MACIG Connect Series
GoviEx Uranium describes its African strategy where it has acquired three advanced stage uranium projects.
GoviEx has three advanced stage uranium projects in Zambia, Niger, and Mali. How has the company turned the perceived risks of these projects into opportunities?
From a project perspective, we have found that being in Africa actually helps. For example, because we are in a developing region, export credit agencies (ECAs) tend to be supportive, whereas they may be less likely to offer assistance in a developed country. GoviEx has been in discussion with a number of ECAs, predominantly on a procurement basis, because we have not yet defined our off-takers and we have found a few ECAs that are potentially interested in providing insurance coverage for the full amount of our debt. The underlying funding banks are then more comfortable with being involved. Particularly in relation to our Madaouela project, people tend to believe we will have difficulty funding our project because it is in Niger, but we now have a number of commercial banks working through our data room.
What is the company’s strategic advantage in offering this geographically diversified portfolio of projects?
GoviEx started in Niger where we have a world-class uranium project and a lot of further exploration upside. The exploration potential at the Madaouela project and the scale of the property could have resulted in two projects. While developing two projects is an option, our Board felt the more strategic approach would be to diversify our portfolio. While we wanted to diversify, the Board did not want to acquire greenfields exploration projects in other parts of Africa, so the focus of our acquisitions targeted advanced projects. The reason we like the assets we obtained in Zambia and Mali is that they are advanced projects with defined resources and further exploration upsides, and they provide a structured development pipeline, giving GoviEx a number of projects that can be brought into production.
When looking to diversify, why did you select operations in Africa rather than looking at other projects around the globe?
We saw the market crash and the continued weakness in the uranium price as an opportunity to consolidate assets on a regional basis. We have to be sensible; we do not want to have assets all over the place. We did look at assets in other parts of the world, but we ultimately felt we were never going to match the value available in Niger, Mali and Zambia. GoviEx realized that Africa provides us with excellent investment opportunities as long as governments demonstrate continued stability. We have observed that governments are becoming more pragmatic than they were previously and, generally, it appears that the continent is more stable than it has been in a long time.
What trends in nuclear energy do you believe will prove most significant in driving the price of uranium?
Looking at the big picture for nuclear energy there is a massive growth scenario occurring, particularly in China and India where there is increasing stability and a greater commitment to fulfilling green energy initiatives. Furthermore, the U.S. and Europe are beginning to realize that they have to treat nuclear as clean energy and give it appropriate support. Demand for uranium is therefore forecast to grow at 3% per annum. The spot uranium price has declined 85% in the past nine years and, for the past three years, the price has been below the all-in cost of the industry. Looking forward, a number of major mines are due to close as they come to the end of their known reserves and the current uranium price is not sufficient to incentivize new project developments. We are therefore looking at an impending and increasing supply deficit, unless there is a marked improvement in the uranium price.
What is the risk to the uranium industry if the exploration sector continues to struggle to secure adequate financing?
The mining industry has a major financing problem, unless you happen to be one of the major companies that has its own internal cash flow. Securing debt financing on projects is exceedingly difficult in the current market and, subsequently, supply will continue to be constrained. This impacts not just the uranium industry, but all of the commodities. Getting smaller- to middle-sized projects up and running is becoming more and more difficult. The big mining houses are still able to support large-scale projects, but the middle tier will continue to struggle. Exploration spend has been decreasing, which, down the line, risks creating another super-cycle.