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Ross McElroy, is the President, COO and Chief Geologist of Fission Uranium Corp.. He joins Lara Smith, Founder of Core Consultants to discuss ongoing projects, future projects and challenges to the global uranium supply related to commodity prices. The following is the transcript of the interview: 

Lara Smith: Hello everybody. I’m here from Core Consultants from my couch in Tel Aviv. I’m joined by Ross McElroy from Fission Uranium who is in Canada at the moment. Hi Ross.

Ross McElroy: Good afternoon, at least from where I am at in Western Canada. 

Lara Smith: Western Canada. Right. So good evening from where I’m at. So you’ve had some interesting times or fortunate times. Firstly, the uranium market has actually increased, which is surprising given the oil price. So that’s been driven up, presumably by the Kazakhs going offline. What do you make of that?

Ross McElroy: Well, I think what it’s really showing is just the fragile nature of the supply of uranium. You know, so much uranium comes from so few producing mines and I mean, a lot of them come from pretty questionable jurisdictions anyways. You know, I think the real issue is really with covid 19 causing disruption in, you know, having to temporarily shut down mines. It’s also maybe a convenient reason for mines that are not particularly economic to be to be turned off as well. So, you know, I think there are some companies taking advantage of this, they bring their own economic production off, but also there was some, you know, some very high quality minds that have come off too. And I think what it’s really shown is we still have power requirements; there’s still electrical need out there. The reactors still need to operate, they need to run. And the supply side. I mean, we’ve been flagging it for years and years. I mean, as long as I’ve been in this industry, 30 years, I’ve heard a lot of the same comments, the supply side is,really quite fragile. And I think we’re really seeing the effects of it right now with shutting off the key players. I mean, even in Canada there is no production now. Canada was ranked number two in the world for supplying uranium and now there is no production.

So it’s a mess. And that’s just by shutting down the last remaining mine, Cigar Lake, you know, last week Cameco made the decision. So it’s pretty interesting. The prices will go up. You know, this was really the solution to the uranium issue is, the price of the commodity has to go up significantly. And this is pretty much, for all players and that’s what’s happening. So the demand is still there, and I think it will be an ongoing demand. And the supply, will continue to tighten those as the prices are poor and that’s why we’ve seen uranium prices creeping up, even more than creeping up, I’d say the last couple of weeks…

Lara Smith: They’ve really spiked. But do you think these prices are sustainable? If we, if we sort of cast ourselves forward, if we’re going to imagine a post covid 19 world, where production presumably comes back, or maybe it doesn’t? 

Ross McElroy: Yeah, well, I think even pre covid19 we had Cameco making the decision to turn off McArthur river and they’d made comments that this was one of the world’s best high grade uranium deposits. It was turned off due to the low uranium prices. They mentioned that they weren’t going to turn that one on until the price of uranium was close to $50. That may be the minimum target for most of the uranium projects, and this was the highest quality ones of the lowest cost operators need that kind of price environment, so no, I think that there’s some substantial improvement in the price and that will be required in order to keep the lights turned on for all parts of the world. Nuclear is such an important part of the electric grid worldwide. 

Lara Smith: Okay. And tell us about your project. You’re involved with the Triple R uranium deposits, I see you just got funding from Sprott, which is… congratulations during this time. It’s excellent. 

Ross McElroy: Yeah. No, we’re very pleased to have that. Just a little bit of background on the project itself, so you’re right, the project is called PLS. The deposit is the Triple R deposit, and it’s a large high grade uranium deposit.

In the Athabasca basin, which is recognized worldwide as being the premier geologic environment for hosting high grade uranium deposits, and really high grade means economics. So if you have a high grade deposit, generally your economics are superior to a deposit that is very low grade. So we made our discovery back in 2012. We’ve been able to get it up to the level now where we’ve just completed a prefeasibility study. In fact, we completed the two pre feasibilities in 2019 because there’s different ways to look at mining this deposit. The advantage it has over everything else is that it’s near surface. Being near surface, you know, we could look at extracting it as an open pit conventional mine or going underground. We’ve pretty much settled on an underground scenario. We looked at the details of both and really the underground would be the way to go forward. First of all, it’s a lot less capital intensive and quicker to put into production. Probably some advantages on the permitting and regulatory side by going underground as opposed to an open pit. And it’s still going to be one of the lowest costs operating uranium mines in the world. So that’s the stage we’re at: pre-feasibility. The next step is to go through feasibility and all the permitting that goes along in parallel with it in order to be able to get your mine in a position that you received licenses to build and operate, probably four years out from where we’re sitting right now. So in the big, big picture, we’re looking at having a project that could be a producing asset by 2027. And to get your points on the financing, yes, we’ve just recently completed an agreement with Sprott lending that, for 10 million US, so Canadian dollars is around 14 million, that’ll go a long way towards us being able to advance a project on the feasibility study, which will be upcoming. Hopefully this will be able to get going on it this summer and on the permitting that’s required as well.

Lara Smith: Okay, fantastic. And you know, it’s something about, which always comes back when you speak about uranium and everybody thinks of the natural nuclear disasters and the volatility in the uranium price. I mean, I remember myself as a junior analyst, I think the first recommendation I ever made was Uranium One, and that was back in 2005, and I think the chief investment officer was like kicking himself for hiring me because it was so volatile; the price of uranium. Do you think that this level of volatility is now behind us in the uranium market given what’s happened given the month [] it’s come off? 

Ross McElroy: I think it’s still a volatile market for the reasons we were talking about earlier, and that you have very few projects that actually supply a lot of the uranium for the world. You know, there’s different reasons for volatility right now, obviously covid 19 is a huge component to the volatility. But you’ve also got uranium coming from pretty questionable jurisdictions, you know, you have a lot of African supply. Some countries are, you know, the politics there might not be what long term focused people are looking for in, you know, say utilities. So there’s been a lot of volatility in that market anyways, and I think that the fact is the price of uranium is just so low right now that nobody’s making money at it until you get to a base level, probably 60 to $70 a pound US for, for uranium. I think that the supply side will continue to be quite fragile. Now the advantage for us being in Canada and the Athabasca basin because of these high grade deposits you tend to be the lowest operating on the cost curve. So, you know, if you can get your mine into production, it’s probably the most inexpensive uranium to get out of the ground.

And so, you know, I think that we’ll always be in an advantageous position to be a supplier, no matter where the price of uranium is on the cost curve, but it still needs to see a significant improvement, really for any uranium to be turned on.

Lara Smith: So the price of uranium is around $29 $30 per pound at the moment, moment. At this level, do you think most in the basin are making money at this level or not yet? 

Ross McElroy: No, probably not. You know what? I think if you see the reasons that Cameco shut down the McArthur river project, it was, the world’s biggest, best high grade uranium deposit, if they, this is Cameco, if they need the price of uranium to be $45 to support that deposit, it kind of tells you what prices you need for other deposits that maybe aren’t quite as good. I mean, it’s orders of magnitude higher grade than pretty much anybody else has, so, you know, it just tells you that the price has to be probably double from where it is right now in order to have any new meaningful production come online. That’s my thought. So I think that is where the price is probably headed.

Lara Smith: OK. That great. And maybe just a little bit more on Fission Uranium on your project, so you’ve got feasibility expected this summer, it sounds like you’re advancing the project well despite the covid 19 conditions.

Ross McElroy: Yes, we are. Well, there isn’t any work going on in the field right now, and that’s probably true maybe globally, you know, there’s very little work going on on many projects. You know, our plan was really not to be doing any field work until the summer anyways, be it July or August.

So, you know, our outlook is still more or less the same. I’m still planning for a summer program, you know, maybe it’s pushed back til August, September, you know,  we’ll see how things go. We’ll have to monitor it and play it by ear, but, and that would be the start of our feasibility work for the summer. But, you know, we’ll just have to wait and see how this pandemic plays itself out, you know, we’re hopeful that in a couple of months it’ll be a different world again and one that we can get back to working in some form of what we called normal in the old days.

Lara Smith: Right. Okay. Well, thank you so much for that update. Is there anything else you want to add to that before we say good evening? 

Ross McElroy: Well I think that you want your viewers to really pay attention to the uranium market. You know, I mean, I think we’re obviously a significant player in there, but uranium has… a lot of the analysts and people that follow it have been calling for these higher prices for quite some time and what are going to be the triggers that move it? This is just the latest edition of a number of factors that have been causing the price to go up over the last couple of years. I think this is a real accelerator for that price. But you know, if you have a position in a solid company with great uranium assets, I think that’s a good place to be. And you know, the price of that commodity, if you have enough turn in the price of the commodity, the share prices tend to follow quite closely with that price of commodity. So it is something that you want to certainly pay attention to right now.

Lara Smith: Thank you very much for that. 

Ross McElroy: It’s been great talking to you. Thank you. 

Lara Smith: Great talking to you to stay safe. 

Ross McElroy: Cheers. You too. Thanks. Bye.

author avatar
Lara Smith
Lara is the CEO and founder of Core Consultants. She has been an analyst for over thirteen years and has focused on commodity markets for just over a decade. She began her career as a buy-side analyst at Foord Asset Management in Cape Town, before taking a Head of Research role at a mining corporate finance and investment firm.
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