the project will move into a detailed engineering phase. The detailed engineering phase will help refine all the pricing that was present in the Feasibility Study.

The detailed engineering studies are expected to be completed by Q4 2022, providing an accurate picture of the project’s total CapEx (Capital Expenditure). In order to mitigate concerns, the company has been sourcing a lot of materials and fabrication facilities in Niger. Notably, a couple of big Turkish companies have built new hotels and an airport terminal in the country. These companies have operations here along with a large skilled labour workforce. A lot of fabrication is also done within the country.

Most of Global Atomic’s belts, conveyor belts, and tanks are built within the country. The company is looking to build around 45 different tanks, which it plans to source locally. This would help cut down costs significantly across construction, fabrication, and shipping.

Due to the recent supply chain issues, there has been a dramatic increase in shipping costs. For instance, the previous cost of shipping a sea can on the ocean was $2,500, which has now increased to $20,000. Due to the steep rise in costs, the company is sourcing a lot of material from Niger and surrounding areas, effectively eliminating the shipping costs. The company is confident that it can sustain the production costs that were highlighted in the Feasibility Study.

Drill Operations

Global Atomic has carried out extensive drilling in order to expand and join different zones. The mining program successfully pulled in Zone 2, Zone 3, Zone 4, and Zone 5. Connecting the zones has led to a significantly larger resource than the initial mineral resource estimate.

The company has expanded the ore body and is looking to publish an updated mine plan by the end of 2022. It anticipates that the new plan would have an overall reduction in operating costs. This is because the company wouldn’t need to carry out a lot of underground development in order to access the next phase of ore. Phase 1 is primarily the Flank Zone. The company has successfully connected the Flank Zone with 2 smaller zones. This enables it to carry out mining operations close to the original Flank Zone area, resulting in a significant reduction in underground development costs.

The Iskenderun Project

The Iskenderun project is located 30km southeast of the Dasa Uranium project. The company has shipped 6 cores from its drilling program to the Saskatchewan Research Council labs in Canada. Since the facility is currently booked for all the uranium activity, the company’s cores are scheduled for permeability and porosity testing in July.

Once the results of the tests are back, the company will be able to enter the next phase of the operation. In a case where the results are positive and the core is leachable, it would provide the company with a 35Mlbs-50Mlbs resource that could be potentially leached and the resin could be shipped to the Dasa plant. The company is looking to publish the test results by August or September 2022.

Cash Position

As per Global Atomic, the banks it’s currently working with do not factor in market volatility, but instead, focus on project specifics. The banks develop a model with higher and lower uranium pricing. If the project looks profitable and the banks can get paid back in a reasonable time, they are likely to invest. The company anticipates that the banks are interested in uranium and are looking to support a new project in a developing country.

On the equity side, the company has about $10M in warrants that are due at $3. It also has an additional $20M in warrants at $6 which are due next year by the end of June. The company isn’t looking to issue more equity. It anticipates that the combined cash flow from the Turkey asset, the potential revenue generated from Orano, and the equity coming in from the warrants will be sufficient to meet the capital requirements. The company has also received interest from a number of groups that are offering 12-24 month bridge loans on a mezzanine-type basis.

Targets 2022 and Beyond

Global Atomic is looking to gain clarity on the banking syndicate and the extent of funds available by the end of Q2, 2022. This year, the company is also looking to finalize the Orano deal. It is also planning to layer a few off-take agreements over the next 2 years while the plant is being built. This would enable the company to take advantage of the higher uranium prices, which is also a major driver for its stock. Once the project financing and off-take agreements are in place, the company expects to see a significant re-rating in stock.

Due to the ongoing Russia-Ukraine situation, the utilities market is determined to spread the risk across other projects. Global Atomic’s project is expected to generate massive interest once the banking component is in place. The company has set short, medium, and long-term pricing for uranium. Notably, the Feasibility Study was done at $35/lb, while the current term price is $48/lb. Once the company enters production in 2025, it anticipates that the uranium term price will cross the $50/lb mark, making it a highly profitable operation.

To find out more, go to the Global Atomic website