Philip Williams: Japan's Tsunami Crisis Creates Uranium
Source: Brian Sylvester of
The uranium market is still shell-shocked from the tsunami in
Japan and the resulting anti-nuclear backlash. But Philip
Williams, vice president of business development for investment
firm Pinetree Capital in Toronto, is urging investors to dust
themselves off and start shopping. Strong fundamentals are still
in play and upcoming catalysts could boost suffering uranium
equities this year. In this exclusive interview with
The Energy Report,
Williams discusses which companies he expects will ride the
: ALLIGATOR ENERGY LTD. - AREVA - MACUSANI YELLOWCAKE -
MAWSON RESOURCES LTD.
MEGA URANIUM LTD.
- PALADIN ENERGY LTD. - RIO VERDE MINERALS DEVELOPMENT
CORP. - ROCKGATE CAPITAL CORP. - TITAN URANIUM INC. - U3O8
The Energy Report:
Phil, when we talked in February, you believed the spot price for
uranium would reach above $100 a pound (lb.). Obviously, much has
happened since then, including various antinuclear energy
policies from European governments, notably Germany. Given these
events, why should anyone even put a dime into uranium?
Despite the events at the Fukushima plant, the first reason to
invest in the sector is that demand fundamentals are still in
place. Notwithstanding what we're seeing in Germany and Japan-and
maybe to a lesser extent Switzerland-we're still seeing major
countries driving their nuclear build-out on pace with continued
growth in the space. All of the main driver countries, such as
China, India, Korea, the Middle East and Russia, have all
reaffirmed their need for nuclear power in their energy
Since the accident in Fukushima, 10 reactors have stopped
operating out of 443. Reactors under construction have increased
by three and there have been three new starts. The planned
reactor base has gone up by 13 from 142, and proposed reactors
increased by 19 from 322.
Also, uranium equities are very cheap. For example,
Paladin Energy Ltd. (PDN:TSX; PDN:ASX)
is a stock that was up to $10 in the heyday of uranium, but
today it's just over $1.60. It just did an equity financing at
$1.20. The stock hasn't seen these levels since 2005.
As for the uranium spot price itself, although we've seen it
rise and fall dramatically, it is still well above where it was
in 2005. We're getting closer to the original conditions that
drove price increases, specifically the end of the HEU program,
which currently fills the gap between primary supply and
What is your outlook for uranium through 2012?
I think I'll take a lesson from my last prediction and
forego a price forecast, but I certainly think the price is going
to increase. It's sitting in the low $50s/lb., but it's possible
we could be up to $60/lb. by the end of the year. Next year, I
expect volatility in the price.
The price should go sideways, trending up between now and the
end of next year. I believe there is still potential for
pre-Fukushima levels. Chinese buying was the driver to push
prices close to $70/lb. There is a possibility that they will
come back to the market at some point. As they develop more
reactors and get closer to construction, they're going to build
inventory, and they'll buy a decent slug of material. That could
be a catalyst to take the price even higher, with the possibility
for a spike.
What are three things that you believe investors should
know about investing in uranium companies?
The number-one thing that people should know is that this
is a very hard sector for juniors. Time and time again, companies
that are developing projects get delayed, politics get in the way
or they have technical challenges. But this also speaks to the
There are no easy projects in the uranium space. On one hand,
this means supply shortages are a definite risk, in which case
the price will move ahead. Investors need to pay special
attention to jurisdictions. There are pro-uranium jurisdictions
and there are anti-uranium jurisdictions. Projects can and will
move ahead on that basis. Finally, consider where companies are
in their development timeline, keeping in mind that timelines are
long in this sector.
The most fundamental thing that investors should understand
about investing in uranium is that these are strategic resources
in the sense that the product is critical to run the fleets of
reactors around the world that keep the lights on.
Have you added to your uranium positions in the lows since
the tsunami, or are you sitting tight with cash in hand and
waiting for further market weakness?
We've selectively added to our positions, adding quite a
few last summer through the beginning of the year as the price of
uranium rebounded to the $70/lb. level. Our positions are
sizable, north of 10% in a number of uranium companies. We'll
continue to be opportunistic, looking for cheap opportunities. As
people come back into the junior resource market, we'll be there
and we'll continue to add on the way up.
What are some names you have added?
We added to and would continue to look to add
U3O8 Corp. (UWE:TSX.V)
, a South American uranium exploration story with three main
projects in Guyana, Colombia and Argentina. The company is going
to end the year with 50 million pounds (Mlb.) of resources across
these three projects. It's doing a lot of good work and its team
understands metallurgy and process well.
A core holding for us is
Mega Uranium Ltd. (MGA:TSX)
, a development story in Western Australia.
We own more than 10% of
Mawson Resources Ltd. (MAW:TSX; MWSNF:OTCPK; MRY:Fkft)
. We haven't added to that position just yet, but there's
definitely a reason to consider it. Mawson is a gold company, but
hidden behind its Rompas gold project in Finland, it has a very
nice portfolio of uranium projects, including another project in
Finland where it put out drill results that rival the Athabasca
Basin. It just hasn't gotten any attention for those other
projects because of the exciting gold grades it's been delivering
Is there a chance that Mawson might spin its uranium assets
out into another company?
There's always a chance. I think that that would make a lot
of sense. Rompas is a gold project. Notwithstanding that, it has
extremely high-grade uranium at the surface; the potential value
of the gold there makes it a gold company. The other projects,
especially the ones in Finland, are a portfolio it acquired
. While those projects are very interesting, they won't become
the focus in Mawson's portfolio because they're competing against
Rompas. So yes, a spinout would make a lot of sense.
Given that there's uranium in the Rompas deposit, is the
gold potentially radioactive?
BHP Billiton Ltd.'s (BHP:NYSE; BHPLF:OTCPK) Olympic Dam,
the mother of all uranium projects, is a gold and copper project.
I don't see any issues with that. Anecdotally, it shouldn't be an
issue for Mawson.
What is the other company you wanted to mention?
Titan Uranium Inc. (TUE:TSX)
, a U.S. developer with a 30 Mlb. resource in Wyoming, which is a
previously producing mine. Titan doubled the resource earlier
this year and submitted a number of its permit applications. An
updated prefeasibility study is coming. We expect the economics
of this project relative to where it trades in the market today
will prove quite compelling.
There certainly is a lot of room for upside. That stock is
trading at about $0.15 right now, down a little bit from its high
I think it's an excellent entry point. It has done a lot of
work de-risking the recovery side. The big issue for U.S.
companies is how they can navigate the permitting process, and
Titan is very much on the ball with permitting. A few companies
in the U.S. have gone through the process over the last few
years, and Titan has been able to take advantage of all the
lessons those companies learned. It is submitting its documents,
which look fulsome. It has a very good chance of completing
permitting in the next two years and getting into production just
as the supply-and-demand imbalance comes to a head once the
highly enriched uranium downblended by Russia comes off the
Wyoming is undergoing something of a renaissance in uranium
exploration because it's one of the only spots in the U.S. where
uranium is prevalent in economic quantities. Is state government
going to remain friendly to uranium exploration? Given that there
are so many companies looking for uranium, will Wyoming become
more selective in its permitting process?
I don't think the government wants to limit the amount of
permits. I was recently in Casper, where I attended some company
presentations and talked to locals in that area. They're very
much pro-development. They'd love to have the jobs and the
benefits this industry offers. They're not looking to limit the
number of mines, but want to make sure that all projects clear
very strict hurdles. That's the reason why so many companies are
there. Other state governments don't have the same level of
conviction about helping these projects advance. Wyoming is a
Do you believe the prefeasibility study will be a
significant catalyst for Titan's share price?
Absolutely. The market has sold off on the basis of broader
markets and it's not pricing in the old feasibility. Based on my
own work, the numbers Titan will likely come out with when it
updates the study in the first quarter could be a significant
improvement. They could likely double the size of the resource,
lower the acid consumption by 75%, increase the recovery and come
closer to production. When you factor all those into an economic
analysis, I anticipate a big improvement over the last study.
What other names stand out?
We have a position in
Rockgate Capital Corp. (RGT:TSX)
, which has an interesting silver and uranium project in West
Africa. The company raised a significant amount of money and will
have four rigs turning on the property by early next year. It's
growing a resource to a substantial level. My personal target is
more than 50 Mlb. of uranium, plus the silver. Over the last
year, Rockgate has been adding a very strong technical team on
the development side as it rotates from an exploration story to a
development story. It's another one where some initial economic
analysis will be a major catalyst for the company. This is one of
the best potential development projects in Africa not already
owned by a major.
Pinetree often invests in companies long before they ever
become well-known stories. Some great examples of that on the
gold side would be
Colossus Minerals Inc. (CSI:TSX)
Continental Gold Ltd. (CNL:TSX)
, which subsequently exploded.
One of the things that makes Pinetree's model unique is
that we're very active in the private space. Over the last six
months, we've done a number of very interesting deals in the
private space where we have basically financed companies in gold,
rare earths, potash, iron ore and other spaces. We've been very
actively involved in charting the course for these companies. We
think that over the coming 12 months, assuming the market for
initial public offerings opens up again, you'll see these names
come out onto the public market with the Pinetree name behind
The last time we saw a dramatic economic downturn,
financing for junior mining companies dried up almost completely.
Do you think that kind of environment helps Pinetree, being one
of the few financing companies left?
It does. A lot of uranium companies were financed before
the wheels came off the market. The ones that haven't come to the
market are not able to raise money. Cash is king right now. You
have to take a view as to when they might be able to raise more
money. It's an important part of analysis.
Let's go back to those off-the-radar names.
Macusani Yellowcake Inc. (
is an uranium exploration company in Peru trading around
$0.15, but it was over $1 before Fukushima. It has three drill
rigs turning and about $15 million (
) in the bank. The driver behind the stock pre-Fukushima was that
it had found some extremely high-grade uranium within its project
area. There are a lot of results in the lab still to come, but I
expect material results for that company. Regardless of where the
broader market is, Macusani could generate some exciting results
and get paid by the market.
Alligator Energy Ltd. (
is a group of guys who we've known for a while in the
uranium space. They're good explorers. They did a deal with
Cameco Corp. (CCO:TSX; CCJ:NYSE) to option some of its ground in
the best jurisdiction-the equivalent of the Athabasca Basin for
uranium in Australia, which is where Jabiluka, one of the best
undeveloped deposits, is located. It has been drilling. Outside
of the Athabasca, it could bring some of the highest-grade
uranium results that you can find. It just went public, so it's
still fairly under the radar screen.
Jabiluka is the mother of all projects, but will likely never
be developed because of aboriginal issues. That's an important
consideration for anything in Australia. But Alligator Energy has
done a great job getting access and agreements with their
aboriginal claimholders. It just raised money, so it's well
financed with more than $10M in the bank. It has the potential to
bring in some high-grade results.
Pinetree is always trying to be ahead of the curve with its
investment strategies. We've seen rare earths take off. We've
seen lithium juniors take off. What's next?
That's a good question. The agriculture area is not
necessarily new, but I think it is still emerging. We are
certainly putting our money into potash and phosphate. We've been
investing quite a bit in a number of juniors coming up in Brazil
searching for potash and phosphate. Brazil is the number-one user
of fertilizers, but it imports quite a lot because it doesn't
have a big resource industry for these fertilizers. It's very
prospective and it has not yet been explored properly.
Right now, we're trying to exploit some sectors that have gone
out of favor. Obviously, equities are out of favor across the
board, but some of the bulk commodities have really been hit-iron
ores and coal. There are some jurisdictions that have the
potential to come back into favor, including countries in Africa,
like Liberia or Zimbabwe.
Is there an agriculture name that is particularly
interesting right now?
In Brazil, for example,
Rio Verde Minerals Development Corp. (RVD:TSX)
is not trading anywhere near its potential value. It's
drilling a potash project right next to the only operating potash
mine in Brazil in the Sergipe Basin. Some work done by the
leading engineering firm suggested that there's north of 1
billion tons (Bt.) potential there. It's drilling its first hole
right now. Potash exploration is expensive, especially in basin
environments, but it only takes a few holes to prove a fairly
good-sized resource. On top of that, the company is in the
process of acquiring a producing phosphate project. It's going to
have a number of exploration projects in the country. That's one
of my favorite picks in that space.
joined Pinetree Capital in January 2009 and was appointed
to the position of resources analyst and promoted to vice
president of business development. Williams brings almost 10
years of financial market experience to the company. Prior to
joining Pinetree, Williams spent five years working for several
institutional brokerage firms in the equity research
department. Most recently, he was a uranium analyst focused on
companies with advanced development projects in Australia, the
U.S. and Namibia.
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1) Brian Sylvester of
The Energy Report
conducted this interview. He personally and/or his family own
shares of the following companies mentioned in this interview:
2) The following companies mentioned in the interview are
The Energy Report
The Gold Report:
Colossus Minerals Inc., Continental Gold Corp., Mega Uranium Ltd.
and Mawson Resources.
3) Philip Williams: I personally and/or my family own shares of
the following companies mentioned in this interview: U308, Mega,
Mawson and Rio Verde. I have options in Titan, Rockgate and
Macusani. I personally and/or my family am paid by the following
companies mentioned in this interview: I am a Director/Officer of
the following companies mentioned: U308 and Mega Uranium.