Fission Uranium Corp. CEO Dev Randhawa on $86 m Investment

James West
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Fission Uranium Corp.(TSE:FCU)(OTCMKTS:FCUUF) joins the Ten Baggers for a discussion on the significance of an $86 million investment for 20 percent of Fission by Chinese Uranium miner CGN Mining.

Midas-Letter-financial-radio-podcast-thumb[four_fifth_last padding=”0 0 0 20px”]Listen to the interview with Dev Randhawa:

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Transcript of Interview

James West:    Dev, thanks for joining us today.

Dev Randhawa:  Well thank you for having me. It’s a pleasure to be chatting with you guys.

James West:    Dev, can you start with an outline of what exactly is the value proposition for investors in Fission Uranium?

Dev Randhawa:  We’re a long term believer in nuclear power being part of the solution worldwide for the increasing need for energy and for clean energy, and I think China certainly has embraced that in a very aggressive way. They’ve been building reactors year on year, and they’ve really made a true commitment to clean air. They want to go from about 1.5 percent to 15 percent of their energy come from renewables and nuclear. To do that, they’ve got to build about 200 reactors, which is very good news for the uranium industry because we – the rest of the world – still have a kind of a negative view of nuclear power such as with Fukushima, but there are now more reactors being built since Fukushima. The reality is, the positive aspects just don’t capture the news like negative issues do, but there’s been a real renaissance in the industry.

You’ve got countries like Saudi Arabia and Middle East that are building reactors, because they’ve realized that it’s not only clean energy, it’s baseload. We all turn on of us go home and turn on our appliances at the same time, and there’s a big demand right away, and nuclear can handle that. But hydrocarbons can’t. In fact last year, we had the big freeze up north, coal didn’t work, nor did gas, it was nuclear power that really did save the northeast.

So to me it’s more about our need for energy worldwide, and how nuclear power fits in, especially in China and India.

Ed Milewski:   You know, I’m listening to what you’re saying, and the other side, of course, is what Germany has done. Germany has said they want to be out of nuclear. And I don’t know, I’m not an expert, I’m just saying, I’d like to know myself, because the price of oil is $32.20, you know, there’s these headwinds, and it’s very confusing, and it certainly is confusing for Canada.

Dev Randhawa:  It was confusing because the media did a crappy job of telling the balanced truth. Germany is only talking about turning down 8 reactors, but do you know what they’ve done? They’re getting the energy from France. Where does France get their energy? Nuclear. So the Germany issue is a non-factor because they’re still using nuclear power, they’re just deciding to pay more.

James West:    You released some news today describing a sale of shares in your company as well as an offtake agreement. Can you summarize the key points of the deal for us, please?

Dev Randhawa:  Oh, sure. Basically we’re selling 20 percent of the company for 82 million. The stock was around $0.60, we got about 40 percent premium for the stock, it gives us the key to $82 million that will keep us very well funded and don’t have to raise any money for the next three to four years. So really de-risking because we going out there and raising money despite a very unstable world.

The reality is, you know, exploration companies need money all the time, and have to always get out there raising money, so now, that’s off the table. So that’s one advantage. If investors want to own this stock, they have to go on the open market to buy it rather than wait for a financing. So that’s one advantage.

Also, it takes us a bit off this flow-through treadmill. I mean, we’ve had excellent investors, better than most, I would say, that believed in our story from Day One; but this means we don’t have to go out and raise money all the time any more, and so investors can go on the open market.

Ed Milewski:   So how long will it take you to put this project into production?

Dev Randhawa:  Well, when you start from the day you decide you want to take that decision, it’s around seven to eight years, and it can be ten, depending on how the permitting goes. But we’re not quite ready to make that decision. We’ve only touched about 3 percent of the property; again, people think that you know, you find 100 million pounds, okay, now you can go to production; that’s not quite how it works. You have to make sure you understand your property. And so the first thing we’re doing is continue to grow this R600 West area (a new area not included in the Triple R deposit). We’re going to continue to grow this.

All uranium in the basin comes through a conductor, and we have 103 of them, and you’ve got to test them all. Not all conductors are going to have uranium or high grade. So we’ve got a number of conductors we want to test yet. However, it doesn’t mean at some point along the way, we pull the plug, okay, this is it…

Ed Milewski:   How much of this property have you explored to date?

Dev Randhawa:  Three percent. We’ve only touched about 3 of the 105 conductors and a very small part of the land. You have to keep in mind… what made this discovery was a field of boulders a kilometer long, and these were running up averaging 10 percent, so that motherlode, it’s a big, big, that was the largest uranium field they had found, the boulders. So we know there’s lots of – but the reality is too, you have to balance that with the needs of investors. You can’t just say we have to test everything before we go out there. Our job is to maximize shareholder wealth, and when we think we’re ready we’ll pull the plug, put the pin in, go into production.

But don’t worry, we’re doing all our baseline studies, we do all the environmental work, like going into production all along. So you assume that you’re always doing this, but it doesn’t mean you put the pin in yet.

James West:    So who is, then, if I can ask, Dev: who is CGN Mining, and who are they that they put in such a – they buy 20 percent of the company when you’re still eight years away from production?

Dev Randhawa:  Well, they’re the world’s leader, I think, in nuclear power. Like, they are the, I’ll call them the big mother ship. There are only two companies in China that are allowed to act for the government, that’s CNNC and CGN.

Ed Milewski:   Dev, are they public?

Dev Randhawa:  Yeah, they’re a public company, they’re raised about 3 billion about a year and a half ago, I could be off. But they did a big IPO, they raised 3 billion to build reactors.

Ed Milewski:   Do you know what the market cap is?

Dev Randhawa:  Yeah, it’s around 20 billion if I’m correct. I can confirm that with Ritchie.

Ed Milewski:   Okay, thanks.

Dev Randhawa:  But they’re very large. What happens is, we did the deal with their mining arm, and so they own 70 percent of that company, roughly, so we did a deal with them. But CGN, they’re the ones that are putting Husab into production. They will be, according to most analysts, the largest users of uranium by 2025. They’ll use more uranium than any other utility, and that’s incredible when you consider where they were three to five years ago, almost starting from scratch.

James West:    So they’re blocking out supplies specifically for the Chinese domestic consumption of uranium in reactors?

Dev Randhawa:  Absolutely, yeah.

James West:    I see. Okay, that’s interesting. So besides the obvious, then, what are the primary and immediate benefits to the shareholders of Fission?

Dev Randhawa:  Well, I think it’s a great benefit to shareholders going okay, you don’t have to worry about raising money anymore and you’ve got Big Brother there if someone, you know, you don’t want to be sold out yet. And it’s also for the industry, it’s also for the west side of the basin. It means that now you’ve got a big, a larger company than Cameco, for example, who’s coming into the west. Areva is in the west. I think it’s creating credibility for the west side of the basin, which it wasn’t there before.

For the industry as a whole, I’ve had comments back from other industry leaders like Amir from Uranium Energy and Jim Patterson, Kivaliq saying hey, great for the industry, great stuff. The nice thing about uranium, last year it was the best-performing commodity, and this year, I think it will be the best outperforming commodity again, because it’s not based on the growth of the Chinese economy, the growth of the US market; it’s simply based on a commitment India and China have made to nuclear power.

Right now, most utilities have got this sitting on their hands. They’ve bought as much uranium over the last four years they’d normally buy in one year. So you’ve got all this pent-up demand, because people still think Japan is not coming fully back online, therefore all this overhang in the uranium will come into the market. That’s why you have your utilities buying 20 to 25 percent of the normal uranium they’d buy. As a result, you’ve got this pent-up demand building up. Whether it’s going to be in 2016 or ’18, I mean, hopefully, some will get their brains back and say hey, you know what, we got to get ourselves covered for uranium moving down the road.

Ed Milewski:   Dev, the price of uranium today, could you give us an idea, or give the listeners maybe an idea of what the range has been in the last two years? Like, where are we now –

Dev Randhawa:  When I got in the industry quick, it was $7 a pound.

Ed Milewski:   And how long ago was that?

Dev Randhawa:  1996 it was $7 a pound, and it stayed in that $7-$10 range until about 2004, then it creeped up. There were two significant events: Cigar Lake got flooded, and there was a fire in Ranger Mine in Australia. That suddenly took it to 17, 25, 30, and then boom, it went to 140. $7 to 140…it came back in that 45-50 range, Fukushima happened, it’s gone back down as low as 26, 28 about a year and a half ago; now it’s back to 35 and long term is 45. So it’s below what Fukushima was –

Ed Milewski:   And where does it need to be for you with your project?

Dev Randhawa:  We’re fine. We’re lucky, our PEA [Preliminary Economic Assessment – ed.] showed that we could potentially produce at $14 a pound including building a mill. Actually, that’s what got the Chinese so interested, was that our PEA showed better numbers than even Cigar Lake, better than Kazakhstan. They’re all on $19 a pound. Now mind you, ours is like a scoping study, so you can’t put a lot – but it tells you that this should be one of the lowest cost producers in the world, once we start to produce. And that’s why CGN insisted on having, they said. And it’s a good marriage, it’s the best undeveloped uranium project in the world, and we won the award at the London Mines and Money for the best exploration project in the world, including gold, silver, etc. We won that, and that’s pretty hard to do, especially for North America.

But it’s the best exploration project in the world, it’s the best undeveloped uranium deposit, and there’s nothing like it. The basin in the past, the last 40 years, there’s been discoveries, but they’re all deep; they start at 400, they go down. Look at Hathor; it was 400 meters down, and sure enough, it’s been shelved. It’s an exploration project. There’s not a single discovery of large size in the basin, even close to being 50 meters close to the surface.

You’ve seen NexGen’s great discovery, but again, it’s at 400 meters, and today’s announcement showed 700 meters down. When you start going down like that, your economics really change, and you have to start talking about freezing uranium walls, and that scares the crap out of people because it took 10 years for Cigar Lake to come back on-stream. It was supposed to be 2005; it didn’t come back on-stream 10 years later, and this is run by the best uranium company in the world.

So when we always talked about pounds, okay, that’s great; but what makes these pounds better than any other pounds in the world is that it’s high-grade, and it starts at 50 meters from surface, the high-grade. It’s also in basement rock. Basement rocks: much easier to mine than that slurry sandbox on the east side of the basin.

Ed Milewski:   Hey, Dev, I got a question for you: the fact that CGN has signed this deal, does this preclude other companies from taking a shot at you? Because this is obviously is a monster deposit. Do you think that –

Dev Randhawa:  It’s a monster deposit, yeah. But I don’t – see, I’m not trying to put water on people’s dreams of lots of buyers on the side; I just don’t see them. I try to explain this to people, that the fundamental problem that we have in this industry is there are so many bad decisions made, okay? I mean, really bad decisions. You had Areva spend $4 billion on that garbage property, Uramin had). It cost them 4 billion, there was almost no uranium there, but they didn’t talk to their geologist. So to me, that was a bad decision.

A bad decision by Rio was to buy the Hathor project. They didn’t bother doing their homework, and they made the assumption that inferred pounds are real. Inferred pounds mean you drill whatever, 50 to 100 meters, and think it’s continuous in between. Well, that’s just stupid, because the basin, uranium, you’re off by two meters, five meters, you miss the entire deposit. We know – we’ve had experience drilling there for a number of years, and you have to be right on top of it.

A gymnasium, a simple high school gymnasium, can hold 20 to 30 million pounds. So if you’re off, just think about it, if you’re off by 5 meters, you missed that. So I don’t see – I’m not trying to be a downer, but I don’t see an army of people waiting there to buy companies because there have been so many bad decisions made by…

Ed Milewski:   The commodity price would have to move dramatically for things to change.

Dev Randhawa:  Well, exactly. You nailed it. You’ve nailed it right on the story; we all know fear brings in more fear and selling brings – that’s just the way it is. Right now, we’re in a fear-dominated market. So I don’t see this as oh, let’s say someone makes a run. But the bottom line is, I’m always talking to our other players in our industry, but the nice thing now is, I don’t have to go with my hat in my hand to them, do you understand? I don’t have to be looking for money, and if I do get money from them, it’s strictly on my terms.

We’ve got pretty good terms here, but we’re going to get even better terms if someone else says, well, we’d like to own 5 or 10 percent of the company, great. Step up. I got 40 percent premium last time, what can you do for me?

So when you’ve got money in bad markets, and today’s announcement, I don’t think people really get it. This is so important to do what we did today. What we announced before was a letter of intent, we’re going to be signing those agreements. These agreements are signed now, and they’re binding. This deal is done between us. Now it’s up to the Toronto Stock Exchange to approve the deal. We’ve already got pre-approval. There’s a couple of things they want, but they’re just everyday housekeeping stuff; this deal’s going to get approved. This is actually a very significant news release. I was more worried about this than I was about the LOI, because the way the contract was written, they could have walked last night and said here, here’s $3 million for wasting your time, that was the deal we had, and sorry, the markets suck, we don’t know what’s going to happen, so we’re going to step away.

But they signed all the documents, gave them to us last night after Hong Kong market close, and we now could announce today. It’s actually a very significant day for us, because next step is a piece of cake, it’s just the TSX approval. Neither side can walk now. And you and I both know a deal’s not done till it’s done, but when the contract’s in your hands, both sides have signed off, now the TSX will approve it and I don’t see a problem there. So to me, it’s a very significant event.

James West:    Well, congratulations on that, Dev. Thank you so much for your time today.

Dev Randhawa:  Thank you. Anytime you guys want to chat, let me know. Okay, boys, take care.

 

James West

James West

Editor and Publisher

I employ a Capital Efficiency Model that dictates money should never be exposed for longer than is absolutely necessary to the possibility of being lost. Thus, I routinely sell half my position when a stock doubles from my entry price, and I sell stocks that lose 20%, unless there are...
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