Interview with Stephen Roman, Chairman, President & CEO of Global Atomic Corp. (TSE: GLO). Global Atomic is a Canadian resource company advancing the large, high-grade Dasa uranium deposit in the Republic of Niger.
In addition, Global Atomic benefits from the dividend stream generated by its share in the Befesa Silver-met zinc concentrate production facility in Turkey.
Matthew Gordon: You finished the year quite well. You must be pleased.
Stephen Roman: Yeah, we're very pleased. A lot of hard work by many people added to the effort and we had a very successful outcome on 23rd December by presidential decree and passed by the council. We received our mining permit for the Dasa project. So from the submittal of our development plan and application in September, it was as we expected, a very quick process in Niger. So that's one of the prime reasons we are there looking for great projects with an actually good permitting regime.
Matthew Gordon: I think the mining permit just before Christmas; you got that out before the election. So were you surprised at getting the mining permits out so quickly?
Stephen Roman: Well, we had a good indication when we submitted our development plan that because the government wanted to get specific items done before the election, that we were high on the list to get our permit approved fairly quickly and they were true to their word. Obviously, we got it before the election. So it was a very, very positive year for Global Atomic.
Matthew Gordon: This mining permit allows you to also move things along on that front. So what is the plan now? What's the timing on that? Have you got the cash to be able to do it?
Stephen Roman: Well, you asked many questions and I will go through them. Number 1, yes, we do have the cash to do it. Number 2, we are working very diligently on completing our Bankable Feasibility Study. That's probably done by Q3. We're currently doing geo-tech drilling to complete that to finalise our mine plan. We are also completing our pilot plant study. So we ship material from the Dasa deposit, first 5-years of mining, brought it to Canada, built a pilot plant, ran it through that pilot plant, and we should have results coming out on that very soon. That will also be integrated into our Feasibility Study. So optimising the flow-sheet, optimising the process plant, and all of those engineering details. That's all in the works, Matt. That's all on schedule. We expect news to be flowing for the first few months of the year as we complete these initiatives.
Matthew Gordon: Can you give people an idea of when you think the timing for that is, and what are the barriers, the things that are going to hold you back, from getting into production quickly?
Stephen Roman: Well, I think the biggest barrier would be of course raising sufficient financing in some sort of a project loan to do it. There are no other barriers really. We have our mining permit now. We have all the engineering and all of the work being completed. We're putting a team together to be able to do all of this work and move the project forward. You'll see more news on that soon. You know, just with the Uranium market sitting at a $30 spot price and of course term is around $35, now we are profitable at those prices but I think the market needs a little bit more of a sign that Uranium prices are moving ahead and of course then there's going to be more financing available. Now on that front, I must say that we've had a lot of approaches from groups that want to finance the company. So we feel very optimistic about being able to do this. There are different types of financing we can look at. We can look at a project loan including some debt, a bit of equity, leveraging the cash flow from our Turkish operation, so we have a number of different ways to go ahead and do this. Of course, the bigger banks want to see the completed Bankable Feasibility Study, so that's the main goal right now. Let's get that completed, get the numbers out, I think the numbers are going to be better than the PEA in my estimation based on the work we're doing. The market needs to realise this market value we have right now of about $0.25Bn, we're only talking about the flank zone here. The whole Dasa deposit is 250Mlb. We're talking about mining 45Mlb thereabouts on the flank zone. So you're looking at maybe 18% - 20% of the deposit.
Matthew Gordon: You know, are you fully valued given that the NPV is around the same as the enterprise value. You're talking about less than 20% of the company relates to that NPV, okay. Understood.
Stephen Roman: That's without Zinc.
Matthew Gordon: What do you think you're getting in terms of value for the Zinc today?
Stephen Roman: Well, you know what if you look at the Befesa stock price, they're our partner, they have just about the same amount as we have although they have other operations in Europe obviously, they're trading at 10 to 12 times. Their stock is at €55 or $55 right now, and obviously, Zinc price is at $1.28/lb. I mean if you just extrapolate what we should be worth, that Zinc operation of ours is worth about CAD$150M I would say right now, which is most of our market cap. So I think getting the mining permit obviously created a catalyst and brought our name to the forefront of Uranium companies. So we added probably CAD$100M of our market cap through the value of our Zinc asset. There's a long way to go here.
Matthew Gordon: How do you play that? The Zinc component, once the debt is paid down, which I think, from the last time we spoke, is going to take another 18-months or so depending on Zinc prices, obviously, before it starts putting cash.
Stephen Roman: Less than that.
Matthew Gordon: Less than that. Okay. What are we at, 12?
Stephen Roman: Max 12.
Matthew Gordon: Max 12, okay, and then the terms of the contract, you get paid in March of each year, right?
Stephen Roman: We get monthly management and sales commissions, which covers a lot of overhead costs. Then once a year we extrapolate how much money we've made and a dividend is paid to the partners. So that's declared at the annual meeting every year and then the dividend is paid. So that's the majority of the big cash that comes in annually, and then of course every month you get the other fees.
Matthew Gordon: What do you think the Zinc component is going to contribute on an annualised basis?
Stephen Roman: Well, if it stays the way it's running right now - so we're running at capacity at the moment. The Steel industry has picked up in Turkey. There's a lot of waste. We are processing this waste. You know, we're a green company that cleans things up and produces no Carbon. So you know what, we are running at capacity and the Zinc price is CAD$1.28. If it stays like this, we'll be kicking up, I would say, in the range of CAD$12M - CAD$15M net to us on an annual basis. It's a pretty significant amount. It'll support a fair bit of debt if we want to leverage that cash flow to build the Dasa mine.
Matthew Gordon: Those sorts of operations just run and run and run. That's just going to an annuity stream of cash. So how do you treat that? Do you just take that as a cash machine? Do you sell it forward? Do you cash it in today? I mean, how do you look at it? Where do you think the big prize is? Is it Dasa or is it running the 2 side by side? How are you thinking about it?
Stephen Roman: Well, the steady-state cash flow we get out of our Turkish operations I think could easily support a CAD$200M - CAD$300M market cap, in my estimation. It's a long-term, steady cash flow. As you say, it's an annuity. The big upside, where you get up into the CAD$500M, CAD$750M to CAD$1Bn market cap, that's going to come from Dasa. So Dasa is a standout Uranium project. It's very large. It’s high grade. We haven't explored all the strike extensions and down-dip extensions on this deposit. So it's going to get even bigger than what it is. But you know, when we hit 250Mlb, we said, 'Hey, you know what, we have enough here, let's start a mine. Let's get our mining permit and we'll continue developing this asset as time goes by. There's going to be a big demand for this. Obviously, several Uranium mines are shutting down because of ore exhaustion. We've got our memorandum of understanding with Orano, to supply them with feed from Dasa.' So this is an asset that's going to keep building in value, particularly if Uranium prices start moving ahead, which we expect. We expect the same thing's going to happen now that happened in 2007. All of a sudden, the utilities are going to wake up and say, 'Holy Smoke, there's no supply.' They're going to start jumping into the market and you're going to have a big spike. I think we're one of the only junior companies that's going to be ready to go into production to hit that price rise.
Matthew Gordon: Yeah, for sure.
Stephen Roman: It's very exciting.
Matthew Gordon: I want to totally exhaust and be able to park up the Befesa JV. I know you're a Uranium guy at heart, right?
Stephen Roman: Well, I'm a mining guy.
Matthew Gordon: So, Steel production is a big part. In terms of feedstock, you're good I guess but would you want to push that envelope. Would you want to increase the scale of that JV? Would you be looking to do any M&A potentially or also capex raises to build the scale of that operation in Turkey?
Stephen Roman: Well, the Turkish operation, you may recall, we just built a brand new plant in 2019 and we bumped the size from 60,000t, 65,000t a year throughput to 110,000t, 120,000t. So we've pretty much doubled the size of that operation. We also made it much more efficient, much cleaner, the highest tech available for this recycling type of plant. We have moved ahead with expanding that operation in that regard. Now with Befesa, we have a JV that says, you know, if there are other opportunities in Turkey, we will do them jointly, the same as we're operating this plant. In other parts of the world, of course, Befesa are building some plants in China right now; they have a number of plants in Europe. There are potentially other opportunities out there and we get along very well with Befesa. They're a great partner. Obviously, if there are opportunities, typically we show them to Befesa and say, 'Hey, would you be interested in maybe doing something on this project?' There's always a possibility of that, Matthew.
Matthew Gordon: I'm just trying to think, the jurisdictional risk for them, they're comfortable with Turkey but there may be other risks associated with building it too big, and you feel that you've done enough scaling for now. Is that the reality?
Stephen Roman: In Turkey, yes. We have enough scale in Turkey at this time.
Matthew Gordon: I think we've explained, ad infinitum, ran spot versus contract or term contract, the difference in pricing, what's important to companies, what's important to companies to get financing. Do you have a view on when things will start moving? The spot price is $30 today. It's nowhere near where you need it to be.
Stephen Roman: Well, you know what it's hard to say when utilities are going to actually start to move but the good thing is that they're starting to talk. So they are talking to Uranium producers like Cameco, Kazatomprom, and even Global Atomic. So we've been approached by a couple of people that want to do off take agreements right now. You know what, this is all going to shake out in the next few months and we'd obviously, that's another good point relating to financing a project, if the banker sees that you've got off-take agreements with 3 or 4 utilities, they're going to be more amenable to loaning you some money to build your project. So this is all part of the plan, Matt.
Matthew Gordon: But the catch 22 for you here is, you don't want to do term contracts at $30 or $35. I know you could.
Stephen Roman: No, you wouldn't do that.
Matthew Gordon: How do the big funds that may want to give you the cash value you? Are they going to have to wait until the BFS is complete? When you say people have approached you, what sorts of conversations are you having? Is it just literally getting information from you or are they actually negotiating, or starting to try to understand the basis under which you will do business?
Stephen Roman: Well, I think, first of all, the utilities need to know when you can actually deliver Yellow Cake. So we plan to start earthworks in early 2022. We could potentially start shipping ore from the mine to a nearby mill in 2023 and if all goes according to plan, we would be producing our own Yellow Cake sometime towards Q3 of 2024. So if you look at the term pricing on Uranium for 2024, 2025 delivery, you're up in the $40+ range at that point. That's definitely an incentive price for us to go ahead. So you wouldn't be signing things at today's price. You would be signing them on pricing 2 to 3-years out.
Matthew Gordon: Talking about the mill component. How do you negotiate something like that, because he who controls the mill controls the district? It's the old cliché in the states, right? So in terms of the deal with the mill owner Orano, how do you go about having those discussions? Are they forward-pricing it? How do you get the best deal?
Stephen Roman: Well, that's all in the works at the moment, Matthew. So the MOU we signed said that they would buy it at spot, but of course, spot is fluctuating. So you know, they would pay us for the Uranium that's contained in the ore plus a processing fee. So that's the way it's based, currently. Our MOU stipulated 100,000t a year would be shipped to them for 5-years. We've been discussing those terms and other terms that have been put on the table. That's something we'll hopefully get some clarity on in the next few months.
Matthew Gordon: What we are seeing is a lot of generalist funds stepping in on the equities side of things, picking up some stock here and there, who have been watching I guess for the last year. They must believe it's about to move. If I look at the equity prices, they seem to have-
Stephen Roman: Well I think there's been a seed change as they say in the US thinking. So US institutions are definitely on the Uranium bandwagon right now. They realised that for a low-Carbon future, they need to be supporting nuclear development. So you're seeing a lot of buying coming out of US institutions and of course, there's no other junior out there really that is positioned the way we are with the large high-grade deposit that just received its mining permit. I mean holy smoke, as you said, we're in a category of 1.
Matthew Gordon: Keep doing what you're doing. 2021 could be a good year for you boys. I'll expect a phone call when the next exciting thing happens.
Stephen Roman: Oh yeah, we'll keep you posted.
Matthew Gordon: Cheers buddy, speak to you soon.
Stephen Roman: Thanks Matt, Take care.
To find out more, go to Global Atomic's Website.
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