David Cates: Now is the time to buy Uranium




Proven & Probable, had an opportunity to discuss the Uranium Market with one of the foremost and respected names in the Sector Mr. David Cates, the CEO and President of Denison Mines (Symbol: DNN) during the 2015 Sprott-Stansberry Conference in Vancouver, British Columbia.


Maurice Jackson: Hi, I’m Maurice Jackson alongside David Cates, the President of Denison Mines. We’re here live at the Stansberry Conference in Vancouver, British Columbia. David, a pleasure.


David Cates: Yeah, real pleasure Maurice.


Maurice Jackson: You’re one of the foremost experts in uranium. Do you mind sharing with the audience what’s going on in the world of uranium?


David Cates: Yeah. I mean uranium right now, it’s a big picture story, right? We’re looking at supply-demand fundamental story where supply has taken off. We see it in the long terms of – sorry, demand I should say has taken off. In the long term, we see China, India and Russia driving the demand scenario. And we see supply on the other side struggling to come on stream. New supply is difficult to justify at prices where we’re at. And so, in a big picture, macroeconomic level, we really see a scenario emerging where demand is predictable.

Maurice Jackson: OK.


David Cates: We see nuclear reactors being built. And we can see it’s rising. And at the same time, we see no reason why supply should rise. And so, that together creates a scenario where prices are going to be under pressure. And prices will have to rise. Without rising price, that supply is not going to materialize.


Maurice Jackson: OK.

David Cates: And if that doesn’t materialize, man, the space is going to go crazy because everyone is going to be fighting for material.
Maurice Jackson: Yes, they are.


David Cates: Utilities have got to make power. They’ve got nuclear plants that need to run for them to make any money. And they’re going to be fighting for that material. We saw this thing sort of happen in ’06, ’07 where the price rose all the way up $120 per pound just because utilities were fighting to get supply.
Maurice Jackson: OK. And the current price right now is roughly around – it’s in the mid 30s, isn’t it?
David Cates: Yeah, we’re in the $36 mark for the spot price but there’s also a long term price so if anything is on a contract basis, you’re up in the $46 to $50 range.
Maurice Jackson: OK. And you mentioned the nuclear plants. How many of them are projected to be in production or actually operating and running in the next 20…


David Cates: Yeah, I mean these things are cycling through, right? Some plants they’ll come online and other plants would come offline. I think what’s more important, not so much an absolute number, but the plants that are coming online from Asia. So you’ve got China looking at adding 200 plants roughly.
Maurice Jackson: That’s amazing.

David Cates: Exactly. And they’ll be adding them in a rate of say 1 or 2 per quarter from here on out. They’ve already started to build them. They’re under construction. These things are already happening. India is going to layer on plants as well and then Russia. The top three there are going to account for for the bulk of the growth in nuclear power.


Maurice Jackson: OK. Now, how can an investor take advantage of this opportunity? Because for me, I believe there’s a great value proposition here with uranium. Is this the right time?


David Cates: Yeah. I mean timing and how are kind of two separate questions. And let’s talk about how. There really aren’t that many ways to play the uranium space. Some of these utilities you can buy into. But when you buy into utility, you’re buying into a whole bunch of stuff. Because they’re probably not just generating nuclear energy, right? So then your next option is to buy into a uranium producer or uranium exploration development company. That’s where Denison fits into this.


When do you buy? That’s also a tough question because we know the price is under pressure right now because there isn’t a lot of activity in the uranium market. And price is subdued. But at the same time you know those fundamentals are going to emerge where there will be upward pressure on price. How do you pick the right time?


Maurice Jackson: OK.


David Cates: Classic investing question, right?


Maurice Jackson: Right.


David Cates: Everyone wants to pick the bottom. It’s tough to know where that is. I think we’ve already hit the bottom. I think when we had uranium at $28.


Maurice Jackson: Uh-huh.


David Cates: That was the bottom. We’re up to 36 now. So I mean realistically, now is a reasonably good time to be getting into the space because you’re on the low end of the grand scheme of things but you’re on a bit of an upward tick, right?
Maurice Jackson: Right. What does Denison Mine – how does that fit into one’s portfolio?


David Cates: I mean Denison has historically been a story of exploration development in the Eastern portion of what we call the Athabasca Basin which is in Northern Saskatchewan.
Maurice Jackson: Right.
David Cates: We have recently announced the merger with Fission Uranium Corp. And Fission of course has a Patterson Lake South property, to triple our deposit on the Western side of the basin. What we’re trying to do here is consolidate those assets into one because we want to be the go-to brand for uranium investment. We know Cameco is out there and Cameco is obviously an established producer. But what we’re trying to do is create a clear number two in the space.


There really aren’t any other companies in sort of the mid-cap range. Cameco large cap, you’re talking $6, $7 billion and then you drop all the way down to small caps where you got Denison now, Fission now, other companies in that space fighting for a pretty fixed number of dollars. Together would be about $700 million to a billion dollar company. We’re going to start to open markets out for our companies. We won’t fight against each other. We’re looking at bigger funds to invest money into us.


I think that’s why the merger creating this consolidated go-to company is so important for both of our companies. Investors will see us as the clear choice. If they want exploration development leverage and they want uranium in the Athabasca Basin, there’s not going to be a better choice than Denison Energy.


Maurice Jackson: I would agree on that. I would agree on that. If we can, switching gears lightly, Lukas Lundin, what’s his position in this?


David Cates: Yeah. No, absolutely. So Lukas has been with the Denison brand for many years. He’s going to be taking the chairman role in the combined company.


Maurice Jackson: OK.


David Cates: And I think Lukas is a pretty smart businessman. I mean he has been very successful in the past.


Maurice Jackson: Yes.


David Cates: And I think he’s behind this concept of creating the go-to brand. And you might ask, “OK. Well why now? And why is Lukas thinking that this is the thing to do?” I think it’s underpinned by a fundamental belief that the uranium market is about to take off.


Maurice Jackson: OK.
David Cates: And so together we’re going to have more leverage to that market. And I think that’s what Lukas sees in this deal. And I think that’s why he’s so excited about this deal. It’s because he sees that the market is going to take off. And there aren’t that many places to put your money in. And we’re going to put together the best option for investors in the space.


Maurice Jackson: That sounds amazing. I’m a shareholder of Fission Uranium and I’m actually very excited about the merger.


David Cates: Great.


Maurice Jackson: I see the synergy there and the opportunities for you to specialize in what you specialize in and that Fission specialize what they specialize in. And what is the new symbol going to be?
David Cates: Ticker symbol?


Maurice Jackson: Yes sir.


David Cates: Yeah, I don’t know actually. We’ll probably still be DML but we may look at rebranding that. Yeah.


Maurice Jackson: OK. And if somebody will have further questions, who should they contact?


David Cates: In our website, it has got a lot of good resources on it. You can always contact our investor relations group. We’ve got a phone number on the website.


Maurice Jackson: OK.


David Cates: Sophia Shane and Amanda Strong would be able to point you in the right direction.


Maurice Jackson: OK. And what’s the URL? What’s the website?


David Cates: It’s www.denisonmines.com.


Maurice Jackson: OK. Well sir, it has been an extreme pleasure.


David Cates: Real pleasure Maurice. Thanks so much.
Maurice Jackson: Thank you.

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