Scott Melbye: "It’s a Very Exciting Time to be a US Uranium Producer"

Scott Melbye of Uranium Energy discusses uranium mining in the US, touching on projects, political support and market demand.



The Trump administration is “very pro-American, pro-energy security,” Scott Melbye, executive vice president of Uranium Energy (NYSEMKT:UEC), said last week. “Nuclear is not just part of the mix in [US] energy policy going forward, it’s a priority.”
Melbye had just returned from a visit to Washington with company CEO Amir Adnani, and he took the time to speak with the Investing News Network at the Sprott Natural Resource Symposium.
In addition to discussing the future of nuclear energy in the US, he touched on the company’s projects. UEC’s core operations are in South Texas, and are centered on the Hobson processing plant, which can process 2 million pounds per year of uranium. UEC acquired the plant from Uranium One during the financial downturn, and the plant is located close to the firm’s five uranium deposits.
One of those deposits is Burke Hollow, where UEC recently extended its drill campaign. A total of 94 holes have been drilled at Burke Hollow and an estimated 30 holes are planned. The firm’s latest acquisition is Reno Creek, which it purchased to advance its “footprint” in Wyoming.
Speaking about the uranium market itself, Melbye said that operating in a bear market has “required a lot of patience.” However, he believes that the market hit bottom in November 2016, when prices reached about $17 per pound. As of July 24, prices were at $21.50.
Lower prices have led to production cuts, and Melbye believes that as utilities companies renew their supply contracts, “we’re going to have an industry that is going to suffer from underinvestment and very long lead times to respond once prices recover. As an investor, it’s a great investment thesis because … we’re in for some very volatile upward movement in uranium prices once that does start to occur.”
The transcript for this interview can be viewed below.

INN: I was just wondering if you can tell me a little bit about Uranium Energy and how it got started.
SM: Uranium Energy Corp is a company founded by Amir Adnani about 12 years ago now on the premise of looking at picking up undervalued assets in commodity downturns and derisking and preparing those assets for production when prices ultimately recover. The company, over the 12 years, has really grown the asset base but the real core of UEC continues to be in South Texas. We have the Hobson Plant, south of San Antonio. It’s 2 million pound a year plant that we acquired for probably around $10 million. It’s a $100 million plant we acquired from Uranium One during the financial downturn. That’s the core of the hub and the hub and spoke that we deploy in Texas. The spokes are the five deposits within 50 to 100 miles of the Hobson Plant so about 18 million lbs of resources. It’s a very simple business model. It’s ISR mining, environmentally-friendly, and low capital cost, low operating cost way to extract uranium from sandstone ore bodies.
INN: I noticed the in-situ recovery. Can you talk a little bit about it?
Scott: ISR has been around for a number of years and in fact, it was really developed in South Texas but I really see it as really a disruptive technology in that maybe similar to the way fracking unlocked a lot of uneconomic ore bodies. A lot of uranium deposits in the western United States either were mined by conventional means or were intended to be mined by those methods. Given the ore grades, they tended to be more high cost operations and so really suffered from competition from Saskatchewan, Canada, Kazakhstan and elsewhere. What’s happened with in-situ recoveries, we’re able to go back into these very same ore bodies and using this non-intrusive mining method to go in with again the very low capital cost, operating costs and be competitive on a world scale. In South Texas, we’re not a large producer but we have a 2 million lb a year capacity. We’d like to also advance our footprint in Wyoming. We just are closing on our latest acquisition called Reno Creek that for very minimal dilution, we’re able to increase our resource base dramatically and get a foothold now in one of the other most prolific uranium producing regions of the United States.
INN: I noticed that. There’s a lot of uranium projects going forward in Wyoming.
SM: Wyoming and Texas, uranium production in the United States is scattered amongst four or five states, Nebraska ,Wyoming, Utah, Colorado, Arizona, Texas but we really like Wyoming and we like Texas. One because the geology is great. They are the rural front sandstone deposits are extremely amenable to this ISR process. There’s great infrastructure, established roads, support facilities. You’re not out in the middle of the wilderness somewhere trying to put in all the infrastructure yourself. There’s plenty of workforce and talented skilled workforce coming from oil and gas and uranium mining and the regulatory process, which can always improve and I think is improving under the Trump administration but at least the regulatory process in Texas and Wyoming is somewhat predictable. It’s too long but it’s predictable and we see that really improving in the coming administration.
INN: Uranium Energy had some recent news. On the 25th of July, there was 94 drill holes completed and the expansion of the Burke Hollow ISR project into September.
SM: It’s an exciting story because a lot of the uranium deposits that companies are developing today are really deposits that were discovered in previous exploration cycles. Some going back into the 70s and 80s. But Burke Hollow represents a new discovery. Our company went into this 20,000 acre ranch and initiated our own drill programs and discovered the initial deposit, which extended about just under two miles of strike length. This drill program which was done very economically and very smartly in terms of spending that capital wisely. We’ve been able to extend that trend close to seven miles in strike length. For us, that’s going to be a very major producer. It is all essentially permitted. We have one last radioactive materials handling permit which is the most minor of permits to receive in the process and then we have three fully permitted projects in south Texas that can feed the Hobson Plant.
INN: And so inevitably, the question comes down to the price market. Uranium prices have been low for some time now. What’s your thoughts on the future projections?
SM: It’s required a lot of patience for those of us in the industry and uranium investors, the bear market that really started with Fukushima and has lasted now close to seven years. I think we saw the bottom of that cycle in November of last year where prices got down around $17 dollars a pound. We’re up at about $20 to $21 a pound today which is still very low and what’s important is that’s below the all in cost of most global production today. So any economist would look at that and say, this is an unsustainable situation. We would agree. The only reason we haven’t seen more recovery in the price to date even though we’ve had such poor uranium prices, you would normally see a lot more production cutbacks coming during a period like this but a lot of global production has really been protected by higher price contracts that were signed in previous cycles. What’s happening now though is these contracts are falling off. The producer has higher production costs that might be $50 or $60 or higher. They’re now looking at selling at $20 or $30 a pound and so the decision to cut back or shut in production, there’s no question. So that has really been the story in the last 18 months.
We’ve seen about 17.5 million lbs of production cut backs. Everything from Cameco (TSX:CCO,NYSE:CCJ) in Saskatchewan, Canada, the United States, Niger in Central Africa. The Areva (OTCMKTS:ARVCF) mines have cut back 15 percent. Paladin at Langer Heinrich and then the big production cut that was announced by Kazakhstan, 10 percent cut to the world’s largest uranium producing country in January of this year. So that’s what needs to happen. I think there needs to be additional cuts that can and should occur to bring the market in balance but we’re going to see a situation where demand is increasing now at record levels in terms of new reactors coming online around the world and we’re going to have an industry that’s going to suffer from underinvestment and very long lead times to respond once prices recover. So as an investor, it’s a great investment thesis because I think we’re probably in for some very volatile upward movement in uranium price when that does start to occur.
INN: And how has uranium energy been able to weather the challenges of this low price environment?
SM: Well, our strategy as an unhedged producer has to be very different than a lot of our peers in that if we are not going out and hedging our sales forward because we intentionally do not want to cap the upside firm investors but the downside to that is when markets are tough as they have been, you have to have the discipline to shut in production and so we did that at the Palangana Mine in South Texas where we brought it into production. We had great results, technical and economic results of the mine but we had the discipline to shut it in and keep the pounds in the ground, which will sell into a better market going forward. Because we’re not in a full operating mode, we can really keep our cash expenditures at a very low level. Our operations as it is require a lot of contractor help so our staff and workforce can be kept at minimum levels and really the major cash burn that’s occurring in the company for us right now is just really at Burke Hollow with the permitting licensing process and the drilling program that we just discussed. Again, it’s watching the cost side of the equation, keeping your cash expenditures down, but continuing to advance and derisk the assets so they’re ready to produce and generate revenues very quickly when prices recover.
INN: I’m pretty much out of questions. Is there anything else that you wanted to add that we didn’t touch on?
SM: I think Amir Adnani and myself, we just returned from Washington DC where we met with the Trump administration, particularly the Secretary of Energy and the administrator of the EPA and I think it’s a very exciting time to be a US uranium producer like ourselves when we now have an administration that’s very pro-American, pro-energy security. They’re promoting a very diverse energy source. Nuclear is not just part of the mix in our energy policy going forward, it’s a priority so we were very encouraged by steps that EPA and DOE can take to promote both nuclear energy in the United States and support a strong domestic uranium mining industry.
Don’t forget to follow us @INN_Resource for real-time news updates!
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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Australia is the second largest producer of uranium in the world. Here's a look at the mines that are producing today, and the significant ones that are being developed.

Despite sitting on the largest known recoverable resources of uranium worldwide — 1.69 million metric tonnes in 2019 — Australia uses no part of it for energy. Instead, Australia exports the valuable resource, which accounts for one-quarter of its energy exports.

In fact, Australia was the second largest producer of uranium in 2020, producing 6,203 metric tonnes. It was only beaten by Kazakhstan, which produced nearly 20,000 metric tonnes that year.

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Catch up and get informed with this week's content highlights from Charlotte McLeod, our editorial director.

Top Stories This Week: Powell Gets Fed Nomination, Using Gold in a Market Correction youtu.be

We're back after a break last week with quite a bit to cover in the gold space.

After running up past the US$1,860 per ounce mark midway through November, the yellow metal has taken a tumble. At the time of this writing on Friday (November 26) afternoon, it was sitting just under US$1,790.

Gold's losses this week have been attributed to elements like a stronger US dollar and better Treasury yields, although Jerome Powell's US Federal Reserve chair renomination has pulled other factors into play — some market watchers believe he may move to taper and raise interest rates faster than anticipated.


If the Fed follows its previously laid out timeline for tapering, it will wrap up in mid-2022; the central bank has said it won't raise rates until after that. It has also emphasized that its roadmap may change if necessary.

Looking at the larger picture for gold, I heard recently from Nick Barisheff of BMG Group, who believes the stock market is due for a major correction.

"The market is due for a major correction. What will cause it and when it will happen is anybody's guess — it could be tomorrow, it could be six months from now" — Nick Barisheff, BMG Group

It's impossible to know when this correction will happen, but Nick emphasized the importance of acting before it's too late. He pointed out that investors are typically slow to get out of the market once a crash actually begins — they wait for a turnaround, and by the time it's clear there won't be one, they've experienced big losses.

In his opinion, the solution is to get out of the stock market early and transfer money into gold.

Here's how Nick explained it:

"Instead of taking your money off the table and going into cash … you go to gold (because cash is devaluing daily). Gold will at least hold its own and probably appreciate … so by sitting it out in gold you can wait until the market finishes correcting and then buy back in" — Nick Barisheff, BMG Group

With gold's future in mind, we asked our Twitter followers this week what price they think the metal will be at the end of 2021. By the time the poll closed, most respondents had voted for the US$1,800 to US$1,900 range.

We'll be asking another question on Twitter next week, so make sure to follow us @INN_Resource or follow me @Charlotte_McL to share your thoughts.

Finally, in the cannabis space, INN's Bryan Mc Govern spoke with Dan Ahrens of AdvisorShares to get his thoughts on 2021 trends and what's ahead in 2022.

Dan was candid, and said if he had to choose one word to describe the cannabis market in 2021, it would be "painful." Like many others, he's been disappointed in the industry's performance — while positivity initially ran high due to excitement about potential federal changes in the US, ultimately progress has been slow.

"Cannabis started with a big run-up in January and February ... and things dragged from there" — Dan Ahrens, AdvisorShares

Still, Dan has hope for 2022 and said it will be a "huge year" for cannabis. He believes US reforms will come sooner rather than later, and in his opinion those widely anticipated changes will bring a wave of M&A activity.

Specifically, he expects to see alcohol, tobacco and other consumer packaged goods companies making deals with cannabis players, not just cannabis entities doing transactions with each other.

"Those big alcohol companies, tobacco companies, other consumer packaged goods product companies — they're waiting. They're waiting on the US" — Dan Ahrens, AdvisorShares

Want more YouTube content? Check out our YouTube playlist At Home With INN, which features interviews with experts in the resource space. If there's someone you'd like to see us interview, please send an email to cmcleod@investingnews.com.

And don't forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Charlotte McLeod, 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.

cannabis plant layered with German flag graphic
Dmytro Tyshchenko / Shutterstock

Catch up on some of the biggest news of the week for the cannabis investment world.

Three political parties have formed a coalition in Germany, leading to a new government, and it has promised cannabis reform in the European nation.

Meanwhile, a popular cannabis retailer confirmed consumers will now find its products available for delivery on the Uber Eats mobile application in Ontario.

Keep reading to find out more cannabis highlights from the past five days.


Coalition of parties promises forward-looking cannabis policy

Germany, a country with comprehensive and elaborate medicinal rules for cannabis, is in a time of transition as a new government is set to begin to take over after 16 years of Angela Merkel.

Olaf Scholz, the proposed next chancellor of Germany, leads a three party coalition that will become the country's governing body. As part of its promises, talk of adult-use cannabis regulation has now gained even more momentum. A report from MJBizDaily quotes a German policy document that shows the coalition's stance:

"We are introducing the controlled distribution of cannabis to adults for consumption purposes in licensed shops. This controls the quality, prevents the transfer of contaminated substances and guarantees the protection of minors."

However, despite the promise and excitement, it remains to be seen how these ideas will be applied since no formal regulations have been drafted or approved yet.

Canadian cannabis retailer partners with popular delivery app

Tokyo Smoke, a cannabis retail operator in Canada owned by Canopy Growth (NASDAQ:CGC,TSX:WEED), announced a collaboration agreement with Uber Canada (NYSE:UBER) whereby cannabis consumers will be able to use the Uber Eats app to order products before they visit stores.

While the app won't let consumers get cannabis delivered to them, this new method opens the doors to more dynamic ways of buying cannabis.

"As a market leader in innovation and a platform used by so many Canadians, we believe this is the ideal next offering that can be done safely and conveniently on the Uber Eats app," Mark Hillard, vice president of operations with Tokyo Smoke, said in a press release.

A report from the Canadian Press indicates Ontario is considering allowing dispensaries to have delivery and pickup options made available to consumers permanently. The province allowed some of these purchasing options at the outset of the COVID-19 pandemic, but then removed them.

Lola Kassim, general manager of Uber Eats Canada, said this new end-to-end experience will provide consumers with responsible access to legal cannabis products.

Cannabis company news

  • Organigram Holdings (NASDAQ:OGI,TSX:OGI) issued financial results for its Q4 2021 period. In its report, the company notes a net loss of C$26 million despite a 22 percent uptick in net revenue to C$24.9 million. Beena Goldenberg, the newly appointed CEO of the firm, is encouraged by the market share position earned by the company, which said it became the fourth biggest producer in Canada during the reporting period.
  • Halo Collective (NEO:HALO,OTCQB:HCANF) confirmed the decision for Akanda, its spinoff company focused on international cannabis opportunities, to begin trading on a US exchange. "The number of shares to be offered and the price range for the proposed offering have not yet been determined," the company told investors in a press release.
  • High Tide (NASDAQ:HITI,TSXV:HITI) announced the acquisition of 80 percent of NuLeaf Naturals, a CBD product wellness developer, for an estimated US$31.24 million. The deal includes a three year option clause for High Tide to complete a total acquisition. "As international markets open up and as export regulations evolve, NuLeaf's cGMP-certified facility positions us to take advantage of the global CBD business opportunity," Raj Grover, president and CEO of High Tide, said.
  • Humble & Fume (CSE:HMBL,OTC Pink:HUMBF) released the financial report for its first 2022 fiscal quarter to shareholders and the market. "As the legal cannabis market in North America continues to mature, Humble remains agile and focused on providing a leading solution for brands to scale quickly and retailers to focus on their customers," Joel Toguri, CEO of Humble, said.

Don't forget to follow us @INN_Cannabis for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

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