Editor's Note: Today we bring you the second part of Gerardo Del Real's exclusive interview with the president and CEO of Uranium Energy Corp. (NYSE: UEC), Amir Adnani. Part one may be found here.
Read on to learn about UEC's unique "hub and spoke" strategy, how it is reacting to the current state of the uranium market, and the Alto Paraná titanium project.
To your wealth,
Publisher, Outsider Club
Gerardo Del Real: Past uranium bull markets have been violent to the upside, particularly the spike to an all-time high of $137/lb. in 2007. Can you share your experience in the last uranium bull market and how you used that experience during this latest bear market — which has been brutal — to position UEC for success?
Amir Adnani: I think it’s very instructive to look at the past market cycle and share that experience with you. We started UEC in 2005 when the spot price was below $20/lb. and there was something like 30 companies worldwide engaged in uranium exploration/production. By 2007, the uranium price approached $140/lb. and the number of companies grew to over 500, maybe even more. And now in 2018 we’re back to about 30 or so companies again. Looking back, the 2006-2007 uranium bull market was so powerful that it would make the 2017 cannabis stock run look like the minor leagues! But seriously, as a mining entrepreneur I have to think long-term and I believe in the importance of prolonged bear markets being essential for acquiring and developing your building blocks at attractive valuations. So, while 2006-2007 was “fun”, it wasn’t nearly as productive in long-term value creation as the last six to seven years have been for UEC.
While we have been in a protracted down cycle, it has presented opportunities for resource expansion, project development, permitting, and licensing advancement. This period of weak market prices has enabled us to acquire undervalued, accretive assets and expand our resource base through carefully orchestrated drilling campaigns. As an example, this past year we acquired the fully licensed Reno Creek project in Wyoming’s prolific Powder River Basin and we increased our Burke Hollow resources almost 40% this past summer through a successful drilling campaign. We have also been de-risking our projects with continued licensing work.
Through these efforts, UEC has assembled a portfolio of low-cost, fully permitted in-situ recovery (ISR) projects in South Texas and Wyoming that will be the building blocks to lead U.S. uranium production higher, which is urgently needed. UEC’s fully licensed Reno Creek ISR Project in Wyoming has a U.S. Nuclear Regulatory Commission production license of 2 million pounds per year. This, combined with physical capacity of 2 million pounds per year at our Hobson Processing Facility in South Texas, positions UEC with a baseline potential production profile of 4 million pounds of U3O8 per year. As an independent, 100% unhedged U.S. uranium company, we are well positioned to take advantage of what we believe will be a much stronger uranium market.
Gerardo Del Real: What price do lower quartile-cost producers like UEC need to turn the switch back on and start supplying the market?
Amir Adnani: While market prices are depressed, we will continue to hold our resources in the ground until such time the market shows a sustainable price recovery to justify production and reward our shareholders. We have shown cash operating costs in the $22/lb. area, but we believe the market price needs to have a sustainable $40 handle before we will restart production.
Gerardo Del Real: Can you please explain the “hub and spoke” strategy that UEC employs?
Amir Adnani: UEC employs a hub-and-spoke production strategy in our South Texas operations, using our state-of-the-art Hobson Processing facility as the central hub of the operations. Low-cost In-Situ-Recovery (ISR) feed material in the form of uranium-loaded resin, produced at our individual mine sites in the spokes of this strategy, will be shipped to Hobson for processing into U3O8. In South Texas, we now have five spokes that we plan to activate in this strategy, including the Burke Hollow, Palangana, Goliad, Salvo, and Long Horn projects.
Gerardo Del Real: How does UEC provide speculators and investors leverage in what I believe is a uranium bull market that is in the first inning?
Amir Adnani: UEC provides a unique one-two punch with 1) being 100% un-hedged and, 2) production readiness with significant low-cost, fully-permitted ISR resources in Texas and Wyoming. The cornerstone of our production capability is the infrastructure advantage we have with our fully-licensed, state-of-the-art Hobson Processing Plant in South Texas. We have full exposure to the next bull market through our 100%-unhedged profile that will reward our shareholders. Instead of contracting out our resources in the bottom of the price cycle, we have been preserving and growing our asset base while prices are low.
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