In 2020 @SachemCove presented a "confidential - not-for-distribution" deck on the @MacroVoices podcast. This document has been prepared by Lloyd Harbor Capital Management.
Let's dive in & go back to basics: Math is the Math.
2/22
The document starts off with the prejudiced fear narratives common investors absorb or generate when it comes to investing in this sector.
Please take note of how some of those points are similar to the ones used by @ItsWarrenIrwin in his current #Uranium bear thesis.
3/22
If we pierce through the fear narratives we start seeing the first signs of the #Uranium bull case.
@ItsWarrenIrwin still uses the 2% PA demand growth model. But @FootnotesFirst explains that his models are very conservative & don't include restarts, life extensions, etc.
4/22
The #Uranium Investment Case is based on an exceptional asymmetric risk/reward thesis.
A major dislocation between the math and the narrative in a butchered sector that saw massive investor fatigue from a multi-year downturn.
Most of the companies are not investable...
5/22
Back in 2020, and with @FootnotesFirst's very conservative models, the bull case was already better set up vs the prior bottom.
These models did not include all the new demand increases coming from Japanese restarts, life extensions & massive new global build programs.
6/22
The March 2011 Fukushima disaster was the main cause of demand destruction in the previous cycle.
But other factors, like Kazakhstan ramping up production, and Cameco bringing on significant supply in 2014 into an oversupplied market, also contributed to aggravating it.
7/22
Since Q4 2016 bottom up to Q3 2020 when this deck was presented @SachemCove already viewed how a few years made a huge difference in the supply vs demand model.
At this point in time in 2023 we could basically say we have now completely swung 180 degrees.
8/22
Narrative vs the Math. Mike Alkin hammers on this a lot. The narratives are stories not always supported by maths.
His advice: Ignore the narrative, mine the arithmetic gap.
We, as shareholders, should mine that arithmetic gap without getting "mined" by the companies ๐
9/22
Back in 2020, @SachemCove's models predicted that $KAP production would peak in 2023. They were not that far off as it seems it might even have peaked in 2022. Their revised forward guidance shows they will not be able to ramp up and are decreasing production expectations.
10/22
And the $KAP production peak squares with its capital spending plans.
@ItsWarrenIrwin keeps repeating that $KAP will be able to ramp up production whenever they like, but the forward-looking expectations & capital spending plans disagree with him. The Math is the math.
11/22
If you don't believe Mike Alkin's data models regarding $KAP's #Uranium production, read the words from Kazatamprom themselves...
Remember, this was well before Japanese restarts, multiple life extensions, SMRs & enormous new build programs recently announced by the DOE.
12/22
This used to be the future deficit outlook of the supply/demand if LT #U3O8 prices stay below $45. It included Cigar Lake online in 2020 & $KAP at FULL production.
It did not include higher inflation = higher incentive price + increased demand.
#Uranium price is EVERYTHING, don't confuse costs with required selling prices.
"Oh yeah, of that ~140Mlbs with AISC below $50, 23Mlbs are on care & maintenance, and another 3Mlbs depletes within a couple of years."
15/22
Many proponents of the bear thesis only cite new mine builds, but #Uranium mines don't last forever. And the further along they are in time the higher the costs to mine the ore. In their deck, @SachemCove covers the production cuts & planned closures of current producers.
16/22
Many bear thesis proponents point towards $NXE's production start as a catalyst that might saturate the supply side, but none of them mention the Lbs that permanently go offline due to depletion.
If $NXE goes online in 2029/2030.
Cigar Lake goes offline at the same time.
17/22
Only higher LT prices can solve the staggering deficits caused by contracting apathy. The risk has transferred from suppliers to nuclear utilities.
Remember, this was before the Ukraine war, the Energy Crisis, the Nuclear Renaissance, restarts, life extensions, SMRs, etc.
18/22
@SachemCove & @FootnotesFirst models showed that LT contracting had to start soon again as it had fallen below consumption in 2013 and never got above again.
In 2022 we started a new LT contracting cycle which started at the highest #Uranium price starting point ever...
19/22
All of this while Global #Uranium deliveries were declining precipitously & incentive prices have gone well above $50lbs due to higher inflation since 2020 QE & low rates environment. Let alone the Ukraine war bifurcation which will keep playing a role in #U308 deliveries.
20/22
In 2020, pre-Ukraine war & Energy Crisis, this @sachemcove deck stated that Utility security of supply was low. It is way lower now.
Mike Alkin & Co thought that history will at least rhyme with the previous cycle. Remember, this was in 2020...
Rhyme, repeat, or beat?
21/22
Remember, 2.3 years #Uranium inventories won't bail utilities out this time. Not in a high supply risk phase.
@AtomicCorp announced that the Credit Committee meeting to review the #DASA funding opportunity has been postponed, much to the disappointment of many. But why? What are the options if this becomes unviable?
2/10
The press release ended up creating more confusion than providing clarity. $GLO is in constant contact with the banks involved, but at the last minute, there were new questions that needed answers? Questions related to what exactly?
3/25
Some people suggest that is how banks work. If they do not like the project anymore, they delay until the project owners walk away themselves. Banks don't want to be seen denying projects. I can understand this from a commercial bank perspective. Butโฆ
On May 1, I applauded @NexGenEnergy_'s compensation strategy for not adopting RSUs. But everything has changed since then.
This thread will reveal @leighcuryer's sophistic deflection tactic when responding to questions about RSUs.
/2
In the 2023 MIC, $NXE specifically mentioned #RSUs. They considered that RSUs:
1. Can be dilutive 2. The markets might view it negatively 3. Are not tied to stock performance
(Note: RSUs can be granted by issuing new shares or using treasury shares. More on this later on.)
/3
Browsing the 2024 MIC, I was surprised to read that @NexGenEnergy_ plans to adopt the "2024 LTI Plan," which includes RSUs, PSUs, and DSUs. Surprisingly, instead of using newly issued shares for these grants, the company intends to buy them on the open market.
Since most people misunderstood the intentions of my earlier post regarding $DNN & $NXE's ๐จ๐ฆ CEO's CFA curriculum and lack of expertise in building and running novel #uranium mines, let me try a bit harder to convey my thoughts.
/1 ๐ธ
/2
The CEO of a junior miner is akin to a ship's captain, responsible for steering the vessel & ensuring the crew works in harmony. They oversee the entire operation, fostering effective communication & collaboration among departments like geology, engineering, and metallurgy...
/3
...Much like a captain, he ensures coordination among the ship's crew to avoid conflicts and ensure smooth sailing. The CEO addresses operational challenges and resolves conflicts within the team, balancing technical realities with economic goals to keep the ship on course.
I had to cut the previous thread short due to technical & time issues, failing to address some final observations & conclusions. Let me first summarize the inconsistencies & contradictions I observed.
Leigh admitted they could have bought #uranium earlier, confident in rising prices, but didn't convincingly explain the delay. Instead, he deflected by claiming their purchase astutely avoided driving up the spot market price, which wasn't even a concern raised by anyone.
/3
Travis McPherson's statement that "there's no urgency" contradicts taking on debt to buy uranium now. His broad and vague explanation of optimizing contracts and sale prices, especially given market-related strategies, adds to the confusion.
Why did they purchase #uranium with debt? Did they provide coherent and consistent reasons? Are @NexGenEnergy_'s @leighcuryer & @travmcph as astute as they claimed on the call, or is this management team -at best- incompetent?
2/22
Leigh Curyer mentions during his remarks that the procurement of 2.7 Mlbs of #uranium "now is logical, given our stage of development in approaching final permitting."
Greenfield developers should logically procure supplies when approaching final permits?
3/22
Leigh Curyer explains that this #uranium purchase "shows utilities @NexGenEnergy_ has their back and is a responsible, reliable supplier," and understands their risks.
Reason #Greenfield developers should support utilities and respect their risks.
In this thread, I'll share my initial findings on a matter related to @NexGenEnergy_. I'll provide facts, make assumptions, and draw some connections. Please note that Iโm not a mining engineer or an environmental regulatory expert. DYOR.
2/25
I've only scratched the surface, so keep that in mind. There's still a lot of material to go through, but I felt compelled to share my preliminary findings because I consider this information material for shareholders.
Let's begin with...
3/25
The notorious Mount Polley Mine ๐จ๐ฆ tailings disaster. On August 4, 2014, the tailings dam failed, releasing 25 million cubic meters of wastewater and tailings into Polley Lake. It remains the largest environmental disaster in Canadian history.