Chairman & CEO, Fission Uranium Corp.
Fission Uranium Chairman and CEO Dev Randhawa discusses his contrarian approach with Sprott's Sam Broom.
Be sure to catch Mr. Randhawa and other top names at the Sprott Natural Resources Symposium in Vancouver .
Don't forget the 2017 Vancouver Natural Resource Symposium is coming up on
Sam Broom: Dev, thanks for taking the time to speak with us.
Dev Randhawa: Well thank you for taking the time to talk to us. When spot prices are low a lot of people don't want to talk to you. They tend to want to talk to you when spot prices are jumping up. So we appreciate your contrarian approach. It's refreshing.
Sam Broom: Absolutely. Fission is a Platinum sponsor of our upcoming Natural Resources Symposium in Vancouver in July. We're looking forward to having Dev come along and speak at the conference. For those of you planning to attend the conference, make sure you come down and check Fission out. So Dev, if you don't mind, please give us a little bit of background about the company, where you come from, and about the exciting discovery—the Patterson Lake South (PLS) project—over the last few years.
Dev Randhawa: Well thank you again. Our story goes back to a fundamental core belief similar to that of Sprott and Rick Rule in the US: You’re either a contrarian or you're a victim. That's really the basis on which we began Strathmore (Minerals). You know uranium prices were $7 and everyone said they would never go back up. Smart people always tell you to do the math and follow the money. If you did the math, you would have seen that demand continued to rise and supply continued to shrink. In America, there was a time when they produced 40 million pounds and needed 4 million. And then suddenly, they were producing 4 million but needed 40 million, exactly the inverse of what it was before. Sooner or later it had to change.
There was a blip with Oren Benton going bankrupt and the price jumped to $17. Unfortunately, the government headed by Bill Clinton decided to sell off the assets into privatization on Wall Street. It then had nothing but uranium for dividend cash so they were divvying it out and that drove the price to $7 and it stayed there until there was a huge supply disruption. Cameco had huge flood issues at Cigar Lake and Ranger had issues with a fire in Australia. That triggered this move all the way from $7 to $140. When you push the spring down long enough you know what will happen. The more you push it down, the more it pops back up. That's exactly what happened.
We got into Strathmore at that time and we've been very fortunate. We’ve been able to recognize that when times are bad you buy and when times are really good you sell. So at the top of that market we sold off US assets and just left it to Strathmore. A bunch of us, I would say a more entrepreneurial group, went into exploration and partnered with the Japanese in Strathmore. We partnered with the Koreans and we started in Canada—meaning they paid our way. Like Rick always says, it's your property, your brains, and other people's money.
We used that as a great model. So we made the discovery called Waterbury with the help of the Koreans and then we sold that to Denison. We started another company and now we’ve spun off something else. So, if you owned Strathmore shares originally, you'd have shares in Energy Fuels, Denison and Fission Uranium, and Fission 3.0. At the end of the day, we believe that the best thing for investors is when management and shareholders are aligned. They both win together or they lose together. That's how the company was built. Our strategy really reflects my view of where uranium prices are today. That's the background of our company.
Sam Broom: Thanks for that. In particular, I want to touch a little bit on the PLS deposit itself. Was it discovered back in 2013?
Dev Randhawa: The first discovery was, I believe, in November, 12, 2012. Then the confirmation holes were in January. That's when we continued to move forward with it. Essentially, it's a very, very unique deposit. For the first time in 50 years, someone has made a high-grade discovery in Canada. And it's shallow, meaning it's close to 50 meters from the surface. We've had lots of shallow discoveries. They've all been in Africa typically or in Quebec. But this is in the part of Canada called the Athabasca. It's very unique. The deposits to date have generally been on the east side (on the right side) of the basin. Our geo felt there was room for discoveries in the west. So we used a technology other people weren't—flying an airplane really close to the ground. And we made some. We broke tradition by: 1) going west and 2) not staying in the basin.
Because we found a deposit outside the basin, we don't have the overlying sandstone—the boundary of Athabasca was really defined by the limit of the sandstone in the basin. So if you’ve got anything inside the basin, you're going to have a discovery above the unconformity which causes water problems. But that’s where the high grades were. We used different technologies to find something outside the basin.
That's really good for two reasons. The glaciers had scraped off the sandstone and you have nothing but this amazing hard basement and we are 50 meters from the surface. This discovery is unique in that it is running 2%, typical of high-grade deposit in the basin. The difference is it's 50 meters from the surface. And our first 42-101 two years ago showed about 108 million pounds of U3O8 of different categories. We'll do another one by the end of this year. And we’ll have a whole team working on a feasibility study next year as well.
So it's a very unique and I believe that's why the central government of China, through its state owned enterprise (SOE) TGN, chose us over every deposit they looked at in the world. They invested over $2.5 million in due diligence, investigating every deposit around—whether it's Australia, Spain, outside of the Athabasca, the US, and they realized that there are only two places you can make money: in Kazakhstan and Canada.Kazakhstan has a lot of political unrest so they came to Canada. And really that's how they chose us as partners. And it’s fantastic because it gave us a 40% premium to the stock. They gave us $82 million for them take this further. We're very fortunate because, as you know, spot prices have been weak. They chose this deposit because the Chinese like shallow deposits. This is more of a trucking operation, going underneath - freezing this, freezing that. And there's only one real company in the world that can do that and that's Cameco. More people can do open pit mining of uranium than underground mining.
Sam Broom: A lot of people won't realize that difference between hard rock and mining in that sandstone. You touched on the fact that in the mines that Cameco are operating - in sandstone - there are all sorts of logistical issues like having to freeze the sandstone in order to extract it. In general, it seems that mining in the hard basement rock, beneath the sandstone, is much easier.
Dev Randhawa: It's easier to engineer. One is like you are in a wet sandbox and water never stops. Your number one issue is stopping the water. And that's why Cigar Lake was supposed to come online in 2005 but when did it come online? 2015! It was 10 years behind schedule. The best mining company in the world, trying to work with sandstone—that’s what you got.
Sam Broom: The other thing that I wanted to touch on is the grade you guys have. When you say 1, 2, 3% uranium –it doesn't mean anything to a lot of people. They're not used to hearing those terms. A 3% copper deposit? That's nice but most people probably won't realize exactly how much the in situvalue of a ton of rocks is with grading 3% uranium.
Dev Randhawa: Yes exactly. Well 2% is really like 2 ounces per ton of gold—almost. So really think of this PLS deposit as 5 million ounces, 50 meters from the surface, running about 2 ounces per ton in terms of value. High-grade in a uranium deposit is nothing like a copper of gold deposit at all.
Sam Broom: Exactly, so thanks for clearing that up. There are a lot of questions I get about the deposit from our clients. They know that it extends under a lake. I wanted to ask you if you can touch on that, and talk about the logistics of how you guys are going to approach this and whether it’s been done before.
Dev Randhawa: We're going to do it as other groups have done. There's some weird concept that it’s never been done. First of all the lake is only 3-6 meters deep. Cluff Lake just did it up the road. Key Lake also. There's been a whole bunch and I am happy to send you all the information on what's been done before. Your question is important: it’s been done before, engineered before. In fact we're hiring the people who did the Cameco work to do the engineering. And it's one of those old wives myths. There's are concerns but the lake's not the concern. It would be different if you had to go way down, but this is 50 meters from the surface and depth pressure is not the issue.
Sam Broom: The planned operation at this stage is to start off with an open pit operation and then move underground, is that correct?
Dev Randhawa: Exactly. The new discoveries on land are going allow us to start on land first.
Sam Broom: I know last week it was you announced a brand new discovery and a bunch of holes in what you call the R1515W zone?
Dev Randhawa: Yes, we keep going on land towards the [original discovery] boulders. The boulders are found along almost on the other side of the highway. This highway runs 365 days a year, if you follow it you go to Cluff Lake and so we found the boulders and now, slowly, we’re making our way back to the boulders. And it simply shows now that we’ve got a strike length of over 3 kilometers, you know it’s the biggest footprint in the Basin. And Cigar Lake is about 2 percent, so we're much bigger than that. All this is a lot of work to do to fill it all in. So, that's the grade—it’s a very high grade.
Sam Broom: And for those readers who are unfamiliar with the boulder concept, you're saying that you're finding some outcropping boulders that have obviously come from somewhere—somewhere nearby most likely. And you believe that that means potential for additional high grade on the surface, within your property.
Dev Randhawa: Yes. We have around 102 conductors and only 2 or 3 have already been tested. We always say in the title of our presentations: Early Days of PLS. If markets were better, meaning a market cap of say 600 million (twice of what we are), we’d probably raise another $50 million and be more aggressive. But we’re not going to do that because we don’t know if it’s going to turn on the spot price. So our strategy is based on that.
Sam Broom: Speaking of that, can you touch on your current cash position?
Dev Randhawa: We have just over $52 million. We have about 3-4 years of money left. We believe that's when spot prices will start to recover, simply because that's when utilities have to start coming into the market—to pick up, to cover what their needs are.
Sam Broom: So you guys are basically playing the contrarian card here. Preparing yourself for a uranium bull market that you see starting in the next couple of years.
Dev Randhawa: It could be three weeks, it could be three years. The problem is it's going to be on the supply side. It has to be the supply side. Kazakhstan’s got to have a problem. Cigar Lake has to have a problem. It's always been a supply-side black swan, as you would say, that causes the jump in the spot price. Instead of being smart and buying as much as you can here, they don’t. They want to wait until it goes up. Most contracting is done by utilities when times are high and not when they are low.
Sam Broom: One of Rick’s most famous lines: “In the natural resource business, you're either a contrarian or a victim.” So you know we have touched on this a little bit but if you just want to finish off exactly how you see the market. And then perhaps outline a few near-term catalysts for the next 12, 18 months for the share price of the company.
Dev Randhawa: Unfortunately, we put out great results and our stock went down 2 cents. Because when the spot price goes up we go up 2 or 3 cents. So for us, we're going to continue to grow this deposit, keep making it bigger. At the same time we're not going to blow our brains out, spend all our money, and have to go do a cheap financing when stocks are low. That's not what we want to do. We want to find a balance between growing the deposit and continuing to conserve our cash so we don't have to do a funding. We are finding creative ways to drill as many holes as possible using cheaper technology. Instead of using core all the way down, we now don’t do any core until we first do an RC hole with a cheap rig. And then we test its down hole gamma. If it shows – boom, we’ve hit. That's one advantage of having a shallow high-grade deposit. You know almost right away what's underneath. So we're able to be as aggressive as we were before, while spending less money. At the same time conserving cash. We’re trying to find ways to cut G&A, that's tough because you have to be careful to not let people go because that's a small part of what you do. The big expensive part is drilling which you contract out.
Sam Broom: Absolutely, and you see future tightness coming in the uranium market?
Dev Randhawa: I'm not an expert but I can tell you I speak to Tim Gitzel. And Tim says always “These prices are irrational, unsustainable.” And Rick says “If the average cost of running a mine is $50 a pound and it’s $20, one of two things has to happen: You turn off 20% of the power to the United States or the price goes up.” That's how typically it works.
Sam Broom: Absolutely, you know for those that aren’t aware of the history of the uranium prices, 10 years ago, people bought $140 a pound.
Dev Randhawa: It went from $7 to $140 and because the cost [of fuel] is only a small part of running a reactor, so will see big moves all the time.
Sam Broom: Considering now that spot prices are trading at $20 dollars a pound. Give or take.
Dev Randhawa: Yes, it's about $20, $19. It keeps jumping around a bit. The problem is 150 million pounds a year are needed to run reactors. It'll take 50 thousand pounds, trade it back and forth, that sets the price. The tail is wagging the dog. So unfortunately people do get caught up in that whole spot price—but don't. The real business, most of it, is done at the long term price.
Sam Broom: Dev it's been a pleasure having you today. All the best in the future anyway. And we look forward to seeing you at the conference in July.
Dev Randhawa: Absolutely.
To learn more about Dev Randhawa and Fission Uranium Corp. visit their website: http://www.
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DEV RANDHAWA is an experienced CEO with a strong track record of growing resource, mining exploration and energy companies. Northern Miner Magazine named him ‘Mining Person of the Year 2013’ and Finance Monthly awarded him with their ‘Deal Maker of the Year 2013’ award. Currently he is the CEO of Fission Uranium and Fission 3.0 Corp.
Mr. Randhawa founded Strathmore Minerals Corp. in 1996 and remained CEO until September 2008. In 2007, Dev Randhawa spun Fission Energy Corp. out of Strathmore to focus on uranium exploration in Saskatchewan. He remained as CEO and Chairman until the company sold its Waterbury Lake discovery and a large selection of its assets to Denison Mines in 2013. Fission Uranium Corp. was spun out with the remaining Fission Energy assets as part of the agreement with Denison.
In 2011 Fission Energy was named a TSX Venture 50(r) Company. “The TSX Venture 50(r) are the top 10 companies listed on the TSX Venture Exchange, in each of the five major industry sectors – mining, oil & gas, technology & life sciences, diversified industries and clean technology – based on a ranking formula with equal weighting given to return on investment, market cap growth, trading volume and analyst coverage. All data was as of December 31, 2010.”
Dev Randhawa received a Bachelors Degree in Business Administration with honours from Trinity Western College of Langley, British Columbia in 1983 and received his Master in Business Administration from the University of British Columbia in 1985.
RICK RULE has dedicated his entire adult life to many aspects of natural resource securities investing. In addition to the knowledge and experience gained in a long and focused career, he has a worldwide network of contacts in the natural resource and finance worlds.
As Director, President, and Chief Executive Officer of Sprott U.S. Holdings, Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management.
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