Interview with Stephen Roman, Chairman, President & CEO of Global Atomic Corp. (TSX: 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've had a nice run up, are you happy?
Stephen Roman: You know what, I think finally, some investors are starting to realise that the value of our company, clearly in the past, people were valuing was on our Zinc asset and our Zinc cash flow. Finally, with a turn in the Uranium market, it looks like there's some investors thinking that perhaps we have a good Uranium project, as well. So, I think if you look at our project and compare it with others, and the value of a pound in the ground, and how that's viewed with other companies, we are still undervalued. We're probably trading at between $1 and $1.50, a pound in the ground right now. Whereas a lot of companies with projects that are far less advanced than ours, are in the $3 to $5 range. So, I think there's a lot of upside here yet and of course, as we move this project forward, get our Feasibility done and start building, I think the value will just continue to increase.
Matthew Gordon: I saw a Cormark report recently, which was and Cormark institutions like Morgan Stanley are starting to issue coverage and in a serious way, and I get that maybe there's some of the analysts are new to this, but the Cormark guy was using $8/lbs in the ground. That's quite a chunky number compared to where you're at.
Stephen Roman: You mean $8/pound in the ground for which companies?
Matthew Gordon: I think that report was specifically for Energy Fuels I was looking at specifically.
Stephen Roman: I'm not quite sure, I don't have… I know, the Cormark report, they just came out and started picking up coverage on Global Atomic so that's great news. They were involved in our recent financing as well. And of course, they had a whole range of Uranium companies there, they had a chart in their report, and we were way down at the bottom with our valuation compared to others. And of course, the big guys Kazatomprom, Cameco, they're way up there with probably $10 a pound in the ground. But you know the real junior developers are down at $1 or $2. I think we're past that now having reached to full permitting and completing our final engineering. So, we should move up on that scale.
Matthew Gordon: You've been in the Uranium game a long time, we've seen Denison, UEC raising money to come by pounds, sweep up, soak up pounds in the market. And I'm not quite sure either whether it's an investment basis or in the hope of trying to get utilities to move a little bit quicker than they are. But what's your take of it?
Stephen Roman: You know, what I guess the bottom-line take is that their pounds are more expensive to produce than what they can buy them for right now in the market. They also want to leverage those pounds because of course they don't know when they'll be able to get into production, they think the Uranium price is moving higher. So why not have a few pounds of inventory that they can use as an asset on a financing to build their mine. Us on the other hand, the current price is double of what our production cost is. So it makes absolutely no sense for Global Atomic to be buying pounds, we can produce them much cheaper with our own production. So, you know I just view this as something that a few companies are doing that feel that their purchases of pounds are going to help them in the future for financing.
Matthew Gordon: They're playing the arbitrage game and what they can by that today and what they might be able to sell it out in the near future.
Stephen Roman: Exactly.
Matthew Gordon: So that's an arbitrage investment basis, or it allows people permission to have conversations with utilities earlier than they would, or they don't believe they're going to get into production themselves anytime soon. And if they are, it's not going to be at a price that they're going to ever sell to the market economically at one of all of the above, is that what you're saying?
Stephen Roman: Yeah, one or all of the above, right, exactly. Like I can't imagine, you know, raising money from investors and then turning around and buying a whole bunch of pounds. I mean, we have a 250Mlbs deposit right now with a very high-grade and low operating costs so for us, that would be a silly thing to do.
Matthew Gordon: Because you think you will definitely get into production?
Stephen Roman: There's no doubt about it. We're moving ahead, we've got field work going on now. We've got heavy machinery on our site digging pits and testing ground conditions for the locating of the plant, the tailings, the town site, all that's ongoing right now. We're doing Geotech drilling to finalise our mine plan currently. And the Feasibility is on track to be completed by the end of Q3. So, you know, this thing, we should be actually there moving dirt, building the town site and the mine infrastructure by Q1 of 2022.
Matthew Gordon: You've raised some money recently, a lot of Uranium companies have raised money recently, and it seems quite easily, was it easy?
Stephen Roman: Yes, it was definitely not a big struggle to raise some money in this market, which is great. Uranium finally seems to have turned the corner and we were well oversold. Of course, the syndicate had a top of 10M with an over-allotment provision that bumped us up to 12.5M that was fully subscribed in the first day. So you know what this provided us with additional capital on the balance sheet. There was a lot of, let's say, discussion on doing a lower price financing. We said, no, we're not interested in financing at a lower price. So, we thought $2 was a great price, based on the fact that the previous one was at $0.60. So all of our investors, I believe that were in on a $0.60 round, they support us on the $2 round so that just shows the commitment to the company and the fact that they really believe in this project.
Matthew Gordon: Looking at the price that some of the Aussie companies have raised that up to 25%, 12.5 down to 25% tight discounts needed to kind of get that over the line there. So what were the terms of yours again?
Stephen Roman: It was a $2 unit with a warrant at $3. And we basically did it at up out about a 3 or 4% discount to what I was trading and I think we were trading at 2.10 or 2.15 at the time, so a very small discount.
Matthew Gordon: Okay so do you think that's like the North America is more confident in the Uranium story? Or is it just the fact there aren't that many players and perhaps some of the Aussies were in a different position to you? I mean, why do you think there's that disparity in the discounting component applied?
Stephen Roman: Well, that's a good question. I really think that people think that since we have a fully permitted project, the risk is much less on our project. And so they're willing to pay almost a no discount. So, you know, that's what I would say, I mean, we've eliminated a lot of risk on this project.
Matthew Gordon: When we’ve spoken in the past, you've talked about no real desire to go and raise capital. You thought you might be able to kind of muddle through as it was why you raised this amount of money. What are you going to do with it?
Stephen Roman: Well, first of all, I don't think I would have ever say that we'd muddle through it, because we do have a cash flowing asset. And we're one of the few junior developers that has a cash flowing asset Zinc by the way is at $1.30 a pound right now. We're running at capacity in Turkey so no, we were not muddlers. But you know what, to strengthen the cash on our balance sheet, to allow us to start a couple of other programmes at site, which includes all of this geotechnical work the pitting with the excavators, we're going to be announcing some other projects on site here in the coming months. So, we just wanted to expedite the whole programme and accelerate the development of the project.
Matthew Gordon: Cominak is closing and literally in the process of closing down over the next few weeks, it's shut and gone. There's a lot of infrastructure, there are roads, there's all sorts of infrastructure, which you could take advantage of it. Where are you in discussions with Orano?
Stephen Roman: Well, Orano of course, we have that an MOU that we signed with them to truck ore from Dasa, to their Somair plant. So we're still in discussions with that. We've just finished a pilot plant study that we announced recently. It was a programme that was started last summer and we had very good results, much better than what we expected in our PEA document we released last May. So, at the moment, Orano would like to also test some samples at their Somair plant to make sure that basically, they can process it there. We don't see any issues but it's a matter of dotting the i's and crossing the T's. Obviously, what we're doing right now is we're moving ahead to have a standalone project. So, we view a potential shipment of ore as a value opportunity. We want to build a standalone operation with our own plant. But we like to keep all of these options open to us so that that is still in the works.
Matthew Gordon: How do you move from PEA last March through to production, you've got a bunch of studies, you've got to work your way through, you've got enough capital to get through to where? deliver PFS, deliver Feasibility Study?
Stephen Roman: Okay, so on the PFS side, the Pre-Feasibility Study what we've done between 2018 and then of course at 2020 PEA. We did PEA in 2018 as well, that took into accounts of different mining options, including open pitting. We've done a number of other trade off studies between the May project and where we are today. So, this is effectively a PFS level so we're moving right into a Definitive Feasibility Study now it should be done in Q3, by the end of Q3. And then, we have to put a project financing together and move into construction phase.
Matthew Gordon: So given the price of Zinc, and given you running full capacity at in Turkey, when do you start having conversations about you leveraging that annuity stream of cash which you're going to, I seem to be stopping paid out on? And is that the way you're going to finance this project? The equity portion of this, the debt portion of this? I mean, how you’re looking at it?
Stephen Roman: Well, we're looking at various options, Matt. So, you know, obviously the cash flow from Zinc could help us leverage some sort of financing so we can reduce any kind of equity dilution. The typical bankers are going to want 25 or 30% equity, we may be able to do that with Quasi Equity. We are in discussions with a number of groups now on financing the project. So, we have a probably I would say, over the next 3 months, we would have more clarity to the market how this is going to happen, but I can't really talk about all of the initiatives currently.
Matthew Gordon: I look at Turkey at the moment, Turkey has been sort of a bit hit and miss politically with some of the decisions being made by Mr. Erdogan, most recently of which is removing their world banker. What's your take on this? Is it business as usual or is this just norm for working in Turkey? How do you view it?
Stephen Roman: Well, right now, of course, it hasn't affected our business at all. So, you know, we're running very well there. Of course, all of our local costs are in Turkish Lira. We get paid in US dollars, because all of our concentrates are shipped out of Turkey to Europe. Obviously, the Turkish Lira has taken a hit, which on the accounting, it shows as a foreign exchange loss, but effectively all of our revenues and US dollars. So, it's an accounting entry based on IFRS principles. But, we're making money at that project, we expect to have all the Capex, effectively the money we spent on the new plant paid out this year. Then dividends will start flowing to the company. Currently, we get the management fees and sales commissions every month. But in Turkey, so the way it works, there is once a year you declare a dividend, the capital or the cash that you make accumulates during that year, and then you get it in one payment, after an AGM. So effectively, cash flow that would be free cash flow for us, made in 2022 would be paid to us in April 2023. So it's always one year in arrears.
Matthew Gordon: You've recently signed a marketing agreement with Fuel Link, which tells me you think that utilities are going to want to be talking to you soon or you're going to want to be talking to them, so is that right?
Stephen Roman: That's absolutely right. We are talking to utilities right now and utilities are interested in Global Atomic right now. So, Fuel Link, who is run by a fellow named by Bahi Sivalingam. He is a very experienced Uranium marketing man. He used to be with TradeTech most recently, but his big experience comes with Rio Tinto. He worked with Rio Tinto for years and he was selling up to 10Mlbs a year out of their Rössing operation and he's very well plugged in, he knows all the utilities. We're developing a strategy currently but discussions are underway with utilities as we speak.
Matthew Gordon: Do the conversations with the utilities have any bearing on those plans, Fuel Link can introduce you to and have conversations on your behalf say these guys will get into production, I've got high degree of confidence, and they'll have to take a view on that. Or you'll have to hit certain hurdles or milestones along the way. What's the likelihood of them turn around and say, Well, we'd like you to be producing more, can they put that influence their because you started off small, and you're going to build it up, right? But with long term contracts, money gets a bit cheaper, and you can do more. So, what's the thing? How do you have that conversation with yourselves internally?
Stephen Roman: Well, I think what the market needs to understand is, and investors frankly is that right now, there's really Kazatomprom, Cameco, Orano that have the bulk of the market. I think conversations that we've had with utilities to date, indicate that they would like to see some new entrants into the market. So, we also feel that if we can sign some offtake agreements with a number of utilities, obviously, just as you mentioned, you're going to get much better financing terms and money will be more available because you'll obviously have sales right off the bat. So you know, we were not going to build the project unless we have sales, so right now it's a prime, I would say an incentive for us is to get out there and educate the buyers on the project and get some sales locked in.
Matthew Gordon: Do you feel that there's a lot of noise out there? Do you look at these Uranium companies and go, you will all definitely get into production, don't worry about it. If nuclear fuel bars there's enough supply coming down the line or can you as a CEO look around and say, I know that there are companies there who are making a lot of noise, 1) you would never get into production or 2) it'll be a long time before it comes. I mean, honestly, I spoke to the Gold guys and the Lithium guys the same way and you guys always know who is genuine and who's not. What are you seeing out there in the Uranium space?
Stephen Roman: Well, there's, of course, projects that are reasonable and projects that are great, and projects that are not so good. So right now, of course, a lot of Uranium companies have moved up because the sentiment is better in the Uranium space. But I would say realistically, maybe 25% or 30% of them are going to get into production at some point. I think that's of course dependent on the Uranium price and a lot of companies need a much higher price than we do. Because we have the grade, and we have our permits. So, grade is very important. cost to produce is very important. And of course, the permitting is very important. So right now, there's some good assets out there, but I think it'll be a long time before they get permitted. We've already passed that hurdle. And so I don't like to pass any kind of disparaging remarks on anybody else out there in the market. Because I've had my share of poor projects in the past and I know it's tough. And of course, you're waiting on better conditions and hoping that you make the grade so to speak. So, I think that as I said 25 to 30%, they're probably viable, the rest probably not.
Matthew Gordon: Do you think it's time to go list on the NYSE?
Stephen Roman: Too early for that. Maybe once we're in production, we'll do that.
Matthew Gordon: What the thing we're looking at for this year? Obviously, you're talking about the PFS is really at Feasibility level so what's the timing on that?
Stephen Roman: It's an effort, It's a DFS Matthew, not a PFS.
Matthew Gordon: I know you're skipping a stage, you're skipping a stage. I thought you said to me.
Stephen Roman: No, we didn't skip a stage, we actually did a lot of those trade-offs that were effectively a PFS. So we eliminated all of the different scenarios that didn't work for us and we've zeroed in on the final scenario, which is a high-grade underground mine at the flank zone. And of course, you mentioned before, could you scale this up? Yes, if the demand is there, we could definitely scale it up. We chose 1000t/day and producing about 4.5Mlbs a year, because we felt as a new entrant to the market it's the amount of Uranium that we would be able to sell. Now that makes this an extremely viable and profitable project. But you know, if the demand is there for 6Mlbs a year or 8Mlbs a year, we can ramp this up to that level. So, I think people need to understand that even at today's price I mean, we, as far as we're concerned we don't need a higher price, we're moving ahead.
Matthew Gordon: Okay, brilliant Stephen. Thank you so much. Stay in touch. Let us know how you get on. Okay.
Stephen Roman: Thank you, Matthew, good to speak to you, all the best.
To find out more, go to Global Atomic's Website.
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