UEX Corporation (UEX) - How to Monetise a Large Uranium Portfolio?

Uranium is still hovering around $31/lb, with uranium explorers like UEX Corporation attempting to manoeuvre smartly into a prime position ahead of the imminent next uranium cycle. What is the latest news around this uranium mining player with a large portfolio of uranium assets in the renowned Athabasca Basin?

UEX Corporation had announced a measly USD$700,000 private placement at the start of May, which eventually closed as a USD$2M oversubscribed private towards the end of May. Such a small quantity of capital was raised as part of a "hard-dollar financing" strategy. It was intended to be used as a small working capital boost to enable UEX Corporation to do some more work at the Christie Lake uranium project. On August 4th, UEX Corporation commenced drilling at Ōrora North within the wider Christe Lake project. The first phase of this summer drilling program will consist of three holes, resulting in 1,800m of drilling. A possible second phase will hinge on the results of the first, with anomalies being hunted enthusiastically with the potential for high-grade, low-cost uranium on the horizon.

As the most active uranium explorer in the Athabasca Basin, how will Lemaitre and his team systematically decide which average uranium assets to offload and which to develop?

We Discuss:

1. 1:40 - Company Overview
2. 2:50 - Roger's Track Record and Experience
3. 4:03 - Why Raise So Little? Strategy and Outlook
4. 6:28 - The Complex Uranium Market and its Impact on Company Decision-Making
5. 11:16 - 2/10 Assets: Update and Plans for Christie Lake & Shea Creek
6. 14:58 - 8/10 Assets: Plans & Timeline
7. 20:35 - No One Sells the Good Stuff Cheap: Offloading Philosophies & M&A Red Flags
8. 28:22 - Future Raises: Market, Sums, & Future for UEX

 Matthew Gordon: Give us a one-minute overview of the business for people new to this story and then we can pick it up from there. 

Roger Lemaitre:  The UEX Corporation, we’re one of the older Uranium juniors in the space.  We jumped into the Athabasca Basin way before everybody else did in the last cycle.  And we have 10 Uranium deposits that are poised to move forward into the next cycle.  But we really think in the current environment that our strength in the mid and short-term is to work on our portfolio for new discoveries because that’s where quite frankly we think the greatest value comes for shareholders in new discovery companies.  And we have the lowest risk portfolio of opportunities in the Athabasca Basin and where it’s a starkly lower cost to production restrictions. If you’re looking for a portfolio with a lower risk of exploration, upside potential, but backstopped by uranium pounds that could be moved forward when the time was right, then UEX is one of the few companies that can do both. 

 Matthew Gordon: You’ve got the Cobalt component there as well for when that comes back. 

Roger Lemaitre:  Yeah, absolutely.  It’s a chance for shareholders to get a little bit of extra value when the market comes but it’s not our core focus. 

Matthew Gordon: What’s your background, your track record again? 

Roger Lemaitre:  I’ve been in and out of the majors and juniors for the last 30-years.  The last 20 of it’s been in the Uranium sector.  I spent 12-years at Cameco, running from this little … right at the beginning of my career there I was on the exploration team that helped extend the Rabbi Lake Eagle Point operation with new discoveries in basement rocks, where they said they couldn’t be found.  We moved on to manage the Saskatchewan operation for Cameco and I was on their mergers and acquisitions teams for a few years and then managed their global portfolio of operating projects before I moved on and moved back into the junior sector.  I think my claim to fame would be that every single major company I’ve ever worked for in Canada no longer exists, except for one and that’s Cameco.  They’ve all been bought out.

 Matthew Gordon: Where is that going? Last time we spoke you’d raised a couple of million bucks, what was the plan? 

Roger Lemaitre:  The last raise was a little bit of a … we call it hard dollar financing in Canada because it wasn’t flowing through.  And the idea was to help us do a little bit more work at our Christie Lake project, that we are doing some drilling here and we just started rapping up that programme as we speak.  And to keep us going through to the end of next year without having to raise money to keep the lights on.  We had a little bit of money left over from our previous flow-through financing that was done in late November, early December, that was funding the exploration after this year.  Since that we’ve been doing a deep dive into our Shea Creek project as well, to look at the ex-pat potential that we’ve always thought has been there.  And I think what surprised us is that it’s far larger than we were … the upside potential is much larger than we predicted.

Matthew Gordon:  If I look at some of your neighbours within the basin, they’ve raised a lot more money than you.  I mean why so little?

Roger Lemaitre:  We’re really conscious about shareholder delusion and when the market starts to move in the right direction, that to fund larger programmes, development programmes and whatever.  When it comes to funding our exploration activities. I wouldn’t say we act as a major company but we kind of did a little more planning and say okay, in the next 6 to 12-months, what exactly do we want to do?  We look at our portfolio, we look at the targets within the portfolio because we look at targets as opposed to the projects within the portfolio and say, where should we spend our best money?  What’s the market that we should do?  What’s fairest to shareholders that are currently in the company?  And so, we’ll raise two million. 

Three years ago, we raised USD$6M because we were drilling off deposit and it just depends on what’s urgent for the company, what’s best for shareholders.  But we have literally turned away USD$6M or $USD7M in the last couple of weeks because it wasn’t the right time.  We’re just entering our cycle as to what we’re doing in 2021 and how much we need to raise and we’ll size anything that we do in the future is always going to be sized on what we’re going to do in the next few months, to 12-month window.  we could raise more money, it doesn’t necessarily benefit shareholders.

Matthew Gordon:  What explorers are capable of doing and investors in the market are kind of I guess confused at the moment? 

Roger Lemaitre:  It’s been like that for a while for sure.  It’s a confusing market, it’s not as … you know, we hear people saying it’s not transparent.  There’s very little doubt about the lack of transparency in the market.  And when we look at things, the spot price is a great short-term trigger but pretty much every pound the spot purchases, eventually works its way into a utility contract somewhere in the future.  The vendor’s always going to be driven by utilities and utilities have been for the last couple of years sitting on the sidelines waiting for things to work through as the over hangers in the space seems to be eating away or working into their inventories.  But quite frankly, we said last time, they are always believing that there’s an endless supply of cheap Uranium to be had out there and in many years they’re correct. 

But when it changes, it changes pretty quickly and I think they believe until we see what happens post-COVID with the big players that are out there with their sort of longer-term contract philosophy, they wait and see whether the market is tight.  And you have utilities saying the market’s not tight and you have suppliers saying the market’s tight.  The reality will show up in the next few months and I think it’s the next few months is more … not the bang, it’s going to change instantly world, it’s more of, okay here’s the first step among a few, to get to us where these Uranium companies are going to be comfortable bringing new production on and supported by investors and future contracts.  I don’t think it’s going to change in October in terms of a radical step change, it’s a small step in the right direction.  But when it can be like a reform fund it just gets bigger and bigger as it moves outwards, so we’ll see where it goes. 

Matthew Gordon:  Do you think this first step forward is going to be the first of many small steps required to move the market to a point where you’re saying it’s a fair reflection of what you think you’ve got? 

Roger Lemaitre:  The RSA decision will help the American utilities make decisions about what they can do about procurement.  Your next step is, okay now we’re out contracting, can you find it if you’re a utility?  And what do we do if we can?  What do we do if we can’t?  That’ll be step number two.  And then it will come down to what the volume is and whether or not there are utilities out there that want to be … you know, I don’t think anyone wants to be first to jump in the pool, they all want to be second.  But they don’t want to be last.  But the question comes down to, how urgent is that run-up?  And I think that’s impossible to predict from where we stand.  We don’t buy and sell Uranium every day.  That’s not what we do.  So, we’ll take our cues from some other players who do that. 

I’m in the junior sector so we’re going to be optimistic for sure.  It will change someday.  Is that October or is that a year from October, or is that beyond?  I can’t predict that because it really does come down to … there’s a real cashflow problem for companies that are selling, and they need cashflow.  It depends how desperate they are and how desperate are the utilities.  So, it’s going to be a tug of war. 

Matthew Gordon:  what’s been happening at Christie?

Roger Lemaitre:  We were working along with a trend of known mineralisation out of our three known deposits, Aurora, Ken Pen and Paul Bay and we realised last year that the trend was offset potentially because we knew there was mineralisation across the property boundary from our neighbour Cameco, who drilled a hole that was of interest out there.  We looked at the offset, we sorted out some geophysical imaging over the last 12-months that told us that we should be over here.  We drilled our first Shea holes into this trend and the whole purpose of this programme, everyone would like to say hey, we’re going to make the next big discovery on the very next hole and of course we always hope that’s the case. 

But for us, we have this Kilometre and half trend that’s got all the signs that we need to see.  Is it the right place for us to focus on our next bigger programme?  And that’s really what it is, what it’s about.  I think we finished that programme, we’re still waiting for the analytical results to come in.  They were in … just a couple were in, in the last couple of weeks, so we don’t know where we will stand until we see the results back from that.  But I would say that we’re pretty happy with where we’ve got … it might not be … obviously it’s a … I can’t tell you what the results are until the news comes out, but yes it was a small programme and only four holes, so we weren’t expecting to make the next £150M discovery with four holes.  

Matthew Gordon:  What’s happened at Shea Creek? 

Roger Lemaitre:  Over the last 8, 9-months we have been in the field looking at the old core, taking a bit of the knowledge that we have, myself and some members of our team who have experience with several basements hosted deposits, like at Eagle Point and at Millennium and a few other places.  And saying okay, how come the bulk of the resource at Shea Creek is in the basement?  Yet, the basement mineralisation hasn’t really been looked at by the operator and just taking a deep dive into sort of our structural understanding of how these deposits form and why basically are there, within the footprint of the existing deposits, is there a chance to expand things? 

Our chief geologist did a deep, deep, deep dive into the records, the core itself and 3D modelling and we’ve actually been able to identify 10 really high core areas, but particularly two that really jump out at us as to why we should be looking for Kianna deposits at Shea Creek.  And it’s one of the four deposits that haven’t been looked at.  So, we’ve been working … we’ve identified those.  For a modest amount of money, we can drill some holes, we, of course, have to get our partners engagement on that at Arano.  And Arano’s have been challenged over the last decade financially and COVID certainly hasn’t made that easier.  So, we’re working with them to try to find a way to … we think it’s probably one of the highest possible use in terms of growth anywhere in the basin for current resources.  Because that model’s not been tested.  So, our goal is to grow that into larger, undeveloped areas, it already is, to make it even bigger. 

Matthew Gordon:  When’s the next capital raise? What are those points that you’re going to time your capital expenditure? 

Roger Lemaitre:  Well for us we’re looking forward to 2021.  I think the next month I will get our team together, they will go through our … we have a target inventory and say okay, which are the things that we want to achieve, what can we get the best bang for the buck on as well.  Because sometimes the best targets … and we always go after our best targets first … are a little more costly than some of our shallower targets, like we have at Hidden Bay and we rank them, make every one of those targets and say okay which one do we want to work on this year.  We do want to do some work, I don’t think we can sit here and say okay we’re closing up shop for the next two years, because that’s when we think the market’s going to change.  Because everyone’s been wrong for the last almost decade now.  So, I’m not sure that that’s really a realistic option. 

But we’re not also going to go out and say okay we’re going to spend USD$10M worth of work this year and try everything we can to find a deposit come hell or high water essentially.  We have tens of millions of dollars’ worth of exploration targets, drill-ready exploration targets that we can tackle.  It’s not responsible for us to go out there and just say we’ll drill at all costs, at any cost.  So, we’ll put a proposal together, our board will look through it and then I mean realistically our 2021 programme, from the exploration, execution point of view, will need some sort of funding and we’ll have to decide whether that’s USD$1M or USD$10M or somewhere in-between.  And we’ll be going out probably to look at that sometime early next year.

Matthew Gordon:  How you think things are moving,?

Roger Lemaitre:  We’ve had people knocking on our door trying to give us money, but I’m not sure the cost capital that’s involved with those transactions are necessarily … I don’t find them acceptable to shareholders today.  We have to be a little bit patient.  We have pretty much zero holding costs for all our assets, so we’re not obligated to go and spend money if we don’t have to. 

Matthew Gordon:  Could there be buyers out there if you need cash.  Is that in the thinking at the moment? 

Roger Lemaitre: Absolutely and it has been for several years.  The keyword for us in all of these types of transactions is sustainability.  That’s the keyword.  It’s not sustainability from an ESG point of view, it’s sustainability from a finance point of view.  So, we easily could have optioned off all of our non-core assets over the last couple of years and end up in a situation where we have stranded assets that can’t be funded.  So, we’ve decided because the cost of holding them was relatively small, we’ll hold them until we can find partners that can absolutely sustain and answer the next one or two key questions on each of those projects that we want to be answered.  And I think we’re more interested in space, that’s definitely a lot more possible than it would have been a year and a half ago, where the industry as I used to say was sort of like having to call up the banker or something and say, hey I want to talk to you and they’d go, you’re in Uranium, oh don’t talk to me, I don’t want to talk to you, because it’s dead space to me right now. 

Roger Lemaitre: That at least has changed for the industry and then there’s money being raised.  And yes, I think one of the advantages of our portfolio with our more grassroots projects is that I mean the discovery potential in the Athabasca is still pretty high.  There’s still a lot of potential for new discoveries and those new discoveries tend to fit in the low cost halfway curve, which the cost curve if you made a discovery you need to be, as a Uranium Investor, invest in the space where you have a possibility of bringing it towards production.  And you can go and find cheaper assets somewhere else that doesn’t necessarily or didn’t make the last run, didn’t make the last upright or the one before that, or going back to the starting in the entire industry, has been found early on, it can’t be moved forward in tougher jurisdictions and hope that you’re going to get something out of it.  Or you can if you just look at UEX from the last run and some of our peer companies and their subsequent discoveries they made, then that’s where the value appreciates.  I mean that’s where we think we can help other companies go forward and help ourselves. 

Matthew Gordon:  You’ve got a bunch of assets, you’ve ranked them 1-10 in terms of quality, which one do you sell first?

Roger Lemaitre:  Well, that would be the biggest question and I think it comes down to quite frankly the appetite of the people who want to participate.  We have the ability to okay you’re a Uranium investor but you don’t have the technical expertise to do this, you can take on a higher or a lower risk project but you don’t have the skills, we can help you with that because we have the capacity to operate for you.  And hey you want to work on a project with three holes that mineralised, you can have one of those.  If you want a cheaper entry on a pure grassroots play, we can give you one of those too, as well.  I think the core four assets we have are probably not ones that we’re looking to move. 

Although on one of our projects there are targets within there that we’d consider that at Hidden Bay, for the right price.  But the price of the entry’s a little higher, right.  If you want to drill a hole next door to a Mclean Lathe mine, you might pay a little more than a grassroots project in the South-West corner of the basin that’s far away from where the hot stuff is going. It comes down to the appetite.  With the key projects, Shea Creek, Christie Lake, Horseshoe Raven and key parts of Hidden Bay, probably not something we’re going to do. 

Matthew Gordon: There are quite a lot of M&A announcements coming out within the Uranium space. What’s your view? 

Roger Lemaitre:  I more worried not so much about the grade, about the dollars you can make from the project itself. I do think it’s very difficult.  ISR projects that bring the right provisions obviously do well and we see 55% of the world’s Uranium coming out of the ground that way.  A lot of its low cost.  But there are other ones that are very high cost.  So, projects that have been around and been through two or three cycles, those ones are hard wins.  The cost of being able to bring in something that’s small, you run across the same permitting costs, you run across the same environmental costs, ESG costs.  But the hurdle becomes really difficult.  And they tend to be in the higher cost half that’s they’ve set. 

To be successful means you do have to be in the low cost you can build a bunch of assets, you can get them for very cheap, that you hope things are going to turn and you have a very different strategy if you’re hoping to buy a portfolio that will be of interest to others.  And it’s not other investments into another big company, and if you’re in the Uranium space you don’t see a lot of takeovers of those types of companies that are successful, going to the bigger players.  You’ve had an eyeball on us for many years and they have a large portfolio … database of, hey, do I like project A in jurisdiction B that’s been around since 1970, they’re less likely to move on that. 

They’re very risk-averse as well.  They need to see that it’s going to be a low-cost house, so for us, that’s why we focus yeah in Athabasca Basin, the place where you can’t … there are other jurisdictions where you can do that as well.  But then they happen to be good investment jurisdictions as well.  But yes, if you’re going to put together £10M assets and hope that you can put something together, that’s going to be difficult.

Matthew Gordon: These management teams putting these projects together, what are your initial thoughts?  What are your concerns? 

Roger Lemaitre:  As a CEO I get concerned about investors and funds being able to discriminate between both of that kind of players and which ones are the quality because when we saw the last run out space was so dead for so long nobody knew what was good or bad.  And there was a lot of money poured into space and disillusioned investors.  So, I think with the reboot well it’s been a decade and a half now since we were in the last run, people have turned over and they can see that same thing competing for space and for some, I remember when there were 500 Uranium juniors and you could make a great discovery and you’re trying to get seen, it’s very difficult.  Because there was just a lot of noise. 

So, that’s the part I worry about the most is being able to be heard when there’s a lot of noise and yeah, it’s a bit of a challenge.  But I also think that disillusioned investors when they don’t get what they expect out of things, that people promise what can’t be actually achieved, and it hurts all of the whole sectors.  I worry about those things.  I worry about the competition for space, because of the noise of things.  I think even seeing some of those companies will even go, maybe the strategies, the building blocks to get something bigger and better in the future, that’s going to be harder to do this time around than it was the last time. 

Matthew Gordon: People are a bit more cognoscente of what is real and what is just promote.  But I appreciate your insight.

Roger Lemaitre:  I think in the last cycle Matt, we were coming off Gold, where Gold companies were being valued on the ounces in the ground and not so much the cash flow and so there was such hype there that Uranium companies got valued the same way. So, creating pounds was the metric between how people and companies were evaluated.  We followed at the hot gold market then and we’re following the hot gold market now, but I don’t think the Gold market today, despite its frothiness is being valued on how many ounces do I have in the ground basis.  Maybe that creates a more realistic place for investors when they start to transition to other sectors and hopefully, it’ll be the Uranium sector where they don’t value, they’re just based on the number of resources we have in the ground, but the quality that you have in the ground.

 Matthew Gordon: Are you saying to me that you have no sense of what that quantum is yet? 

 Roger Lemaitre: No, we don’t have a sense of that quantum.  But I don’t … I think if you think we’re going to come out and raise £15M I think that’s probably highly unrealistic.  I don’t think you can do a meaningful programme that moves the bar and answers the question for less than a million.  We’re going to be somewhere in the middle.  I think what we did this year is probably as small as what we’d like to do, but to be honest, that’s really up to where the market decides to go with it.  If the terms on picking up money don’t change, then we’ll do less. 

Matthew Gordon:  What sort of capital are we talking about?  What sort of charges do they think they can get away with?

Roger Lemaitre:  Well I think it varies between … in the flow-through angle and the non-flow-through angle, but oddly enough similar asks, so slight discounts to market with warrants as short-term, half rounds, or full rounds with the short … sorry, a very long window, to execute, with a very short premium to the unit price.  And that one’s hard.  I mean there is a cycle change, those things were acceptable, and we did one of those back in earlier this year, we did a half unit deal.  But we did it because one, that’s what the market was demanding at the time and two, the quality investors that we were able to bring in to space, first of all, that I knew they were going to be pretty comfortable with their long approach, that they wanted to be in Uranium for the long term and they liked the way our story was going.  And were less than keen to be that were people who were more willing to be in and out in two, three, four months and are looking for … you know, it’s a great win for them to get the same terms that happened when the market was much riskier just to flop than it is today. 

Matthew Gordon: I suspect if we come back and talk to you in 6 to 9-months, we’ll probably get a slightly different answer. 

Roger Lemaitre:  The market definitely varies day to day and month to month and week to week, so yes we’re not trying to drive the market in terms of why we’re so much in a different position than all our peers, but we also have the luxury of not having to finance and we don’t need to right now, so.  I don’t think it’s to reach back to investors offering the same terms back in when we were negotiating in April and the market was so much more uncertain than it is today.  The people today are necessarily fair people came in then than existed before that.  You could be wrong, but it might turn around five months from now and go well maybe we should have.  But we’re willing to take that opportunity.

Matthew Gordon:   Nice to catch up.  Stay in touch, let us know how you’re getting on.  You’ve got some great assets there.  It would be great to sort of understanding more when you know more, so pick up the phone.

Roger Lemaitre:  All right, thank you very much, guys.  Thank you very much for talking to us. 

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