Adam Thompson:
Perhaps we can start with the current state of the commodity market. This is a bull run, but are you expecting it to run for many years? What’s your take on the commodity cycle at the moment?
Warren Irwin:
Normally I would expect a bull run like this to last the decade, but I am somewhat concerned that things happen way quicker these days, and cycles that normally last five years are lasting two or even a year and things happen a lot quicker, so we’ll see what happens.
But traditionally a typical cycle would last 10 years, and I’m hoping that will be the case. It’ll be a slow, gradual move, but these days capital seems to be quite flighty and things could happen much quicker than we historically would have expected.
Adam Thompson:
What are some of the reasons as to why capital is moving towards commodities at the moment?
Warren Irwin:
Capital is whipping around quickly, there are obviously a lot of people in the U.S. sitting at home trading stocks. Especially when you look at junior resource stocks, they are into GameStop one second and they’re trying to squeeze the silver market the next. The next thing you know they’re into copper or whatever.
So capital is very, very fluid, but there’s a tremendous bull case for commodities, so we’ll see how this all pans out, and I think increasingly we’re starting to see some people talking about commodities, especially some of the more interesting ones that have been out of favour for many, many years.
Adam Thompson:
Do you have a take on coal versus other energy sources and how this might play out with the fate of mining companies at the moment?
Warren Irwin:
My involvement in coal has been in metallurgical coal, the coal used to make steel. There are some technologies people are working on to replace that so that you don’t have to use coal, you use hydrogen. That’s one technology, possibly, that could work. Other people say that the current technologies with hydrogen can’t get the blast furnaces up hot enough to create the steel we need. So, I think over the next number of years that’s not going to be replaced.
Now, as far as thermal coal, that’s the coal you burn in power plants, I think around the world the more developed countries have eliminated any new construction of thermal coal power plants. There are countries that actually need the energy, like India and China, that are probably a few years away from doing that, but they have climate goals they want to reach. But I think their planned climate goals are traded off against, “Hey, we need electricity to power our factories.”
So, I think coal will play a role for some of the big economies like India and China for the next little while, but I think they’re trying to phase it out. China especially is going nuclear, which I think is the correct way to go.
The uranium market – I have never seen such strong fundamentals for any commodity in my career
Adam Thompson:
So, you’re bullish on uranium. What’s caused that sort of spike in such a short period? Is it just that sentiment that you just explained? How do you see the state of play in the uranium market right now?
Warren Irwin:
The uranium market – I have never seen such strong fundamentals for any commodity in my career. The overriding theme is you’ve got the EU and the Biden administration both pushing nuclear. They’re saying, “Hey, we’ve had a significant amount of our power grid powered by non-CO2 generating base load, reliable, dependable energy for half a century causing no problems.”
It’s safely operated and, in fact, nuclear is the safest form of energy in the world of anything for grid scale, and they’re finally waking up to that and they’re trying to push the agenda. Whereas originally, as you’re aware, it was really only solar and wind. So, nuclear is a pretty amazing energy source.
To power nuclear reactors you need uranium, and there’s demand for about 190 million pounds a year. There’s production of about, let’s say, it’s moving around quite a bit, a moving target, but let’s say 140 million pounds, so there’s a significant supply deficit there. And I’ve never seen this in any commodity before where the second largest producer of uranium, Cameco, has both their major mines shut down and are producing zero. And they actually are going into the spot market to buy uranium to fill their long-term contracts.
Then we’ve also got permitting issues for any new uranium mine. For instance, Berkeley is having a tough time in Spain. I don’t know where they are right now. I know they were having some real tough times several months ago. Maybe things have improved for them, but there’s definitely a “not in my backyard” view with respect to that in Spain anyways. And so we’re looking around the world and there’s not too much coming on-stream.
So, what’s happening is you’ve got this supply deficit of 50 million pounds per year and the bears are saying, “Well there’s lots of uranium out there,” but we’re going to find that out pretty quickly, because when you’re chewing through 50 million pounds a year of secondary supply of uranium, let’s hope they have some stockpiles, because if they don’t, the price of uranium will be going through the roof.
And to show how bullish many producers are, you have the guys like Denison and Boss Energy and, I think, UEX and UFC and Yellowcake, well, Yellowcake, as you know, is sort of a proxy for uranium, but they’re actually in the market raising money and taking that money and putting it to work buying uranium in the spot market.
So, I’ve never seen it where one of the major producers of uranium has shut down production until they get to the levels where they think pricing is fair, and there are no real significant mines being built, there are mines being closed, and people are figuring out you need uranium to power these nuclear power plants. Nuclear power is the answer over the next many decades to produce base load non-CO2 generating energy.
Adam Thompson:
Let’s talk about junior mining companies and how they’ve been performing of late. Obviously, it’s a good period – equity markets have opened up, it seems, compared to how they were over the last decade. Are you happy with the way companies have performed generally?
Warren Irwin:
Long-term, I’m bullish on gold. But short-term, there’s been a bit of a setback and I think we just need to work through these levels and get the economies back on track and get people back buying gold again and comfortable with the new higher price and then gold could gradually move higher over time.
Now, as far as things like copper, we’ve had many-fold increase from lots of the copper projects, so they’ve done well. The uranium companies, they’ve run in advance of really a significant move in the price of uranium. Uranium hit a few years ago around US$17, US$18 a pound and now it’s US$30, so that’s good.
People have just started noticing uranium juniors here recently, so I think what we need is a bit of a follow-through with the spot price heading higher before we’ll see juniors continue to move forward.
Copper seniors have done very well, but people haven’t moved into the copper juniors from what I can tell quite yet. They’re still reasonably cheap. I think over time as the market gets a little frothier with the majors, then people will start looking a little bit downstream at some of the smaller cap names or the up and coming developers.
Adam Thompson:
And just finally, now’s a good time to be an explorer. Would you agree that sentiment’s probably the best it’s been for a while and that actually exploration is where the upside is at?
Warren Irwin:
Absolutely! The financing window is open. You are able to raise cash to go and do and drill those properties that have been sitting on the shelf for the last decade and you couldn’t raise money to drill. So, it could be an exciting time here.
Last cycle there weren’t a lot of super big discoveries made, but definitely the previous cycle there were. My fingers are crossed and we’ve got some big super discoveries to be made.
There’s nothing like a multi-billion dollar takeout to liven up the junior market, so let’s hope a few of those are coming down the pipe, because they’re definitely financeable. There are a lot of drills turning right now, so if you could combine a couple of big discoveries with a 10-year bull market for commodities, there could be a lot of money to be made over the next 10 years.
