Bannerman Energy Ltd (ASX:BMN) reported significant progress in its Otango Project in Namibia during its Q1 2025 earnings call. While the stock has faced challenges, declining over the past three months according to InvestingPro data, the company’s focus on project development and strategic market positioning contributed to a 6.67% increase in its stock price, closing at $1.95. Bannerman’s strategic efforts come amid a fragile uranium market, characterized by strong demand and underperforming supply expectations. InvestingPro analysis reveals 8 additional key insights about Bannerman’s market position and future prospects.
Key Takeaways
- Bannerman Energy’s Otango Project is making substantial progress, with key infrastructure installations completed.
- The uranium market is experiencing strong demand, driven by AI and data center energy needs.
- Bannerman’s stock saw a 6.67% increase following the earnings call, reflecting positive investor sentiment.
Company Performance
Bannerman Energy is advancing its Otango Project in Namibia, with significant milestones achieved, including the excavation of the primary crusher site and installation of construction power. The company’s strategic focus on heap leaching as a cost-effective processing solution positions it well in the competitive uranium market. Despite the challenging supply dynamics, Bannerman’s extensive resource base and flexible development strategy provide a competitive edge.
Financial Highlights
- Cash balance: $68.8 million
- Cash expenditure during the quarter: $11.7 million
- General and administrative expenses: Approximately $200,000 per month
- Committed expenditure: $26 million
- Working capital available: Over $40 million
Outlook & Guidance
Bannerman Energy is actively pursuing financing and offtake discussions, with potential contract opportunities primarily from US utilities. The company anticipates securing 10-12 contracts for its initial production phase, with potential contract prices featuring base price escalation and market-related components. The expansion potential from 3.5 million to 6.7 million pounds of production underscores Bannerman’s growth prospects.
Executive Commentary
Brandon Munro, Executive Chairman, highlighted the technical simplicity and cost-effectiveness of Bannerman’s mining operations, stating, "We are blessed with a technically simple mining operation with an extensively tested heap leaching processing solution." Munro also emphasized the underperformance of new supply in the market, noting, "Supply pretty much everywhere, particularly new supply, is underperforming according to expectations."
Risks and Challenges
- Supply chain disruptions could impact project timelines and costs.
- Market saturation or shifts in demand for uranium may affect future contract opportunities.
- Macroeconomic pressures, including inflation and currency fluctuations, could impact financial performance.
- Regulatory changes in Namibia or other key markets could pose operational challenges.
Bannerman Energy’s strategic focus on project development and market positioning, coupled with the positive stock performance, reflects its strong potential in the evolving uranium market.
Full transcript - Bannerman Energy Ltd (BMN) Q3 2025:
Emma Culver, Investor Relations and Communications Manager, Bannerman Energy: Good morning, everyone, and welcome to the Bannerman Energy Quarterly Webinar Update for the March. For those of you that don’t know me, I’m Emma Culver, the Investor Relations and Communications Manager at Bannerman, and I’d like to thank you all for joining us this morning. I’m joined today by our Executive Chairman, Brandon Munro, who will provide an update on the quarter, an update on the Atango project in Namibia and the progress that we have been making. Following this, we will move into q and a. Many of you are probably most familiar with the Zoom, but at the bottom of the screen, you’ll see the the q and a in the toolbar there.
Just type in your questions there, and we will move through them at the end. Many of you know Brandon. He has deep uranium, sector experience. He is currently a member of the World Nuclear Association director general’s advisory council. And for now, I will hand you over to Brandon.
Brandon, thank you for joining us this morning.
Brandon Munro, Executive Chairman, Bannerman Energy: Thank you, Em, and good morning, good evening, or good afternoon to everybody who’s joining us. Thank you for joining us to hear about what’s been a very productive quarterly and a really important time to be talking about stability and financial prudence here given the background of what’s happening in the broader market. So against that backdrop, which, of course, is extreme volatility, great uncertainty associated with North American trade policies, and what’s some of the announcements coming out at a fairly rapid fire pace from the White House, I’d hope that you’ll see from this quarter that Bannerman is presenting a picture of stability and prudence. The key points from the quarterly think, Emma, if we can go to that next slide. So really, the key points distilled into three bullets here is the early works instruction activities are tracking in line
I’ll show you some pictures just now to give you an idea of the scale. But what I’d like you to understand here is that we are achieving a lot for a very constrained level of expenditure. And our CEO, Gavin Chamberlain, and his team are doing a very good job on the ground. It’s on budget. It’s on time or ahead of time, and it’s being done safely.
So we couldn’t be happier with the work that’s taking place in Namibia in our Otango project. We’ve continued to make progress on both financing and offtake discussions, although as you will see from the text of the quarterly, both of those work streams are highly contingent on us doing the right job timing those work streams for sentiment in the uranium market and, to a lesser extent, sentiment in the equities market. We don’t see that sentiment at the moment, but we have put ourselves in a very favorable position that that is not to the detriment of shareholder value, and we can talk about that during questions. And, look, finally, you should have the confidence in our financial leadership right now. Still got a very strong cash balance, $68,800,000.
We’ve progressed the project to a very significant degree during the quarter whilst maintaining that financial discipline and financial prudence. So of the cash expenditure during the quarter, $11,700,000 has gone into the ground, into the project. So that’s exploration and development expenditure with the g and a running where it should be at about $200,000 a month. So that gives us a lot of flexibility. You’ll see from the disclosures that our committed expenditure in US dollars has stayed the same as where it was last quarter, but because of the exchange rate movement, it’s edged up a little bit, but still at around 26,000,000.
So that leaves more than $40,000,000 available to us for extended working capital runway if you’re feeling uncertain about the world right now and otherwise gives us a lot of flexibility via discretionary spending as to how we move this project forward. Now let’s have a quick look at what we’re achieving on the ground. And, hopefully, you’re starting to follow the images that Emma Culver and her team have been putting out. There’s a huge amount going on, and what we can see there is now the primary crusher site has been fully excavated. Those lines that you see moving up to the top right, one is the conveyor belt line and the other is the access road.
You can see that the power’s installed just to the just below the access road. And what I’d like you to see from this is, first of all, the site conditions really couldn’t be better for a large scale mine. There’s no clearing. There’s obviously no people. It’s a very flat site, and that’s certainly to our advantage with the progress that we’re making.
The next slide. All of our construction power overhead infrastructure is in place now. The transformer’s installed, and this is infrastructure that will serve us during the operational phase as well. Next slide. So, again, you can see the stockpile tunnel, the final blasting ’s being completed.
That’s a slightly different view there from the of the site. In the top left, you can see some of our water infrastructure at the reservoir that’s still in place. Next slide, Emma. And importantly, we’re now making very good progress readying the site for the next step for the heap leaching pad area. The advantage to us at this stage in the process of this being a heap leaching operation and not a more involved tank leaching operation is there’s a lot less equipment and there’s a lot more construction.
There’s a lot more earthworks. So that means that we can really get ahead of the game. We with the award of this bulk earthworks contract, which is a twenty four month contract that’s probably about six months in, it means that we can continue delivering this high value work for very constrained cash impact. And the next step once that heap leach pad area has been prepped, as you can see the progress from this slide, would be the installation of the drainage layer and preparation of those heap leach pads themselves. Now that’s a contract that we expect to be finalized in this coming quarter, the June, but we don’t need to award it in the quarter unless it suits us.
So, again, it just enables us to have a very strong level of control on how quickly we progress this project and and construction, but also how quickly we spend our financial resources and how quickly we choose to reduce our balance sheet strength. So there was a flyover for those who arrived early to the presentation. Emma, I think it might be useful once we wrap it up. If we just allow the webinar to run for an extra couple of minutes and run that drone footage, for anyone who wants to stick around for another minute and a half or so, it really does give you an excellent feel for how much is going on-site. It gives you a good feel for how big this site is, how extensive the mine is.
But what what I really want investors and shareholders to understand here is that we are blessed with a technically simple mining operation with an extensively tested heap leaching processing solution that gives us a real edge. It means that it’s a simple mine. We’ve tested it and derisked it to the nth degree. The heap leaching gives us a very cost effective, relatively cheap processing option, which makes this mine work. It makes the economics robust, and it gives us a real differentiator when we move into the commissioning phase because of its simplicity.
It doesn’t attach the same level of risk that many other restarts or greenfield projects would have. So with those opening comments, I think we can go straight into q and a now. M?
Emma Culver, Investor Relations and Communications Manager, Bannerman Energy: Yes. Thanks, Brandon. So our first question today, can you comment on the recent Namibia Russia nuclear partnership talks?
Brandon Munro, Executive Chairman, Bannerman Energy: Sure. I certainly can. So those of you who follow the long term progress that the Russian state owned Rosatom entity has been making in the global South would know that they’ve had preliminary up to advanced talks with a range of nations in Africa, and those advanced talks are yielding construction in Egypt right now, but countries moving along the nuclear path in many parts of Africa. Namibia is at a very advanced stage with that. It does have a fairly small grid, so the potential for conventional reactors is probably fairly low, although it would be a candidate for a couple of SMRs over time.
Whether the talks yield anything, well, that that remains to be seen. But in common with just about every developing country in the world, nuclear power is very attractive to Namibia. I suppose the question behind the question here is, well, you know, should we be concerned in any way about Russian involvement in Namibia? And the answer is no. Namibia has had a multilateral facing foreign policy since its independence.
It’s maintained good relations with Russia, but equally, it’s maintained good relations with The US, with Europe, with Australia, and for that matter, China. And we don’t see any threat from that, but we certainly see a lot of advantage that Namibian uranium can be sold around the world.
Emma Culver, Investor Relations and Communications Manager, Bannerman Energy: Brandon, how do you view the broader uranium market from supply and demand deficit? Do you see the recent heavy rainfalls and any impact from Rossigne or Hussad adding extra pressure to the supply side?
Brandon Munro, Executive Chairman, Bannerman Energy: Yeah. So let’s start with the the more detailed aspect to that question first. We’re not aware of any significant supply impacts on Rossign or Hussab. It’s worth distinguishing Paladin’s experience from Rossign and Hussab, the Langerhainrich mine. Rossign and Hussab are both primary deposits like Itango.
In other words, they’re massive granite intrusions that get obviously blown up and then crushed up and then turned into ore, in their case, tank leached. And as I’ve said, we’re blessed to be able to deep leach very cost effectively at a tango. So the key difference is when granite gets wet, it dries effectively immediately. So whilst both of those pits would have had water incursion as a result of those heavy rain events, they would have been able to dewater those pits fairly quickly and get back to normal operations within a limited number of days. And so from what we’re hearing on the ground and what we expect technically, we don’t anticipate any impact on those operations.
I think what’s more relevant to the supply picture around the world is that supply pretty much everywhere, particularly new supply, is underperforming according to expectations. You see that with just about all of the restarts around the world, including in The US. If somebody is hopeful of seeing a supply gap close-up, As they go back to their modeling, they will see a range of greenfields projects who are either choosing to take their time as we are, waiting for markets to appropriately tighten up, or through permitting and other issues they’re finding themselves delayed, whether that’s permitting in Canada affecting some of the big projects coming in there or geopolitical issues such as what we saw in Niger having very marked effects on the greenfield’s potential there. So supply and demand, I think the basic principles are demand is as strong as ever with near term demand shocks showing some potential primarily driven by AI thirst for energy, and in particular, a thirst for the prime source of energy that can drive always on data centers, which, of course, is nuclear power. That thirst is driving very near term effects.
The most notable are the three restarts restarted reactors in The US and the potential for other reactors to be brought online quickly in The US and elsewhere. But also, more importantly, up rates. The reason I say they’re more important is an up rate. So we’re talking about an increase in the electrical capacity, the output of a nuclear reactor. Out rates can be achieved fairly quickly between about 510%.
So this is low hanging fruit, such as changing the refueling cycle so that you can run the reactor for longer without needing to stop it and refuel it. That can give you a pretty easy 5% increase in the output. Interestingly, it’s not the most efficient way to consume your uranium, so it achieves a little bit more than a 5% impact on the fuel demand. But, of course, that’s a good thing for us. To get beyond that five to 10% requires more investment, but it still produces a result faster than building a new nuclear power plant.
So we’re seeing up rates contributing to the demand picture driven by this immediate urgent insatiable thirst for power that’s coming from AI and data center and robotics. So the demand picture looks very, very strong. We’ve well and truly turned the corner over the last couple of years from the era where you were taking, you know, a couple of steps forward on new reactors, but then one step back because a reactor gets closed. Any of the political decision making against nuclear power has run its course, and now it simply presents upside in markets like Taiwan and Spain where inevitably they’re going to have to dial back their anti nuclear political decisions, and that will create its own form of market shock. You then compare that to supply.
We’re just not seeing progress in supply. Supply is fragile in many different markets. Restarts have been have under delivered compared to what utilities would have hoped. Greenfields are holding back for better market conditions or for political reasons such as in Niger. And new Greenfields on the horizon are proving themselves for political and permitting reasons to be elusive.
So utility expectations on supply are performing pretty much the way that on the mining side we always knew they would, but that wasn’t obvious to utilities. So there is that supply and demand imbalance that’s becoming more and more apparent. Now the final comment I’ll make on this, and I think this is pretty important for anyone trying to make sense of the uranium market. Like, I’d be surprised if you haven’t spoken to me recently if you’re not saying, well, hang on a sec, Brandon. How can supply and demand be so good?
And then I’m looking at a price that $80 on term price still isn’t moving, and we’ve got a spot price that’s in the doldrums. So when it comes to term price, I’d like everyone to understand something that’s really important for making sense of that equation. And that is that in our sector, I like to think about demand as real demand and visible demand. And equally supply, you’ve got real supply and visible supply. So let’s take up what real demand and supply is.
That’s probably what you think it is. Real supply is what’s mined plus a contribution from secondary supply. Real demand is what’s consumed in nuclear reactors around the world, including first loads for new nuclear reactors. Now in most commodities, there’s pretty much a match between real and visible supply and demand. In the uranium sector, real and visible supply is about the same because whatever’s mined around the world is sold around the world.
You know, give or take, you’ve you’ve had periods in the recent past where the big miners have actually oversold their production, so visible supply has been a little bit more than demand actual supply, but more or less, it trades the same way. The big difference in our sector is that visible demand is what utilities are contracting, and they are under contracting. They’re not yet reaching replacement level contracts. So the visible supply is less. The visible demand is less than the actual demand.
This market is not yet behaving in an economic sense where supply and demand is achieving an equilibrium. It’s behaving as if the supply deficit doesn’t exist because the visible demand is less than the actual demand. Now the reason that’s so important is really three reasons. First of all, it helps you understand that in in a situation where we know that there isn’t enough uranium being mined or being sourced from secondary supplies to actually fill the requirements of utilities, it explains why we aren’t currently in an upward price trajectory like we should be, simply because the supply and demand that’s visible to the market is matching out where we are. But more importantly for investors, as we see utilities move from drawing down inventories into replacement level contracting, they will necessarily expose that imbalance between visible supply and demand.
And as visible demand starts to achieve levels near actual levels of demand, in other words, utilities are buying as a whole what they consume, you can expect to see significant pressure on uranium prices. And then the third aspect is, at some point, we expect utilities as a whole to recognize the fraught supply demand picture that is emerging from the early twenty thirties and beyond, and the one lever that utilities have to be able to insulate themselves from that very strained supply and demand picture that’s often called a deficit or a crisis or insert appropriate investor word here. The only way they can insulate themselves in the short term is by building up their stockpiles and restockpiling. Now, again, that would take a situation where the visible demand exceeds potentially quite dramatically what is available supply. They’re important metrics to track as an investor.
Cameco does a great job of talking to the degree to which contracting so far lags replacement levels. And I think you can watch their commentary and, of course, talk to us about it to try and track that dynamic.
Emma Culver, Investor Relations and Communications Manager, Bannerman Energy: Thanks, Brandon. And what do you see as a a trigger to shift sentiment to be more positive in in the sector?
Brandon Munro, Executive Chairman, Bannerman Energy: So I think it’s going to take one of two forms. It’s sentiment in this sector right now, and I’m I’m gonna talk about investor sentiment, but it it applies in to a large degree to uranium sector sentiment and decisions that are being made in the spot market right now. The first form which is easy to identify but very hard to predict is some level of supply catalyst. And there’s numerous catalysts that we could see that will knock that fragile supply picture and shift the calculus of market participants. And that’s one that may or may not happen in the next six to twelve months.
You you just can’t predict it, but you can make a pretty good list of supply catalysts that could, really set this market on fire. And that is the reality of a fragile supply picture in a sector like uranium. Now on the other side, it’s anything that reverses the negative sentiment picture that we have at the moment, but most predominantly, some degree of certainty on policymaking in The US and, for that matter, the geopolitical implications. So right now, uranium sector sentiment’s very low because of the uncertainty predominantly around tariffs and other trade barriers. Utilities and other market participants simply don’t wanna commit themselves right now until they feel confident that they won’t have tariffs imposed on the uranium.
Now you’ll see that we’ve included some analysis in our quarterly report explaining that the uranium products that that we will be producing and that are traded in the spot and return market have been exempted from tariffs. I would add that there’s a couple of technicalities that are still being resolved on Canadian uranium, but we expect to see them resolved and clarified to give our our colleagues in the Canadian sector that confidence as well. So it looks like the picture is clear, for now at least, that uranium won’t be included. And the same applies to u f six and other nuclear fuel products. So that’s been an important step because until fairly recently, as you’ll see from the dates that we’ve put in the quarterly, that has been a huge overhang on any activity that utilities would want to undertake, whether it’s a spot market, whether it’s instructing traders to purchase in the spot and carry trade it out for future delivery or enter into term contracts.
What remains now is the utilities having the confidence that that policy is going to stick. The other aspect of subdued sentiment has just been a variety of different investor related assumptions around the uranium sector. And most of those feed into short selling narratives. And it’s a little bit hard when you’re deep in the sector to interpret these narratives. And I just have to keep reminding myself they don’t need to be grounded in reality.
They just have to have enough of an appeal to create a short selling narrative. So, for example, one of the prime short selling narratives that was driving the huge number of shorts on ASX uranium stocks was that, oh, gee, Trump’s come in now. He’s talking about normalizing relationships with Russia. He’s going to then resolve the Ukrainian war in twenty four hours. That’s gonna be bad for uranium.
Now we know that it won’t be bad for uranium. It might be a little bit of a hard sell for a very small number producers of uranium. But in terms of the sector, it won’t be bad for uranium. It will lead to a normalization of EUP and enrichment supply that will give utilities, both US and outside The US, the confidence to get on with their term contracting and their normal purchases of uranium. Russia doesn’t export a material amount of uranium.
They only export what they’re allowed to that’s embedded in EUP. They don’t want to become an exporter of uranium because they need it all for themselves anyway. So normalization with Russia is not a threat to the uranium market. However, you’ve got to sit down with a short seller and have a good half an hour with them to convince them of that, and that’s not how short selling narratives always work. Then the next short selling narrative was that, well, the the utilities are paralyzed now because of tariffs, and the short trade can control financial pressures on the spot market.
And therefore, with an amount of supply that’s coming into the spot market such as the traded supply that comes out of Uzbek production, well, we’re just gonna see a a spot price drift. Now that was well formulated narrative. However, with utilities now evolving in their confidence to be able to become a market participant again, we see that that narrative will now need to unwind. So, you know, for what it’s worth, any hedge funds out there that are watching this wondering whether it’s time to start covering, in our view, it certainly is because we think that utilities via both the carry trade and its direct participants in the spot market will start to create that discretionary demand that will quickly neutralize the nondiscretionary produced supply that’s coming into the spot market. And we see, over a fairly short period of time, an upward trajectory in the spot price.
And I think we’re starting to see the first signs of that. Many of you would have noticed the capitalization of the ETFs, particularly the spot driven ETFs and a large number of substantial shareholder notices that have come out in the last couple of days showing substantial buying at the end of last quarter. But from our tracking in our register, it’s continued in Bannerman, which therefore would have means it’s continued in the other stock that are tracked in those indexes. So there’s a lot of index buying at the moment. And if the pattern now is similar to other inflection points in this sector, including during 2021 when the Spot Physical Uranium Trust was just getting started, that’s a strong indicator that the smart money coming out of The US is ready to reverse the short trade.
As only volatility in the uranium sector can bear out, we’ll probably see a lot of those very successful short trades start to reverse and start to become long trades. So that’s something we’re looking for. Sentiment is a difficult beast to define, and unless you can define it, it’s hard to understand exactly how it’s going to change and pivot. There’s a lot of money just flowing into gold right now. That’s the easy trade.
However, the discussions that I’ve been having with investors and our own analysis suggest that we are somewhere near, if not the bottom pivot point in the way that the uranium trade’s gonna flow. So we’re watching those signals very closely as as many of the people are on this call.
Emma Culver, Investor Relations and Communications Manager, Bannerman Energy: Thanks, Brandon. And we we we’re close to time here, but we’ve just got a couple questions. One is around what long term price is Bannerman looking for to start production? So it’s probably best to talk to a little bit of how we how the board views the contract book and and how that would be structured. The other question here is how would you characterize the global regions where contract buying interest is mostly coming from?
And I think they’re probably if we can tie those two together.
Brandon Munro, Executive Chairman, Bannerman Energy: Yeah. Great. So regionally, the driver for the next round of contracts we see is predominantly being The US. To a lesser extent, the growth oriented European utilities, you would have seen that Ches, the Czech giant, has recently announced a contract with Kazatomprom. The reason The US is playing a big role in this next round of contracting is our feedback talking directly to The US and other to The US utilities and other market participants is that these utilities or a number of these US utilities have been ready to roll on their contract procurement process for some time, but they wanted to see a bit of stability coming, first of all, into the US election, then inauguration, and then, of course, everything’s been up in the air.
Now that’s important because it is quite a process for a utility to initiate a term contracting tender. They’ve got layers of approval that they go through internally. It needs to accord with their broad based procurement process, and it’s not a quick decision that they can make. The fact that they’ve kind of got bullets in the chamber now ready to deliver on these procurement contracts means that when the time is right, we’re likely to see multiple US utilities come into the term contracting market at the same time. And that’s not a dynamic that we’ve seen for a long time in the uranium sector.
Even last year when there were a number of contracts written, we didn’t see more than three market RFQs in place at any point in time. So that’s a dynamic that we’re looking forward to, and we’ve positioned ourselves as Bannerman for. And in terms of the question, look, I I think everyone on the call understands that I can’t answer that question directly and start telling you at x dollars we’re going we’re gonna fill our boots here. However, what I can say is there is no single contract price for us. It’s not it’s not as binary as that.
We would expect to have about a dozen contracts for our initial three and a half million pounds of production from a tango. We have the opportunity to layer those contracts. So the terms and conditions on which we would write our first contracts are not indicative of the terms and conditions that we would hold out for in those final layers. The reality for writing a contract book such as ours is you’re going to have a mix of base price escalated. So you pick a price at the moment.
That trading price is approximately $80. You escalate it for, for example, US inflation over the life of that contract. And market related, we we would insist on floors and would therefore need to offer ceilings. The initial contracts that we’d write in the current market, the market related contracts are not very attractive because they tend to get dragged down to the spot price. However, we are seeing, you know, as everyone can see, fairly attractive contracts for that layer of a base price escalated.
Now over time, we’d wanna continue improving that contract book. And as we get closer to our production date, you can tend to ramp up the commercial strength that you’ve got in those negotiations. And we’d look to improve both the value of the overall contracting portfolio and ensure we’ve got the appropriate mix of market related and base price escalated. If you read the commentary in our quarterly, we’ve tried to give a succinct explanation. But really, what it’s about is it’s about protecting a minimum bottom line and ensuring a financial stability and sustainability of our mine, at the same time giving an appropriate level of exposure to upside in the uranium market.
The final point I’d make is we’re blessed because we don’t have a singular opportunity to capture the next five or ten years of value in this sector. And that’s because we can readily expand our project from three and a half million pounds to 6,700,000. So the contract portfolio that we write to get into production at 3,500,000 is not the ultimate investor exposure to a tango because in a rising price environment beyond our initial production, we can then capture that via the expansion if we choose to go down that route.
Emma Culver, Investor Relations and Communications Manager, Bannerman Energy: And, Brandon, any thoughts on the spot cash shortage? And and then just also speaking about spot. Can you comment with the lift in the in the substantials and what you’ve seen historically as a lead on future pricing outcomes?
Brandon Munro, Executive Chairman, Bannerman Energy: Yeah. Great. And look. I’m I’m aware of the time, so I’m sure some people will have to drop off, but it won’t surprise any of you to know that I’m happy to continue talking. Right.
So first of all, the Sputtash crisis or whatever you wanna call it, that’s simply a short selling narrative. You can look through that noise very comfortably. If you haven’t followed it, basically, the narrative goes like this. Sput has administrative and storage and fee based costs that they pay back to their manager, Sprot Inc, and, their cash balance is down to something like $8,000,000 now. They haven’t been able to issue new units for a long time because they’ve been trading at a discount in line with sentiment, and they can only issue new units when they’re trading above their net asset value per unit.
The reason why it’s an attractive short narrative is there’s some speculation that the same investors who created the short trade in these uranium stocks are also in a position to sell split units if they start to get close to an NAV premium. So they feel that this is a trade that they can exert some control and influence over. Now here’s the thing. There the narrative goes, oh, Sprott’s gonna get low on cash, and the only thing they can do if they can’t issue new units is flog uranium, and that’s gonna somehow open a sluice gate, and we’re gonna see Sput uranium filling in utilities and doing all sorts of other wonderful things for the short narrative. It’s a naive narrative, frankly.
And John Ciampaglia has been on various platforms explaining this. So they’ve got alternatives that are far more attractive to them than selling uranium. The most the simplest alternative is they’ve got 66,000,000, and there are attractive location swaps around the world. Those 66,000,000 are fairly evenly spread around three converters, branch, US, and Canadian. From time to time, you see location swaps.
You’re seeing that at the moment because of geopolitical tensions and tariff and trade wars. They can quite readily reallocate their holdings from, for example, Canada to The US or US to France and achieve those location swaps. And earlier in the tariff war, I heard John Ciampaglia say that the the location swap on Convodyne held uranium was $2.50 a pound. So they can make $2.50 a pound without doing anything to their balance sheet. That makes a whole lot more sense than going and selling uranium.
And and I heard John say on the Crux interview a couple of days ago that there’s a couple of transactions in place to do that. So I just I think that’s a false constructed narrative that is fairly easy to dispel. Now in terms of the question of the the SPROT substantial notices. So it appears to be driven by ETFs, the SPROT ETFs rather than discretionary buying within SPROT funds. Although, there might be some of that at the margin.
We we don’t know. The pattern previously has been a little bit Smart money in The US who are able to read signals very well position themselves in equities, either through ETFs or they position themselves directly into stocks. And we’re we’re certainly seeing evidence of that through ETF inflows and the substantial amount of buying that those SPROT driven or SPROT managed ETFs had to execute at the end of last month and have continued to execute since. Interestingly, there’s obviously a bit of panic selling out there because they’ve been able to obtain that those holdings without putting a huge bomb under prices, which will be attractive for people wanting to get further exposure to those stocks.
The next part of the pattern that we’ve seen in the past is that the uranium price goes up. And it goes up either because of the fundamentals that are driving those initial purchase decisions, or they go up because the spot physical uranium trust starts to become capitalized and reenters the market as a buyer. Now with any pattern, it’s not proof. It’s simply an indicator. But that pattern accords very strongly with the observations and the insights that we’re gaining from the uranium sector right now.
I feel very strongly that $65 as a spot price is not an indicator of the uranium sector right now. It’s an indicator of a very limited set of circumstances that I described to before, and a break in the factors that are constraining the spot price to $65 is likely to lead to a fairly quick escalation in that spot price. And when you look across the board at uranium equities right now, including Bannerman’s share price, they are screening very, very cheap. So it seems like a sensible move by people who’ve got levels of confidence and insight into what’s happening in The US in particular that they’re loading up on equities ahead of a move in the spot price. Now we add a little bit of I was gonna say kerosene to the fire, but it’s a little bit more like just pouring jet fuel on it, really, because there’s still huge short positions in some companies.
And that short unwinding, if there’s a trigger, either a like I said before, either a supply driven fundamental trigger in our sector or a triggering sentiment, the short covering on those positions would need to be dramatic, particularly if it’s in the context of a widely understood trade where there’s a broad awareness that all the shorts are starting to cover now. You know, most sellers at that point would hold back. And in our case, you know, we’ve got until recently, we had six and a half percent short coverage. Not not too bad, but it’s up dramatically from less than 1% at the end of last year when the short covering was more stock specific. Now that was more than ten days to cover, but that’s ten days of normal liquidity.
The number of days to cover where all of the sellers are holding back expecting a short squeeze, that can run into multiples of those ten days to cover and can really put a lot of upward pressure on a share price. So we don’t know is the answer, but the signals are starting to suggest that the ingredients for this sector returning to a normalization of values and a normalization of trading in the spot market and and therefore sentiment, it seems to be coming closer. And if it comes closer driven by those sort of dynamics, then, you know, we might see really quite a dramatic move.
Emma Culver, Investor Relations and Communications Manager, Bannerman Energy: Great. Thanks, Brandon. And just circling back, the last question that we have here, just back on RFPs. Are you seeing longer terms in those RFPs that are coming to market now?
Brandon Munro, Executive Chairman, Bannerman Energy: Well, the answer is no. We we aren’t seeing a lot of RFPs coming to the market. My comments earlier were our expectation of RFPs, request for proposal coming into the market. Now in terms of what we expect, I’m not seeing any reason why we’ll expect longer terms at the moment. We did see a period of longer terms.
In other words, a greater number of years of the duration of that contract when we were reorienting Eastern European and Central European supply away from Russia and towards Westinghouse. And that’s be just because of the nature of those fairly singular supply arrangements. And together with a dynamic where enrichment capacity was being added, but the enrichers were demanding longer term contracts, which would then be, I suppose, matched off against longer term supply. That was back in 2022. So everything that we’ve seen since then has resulted in a bit of a normalization.
So for a first time producer, that’s sort of five to seven years. For an established producer, it can be seven to ten years. And I would add that, like, in the EU, for example, you need your Adam special approvals to go beyond ten years with the contract. So you don’t tend to see contracts beyond ten years. Now this is a relevant consideration when you start projecting forward, particularly towards the limited number of greenfields projects that can deliver into this uranium supply deficit and the particular geopolitics that are at play at the moment.
We’re seeing through our own strategic financing process that the key driver for market participants considering an investment into a project and or a financing of a project rather than just simply being a customer is the difference between a seven, five, seven, ten year contract and having life of mine access to that uranium. And the tension in the uranium sector that we anticipate building over the course of the second half of this year, that tension expresses itself in price. It expresses itself in appetite for long term contracting, but it also expresses itself in the way that utilities and other market participants regard the premium that they can attach to long term life of mine offtake as opposed to the shorter term contractual protection that they have via a long term contract. And, you know, with a massive resource well over £200,000,000 at Otango, a initial mine life of fifteen years that we can demonstrate to ’27 that’s likely to go multi decades, Tango is extremely well positioned as that calculus starts to change and as utilities and other market participants say, gee, the next round of contracting only gets us to the beginning of the supply crisis.
It doesn’t actually protect us from the supply crisis coming in from the mid twenty thirties. That’s where you get big upgrades in the the financial metrics that market participants are prepared to engage with in order to secure that longer term supply.
Emma Culver, Investor Relations and Communications Manager, Bannerman Energy: Right. Thank you, Brandon. We will leave it there. If, there are any other questions, please reach out to myself or Brandon, always available. And I believe that you all have my email address from our communications that have been sent out.
I will leave you now with the the short minute and a half fly through, the drone footage of of of what’s happening at site for anyone that didn’t see it. And please reach out to us if there is anything, and enjoy the long weekend if you’re in Australia. Thank you, Brandon, for joining us this morning.
Brandon Munro, Executive Chairman, Bannerman Energy: And thanks, everyone, for tuning in. I see that we had really good participation on this, and, look forward to continuing to showcase a a really outstanding journey with Otango and Bannerman.
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