Historically, consolidating sectors in bear markets is an excellent plan.
But few companies achieve it, because they have no cash at the bottom of the market. The team at Lumina Copper, led by Ross Beatty, was notably the best.
It acquired several copper projects in the early 2000’s for about $175 million. And by 2005 it split itself into four companies. The total return of those projects was over $1.5 billion to shareholders.
From 2002 to 2008, copper soared 500%.
As you can imagine, with that kind of tailwind high quality copper projects soared in value, taking stock prices with it.
Today, there’s a new analogue — and company — to that copper opportunity: uranium.
From January 2005 to December 2006, Mega Uranium followed this model of consolidating assets. It raised C$50 million and acquired nine projects. Its market cap went from C$15 million to C$940 million — a 25X increase.
Several other uranium companies, like Paladin, Energy Metals, and Uranium One had success with this model as well.
We fully expect uranium prices to stage something similar to the copper rally in 2002.
And there is an excellent junior that plans to follow the model in that commodity.
International Consolidated Uranium (TSX-V: CUR)(OTC: LBHRF) took a page from Lumina Copper’s playbook. They’ve collected a fantastic uranium portfolio that they can sell at a profit for the next decade.
Alternative Energy is Great Until It Doesn’t Work
Coal is all but dead. And filling its gap in electric power will create huge opportunities for investors.
For the past 100 years, coal-fired power plants supplied a critical part of the world’s electricity. These plants never shut down. They just percolated in the background and generated power 24 hours a day.
That’s called “base-load” power. Without it, you end up with brownouts or full outages.
As governments around the world closed those coal plants, they replaced them with alternative power like wind and solar.
Those sources don’t supply base-load power. So, the frequency of weather-related outages jumped.
It happened to England in June 2018, when the winds dropped to nothing for two weeks. At the time, the country only got 4% of its power from wind turbines. But that loss drove power prices to decade highs…because they didn’t have enough.
During ideal conditions, those wind turbines can produce the electrical power equal to twelve nuclear power plants. But not when it’s calm.
It happened again in November 2020. Calm weather created a problem for the grid. It fell 1.5% short of demand. As noted by Ellen Wald in her essay in Forbes:
National Grid was forecasting a shortfall of 740 MW (1.5%) in the extra power plant capacity it needs to have available at all times to meet demand or pick up slack in the event a power plant breaks down. It is important to note that this happened at the beginning of November, not in the heat of summer when air conditioning can strain grids or an abnormally long cold snap in the winter. No, this was not caused by overburdening the grid but by overreliance on unreliable alternative energies.
It happened again in the U.S. over Valentine’s day weekend in 2021. A huge blizzard froze wind turbines across the state of Texas. Two million customers lost power.
It stretched the state’s power grid so badly that customers who didn’t lose power faced rolling blackouts for the first time in a decade.
Utilities cut 10.5 gigawatts of power demand to ease strain on the power grid throughout the state.
I expect these events to begin a nuclear power renaissance around the world.
Power outages aren’t acceptable in today’s online world.
Wind, solar and hydro power are all great. But they each have a significant flaw… calm, night, and drought respectively. As a society, we need power all the time, not just when conditions are good.
This is one of the biggest problems for carbon-free power sources. If you rely only on wind and solar, you will fall short at times. The clients end up paying more for the power and it can damage the power grid.
Renewables are going to be a large part of the future to be sure. But they need a baseload counterpart… an energy source that can stay on all the time.
Fortunately, there is a carbon-free answer: new nuclear power plants.
According to the International Atomic Energy Agency (IAEA), countries around the world understand that. The IAEA data show fifty new reactors under construction in nineteen countries…including two in England.
However, there’s a problem with fuel for those new reactors. The uranium price cratered in 2011, after the Fukushima Daiichi disaster in Japan. An earthquake followed by a tsunami devastated a nuclear power plant there.
As you can see, the price of a pound of uranium fell about 75% from 2011 to 2017, before starting to recover.
That collapse created many orphaned uranium projects.
But it left many excellent projects selling for just pennies on the dollar. That’s where International Consolidated Uranium (TSX-V: CUR)(OTC: LBHRF) took advantage of a huge opportunity.
For speculators, the important thing to keep in mind is that the uranium sector is highly cyclical in nature. And while it’s true we haven’t really seen a major resurgence since post-Fukushima-2011, the annual supply-demand gap — which currently stands at 20 million pounds U3O8 — points to a highly bullish scenario for uranium prices going forward.
What we’re looking for next is for the major US utilities to come in and start purchasing U3O8 contracts at higher uranium prices — signaling the start of what many experts believe will be a swift and sustainable uranium price move from the current $30/lb range to $50/lb and perhaps even higher.
Once that happens, those select few well-positioned uranium juniors like International Consolidated Uranium could see their respective share values rise in dramatic fashion.
The key is owning select top-quality names before U3O8 prices heat up — just like what we witnessed in mid-2007 with uranium rocketing to $135 per pound and bringing the vast majority of North American uranium companies along for the ride.
International Consolidated Uranium is a C$39 million market cap junior mining company.
It has a tight share structure (47.1 million fully diluted). And it has a solid C$10.3 million cash position (as of January 2021).
Two important uranium companies, Mega Uranium and IsoEnergy own 4.2% and 3.0% of its shares, respectively. Management and insiders own another 5%. Institutions like Sachem Cove and Segra Capital own another 36%.
This junior packs a big punch in leadership. Its founders are the same team behind NexGen Energy (NYSE: NXE) and Mega Uranium (TSX: MGA). NexGen is a $1.5 billion uranium company.
International Consolidated Uranium holds five uranium projects around the world, as you can see in the table below:
|Ben Lomond||Queensland, Australia||10.7 million pounds Uranium|
|Georgetown||Queensland, Australia||6.33 million pounds Uranium|
|Mountain Lake||Nunavut, Canada||8.2 million pounds Uranium|
|Moran Lake Uranium and Vanadium||Labrador, Canada||136.4 million pounds Vanadium
9.6 million pounds Uranium
|Laguna Salada Uranium and Vanadium||Argentina||84.0 million pounds Vanadium
10.1 million pounds Uranium
|Data from International Consolidated Uranium Presentation|
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me is the president, CEO and chairman of International Consolidated Uranium — Mr. Phil Williams. Phil, How are you this morning?
Phil Williams: Well. Gerardo, thanks very much for having me. How are you doing?
GDR: I’m well, thank you for asking. It's getting exciting in the uranium space. All of the better names are up recently. The spot price still hasn't responded but the equities are not waiting. So I want to get into the uranium space and get your take on it. But before we do that, I would love for you to provide a brief overview of the company and your background for those that may not be familiar to the story.
PW: Sure, thanks. So Gerardo, it's a very exciting time in uranium. As you point out, the equities have rallied hard and we can talk about the dynamics of the space. But International Consolidated Uranium is a company that's new to the uranium space.
I took over the company in March of last year. It was a gold company, principally. And when we looked around the resource space, the junior resource space, and we were looking at opportunities — uranium was screaming to us! And it was because the team behind the company has tremendous experience in this space.
Myself… I've been in uranium since 2006; saw the previous bull market. And then, I sort of liken it to the mafia… Once you get into uranium — it's very hard to get out!
And since 2006, whether it was as a sell side research analyst… as a buy-side investor at a fund in Toronto where I'm based… as an investment banker for several years at one of the firms also here Toronto… or, in fact, a couple of years ago, I stepped out on my own and started a private uranium royalty company with some partners — I've just been stuck to the uranium space.
And finally, I think we're on the verge of that return rally that we expect. But as we looked around for opportunities, we really saw that uranium was a space that was open-season and particularly for the kind of story and model that we have with Consolidated Uranium.
And so it's in the name what we're doing. What we're doing is going around the world picking up projects that were high flyers in the past cycle primarily; have had tremendous amounts of money spent on them in the past; have resources in-place; are in jurisdictions that are well-known to the investment community… but for one reason or another, Gerardo, are not in some of the existing companies that are still in the space… have been forgotten about and kind of left to the side.
But we see opportunity there. And we've been able to pick up quite a few interesting projects at very good prices and have started to build our portfolio to some critical mass here.
GDR: That is the strategy just to be absolutely clear for everyone out there, correct? The strategy is to acquire and develop quality projects around the world, right?
PW: And again, we see a tremendous white space here. And we give lots of credit to the companies that have been able to withstand this bear market since post-Fukushima in the uranium space.
But there's a much smaller number of names than there once were. And they're focused on their projects and that's great. But there's all kinds of projects that have been left to the side where we can pick up.
And with the team we have and the experience that we have and the fact that we think we can pick them up, again, for very good terms… but advance them, add value, and be prepared for that next bull run where a consolidation strategy will outperform, in our opinion, some of these other companies and potentially quite dramatically. And when we look in the past, we can see that this strategy has been very successfully deployed by other companies.
GDR: The stock has performed well recently. For those that may think that they've missed out, I noticed that in your corporate presentation, you make it a point to highlight Mega Uranium as a case study, right?
And for those that aren't familiar with what happened with Mega, can you give us a little bit of background there because it was pretty spectacular! I think it really speaks to the potential in the space because there are such few quality names out there.
PW: No, one hundred percent, Gerardo! And that is really the guide that we've used to how we're putting together Consolidated Uranium. And, as you point out, in our presentation what we've done is we've put a graphic together which is a two-year share performance chart for Mega from the beginning of 2005 to the end of 2007. And that was the period just when uranium was starting to get going and leading into the high that it made in early-2007 of over $130 per pound.
And in that two-year span, Mega said, “Okay, we're going to be a consolidator in this space.” They did nine acquisitions. They raised about $50 million in capital. And over that period of time, their share price went up 25 times. Their market cap went from $15 million to $940 million. And again, the uranium price went from $20 to $78 on its way to $136. But their performance was tremendous, and, of course, as I said, this is exactly what we'd like to emulate.
And we have the benefit of hindsight. The current CEO of Mega Uranium is one of the strategic advisors to the company. I spent some time working at Mega Uranium a little after the original two-year period that I'm referencing. But we can kind of now look back and say… Okay, what did they do well… what maybe not so well… and how do we learn from that and deploy the strategy again?
GDR: You announced late last week, that you had acquired a project in Quebec, Canada. Walk me through the portfolio of the initial acquisitions. Walk me through what that looks like and just how you plan on executing here moving forward in a sector that's heating up now, right? It was a lot easier to pick up quality projects when no one was looking… that kind of speaks to my contrarian heart. How do you approach it moving forward?
PW: Yeah. So two-part question. I'll walk you very quickly through the portfolio and we can dig into any project specifically. But the first project that we acquired was actually two projects in Australia — called Ben Lomond & Georgetown.
And Australia is a geography that we want to be in; they’re a uranium producing geography. There's a couple of mines there operating. And these are projects that had $30 million spent on them in the past. And so they were kind of the first projects and the anchors to the portfolio.
We've then gone on to add a project in Nunavut called Mountain Lake; a project in Labrador, Moran Lake. We also went down to Argentina, again, where we’ve approached a project that we’re very familiar with that had $15 million spent on it; a PEA completed.
And in all of these cases, Gerardo, there's historic resources. And in that last press release that you're referencing, we put a table together of all of those resources. And then, most recently, we've gone to Quebec. And Quebec, again, is a jurisdiction that, in the previous cycle, had well over a $100 million spent.
The majors were there… Cameco was there; Areva was there; now Orano; and one particular junior that was a high flying junior named Strateco was there; lots of money was spent in the province.
There was a speed bump hit back in the day when there were some issues with getting mining permits in the province. And so the whole industry in Quebec went dormant. We identified a project that, in fact, was open for staking called Dieter Lake. Previously, it was owned by a company that has a big history, Uranerz. They're not around anymore. But Fission and Strathmore and Denison all owned this property at one point in time.
But because the pendulum swung to the one side where you couldn't get anything done, the project was available; we picked it up. It has a historic resource of 24.4 million pounds.
And again, we have a long-term view here and a long-term vision where, as uranium starts to get traction as positive for climate change – nuclear reactors, of course, are low-carbon-emitting electrical generation – that we think the pendulum could start swinging the other direction.
And Quebec is a well-known mining jurisdiction. There's lots of different mines there. They have a focus, more recently, on critical metals. So there's lithium; there’s graphite; even nickel. We think that uranium fits into that bucket. And over time, we might see the province open up more to development.
GDR: Walk me through the share structure a little bit, Phil. I see you have, I think, approximately just over 30 million shares outstanding with 17 million in warrants and options?
bout a million dollars in cash. Over the nine months, twelve months since then, we've raised a considerable amount of money; we raised C$9.7 million and that accounts for the bulk of the warrants. We brought in a number of institutions along the way.
And even in the press release announcing the financing, we mentioned two of the key backers — and that’s Sachem Cove and Segra Capital. And for people that follow the uranium space, they will know these names. These are New York hedge funds who focus specifically on uranium, and they're the experts in the space. Behind them, though, I'll tell you that we have another 10-odd institutions that participated in the last two rounds. And so we're very well backed in that sense.
And when we talk about what's next for the company – and I'm sure you're going to want to go there at some point – what we've really tried to do is build up a register of supportive institutions so that when we have bigger deals to do, they're going to be there helping to write checks and finance this business going forward.
GDR: Well, you asked my next question. What's next for the company?
PW: Okay. So look, the strategy here, of course, is simple, right? We're consolidating projects around the globe. But we do it with a lot of forethought in terms of how would you build a portfolio. And this is, again, with this hindsight of seeing what happened in the last cycle… where do you want to be… what kind of projects do you want to have… we think that diversification is the key.
And I'll just take a quick tangent there, Gerardo, because for people that have been around the space as long as we have — single assets, single projects, single jurisdiction companies have repeatedly been derailed. And Quebec is a perfect example. But I can list off other jurisdictions around the world where there were companies that had amazing projects and were on a clear path to development. And a kind of black swan event happened where a government changed its policy, or changed its leadership and then changed the policy — and projects went from hero to zero very quickly.
So what we're trying to do is provide investors with diversification against that. So, okay, you have a project in Quebec. One day it's good; one day it's not… and then it comes back on. That's not the only thing that we have going so we can insulate investors from the potential downside there. And this is just a reality of the uranium business.
Permitting is the biggest challenge and so having diversification is the key. What we want to go and do now is we want to add some more geographic diversification. I'll be very clear; the one jurisdiction that we're not in today that we definitely are looking at and want to be in is the US. Late last year, we brought on a consulting geologist named Ted Wilton who has 30-plus years of experience in the US looking at projects. That's somewhere we want to be.
We'd like to add some additional projects to our Canadian portfolio. We're not in Africa yet. There are jurisdictions that we wouldn't be looking at within Africa. But there's certainly some places in Africa that have interesting potential.
And I can tell you that – notwithstanding things moving up and the uranium space attracting more attention – we have lots of counterparties that still want to talk to us. Because, again, if you're a company that has a single asset in a single jurisdiction and you understand the exposure that that might give you — bringing that asset into our portfolio and being part of this bigger enterprise is quite attractive.
So yes, things might be a little bit more expensive. We've definitely been able to buy well up to this point. But on a relative basis, I think we can still do well. And I think that this is really a case of when one-plus-one is more than two when we add the right projects to our mix.
GDR: Agreed. What's the working capital looking like, Phil?
PW: So we've got C$9.5 million in cash and equivalents right now. And a chunk of that is in shares of NexGen, which came before my time. And we're, of course, very happy to have those shares of NexGen because it’s a C$5.00 stock. And yeah, so we're very well-funded.
And one of the interesting things about our business model is we're not taking on a lot of the costs of operating these projects when we do our deals. So each one of the transactions that I've talked about so far — we've acquired those projects under option.
So we have the exclusive irrevocable right to acquire those projects on a 100% basis. But we haven't yet taken them onboard such that we're not required to pay the holding costs; pay any of the people that are associated with it. We've insulated our balance sheet from that.
So all of that cash – other than me being one of the only full-time employees and some part-time people around who are doing the various accounting functions and some of the consulting geologists that we have – all of that cash is really earmarked for new acquisitions.
GDR: Phil, you have a good balance sheet. You have a very, very solid share structure. Obviously, an experienced team with a network that I think is going to come in extremely handy for this cycle. Is there anything else that you'd like to add?
PW: Well, look, I just think the one thing that we didn't talk about as much is the uranium market itself. I've been around for a long time. I'm not the kind of person that's going to tell you exactly when the price is going to move. But I am more convinced than ever that the price is going higher from here.
We have a fundamental disconnect between the cost of producing and the cost of bringing on new mines and where the price is today. When it turns, again, I can't say exactly when, but when it does — it could be more violent than people expect if history is a guide.
And so I just think we're getting started. And yes, the equities have moved and we need the spot price to come along. But I feel quite certain it will. And it's a very exciting time to be in this sector.
GDR: I couldn't agree more, Phil. It's always better to be early when it comes to the uranium cycle than it is to be late! And it's definitely not late yet. I think we're just getting started. And I couldn't be more excited about 2021 from that perspective.
PW: Yeah, me as well.
GDR: Philip, thank you so much for your time. I'm looking forward to having you back on. I get the sense that you’ve got multiple deals in the works, and I'm looking forward to chatting about those in the future.
PW: Thanks very much, Gerardo. Great chatting.
GDR: Thanks again.
International Consolidated (TSX-V: CUR)(OTC: LBHRF) Uranium Offers Lower Risk and Huge Upside
International Consolidated Uranium isn’t a grass roots exploration company. It has five advanced uranium projects that hold a significant amount of uranium and vanadium.
However, its market cap is so low, it’s a steal right now. On an enterprise value to resources (EV/resource) metric, you can buy International Consolidated Uranium for just C$0.68 per pound of uranium. That means you get all of the vanadium for free.
If we consider the vanadium, the cost drops to just C$0.37 per pound of metal…by far the cheapest resources in its peer group. The average EV/Resource is C$2.25 per pound. International Consolidated Uranium’s price needs to go up 500%, just to hit the average!
That makes a compelling argument for owning International Consolidated Uranium. The sector’s bear market looks to be over.
Demand for nuclear power is on the rise, globally. And this junior has strong leadership, cash in the bank and a great portfolio of projects.
Uranium is a great sector for investors. It’s still cheap and it’s in an uptrend. International Consolidated Uranium is a great low-risk, high reward stock to own right now.
Learn more about it at its website here.
— Resource Stock Digest Research