Cherry Picking the Best Uranium Properties on the Cusp of the Next Commodity Boom

Phil Williams: Well. Gerardo, thanks very much for having me. How are you doing?

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.

PW: Correct.

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.

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?

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.

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.

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.

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.

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.

PW: Yeah, me as well.

PW: Thanks very much, Gerardo. Great chatting.