Latest / Kitco MINING / Uranium Prices Remain Too Low as NexGen Advances Rook I | Travis McPherson

Transcript

Uranium Prices Remain Too Low as NexGen Advances Rook I | Travis McPherson · Kitco MINING

• 0:05
  SPEAKER_00: Hello and welcome to Kitco Mining with me, Paul Harris.
• 0:08
  SPEAKER_00: Today is Thursday, October the 15th, and we are talking about uranium.
• 0:12
  SPEAKER_00: Joining me now is Travis McPherson, Chief Commercial Officer of NextGen Energy.
• 0:17
  SPEAKER_00: Travis, welcome to Kiko.
• 0:20
  SPEAKER_01: Yeah, thank you for having us.
• 0:21
  SPEAKER_01: We're uh very excited to be here and happy to talk about NextGen.
• 0:25
  SPEAKER_00: Excellent.
• 0:25
  SPEAKER_00: I'm looking forward to our conversation.
• 0:27
  SPEAKER_00: 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.
• 0:33
  SPEAKER_00: NextGen, of course, you've reached a major inflection point this year with your Rook One project.
• 0:38
  SPEAKER_00: 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.
• 0:48
  SPEAKER_00: 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.
• 0:59
  SPEAKER_00: But uranium equities have generally failed to sustain a comparable re-rating.
• 1:05
  SPEAKER_00: 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.
• 1:16
  SPEAKER_00: Um, are these prices sufficient to incentivize the new production that the market will require to fill in this forecast reduction deficit?
• 1:27
  SPEAKER_01: Yeah, no, it's uh the short answer is no.
• 1:30
  SPEAKER_01: No, we're not.
• 1:31
  SPEAKER_01: Um we're nowhere near where we need to be to incentivize uh new production and frankly, even sustain existing production.
• 1:39
  SPEAKER_01: Um, so we've got a long way to go for sure.
• 1:42
  SPEAKER_01: As you point out, uranium prices have risen uh materially.
• 1:46
  SPEAKER_01: They are at you know multi-decade highs, but you know, they're they're still not high enough.
• 1:52
  SPEAKER_01: 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.
• 2:05
  SPEAKER_01: So there's not many commodities in the world that the commodity price 5x is and supply stays flat.
• 2:11
  SPEAKER_01: There's a couple of reasons for that.
• 2:13
  SPEAKER_01: 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.
• 2:34
  SPEAKER_01: So uh now that's coming home to roost.
• 2:37
  SPEAKER_01: 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.
• 2:49
  SPEAKER_01: Okay, miners, go go get it for us.
• 2:51
  SPEAKER_01: 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.
• 2:58
  SPEAKER_01: And so it just takes time uh to to do it.
• 3:02
  SPEAKER_01: 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.
• 3:22
  SPEAKER_00: Now, Travis, I mean, this is interesting because the the uranium supply deficit that's been predicted or forecast for several years.
• 3:29
  SPEAKER_00: Um, to what extent are the utilities concerned about future availability?
• 3:34
  SPEAKER_00: 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.
• 3:45
  SPEAKER_00: 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?
• 3:58
  SPEAKER_01: That's exactly right, Paul.
• 3:59
  SPEAKER_01: Um they are getting concerned for sure.
• 4:02
  SPEAKER_01: Um look, it's always a uh I would say it takes longer than people think sometimes to psychologically change.
• 4:09
  SPEAKER_01: 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.
• 4:27
  SPEAKER_01: So we've got to make a 180-degree turn here.
• 4:30
  SPEAKER_01: So it is definitely happening.
• 4:32
  SPEAKER_01: 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.
• 4:42
  SPEAKER_01: So, you know, the the the industry understands where this is going.
• 4:46
  SPEAKER_01: And as you point out, it is an industry that you know is is based in in uh in the future, so to speak.
• 4:52
  SPEAKER_01: So utilities aren't looking at necessarily uh uranium demand tomorrow, they're looking at it kind of in the next few years.
• 5:01
  SPEAKER_01: 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.
• 5:18
  SPEAKER_01: 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.
• 5:29
  SPEAKER_00: 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.
• 5:39
  SPEAKER_00: 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.
• 6:04
  SPEAKER_00: How do you how are these things changing the pictures?
• 6:08
  SPEAKER_01: 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.
• 6:15
  SPEAKER_01: 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.
• 6:36
  SPEAKER_01: Um, so that is a reality.
• 6:38
  SPEAKER_01: But the important thing here is even if you axed all of that overnight, you still have this massive supply deficit.
• 6:46
  SPEAKER_01: 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.
• 6:57
  SPEAKER_01: 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.
• 7:07
  SPEAKER_01: And and so it really has shone a light on nuclear at large.
• 7:11
  SPEAKER_01: 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.
• 7:21
  SPEAKER_01: 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.
• 7:29
  SPEAKER_01: Um, and so uh that's really what it's based on.
• 7:34
  SPEAKER_00: 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.
• 7:47
  SPEAKER_00: That's obviously the perfect storm for a developer such as NextGen.
• 7:52
  SPEAKER_00: Um, the company's contracted more than sort of 10 million pounds of uh annual supply, I believe.
• 7:58
  SPEAKER_00: How much production do you want to contract before that first output?
• 8:02
  SPEAKER_00: Because I imagine as you get closer to that 2030, the indication is prices are going to be higher.
• 8:06
  SPEAKER_00: So you're balancing you know a bird in the hand today, perhaps two, three, or four in the hand tomorrow.
• 8:13
  SPEAKER_01: Yeah, no, exactly.
• 8:14
  SPEAKER_01: 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.
• 8:22
  SPEAKER_01: 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.
• 8:35
  SPEAKER_01: 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.
• 8:52
  SPEAKER_01: Um so what does that practically mean?
• 8:55
  SPEAKER_01: It means we will continue to remain patient.
• 8:57
  SPEAKER_01: 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.
• 9:12
  SPEAKER_01: 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.
• 9:25
  SPEAKER_01: 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.
• 9:38
  SPEAKER_01: 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.
• 9:48
  SPEAKER_01: Um, again, to be very clear, the world wants all of our production and more, and they want it sooner.
• 9:54
  SPEAKER_01: 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.
• 10:02
  SPEAKER_01: 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.
• 10:15
  SPEAKER_01: We're basically gonna do sign contracts as they make sense to us as we continue to develop.
• 10:21
  SPEAKER_01: Um, and uh and then once we start to produce, uh we'll make sure that we optimize uh what we have.
• 10:30
  SPEAKER_00: Thank you, Travis.
• 10:31
  SPEAKER_00: 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?
• 10:41
  SPEAKER_00: And if if I may, I want to give a use a parallel for copper concentrates.
• 10:45
  SPEAKER_00: In the past, copper concentrates were negotiated on multi-year contracts, maybe three-year contracts.
• 10:51
  SPEAKER_00: Now they're very much one-year contracts at best, maybe even six-month contracts, um, and they're becoming less opaque.
• 10:59
  SPEAKER_00: Is something similar happening in the uranium space?
• 11:03
  SPEAKER_01: Yeah, 100%.
• 11:04
  SPEAKER_01: And and it's really, you know, uh been driven by us as a new entrant with this project coming in.
• 11:11
  SPEAKER_01: 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.
• 11:19
  SPEAKER_01: It's a good thing.
• 11:20
  SPEAKER_01: 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?
• 11:34
  SPEAKER_01: 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.
• 11:57
  SPEAKER_01: And um and so uh as you point out, every commodity has effectively evolved into a more liquid, transparent, clear market.
• 12:09
  SPEAKER_01: That like go back to the standard oil days.
• 12:12
  SPEAKER_01: Uh you brought up an example with copper, you know, natural gas in Europe, iron ore, uh about 25 years ago.
• 12:20
  SPEAKER_01: 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.
• 12:31
  SPEAKER_01: And uh, and that's our focus for sure, is to do that.
• 12:34
  SPEAKER_01: Now we can't flip a switch and do that overnight.
• 12:37
  SPEAKER_01: And so, you know, phase one is to shorten those the duration of those contracts.
• 12:42
  SPEAKER_01: 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.
• 12:54
  SPEAKER_01: 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.
• 13:01
  SPEAKER_01: Um we're not gonna do that.
• 13:04
  SPEAKER_01: 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.
• 13:25
  SPEAKER_00: Thank you, Travis.
• 13:26
  SPEAKER_00: 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.
• 13:36
  SPEAKER_00: What what commercial impact has that had?
• 13:38
  SPEAKER_00: Um, them being able to sort of come in and basically soak up the uh soak up product.
• 13:45
  SPEAKER_01: 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.
• 13:53
  SPEAKER_01: 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.
• 14:10
  SPEAKER_01: And once they do rise, then utilities are willing to uh to buy buy uranium again.
• 14:15
  SPEAKER_01: So yeah, it's it's been a positive thing.
• 14:18
  SPEAKER_01: 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.
• 14:33
  SPEAKER_01: But from a fundamental perspective, like it's not like real demand, meaning it's not a material amount of actual demand.
• 14:40
  SPEAKER_01: Like the industry consumes about 200 million pounds of uranium every year in nuclear reactors around the world, which is just growing.
• 14:49
  SPEAKER_01: Um and uh and and so what they buy is not, you know, against that backdrop is not material.
• 14:56
  SPEAKER_01: But um, as I said, it's been important for um adding that liquidity and transparency to the price.
• 15:05
  SPEAKER_00: Thank you, Travis.
• 15:06
  SPEAKER_00: 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.
• 15:14
  SPEAKER_00: You've got the you know supply constraints, you've got rising prices.
• 15:18
  SPEAKER_00: 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?
• 15:27
  SPEAKER_00: Why aren't they expanding and rising because of this?
• 15:31
  SPEAKER_01: Yeah, no, and it's a fair question.
• 15:33
  SPEAKER_01: 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.
• 15:44
  SPEAKER_01: And so what we've seen is a high correlation with the AI basket um uh in terms of equities.
• 15:51
  SPEAKER_01: 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.
• 16:06
  SPEAKER_01: 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.
• 16:15
  SPEAKER_01: 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.
• 16:28
  SPEAKER_01: It certainly isn't.
• 16:29
  SPEAKER_01: 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.
• 16:38
  SPEAKER_01: I mean, that's a you know 30 percent divergence.
• 16:42
  SPEAKER_01: Um, and uh and the fundamentals, as we've talked about, have not uh deteriorated at all.
• 16:48
  SPEAKER_01: In fact, quite the opposite, they've just continued to improve.
• 16:51
  SPEAKER_01: Um, so from our perspective, what an opportunity.
• 16:56
  SPEAKER_00: Absolutely.
• 16:57
  SPEAKER_00: Now, when uh Rook One comes on stream, that's gonna be what 30 million pounds a year.
• 17:01
  SPEAKER_00: Uh in a 200 million pound market, that's what a 15% increase in the market.
• 17:06
  SPEAKER_00: 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?
• 17:18
  SPEAKER_01: I don't think so.
• 17:19
  SPEAKER_01: Um, you know, again, based on a couple of factors.
• 17:22
  SPEAKER_01: One is just the the mathematical reality of where we are, where you know, today we need two arrows today to fill the deficit.
• 17:30
  SPEAKER_01: By 2035, it's estimated about a hundred million pound annual deficit.
• 17:35
  SPEAKER_01: 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.
• 17:46
  SPEAKER_01: Obviously, that will never happen.
• 17:48
  SPEAKER_01: Um, and that already does account for arrow coming into production.
• 17:52
  SPEAKER_01: So, no, I don't think so.
• 17:54
  SPEAKER_01: 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.
• 18:01
  SPEAKER_01: 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?
• 18:15
  SPEAKER_01: And uh, and yet they are.
• 18:19
  SPEAKER_00: Fair comment.
• 18:20
  SPEAKER_00: Let's talk a little bit more about Rook One and Arrow.
• 18:22
  SPEAKER_00: Um, as I mentioned earlier, you've entered construction.
• 18:25
  SPEAKER_00: The the CapEx there's what, 2.2 billion Canadian.
• 18:28
  SPEAKER_00: Um, what what phase of uh construction are you at at the moment?
• 18:33
  SPEAKER_00: Where where are you in the build?
• 18:36
  SPEAKER_01: 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.
• 18:56
  SPEAKER_01: Uh uh, there's two shafts that will be syncing.
• 18:58
  SPEAKER_01: 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.
• 19:13
  SPEAKER_01: So uh the team is completely um um uh executing, executing very, very well.
• 19:20
  SPEAKER_01: And you know, I think part of that is is related to two factors.
• 19:24
  SPEAKER_01: One, you know, a seven-year permitting process is a very long permitting process.
• 19:29
  SPEAKER_01: 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.
• 19:42
  SPEAKER_01: Test, you know, people, processes, the project itself physically, um, et cetera.
• 19:48
  SPEAKER_01: 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.
• 20:00
  SPEAKER_01: So um uh that's that's been very important.
• 20:03
  SPEAKER_01: 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.
• 20:16
  SPEAKER_01: 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.
• 20:25
  SPEAKER_01: 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.
• 20:50
  SPEAKER_00: Thank you.
• 20:51
  SPEAKER_00: Uh you you've got a a four-year build ahead of you, more or less.
• 20:54
  SPEAKER_00: Uh, what for for the company are the the greatest schedule and capital risk elements of that build?
• 21:01
  SPEAKER_01: 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.
• 21:12
  SPEAKER_01: There's no way around that.
• 21:13
  SPEAKER_01: However, this project is uh is very, very unique and and advantageous in that again, it's compact, very, very small.
• 21:23
  SPEAKER_01: Um, it's uh hosted within this granite basement rock.
• 21:27
  SPEAKER_01: 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.
• 21:39
  SPEAKER_01: 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.
• 21:59
  SPEAKER_01: 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.
• 22:41
  SPEAKER_01: We did so on the basis of again, hopefully finding something to bring it into construction operations and ultimately close it down.
• 22:49
  SPEAKER_01: 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.
• 23:02
  SPEAKER_01: Um so we've had that very long history and and continuity uh through the entire thing.
• 23:09
  SPEAKER_01: 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.
• 23:18
  SPEAKER_01: Like it's already the best project by miles.
• 23:21
  SPEAKER_01: So we don't need to like gussy it up to make it look better.
• 23:25
  SPEAKER_01: Um, so in fact, we can do the opposite and we can add a lot of conservatism to it, and it's still phenomenal.
• 23:31
  SPEAKER_01: So that behooves us to do that, and we've always done that.
• 23:34
  SPEAKER_01: 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.
• 23:40
  SPEAKER_01: 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.
• 23:48
  SPEAKER_01: 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.
• 23:55
  SPEAKER_01: And now this is all within our control.
• 23:57
  SPEAKER_01: 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.
• 24:07
  SPEAKER_01: So we have every reason to be confident.
• 24:09
  SPEAKER_00: Thank you.
• 24:10
  SPEAKER_00: As mentioned, you'll be producing 30 million pounds per year from 2030.
• 24:14
  SPEAKER_00: Is there a possibility of being able to bring production online uh sooner than that?
• 24:20
  SPEAKER_01: Uh yeah, there's there's opportunities that we're looking at and evaluating um for sure.
• 24:26
  SPEAKER_01: Um, but I think four years we're comfortable with, and and it's a it's a very realistic uh timeframe, you know.
• 24:34
  SPEAKER_01: 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.
• 24:45
  SPEAKER_01: Um but as we sit today, I think four years is is what we're comfortable with.
• 24:50
  SPEAKER_00: Thank you.
• 24:51
  SPEAKER_00: And I mentioned that the capital cost, uh$2.2 billion Canadian.
• 24:55
  SPEAKER_00: A couple of questions there.
• 24:57
  SPEAKER_00: How confident are you you'll be able to deliver that on budget?
• 25:00
  SPEAKER_00: And uh how have you financed the development?
• 25:04
  SPEAKER_01: Yeah, so we haven't seen any uh any material changes to that CapEx number.
• 25:10
  SPEAKER_01: 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.
• 25:38
  SPEAKER_01: 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.
• 26:03
  SPEAKER_01: So that meant that uh dollar for dollar the same um over a two-year period.
• 26:07
  SPEAKER_01: And that's really true across what we've seen so far and what we see into the future.
• 26:12
  SPEAKER_01: So um can we guarantee that we'll deliver the project exactly to$2.2 billion in exactly four years?
• 26:20
  SPEAKER_01: Um no, we can't.
• 26:22
  SPEAKER_01: 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.
• 26:34
  SPEAKER_01: Um, because again, we were the ones that have found this and brought this forward to this point better than anyone seen before.
• 26:41
  SPEAKER_01: There's absolutely no reason why that will change going forward.
• 26:46
  SPEAKER_00: Thank you.
• 26:46
  SPEAKER_00: Now, with the a four-year construction, you're going into that uh sort of shallow part of the Laisson curve.
• 26:52
  SPEAKER_00: Um, four years is a long time to be in that part of the Le Sang curve.
• 26:57
  SPEAKER_00: 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?
• 27:06
  SPEAKER_01: 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.
• 27:21
  SPEAKER_01: Well, they can take their money out of that and put it into something else.
• 27:25
  SPEAKER_01: In uranium, that just doesn't exist.
• 27:28
  SPEAKER_01: There aren't other a bunch of next gens to invest in.
• 27:32
  SPEAKER_01: Uh, and and it's a very concentrated market with very few um you know investable equity equities there.
• 27:40
  SPEAKER_01: So I think that's a big component of it.
• 27:42
  SPEAKER_01: 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.
• 27:53
  SPEAKER_01: Um, but this is a one-of-one and and a very unique situation.
• 27:58
  SPEAKER_01: 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.
• 28:11
  SPEAKER_01: So even if the shape stays the same, you can have it shift up.
• 28:15
  SPEAKER_01: Uh, and and you know, there's lots of examples in the past of that.
• 28:19
  SPEAKER_01: 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.
• 28:33
  SPEAKER_01: 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.
• 28:49
  SPEAKER_01: So that's a big part of it.
• 28:52
  SPEAKER_01: 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.
• 29:04
  SPEAKER_01: 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.
• 29:11
  SPEAKER_01: 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.
• 29:21
  SPEAKER_01: 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.
• 29:32
  SPEAKER_01: Um, and then three and a half kilometers away in that same competent grounds conditions, you have another Aero type project there.
• 29:42
  SPEAKER_01: Well, I mean, you can imagine the types of synergies and benefits you could potentially see there and could potentially be realized.
• 29:49
  SPEAKER_01: 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.
• 30:06
  SPEAKER_01: I think it'll bring it forward.
• 30:08
  SPEAKER_01: 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.
• 30:18
  SPEAKER_00: Thank you, Travis.
• 30:19
  SPEAKER_00: Now you you mentioned some of the milestones that you talked about in September.
• 30:22
  SPEAKER_00: 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.
• 30:32
  SPEAKER_01: Yeah, so the big one will be uh starting the temporary freezing uh for the shafts.
• 30:37
  SPEAKER_01: 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.
• 30:47
  SPEAKER_01: 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.
• 30:56
  SPEAKER_01: So step one, start that freeze.
• 30:58
  SPEAKER_01: Um, that's a big milestone because the sooner we can do that, obviously the sooner we can get underground.
• 31:05
  SPEAKER_01: Uh, the second phase naturally to that will be the freezing ending and the pre-sinking starting.
• 31:11
  SPEAKER_01: That's another major milestone that will happen next year as well.
• 31:15
  SPEAKER_01: And then getting into uh and then getting through that overburden and into the basement rock um is uh is another major milestone.
• 31:23
  SPEAKER_01: 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.
• 31:33
  SPEAKER_01: 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.
• 31:42
  SPEAKER_00: Well, I wish you the best of luck with the build.
• 31:44
  SPEAKER_00: Jerry's McPherson, thank you very much for joining me today.
• 31:47
  SPEAKER_01: Yeah, terrific, Paul.
• 31:48
  SPEAKER_01: Thank you, and thanks to Kitco for all everything you guys uh do and have done for many years.
• 31:53
  SPEAKER_00: Well, thank you very much.
• 31:54
  SPEAKER_00: You're more than welcome.
• 31:55
  SPEAKER_00: And of course, to our viewers, if you like what you see, don't forget to hit that subscribe button.
• 32:00
  SPEAKER_00: I'm Paul Harris, and this is Kitco Mining.