Laramide Resources (LAM) - Timing the Uranium Market Right

March 24 2021, 13:31 GMT

Laramide Resources

  • TSX: LAM
  • Shares Outstanding: 166.87M
  • Share price C$0.53 (23.03.2021)
  • Market Cap: C$88M

Laramide Resources is a Canadian-based company with large mineral resource projects strategically positioned to deliver Uranium for clean nuclear power to meet the accelerating rise in world electricity needs. Laramide’s portfolio of advanced Uranium projects has been chosen for its low-cost production potential. Major US assets include the Churchrock and Crownpoint In Situ Recovery (ISR) projects and La Jara Mesa in Grants, New Mexico, as well as La Sal in the Lisbon Valley district of Utah.

We caught up with Marc Henderson, President and CEO of Laramide Resources to discuss plans for the company going forward and the Uranium industry as a whole.

Company Overview

Laramide Resources has Uranium projects which range from advanced exploration assets in Australia’s premier exploration districts to permitted Projects in the USA that have potential to quickly become Uranium-producing operations in response to strengthening market demand. These projects provide the potential for low cost, low technical risk Uranium mining operations located in safe, stable jurisdictions in the southwest United States and in Australia.Laramide Resources (LAM) - Timing the Uranium Market Right

Equities across the board have done better, but at USD$27, no one is building a Uranium mine. Cameco has closed Cigar Lake, partly due to the pandemic situation, but it tightens the market, and the market needs to be tighter before supply. 

Last year was challenging for Laramide Resources in terms of getting work completed. They have a work programme planned this year in Australia, particularly in the Northern Territory, which will be exciting and they should be on the ground in New Mexico as well. Last year it was very challenging to get permits there and very challenging to get government response on routine queries. Laramide Resources (LAM) - Timing the Uranium Market Right

Business Plan & Approach to Raising Money

Laramide Resources has 2 major projects, both of which have 50Mlbs+, so are big projects that could run for 10 years or more says Henderson. One project in the US could be 3Mlbs/year, another in Australia could be 5Mlbs/year, but they have to be brought into the market relatively carefully. A smaller project that is 1Mlbs/year with relatively low capex could start to heat up more quickly and they want to focus on that because that gives a bit of flexibility. They also have development assets that are going to be part of the future production of Uranium. 

The main problem is that until we see the price signal up and be sustainable to at least USD$40-$45, it's hard to move aggressively in terms of raising money and putting the team together and getting contracts in place because Uranium can’t be produced at USD$27. The capital markets have become a lot healthier where Laramide Resources could have been raising money for the last 4-months but they are not keen as it is dilutive to NAV.  

Market Dynamics: Catalysts, Timing, & Changes Happening 

Laramide Resources think they have the right type of shareholders on board. The price of Uranium is going up and they are happy that they will soon be able to get money at a better level than if they raised money now. Cameco and Kazatompron going offline is affecting the supply side of the story significantly. Everyone thought that last year was the year for Uranium but it didn’t happen and the industry is still waiting. The US Uranium reserve has certainly elevated the critical supply situation and now people are aware of the position. It has increased the level of conversation about nuclear and the role it fills in American energy generation in a fairly meaningful way so it was definitely a worthwhile exercise.

This last year has been about survival mode for a lot of companies and the reality is that not much has changed on the ground since Fukushima as everyone is really just waiting for an increased price signal. It's an unusual market which really looked like it would turn in 2017 because mines were shutting down. Eventually it will turn Henderson tells us, but it is surprising everybody in how long it is taking as for the industries that require critical materials to stay in business, you would think they would have a different procurement strategy in place.   

The Uranium space is different to the Gold space in terms of consolidation where there is a benefit to add new stories to existing ones. The problem with the Uranium space is there are development projects in every company who needs to decide which project goes first. If they put another 2 from another company in, how does that really help them? There are not many potential big buyers in the industry with only Cameco and possibly now Energy Fuels as they have the market cap to look at buying other companies and projects.

Utility buyers are looking to form relationships with companies that can get into production to have some certainty around being able to deliver and there are not that many players that seem to be actually focused on production. There are explorers out there which is great for discovery and great for headlines. But this supply-demand dynamic is not changing. There is a massive deficit coming down the line and the industry is going to need people who can actually produce.  Laramide Resources (LAM) - Timing the Uranium Market Right

Yellow Cake Option with Kazatomprom: Why Did it Take so Long?

Yellow Cake is taking up the $100M option with Kazakhstan to buy at a sub-$30 level. The Yellow Cake contract is interesting in that they can secure the price before they have to commit to getting the capital, so the investors really know what they're getting. Cameco and Kazatomprom, who both have taken operations down and production down and both said they want to be in the spot market, can't really be seen marking up the spot market by USD$3/week, so this is a good way for them to have someone else do it for them.

We are unsure what will happen to get the spot market to move to USD$40-45 as it has to get there somehow and there seems to be little urgency on the part of the people that actually need it in the near future. With 2-2.5-years’ worth of inventory, perhaps they think they've got a bit of a bit of time, but mines take a long time to get into production. There are companies in care and maintenance, but also new mines and former producers that need to ramp this up and also need to be incentivized. We all agree on the thesis that the macro says there's going to be an uptick which should be turning relatively imminently.  

Management Increasing Shareholding yet No Imminent Financing for Laramide? 

Henderson wants to keep his ownership at around 10% as it is a good signal to the shareholders that he is committed to the company. There is no imminent financing planned for Laramide Resources as they want to wait and see what happens in the market. There is no imminent urge for them to raise money as they don’t plan to do anything with the money just yet.

They have one investment in crypto as they started a company called Con that was also in the Uranium business in Mongolia. It ended up working well and the company got paid out for its asset which has gone up 6-8x and Laramide Resources had a big position in the company so they can get by on that for a while and still have a couple of USD$M value there.

US Assets: Conversations Being Had & Progress Made

The project at La Sal in Utah is permitted and can go into Energy Fuels to the mill once the price goes up and the mill is taking Uranium. They have an ore body that contains no Vanadium which can go into the mill to be run without running it as a Vanadium circuit. Other projects on the Colorado Plateau have a lot of Vanadium and the Energy Fuels’ mill can be tweaked to get other products out of it. Laramide Resources hasn't had those conversations with Energy Fuels yet because the price is too low as it’s an asset that needs to be at least USD$50 before they’re serious about it. They need to get permits first and the goal is to get shovel-ready to start into production as soon as possible. 

They actually have a milling contract with Energy Fuels from 2013-14, when they saw the light at the end of the tunnel and got ready for production. That contract is ready to go and just needs to be changed a little as to how it would work now. Energy Fuels owns the mill, but is not going to start the mill until they see enough longevity in the price and enough solidity behind who's buying, and off-takes, etc. When they turn it on for Uranium, they will want to turn it on with a plan to leave it on.

Moving ISR Projects Forward: Process & Timing

Laramide Resources are trying to move the ISR projects forward. They require planning and testing but last year was frustrating because they had little responsiveness from government officials to get the permits they need. They need to do a drill programme and a technical programme to demonstrate restoration in the lab, in the well field and in the aquifer to a level to get that final permit. That requires some drilling and they need access to go out and do the work which has been a frustrating exercise in New Mexico. Much of these frustrations were Covid related as there were towns that were literally closed down and these concerns still exist but they hope to get it done this year.Laramide Resources (LAM) - Timing the Uranium Market Right

Australia's Issues with Nuclear Mining

Laramide Resources’ assets in Australia have plans ongoing. There are meetings scheduled to get the permits to allow them to go out and do the work from July this year which is exciting. There is a big greenfield asset right next to their main brownfield asset which has the same geological model and if they start hitting something interesting there, people will get excited. Greenfield exploration in the Uranium industry is important as ultimately, new ore bodies will be needed in the future.

The Labour government that was in Western Australia was not pro-Uranium or pro-nuclear which could perhaps have caused the difficulties around the permits in the past. The attitude in Northern Territories and Queensland is better now and they're introducing the idea of nuclear energy into the conversation slowly and carefully in Australia, with the view that nuclear energy is ESG friendly and may eventually happen. Queensland needs to get rid of the idea that you can't build a Uranium mine which should happen at some point.Laramide Resources (LAM) - Timing the Uranium Market Right

500 New Uranium Companies to Show Up Once Markets Turn? 

Once the markets turn it is a concern that there could be 500 new Uranium companies, and only 20 of them will ever produce anything or even less than that which would be similar to what happened during the last cycle. There are now less brownfield discoveries to be made compared to 10-15 years ago so it is hard for companies to find a new asset. We have seen some new entrants into the market picking up assets that we know didn't work last time around which is worrying as retail investors will perhaps be persuaded to get involved and it is our job to point those things out to potential investors.

It was great to catch up with Laramide Resources and we look forward to following their story as the Uranium market moves its way towards a price rise and the company gets closer to Uranium production.

To find out more, got to  the Laramide Resources Website

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