September 20, 2007
By Julie Ickes and James Finch
coming soon! Print Version
Adobe Reader required click here for free download
'Tremendous opportunity for uranium to go up'
Strathmore Minerals Re-Organizing Its Multi-National Uranium Approach
An Interview with David Miller, President of Strathmore Minerals
Will the uranium price decline hurt utilities? StockInterview.com interviewed David Miller, president of Strathmore Minerals (Toronto Venture Exchange: STM) for his thoughts on the recent dip in the market and to expound upon themes presented on his recent CNBC appearance. Mr. Miller explained how consumption of uranium outpaces production, and that combined with a price decline provides less incentive for new production to come online. Below are his insights on why the uranium market should not be overlooked just yet.
David Miller,
President of Strathmore Minerals
StockInterview:
Recently you were interviewed on CNBC TV, where the host commented that your view was an esoteric one. How do you respond to the viewpoint that the uranium industry and market is ‘understood by or meant for only the select few who have special knowledge or interest?’
David Miller:
Frankly what it shows to me is that there is still tremendous opportunity for uranium to do nothing but go up because the exposure to US investors is minimal at this point. Uranium has a market and the new uranium industry will become a regular marketplace with buyers and sellers. With a big uranium shortage, we are still consuming 180 million pounds per year and only producing 110. That is not an esoteric view.
"How to Play Uranium"
Originally aired on CNBC August 24, 2007
An Interview with David Miller, on the program,
"Squawk on the Street"
StockInterview:
During your CNBC interview, the possible losses of uranium industry investors were compared to those of mortgage industry investors. Do you think that comparison is fair?
David Miller:
No, it’s not fair at all, other than like they said, if you’d gotten in uranium two months ago, when uranium spot was still $135, and tried to exit the market right now when the uranium spot is $90 you’re going to lose money. But that correction is the first correction the market has had since 2002 or 2003. We went up steadily month after month for sixty to seventy straight months. So now we’ve had a correction for three or four months and the correction may go on for another year, I don’t know. The US Government is again doing their handiwork in the marketplace by releasing some Department of Energy uranium into the marketplace, basically at the bequest of US utilities and maybe world utilities. It’s going to change the dynamics of the market a little bit for short periods of time, but the fundamentals are still present. The world is consuming far more uranium than it produces. There is still a 70 million pound shortfall every year. Now add on to that the 35 to 40 plants under construction and now for in the permitting and planning stage – I think the number is up to 200 plants around the world that are being built, permitted, or in the planning stage. That’s half the amount of nuclear reactors operating in the world right now. So, those 200 new plants are going to create demand basically for another 100 million pounds of uranium a year when they come online. Now they’re not going to come online tomorrow, the earliest ones - are the ones under construction, they’ll come online in a few years, but in ten years and in fifteen years, you’re literally talking 50 or 100 or 150 new plants – all of which need uranium, of which we’re 70 million pounds a year short right now with building one of the new ones.
StockInterview:
The negative image of nuclear can be traced to fears of nuclear warfare or terrorism or disasters. What is your take on the safety issue in regards to the nuclear industry versus safety concerns?
David Miller:
The late Peter Beckman, was an electrical engineering professor at the University of Colorado. He basically said it makes as much sense to associate nuclear with bomb as it does electric with chair. As we know with technology, the first uses of technology are invariably in some sort of war situation. Looking at the other side, the nuclear power industry is one of the safest industrial activities, not only in the United States but in the world. Compare the safety record to any other industrial activity and you’ll see that nuclear power is as safe or safer than any other industrial activity. Just look at the news items recently. All the coal mine disasters we’ve been seeing, not only in Utah, but in West Virginia and especially in China where they literally kill 5,000 people a year in coal mine accidents. The death per unit of energy generated is far, far lower with nuclear power than any of the other energy sources out there and I’m including solar in that statement. Now we’re going to the future, we’re worrying about global warming, we’re worrying about CO2 gas emissions, and the only mass way to produce mass quantities of energy out there is nuclear power.
The spot uranium price has been on the decline, but recently has held steady at $85/lb.
Chart courtesy of TradeTech, www.uranium.info
StockInterview:
What impact does the lower price of spot uranium today have on the world’s nuclear industry in the future?
David Miller:
Anytime the price goes down, that makes less uranium available. Again, the utilities are going to be rudely awakened here. This is going to damage some of the new production trying to come online. What utilities need is new production online. This actually makes the case that this recent down drop on prices, the pressure the utilities are putting on the US Government to release the government stockpiles of uranium – that pressure will result in less uranium becoming available in the future – both the short term and the mid term. So, there is a bigger chance that some nuclear plants will not have enough fuel because of this drop in price from $130 to $90, and who knows, it may even go down to $60, I don’t think it will – I think we’re pretty much at the low right now but say it goes down to $60. It’s going to delay new production coming online. So, the utilities actually having a bigger worry out there. The bigger worry should be, is there uranium available at any price. Frankly, we’re becoming closer to that scenerio than just uranium available at a high price. They’re making it more likely no uranium will be available because some of the marginal properties around the world are going to be delayed coming online now that the uranium prices have dropped. If it stays low for very long, it’s hurting the ability of some of the smaller lower grade deposits in the world to come online. So ultimately there will be less uranium available. Maybe not enough to run the existing fleet of nuclear power plants in the world.
StockInterview:
How is Strathmore affected by the lower uranium prices? Will you still be able to operate profitably?
David Miller:
The case with Strathmore is that we started acquiring uranium properties when uranium was $12/lb, back in 2003. Back in early 2004, you (StockInterview) asked me the question, where do you think it’s going to go? And I said, well I think it could double from here, and when it had doubled to $30/lb you asked the same question again – could it double again? And I said yes, it probably can because the demand was still great. So, we have some properties that are recoverable in the $30/lb range. We have more recoverable uranium in the $50/lb range and we have even more recoverable uranium in the $100/lb range. If uranium would go back to $30, we could probably get up to 500,000 lbs/year production rate. If uranium is at $100, we’re going to be multiples of that of production rate, if uranium stays above $100/lb nearly all of our resources are economic. When we calculate resources – we do it with a variable cut off grade. As the uranium price goes up, we go to a lower cut off grade for our deposits so the actual total metal of the resource recoverable is higher at higher prices. As the uranium price goes down, we have to increase the cut off grade. And increasing the cut off grade is going to lower the total amount of metal available out of a particular deposit. And frankly some deposits will become uneconomic at any cut off grade then. So at higher prices, we have far more uranium available than in the lower prices. So it really is a line that as the prices goes up, the more pounds we have to sell. As the price goes down, the less pounds we have to sell. And it’s like that with every company.
Former Strathmore Minerals properties in Canada are now part of the Fission Energy portfolio.
StockInterview:
There has been a lot of restructuring and joint ventures announced recently by Strathmore Minerals. One of them was the spin off of Canadian and Peruvian assets into Fission Energy. Can you tell us a bit about how Strathmore Minerals is evolving?
David Miller:
Our obligations and our manpower needs have gotten so big with all the operations we have going in the U.S. The advancing of the Roca Honda project, the doing the Sumitomo deal in Japan. Here in Wyoming we’ve done a number of joint ventures with a company called Yellowcake Mining on our Juniper Ridge project, our Sky project, and our Jeep project. We’ve done another deal on our Pine Tree – Reno Creek area with a company called American Uranium. So just managing all these joint ventures in the US we must expand rapidly and add staff and get all the projects advanced. We’re struggling to keep up. I just interviewed two more people today, we just put two more people on full time just a week or two ago. We’re in that growing mode right now. We’re permitting on a number of these projects to go into production and it’s just really busy times. In Canada we’re doing the same thing. We’ve got a number of exploration projects in Canada. We’ve actually joint ventured a couple of those but everything is managed through Fission Energy now that it was spun out of Strathmore. The split gives our shareholders and investors two very different investment opportunities. Strathmore is now solely based in the US and is moving its four advanced projects toward development. Fission is based in Canada and holds the blue-sky exploration projects. It’s a publicly traded company. It’s traded on the Toronto Venture Exchange and its price right now is somewhere around 65 or 70 cents a share. Right now the same board of directors is running Fission, but we ultimately plan on recruiting new managers and new directors to help run Fission.
StockInterview:
You mentioned the Sumtomo joint venture agreement that was recently completed. What attracted Sumitomo to Strathmore and specifically to the Roca Honda project?
David Miller:
Sumitomo was looking for a large quality uranium asset. Roca Honda certainly fits into that criteria. This promising asset, in a very desirable location attracted their attention. It is located in the Grants Mineral Belt, historically the largest uranium-producing district in the world during the previous uranium boom. Roca Honda is also quite sizeable, as according to our official NI 43-101, measured and indicated resources are approximately 17.5 million lbs of uranium at an average grade of .23% U3O8. Sumitomo was also confident in our level of technical expertise in uranium mining and have allowed us to retain operational control. We are very pleased to have attracted and obtained such an elite joint venture partner.
Strathmore Minerals holds several properties in the Grants Mineral Belt. The Roca Honda project in the bottom right is the recent property to be joint ventured with Sumitomo Corp. Also shown above is the proposed regional mill site for the Grants, New Mexico area for conventional processing of uranium ore from the local mines.
StockInterview:
Strathmore has also entered into a few joint ventures with Yellowcake Mining. What can you tell us about these joint ventures?
David Miller:
On Jeep claims and Sky claims, it’s a 60/40 joint venture. On both of those they have to spend $ 7.5-10 million to earn their 60% interest and then we have the right to buy back 11% of the total, so we can retain operatorship if we choose to do so at that time. That will be a function of where the uranium market is at that time whether we want to do that. We’ll have the flexibility of letting them take over management of the project and continuing going into production with those or if the timing is right and the return on our investment to earn back our 11% is right, we could conceivably retain operatorship and retain 51% ownership in both of those. Right now, on Sky claims they have to spend the next $7.5 million and on the Jeep claims, they have to spend the next $10 million before we have to put money back into it. On Sky we are installing monitor wells for permitting purposes. On Jeep we just completed a 40 hole drilling program that extended the mineralized trend.
StockInterview:
Would you still consider Strathmore a good investment?
David Miller:
Absolutely. We have some of the premiere United States deposits. The US was the largest uranium producer in the 20th century. New Mexico was the #1 uranium producer in the Grants Mineral Belt. We’re one of the dominant land-holders down there. The Roca Honda deposit was the next deposit under development by the old Kerr McGee Nuclear group. They were the #1 Uranium company in the world at the time. Of course, with Three Mile Island and the collapse of the uranium prices in the 80s, they mothballed that project. We ended up with the project in early 2004. Along with our other uranium projects in New Mexico, we’re in great shape. But Roca Honda, is our company maker asset in New Mexico. Same thing in Wyoming. The Gas Hills uranium district in Wyoming is the #2 uranium district in the country. Strathmore is very big in that district, we have some properties that we’re permitting on right now to go into open pit production. We’re doing exploration for in-situ recovery projects also in the Gas Hills and we have another dozen projects scattered around Wyoming that we also have in our portfolio. But our main project in Wyoming right now, is the Gas Hills. So we’re working in the #1 district and the #2 district in the United States, and the United States was the largest uranium producer in the 20th century. So we like our position in the emerging uranium market.
StockInterview:
In continuing with tradition, we’ll ask you again. Where do you think the spot uranium price will go?
David Miller:
I’d expect volatility in the uranium spot price - that it will go up and down. There has been lots of speculation on that, there’s a number of funds that have simply bought uranium inventory. I can see a panic in their eyes, a few months ago it was at $130 and now it’s only $90. So some are feeding uranium into the market and causing the current volatility. I’m excited about the long-term fundamentals. The price should stabilize around 80 to 90 and then start back up. In the next two years we will see spot prices over the recent highs. We’re not in production yet. The earliest production we’re going to have is 2010 or 2011 when we get our permits. So, again, we have to look at it on a long-term basis. Our goal at some point, is to start signing long term contracts with the major utilities of the world. Our goal is to become a leading and reliable uranium supplier to the nuclear utilities – not only to the United States, but around the world.
|
Thread abonnieren
