Interview with Daniel Major, President and CEO of GoviEx Uranium Inc. (CSE: GXU): Three Large Advance-Stage Uranium Projects in Africa with Resources Totaling over 200 Million Pounds of Uranium, Projecting Cash Cost of Under $25 per Lbs.

By Dr. Allen Alper, PhD Economic Geology and Petrology, Columbia University, NYC, USA
on 7/8/2016
GoviEx Uranium Inc. (CSE: GXU) is a mineral exploration and development company that owns three large advance-stage uranium projects in Africa with resources totaling over 200 million pounds of uranium. Two of the three projects have mining permits and are shovel ready, which adds a lot of value to GoviEx because it can have the mines ready for when the uranium market recovers over the next three to four years as predicted by most analysts. According to Daniel Major, CEO of GoviEx Uranium, they are looking at a cash cost of under $25 a pound and with the predicted uranium prices close to $60 they are going to have a very positive return. We learned from Mr. Major that the key plan is to move forward with development of their flagship Madaouela project in Niger that holds 100 million pounds of uranium. The company is working on financing and optimizing the project and reducing the unit cost. At the same time GoviEx is going through the 25 years of technical data on their second permitted project, Mutanga in Zambia, where they have up to 50 million pounds of uranium. According to Mr. Major, operating in Africa is relatively straight forward; obtaining permits is many times faster than in Canada.

Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-chief of Metals News interviewing Daniel Major, who is president and CEO of GoviEx Uranium Inc. I know you have a huge property in Africa. You and your chairman have great backgrounds. You also have a huge company and great investor support from companies. Tell me a bit about what differentiates your company from other uranium companies?

Mr. Daniel Major: I think there are a number of differentiations between GoviEx and many others. One, the sheer scale of the resource that we have. We are now sitting with over 200 million pounds of uranium in resource spread over three large advance projects. The Nigerian project at Madaouela has over 100 million pounds, and then there are about 50 million pounds in either Zambia or in Mali. I think the other key points are that they're large resources, they're relatively high grade for Africa. The other differentiating point is we now have two projects which have mining permits. I think that adds a lot of value where most analysts are predicting that the uranium market will recover over the next three to four years as we see the gap in supply and demand widen as inventories are worked through and increasing demand comes on.

I actually saw an interesting statistic the other day talking about the offtake positions, particularly in Europe, where they're well covered at the moment. By 2018, they only have 70% coverage on their long-term offtakes. By 2020 and onwards, less than 40% of their positions are covered already. Where we are different is that we can actually build these mines because we're fully permitted and shovel ready. We're looking at a cash cost at under $25 a pound with most analysts predicting uranium prices closer to $60 at that time. Obviously we're going to have a very positive return for those projects.

Madaouela is the primary one in Niger. Mutanga, which we acquired recently from Denison, already has its permit. It has a large resource there. It's relatively simple, open pit mineable, very low acid consumption and we're starting to work our economic numbers on that. We certainly think that's two to three years behind Madaouela from a development point of view, which would still be within the scope of the next cycle. I think those are the real differentiations. When you look at our value, we did not get any credit for that valuation and those projects and the value of the mining permit.

Dr. Allen Alper: Could you tell me a little about how it is operating in Africa?

Mr. Daniel Major: Other than really nice and warm, it's relatively easy. GoviEx started operating in Niger in 2007 with the field work. That's the one we have the most experience in. In 2008, we started our drilling campaign. Between 2008 and the beginning of 2013, we drilled over 600,000 meters on the property to define the resource. We took it all the way through from initial exploration to developing over 100 million pounds measured and indicated. We did all of our environmental work and got our baselines sorted out and filed our ESIA at the beginning of last year.

Operationally, it's been relatively easy. We've had no issues operating in the field. In 2009, the company took a Nigerian approach on everything. We run a full 100% Nigerian team in the field. Our drilling contractor, who did the 600,000 meters of drilling, was a Nigerian drilling contractor. Our ESIA team, working in the field, was another Nigerian ESIA contractor. Finding the key people to operate in the country is relatively easy, particularly when you're working in a country that's been mining uranium for over 50 years. You have to appreciate people like the president who used to work for AREVA and was an NUM supervisor. They have a lot of experience. They have a geological college, a mining college. Finding key skills in country is relatively straightforward.

As I said, you get stuff done. We filed our ESIA, full international equator standard ESIA in March and by July, it had been signed off. For our mining code application, the permit was filed in July and was signed in January. Those are six month windows to get things done. I did do a study of Canada, trying to understand how that compared. There are four permits that I could find and the quickest was Rabbit Lake, which took seven years to permit, Elliot Lake, and Key Lake took 12 years each to permit, and this is from one of the lawyers in Canada who had written a document on it. Cigar Lake took 23 years to permit. The ability to operate in the field, find the key people, have all our infrastructure around us, roads, power, mining towns next door to us, and the ability for government to get things done, makes operating in Africa relatively straightforward.

Dr. Allen Alper: Well, that sounds great. A cash cost of under $25 a pound, how does that compare to other major companies and other uranium producers?

Mr. Daniel Major: It's about in the middle of the cost scale. Obviously, the very low cost operator is coming out of Kazakhstan and you have Cigar Lake. If you compare it to projects in Africa, Langer Heinrich, which is owned by Paladin, operates an average grade of .05%, those cash cost is under $24 a pound at the moment. Our average grade is .14%, so it's right there in the middle of the cost scale. It's a fully loaded cost and it's full of PFS cost as well. There are some projects out that I've seen with not fully loaded and non-PSF, which are lower, but ours has already gone through full PSF as a fully loaded cost. It's right in the middle of the cost scale. We're looking at a break even for the project at $48 a pound. The initial work that we've been doing on offtake is indicating that floor price contracts are achievable at $50 up. On that basis, based on our economic models, based on a debt finance structure for 2/3 of the capital, this project is a go.

Dr. Allen Alper: It sounds very good. Could you tell me a little bit about your background, your executive chairman's background and the rest of the team.

Mr. Daniel Major: Yeah, absolutely. Let me start with myself. I have some background as a mining engineer. I went to the Camborne School of Mines here in the UK. I started operating in what was then Southwest Africa a long time ago for Rössing, Rio Tinto’s uranium open field operations. I worked there four years until the uranium price went to $8 a pound. My last job there as a senior planning engineer was to redesign Rössing work at $8 a pound and survive for a number of years, which it did.

I then went into the platinum industry, operated in the platinum industry in South Africa, opened a platinum mine. Did that for a few years. Then I had my own consultancy company for a while. I went to work for one of the big gold mining houses for a company that was called JCI, Johannesburg Consolidated Investments, which was in chrome, coal, base metals. It doesn't exist anymore. I was doing mergers and acquisition work for them and project work. I was an equity analyst for a while, a rated equity analyst in the UK and South Africa, part of a number one global team. I then worked in Russia, working for Oleg Deripaska, who owns RUSAL. I was operating his molybdenum operations for him in Russia. I was producing about 8% of the world's ferro moly and then I ran his timber businesses as well. From there, South America exploration, gold and gold production in Canada and Peru, and now I'm back in Africa. That's me.

Dr. Allen Alper: That's a great career and background.

Mr. Daniel Major: Yeah. I've been to most of the world at some point and I've done a lot of commodities as well. Looking at different jobs, different projects, different commodities, what you do learn is that most commodities are very similar and most metals are the same. In fact, I've realized that timber and mining are actually pretty similar as well. You process in very similar ways. The whole process route is pretty analogous one to the other. You're just processing different things.

Govind Friedland’s background, he's obviously the son of Robert Friedland, he is a geologist by background, geologist engineer from the Colorado School of Mines. He's worked for a number of exploration companies before joining Ivanhoe where he was business development for the company and worked with them until 2006, which is when this opportunity came up. The government in Niger at the time was trying to diversify its land ownership away from Areva. An opportunity came up to acquire these licenses and he realized that the source of all the uranium in Niger and this area was the mountains in the east. Areva’s mines were in the west, and the properties for sale were between Areva and the mountains. Therefore, unless the uranium had just jumped across the property, it had to flow through the land that we had to get there.

He saw that as a great opportunity and acquired the assets. He then subsequently brought Cameco on board. He presented the story of the assets to the Cameco board early in 2008 and what he had there. They had experienced all of that area and said, "Yes, we want to come on board." He gradually built the company up. He was the CEO for a very long period of time, and then the company was going to IPO in March of 2011. Unfortunately, the filing date for the draft IPO document was the Monday after Fukushima occurred. So the draft document wasn't filed and the company subsequently didn't IPO. He then got Toshiba to join us as an investor. Initially, they were a debt investor. They came on board because they own Westinghouse and they were looking to secure long-term offtake, so we have an offtake contract as part of our structure with them on the project. We did convert that debt when we IPOed the company on the CSE in June of 2014. Toshiba is now one of our largest shareholders.

On our board, we have Benoit La Salle most of your readers will know, the guy who founded SEMAFO, the chairman of Algold as well with a long history in the mining industry, a company creator in West Africa. Tony Abbenante comes from Ivanhoe Industries. He's President of Ivanhoe Industries, LLC, a U.S.- based, privately held company actively engaged in supporting technology, energy and natural resource companies worldwide. We had David Cates join the board now. Matthew Lechtzier, a lawyer by background and corporate financier, worked in the industry for a long time. Robert Hanson comes from a wealthy family. Transport, a lot of contact particularly across the Asian market as well. Chris Wallace joined the board after becoming an investor. The head of our audit committee stepped down and we asked him to join. His background is corporate finance, started Capital Corporation, a US$100 million private equity and mezzanine loan fund. Very strong from an audit point of view, very strong from a corporate investor point of view as well. We have a very strong constructive board, a small management team, but we all have been around the block and know what they're doing.

Dr. Allen Alper: You have a great management team, a strong board and great support from corporate investors. That's a great position to be in. It sounds like your property is very extensive with great potential. Could you tell me a bit about your plans going forward?

Mr. Daniel Major: Yeah, absolutely. Absolutely. Because of the structure of the property, the key plan really is to keep moving forward on the development stage for Madaouela. That is our primary target. We're working on the debt structuring and the finance structuring for that. At the same time, we're working on optimizing that project. I'm one of these engineers who is never satisfied that I have the right project and I' have to keep working on the costs, seeing where we can optimize further. There are a lot of things that I've left that I can go back through, currency adjustments, for example, that need to be made. We could help reduce the unit cost. There are optimizations on the design side that still have to be worked through further. That is going to be done in parallel with work that we're doing on the debt side because I want the debt people to be involved and see the fruition on the technical. At the same time, we're starting to work on the equity side, but tying that to the offtake as well, preliminary the offtake contracts.

Actually, all four of those components, the debt, the technical, the offtake, and the equity all tie together. For example, when you talk to the Chinese ECAs, they very quickly point out that they would like to talk to certain Chinese operating companies. That then brings you round to the offtake side, and if you're in the offtake, then you end up on the technical, so they all very much interrelate. We're running them all parallel. That is going to be our process with Madaouela. On Mutanga we're currently going through all the data we've acquired from Denison. They've done a great job of scaling the resource up to 50 million pounds. There's a lot of technical data because there was a mining permit already on it. We want to revisit that technical data and see how it compares now that the resource is bigger than when it was last done.

I think there are a lot of opportunities on that one. It's a very low acid consuming project. It's in a country that produces quite a lot of acid. It's in Zambia, it's open-pittable, it's heap leach with good recovery, low CapEx. That looks really interesting. We're going to see what we can do about advancing that project and then probably slightly further down the track for us, less work to be done until we see an improvement in the market will be the very exciting project Falea in Mali which needs more drilling. It's got a great silver and copper credit. For example, the indicated resources have a 70kg a ton silver grade and a .2% copper credit that goes with it. That one's not as advanced. A lot of technical work. I mean, over $200 million has been spent on these three projects in the ground investment. There's a lot of investment here and that's not being credited into the market value. We're trading it ten cents a pound in the ground. Our peers are trading at a dollar a pound in the ground. We're saying, yes, we understand people believe there's an Africa risk. We're saying it is completely overblown, you get your permits done, you get stuff done.

People see Africa as a risk, but on the other side, when you can go out and get projects done that’s a good thing. If you're in Australia now, for example, you must be very concerned if a federal labor government gets in, they have an anti-mining mandate. Where does that leave not only the Australian mining industry, but more importantly the Australian uranium mining industry? Those are some of our peers that we have to compete with, and as I said, in Canada, it takes you ten, twenty years to permit a mine. That I see as risk as well. I mean, you look at Strateco, who had their project in Quebec, they probably thought they were onto a good thing, and now they have no project because the Quebec government stopped it.

Dr. Allen Alper: It sounds like that's a great opportunity once people start recognizing and feeling more comfortable with Africa and as uranium prices increase. There's a great opportunity for your stock to increase in value. Could you tell me a little bit about your share structure and your capital structure?

Mr. Daniel Major: Yeah, absolutely. Absolutely. Our current number of shares is 267 million. Cash is about $2.8 million, which is what we just raised. We have some debt on the balance sheet still. In 2012, when we did our transaction with Toshiba, we took on a uranium loan, a structure whereby we borrowed 200,000 pounds of uranium from them. We owe them 495,000 pounds of uranium in April of 2020. There're no other commitments before that, and we expect that to be paid from production. That's the only other thing that's on our balance sheet.

Dr. Allen Alper: What are the primary reasons our high-net-worth readers/investors should invest in your company?

Mr. Daniel Major: Yeah, absolutely. We are massively undervalued to our peer group, despite the asset base and quality of the project that's sitting there. You are looking at size. You're looking at very positive cost structuring. You're looking at a great stable shareholder base. You're looking at a company with two mining permits, which have considerable value. If you're looking at companies that may potentially be taken out, surely you're a takeout target if you're a project. A Chinese or whatever investor is going to be, "I need to be able to produce uranium from this project," and therefore those permits have got a lot of value. We have diversity, but we also now have a portfolio of assets, so we now have three large projects in Africa that are all very advanced, well past exploration. They all have technical studies on them. Despite that, we're trading at ten cents pound in the ground versus a peer average of a dollar, and then a lot of the analysts like to talk about takeout stories.

The best comp that we had for a takeout was Mkuju River. Admittedly, it was taken out in the good times. Mkuju River had 119.4 million pounds of uranium in Tanzania. Its average grade was .04%. Our average grade just at Madaouela is .14% uranium. Mkuju River was in Tanzania, which actually isn't a recognized uranium mining country. It was bought for $1.2 billion. Our current market cap is under $20 million.

Dr. Allen Alper: It sounds promising.

http://www.goviex.com/

Email: info@goviex.com
Phone: 604-681-5529 (Vancouver, Canada)

Daniel Major, Chief Executive Officer
Email: DanielM@goviex.com