Anfield Resources (V.ARY) set to deliver on uranium mining strategy

In my view, Anfield has the right success factors in place: uranium assets with resources and stockpiled ore; a permitted mill; favorable location; and the necessary strategy and people on board to make it happen. Timing is also favorable as the Company will be ready to produce yellowcake as the commodity price recovers.

I believe providing proper oversight is the key role. My role is to ask the right questions to safeguard the interests of shareholders. And at the same time, provide advice and direction to help build the Company and deal with the inevitable hiccups along the way.

I think you will quickly see a well-planned and staged approach to preparing the Shootaring Canyon Mill for production and developing the uranium mining assets.

For an investor, the bottom line is the risk/benefit calculus -- whether there is more upside than there is downside and a path to growth and prosperity. An investor needs to look at whether the key risks are manageable and being managed, and the benefits are achievable in a reasonable time frame.

I believe a niche exists for small-scale, low-capex uranium projects with growth potential in the U.S. Previously-operated projects offer lower financing hurdles and lower financial risk through staged development of the projects, ultimately unlocking a premium for U.S. domiciled projects

In Anfield’s case, the company has near-production uranium assets that are significantly de-risked, has a mining-friendly U.S. location and has the management to actualize plans. Importantly, the Company now has the most recently built mill in the U.S., and one of only 3 licensed mills. Timing is fortuitous: uranium prices are at unsustainable levels, uranium stocks are beaten-up -- and conditions are set for these factors to significantly improve. In many ways, it’s an undiscovered new story at the right time.

Overall, the Company is executing a business plan of acquiring projects that have the potential to generate near-term revenue to finance on-going development projects that have a longer development horizon with significant upside. As part of this strategy, Anfield has acquired and is bringing into production Chilean copper properties and is entering into a joint venture agreement to develop its Arizona copper project through to production.

That is an extremely important question. Anfield plans to stand out by saying what it is doing and doing what it is saying. The nature of the mining business has often been to disappoint, to not meet expectations and commitments. The way to stand out -- is to deliver.

Becoming a producer is why Anfield is here -- its raison d’etre. First production is expected in 2017.

Without question, the biggest catalyst is the commodity price. This is where timing is important. Anfield’s mill is expected to be ready for production when the price of uranium is high enough for the mill to be profitable.

The dialogue should begin as soon as practicable to establish a presence and acquaint potential customers/partners with Anfield’s plans and progress. The necessary conditions and appropriate timing for signing a supply contract will become apparent as the Company progresses, the needs of utilities shift, and markets evolve.

Right now, the driver is Japanese re-starts to restore confidence and uranium demand. In 10 years? It’ll be the new reactors now being built. Uranium usage is reasonably calculable, barring an extraordinary event such as Fukushima. That being the case, uranium usage will rise sharply as the number of reactors coming on line increases in the next 10 years.

This increase will be principally, but not entirely, in Asia. As of Aug 14, the WNA states that worldwide, 72 reactors are under construction and 174 more are planned (planned means approvals, funding or major commitment are in place, and most are expected to be in operation within 8-10 years). An additional 299 reactors are proposed (i.e. specific program or site proposals, expected operation mostly within 15 years). Any way you look at it, these are large numbers in a large pipeline. These figures may actually increase if GHG concerns become more acute, as urbanization and population growth outside Europe and the U.S. escalates, and as security of energy supplies becomes more of an issue.

I believe it’s more positive than many people realize. The long and strong suit of nuclear is that it is ideal for generating baseload electricity, is emission free, and fuel (uranium) is a small percent of the cash cost going forward. As is often pointed out, however, right now there is about an 11:1 ratio of domestic uranium demand to domestic supply. That is, about 55m lbs/yr of uranium is consumed in the U.S. but less than 5m lbs/yr is produced in the U.S. This spells opportunity for home grown uranium production in the U.S.

Nuclear is a very important component of the U.S. energy mix, with 100 plants providing approximately 20% of the electricity generated in the U.S. In addition, according to the WNA, there are 5 units under construction, 5 more planned and 17 proposed. Expansion of nuclear plants is not particularly problematic as greenfield sites are not required due to the large capacity of existing sites to accommodate new units. Further, public acceptance of nuclear energy is strong. Public attitude surveys commissioned by the Nuclear Energy Institute in March of 2014 found that 74% of Americans feel that nuclear energy will play an important role in meeting the country’s future electricity needs, and half believe this importance will increase with time.

Keep in mind that energy planning by utilities and government necessarily looks at very long-term factors (reactors are licensed for 60 years) rather than short-term capex and opex considerations. This where nuclear trumps fossil, despite currently favorable fossil fuel costs. Gas, as the premiere fossil fuel, is being used mostly as a replacement fuel for coal (a good thing) and has inherent expansion limitations based on existing pipeline capacity and the difficulty in building new pipelines; whereas, there are no restrictions on the availability of uranium nor any alternate uses for uranium, unlike gas.

Each area has its advantages and disadvantages, and it’s more about how these all add up in individual projects. There are a multitude of considerations to take into account, including: resource grade, size and depth; mineability, including rock structure, hydrology, presence of deleterious metals, etc; accessibility and infrastructure; access to milling; cost of drilling, permitting, and mining; and even the suitability of climate for exploration and development. Rather than compare areas, however, projects in each area should be taken on their own merits, as the bottom line is the extent to which each project or operation can get into production and produce a good return for shareholders.

The difference is huge in terms of time, money and certainty between permitting and building a new mill as opposed to refurbishing an existing mill. A study done in July 2005 by Behre Dolbear & Co. stated that the replacement cost of the Shootaring Mill would be US$80.5m. Obviously, 9 years later the figure would be much higher, and this is an avoided cost with a built, permitted and formerly operating mill.

Embracing nuclear, as a major baseload energy source, is simply good business strategy. And major oil companies have done this before with uranium in the 1970s. Major oil companies need to look ahead well into the future and essentially hedge their bets. Some major energy companies look ahead 2 decades to be ready to respond IF major trends play out (or even “black swans” turn up).

Energy planning inherently has significant uncertainty in a host of areas. Not just with geopolitical risks (witness dependence on Russian gas in Europe) and government legislation and GHG regulations, permitting uncertainty (witness Keystone XL, etc), production costs, commodity price volatility, technical aspects of new fossil fuel extraction and distribution -- but also with public acceptance (or opposition). It’s a big bet for major oil companies given the size of their requirements for new (more difficult) supply sources, new infrastructure and investment and the long time lines needed to achieve this .

The short answer is: in a significantly stronger position. I would expect a year from now we'll see important trends converging, including: Anfield's demonstrable progress towards production; improving uranium prices and investment interest in the uranium space; and increasing awareness of and interest in Anfield's combination of low U.S. jurisdictional risk and near-term yet-unhedged production capability at low capex. This last point is critical. In a risk-off environment, a project needs to have all these features in place, not just some -- the right jurisdiction (increasingly a problem with global events), realistic prospects for production and profitable margins, and bite-sized capital requirements. This is where Anfield stands out.