Global Atomic (TSX-V: GLO) - Uranium’s Frontrunner At Discounted Sale Price?

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.

Matt Gordon caught up with Stephen Roman, CEO, Chairman, and President, Global Atomic. Stephen 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.

Market Landscape

According to the company, when the markets are volatile and discounted from the peaks, it is a great time to invest. Global Atomic has been operating in Niger for 17 years. It has endured a very low period after the Fukushima nuclear incident. It continues to work on advancing the project. The company has come off a high share price of $5.11 and is currently trading at $3.60-$3.70. While these prices are discounted for the rest of the market, from a valuation perspective, the company has carried out the required work and is now moving into production. It has all the needed permits and has miners on-site to move the project ahead. Notably, Global Atomic will be the first new uranium producer coming out of the gate in the current cycle. The company is looking to deliver yellow cake to utilities by 2025. When it comes to investing, people should look at companies with solid fundamentals and buy the dip. Once the markets turn around, the investors are likely to turn a profit.

For the Dasa uranium project, the company’s representatives visited Niger in 2005 and spent 18-24 months looking through the old data, seeking opportunities in the Tim Mersoï Basin. The company applied for permits in this area and started exploring. The entire process took close to 2 years. In 2007, the company started exploration on the ground fieldwork, and by the end of 2010, it discovered the Dasa uranium deposit.

Between 2007 and 2010, the company made 3 other discoveries. The 2010 discovery of Dasa was a game-changer for the company due to its significance. The company successfully raised capital during this time period. In 2011, the Fukushima nuclear disaster in Japan caused a 10-year dry spell for the uranium market. During this time, a lot of junior explorers stopped working, while Global Atomic continued operating. Over that 10-year period, the company was able to advance the project to a point where it can now enter production. During difficult market conditions, Global Atomic’s sister company Silvermet provided financing.

It took the company 17 years to reach the point of production. It is important to note that most new discoveries take at least 10 years to turn into new mines. In the uranium space, the timeline between a discovery and a new mine can take up to 30 years. Denison Mines’ Midwest Lake is one such project that took 30 years after discovery to acquire permits and carry out the required work. People need to realise that it can take anywhere between 10-20 years to get nickel, lithium, copper, and uranium projects to get up and running.

The 17 years of past work has benefited the company in significant ways. It has had highly supportive investors. The company is hitting the market at an advanced stage. This comes at a time when the nuclear energy and uranium market is observing a bull run in the current cycle. The company anticipates that the bull run will benefit junior explorers as well. However, investors should still carry out their due diligence.

Out of 1,000+ exploration projects, very few actually work out. The discoveries are very few and far between and more often than not, recurring properties come up every cycle. These projects are then recycled with new branding and a new company, in order to take advantage of the next market cycle. Investors need to understand that across the spectrum of mining projects, there aren’t many projects that end up making it to production.

The Dasa Uranium Project

The Dasa uranium project is a company-building asset. The company has worked for years to bring it to its current stage. It currently has 125-150 people on-site. The company is ramping up to initiate mining operations. It has an opening blast ceremony on the 5th of November, an event which is expected to be attended by 1,000 people. The entire engineering team is on-site working on the final preparations for the mill location and design. The company intends to kick this off by Q1 2023 with on-site civil work, pouring foundations, and building the plant. The company has also signed another off-take agreement with a big North American utility. It now has 2 off-take agreements signed. It expects to have additional agreements in place once the terms of project financing are announced, which is expected before the end of 2022. The Dasa uranium project is a world-class asset that is moving towards production. There aren’t many projects in the market right now that are at a comparable stage of advancement.

The company’s share price has been knocked down by 30%-40% from the highs, making it a good entry point for investors. The energy market is on the rise and a large number of new nuclear reactors are expected to come online over the next 5-10 years. These developments will drive up the demand for uranium to feed the reactors. In its current state, the ongoing uranium supply is falling short of the growing demand. The commodity’s supply-demand trend is comparable to lithium. Notably, lithium prices have seen a massive jump since everyone started focusing on making batteries. Uranium is expected to have a similar demand spike in the near future.

Interestingly, the last big spike in uranium was in 2007. During this time, the prices almost reached the $140/lb mark. The current market price for uranium is $50/lb. There’s a lot of headroom for growth, which is expected to be a major driver of share prices in the uranium space. As the company continues to sign additional contracts, it expects to generate a significant cash flow. At the same time, the deposit continues to grow.

The company intends to continue drilling at the Dasa uranium project. It recently finished a 16,000m drill program. The drill program was a tremendous success, enabling the company to extend the deposit’s size. According to the company, there hasn’t been a deposit in Niger with such a massive scale and potential. It has plans to publish updated numbers in the first part of the next year.

The company is more of a development story now rather than an exploration story. When a company makes a big discovery, the share prices typically go up substantially. As these companies get into development, the prices come off. Once a company enters production, it gets re-valued. Global Atomic is currently in the development stage. As soon as it starts producing, it is anticipating a big re-rating on its share price. The company has performed significantly better than a lot of other uranium companies. Once it starts producing, investors will have to pick the ideal spot over the next 1-2 years to buy some shares. Once the company starts delivering yellow cake, it will lead to significant changes.

Financing Considerations

Some of Global Atomic’s shareholders have exercised warrants amounting to $10M. This will help fund the operations at Dasa. The company is currently working with banks that have completed their due diligence at the project site. By the end of the year, the company expects to gain some clarity on the bank package, which is expected to be in the 60-40 range, or 60% debt with 40% equity. The banks will allow the company to use its expenditures from 2021 and 2022 as part of its equity contribution.

The company is also in discussions with subordinates to the banks for a potential bridge facility. The announcements will help the company acquire additional utility contracts, which will have a positive impact on its valuation. Some of the utilities are waiting for the company to attain project financing before entering an agreement. Before it enters production, the company is looking to sign between 6-12 utilities. As the market moves along, the company is looking to layer contracts in a way that the utilities that got in earlier have better terms compared to the utilities that come in at a time when the uranium prices are moving upwards.

Global Atomic is looking to sign between 1.5Mlb-2Mlb supply in off-take contracts in order to cover all its costs, including the bank interest and repayments. Based on the Feasibility Study, the mine has the capability to produce about 4.5Mlb on a yearly basis. Once it enters production, the company will be in a position to enter additional contracts with utilities. It is important to note that the company also has an agreement with Orano Mining, which has the Somaïr facility located north of the Dasa uranium project.

The company anticipates that it will be directly shipping ore to the Somaïr facility by 2024. This would bring in some early cash flow, which, in turn, would help the company with its overall bank financing. The company also has about $28M in warrants that could potentially be exercised in June 2023. If the company can attain some dividends from the Befasa Silvermet asset in Turkey, it will have sufficient capital to run operations through Q1, 2023. While the company isn’t in favour of issuing more equity, the banks might demand it. Global Atomic is not looking to raise capital at this time.

Orano mining has its own internal processes and is currently working on mine plans in order to determine the amount of ore it requires at the Somaïr facility. Following the disclosure of ore requirements, Global Atomic is looking to make some announcements to the market. The announcements are expected before the end of 2022.

There are different types of investors in the market. The ones that carry out due diligence and are seeking a good long-term asset would choose a company like Global Atomic, which is expected to generate cash for the next 50 years. The smaller retail investors find the prices to be on the higher side and end up investing in penny stocks instead. Investors should focus on having a balanced portfolio.

Global Atomic is a solid company with good backers and a strong institutional following. The company’s pounds in the ground are currently valued at $1/lb or $1/lb, which is surprisingly low for such an advanced project. Interestingly, there are some projects in the market without a permit in place that are valued at $8/lb-$9/lb.

The company’s Feasibility numbers are based on 1,000t per day mining, producing 4.5Mlb on a yearly basis. The base case price for the supply is currently estimated at $35/lb, which results in a 22%-23% IRR (Internal Rate of Return). At a $50/lb uranium price, the IRR increases to 45%-50%. The company is currently contracting the supply north of the $50/lb price point.

To find out more, go to the Global Atomic website