A Conversation with Strathmore Mineral’s David Miller

Recently we had the chance to once again interview Strathmore Mineral’s CEO, David Miller. We always find his insights and opinions quite useful and on the money. In our conversation we discussed many topics ranging from Strathmore, the current uranium market, the future of the uranium market and the current state of the industry.

Strathmore has been one of the leading uranium companies developing American uranium properties since we began covering the uranium market years ago. The company has properties located throughout the western United States and those properties are in historical mining districts. Over the years, Strathmore has developed the projects and now has two projects quite close to actual development, one in the Gas Hills and the company’s flagship Roca Honda Project (a 50:50 joint venture with Sumitomo). All of this has positioned Strathmore among the premier American uranium developers, and from our conversation with Mr. Miller investors should keep an eye on the company as new developments should help to move the stock higher.

According to Mr. Miller, “Roca Honda will be the first project to have a full feasibility study prepared.” This should give investors an accurate picture of what the costs will be to mine the uranium and how profitable any mining operation will be. Investors can expect this study to be completed by the second half of this year. Although this isn’t a low cost production project, Mr. Miller indicated that the company is not concerned about today’s current spot price of yellowcake as they believe that the price will be higher when their production comes online (Editor’s Note: It is important to differentiate between the current spot price and long-term price, as spot recently traded at $41.75/lb and the long-term price was quoted at roughly $60/lb). Even now, Mr. Miller says, “our core projects can compete in the marketplace.”

Further reducing risk is the fact that Sumitomo is a uranium trader which could potentially provide a market for purchasing production. Recruiting customers and developing relationships is key to developing a market for your uranium production. According to Mr. Miller others have been around kicking the tires, including some utilities trying to lock in long-term contracts. Regarding long-term contracts, Mr. Miller stated, “We will be receptive to long term contracts when the price of uranium runs up again, and we have greater visibility on our production timelines. We are not interested in long-term contracts at the current spot price.”

Regarding hidden traps for investors, it was mentioned that investors should be on the lookout for those companies whose properties are encumbered by royalties and other profit sharing schemes. To be clear, Strathmore Minerals is not one of those companies; their properties are not hindered by those royalty agreements, thus insuring that future cash flows are not diverted from shareholders to other parties.

In discussing the company’s outlook for uranium, Mr. Miller stated that he thought Adam Schatzker, an analyst with RBC Capital Markets, was right on in his analysis on the outlook of uranium demand and supply. In short the company believes that by 2015 the supply of uranium will not be able to meet the world’s future demand.

We have long been a believer in the industry, and Strathmore has always been one of the North American companies we thought would bring a deposit into production. It appears that Strathmore is indeed the real deal and not a pretender, and the next year should demonstrate this to investors as Strathmore moves forward with their feasibility study, planning and permitting.

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