The mining business can be a pretty tough one. Companies are beholden to often fickle futures prices for metals that take a long time to extract and process, giving them little chance to adjust to a market over which they have little control.
What’s more, the industry usually requires considerable capital expenditures just to get things up and running. That’s why the smaller members of the segment are often years from actually seeing any cash flow, requiring great patience from investors. Patience that doesn’t come with any guarantee of results. That’s why Anfield Resources ($ARY:CA) ($ANDLF) stands out as unique. With producing copper assets in Chile as well as a recent acquisition of key Uranium resources in the United States, Anfield Resources is the rare mining junior with a quarterly balance sheet that won’t make investors sweat the short term.
Equities.com talked with Corey Dias, Director and CEO of Anfield, about his company’s positive cash flow and why its newest acquisition may have placed them in the cat bird’s seat for the American uranium market.
EQ: Can you provide us a brief overview of Anfield Resources as well as discussing its targeted projects and minerals?
Dias: Anfield Resources is a resource company with assets in both the copper and uranium space. We’ve got copper assets in Chile and in Arizona and we have uranium assets in the US in the states of Colorado, Utah, Arizona, and South Dakota.
We have a small copper production asset in Chile. We ship raw ore to a government agency for processing and then we get paid at a discounted price to the spot price for those deliveries. Assets in Arizona on the copper side consist of two past producing mines in a high grade copper area known as the Arizona VMS Belt.
On the uranium side, we’ve been acquiring a number of uranium assets over the past nine months, primarily in Utah and Colorado. Most of these properties do not have resource estimates associated with them but many host past-producing mines or underground mine workings. We think they are certainly prospective.
Finally, we just announced in August the acquisition of Uranium One's US conventional assets which includes both the Shootaring Canyon uranium mill and 6.8 million pounds of historical M&I resource.
EQ: It definitely sounds like you're one of the few companies currently in the junior uranium producing segment in the United States.
Dias: The Shootaring Canyon mill itself is unique because this is currently one of only three licensed, permitted and constructed conventional uranium mills in the U.S. Back in the 1980s, there were over 40 conventional mills in operation. I think that puts Anfied in a unique position vis-a-vis a number of other junior mining companies and certainly puts us into a very exclusive group when it comes to junior uranium producers.
There are three conventional mills – one owned by Rio Tinto (RIO), one owned by Energy Fuels (UUUU) (ERF:CA), and now one owned by us – but there are also only three or four other publicly-traded junior ISR producers in the U.S. The bottom line: we'll be one of fewer than 10 potential junior producers or interim producers on the uranium side.
EQ: Can you go into a little bit more detail in terms of the value creation that you see from this deal?
Dias: We're going from being a junior developer with the process of having to sell our ore to a current producer wherein we wouldn’t have much pricing power. So the opportunity to buy a mill for ourselves, which would allow us to control all aspects of production, pricing, timing and everything else is significant.
Secondly, the fact that it is a uranium mill – not a copper mill, silver mill, gold mill or the like, where regulation is not necessarily as strict – also provides a unique barrier to entry, given the inherent difficulties faced if one wants to actually build a mill nowadays. It could take between 7 and 10 years from concept to construction and production – notwithstanding the substantial capex involved – and that assumes very little push back from state or federal agencies who oversee this market, or environmental groups who oppose nuclear power.
EQ: Anfield is one of the few juniors that actually generates cash flow and how does that help set you apart from the other juniors in the space and how do you plan to further capitalize on this?
Dias: We generate a small amount of cash flow in Chile. While there is a significant opportunity to grow there, right now our focus is on cash flow in general throughout our portfolio. We’ve got a joint venture partnership with a group that’s related to our Arizona copper assets which we expect will generate cash flow in the future. Moreover, when we look at the assets that we've originally acquired in the uranium space, cash flow generation was top of mind. Finally, the recent acquisition of the Shootaring Canyon mill and 6.8 million pounds of historical uranium resource should allow us to commence and sustain generating significant cash flow for us.
As I mentioned, to build something similar to what we’ve recently acquired from scratch at this time would mean that an entity would be foregoing cash flow for at least 7 to 10 years. This is just another opportunity for us to emphasize our strategy of looking for near term cash flow generating assets.
EQ: The mining space has faced considerable challenges over the last few years. What are some of the trends that you think are going to work out in your favor, particularly in regards to the uranium space?
Dias: I think the uranium price has been very soft this summer. It hit lows in the mid-20s per pound. Obviously that didn’t bode well for anyone who is looking to invest in the uranium space. That said, we as a company decided to take the contrarian view and say the uranium price wasn’t sustainable and that this is the time to acquire undervalued assets in the sector.
Nuclear power is widely used, and becoming even moreso. You’ve got a number of countries that are looking to move away from fossil fuels, looking for clean energy sources, and are now embracing nuclear energy. Uranium production today can essentially meet current nuclear reactor demand but, in the future, given the expected proliferation of nuclear reactors coming online, current production won’t be able to meet future demand.
We knew that there is a disconnect between these two things and there would certainly be downward pressure on the uranium price, so, looking at the low price today, we decided to embark on an acquisition strategy of uranium assets on the cheap. And the opportunity to buy uranium assets at a low price in a low price environment certainly worked out well for us. We’ve been pursuing that strategy about that for the past 9 months, culminating in this acquisition.
It looks as if the uranium spot price has bounced back from the bottom, and I would like to think the upward trend is going to continue. The uranium price climbed back to $30 per pound last week. I think the prospects, in general, are good. Japan is considering putting some of its nuclear reactors back on line. There are increasingly more positive headlines associated with the uranium space. We think the positive sentiment will continue and I think, as we continue to get our mill ready for production, the uranium price will continue to move in the right direction. We’ll be well positioned when the pricing is optimal.
EQ: Are there any milestones or goals over the next 12 months that you think the investment community should be looking out for?
Dias: We first need to consummate the transaction, which will likely take a few months. Part of this process includes the transfer of the radioactive materials license to Anfield from Uranium One. Once this is complete and the transaction closes, we will then embark on assessing all of our wants and addressing all of our needs, and the means by which we will pay for it all.
Currently, we have 6.8 million pounds of historical M&I resource. We would like to increase that figure in order to justify an even longer term production profile at the mill. Nevertheless, we do want to be strategic and opportunistic when it comes to acquiring further assets in the space. We know that there are likely other assets available throughout the US that could potentially work for our mill.
EQ: Do you have any additional closing comments you'd like to make?
Dias: I think it's important to note that Anfield is now moving into a new realm here. The uranium space itself is very highly controlled, a very tight-knit community. There are very few juniors out there with the capacity to start production. There are three conventional mills in the U.S. and the likelihood of more being built is quite remote so I think there is a lot of scarcity value here.
I think that it's important for investors to understand that the uranium space you may only ever have a handful of producers. When you look at the value given to the other uranium producers in the space, current market caps tend to range anywhere from $100 million to $150 million while our market cap is sitting below $8 million. Granted, we are not in production yet and so probably don’t deserve an equivalent valuation at the moment; however, I think there is an opportunity for investors to see the value in looking at our company as the valuation gap is quite pronounced.
For more information on Anfield Resources, go to www.anfieldresources.com.