Fission Uranium Chairman and CEO Dev Randhawa discusses the uranium market and growing worldwide demand for nuclear power.
At the International Metal Writers Conference in Vancouver, the Investing News Network caught up with Fission Uranium (TSX:FCU) Chairman and CEO Dev Randhawa to talk about the uranium market.
Randhawa said that while a lot of people don’t like uranium, the world will need about 150 percent more energy over the next 10 to 12 years, and nuclear is the only source of carbon-free base load power.
He commented that Fukushima did not stop demand for nuclear reactors, and more continue to be built; however, the disaster did change how utilities buy uranium. Randhawa explained that uranium prices are down because utilities are buying uranium in shorter two- to three-year contracts instead of buying five to 10 years in advance.
By 2020, many uranium contracts will be uncovered, and utilities should begin arranging deals to renew their uranium supply. Randhawa hopes that investors will learn to be contrarian because uranium prices are hovering around $20 per pound, and running a profitable mine requires $60 uranium. “Sooner or later that has to switch,” he said.
The transcript for this interview can be found below.
INN: Talk to me about uranium. What are you hearing most at the conference right now?
DR: It’s not a metal people love. Like gold has conspiracy people and everything else. Uranium is the metal people don’t like but at the same time the world needs energy. What we need today and another 12 years they’re going to need 150 percent more. I’m not against renewable. I just think you need nuclear energy to continue to be a part of that mix. It continues to be the only carbon free base load power – base load means when we all go home at night we want to turn on our fridges our TVs all at once, which means you have to be able to dial it up and uranium, nuclear power is the only one that can do it and so that’s number one.
Number two for us most of the questions asked here are: ‘If you’re building more reactors than ever now why is uranium prices down?’ And I believe based on smarter people than me who say for example, if it costs $60 an average for a mine to go out and the price is $20 you’re going to lose money. So why isn’t the price sixty versus– you know right now it’s at $20 because what happened is what determines price is supply and demand. People who are buying the uranium are not no longer buying it five 10 years ahead. They’re buying it two or three years ahead. They’re not worrying about what the future brings. So as a result, Fukushima did not stop to demand of nuclear reactors – in fact more reactors never being built. What it changed was the buying cycle of utilities instead of buying five 10 years in advance, now it’s only like two three years. So that’s the fundamental problem we have why uranium is $20 versus not being higher.
INN: Do you think that that will change and there will be longer contracts in the future?
DR: I hope so but hope is not exactly a strategy you can have as a company. So what we did is we went to a went to a number of groups, and we finally come to terms with a Chinese company a very large billion dollar company an SEO from the central company in China called CGN. They gave us $82 million for 20 percent of our company and that money will last us another three to four years. We’re counting on less than brilliant markets. Now that’s the worst scenario. See what happens is in about 2020 you’re going to see lot of contracts that are uncovered meaning people need uranium in fact the next 10 years is over 800 million pounds uncovered – meaning they need them but they haven’t arranged for it yet. In the past they would have but not now. So that may change what we’ve planned so that if it doesn’t happen and we have enough money. We hope they wake up but again hope’s not a strategy so we have to plan for that. And that’s what we’ve done we raise the central company in China as it gave us $82 million for 20 percent of our company.
INN: Because I I’ve been hearing that that’s where a lot of the demand is coming from countries in India and China.
DR: Saudi Arabia, middle– It’s really funny countries that are very serious about preparing– now put their finger up and see where the political winds go. They’re going hard nuclear. All they want to do is be like America. 20 percent of the power from electrical needs comes from nuclear and so that’s America. That’s kind of the model. China wants to get there. Saudi Arabia wants to get there. So it’s funny home that cheap oil is building reactors which should be a bit of a light ball for investors but unfortunately a lot of investors are not contrarian enough. I was told if you want to make real money in this life be a contrarian or a victim. I have made my money by being contrarian. If oil is down I’ll buy an oil stock. If silver is running I sold my silver that’s all I am I don’t think I can change.
INN: What’s happening with your company right now? What are some of the interesting developments?
DR: We’ve tested about two three conductors. We have a 100 on our project. So we’re going to continue to test conductors. Our property itself is more than enough to keep us busy for a long time. Secondly, we’re finding cheaper, cheaper, ways to do as much drilling at a lower cost. So we believe conserve our cash, continue to be aggressive yet not blow our brains out.
INN: Is there anything else you want to talk about?
DR: No. I hope investors will learn to be contrarians and not follow the sheep. Like Rick Rule says he bought a bunch of companies when uranium was low. The worst case return was 22 to one so every dollar you put in was $22. And if you look at it think about it some were 50 to one there was a company called Paladin for one cent went to $10. How much do you have to buy to retire? So don’t chase whatever is in momentum, buy good quality companies that are cashed up with good management and contrarian plays. And right now you can find something more contrarian with the average cost, are running a miner on $60 and the price is $20. So sooner or later that has to switch.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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