WEBVTT
00:00:05.599 --> 00:00:08.560
Hello and welcome to Kitco Mining with me, Paul Harris.
00:00:08.640 --> 00:00:12.480
Today is Thursday, October the 15th, and we are talking about uranium.
00:00:12.640 --> 00:00:17.280
Joining me now is Travis McPherson, Chief Commercial Officer of NextGen Energy.
00:00:17.440 --> 00:00:18.640
Travis, welcome to Kiko.
00:00:20.160 --> 00:00:21.440
Yeah, thank you for having us.
00:00:21.600 --> 00:00:24.879
We're uh very excited to be here and happy to talk about NextGen.
00:00:25.440 --> 00:00:25.839
Excellent.
00:00:25.920 --> 00:00:27.280
I'm looking forward to our conversation.
00:00:27.359 --> 00:00:33.280
We're going to talk about NextGen and your Rook One project, but before we do so, I'd like to ask you a little bit about the uranium market.
00:00:33.679 --> 00:00:38.240
NextGen, of course, you've reached a major inflection point this year with your Rook One project.
00:00:38.399 --> 00:00:48.799
You received the final federal approval in March and you entered an expected four-year construction period for a project designed to produce up to 30 million pounds a year of U308.
00:00:48.960 --> 00:00:59.679
At the same time, uranium spot prices have approached 90 to 100 US dollars per hour per pound, and long-term prices are at their highest level in at least 18 years.
00:00:59.920 --> 00:01:05.519
But uranium equities have generally failed to sustain a comparable re-rating.
00:01:05.840 --> 00:01:16.159
Starting with this the big case for uranium, and as I mentioned, spot prices have approached that 90 to 100 US dollars per pound, long-term prices at multi-year highs.
00:01:16.239 --> 00:01:26.239
Um, are these prices sufficient to incentivize the new production that the market will require to fill in this forecast reduction deficit?
00:01:27.599 --> 00:01:30.000
Yeah, no, it's uh the short answer is no.
00:01:30.159 --> 00:01:30.959
No, we're not.
00:01:31.040 --> 00:01:39.280
Um we're nowhere near where we need to be to incentivize uh new production and frankly, even sustain existing production.
00:01:39.519 --> 00:01:42.319
Um, so we've got a long way to go for sure.
00:01:42.480 --> 00:01:46.159
As you point out, uranium prices have risen uh materially.
00:01:46.319 --> 00:01:51.840
They are at you know multi-decade highs, but you know, they're they're still not high enough.
00:01:52.079 --> 00:02:05.680
And you know, uh a great example of this is actually if you look over the past 10 years, you've had uranium prices 5x over a 10-year period, yet you have supply globally essentially stay flat.
00:02:05.920 --> 00:02:11.680
So there's not many commodities in the world that the commodity price 5x is and supply stays flat.
00:02:11.840 --> 00:02:13.280
There's a couple of reasons for that.
00:02:13.439 --> 00:02:34.479
One primary driver is the fact that we had, you know, a very prolonged bear market, um, which meant essentially outside of next gen, ISO Energy, which we started, and one or two others, essentially no investment uh being made across the uranium supply chain uh for the better part of really 15 years.
00:02:34.719 --> 00:02:37.680
So uh now that's coming home to roost.
00:02:37.840 --> 00:02:48.879
And, you know, unsurprisingly, these things happen where, you know, it's a forgotten industry, and then policymakers wake up one day and say, we love this now and we want it in a really material way.
00:02:49.120 --> 00:02:51.599
Okay, miners, go go get it for us.
00:02:51.759 --> 00:02:58.560
And and you know, the reality is we're we're talking about moving atoms here, and we can't uh change the laws of physics.
00:02:58.639 --> 00:03:01.840
And so it just takes time uh to to do it.
00:03:02.000 --> 00:03:21.919
And uh, and as I said, we're not even at the point where the I mean next gen is unique, and I'm sure we'll get into it in terms of the project, but at large, the industry, I mean, there's no incentive to go explore right now, there's no incentive to to uh bring new projects on because even at current prices, they're they're not making any money.
00:03:22.560 --> 00:03:29.599
Now, Travis, I mean, this is interesting because the the uranium supply deficit that's been predicted or forecast for several years.
00:03:29.759 --> 00:03:34.319
Um, to what extent are the utilities concerned about future availability?
00:03:34.400 --> 00:03:45.759
Because they tend to buy on you know long-term cycles, they look to lock in the supplies they need in the long term, and we'll perhaps get into talking about how how contracts and contract terms are evolving.
00:03:45.919 --> 00:03:57.280
But they must be um you know getting quite concerned because they could presumably see a you know a wall coming that they're gonna crash into and say, you know, where's the uranium coming from?
00:03:58.319 --> 00:03:59.599
That's exactly right, Paul.
00:03:59.759 --> 00:04:01.919
Um they are getting concerned for sure.
00:04:02.080 --> 00:04:08.879
Um look, it's always a uh I would say it takes longer than people think sometimes to psychologically change.
00:04:09.039 --> 00:04:27.759
When you're in an oversupplied market for 15 years, you know, and and things change rapidly like they are as we speak, you know, it's not like you can just shift your mind overnight and and realize like, oh, the things you've been doing for the last 15 years aren't gonna be aren't gonna work for the for the foreseeable future.
00:04:27.839 --> 00:04:30.560
So we've got to make a 180-degree turn here.
00:04:30.720 --> 00:04:32.639
So it is definitely happening.
00:04:32.800 --> 00:04:41.920
Um, and in in you know, I again in our case, uh, we are you know overwhelmed with uh demand and interest for our product.
00:04:42.079 --> 00:04:46.079
So, you know, the the the industry understands where this is going.
00:04:46.160 --> 00:04:52.639
And as you point out, it is an industry that you know is is based in in uh in the future, so to speak.
00:04:52.800 --> 00:05:00.959
So utilities aren't looking at necessarily uh uranium demand tomorrow, they're looking at it kind of in the next few years.
00:05:01.120 --> 00:05:18.720
And so, and when you look out, you know, certainly when when our project comes online in 2030, you know, that's a that's an even more precarious supply chain than we we see today, because you have mines that have been relied upon for a long time getting to the end of their useful lives and depleted.
00:05:18.800 --> 00:05:28.319
And and so on a net basis, even our project, as phenomenal and large as it is, isn't even really addressing the problem on a net basis.
00:05:29.439 --> 00:05:39.839
So, Travis, this this supply crunch has been brewing for quite a while, and and this year, last year, we've seen a couple of other additions or additional factors that may impact that.
00:05:39.920 --> 00:06:04.319
Uh, of course, uh what's happening with Russia, Ukraine, the Russian sphere of things, and also on the demand side, AI data centers, um, a number of the companies that are building these are increasingly looking to developing their own power sources to power these, which of course includes includes nuclear, small modular reactors, things of that nature, that will also require uranium.
00:06:04.480 --> 00:06:07.600
How do you how are these things changing the pictures?
00:06:08.800 --> 00:06:15.040
Yeah, I mean, look, it's it's uh you know, specific to AI, I think you know, we've been saying it for a long time.
00:06:15.199 --> 00:06:36.079
It is it is very real, it's a serious demand driver of electricity and and certainly nuclear demand, as you point out, because all of these hyperscalers are partnering and developing and investing in nuclear as their preferred option for sustainable long-term base load power requirements that are very, very efficient and clean.
00:06:36.240 --> 00:06:38.240
Um, so that is a reality.
00:06:38.639 --> 00:06:46.800
But the important thing here is even if you axed all of that overnight, you still have this massive supply deficit.
00:06:46.959 --> 00:06:57.199
And so that is a really important fact in our business, particularly now, because you know, there has been so much focus on AI and everything.
00:06:57.279 --> 00:07:07.519
And and, you know, I think in some respects it's been very good because it's really emphasized, hey, how sustainable is our power systems, how sustainable is our electricity grid, all of that.
00:07:07.759 --> 00:07:11.439
And and so it really has shone a light on nuclear at large.
00:07:11.680 --> 00:07:20.879
But again, for for an investor or the thesis around somebody like NextGen to hold true, you actually can say, assume there's no AI demand at all.
00:07:21.040 --> 00:07:29.759
And there's still a really compelling case because again, it's been based on a 15-year bear market with no investment across the whole sector.
00:07:29.920 --> 00:07:33.600
Um, and so uh that's really what it's based on.
00:07:34.560 --> 00:07:47.360
So um, NextGen, you're looking at bringing uh production online in 2030, as you mentioned, um, bringing production into a market that faces an increasing deficit and rising prices.
00:07:47.519 --> 00:07:52.000
That's obviously the perfect storm for a developer such as NextGen.
00:07:52.319 --> 00:07:57.759
Um, the company's contracted more than sort of 10 million pounds of uh annual supply, I believe.
00:07:58.079 --> 00:08:02.240
How much production do you want to contract before that first output?
00:08:02.319 --> 00:08:06.800
Because I imagine as you get closer to that 2030, the indication is prices are going to be higher.
00:08:06.879 --> 00:08:12.720
So you're balancing you know a bird in the hand today, perhaps two, three, or four in the hand tomorrow.
00:08:13.680 --> 00:08:14.879
Yeah, no, exactly.
00:08:14.959 --> 00:08:21.600
And and you know, our when we step back, our strategy is really simple, which is maximize the value of every pound we produce and sell.
00:08:22.000 --> 00:08:35.360
And uh we're in a really unique position in that we have this very conventional, uh, underground, very small underground uh and very high grade uranium mine uh in in Saskatchewan.
00:08:35.440 --> 00:08:52.559
And so that enables us a lot of flexibility around how much we produce and sell, and and so enables us to really leverage uh and and take advantage of that as it relates to our our overall objective of maximizing the value of every pound that we produce.
00:08:52.960 --> 00:08:55.440
Um so what does that practically mean?
00:08:55.519 --> 00:08:57.679
It means we will continue to remain patient.
00:08:57.840 --> 00:09:12.720
So, notwithstanding the fact we have significant demand for our product um and and desire to sign those contracts today, and we will continue to sign contracts as we go, but we're not in a rush to sign a lot of contracts.
00:09:12.960 --> 00:09:25.279
Um, we're not against it, but we're not, that's not our focus, is not to, you know, uh essentially go out to the market and say, have whatever you want, take it all, um, and and be done with it.
00:09:25.360 --> 00:09:38.639
Like we we view our responsibility is to respect the fact that we have this very special asset in the ground and we're and our responsibility is to bring it out uh responsibly over the next uh four years, and then start to produce it.
00:09:38.720 --> 00:09:48.000
And when once we start to produce it, make sure that we're maximizing the value of it, not just be the biggest producer or just sell as much as we can.
00:09:48.159 --> 00:09:54.639
Um, again, to be very clear, the world wants all of our production and more, and they want it sooner.
00:09:54.879 --> 00:10:01.840
Um, but you know, our jobs are to stay disciplined and make sure that um, you know, we don't give away optionality for nothing.
00:10:02.000 --> 00:10:15.600
And so we will continue to sign contracts over the next few years, but it we don't have a set metric in our minds of, you know, it's gonna be uh 80% contracted by 2030 or or whatever.
00:10:15.840 --> 00:10:21.679
We're basically gonna do sign contracts as they make sense to us as we continue to develop.
00:10:21.840 --> 00:10:29.440
Um, and uh and then once we start to produce, uh we'll make sure that we optimize uh what we have.
00:10:30.480 --> 00:10:31.600
Thank you, Travis.
00:10:31.759 --> 00:10:41.279
How given all of these things, all these, you know, it's a very fluid situation in some ways, how is that seeing the contracting process evolve?
00:10:41.440 --> 00:10:45.360
And if if I may, I want to give a use a parallel for copper concentrates.
00:10:45.519 --> 00:10:51.120
In the past, copper concentrates were negotiated on multi-year contracts, maybe three-year contracts.
00:10:51.200 --> 00:10:58.879
Now they're very much one-year contracts at best, maybe even six-month contracts, um, and they're becoming less opaque.
00:10:59.120 --> 00:11:02.559
Is something similar happening in the uranium space?
00:11:03.519 --> 00:11:04.559
Yeah, 100%.
00:11:04.960 --> 00:11:11.039
And and it's really, you know, uh been driven by us as a new entrant with this project coming in.
00:11:11.120 --> 00:11:19.519
We we, you know, when we step back, there's no way you can argue that that um more transparency and more liquidity in a market is a bad thing.
00:11:19.759 --> 00:11:20.720
It's a good thing.
00:11:20.879 --> 00:11:34.159
And and so that's always been our kind of focus since we started looking at marketing and selling our product, is is does it make sense to you know at have do it the exact same way it's been done in the past?
00:11:34.720 --> 00:11:57.440
And and the short answer is absolutely it does not, uh, because you know, the past was what really that those those contracting strategies that were employed, while they probably made sense at a point in time, or given certain projects technical characteristics, in our unique situation at this current time and what we see into the future, it certainly doesn't make sense to do it that way.
00:11:57.679 --> 00:12:09.279
And um and so uh as you point out, every commodity has effectively evolved into a more liquid, transparent, clear market.
00:12:09.679 --> 00:12:12.399
That like go back to the standard oil days.
00:12:12.559 --> 00:12:20.000
Uh you brought up an example with copper, you know, natural gas in Europe, iron ore, uh about 25 years ago.
00:12:20.159 --> 00:12:31.200
They've all kind of started in these oligopoly markets where it's over the counter and it's negotiated bilaterally, and then they evolve into something that's more um or less opaque as you put it.
00:12:31.360 --> 00:12:34.080
And uh, and that's our focus for sure, is to do that.
00:12:34.240 --> 00:12:36.960
Now we can't flip a switch and do that overnight.
00:12:37.120 --> 00:12:42.320
And so, you know, phase one is to shorten those the duration of those contracts.
00:12:42.480 --> 00:12:53.919
So, whereas in the past, you know, producers would at our current stage sell all of their production and more way out into the future, like 10, 15 years out into the future.
00:12:54.159 --> 00:13:00.799
So, you know, if it's 15 years of deliveries, you're talking about 20 years into the future you're you're looking out into.
00:13:01.279 --> 00:13:04.000
Um we're not gonna do that.
00:13:04.320 --> 00:13:24.480
Um, we're gonna shorten the duration of those contracts, tie them to the to the prevailing market price of the time that they're delivered under, and uh, and a few other elements that that kind of just I would say just modernize uh the contracts uh to reflect the realities of of this commodity evolving.
00:13:25.200 --> 00:13:26.320
Thank you, Travis.
00:13:26.480 --> 00:13:36.159
Um past couple of years we've seen sort of new market entrants in terms of ETFs, exchange traded funds that uh you know buy and store basically physical uranium.
00:13:36.240 --> 00:13:38.559
What what commercial impact has that had?
00:13:38.720 --> 00:13:44.080
Um, them being able to sort of come in and basically soak up the uh soak up product.
00:13:45.279 --> 00:13:53.440
Well, I think all they really did was add tra add liquidity to a market, and it really just uh added some price discovery to the market.
00:13:53.600 --> 00:14:09.840
Um and and we've seen what's happened, and and it's a really positive thing that it did happen because it it you know it has helped um utilities and the industry see that hey, there actually is a problem here, and there's a problem brewing, and uh, and prices need to rise.
00:14:10.000 --> 00:14:15.600
And once they do rise, then utilities are willing to uh to buy buy uranium again.
00:14:15.840 --> 00:14:18.320
So yeah, it's it's been a positive thing.
00:14:18.480 --> 00:14:33.120
It's it's certainly not a material um uh component in the market, meaning, like fundamentally, it's you know, I think they're they're a useful kind of tool for investors to diversify how they invest in uranium.
00:14:33.200 --> 00:14:40.639
But from a fundamental perspective, like it's not like real demand, meaning it's not a material amount of actual demand.
00:14:40.879 --> 00:14:49.200
Like the industry consumes about 200 million pounds of uranium every year in nuclear reactors around the world, which is just growing.
00:14:49.440 --> 00:14:56.080
Um and uh and and so what they buy is not, you know, against that backdrop is not material.
00:14:56.240 --> 00:15:04.000
But um, as I said, it's been important for um adding that liquidity and transparency to the price.
00:15:05.200 --> 00:15:06.240
Thank you, Travis.
00:15:06.320 --> 00:15:14.639
Uh, this brings me to sort of perhaps one of the sort of key questions of our conversation, given that the the outlook for uranium and nuclear is very, very positive.
00:15:14.799 --> 00:15:18.240
You've got the you know supply constraints, you've got rising prices.
00:15:18.399 --> 00:15:27.279
So the question that a lot of investors have is this being the case, why have the the share prices of uranium equities, why have they been pretty stagnant?
00:15:27.360 --> 00:15:30.879
Why aren't they expanding and rising because of this?
00:15:31.759 --> 00:15:33.360
Yeah, no, and it's a fair question.
00:15:33.440 --> 00:15:44.559
I think uh definitely part of it is you know, the um structurally and and and also companies have been really promoting um the whole AI component of it.
00:15:44.639 --> 00:15:50.960
And so what we've seen is a high correlation with the AI basket um uh in terms of equities.
00:15:51.200 --> 00:16:06.639
So, you know, uh something happens with OpenAI or or Core Weave or something, and then next thing you know, uh uranium equities are getting hit, which doesn't make any sense fundamentally, but it's just because there's been this kind of grouping um together.
00:16:06.799 --> 00:16:15.360
Now, what I would say related to that is that you know, where we sit today, um you know, you're not paying for any of that uh as an investor.
00:16:15.519 --> 00:16:28.000
Like uh it's not like these things, uh these uranium equities, certainly next gen, is accounting for you know multi-digit annual growth rates in electricity around the world related to AI.
00:16:28.080 --> 00:16:28.960
It certainly isn't.
00:16:29.120 --> 00:16:38.559
It's um, you know, because as you point out, like you've seen uranium prices go up uh over the last year about 10% and equities down 15 to 20 percent on average.
00:16:38.720 --> 00:16:42.639
I mean, that's a you know 30 percent divergence.
00:16:42.799 --> 00:16:48.399
Um, and uh and the fundamentals, as we've talked about, have not uh deteriorated at all.
00:16:48.559 --> 00:16:51.600
In fact, quite the opposite, they've just continued to improve.
00:16:51.759 --> 00:16:55.279
Um, so from our perspective, what an opportunity.
00:16:56.399 --> 00:16:57.120
Absolutely.
00:16:57.279 --> 00:17:01.679
Now, when uh Rook One comes on stream, that's gonna be what 30 million pounds a year.
00:17:01.840 --> 00:17:06.799
Uh in a 200 million pound market, that's what a 15% increase in the market.
00:17:06.960 --> 00:17:16.400
Is is there potentially the the fact that the the market is factoring in that and is perhaps seeing you know weaker prices because of that when Rook comes online?
00:17:18.079 --> 00:17:19.039
I don't think so.
00:17:19.200 --> 00:17:22.000
Um, you know, again, based on a couple of factors.
00:17:22.160 --> 00:17:29.759
One is just the the mathematical reality of where we are, where you know, today we need two arrows today to fill the deficit.
00:17:30.000 --> 00:17:35.039
By 2035, it's estimated about a hundred million pound annual deficit.
00:17:35.119 --> 00:17:46.079
So more than three uh aero type projects getting um, you know, frankly, they'd have to be found and built in the next nine years for that to to be met.
00:17:46.240 --> 00:17:48.079
Obviously, that will never happen.
00:17:48.160 --> 00:17:51.920
Um, and that already does account for arrow coming into production.
00:17:52.160 --> 00:17:53.839
So, no, I don't think so.
00:17:54.079 --> 00:18:01.279
That that reality combined with the fact, again, that you know, in our discussions with utilities, there's no there's no indication of that.
00:18:01.519 --> 00:18:15.599
I mean, again, if if that were true, I mean we wouldn't have be having many conversations, I would guess, because if I was a utility and I felt like, well, they're just gonna bring this on and it's gonna crush the price, why would you go out to buy uranium?
00:18:15.759 --> 00:18:17.920
And uh, and yet they are.
00:18:19.119 --> 00:18:20.000
Fair comment.
00:18:20.079 --> 00:18:22.559
Let's talk a little bit more about Rook One and Arrow.
00:18:22.640 --> 00:18:25.359
Um, as I mentioned earlier, you've entered construction.
00:18:25.440 --> 00:18:28.720
The the CapEx there's what, 2.2 billion Canadian.
00:18:28.880 --> 00:18:33.200
Um, what what phase of uh construction are you at at the moment?
00:18:33.440 --> 00:18:35.119
Where where are you in the build?
00:18:36.160 --> 00:18:56.000
Yeah, so we got our approval on March the 5th, and uh, and so we're in uh the beginnings of our construction, major construction um programs, all related to the critical path activities and and and subcritical path activities, primarily gated by the shaft syncing um or shafts.
00:18:56.160 --> 00:18:58.799
Uh uh, there's two shafts that will be syncing.
00:18:58.960 --> 00:19:13.279
So a lot of the work uh from then till till now and continuing is related to um getting underground next year in in shaft syncing, and that is all going um to schedule, to budget, and and importantly to scope.
00:19:13.440 --> 00:19:19.920
So uh the team is completely um um uh executing, executing very, very well.
00:19:20.319 --> 00:19:24.720
And you know, I think part of that is is related to two factors.
00:19:24.960 --> 00:19:29.119
One, you know, a seven-year permitting process is a very long permitting process.
00:19:29.359 --> 00:19:42.240
So we've been able to leverage that time and basically run tests and test everything more than you normally would for a project, just given that amount of time that we had.
00:19:42.480 --> 00:19:48.559
Test, you know, people, processes, the project itself physically, um, et cetera.
00:19:48.720 --> 00:19:59.839
So essentially we could we once we got approval, I mean, we couldn't run any more tests to to whether it's geotechnical, metallurgical, hydrogeological systems, et cetera, like that, they'd been tested.
00:20:00.000 --> 00:20:03.440
So um uh that's that's been very important.
00:20:03.519 --> 00:20:16.400
And then the other element is that we got approved through the uh province of Saskatchewan for three exploration-related scopes tied to an exploration airstrip airstrip, uh camp expansion, and road upgrades.
00:20:16.559 --> 00:20:25.680
Um, and the the those three scopes were roughly$100 million um to do, and those were done uh to schedule uh scope and budget.
00:20:25.920 --> 00:20:50.240
And so that was kind of like almost a mini test run in exploration activities, but uh infrastructure and construction that uh that meant we were uh able to kind of test test those things again while doing that, while waiting for our approval, such that you know, once we got our approval, we were really at a full sprint and and where we are today, which is again executing extremely well on the project.
00:20:50.640 --> 00:20:51.119
Thank you.
00:20:51.279 --> 00:20:54.400
Uh you you've got a a four-year build ahead of you, more or less.
00:20:54.559 --> 00:21:00.480
Uh, what for for the company are the the greatest schedule and capital risk elements of that build?
00:21:01.680 --> 00:21:11.920
Uh yeah, I mean, look, we're building a mine, so you know, obviously for those that aren't you know are coming to mining uh from somewhere else, you know, mining is a difficult business.
00:21:12.000 --> 00:21:13.680
There's no way around that.
00:21:13.920 --> 00:21:23.039
However, this project is uh is very, very unique and and advantageous in that again, it's compact, very, very small.
00:21:23.200 --> 00:21:27.119
Um, it's uh hosted within this granite basement rock.
00:21:27.279 --> 00:21:39.039
It's shaft access, it's vertical in nature, the deposit itself, and it's basically these huge panels of high-grade uranium uh vertically situated and stacked next to each other.
00:21:39.200 --> 00:21:59.519
So it's really if I mean, quite frankly, if you know we flash back to 2013 when we were all talking about, hey, let's go look for a uranium project to hopefully find something to build it, we couldn't have put all these characteristics in it because they just never existed and wasn't really thought possible to have this many advantages in a project.
00:21:59.599 --> 00:22:40.960
So So um yeah it's a it's uh it's a very very um unique project and it's and it's something that because of all of that we we like people ask us sometimes like what keeps you up at night I can tell you absolutely nothing keeps me up at night because everything that we see we actually see we don't see any red flags or material risks and the and the risks that we do see we actually see being able to be turned into opportunities frankly um why well a because we've always had an element of conservatism because again the very unique thing here with NextGen is that we found this project ourselves back in 2014.
00:22:41.759 --> 00:22:49.599
We did so on the basis of again, hopefully finding something to bring it into construction operations and ultimately close it down.
00:22:49.759 --> 00:23:02.720
So every single drill hole, every single study, every single team member hired or fired was all done on the basis of optimizing for constructing, operating, and and closing a mine down.
00:23:02.880 --> 00:23:09.440
Um so we've had that very long history and and continuity uh through the entire thing.
00:23:09.759 --> 00:23:18.799
And uh and so that's really meant that you know we've always viewed it as okay, be conservative because we don't need to make this look any better.
00:23:18.960 --> 00:23:21.440
Like it's already the best project by miles.
00:23:21.599 --> 00:23:25.119
So we don't need to like gussy it up to make it look better.
00:23:25.279 --> 00:23:31.200
Um, so in fact, we can do the opposite and we can add a lot of conservatism to it, and it's still phenomenal.
00:23:31.279 --> 00:23:33.839
So that behooves us to do that, and we've always done that.
00:23:34.000 --> 00:23:40.240
Um and then uh and then yeah, it's it's it's uh it's again something that we've been planning for a very long time.
00:23:40.400 --> 00:23:48.000
And so everybody at the project at the company is just extremely excited because this is the element now where it's all within our control.
00:23:48.400 --> 00:23:54.960
You know, when you're going through a permitting process, there's a lot of elements that are outside of your control and you can influence, but you can't control.
00:23:55.039 --> 00:23:57.279
And now this is all within our control.
00:23:57.359 --> 00:24:06.960
And again, we have this rock solid foundation over many, many years, and and uh and and and again, we we've now started and we're executing extremely well.
00:24:07.039 --> 00:24:09.039
So we have every reason to be confident.
00:24:09.680 --> 00:24:10.160
Thank you.
00:24:10.319 --> 00:24:14.079
As mentioned, you'll be producing 30 million pounds per year from 2030.
00:24:14.240 --> 00:24:19.279
Is there a possibility of being able to bring production online uh sooner than that?
00:24:20.640 --> 00:24:25.920
Uh yeah, there's there's opportunities that we're looking at and evaluating um for sure.
00:24:26.079 --> 00:24:34.640
Um, but I think four years we're comfortable with, and and it's a it's a very realistic uh timeframe, you know.
00:24:34.799 --> 00:24:44.799
Um so yes, there's there's opportunities, and that's our job is to always look at those opportunities, evaluate them, and where appropriate, um attack them and execute on them.
00:24:45.039 --> 00:24:50.319
Um but as we sit today, I think four years is is what we're comfortable with.
00:24:50.960 --> 00:24:51.440
Thank you.
00:24:51.519 --> 00:24:55.680
And I mentioned that the capital cost, uh$2.2 billion Canadian.
00:24:55.839 --> 00:24:56.880
A couple of questions there.
00:24:57.039 --> 00:25:00.559
How confident are you you'll be able to deliver that on budget?
00:25:00.640 --> 00:25:03.440
And uh how have you financed the development?
00:25:04.559 --> 00:25:10.000
Yeah, so we haven't seen any uh any material changes to that CapEx number.
00:25:10.160 --> 00:25:38.319
You know, we've signed some recent contracts, major contracts like Shaft Syncing that, you know, were uh included in that$2.2 billion number, where you know from two years ago to today, certain elements of those contracts' uh inputs have changed, but they kind of wash out because again, like if we look at the shaft sync contract as a specific example, it's made up really of like labor unit rates and hours to do the work.
00:25:38.480 --> 00:26:03.440
And because again, going back to what I said earlier around how we've always carried a lot of conservatism, um we carried conservatism both in labor unit rates and hours, such that yes, labor unit rates have gone up over the last two years, but um, but hours have also adjusted as we define uh um the shaft sinking delivery um more clearly over the last two years.
00:26:03.519 --> 00:26:07.680
So that meant that uh dollar for dollar the same um over a two-year period.
00:26:07.759 --> 00:26:12.400
And that's really true across what we've seen so far and what we see into the future.
00:26:12.640 --> 00:26:20.559
So um can we guarantee that we'll deliver the project exactly to$2.2 billion in exactly four years?
00:26:20.720 --> 00:26:22.240
Um no, we can't.
00:26:22.319 --> 00:26:34.319
Uh, but what we can absolutely guarantee is that it will be done uh faster and uh optimally from an uh expenditure perspective and to scope than anyone else could.
00:26:34.480 --> 00:26:41.200
Um, because again, we were the ones that have found this and brought this forward to this point better than anyone seen before.
00:26:41.359 --> 00:26:45.119
There's absolutely no reason why that will change going forward.
00:26:46.079 --> 00:26:46.559
Thank you.
00:26:46.720 --> 00:26:52.720
Now, with the a four-year construction, you're going into that uh sort of shallow part of the Laisson curve.
00:26:52.880 --> 00:26:57.200
Um, four years is a long time to be in that part of the Le Sang curve.
00:26:57.440 --> 00:27:05.680
What kind of things can the company do to remain front of mind for investors during that period where perhaps there's not a lot of news flow?
00:27:06.640 --> 00:27:21.519
Yeah, I think look, uh when you step back on the Laisson curve, I think that there's an input, there's an assumption in that that there's alternatives, like i.e., investors can like want to invest in gold um and a company starts going into development.
00:27:21.680 --> 00:27:25.680
Well, they can take their money out of that and put it into something else.
00:27:25.920 --> 00:27:28.240
In uranium, that just doesn't exist.
00:27:28.400 --> 00:27:32.079
There aren't other a bunch of next gens to invest in.
00:27:32.240 --> 00:27:40.480
Uh, and and it's a very concentrated market with very few um you know investable equity equities there.
00:27:40.640 --> 00:27:42.480
So I think that's a big component of it.
00:27:42.559 --> 00:27:53.599
It's just that, you know, whereas again, with other commodities where there's lots of substitutes and alternatives, I can see why the Laisson curve would would would would really set in on some companies.
00:27:53.759 --> 00:27:58.079
Um, but this is a one-of-one and and a very unique situation.
00:27:58.559 --> 00:28:11.039
The other element, obviously, is even if you get into kind of a subtle LaSon curve, let's say, with uranium prices doing what they will do, most likely, you can have the whole curve just go up and up and up.
00:28:11.200 --> 00:28:15.519
So even if the shape stays the same, you can have it shift up.
00:28:15.599 --> 00:28:18.880
Uh, and and you know, there's lots of examples in the past of that.
00:28:19.039 --> 00:28:33.680
Um, and then what what we can do to control that uh or influence that is certainly by um A being very transparent with the major milestones and what they mean and providing context through um the build.
00:28:33.839 --> 00:28:49.359
And we we kind of started that in September with our investor webinar where we went through all of those milestones over the next four years and kind of emphasized which ones are are important and uh and when we expect to do them and who who's doing them uh at next gen.
00:28:49.920 --> 00:28:52.079
So that's a big part of it.
00:28:52.240 --> 00:29:04.079
Um the other part of it is is uh which we haven't really talked about yet, but is our our Patterson Corridor East um discovery, which is three and a half kilometers away uh from Aero or the Rook One project.
00:29:04.400 --> 00:29:10.880
And it is uh, you know, it's it's earlier days, but it's uh it's it shows all the same characteristics as Aero.
00:29:11.279 --> 00:29:21.599
And just, you know, again, obviously we have to do a lot more work um in terms of you know um scoping studies and 43101s and and permitting amendments and things like that.
00:29:21.680 --> 00:29:32.319
But just when you step back and you think, okay, you have some you have the world's best project here at Aero, which, you know, once in production pays all the capital back in 12 months or less.
00:29:32.480 --> 00:29:41.920
Um, and then three and a half kilometers away in that same competent grounds conditions, you have another Aero type project there.
00:29:42.240 --> 00:29:48.960
Well, I mean, you can imagine the types of synergies and benefits you could potentially see there and could potentially be realized.
00:29:49.119 --> 00:30:06.640
So um I think as as we continue to build our project, as we continue to um be very transparent about those milestones and show that progress, I think that will automatically bring forward that that that re-rating that will happen, that material re-rating that will happen when we're in production.
00:30:06.799 --> 00:30:08.160
I think it'll bring it forward.
00:30:08.319 --> 00:30:17.680
And then concurrently with that, we will you know continue to develop this uh next phase of uh of this Rook One project's life.
00:30:18.240 --> 00:30:19.119
Thank you, Travis.
00:30:19.200 --> 00:30:22.559
Now you you mentioned some of the milestones that you talked about in September.
00:30:22.640 --> 00:30:31.440
So maybe uh we can leave with our audience what uh they can expect to see the next two or three milestones coming out of the development going forward.
00:30:32.240 --> 00:30:37.680
Yeah, so the big one will be uh starting the temporary freezing uh for the shafts.
00:30:37.759 --> 00:30:47.519
So we have to, like you do in lots of parts of Canada, but you have to temporarily freeze the top hundred meters of basically just overburden, like gravel and till and stuff.
00:30:47.680 --> 00:30:56.000
You have to temporarily freeze that and then you uh hydrostatically line it and then you key into that granite basement rock and you release the freezing forever.
00:30:56.240 --> 00:30:58.799
So step one, start that freeze.
00:30:58.880 --> 00:31:05.359
Um, that's a big milestone because the sooner we can do that, obviously the sooner we can get underground.
00:31:05.599 --> 00:31:11.440
Uh, the second phase naturally to that will be the freezing ending and the pre-sinking starting.
00:31:11.759 --> 00:31:15.119
That's another major milestone that will happen next year as well.
00:31:15.279 --> 00:31:22.960
And then getting into uh and then getting through that overburden and into the basement rock um is uh is another major milestone.
00:31:23.119 --> 00:31:33.200
And then finally, getting into the groove of sinking and what are those rates because we feel like we've had we've carried conservative sinking rate assumptions there.
00:31:33.359 --> 00:31:41.440
Um so you know we'll see uh once we get into it how conservative they are and and the opportunities that could present themselves as a result of that.
00:31:42.000 --> 00:31:44.000
Well, I wish you the best of luck with the build.
00:31:44.160 --> 00:31:47.279
Jerry's McPherson, thank you very much for joining me today.
00:31:47.680 --> 00:31:48.799
Yeah, terrific, Paul.
00:31:48.880 --> 00:31:53.359
Thank you, and thanks to Kitco for all everything you guys uh do and have done for many years.
00:31:53.680 --> 00:31:54.640
Well, thank you very much.
00:31:54.720 --> 00:31:55.519
You're more than welcome.
00:31:55.680 --> 00:31:59.920
And of course, to our viewers, if you like what you see, don't forget to hit that subscribe button.
00:32:00.000 --> 00:32:03.279
I'm Paul Harris, and this is Kitco Mining.
00:00:05.599 --> 00:00:08.560
Hello and welcome to Kitco Mining with me, Paul Harris.
00:00:08.640 --> 00:00:12.480
Today is Thursday, October the 15th, and we are talking about uranium.
00:00:12.640 --> 00:00:17.280
Joining me now is Travis McPherson, Chief Commercial Officer of NextGen Energy.
00:00:17.440 --> 00:00:18.640
Travis, welcome to Kiko.
00:00:20.160 --> 00:00:21.440
Yeah, thank you for having us.
00:00:21.600 --> 00:00:24.879
We're uh very excited to be here and happy to talk about NextGen.
00:00:25.440 --> 00:00:25.839
Excellent.
00:00:25.920 --> 00:00:27.280
I'm looking forward to our conversation.
00:00:27.359 --> 00:00:33.280
We're going to talk about NextGen and your Rook One project, but before we do so, I'd like to ask you a little bit about the uranium market.
00:00:33.679 --> 00:00:38.240
NextGen, of course, you've reached a major inflection point this year with your Rook One project.
00:00:38.399 --> 00:00:48.799
You received the final federal approval in March and you entered an expected four-year construction period for a project designed to produce up to 30 million pounds a year of U308.
00:00:48.960 --> 00:00:59.679
At the same time, uranium spot prices have approached 90 to 100 US dollars per hour per pound, and long-term prices are at their highest level in at least 18 years.
00:00:59.920 --> 00:01:05.519
But uranium equities have generally failed to sustain a comparable re-rating.
00:01:05.840 --> 00:01:16.159
Starting with this the big case for uranium, and as I mentioned, spot prices have approached that 90 to 100 US dollars per pound, long-term prices at multi-year highs.
00:01:16.239 --> 00:01:26.239
Um, are these prices sufficient to incentivize the new production that the market will require to fill in this forecast reduction deficit?
00:01:27.599 --> 00:01:30.000
Yeah, no, it's uh the short answer is no.
00:01:30.159 --> 00:01:30.959
No, we're not.
00:01:31.040 --> 00:01:39.280
Um we're nowhere near where we need to be to incentivize uh new production and frankly, even sustain existing production.
00:01:39.519 --> 00:01:42.319
Um, so we've got a long way to go for sure.
00:01:42.480 --> 00:01:46.159
As you point out, uranium prices have risen uh materially.
00:01:46.319 --> 00:01:51.840
They are at you know multi-decade highs, but you know, they're they're still not high enough.
00:01:52.079 --> 00:02:05.680
And you know, uh a great example of this is actually if you look over the past 10 years, you've had uranium prices 5x over a 10-year period, yet you have supply globally essentially stay flat.
00:02:05.920 --> 00:02:11.680
So there's not many commodities in the world that the commodity price 5x is and supply stays flat.
00:02:11.840 --> 00:02:13.280
There's a couple of reasons for that.
00:02:13.439 --> 00:02:34.479
One primary driver is the fact that we had, you know, a very prolonged bear market, um, which meant essentially outside of next gen, ISO Energy, which we started, and one or two others, essentially no investment uh being made across the uranium supply chain uh for the better part of really 15 years.
00:02:34.719 --> 00:02:37.680
So uh now that's coming home to roost.
00:02:37.840 --> 00:02:48.879
And, you know, unsurprisingly, these things happen where, you know, it's a forgotten industry, and then policymakers wake up one day and say, we love this now and we want it in a really material way.
00:02:49.120 --> 00:02:51.599
Okay, miners, go go get it for us.
00:02:51.759 --> 00:02:58.560
And and you know, the reality is we're we're talking about moving atoms here, and we can't uh change the laws of physics.
00:02:58.639 --> 00:03:01.840
And so it just takes time uh to to do it.
00:03:02.000 --> 00:03:21.919
And uh, and as I said, we're not even at the point where the I mean next gen is unique, and I'm sure we'll get into it in terms of the project, but at large, the industry, I mean, there's no incentive to go explore right now, there's no incentive to to uh bring new projects on because even at current prices, they're they're not making any money.
00:03:22.560 --> 00:03:29.599
Now, Travis, I mean, this is interesting because the the uranium supply deficit that's been predicted or forecast for several years.
00:03:29.759 --> 00:03:34.319
Um, to what extent are the utilities concerned about future availability?
00:03:34.400 --> 00:03:45.759
Because they tend to buy on you know long-term cycles, they look to lock in the supplies they need in the long term, and we'll perhaps get into talking about how how contracts and contract terms are evolving.
00:03:45.919 --> 00:03:57.280
But they must be um you know getting quite concerned because they could presumably see a you know a wall coming that they're gonna crash into and say, you know, where's the uranium coming from?
00:03:58.319 --> 00:03:59.599
That's exactly right, Paul.
00:03:59.759 --> 00:04:01.919
Um they are getting concerned for sure.
00:04:02.080 --> 00:04:08.879
Um look, it's always a uh I would say it takes longer than people think sometimes to psychologically change.
00:04:09.039 --> 00:04:27.759
When you're in an oversupplied market for 15 years, you know, and and things change rapidly like they are as we speak, you know, it's not like you can just shift your mind overnight and and realize like, oh, the things you've been doing for the last 15 years aren't gonna be aren't gonna work for the for the foreseeable future.
00:04:27.839 --> 00:04:30.560
So we've got to make a 180-degree turn here.
00:04:30.720 --> 00:04:32.639
So it is definitely happening.
00:04:32.800 --> 00:04:41.920
Um, and in in you know, I again in our case, uh, we are you know overwhelmed with uh demand and interest for our product.
00:04:42.079 --> 00:04:46.079
So, you know, the the the industry understands where this is going.
00:04:46.160 --> 00:04:52.639
And as you point out, it is an industry that you know is is based in in uh in the future, so to speak.
00:04:52.800 --> 00:05:00.959
So utilities aren't looking at necessarily uh uranium demand tomorrow, they're looking at it kind of in the next few years.
00:05:01.120 --> 00:05:18.720
And so, and when you look out, you know, certainly when when our project comes online in 2030, you know, that's a that's an even more precarious supply chain than we we see today, because you have mines that have been relied upon for a long time getting to the end of their useful lives and depleted.
00:05:18.800 --> 00:05:28.319
And and so on a net basis, even our project, as phenomenal and large as it is, isn't even really addressing the problem on a net basis.
00:05:29.439 --> 00:05:39.839
So, Travis, this this supply crunch has been brewing for quite a while, and and this year, last year, we've seen a couple of other additions or additional factors that may impact that.
00:05:39.920 --> 00:06:04.319
Uh, of course, uh what's happening with Russia, Ukraine, the Russian sphere of things, and also on the demand side, AI data centers, um, a number of the companies that are building these are increasingly looking to developing their own power sources to power these, which of course includes includes nuclear, small modular reactors, things of that nature, that will also require uranium.
00:06:04.480 --> 00:06:07.600
How do you how are these things changing the pictures?
00:06:08.800 --> 00:06:15.040
Yeah, I mean, look, it's it's uh you know, specific to AI, I think you know, we've been saying it for a long time.
00:06:15.199 --> 00:06:36.079
It is it is very real, it's a serious demand driver of electricity and and certainly nuclear demand, as you point out, because all of these hyperscalers are partnering and developing and investing in nuclear as their preferred option for sustainable long-term base load power requirements that are very, very efficient and clean.
00:06:36.240 --> 00:06:38.240
Um, so that is a reality.
00:06:38.639 --> 00:06:46.800
But the important thing here is even if you axed all of that overnight, you still have this massive supply deficit.
00:06:46.959 --> 00:06:57.199
And so that is a really important fact in our business, particularly now, because you know, there has been so much focus on AI and everything.
00:06:57.279 --> 00:07:07.519
And and, you know, I think in some respects it's been very good because it's really emphasized, hey, how sustainable is our power systems, how sustainable is our electricity grid, all of that.
00:07:07.759 --> 00:07:11.439
And and so it really has shone a light on nuclear at large.
00:07:11.680 --> 00:07:20.879
But again, for for an investor or the thesis around somebody like NextGen to hold true, you actually can say, assume there's no AI demand at all.
00:07:21.040 --> 00:07:29.759
And there's still a really compelling case because again, it's been based on a 15-year bear market with no investment across the whole sector.
00:07:29.920 --> 00:07:33.600
Um, and so uh that's really what it's based on.
00:07:34.560 --> 00:07:47.360
So um, NextGen, you're looking at bringing uh production online in 2030, as you mentioned, um, bringing production into a market that faces an increasing deficit and rising prices.
00:07:47.519 --> 00:07:52.000
That's obviously the perfect storm for a developer such as NextGen.
00:07:52.319 --> 00:07:57.759
Um, the company's contracted more than sort of 10 million pounds of uh annual supply, I believe.
00:07:58.079 --> 00:08:02.240
How much production do you want to contract before that first output?
00:08:02.319 --> 00:08:06.800
Because I imagine as you get closer to that 2030, the indication is prices are going to be higher.
00:08:06.879 --> 00:08:12.720
So you're balancing you know a bird in the hand today, perhaps two, three, or four in the hand tomorrow.
00:08:13.680 --> 00:08:14.879
Yeah, no, exactly.
00:08:14.959 --> 00:08:21.600
And and you know, our when we step back, our strategy is really simple, which is maximize the value of every pound we produce and sell.
00:08:22.000 --> 00:08:35.360
And uh we're in a really unique position in that we have this very conventional, uh, underground, very small underground uh and very high grade uranium mine uh in in Saskatchewan.
00:08:35.440 --> 00:08:52.559
And so that enables us a lot of flexibility around how much we produce and sell, and and so enables us to really leverage uh and and take advantage of that as it relates to our our overall objective of maximizing the value of every pound that we produce.
00:08:52.960 --> 00:08:55.440
Um so what does that practically mean?
00:08:55.519 --> 00:08:57.679
It means we will continue to remain patient.
00:08:57.840 --> 00:09:12.720
So, notwithstanding the fact we have significant demand for our product um and and desire to sign those contracts today, and we will continue to sign contracts as we go, but we're not in a rush to sign a lot of contracts.
00:09:12.960 --> 00:09:25.279
Um, we're not against it, but we're not, that's not our focus, is not to, you know, uh essentially go out to the market and say, have whatever you want, take it all, um, and and be done with it.
00:09:25.360 --> 00:09:38.639
Like we we view our responsibility is to respect the fact that we have this very special asset in the ground and we're and our responsibility is to bring it out uh responsibly over the next uh four years, and then start to produce it.
00:09:38.720 --> 00:09:48.000
And when once we start to produce it, make sure that we're maximizing the value of it, not just be the biggest producer or just sell as much as we can.
00:09:48.159 --> 00:09:54.639
Um, again, to be very clear, the world wants all of our production and more, and they want it sooner.
00:09:54.879 --> 00:10:01.840
Um, but you know, our jobs are to stay disciplined and make sure that um, you know, we don't give away optionality for nothing.
00:10:02.000 --> 00:10:15.600
And so we will continue to sign contracts over the next few years, but it we don't have a set metric in our minds of, you know, it's gonna be uh 80% contracted by 2030 or or whatever.
00:10:15.840 --> 00:10:21.679
We're basically gonna do sign contracts as they make sense to us as we continue to develop.
00:10:21.840 --> 00:10:29.440
Um, and uh and then once we start to produce, uh we'll make sure that we optimize uh what we have.
00:10:30.480 --> 00:10:31.600
Thank you, Travis.
00:10:31.759 --> 00:10:41.279
How given all of these things, all these, you know, it's a very fluid situation in some ways, how is that seeing the contracting process evolve?
00:10:41.440 --> 00:10:45.360
And if if I may, I want to give a use a parallel for copper concentrates.
00:10:45.519 --> 00:10:51.120
In the past, copper concentrates were negotiated on multi-year contracts, maybe three-year contracts.
00:10:51.200 --> 00:10:58.879
Now they're very much one-year contracts at best, maybe even six-month contracts, um, and they're becoming less opaque.
00:10:59.120 --> 00:11:02.559
Is something similar happening in the uranium space?
00:11:03.519 --> 00:11:04.559
Yeah, 100%.
00:11:04.960 --> 00:11:11.039
And and it's really, you know, uh been driven by us as a new entrant with this project coming in.
00:11:11.120 --> 00:11:19.519
We we, you know, when we step back, there's no way you can argue that that um more transparency and more liquidity in a market is a bad thing.
00:11:19.759 --> 00:11:20.720
It's a good thing.
00:11:20.879 --> 00:11:34.159
And and so that's always been our kind of focus since we started looking at marketing and selling our product, is is does it make sense to you know at have do it the exact same way it's been done in the past?
00:11:34.720 --> 00:11:57.440
And and the short answer is absolutely it does not, uh, because you know, the past was what really that those those contracting strategies that were employed, while they probably made sense at a point in time, or given certain projects technical characteristics, in our unique situation at this current time and what we see into the future, it certainly doesn't make sense to do it that way.
00:11:57.679 --> 00:12:09.279
And um and so uh as you point out, every commodity has effectively evolved into a more liquid, transparent, clear market.
00:12:09.679 --> 00:12:12.399
That like go back to the standard oil days.
00:12:12.559 --> 00:12:20.000
Uh you brought up an example with copper, you know, natural gas in Europe, iron ore, uh about 25 years ago.
00:12:20.159 --> 00:12:31.200
They've all kind of started in these oligopoly markets where it's over the counter and it's negotiated bilaterally, and then they evolve into something that's more um or less opaque as you put it.
00:12:31.360 --> 00:12:34.080
And uh, and that's our focus for sure, is to do that.
00:12:34.240 --> 00:12:36.960
Now we can't flip a switch and do that overnight.
00:12:37.120 --> 00:12:42.320
And so, you know, phase one is to shorten those the duration of those contracts.
00:12:42.480 --> 00:12:53.919
So, whereas in the past, you know, producers would at our current stage sell all of their production and more way out into the future, like 10, 15 years out into the future.
00:12:54.159 --> 00:13:00.799
So, you know, if it's 15 years of deliveries, you're talking about 20 years into the future you're you're looking out into.
00:13:01.279 --> 00:13:04.000
Um we're not gonna do that.
00:13:04.320 --> 00:13:24.480
Um, we're gonna shorten the duration of those contracts, tie them to the to the prevailing market price of the time that they're delivered under, and uh, and a few other elements that that kind of just I would say just modernize uh the contracts uh to reflect the realities of of this commodity evolving.
00:13:25.200 --> 00:13:26.320
Thank you, Travis.
00:13:26.480 --> 00:13:36.159
Um past couple of years we've seen sort of new market entrants in terms of ETFs, exchange traded funds that uh you know buy and store basically physical uranium.
00:13:36.240 --> 00:13:38.559
What what commercial impact has that had?
00:13:38.720 --> 00:13:44.080
Um, them being able to sort of come in and basically soak up the uh soak up product.
00:13:45.279 --> 00:13:53.440
Well, I think all they really did was add tra add liquidity to a market, and it really just uh added some price discovery to the market.
00:13:53.600 --> 00:14:09.840
Um and and we've seen what's happened, and and it's a really positive thing that it did happen because it it you know it has helped um utilities and the industry see that hey, there actually is a problem here, and there's a problem brewing, and uh, and prices need to rise.
00:14:10.000 --> 00:14:15.600
And once they do rise, then utilities are willing to uh to buy buy uranium again.
00:14:15.840 --> 00:14:18.320
So yeah, it's it's been a positive thing.
00:14:18.480 --> 00:14:33.120
It's it's certainly not a material um uh component in the market, meaning, like fundamentally, it's you know, I think they're they're a useful kind of tool for investors to diversify how they invest in uranium.
00:14:33.200 --> 00:14:40.639
But from a fundamental perspective, like it's not like real demand, meaning it's not a material amount of actual demand.
00:14:40.879 --> 00:14:49.200
Like the industry consumes about 200 million pounds of uranium every year in nuclear reactors around the world, which is just growing.
00:14:49.440 --> 00:14:56.080
Um and uh and and so what they buy is not, you know, against that backdrop is not material.
00:14:56.240 --> 00:15:04.000
But um, as I said, it's been important for um adding that liquidity and transparency to the price.
00:15:05.200 --> 00:15:06.240
Thank you, Travis.
00:15:06.320 --> 00:15:14.639
Uh, this brings me to sort of perhaps one of the sort of key questions of our conversation, given that the the outlook for uranium and nuclear is very, very positive.
00:15:14.799 --> 00:15:18.240
You've got the you know supply constraints, you've got rising prices.
00:15:18.399 --> 00:15:27.279
So the question that a lot of investors have is this being the case, why have the the share prices of uranium equities, why have they been pretty stagnant?
00:15:27.360 --> 00:15:30.879
Why aren't they expanding and rising because of this?
00:15:31.759 --> 00:15:33.360
Yeah, no, and it's a fair question.
00:15:33.440 --> 00:15:44.559
I think uh definitely part of it is you know, the um structurally and and and also companies have been really promoting um the whole AI component of it.
00:15:44.639 --> 00:15:50.960
And so what we've seen is a high correlation with the AI basket um uh in terms of equities.
00:15:51.200 --> 00:16:06.639
So, you know, uh something happens with OpenAI or or Core Weave or something, and then next thing you know, uh uranium equities are getting hit, which doesn't make any sense fundamentally, but it's just because there's been this kind of grouping um together.
00:16:06.799 --> 00:16:15.360
Now, what I would say related to that is that you know, where we sit today, um you know, you're not paying for any of that uh as an investor.
00:16:15.519 --> 00:16:28.000
Like uh it's not like these things, uh these uranium equities, certainly next gen, is accounting for you know multi-digit annual growth rates in electricity around the world related to AI.
00:16:28.080 --> 00:16:28.960
It certainly isn't.
00:16:29.120 --> 00:16:38.559
It's um, you know, because as you point out, like you've seen uranium prices go up uh over the last year about 10% and equities down 15 to 20 percent on average.
00:16:38.720 --> 00:16:42.639
I mean, that's a you know 30 percent divergence.
00:16:42.799 --> 00:16:48.399
Um, and uh and the fundamentals, as we've talked about, have not uh deteriorated at all.
00:16:48.559 --> 00:16:51.600
In fact, quite the opposite, they've just continued to improve.
00:16:51.759 --> 00:16:55.279
Um, so from our perspective, what an opportunity.
00:16:56.399 --> 00:16:57.120
Absolutely.
00:16:57.279 --> 00:17:01.679
Now, when uh Rook One comes on stream, that's gonna be what 30 million pounds a year.
00:17:01.840 --> 00:17:06.799
Uh in a 200 million pound market, that's what a 15% increase in the market.
00:17:06.960 --> 00:17:16.400
Is is there potentially the the fact that the the market is factoring in that and is perhaps seeing you know weaker prices because of that when Rook comes online?
00:17:18.079 --> 00:17:19.039
I don't think so.
00:17:19.200 --> 00:17:22.000
Um, you know, again, based on a couple of factors.
00:17:22.160 --> 00:17:29.759
One is just the the mathematical reality of where we are, where you know, today we need two arrows today to fill the deficit.
00:17:30.000 --> 00:17:35.039
By 2035, it's estimated about a hundred million pound annual deficit.
00:17:35.119 --> 00:17:46.079
So more than three uh aero type projects getting um, you know, frankly, they'd have to be found and built in the next nine years for that to to be met.
00:17:46.240 --> 00:17:48.079
Obviously, that will never happen.
00:17:48.160 --> 00:17:51.920
Um, and that already does account for arrow coming into production.
00:17:52.160 --> 00:17:53.839
So, no, I don't think so.
00:17:54.079 --> 00:18:01.279
That that reality combined with the fact, again, that you know, in our discussions with utilities, there's no there's no indication of that.
00:18:01.519 --> 00:18:15.599
I mean, again, if if that were true, I mean we wouldn't have be having many conversations, I would guess, because if I was a utility and I felt like, well, they're just gonna bring this on and it's gonna crush the price, why would you go out to buy uranium?
00:18:15.759 --> 00:18:17.920
And uh, and yet they are.
00:18:19.119 --> 00:18:20.000
Fair comment.
00:18:20.079 --> 00:18:22.559
Let's talk a little bit more about Rook One and Arrow.
00:18:22.640 --> 00:18:25.359
Um, as I mentioned earlier, you've entered construction.
00:18:25.440 --> 00:18:28.720
The the CapEx there's what, 2.2 billion Canadian.
00:18:28.880 --> 00:18:33.200
Um, what what phase of uh construction are you at at the moment?
00:18:33.440 --> 00:18:35.119
Where where are you in the build?
00:18:36.160 --> 00:18:56.000
Yeah, so we got our approval on March the 5th, and uh, and so we're in uh the beginnings of our construction, major construction um programs, all related to the critical path activities and and and subcritical path activities, primarily gated by the shaft syncing um or shafts.
00:18:56.160 --> 00:18:58.799
Uh uh, there's two shafts that will be syncing.
00:18:58.960 --> 00:19:13.279
So a lot of the work uh from then till till now and continuing is related to um getting underground next year in in shaft syncing, and that is all going um to schedule, to budget, and and importantly to scope.
00:19:13.440 --> 00:19:19.920
So uh the team is completely um um uh executing, executing very, very well.
00:19:20.319 --> 00:19:24.720
And you know, I think part of that is is related to two factors.
00:19:24.960 --> 00:19:29.119
One, you know, a seven-year permitting process is a very long permitting process.
00:19:29.359 --> 00:19:42.240
So we've been able to leverage that time and basically run tests and test everything more than you normally would for a project, just given that amount of time that we had.
00:19:42.480 --> 00:19:48.559
Test, you know, people, processes, the project itself physically, um, et cetera.
00:19:48.720 --> 00:19:59.839
So essentially we could we once we got approval, I mean, we couldn't run any more tests to to whether it's geotechnical, metallurgical, hydrogeological systems, et cetera, like that, they'd been tested.
00:20:00.000 --> 00:20:03.440
So um uh that's that's been very important.
00:20:03.519 --> 00:20:16.400
And then the other element is that we got approved through the uh province of Saskatchewan for three exploration-related scopes tied to an exploration airstrip airstrip, uh camp expansion, and road upgrades.
00:20:16.559 --> 00:20:25.680
Um, and the the those three scopes were roughly$100 million um to do, and those were done uh to schedule uh scope and budget.
00:20:25.920 --> 00:20:50.240
And so that was kind of like almost a mini test run in exploration activities, but uh infrastructure and construction that uh that meant we were uh able to kind of test test those things again while doing that, while waiting for our approval, such that you know, once we got our approval, we were really at a full sprint and and where we are today, which is again executing extremely well on the project.
00:20:50.640 --> 00:20:51.119
Thank you.
00:20:51.279 --> 00:20:54.400
Uh you you've got a a four-year build ahead of you, more or less.
00:20:54.559 --> 00:21:00.480
Uh, what for for the company are the the greatest schedule and capital risk elements of that build?
00:21:01.680 --> 00:21:11.920
Uh yeah, I mean, look, we're building a mine, so you know, obviously for those that aren't you know are coming to mining uh from somewhere else, you know, mining is a difficult business.
00:21:12.000 --> 00:21:13.680
There's no way around that.
00:21:13.920 --> 00:21:23.039
However, this project is uh is very, very unique and and advantageous in that again, it's compact, very, very small.
00:21:23.200 --> 00:21:27.119
Um, it's uh hosted within this granite basement rock.
00:21:27.279 --> 00:21:39.039
It's shaft access, it's vertical in nature, the deposit itself, and it's basically these huge panels of high-grade uranium uh vertically situated and stacked next to each other.
00:21:39.200 --> 00:21:59.519
So it's really if I mean, quite frankly, if you know we flash back to 2013 when we were all talking about, hey, let's go look for a uranium project to hopefully find something to build it, we couldn't have put all these characteristics in it because they just never existed and wasn't really thought possible to have this many advantages in a project.
00:21:59.599 --> 00:22:40.960
So So um yeah it's a it's uh it's a very very um unique project and it's and it's something that because of all of that we we like people ask us sometimes like what keeps you up at night I can tell you absolutely nothing keeps me up at night because everything that we see we actually see we don't see any red flags or material risks and the and the risks that we do see we actually see being able to be turned into opportunities frankly um why well a because we've always had an element of conservatism because again the very unique thing here with NextGen is that we found this project ourselves back in 2014.
00:22:41.759 --> 00:22:49.599
We did so on the basis of again, hopefully finding something to bring it into construction operations and ultimately close it down.
00:22:49.759 --> 00:23:02.720
So every single drill hole, every single study, every single team member hired or fired was all done on the basis of optimizing for constructing, operating, and and closing a mine down.
00:23:02.880 --> 00:23:09.440
Um so we've had that very long history and and continuity uh through the entire thing.
00:23:09.759 --> 00:23:18.799
And uh and so that's really meant that you know we've always viewed it as okay, be conservative because we don't need to make this look any better.
00:23:18.960 --> 00:23:21.440
Like it's already the best project by miles.
00:23:21.599 --> 00:23:25.119
So we don't need to like gussy it up to make it look better.
00:23:25.279 --> 00:23:31.200
Um, so in fact, we can do the opposite and we can add a lot of conservatism to it, and it's still phenomenal.
00:23:31.279 --> 00:23:33.839
So that behooves us to do that, and we've always done that.
00:23:34.000 --> 00:23:40.240
Um and then uh and then yeah, it's it's it's uh it's again something that we've been planning for a very long time.
00:23:40.400 --> 00:23:48.000
And so everybody at the project at the company is just extremely excited because this is the element now where it's all within our control.
00:23:48.400 --> 00:23:54.960
You know, when you're going through a permitting process, there's a lot of elements that are outside of your control and you can influence, but you can't control.
00:23:55.039 --> 00:23:57.279
And now this is all within our control.
00:23:57.359 --> 00:24:06.960
And again, we have this rock solid foundation over many, many years, and and uh and and and again, we we've now started and we're executing extremely well.
00:24:07.039 --> 00:24:09.039
So we have every reason to be confident.
00:24:09.680 --> 00:24:10.160
Thank you.
00:24:10.319 --> 00:24:14.079
As mentioned, you'll be producing 30 million pounds per year from 2030.
00:24:14.240 --> 00:24:19.279
Is there a possibility of being able to bring production online uh sooner than that?
00:24:20.640 --> 00:24:25.920
Uh yeah, there's there's opportunities that we're looking at and evaluating um for sure.
00:24:26.079 --> 00:24:34.640
Um, but I think four years we're comfortable with, and and it's a it's a very realistic uh timeframe, you know.
00:24:34.799 --> 00:24:44.799
Um so yes, there's there's opportunities, and that's our job is to always look at those opportunities, evaluate them, and where appropriate, um attack them and execute on them.
00:24:45.039 --> 00:24:50.319
Um but as we sit today, I think four years is is what we're comfortable with.
00:24:50.960 --> 00:24:51.440
Thank you.
00:24:51.519 --> 00:24:55.680
And I mentioned that the capital cost, uh$2.2 billion Canadian.
00:24:55.839 --> 00:24:56.880
A couple of questions there.
00:24:57.039 --> 00:25:00.559
How confident are you you'll be able to deliver that on budget?
00:25:00.640 --> 00:25:03.440
And uh how have you financed the development?
00:25:04.559 --> 00:25:10.000
Yeah, so we haven't seen any uh any material changes to that CapEx number.
00:25:10.160 --> 00:25:38.319
You know, we've signed some recent contracts, major contracts like Shaft Syncing that, you know, were uh included in that$2.2 billion number, where you know from two years ago to today, certain elements of those contracts' uh inputs have changed, but they kind of wash out because again, like if we look at the shaft sync contract as a specific example, it's made up really of like labor unit rates and hours to do the work.
00:25:38.480 --> 00:26:03.440
And because again, going back to what I said earlier around how we've always carried a lot of conservatism, um we carried conservatism both in labor unit rates and hours, such that yes, labor unit rates have gone up over the last two years, but um, but hours have also adjusted as we define uh um the shaft sinking delivery um more clearly over the last two years.
00:26:03.519 --> 00:26:07.680
So that meant that uh dollar for dollar the same um over a two-year period.
00:26:07.759 --> 00:26:12.400
And that's really true across what we've seen so far and what we see into the future.
00:26:12.640 --> 00:26:20.559
So um can we guarantee that we'll deliver the project exactly to$2.2 billion in exactly four years?
00:26:20.720 --> 00:26:22.240
Um no, we can't.
00:26:22.319 --> 00:26:34.319
Uh, but what we can absolutely guarantee is that it will be done uh faster and uh optimally from an uh expenditure perspective and to scope than anyone else could.
00:26:34.480 --> 00:26:41.200
Um, because again, we were the ones that have found this and brought this forward to this point better than anyone seen before.
00:26:41.359 --> 00:26:45.119
There's absolutely no reason why that will change going forward.
00:26:46.079 --> 00:26:46.559
Thank you.
00:26:46.720 --> 00:26:52.720
Now, with the a four-year construction, you're going into that uh sort of shallow part of the Laisson curve.
00:26:52.880 --> 00:26:57.200
Um, four years is a long time to be in that part of the Le Sang curve.
00:26:57.440 --> 00:27:05.680
What kind of things can the company do to remain front of mind for investors during that period where perhaps there's not a lot of news flow?
00:27:06.640 --> 00:27:21.519
Yeah, I think look, uh when you step back on the Laisson curve, I think that there's an input, there's an assumption in that that there's alternatives, like i.e., investors can like want to invest in gold um and a company starts going into development.
00:27:21.680 --> 00:27:25.680
Well, they can take their money out of that and put it into something else.
00:27:25.920 --> 00:27:28.240
In uranium, that just doesn't exist.
00:27:28.400 --> 00:27:32.079
There aren't other a bunch of next gens to invest in.
00:27:32.240 --> 00:27:40.480
Uh, and and it's a very concentrated market with very few um you know investable equity equities there.
00:27:40.640 --> 00:27:42.480
So I think that's a big component of it.
00:27:42.559 --> 00:27:53.599
It's just that, you know, whereas again, with other commodities where there's lots of substitutes and alternatives, I can see why the Laisson curve would would would would really set in on some companies.
00:27:53.759 --> 00:27:58.079
Um, but this is a one-of-one and and a very unique situation.
00:27:58.559 --> 00:28:11.039
The other element, obviously, is even if you get into kind of a subtle LaSon curve, let's say, with uranium prices doing what they will do, most likely, you can have the whole curve just go up and up and up.
00:28:11.200 --> 00:28:15.519
So even if the shape stays the same, you can have it shift up.
00:28:15.599 --> 00:28:18.880
Uh, and and you know, there's lots of examples in the past of that.
00:28:19.039 --> 00:28:33.680
Um, and then what what we can do to control that uh or influence that is certainly by um A being very transparent with the major milestones and what they mean and providing context through um the build.
00:28:33.839 --> 00:28:49.359
And we we kind of started that in September with our investor webinar where we went through all of those milestones over the next four years and kind of emphasized which ones are are important and uh and when we expect to do them and who who's doing them uh at next gen.
00:28:49.920 --> 00:28:52.079
So that's a big part of it.
00:28:52.240 --> 00:29:04.079
Um the other part of it is is uh which we haven't really talked about yet, but is our our Patterson Corridor East um discovery, which is three and a half kilometers away uh from Aero or the Rook One project.
00:29:04.400 --> 00:29:10.880
And it is uh, you know, it's it's earlier days, but it's uh it's it shows all the same characteristics as Aero.
00:29:11.279 --> 00:29:21.599
And just, you know, again, obviously we have to do a lot more work um in terms of you know um scoping studies and 43101s and and permitting amendments and things like that.
00:29:21.680 --> 00:29:32.319
But just when you step back and you think, okay, you have some you have the world's best project here at Aero, which, you know, once in production pays all the capital back in 12 months or less.
00:29:32.480 --> 00:29:41.920
Um, and then three and a half kilometers away in that same competent grounds conditions, you have another Aero type project there.
00:29:42.240 --> 00:29:48.960
Well, I mean, you can imagine the types of synergies and benefits you could potentially see there and could potentially be realized.
00:29:49.119 --> 00:30:06.640
So um I think as as we continue to build our project, as we continue to um be very transparent about those milestones and show that progress, I think that will automatically bring forward that that that re-rating that will happen, that material re-rating that will happen when we're in production.
00:30:06.799 --> 00:30:08.160
I think it'll bring it forward.
00:30:08.319 --> 00:30:17.680
And then concurrently with that, we will you know continue to develop this uh next phase of uh of this Rook One project's life.
00:30:18.240 --> 00:30:19.119
Thank you, Travis.
00:30:19.200 --> 00:30:22.559
Now you you mentioned some of the milestones that you talked about in September.
00:30:22.640 --> 00:30:31.440
So maybe uh we can leave with our audience what uh they can expect to see the next two or three milestones coming out of the development going forward.
00:30:32.240 --> 00:30:37.680
Yeah, so the big one will be uh starting the temporary freezing uh for the shafts.
00:30:37.759 --> 00:30:47.519
So we have to, like you do in lots of parts of Canada, but you have to temporarily freeze the top hundred meters of basically just overburden, like gravel and till and stuff.
00:30:47.680 --> 00:30:56.000
You have to temporarily freeze that and then you uh hydrostatically line it and then you key into that granite basement rock and you release the freezing forever.
00:30:56.240 --> 00:30:58.799
So step one, start that freeze.
00:30:58.880 --> 00:31:05.359
Um, that's a big milestone because the sooner we can do that, obviously the sooner we can get underground.
00:31:05.599 --> 00:31:11.440
Uh, the second phase naturally to that will be the freezing ending and the pre-sinking starting.
00:31:11.759 --> 00:31:15.119
That's another major milestone that will happen next year as well.
00:31:15.279 --> 00:31:22.960
And then getting into uh and then getting through that overburden and into the basement rock um is uh is another major milestone.
00:31:23.119 --> 00:31:33.200
And then finally, getting into the groove of sinking and what are those rates because we feel like we've had we've carried conservative sinking rate assumptions there.
00:31:33.359 --> 00:31:41.440
Um so you know we'll see uh once we get into it how conservative they are and and the opportunities that could present themselves as a result of that.
00:31:42.000 --> 00:31:44.000
Well, I wish you the best of luck with the build.
00:31:44.160 --> 00:31:47.279
Jerry's McPherson, thank you very much for joining me today.
00:31:47.680 --> 00:31:48.799
Yeah, terrific, Paul.
00:31:48.880 --> 00:31:53.359
Thank you, and thanks to Kitco for all everything you guys uh do and have done for many years.
00:31:53.680 --> 00:31:54.640
Well, thank you very much.
00:31:54.720 --> 00:31:55.519
You're more than welcome.
00:31:55.680 --> 00:31:59.920
And of course, to our viewers, if you like what you see, don't forget to hit that subscribe button.
00:32:00.000 --> 00:32:03.279
I'm Paul Harris, and this is Kitco Mining.
