Interview with Roger Lemaitre, President and CEO of Uranium Explorer, UEX Corporation (TSX:UEX).
UEX Corporation is a TSX-listed Canadian junior exploration company with a portfolio of 21 projects (yes you heard that right) in Saskatchewan’s Athabasca Basin. UEX's central focus is on opportunities that present themselves in the uranium exploration sector and the cobalt-nickel market.
Cobalt AND uranium? Most wouldn't envy the position Lemaitre finds himself in, but this is the reality of mining management. Sometimes the market just turns against you, but Lemaitre's job is to protect shareholder's interests from the bear market.
UEX's share price has remained largely stagnant during 2019. It started the year at CA$0.17, rose to a peak of CA$0.20 in June before falling to today's price of CA$0.12. UEX has a market cap of CA$47.30M. Low trading volume and this downwards trajectory can be attributed to spot price performance, but what is Lemaitre doing to get things back on track for investors?
UEX has been working on its West Bear cobalt-nickel project. Long-term the goal is to move it outside of UEX via a spin-off or a new partnership. However, until there is a degree of sustainability in the cobalt price, and it rises to an economical level, UEX has no intention of letting go of it. UEX has spent around CA$5M in the last year to build out the resources to try to add value, but we have question marks against this decision. Why not just hunker down given this dead market? Is this an instance of poor judgment, and could this money have instead been used to protect shareholders from dilution? Why aren't they just doing what most other uranium juniors are and hunkering down? Lemaitre justifies the decision given what he claims to be a cobalt 'supply shortfall.'
As usual, Lemaitre claims investors are buying into both the macro story, the quality of the portfolio and the team. However, one would have to question the prudence of maintaining 21 assets in such a tough market. Would UEX have more success streamlining, reducing overheads and obligations, and waiting it out to ensure their survival? Investors won't be happy if their sole intention is to keep going to market, causing dilution, and not using the money wisely. However, Lemaitre is adamant the diversity of the portfolio is one of UEX's preeminent strengths. Having so many projects at different stages of development and exploration gives something undoubtedly important to UEX: options. Perhaps investors are buying into UEX because surely something has to go well in this diverse portfolio? However, options are only useful if utilised wisely, and if they aren't excessive. We will continue to follow how this pans out.
UEX raised CAD$1.5M on the open market in December with flow through and had c. CA$5M in September. They now sit on CA$3.5M. UEX has been conducting drilling programs with this expenditure, and claims the money will be enough to see them through to the end of the year with some 'modest investments.' Watch this space.
Investors shouldn't expect to see price discovery until utility companies decide to replenish their reserves with new material, but when will this be? Spot price and level of reserves seemingly have an inverse relationship to one another, but some speculators state all that is really needed is a sentiment shift. The only thing that is definite is that UEX will need some fairly sizeable movement soon if they want to deliver on shareholder expectations, or even survive.
What did you make of Lemaitre? Are UEX making sensible decisions? What do you expect from the uranium and cobalt markets in 2020? Comment below and we may ask your question in the near future.
And a free Crux Investor mug to the first person to guess the song featured in the title of this video! (One mug per person)
00:00 - Introduction
1:40- Company Overview
2:30 - The Cobalt Side: Discussing the Market, What They Have and Reasons for Spending Money in a Dying Market
9:54 - Investors and Share Price: What are People Buying into?
12:21, 16:13 - Uranium Assets: Why Maintain 21 Assets? Which Ones are They Focused on?
13:57 - Cash Position
21:11 - Overheads, Hunkering Down and Future Strategy: When Will We Start Seeing Value Generation?
28:30 - The Uranium Market: Who's Getting it Right and Who's Struggling?
31:12 - Present Cycle: Will We See a Replica of the Last Cycle?
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