An in-depth Analysis of Strathmore Minerals with David
Miller, President and Chief Operating Office
Saturday, January 13, 2007
Recently we had the pleasure of interviewing David Miller
who is the President and COO at Strathmore Minerals. We talked about how his
company is positioned to become a large producer in the next few years and
reward shareholders along the way. We really liked the story and the stock
before going into this interview, but starting with the answer to the first
question we began to realize the huge upside potential for Strathmore stock. Mr.
Miller was a geologist for over two decades and worked on, or had knowledge of,
many of the projects you hear of today (whether they are Strathmore projects or
projects owned by other companies). He is also in the Wyoming State Legislature
and serves on the Energy Council.
Mr. Miller pointed out that his team has nearly 200 years
of combined experience in the mining industry, whereas some companies are
forming management teams with people who have admitted to not being able to
spell uranium in the months before their hire. He echoed our pleas to investors
to do their research not only on the company and their projects, but also on the
people running the operation.
We hope this interview helps investors gain valuable
insights regarding uranium stocks and the industry in which these companies
Mr. Miller, your companyís properties have the potential to host more than
149,000,000 lbs. of uranium based on historical resource estimates from
respected entities like Philips Uranium, Pathfinder, and Anaconda Uranium Corp.
Some of these resource estimates are derived from as far back as the 1970s with
some being as recent as the late 90s. With that said, what if any, does
Strathmore see as the upside to adding lbs. in the ground from historical
David Miller: Our actual pound total for just 43-101
measured, indicated and inferred is over 50% of that amount. That equates to
over a 15 year supply at a production rate of 5 million lbs. per year. Drill
indicated and historical resources on all of our properties are substantially
higher. The old resource methods by major companies are reliable and indicate
the general quality of the projects. The technology improvements havenít been
dramatic since then. They did a great job back then and its all about people,
the technology really isnít any different.
In the US it seems that Strathmore operates in two states that are on opposite
sides of the spectrum when it comes to uranium mining. Although Gov. Richardson
(D-NM) headed up the Department of Energy under Clinton, it seems that New
Mexico trails Wyoming, as a whole, in embracing the nuclear renaissance. Can you
give us your thoughts?
David Miller: That perspective is within the uranium media,
however I think it is pretty much perpetrated by people who donít have assets in
New Mexico. New Mexico was the number one uranium district in the world in the
twentieth century and it produced over 350 million lbs. And if I were out there
and didnít hold assets in New Mexico, maybe itís a mistake. To put that into
perspective, New Mexico has just approved a new uranium enrichment facility in
Eunice, New Mexico. That is the first nuclear related industrial facility in the
US in probably 25 years. It has been permitted in New Mexico and is being built
in New Mexico right now, so I think New Mexico is a very favorable place for
uranium and nuclear. So I really donít see a huge difference between New Mexico
and Wyoming, but there is going to have to be regulatory comfort with the new
uranium mining companies in New Mexico. When people prove that they do it safely
and soundly, as well as more environmentally sound here than many other places
around the world, I donít think weíll have any issues. I see New Mexico as
possessing huge potential, weíre happy with New Mexico and we are also one of
the largest property and asset holders in the state at this time. We also have
substantial assets in Wyoming and these assets may make it to production faster
than New Mexico, so we are very happy in Wyoming. Wyoming uranium production
partly survived because the Wyoming legislature, in the depression years,
provided severance tax relief to the remaining uranium producers. This helped
some production to survive and is why Wyoming is the current leader in United
States uranium production.
Currently Strathmore is planning to build a mill near Grants, New Mexico. What
is the timetable on the permitting process and what would construction time look
David Miller: The real issue is getting the permit. We
believe it will take 6 years to obtain an NRC and all related permits. With
that, last fall we purchased a section of land in the center of the Grants
Mineral Belt. Itís on a paved highway, infrastructure is in place, and it even
has a heavy gauge railroad nearby that comes out of one of the coal mines in the
same region, so weíve positioned it to take advantage of infrastructure and the
location in the center of the Grants Mineral Belt. Right now utilities have
their uranium supplies for the next 2 or 3 years. Itís that period from 2012 and
beyond when new power plants around the world are going to need their initial
feeds and then are going to start consuming more and more uranium. 2012 and
beyond is when the consumption of uranium is going to start growing
dramatically. The mill should receive a license and can be constructed when the
big shortages are going to occur.
What projects are your most advanced, and when are you expecting to open your
David Miller: Our most advanced is probably Roca Honda in
New Mexico. It was permitted and even had a shaft sunk on a nearby property in
the late 70s, early 80s. It was Kerr McGeeís next mine they were developing to
feed the largest mill in the world in Ambrosia Lake, which BHP Billiton tore
down 3 years ago. In the Gas Hills of Wyoming, we own 3 projects that are
probably capable of being fully permitted in 24 months, but these would be
smaller open-pit mining operations, and it would be the Sweetwater Mill that we
would need a toll milling agreement with. We are also permitting several ISR
projects in Wyoming and we are starting a number of other initiatives on some of
our other advanced resources in Wyoming.
When you look at Strathmore, what part of the company would you say sets you
apart from other uranium companies?
David Miller: The acquisition of the Kerr McGee properties
in New Mexico along with the Kerr McGee data base is the biggest thing. They
made an early decision to abandon the sector because of its collapsed due to the
cancellation of so many nuclear power plants in the 1980s. We recognized from
day one that the sector had been abandoned and there were no big companies out
there waiting around to pick up uranium projects that companies can be
successful with. We recognized this early on and were the first company to open
a permit office in New Mexico, the first to start the permitting process on a
mill in New Mexico, and we realized that we have to help reinvent the industry.
We staffed up early and have over 200 years of uranium experience in our
management team. Few companies have that expertise available.
Ur-Energy has a highly regarded
has a highly skilled open-pit/traditional mining team, and Pitchstone has some
of the most respected explorers in the industry. What would you say is
David Miller: Well our focus has been acquiring these
advanced properties that are only a permit away from production, and so that is
why we have been working on these advanced properties and their permitting. I
learned early on working with the founders of the industry. They taught me that
GOOD OREBODIES MAKE GOOD MINE MANAGERS so our goal was to acquire some of the
very best uranium ore bodies in the United States.
Our investment technique has been to find companies with greater than one
lb./share, or a near producer and this has paid off handsomely for us, and our
readers. Currently Strathmore fits both categories with a little over 2
lbs./share (based on historical resources) and working closer to actual
production, but are you going to dilute the shares going forward or use a mix of
cash and debt financing?
David Miller: Well thatís an unknown at this time. I donít
really want to issue any more shares as that hurts Strathmore as well as those
who have been with the company for a long time. Currently we are looking at all
possibilities and how to structure the financing. We have been approached by
many utilities as well as uranium traders wanting to buy into our projects, so
we could sell portions of our projects for a mix of cash or debt financing being
supplied by our partners. Nearly all of the assets Strathmore has are owned 100%
by Strathmore. So we have the percentages to work with in attracting big name,
well financed, well heeled partners into our projects. I think it will pay big
dividends for our shareholders in the near future. Issuing new shares vs.
partners vs. debt financing are possibilities and all will be weighted and the
decision made in the best interests of our shareholders.
So is Strathmore going to take on JV partners at an early stage or will you go
it alone and develop each project internally at first and take on partners
closer to production realizing that a higher price could be obtained?
David Miller: We are looking at all that. As we speak we
are entertaining potential partners on any number of projects. Also the market
needs to remember that most of our projects are already advanced projects with
us at 100%. So giving up percentages now, after exploration, will allow us to
own a bigger share of the production, if we go that route. We are not waiting
for anyone, we are moving forward, we are adding value to all of our projects
and if someone wants to come in and participate at some point, weíll look at the
merits of that at the time. The interesting thing is that those numbers keep
going up. Two years ago we would have done JVs at much lower prices than we
would now. In Canada, where we control more than 3 million acres, we want to
look at more JVs to help finance the discovery of additional uranium resources.
As your company moves toward production, is there any thought of listing on a US
exchange as Energy Metals recently did?
David Miller: Well thatís been something weíve been
interested in for some time, and our lawyers are working on that. And yes, we do
need to get listed in the US because our dominant assets are located in the US
and we intend to become one of the largest uranium producers in the US. We are
aware of the need, we would love to do it, and we are currently working on it.
Not asking for exact figures here, but abut what percentage of shares are owned
by members of the board as well as executives?
David Miller: Sprott Management has just under 20% and my
guess for board members as well as managers would be around 10% taking into
account both stock and options.
Do you see Strathmore achieving its future growth organically, or buying or
David Miller: I think itís going to be more organic, more
internal. Again, our growth to date has been by acquiring assets either from
staking on federal lands, leasing of properties from state entities, or from fee
simple mineral holders.
Assuming that the large diversified miners do decide to reenter the uranium
industry, how would they go about it?
David Miller: I think that they are going to look for the
juniors out there right now. Thatís the easiest way for one of the large
companies to get into the uranium business. Right now the valuations amongst the
juniors can be $10 or more per lb. of resource and others are valued very low,
like Strathmore is, maybe $1 per pound of resource. Maybe those valuations are a
little skewed, you know people have to know how to do their homework, and the
big companies know how to do their homework. So I think the biggest opportunity
for them is to look at the juniors with the good personnel, the good properties
and add value that way to get into the business.
The price of uranium has tripled over the past couple of years, where do you see
it going in the next few years?
David Miller: Iím not going to answer that question
because it is already far higher than I ever dreamed. When it was at $16 I told
an analyst I thought we could double. The next year it hit $34, and he asked me
again what I thought. I told him it was possible to maybe double again. Not long
ago he came back to me when uranium was in the mid 60s and once again asked the
same question. I simply told him that right now the price of uranium just seems
to get stronger and stronger each week.
Do you think that the miners will be able to increase production over the next
decade to a level where it will enable further nuclear generating capacity to be
David Miller: Absolutely. I have all the faith that
uranium miners will increase production in order to meet the worldís future
demand for this resource.