The Uranium and Vanadium markets are quite tough at the moment, but Aura Energy think that they’ve got the solution. CRUX Investor interviewed Peter Reeve, Executive Chairman of Uranium & Vanadium explorer, Aura Energy (ASX:AEE, AIM: AURA). Peter Reeve previously worked with Robert Friedland at Ivanhoe. He explains the thinking behind their Uranium and Vanadium strategy and how they intend to deliver growth for shareholders. They have a market cap of c.AUS$14M and have spent c.AUS$20M; the allocation of spend between Uranium and Vanadium is unclear. As is the breakdown of what it was spent on. They have c.AUS$800k cash today.
They have a team with big company experience but now find themselves starting up a junior miner, specialising in Uranium and Vanadium. We ask Peter Reeve if he and his team have the relevant experience to get in to economic production with the Uranium project. Have they got the ability to raise capital in this market for a junior miner? Do they need to think about structured or alternative financing? Do they have knowledge of how to market themselves to enhance the liquidity and volume of trading? Do they have specific Uranium and Vanadium mining experience? And how are they remunerated? This is a tough environment for both these commodities, so what does this management team think they need to do to circumvent the obstacles in their way? Find out in this hard hitting interview.
Aura Energy has three assets in two countries. Tiris is a small Uranium play in Mauritania. Aura Energy has just released the long expected DFS which is suggesting that this is low CapEx, very low OpEx project capable of "making nearly AUS$27M per annum of after tax cashflow". We say investors in this Uranium play would need to know the Uranium price, and whilst the Uranium market is awaiting price discovery, no company can mine economically. So we wait, assuming future secondary licences & permits are granted and no other in country hold ups. Mauritania is not a well known mining jurisdiction. We look forward to hearing from the company about the infrastructure, logistics and planning.
Tiris is currently a small uranium project and Aura Energy has decided to get in to production early rather than develop out the Resource. And its relatively small size could be the differentiator for companies like this. Aura Energy could carve a slot in the market if they can get in to production quickly, ahead of the bigger new projects or companies bringing larger producing Uranium assets back in to production. This is a shallow asset so there is also much less technical risk.
They believe that the cashflow from this asset will allow them to fund most of the exploration for their second asset in Sweden which is a Vanadium project, a very early stage Gold & Battery Metals project.
The Haggan Project in Sweden has the potential to be large. It was drilled previously as a Uranium project but the Swedish government has stopped Uranium mining in Sweden so this has now become a Vanadium project. Aura has done the capital and operating estimates but cannot release this until they have the Measured & Inferred Resource. They currently can only talk about the Inferred number only. Aura is talking the usual Vanadium explorer/developer game of Vanadium Redox Flow Batteries but that is far from reality. They are in discussion with a battery manufacturer. We don't know the nature of this conversation. A scoping study is due end of August.
One concern is the CEO's remuneration which is out of kilter with a junior miner of this size and stage. In our opinion this should be target driven and rewarded against set deliverables.
They have appointed SP Angel who will be providing a coverage note soon. We wait to see what this Paid for Research looks like and what they choose focus on. Truly independent research does not exist for retail and brokers cannot afford to provide it for free.
Being able to produce Yellowcake is a great academic exercise. But what we want to understand is at what point are you able to do so economically? Too many factors that are not in this companies control to be able to answer.
Click here to watch the interview.
Matthew Gordon: Why don’t we kick off with a summary of the business and then we’ll get stuck into some questions.
Peter Reeve: Aura’s got three major parts to its business. The first one is the Tiris Uranium project in Mauritania where we’ve just released the Feasibility Study. We’ve got a Vanadium project called Haggan up in Sweden and we have some fantastic Gold and Base Metal and Battery Metal tenements for exploration down in Mauritania. Quite a lot of work’s been done on those and that’s an interesting situation, a third off the rank, if you like, before two development projects.
We are focusing on getting cash flow out of Tiris, and with that cash flow help to build the other projects, but we’re also considering each one of these businesses to be essentially separate entities, so we’re trying to fund them separately. So we do talk about an IPO separately for Haggan and we talk about some form of separate funding for the Gold, base and battery metal exploration.
Matthew Gordon: What was the big idea when you put this together? If I look at your track record, there’s some big names in there. Big company experience, but this is a start-up. So what are you looking to do?
Peter Reeve: If I talk to the management team for a start, the majority of the management team and a couple of the Directors came from BHP Billiton. In fact one of my Directors was my boss back in BHP Billiton when we were 30. So we’re essentially from big companies and what big companies do really, really well is they do a lot of good, boring, technical stuff but they fail to capitalise on it all the time and commercialise it because big companies don’t have the financial imperative that little companies have.
I left BHP Billiton and went out… I did a lot of things. I became a fund manager, I went to a lot of other mining companies, did some big IPOs and then one of the Directors asked me to come back in. The reason why I came back in after having run some large companies was because I believed and I still believe that these assets can deliver a very, very large company over time when we get those projects in cash flow. So that’s probably the core thinking. Very, very good technical people, very experienced technical people, but hand in hand probably as much commercial impetus as we needed to get these things driving.
So what we want to do with the projects is we don’t want to trade shares on the stock market. We don’t want to flip projects. We want to cut the ribbon on production for our projects, but obviously it’s a Director’s decision. If somebody else has a lot of money for projects, of course we’ll sell them, but what we really want to do, we believe the best way to get best value for shareholders, is by cash flow receipts. You can do it by takeover, you can do it via other methods, but we believe cash flow receipts will ultimately give you the highest valuations.
So we want to get these things into production and make them very valuable for the shareholders.
Matthew Gordon: That’s about what you want to do. I’m more interested in the strategy. You’ve selected Uranium. You’ve selected Vanadium and Battery Metals. They’re quite volatile, certainly in the case of Vanadium. Uranium’s in a tricky position at the moment, but obviously people expecting that story to bear fruit, and Battery Metals, flavour of the month. Why did you pick on those very different commodities in Mauritania and Sweden? Two very different types of environments. Was it a case of they were there or was it case of actually we specifically identified these commodities or these jurisdictions?
Peter Reeve: Going back to the first comment I made about the fact that the company started and was based on highly technical people well before I joined, we had very, very intrepid geos. They see rocks and mineralisation. So it was 2007 / 2008 and they thought Uranium was a very good idea. So they went and discovered Uranium in Mauritania. A survey had been sitting there without any work, a radiometric survey without any overview of anybody external for five or six years. Managed the expedition, went out into the desert and found the first Uranium out there.
Similarly one of our Directors, had done some work in the Scandinavian countries as a younger geo, and knew that the alum shale ran into Sweden and eventually a long story short, that became a piece of ground they picked and cut the first Resource for Uranium and Vanadium. So the very nice thing again about our company, both those projects were virgin discoveries to us. They haven’t cost us a lot of money. We found them out of real geology, so we selected it.
The Swedish government about 18 months ago banned the Uranium mining, as you’re probably aware. We had done a lot of study on Vanadium in the past. The Vanadium price had been through low and so we put that in the background, but there are a lot of other metals in it. When Uranium looked like it was going to be problematic in Sweden, we recut the Resource immediately on the Vanadium side. Of course, the Vanadium price for a period of time looked sensational and frankly for good projects, it’s still okay now. And so we recast that project, which we discovered in 2009 / 10. We recast that as a Vanadium project with some by-product credits.
And then just to flick onto the Gold side of it. Slightly more complicated. We had a parallel sister company called ‘Drake Resources.’ Drake Resources, under our principle geologist, had put together this Gold package in Mauritania. Some years ago they raised $10M. They spent $3M of that on the project and Neil Clifford, who’s my principle geo, conceived that project when he was principle geo for Drake and when Drake decided to do other things corporately, we quickly picked that project up.
So again, it goes back. Every one of our projects is a technical genesis of our people over a long period of time and we rank our technical people very highly. Neil Clifford, regardless, is probably one of the best geos in Australia and nobody knows his name. He’s fantastic. He found 20Moz of Gold in Australia. Essentially found the Sun Rise deposit. Our technical people, have driven what we’ve done.
Matthew Gordon: But to finish off with the strategy. These projects have been identified and pegged by your technical team. Was that all done before you arrived?
Peter Reeve: Discoveries were done before I arrived here. The shift to Vanadium was done under my direction. I sort of drove a fair bit of that. The pickup of the Gold and Base Metals and Battery Metals was done under my time as well.
Matthew Gordon: So on the Uranium project, would you have chosen to do that if you were starting today?
Peter Reeve: I’m still a believer in the Uranium price. Absolutely, definitely. I do believe its something to do, but what I recognised really quickly was the Uranium price. You couldn’t guarantee anybody that the Uranium price was going to go up in the next 12 months, two years or three years, and that’s been right. So we quickly started to diversify.
So what you’re seeing, if you’re trying to get to where we are on strategy, is what we did decide to do, is don’t put our eggs in one basket. Let’s broaden this out.
We started with pure Uranium. We’ve not got Uranium, Vanadium, and we’ve got Gold, base and battery metal exploration. We’ve broadened it right out.
Matthew Gordon: Juniors have got lots of challenges, but you’re making sure that you’re mitigating that country risk.
You talked about the team being technical. I hear that loud and clear, a very technical team, a very good team, but what about all the other experience or skill sets required? You guys have come from big companies. Is there anyone in there who’s been used to running junior companies because it‘s got a whole bunch of different needs?
Peter Reeve: Well, quite a few of us have been involved in junior companies. Let’s just say we all came out of large companies, but five or six junior companies are mixed amongst all our experience. Since 2006/ 2007 Bob Beeson, one of our Directors, junior mining companies. Neil Clifford, our geologist has done a lot of consulting and worked in junior mining companies. Will Goodall, our principle metallurgist. I’ve probably worked now in something of the order of say, five or six junior mining companies. I’ve been a Director of most of those, maybe investments from Ivanhoe into junior mining companies. So we’ve got a lot of junior mining experience as well. Nothing prepares you for a bad time in a junior mining company. All the experience in the world you tend to run those things because the biggest bucking bull you’ll see in our rodeo is a cakewalk compared to a junior mining company in the sector.
Matthew Gordon: So let’s talk about some of those things. Let’s talk about finance first of all. Obviously with the Ivanhoe you were associated with Robert Friedland. He could open a lot of doors in terms of the finance, but how are you finding it now going from big boy stuff down to juniors and are some of those doors shut or just polite conversations?
Peter Reeve: Robert will go into his grave as one of the world’s best mining CEOs that’s probably set foot on the earth. And I say that simply by the score card for the number of great operating projects that he will have to his name out there, still putting dirt through the mill. Nobody at the top of Rio or BHP has done what he has done.
Going with that, is Robert’s ability. He’s got a magical offer bottle in his coat jacket and he pulls it out and he passes this little bottle and the investors just hand over money. It’s fantastic. He’s got some magic about him where he raises money and he does it very, very well, and I haven’t got a clue how he does it. As much as I sat next to him for five or six years, haven’t got a clue.
Matthew Gordon: So what are you going to do now? How are you going to raise money? How do you go about it?
Peter Reeve: We’ve got to do it more incrementally. We had a strategy to get the Gold and Base Metals moving through the DFS period for Tiris, but we couldn’t get those tenements granted quick enough for that strategy to come off. We thought that would be a good strategy to sort of go parallel with that boring sort of development phase because we know investors and share prices go to sleep when you’re trying to develop a project. But now we’re in a situation where with Tiris in particular, the strategy we are pursuing is export credit agency finance. Not completely well known but I think perfect for what a junior mining development company does and that’s obviously where a sovereign nation lends the junior money and the quid pro for that is that buy the equipment for its project from that country.
Matthew Gordon: So you’ve had to look at alternative financing, alternative structures to be able to get this going. How are you funded now? How much cash have you got today?
Peter Reeve: According to yesterday we’ve got $830,000 in the bank. We are essentially equity funding all our projects via a corporate. That’s how we’re doing it. We are looking at various deals. The IPO for Haggan is another way to relieve Aura corporate from having to fund all their programmes. If I could find – and we are looking for a royalty interest in the Gold and base metal part of the business in order to keep the funding off there. So as I said initially, we’re trying to look at Aura at the moment as three distinct businesses and each need their distinct form of funding.
Matthew Gordon: So is Aura potentially an incubator or a hold co for these assets, which may be spun out into their own vehicles?
Peter Reeve: It’s not quite as direct as that as a strategy because if I was doing that I would have started the conversation and say, ”Hey, we’re a company incubator and we’re going to spin those things out.” But you’re right. It’s a correct pick up, that’s essentially what we’re trying to do. We don’t want to keep on making shareholders who are here for our Uranium asset fund Vanadium when it might not be their flavour of the month. We don’t necessarily think everybody’s interested in more primary exploration in Gold base metals and battery metals. So if we can fund it separately we’ve got less criticism from shareholders.
Matthew Gordon: So corporate, ie, your shareholders who have invested into Aura Energy are paying for this. How do you Directors remunerate yourselves? Are you on big salaries and big warrants, big options?
Peter Reeve: The Directors are just on moderate and normal Director’s salaries. I’m on a salary that I’ve taken for quite a lot of time between cash and shares. I’ve got performance rights. It’s just a mix of the norm.
Matthew Gordon: So your $800,000 is going to last you till when and what’s that being spent on? Is that mostly G&A?
Peter Reeve: Oh, no, it’s G&A. We did a $2million financing, only about two and a half, three months ago, and we were very focused on putting all that money into getting the Tiris BFS finished.
Matthew Gordon: And that’s been the bulk of the money that you’ve spent since then till now, is it?
Peter Reeve: Yes, that’s right. And also the work we’re doing on Haggan. So we drilled for about three or four months in Haggan. We’ve now been cutting the core, doing the assays because we’re trying to get a measure, an indicator Resource up for Haggan, a Resource estimate done, a mining plan done so we can release the scoping study very shortly. So really all are corporate and that money we raised is really focused on getting the DFS done and that’s now ticked off.
Matthew Gordon: So when do you need to go and raise more capital?
Peter Reeve: I’m not going to answer that question in an interview because that’s a selective briefing so I’ve got to be very careful with stuff like that. So we wouldn’t answer when we’re going to run out the money, We wouldn’t answer when we’re going to raise money again. We put it out in the quarterly yesterday. We put out forecasts, the amounts of cash we’re going to spend over a period of time. So people can make their own decisions on that.
What we’re trying to do is make sure that every single bit of money we spend is ticking off some form of technical box in one of the projects. So really the money we raised recently was about the DFS and Haggan to that scoping study stage. And out of that and no money on the Gold, out of that everything’s really got to flow. Everything’s got to fund itself. I’m not going to take any more money out of Aura Corporate to fund Haggan. Not going to take any money out of Aura to fund the Gold and base battery metals. We’ve got to find alternative sources of funds for that.
Matthew Gordon: You’ll find alternative funds for those two, but Tiris, you think with this export agency finance should also fund itself? Everything’s fully funded.
Peter Reeve: The export credit agency finance is a combined package for both Haggan and Tiris, but Haggan’s there’s a time lag so yes, it’s more focused on Tiris at the front end.
Matthew Gordon: And then just to finish off on the team’s experience. Uranium’s very different from Gold, Battery Metals, Vanadium. What’s the relevant experience in the team in those commodities?
Peter Reeve: Neil was a part of the discovery team for Tiris Uranium. He‘s a geologist. He found a fantastic Gold deposit as well. So good geo’s can do both.
Tiris wasn’t particularly… It was sitting there essentially. It was a very good survey. I’ve worked in Uranium in Australia 20 years ago. Will is a very, very good metallurgist across many disciplines. He works for First Quantum. He works for BHP, so yeah, we’ve got enough experience in the different areas, but what we do and we do it really well, we’ve got a great technical network. We basically employ 60 year old people wherever we can because they’ve got the best experience and they come on per diom’s and they work for us for a period of time. So if we need a Gold expert, a Vanadium expert, we go and find it.
Matthew Gordon: But what about your commitment? Are you sitting on any other Boards? How do you spend your time? How much time is spent on Aura?
Peter Reeve: I’m full time, but I’m one other Board which I was on before I left.
Matthew Gordon: The other thing that I noticed from one of your previous interviews, you said, I think it was in November last year – “We haven’t spent enough on marketing steps, but we’re going to make positive changes.” Think you’ve done that?
Peter Reeve: Have we done enough on marketing?
Matthew Gordon: You said in November that you were going to make positive step changes.
Peter Reeve: Did I really?
Matthew Gordon: On film.
Peter Reeve: I’ve been around long enough to know that when the Uranium price is sitting still at $24, $25 a pound, it’s pretty hard to go open market Uranium. I would have said that and I do say that on the basis of commodities doing some good work. Really at the moment the commodities aren’t doing good work. Gold’s doing some good work. Uranium’s not. Vanadium’s not. But we still believe in our projects.
I’m a little bit of the mind where we’ve sort of tucked our baton under our arm for the last 200m, and in tucking our arm under, what I’m really saying is we’ve got all the technical steps done. We’ve come across the finish line and now is the time to really get out and talk very broadly about getting the Tiris project understood out in the market. But that said, again, I’ve done thousands of investor meetings in my time, you can imagine, with Robert and people like that, and I’m not going to get a super warm, “Oh yeah, come on, let’s have a talk about Uranium, it’s a fantastic commodity,” because at the moment it’s not. But we also know the way Uranium moves, that if a few utilities decide to walk through the door at the wrong time, ie together at the same time and sign big long-term contracts, the Uranium price will pop and things will change within a week.
So my favourite saying in business is “Success is where preparation meets opportunity” and that’s what we’ve been trying to do. We wanted to get prepared and we are so happy and relieved and getting these DFS materials completed and we’re so happy that it’s in such a great condition and it’s got such good stats, and it sits there as something we can now, if you like, park technically and now really push our mind towards the financing and getting out and marketing that completed document. Being modestly hard to go out and market Tiris without a completed DFS. Now we really can, nothing holds us back.
Matthew Gordon: So that’s a long way of saying you’ve consciously decided not to do any marketing because you don’t think the market’s right. Money’s tight, but now you will up your game in that department. Is that what you’re saying?
Peter Reeve: In November when I made that statement, we were looking at… if you go back then, you’ll probably see our presentation we were going to release the DFS probably in about February or March. It was actually a February date, okay. What happened was we came across, as you are meant to do in technical studies, we came across a clay issue within the ore and that affected the processing and that delayed the scoping study, much to the chagrin of our shareholders, but that delayed the study by another three or four months. But it’s the same story. I wanted to get the study done in February, then get out and market. Now we’ve belied that by three or four months.
Matthew Gordon: In the interview I watched you were talking about a July release. So I think it was slightly prior to that. Let’s just finish off on that thought, which is around the importance of marketing, the importance of talking to the market because especially for juniors who need that liquidity, that increased volume of trading, that comes from retail. I know with the Aussie market it’s a big retail market and I know you’re obviously listed on AIM as well. Those are two very large retail markets.
So is your idea to do more promotion now? Do you believe in it or are you just a technical team?
Peter Reeve: I was a metallurgist originally, but I’m a very rusty metallurgist now, I like to say. I did a dozen years out of my 35 in the field and I’ve been really pushing corporate finance since then. I’ve done a huge amount of marketing. I think I know how to do it.
The issue, I suppose, around marketing for us has just been getting a really good sell of a story and I think we’re getting there with both of them. We’ve made a change to our London broker as well. We’ve taken on SP Angel, who’s very Resource focused and they are at the moment our joint broker and there’ll be another change coming up to put them more in the box seat for helping us. So that’s one big change.
Matthew Gordon: Have they produced any broker reports for you?
Peter Reeve: They are in the process of getting a broker report together because we only signed them up about eight or nine weeks ago. Seven or eight weeks ago, whatever it was, quite recently. It’s one of our announcements. But they’ve put some quite good value reports out on us, a full research piece is in the pipeline.
Matthew Gordon: Again, just in summary. So you value promotion, the question was timing?
Peter Reeve: We value promotion very much. I learned it all the way back when I was a fund manager. I said that western mining, I’d describe – which under Hugh Morgan was a company that essentially was a little shop front window with the blinds pulled down and we could never get the information out of them, and so that’s what made you really have to have your windows cleaned, your blinds up and your door open. So now I’m a big believer in promotion. I would never have been a part of Robert’s group had I not believed in promotion. I really believe it.
Your only customers for Resource companies, I don’t care what size you are and what commodity you are, your only customers in the world are your shareholders. We’re all in commodities. Commodities walk out the door. The only customers we have are our shareholders.
Matthew Gordon: Glad you said it. Not many people recognise that.
Peter Reeve: It’s number one. I mean, I’m not saying I always do it as best as I could. I’m sure I can do things better at different times, but I’m a serious believer in it.
Matthew Gordon: The last presentation on your website is from March, it’s now August. We’re getting an update on that soon, getting a broker report soon and you’re going to get into the market more?
Peter Reeve: Yes, absolutely.
Matthew Gordon: Shall we talk about your projects? Let’s start with Tiris. Again, like to understand the thinking. Everyone’s got different business models. Yours is get into production first and then we’ll worry about building out the Resource. Is that it?
Peter Reeve: That’s a big part of it, absolutely.
Matthew Gordon: Tell me more.
Peter Reeve: We said to our shareholders on Tiris quite some ago – we’ve got a 52Mlbs Inferred Resource there. We’ve just put basically 13Mlbs into mineable Reserve plus a little bit of inventory, but we’ve got a much bigger conversion to come from that. But I said to them, “I haven’t got any interest in spending a lot of your precious money on pushing that Resource out to be 30Mlbs or 40Mlbs of Reserve when I can only spend 1Mlbs of it a year.”
You think of Tiris as 52Mlbs Inferred, 13Mlbs in the reserve mining inventory for the DFS. We have got a 1Mlbs per annum project call at the moment, 800lbs and something on average, but call it a one million pound per annum project in a production sense. And we’ve already got some pretty interesting plans to look at expanding that to 3Mlbs per annum over time when we get more of that reserve conversion done.
Matthew Gordon: So let’s understand where that sits in your strategy. That’s not a big project. It’s not particularly high-grade. It’s Mauritania, with all that kind of risk, but it potentially gives you cash flow to focus on a project that you want to focus on, which is slightly further north, up in Sweden. Is that right?
Peter Reeve: When it comes down to it, just on Tiris, we came out the other day and said that in Australian dollar terms we could make 27 million dollars per annum of after-tax cash flow. Put that on a 10 to 20 times multiple, which are part of the cycle you’re in, and you can start seeing what a project with a good Uranium price and working could do. So it will go some way to funding what you do on Haggan absolutely, but Haggan will then stand on its own for a proportion of…
Matthew Gordon: Eventually it will stand on its own, but right now it’s not at that point. Again, I’d love to understand junior mining management mentality. That’s not a bad strategy. Not the first time we’ve seen it. It’s worked elsewhere. Nothing wrong with it, not criticising it. I just want to understand if that’s your thinking.
Peter Reeve: That has been our thinking all the way all the way along. However, at the moment we’re varying that a little bit by bringing in this concept of doing the IPO to fund Haggan in its own right.
One of the other issues with Haggan is that when the Swedish sun rises, we go to sleep. That’s a pretty good analogy for what happens to projects like that. I think unless you have a really well paid, engaged and active management team in Sweden, it’s difficult to make projects come alive. A part of the Haggan IPO strategy is to get enough cash to set up a permanent management team who speak Swedish, who like pickled herrings, who do all the right stuff in Sweden to make projects get ahead and that’s really a part of where we are now. We want the Swedish project to live in Swedish daylight hours, not try and make it live in Australian daylight hours.
Matthew Gordon: We talk to management teams who think they can manage projects from the other side of the world. It’s tougher. It’s not impossible, it’s just a lot tougher and creates problems.
Peter Reeve: Really hard.
Matthew Gordon: So Tiris is in the Uranium space. Uranium spot price is doing what it’s doing. The utilities aren’t fully engaged yet. I think you’ve got to buy into the macro story to get behind Uranium. You talked about roughly 1Mlbs a year over a 15 year life of mine (LOM), but that depends on the price you can get in the market. There’s a Resource and then there’s mineable ore and depending on the price that will determine the scale of this opportunity. So what is your DFS telling you?
Peter Reeve: In terms of the range of size of the project?
Matthew Gordon: Yes.
Peter Reeve: The conversion of Resource to reserve is very high and the reason is our deposit is, call it an evacuative surface deposit. Average mine depth is about five metres. So we aren’t looking at a pit wall which looks like a cone with the gem of a Gold deposit down the bottom and all that sort of thing. We are in a really good situation where every piece of our ore is accessible, and I believe it’s the sort of operation that, you know, it’s one thing for us to devise us what we do in the DFS – and that’s a step you must go through for all sorts of reasons, the market, events, and Directors and everybody – but when we unleash our operating team on that project, they’re going to do it exactly the way they see the ore in the ground.
My strong belief, and the geo’s strong belief, is that we will expand each of the Resources in the area now. I mean, to get a reserve of course, they’ve got them off as nice square blocks because mine engineers like working in nice square blocks. They don’t like shapes. And so once we can start showing that there is shape to it and it does go a little deeper, it does go a little further, I think we’ll expand the Resource more than contract it. A lot of it will convert to reserve or mineable, whatever we want to call it. Mineable Resource. And we still haven’t really started to do inspiration outside of the core discovery areas, and I think when we do that …
You know how it is. You’ve got a plant built. You’ve got a team there. You ‘ve got everything set up. The marginal cost of then going out to get that extra bit of ore, which might just be a pot of 5Mlbs, three or four kilometres out, is a lot lower.
We understand what happens to projects once you get them there and we’re pretty excited about what that will look like, but yeah, I would be hoping one day we’re going to mine 75Mlbs of this thing at least.
Matthew Gordon: It’s low tech, low CapEx, low OpEx.
Peter Reeve: It’s not just low CapEx, by the way. It’s sensationally low cap ex. You want to get the odds of marketing. You go and look at any other junior mining company or any other Uranium hopeful at the moment, and their capitals are mostly measured in the hundreds of millions of dollars. So to get something sub a hundred with the C1 cash cost of 25, and an all in sustaining cost under 30, there’s not many of us around. That’s why I make this nice marketing line. I say that this is currently one of the most compelling Uranium development projects in the world as we speak. As small as it is, it’s one of the most compelling projects because of that capital and that op ex.
Matthew Gordon: Let’s talk about Haggan. You’ve previously said this is the most valuable asset in your portfolio currently. Tell us why you say that. You’ve done some drilling recently. How are you moving that forward?
Peter Reeve: There’s a lot of metal in that system, just for one. As I said, the Vanadium concentration has been equivalent almost to the Uranium for a long period of time, probably even higher than the Uranium. We had to make this change from Uranium because the Swedish government decided that nuclear in 2040’s going to fall out of their energy balance, so they don’t need Uranium. There was a bit of political stuff going on as you can imagine as well.
But we were fortunate that we had done enough work, we understood enough. We’ve done a lot of good drilling, so within two or three weeks of that all happening, we recapped the Resource into Vanadium and we had it ready to go. So now we’ve got cut off grads for our Vanadium deposit and we found what we call a high-grade zone, but it would be better to call it a higher-grade zone. And that’s a higher-grade zone of about 90Mt of 0.42 per cent of V205.
But again we’re fortunate. Alum shale largely comes to surface and so that Resource will be encapsulated in a pit that starts at about 20m from surface and finishes by about 90m. So again, a very manageable operation.
Before we were talking about a heap leach, a Uranium heap leach that was going to be 25Mt to 30Mt per annum. We’re now talking about a project which is Aura Clubs, and about 2.7Mt per annum. So quite a modest scale project. We did the capital and operating estimates last year, so again we spent our $80,000 to get one of the independent engineering firms to do the capital and operating estimates for Haggan. ASX will not let us release that until we have the measured and indicated Resource. We cannot release that unfortunately with an inferred Resource. So again, it’s where preparation leads to opportunity.
We’ve got a lot of internal numbers and the project looks very, very good. We are quite aligned to the idea of the whole battery push, but we’ll sell our Vanadium to anybody who wants it. But I think the battery push in Vanadium is pretty interesting and when we start to look at the scale of this project, without giving too much away because I’m not allowed to, we’ve contemplated at the moment a 7,500Mt per annum V205 project, that’s about five per cent of the world’s Vanadium. We sized it because five per cent sounded like a pretty non-disruptive sort of thing to do, but we could double the size of that if we had the right market. We can make our cash costs go through the floor, and there’s all sorts of interesting technical things that I sort of kind to allude to just at the moment.
There’s a few proprietary things that are pretty interesting about some by-products we’re playing with there which really help that, and make it a really commercially robust project as well. But what I’m saying is accelerate all our Vanadium, where it’s fallen to, it’s clearly not as good as $33 Vanadium. But we can make money out of $7-$8 Vanadium and we can make a lot of money out of $7-$8 Vanadium if we expand our project.
And therefore all that then goes back to what are you doing as far as your linkages? Who are you talking to? Who do you want to get into bed with? And we’ve made no secret of the point that we are talking to battery manufacturers, we’re talking to people who can be a part of us in whatever way that is.
Matthew Gordon: But how real is that? All Vanadium producers are talking the battery story. 90% of the market is rebar. That’s the reality and it’s early days in terms of the VRFB. And again, we have this conversation a lot with Vanadium producers and talk the battery story because it sounds great to shareholders, but you’ve got to have the prerequisite skills in house or you’ve got to have the right partners on board, strategic partners with the right balance sheet to be able to do that. You’re early stages, so is this wishful thinking or is this actually a reality of what you can do because you think the scale of this will allow you to do that?
Peter Reeve: Well, so far I’ve had three sort of pretty serious full day conversations in three different locations in the world on this particular battery initiative that we’re talking about, and we’re taking it pretty seriously.
The Vanadium battery market, and people know that they have a cap on the Vanadium price before they say it doesn’t really work. I think there’s some really smart things you can do in terms of partnerships to ensure that goes on.
Matthew Gordon: You may be treating this seriously, but what does that actually mean? Are you at latter stage discussions with people, or is it just a process you’re going through?
Peter Reeve: There is a particular party who we are talking to in some detail. I would still put it at the… it’s gone beyond the concept stage. We’re talking how things could work. We haven’t stayed in each other’s laps yet, we haven’t gone… You know how these things move along progressively, but it’s quite serious. We like the story. I’d like to make it happen.
There’s a chart that I have in my presentation for March which you might have read. It’s a battery storage … At the moment I think that chart says that there’s something in the order of 15Gw to 20Gw of storage capacity. And in 11 years, they’re saying now 2030, and they’re saying that might be 300Gw of storage. Now if that chart isn’t even half wrong, if it’s two thirds wrong, if that was the beer market or the underwear market, you’d want to be in that sector. So I would just say that if that’s storage graph is even a third right, then it’s not a bad market to be in.
So I’m a big believer, whether it’s Vanadium Redox Flow Batteries (VRFB) or not, the flow batteries are the ones that do store power for a long period of time, and that’s what interests me. So I’m a bit of a believer in it.
Matthew Gordon: That’s the macro. That’s got nothing to do with you right now. You’re at the point where you’ve got a scoping study coming out later this month, potentially end of August.
Peter Reeve: Yes
Matthew Gordon: So you’re going to have an idea of what you’ve got then and you’ve got to then work out how you move that forward. So what are your hopes for between now and the end of year in terms of what you can do, in terms of understanding what you’ve got and then what are you going to do with it?
Peter Reeve: To push you back a little back there, we found this project ten or eleven years ago. We spent $20 million on it. Yes, a lot of it went onto Uranium. We spent a lot also on Vanadium. So we really understand this project. We do know Sweden pretty well, very well. We know the region, we know the local people, so this is more than just a concept project. This is a pretty serious thing. So I do believe the next step is do something where we start to get a tie up with some of these people.
Like I say, I would be equally happy to tie up with a steel producer who needs the Vanadium. I’ve got some people who are interested in that. They are less interested now that the Vanadium price has gone down, clearly because they don’t feel they need it. But no, I want to move this to a corporate stage. I do want to get the IPO done. I do want to do something with the battery tie up if that’s possible, and I want to do that within a reasonably short period of time.
Matthew Gordon: So just on the IPO you’re looking to IPO on ASX or AIM?
Peter Reeve: Because of the waking up in Swedish daylight hours, it’s got to be European time.
Matthew Gordon: So those are the two projects. Can you quickly go through the Mauritian Gold, battery metals project?
Peter Reeve: What we’ve got there is greenstone belts. All of Kalgoorlie and you’ll notice similar stuff in Canada, is greenstone belt. This is really, really an unusual set of greenstone belts because the only discovery on this greenstone belt is Kinross’ Tazius mine at 21Moz deposit. Greenstone belts are renowned for not having a single discovery and they are renowned for once you have one discovery and you find another, there’s a raft of different sizes.
Neil, our Geo, talks about something called Zipf’s Law. Zipf’s Law is that you have a curve from a 20Moz deposit all the way down to a one million ounce and everything in between. So when you do Zipf’s Law on the Kalgoorlie field, you see 30 or 40 different deposits of varying size. We’ve got one on this field and it’s Tazius and it’s 20Moz.
We got our tenements granted and we then did a deal with another party, so we have now tied up about half of that greenstone belt. All but for one tenement we’ve tied up half the greenstone belt and Kinross has the other half. We’ve hit mineralisation. As I said, we bought this for $100,000 in a royalty, but previously Drake had spent $3 million on the greenstone belt, on these tenements. So we’re not going in there cold and the guy who conceived it and did the work is now my principle geo.
We found mineralisation – what you’ve got to get is you’ve got to get systems size and you’ve got to get grade. We’ve hit system size with a little bit of grade and we’ve hit grade with not much system size. We’ve just got to get the two together, but we’re talking about one drill hole. For the money we’ve spent we’ve drilled one drill hole for every 20sq.m so far. We’ve got a lot more work to do.
One of the more exciting parts of it – and the reason why I put on the battery metals, is we did a fence of drilling, 1.6km long. Again, if you go through that presentation, it’s the bright pink slide. It was equal holes. They were about 6m-7m deep. Pretty well every one of them hit near per cent nickel. So we assayed one in ten and we found Cobalt and the Cobalt was as high as 0.58%. So pretty exciting to get back and look at.
Matthew Gordon: So again, early stages but the potential there, greenstone belts in West Africa. So let’s go a little bit more macro. What’s your view on the Uranium market? When’s it going to turn? Is it your area of expertise? What do you know?
Peter Reeve: I don’t know anything about the Uranium market at all with respect to how a Uranium market expert knows about the Uranium market, but I make it my job to talk to… We’ve got an off-take agreement for Uranium from a group in London and I talk to them quite often and I talk to other players in London on that.
Matthew Gordon: That’s Yellowcake presumably?
Peter Reeve: No, no, that’s a ETF.
Matthew Gordon: So you’re relying on them but you kind of don’t care. If the price is right, you’re going to get into production and you’ll start producing.
Peter Reeve: The big thing at the moment with the market for me, it’s really simple. I seriously don’t make a habit of trying to count how many reactors are getting built and how many pounds goes into each reactor. I let other people with a digital mind do that sort of stuff. What I am focusing on is this big concept of what happened in 2005. If you look at, there’s again a chart that I use. 2005 there was about 50 – or maybe it was 2004, there was 50Mlbs of long term contracting in place and with Finn by the next year they had put 250Mlbs of contracting in place. And that lasted for seven or eight years. It wasn’t a fluke.
The current coverage in 2021 and 2022 for long term contracts is four and three per cent. They will get nervous. I don’t know when it’s going to be, but they will get nervous. It doesn’t matter the cost they pay for this stuff, as you well know, but they definitely cant run out of it. So at some stage they will move. Look, the February results of Cameco, I always read the Cameco stuff. Their marketing stuff is brilliant. They’re fantastic at it. They’ve got teams and teams of people who are much smarter than me focused on it all day long – read their stuff. They also know these comments about the utilities looking like they’re coming back to the table to start with the balance of doing long term contracting.
So what happened in 2004, 2005 that leaned to that big explosion in price was seven or eight of the utilities all decided to squeeze through the door at once and of course… I always remember I asked one of the guys in London. I said, “What happened with that? What was the max price paid in that clique?” He thought it was about $138 a pound. And I said, “Do you know the guy who did it?” And he said, “Yeah, I do. I know him.” I said, “What sort of guy is he?” And he said, “Well, he’s a nuclear physicist. He’s sitting there and he basically had a manila folder and said he needed this much Uranium, and on the day when his boss had walked down the corridor and said “How’s that contracting going?” and he said, “I haven’t got much.” Well, you’ve got to fix that. First to bid, first to bid, and kept on going. So a nuclear physicist running a plant is also looking at nuclear… So these are the sort of things that might happen. I’m a believer that it’s the utilities charging through the door at once which will give us the…
Matthew Gordon: What is your outlook on the Vanadium market?
Peter Reeve: Outlook on the Vanadium market is probably confused, but I would say that getting up to $33 there was clearly a lot of speculation, and I think falling back down to $7, I’d say there’s a lot of play. Some of the people who need Vanadium, they have confided to me that I don’t think they think it’s going to stay down here, but it’s not going to race back up to $33 either. We always thought somewhere in the $10 to $15 range was more likely for it to sit and that’s what I think it will go back to at some stage. But I don’t expect to see, $20 or $25.
Matthew Gordon: Can you summarise your thoughts on where Aura Energy is going and why you think new investors should be looking at Aura Energy. From what you’ve told me today there’s a lot of things that you’re going to be doing.
Peter Reeve: Primarily start with what we’ve got in Tiris. We’re putting together a very interesting chart just comparing the CapEx on our project, it’s C1 cash cost and the All In Sustaining cash Cost (OTC:ASIC) against our market cap. There is no doubt about it. We are the most undervalued of the junior mining companies in this Uranium space with a development project, with the low capital and with the low OpEx.
For me, there’s three things. The low CapEx means the project’s doable and the low OpEx means you’ll make cash flow and the low market cap means we’ve got room for the share price to go up.
So that’s a good enough reason for any shareholder. If they can believe that we will deliver what we say we are, that’s a good enough reason for the shareholders to get in. Then add on to it that if we do an IPO and we retain 70%-80% of that, we’ll get an independent counter attributed into our share price. That’s number two.
And then number three, when we discover a 3Moz deposit on the greenstone belt in Mauritania, everybody will want to own our shares. So that’s going to happen as well.
Matthew Gordon: I appreciate your time. That was a great first introduction to your company. I know the guys on Twitter are going to be really happy about the fact that we’ve spoken. Please stay in touch. Keep us up to date with how things are moving, perhaps later in Q4. Thank you very much.
Peter Reeve: Thanks for the time.
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