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‘Demand is assured, supply is not’: Deep Yellow’s John Borshoff on why the uranium sector is in ‘a broken-down state’

Storied investor Rick Rule often talks about how he bought into Paladin Energy (ASX:PDN) at 10c per share back in the mid-2000s. … Read More
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This article was originally published by Stockhead

Storied investor Rick Rule often talks about how he bought into Paladin Energy (ASX:PDN) at 10c per share back in the mid-2000s.

It went down to 1c … then all the way to ~$10 a share, creating fortunes in the process.

John Borshoff is the geologist who founded Paladin Energy in 1993, before taking it from a junior explorer to a $4bn uranium mining company with two operations – ‘Langer Heinrich’ in Namibia, and ‘Kayelekera’ in Malawi.

This puts Borschoff and his team in rarefied air.  Paladin is one of only three small cap uranium companies outside of the US to have gone into production over the past 75 years, he says.

In October 2016, Borschoff joined then-$10m market cap uranium explorer Deep Yellow (ASX:DYL) as managing director and chief exec.

Deep Yellow, which has three uranium projects in Namibia – Reptile, Nova and Yellow Dune — is now one of a select group of ASX uranium stocks set to enter production once the impending boom hits.

In February this year, a PFS was completed on a ‘Langer-Heinrich-style’ 3mlb per annum open-pit mining operation at the ‘Tumas’ project at Reptile.

Namibian Uranium Province.

With about $50m in the bank, DYL is now neck-deep in a DFS – the most advanced of all studies prior to a decision to mine – which should be completed late next year.

The company expects it will take ~3.8 years to pay back the initial project capex of $US320m. Over an initial 20-year life, DYL is anticipating a project net present value (NPV) of $US407m, based on a uranium price of ~$US65/lb. Its breakeven uranium price would be about $US41.62.

Boshoff tell Stockhead why his ex-Paladin team at DYL is one of the few with experience to develop and operate a uranium project during the upcoming boom.

 

What sets Deep Yellow apart from other near-term uranium project developers?

“Not one of them [other ASX project developers] has been involved in the complete cycle of making a uranium company,” Borschoff says.

“That is a factor that differentiates Deep Yellow. Here, the whole team is conversant in the A-Z of the uranium nuclear business.

“Having pounds in the ground is meaningless unless you have ability and mechanism to get it out, drum it, and have the confidence of the consumer that you will deliver it.

‘There is no future energy mix model that I have seen that is believable or sustainable’

“This industry is in a complete broken-down state. How much expertise has been lost since Fukushima? Who the hell is going to build a mine when you have these boards who have done nothing for five years, have no experience, and no team?

“Over 75 years, only three small cap companies outside of the US have gone into production. One of those was Paladin.

“In 75 years, they are the ones that have achieved. That’s why I put so much reliance on the team over all else.

“The Deep Yellow group truly understand and appreciate the business on a whole range of levels, and we have the confidence of the utilities that we can deliver when so few have.

“There is hardly any uranium expertise anymore. And why should there be? The only other developer that produced a huge amount of uranium in the period Paladin was putting itself on the map was KazAtomProm, and that was a in situ-leach venture.

“In conventional, it was only Paladin, and I have that team [at Deep Yellow].

“We are driving not the repeat history but improve on it. Where are we improving? We are improving on all areas of process, applying innovation, which is going to give us even more efficiencies. That’s why we end up with the numbers.”


 

 

You say there is a lack of operational experience in the industry. Meanwhile, analysts talk about the fact new operations will have to come online to meet future demand. What  is going to happen?

“Analysts really have start questioning – where is this uranium going to come from?” Borshoff says.

“If you have ounces of gold in the ground, or tonnes of copper in a deposit, there’s no real question around how that goes from in situ to the finished product. That’s because there is so much expertise, so much experience that it isn’t the question people ask.

“But with uranium pounds in the ground is not necessarily pounds in the drum.

“Project development is tough. Of the six or seven conventional deposits that were started around the same time as Paladin, only two got into design – both of which were Paladin operations.

“All the rest failed.

“At the moment it is a very theoretical thing to say, ‘here is a company, here are their pounds, here is their annual production’. It is ‘Simple Simon’ stuff.

“The utilities [nuclear power plants] are so mesmerised by the belief that these juniors can supply 3 million pounds, 4 million pounds, as promised.”

 

So, not only is demand going to be higher than projected, but everyone is overestimating how much new supply will come online.

“The demand is assured; the supply is not,” Borshoff says.

“There are many people building reactors that know what they are doing, that have expertise. Meanwhile, there are many companies with uranium deposits who don’t know what they are doing.

“That is no one’s fault. Historical volatility in the market [has just removed experience from the sector].

“Meanwhile everyone is focused on their own little deposit. The big players like Cameco have multiple deposits — you must assure your customers that you have 30, 40 years of supply.”

 

Do think we will see some merger and acquisition activity in the industry?

“Sector consolidation will be key,” Borshoff says.

‘How much expertise has been lost since Fukushima? Who the hell is going to build a mine when you have these boards who have done nothing for five years, have no experience, and no team?’

“There are very few companies that can participate in that or have the appetite and the expertise. We are not going to get the Camecos doing this, because they have their pantry full.

“And you are not going to get the utilities doing this, because they got so burnt [last time].

“Sector consolidation is key, and while Deep Yellow has been working below the radar, we are looking at projects through our lens to see how we would operate them. We do see 6-7 opportunities.”

 

Anything else to add?

“There is no future energy mix model that I have seen that is believable or sustainable,” Borshoff says.

“This will work to the favour of nuclear, I have very little doubt about this. It is such a powerful, safe system that more and more people are coming onside that were negative before.

“I think consolidation will be part of the industry going forward.

“It is an exciting time, and equities have already reacted; perhaps overreacted.

“Incentive pricing is going to probably start clicking late next year – enough pricing to incentive new development.”

The post ‘Demand is assured, supply is not’: Deep Yellow’s John Borshoff on why the uranium sector is in ‘a broken-down state’ appeared first on Stockhead.


Author: Reuben Adams

Base Metals

Moho Resources kicks off RC drilling at Omrah nickel target

Special Report: Drilling has commenced at the Omrah prospect targeting an EM conductor for ultramafic-hosted massive and disseminated nickel sulphide ……

Drilling has commenced at the Omrah prospect targeting an EM conductor for ultramafic-hosted massive and disseminated nickel sulphide mineralisation and other ultramafics in the vicinity.

Moho Resources has kicked off reverse circulation drilling at the Silver Swan North Project to test the Omrah and Wise nickel targets.

This comes after Moho (ASX:MOH) revealed three high priority exploration targets for nickel on September 29, 50km north of Kalgoorlie in Western Australia’s eastern Goldfields region

A review of historical geological and geophysical data identified the Omrah, Wise, and Dukes targets within 10km of Poseidon Nickel’s Black Swan nickel plant.

Drilling to target ultramafic lithologies  

Moho Resources
Rig set up for drilling at Omrah. Pic: Supplied

The Omrah prospect is host to an untested electromagnetic (EM) conductor which has been confirmed by interpretation of multiple surveys.

A 3,000m RC and diamond drilling program is planned to not only test the conductor, but also target additional ultramafic lithologies in the proximity.

The rig will then move to the nearby Wise prospect to begin a 1,200m RC drilling program to investigate magnetic anomalies associated with ultramafic rocks and anomalous historic nickel intersections.

MOH managing director Shane Sadleir said the company is looking forward to testing the EM conductor at Omrah given the potential for discovery of nickel sulphide mineralisation.

Moho announced in October that it had been awarded a grant of $150,000 under the Exploration Incentive Scheme (EIS) program by the WA Government to fund up to 50% of drilling costs associated with the RC and diamond drilling program to test the Omrah nickel prospect.

 


 

 

This article was developed in collaboration with Moho Resources, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

The post Moho Resources kicks off RC drilling at Omrah nickel target appeared first on Stockhead.



Author: Special Report

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Antipa proves ‘camp-style’ gold-copper potential right next door to Newcrest in the Paterson

Special Report: There appears to still be plenty of untapped greenfield discovery potential at Antipa’s Minyari Dome Project, with the … Read More
The…

There appears to still be plenty of untapped greenfield discovery potential at Antipa’s Minyari Dome Project, with the company unearthing more shallow, high-grade gold and copper within 3.5km of the Minyari resource.

Antipa Minerals (ASX:AZY) recently completed 11,000m of greenfield drilling to test multiple high priority gold-copper targets in close proximity to the Minyari resource, in WA’s Paterson Province – just 35km from Newcrest Mining’s (ASX:NCM) massive Telfer gold-copper-silver mine.

Drilling delivered significant shallow, high-grade gold and copper mineralisation at the Minyari South prospect, which sits 250m southwest of the Minyari resource.

Four holes drilled at that prospect returned a top intercept of 9m at 10.8 grams per tonne (g/t) gold and 0.6% copper from 54m, including 3m at 19.4g/t gold and 1.4% copper from 55m.

One hole drilled at the Sundown prospect, meanwhile, delivered a broad intercept of 42m at 0.53g/t gold and 0.2% copper from 125m, including 14m at 1.3g/t gold and 0.4% copper along with 4m at 3.1g/t gold and 1% copper from 135m.

The drilling at Sundown, located 400m west of the Minyari resource, indicated similarities to the northern upper zone of the Minyari deposit, where gold grade increases with depth.

“The increasing cache of greenfield discoveries within close proximity to the Minyari and WACA deposits demonstrates the significant exploration and resource growth potential within the company’s 100% Minyari Dome Project,” Managing Director Roger Mason said.

“The company’s recently completed 11,000 metre 2021 greenfield RC drill program tested 14 targets and has delivered four discoveries (assay results available), with significant sulphide mineralisation intersected at another four targets (assay results pending).

“The Minyari Dome area is showing signs of camp-style potential with multiple mineral systems developed around one or more causative intrusions.”

A reference to ‘camp-style’ potential indicates the possible significant scale of a project, with these multiple near-surface discoveries remaining open.

Map of the southern region of the Minyari Dome Project showing Minyari and WACA resource locations, select 2021 priority greenfield drill targets/prospects and drill hole collars (2016 to 2021).

Follow up drilling at the GP01 prospect, 400m east of the WACA resource, intersected further mineral system related sulphides and alteration along 150m of strike, which remains open.

Drilling also intersected significant mineral system related sulphides and alteration at four other targets, which remain open in most directions and are all within close proximity to Minyari. Assay results are pending for GP01 and the four other targets.

With the continued exploration success at Minyari Dome, the project has shown potential to be both an open pit and underground mining operation.

The Minyari and WACA deposits currently host 723,000 ounces of gold at 2 grams per tonne (g/t) and 26,000 tonnes of copper at 0.24% in the soon to be superseded 2017 resource, with material upside potential.

Antipa’s Minyari Dome project sits within 35km of Newcrest’s huge Telfer gold-copper-silver mine and processing facility and 54km along strike from Havieron.

Newcrest, Australia’s largest gold producer, just last week committed to spending a further $10m on exploration at Antipa’s Wilki Project, also in the Paterson Province.

The mining heavyweight has already spent $6M on the project and it did that well before the initial two-year deadline.

With three majors doing the heavy exploration lifting on the Wilki, Citadel and Paterson projects, Antipa is free to focus all its resources on advancing its 100% owned Minyari Dome Project.

 


 

 

This article was developed in collaboration with Antipa Minerals, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

The post Antipa proves ‘camp-style’ gold-copper potential right next door to Newcrest in the Paterson appeared first on Stockhead.




Author: Special Report

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Base Metals

Ground Breakers: Are sliding dry bulk shipping rates about supply chains, or iron ore demand?

Never mind the impact of the Omicron coronavirus variant, which sent shudders through markets today. ASX-listed miners have so far … Read More
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Never mind the impact of the Omicron coronavirus variant, which sent shudders through markets today.

ASX-listed miners have so far proved resilient in the face of Covid-19 and this morning was no exception.

The materials index rose by 0.6%, driven by the big iron ore miners despite a more than US$5/t drop in iron ore prices on Friday.

Fortescue Metals Group (ASX:FMG) recorded a more than 2% gain.

That may have been partly due to an AFR report that Andrew Forrest’s FMG was planning to use the GLX Digital platform to trade some of its iron ore on the spot market, the same company that set up Pilbara Minerals’ (ASX:PLS) Battery Material Exchange which it has used to blast lithium concentrate sales records out of the water.

Meanwhile BHP (ASX:BHP) was also up almost 1.5% in morning trade.

While iron ore prices fell to around US$96/t to end last week on the back of weak steel production data and the proposed continuation of restrictions on polluters in Tangshan, futures have been resilient this morning.

Iron ore miners’ share price today:


 

Dry bulk freight rates are sliding. Is that a good thing?

One positive for bulk miners has been a contraction in dry bulk shipping rates that hit multi-year highs in mid-October.

That situation played a role in the closures of a number of smaller, higher cost iron ore operations in WA and Tasmania, and crimped margins for the bigger producers with shipping and transport consuming a widening portion of their cash margins.

While the issue has abated in recent weeks, whether that is a sign of supply chains beginning their long return to normal or just weakness in China’s demand for commodities is up in the air.

“After tripling since the start of the year, the BDI has now fallen by just over 50% since its early-October peak. However, the decline in the BDI has not been mirrored in other shipping cost indices. Container shipping costs have dipped recently, but they remain historically very high,” Capital Economics chief commodities strategist Caroline Bain said in a report last week.

“Instead, we think the drop in the BDI is related to the recent plunge in the price of iron ore which is, in turn, a reflection of the sharp drop in China’s steel production,” Bain said.

“Iron ore typically accounts for around 20-30% of the dry bulk trade and China consumes around 2/3 of the world’s seaborne iron ore.”

“For now, China’s iron ore imports have held up relatively well given the downturn in steel production, but stocks at ports are rising and we think it is just a matter of time before imports plunge. Regardless, Chart 4 suggests that the BDI has further to fall even at current import levels.”

“So, if the BDI continues to slump, it should not be seen as a sign that global logistics are improving or that supply chain bottlenecks are easing, it will merely reflect weakness in China’s commodity demand.”

It remains to be seen what China’s steel outlook will be in 2022, after it instituted a series of measures to restrict production through the second half of 2021. Many analysts believe the restrictions could unwind after the Beijing Winter Olympics in February.

Capital Economics chart comparing iron ore imports to Baltic Dry Index
Pic: Capital Economics

The post Ground Breakers: Are sliding dry bulk shipping rates about supply chains, or iron ore demand? appeared first on Stockhead.



Author: Josh Chiat

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