CEO Interview: Big News in the “Budget for America's Future”

Written by Gerardo Del Real
Posted February 17, 2020

The Trump administration has just announced a 10-year, $150-million-per-year ($1.5 billion) request to purchase U.S.-mined uranium for a strategic national uranium reserve. The request is just the beginning of what will be a long process to diversify away from foreign and sometimes hostile sources of uranium.

I had the opportunity to speak with one of the most respected voices in the uranium space, UEC President and CEO Amir Adnani.

We discussed what the announcement means, what comes next, and how UEC had been waiting over 15 years for this moment. Enjoy.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader


Gerardo Del Real: This is Gerardo Del Real with the Outsider Club. Joining me today is the President and CEO of Uranium Energy Corp. (NYSE American: UEC), Mr. Amir Adnani. Amir, this is overdue. How are you, sir?

Amir Adnani: Gerardo, I'm great. Nice to connect with you on a very important day. We have something very important to talk about. Right?

Gerardo Del Real: We absolutely do. We’ve experienced multiple head fakes — false starts — in the uranium space. We know that when this space turns, the gains can be life changing once a uranium bull market really gets going.

We had some really important news. President Trump and his administration, under the “Budget for America's Future”, are looking to provide a 10-year, $150-million-per-year program, and that part is important. It's a total of $1.5 billion to purchase U.S.-mined uranium for a strategic national Uranium Reserve.

Now, we know there's not a lot of good options out there when it comes to U.S.-mined uranium. But UEC obviously has to be excited, shareholders should be as well. Can you provide some details and some color there, Amir?

Amir Adnani: Well, let me just take a step back. If you think about it, President Trump and his administration should really be applauded for taking this action. It's also a very positive situation for our company and the domestic uranium mining industry. If you think about the annual presidential budget it is a big deal for the U.S. uranium industry to be included

Not too many industries or sectors are singled out so positively the way uranium is now singled out with the proposed budget amounts you talked about at $150 million a year over 10 years for a total of $1.5 billion.

This is a great first step forward. Especially when you think about this budget announcement in the context of where UEC and the U.S. market were 15 years ago. When the company was formed, the U.S. was importing 90% of its uranium requirements. We thought that didn't really make sense, and wasn't sustainable. We thought that should reverse and we would end up somewhere closer to where U.S. historical production levels had been.

In the '70s and '80s, the U.S. was one of the world's largest producers of uranium, then it went into a protracted decline. And 15 years later, things were not getting any better. Fast forward to today, basically all uranium mining in the U.S. has been shut down. Now the U.S. is importing 99% or you can really say 100% of its uranium requirements. So just when it seems the darkest, we can now see some light at the end of the tunnel for a turnaround. It's really quite an unprecedented action Gerardo, to have the federal government step in and look to buy uranium for a national Uranium Reserve to support national security objectives. This is not something that happens every year or every decade.

The last time the federal government bought uranium was back in the '60s and '70s. That was actually what kicked off and what ultimately became the bull market in the '70s. The all-time uranium price high, in fact, happened in the late '70s, adjusted for inflation. That is the kind of history we have here. Again, it's important to recognize that from the moment former Energy Secretary Perry came in, and then Secretary Brouillette, there has been a consistent direction following the mandate of energy dominance from this administration.

It seems quite clear that you can’t be energy dominant if you don't produce the basic fuel and the raw material to run the 96 reactors that we have in this country, not to mention the fuel needed for the nuclear propulsion program for all the aircraft carriers and submarines. It is encouraging that Energy Secretary Dan Brouillette said that this is the very beginning of a long process to revitalize the many aspects of the fuel cycle.

Not only that, but The key part is the president's budget request for $150 million to begin purchasing uranium is just the beginning. And in Brouillette's own words, “It won't stop there.” It'll be interesting to see in the coming weeks when the final report or recommendations by the president's Nuclear Fuel Working Group comes out. We'll obviously learn a lot more and hopefully we'll see what else might potentially be in store for us.

Gerardo Del Real: What comes next? Do you see bipartisan support?

Amir Adnani: Yes. Clearly, we hope Congress will support the administration's budget proposal and funding requests. The sooner they take action, the sooner we can get back to producing uranium. And I have to say, uranium is the fuel used in generating CO2-emission-free electricity from nuclear power and it has bipartisan support in Washington, DC. Both the Republicans and Democrats recognize nuclear power needs to be in the energy mix from the standpoints of climate change and reliable electricity generation.

This is not an issue or topic, in my opinion, that would fall in the great kind of political divisions that we see in Washington. More importantly, we're talking about a very vital commodity that we're entirely dependent on from foreign sources. So, I think that's something that should certainly be supported and have bipartisan support.

But to your earlier point, let's first see what other information comes out from the administration's Nuclear Fuel Working Group. Their priorities were to evaluate and make recommendations to the president to revitalize and expand the domestic nuclear fuel cycle, and that starts with uranium mining. President Trump’s budget plan to provide funding for domestic uranium mining is a great first step in the right direction.

Again, it's not every day. It's not every year. It's not even every decade that we see this type of recognition and strong support from an administration. This president says, "Yes, there is a problem. There is a problem with significant national security concerns from U.S. over-reliance on foreign sources. Let's do something about it." There will be more to come out on the NFWG and the Uranium Reserve and we will have to see how this develops over the coming weeks and months.

Gerardo Del Real: Amir, you mentioned earlier having the vision 15 years ago that the current situation back then was not sustainable. How have you positioned UEC shareholders and potential shareholders to benefit from any positive momentum that continues as a result of this first step as you called it?

Amir Adnani: If you go back and look at our company's first ever presentation in 2005 and at our presentations since then, you will see we have been talking about a very U.S.-specific focus. We have spent many years investing into the South Texas uranium trend; acquiring, exploring, drilling, permitting, developing, and ultimately building and operating a uranium mine.

We were one of only a few companies over the last 15 years that actually built, started up and operated a uranium mine. Our Palangana ISR uranium mine in South Texas was built in 2010. We went from a business plan in 2005 to start of operations in 2010 — in just five years — that is a remarkable achievement in the U.S. and was a result of a very aggressive and well executed strategy by our entire team.

So the proof of concept the company has in place is very valuable. And the team and personnel that we assembled to realize that initial production is quite invaluable today. The name of the game right now is not just having pounds and resources in the ground, but also having the people with expertise and having permits to be able to produce. Those are the gating items when you think about how fast you can get back into production.

So the benefits are not only the fact that we started early, being 15 years ago, but that during that period the company was able to experience what it takes to become a producer and then executing on that. I think the most scarce resource to be able to achieve a restart of our domestic industry in the U.S. is going to be a shortage of trained people. I mean, a lot of those people were completely lost in the long bear market.

But luckily, UEC has made, again, a very big investment there and we have the core personnel with solid expertise to go back into production quickly. Then there are permits. Gerardo, it takes up to seven years to obtain permits for uranium mining. Mining uranium is more permit and license intensive than copper and gold mining. There are additional layers of permitting, including radioactive material licenses that other commodities and other miners don't need to go obtain. This means permits are another gating item, another determining step that will be required for new entrants.

At UEC, we're in an excellent position with our South Texas Hub-and-Spoke strategy, anchored by our Hobson Processing Plant that is fully permitted and built with a physical capacity of 2 million pounds per year. And we've already initiated a license amendment process to increase that capacity.

The Palangana mine was built and operated for four years before we put the project on standby. Last year, we got an authorization permit for an additional 10 years of operation and that project can restart quickly.

Not too many companies — in fact, our company has made the only discovery of a new uranium resource in the U.S. over the last decade. That's our Burke Hollow Project in South Texas. We are very intensely advancing that towards production, and have obtained all the major permits. As you know, we were doing development and pre-production drilling there last year and installing monitor wells for the first production area.

Last, but not least, there is our Reno Creek ISR Project in Wyoming. This is the largest fully-licensed pre-production project in the United States. This is a project that we acquired within the last several years to achieve organic growth. This has allowed us, through mergers and acquisitions, to build a strong team with highly professional personnel.

One more thing Gerardo, our main focus is on U.S. in-situ uranium recovery operations. Mining with in-situ recovery has proven to be the lowest-cost way of mining uranium, not just in the U.S., but in the world. This is an alternative to conventional hard rock mining of uranium. ISR mining is a low-cost, environmentally-friendly alternative to the higher-cost conventional mining approach. This is how the Kazakhs have become the world's biggest uranium producer. And we know that it's scalable, it can have size, and it can be a very competitive way to produce uranium.

This is what we are focused on from a development point of view in Texas and Wyoming. We are pursuing ISR projects to achieve that low cost and to be able to contribute to the new U.S. Uranium Reserve Program.

Gerardo Del Real: I got to believe that you and UEC's chairman, Mr. Spencer Abraham, who of course is the former Secretary of Energy, are busy talking with the administration in Washington. I know you're in DC often, so I don't want to take up too much of your time, but I do want to thank you for the time today, Amir.

I'm looking forward to having you back on in the next few weeks because, frankly, I think there's going to be more news made public here soon with the Nuclear Fuel Working Group recommendations as we get closer to getting those recommendations made public.

Anything else that you'd like to add, Amir?

Amir Adnani: I'm looking forward to reconnecting with you soon. I think this is a developing situation and very positive first steps that we're seeing here. Let's reconnect as soon as there's more developments to update you and your listeners on. Nice to connect with you today, Gerardo.

Gerardo Del Real: Likewise. Thanks again, Amir.

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