An interview with Brandon Munro, Chairman of Bannerman Energy (OTCQX:BNNLF) (ASX:BMN)

Recording date: 14th March 2024

Brandon Munro, Chairman of Bannerman Energy, discussed the recent volatility in the uranium spot price, which has dropped from nearly $110 to the mid $80s over the last 6 weeks. He attributed this to very thin trading volumes done by a small number of market intermediaries looking to take profits. Neither utilities nor major producers like Cameco, Kazatomprom and Orano are motivated to push the spot price higher currently.

However, Munro emphasized that the long-term contract price has actually increased to $75/lb during this same period, and that the demand outlook has only strengthened. He sees the spot price move as short-term noise that doesn't reflect the strong supply-demand fundamentals. Utilities are more focused on securing long-term supply than the spot price gyrations.

While the small size of the uranium sector makes the spot price susceptible to trader-driven volatility in thin markets, Munro believes there have been structural improvements in recent years that have reduced the ability to manipulate prices compared to the past. He argues the risks are skewed to the upside for investors taking a medium-term view, as buyers are more likely to be compelled to enter the market and bid prices back up than sellers are to be forced to dump material.

Comparisons to the lithium market boom and bust are not apt for uranium according to Munro. Lithium demand is dependent on hard-to-predict EV sales, while uranium demand is "baked in" and non-substitutable from the fleet of nuclear reactors globally. Even if all idled uranium mines are restarted and advanced development projects are brought online, it will still fall short of projected demand growth. Permitting, technical, and geopolitical constraints make it highly unlikely that uranium mine supply can respond quickly enough.

This should be supportive for uranium prices and equities. Investors can gain exposure via larger producers, ETFs, and developers with high-quality assets that are likely to fill the supply gap. Munro believes his company Bannerman is well-positioned with a large, scalable, permitted project in Namibia with $35M in cash. He is being patient to sign contracts at the right time as the market shifts from a buyer's to a seller's market.

In terms of other uranium companies making acquisitions and deals to build scale and stay relevant, Munro sees some strategic rationale, especially for single-asset developers looking to build a project pipeline. Consolidation can also improve liquidity and access to institutional investors. However, he cautions there is also an element of "white noise" so investors need to carefully assess the merits of deals.

Overall, despite the spot price pullback, Munro remains very bullish on the outlook for the uranium sector. For investors willing to look through short-term volatility, the risk/reward looks attractive with equities retracing 25-30% while the long-term fundamentals are only improving. There is potential for 50%+ upside in uranium stocks as the market re-rates to reflect the looming supply deficit. While early investors have realized big gains already, Munro believes the sector is far from overheated and offers compelling opportunity for new investors taking a medium-term view.

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