More Than Ever, Cash is King

September 16, 2016

Cameco is under $12 from a year high of over $19.  If the uranium industry’s most important producer and overall industry leader has been beaten down that far, it’s not surprising that juniors are struggling.

Even strong exploration news isn’t enough. During the summer we connected two high-grade, land-based zones, expanded the strike length of our mineralized trend (already the largest in the region) to 2.63km, hit a new area of interest with a 600m step out and grew the footprint of the Triple R.  These successes didn’t push the needle.

Next door to us, despite the impressive resource and strong, recent drilling results delivered by Leigh Curyer and his  team, NexGen Energy has fallen below $2 from it’s high of $2.86 a little earlier this year.

As the analysts will tell you, the fundamentals of supply and demand show that a turnaround will happen but until it does, uranium remains the best contrarian play in resources. It’s not unlike gold last year. In fact, at a Vancouver mining investment conference last year, when asked what stocks I would recommend, I said Barkerville (a gold stock). Then, it was in the $0.20’s. Now, it’s in the $0.70’s.

At times like these, having cash is crucial.

Exploration is a costly business and you need a lot of cash to succeed. But if you are raising money in a bad market, that means cheap prices. That’s not only dilutive, it’s also very hard for the stock to climb back up. But while other juniors will be going back to the market over the next few years - some more than once – Fission is well funded for the next three to five years.  To be clear: we are not funded with debt, we are funded with cash.

We are well-funded because our biggest single investor came in with $82M at $0.85 and they are a long-term investor. Why did CGN – which will soon be the world’s biggest utility – invest so much money in Fission? It’s very simple. They are going to need a lot of uranium and they believe that PLS hosts the best undeveloped uranium asset out there. It’s in a world-class uranium district and while there are other high-grade projects in the Basin, Fission has the only deposit where the high-grade core starts at just 50m. No one else has that. No one.

I can’t tell you when things will turn but there are indications we’ve either hit the bottom or we are close to it. Just based on reactors being built now, uranium demand is expected to grow by 20% and that doesn’t include newly authorised projects such as Hinkley Point in the UK - a $24 Billion nuclear power plant just given the go-ahead by the govt. Hinkley is Europe's biggest energy project. As quoted by Mining.com, Jean-Bernard Lévy, EDF CEO said "The decision of the British Government to approve the construction of Hinkley Point C marks the relaunch of nuclear in Europe."  

I strongly recommend checking out the mining.com article as it includes some strong numbers and some great visuals on nuclear fundamentals.

At a smaller, but equally telling level, Rick Rule, President and CEO of Sprott U.S. Holdings, just invested $1M personally in uranium stocks and when smart money starts getting involved, it’s time to start watching things very carefully.

Until the turn happens though, juniors need to ride out the storm and position for the upturn. Fission has been doing this is in a couple of ways.

We are cutting back on marketing expenses such as conferences, travel costs and other areas of IR. We are also reducing exploration expenses while using innovative ideas to get the most out of our exploration budgets, such as using RC drilling rather than diamond drilling to hunt for areas of interest. I’ll let Ross McElroy weigh in with more detail later on but you get the idea.

We made and expanded this discovery through deliberation and innovation. We are going to continue to grow and build value, save money and wait out the difficult times in the same way.

Dev Randhawa, CEO of Fission Uranium