✦ An interview with Noel Ong, CEO, Samso about his views on his top three investment picks
1. What sector/industry are you currently watching and why?
I like the uranium sector now. There has been a lot of talk with Green Energy and Green Metals, but the most misunderstood part of the uranium energy industry is that it is the greenest of the so-called Green Energy Evolution. Yes, there is the part of the not so green waste, but this has been a well understood part of the equation for decades.
Uranium as a component of the energy scale has the lowest carbon footprint of all. The word Uranium is strikes anxiety and stress and hatred to the “Green” movement but there is now scientific and industry evidence that it is the greenest of the lot.
To give context, you can have a read of my recent publishing of the following, Expectations for the Mineral Resource Industry in 2022 - Green Energy and No Emission.
2. What particular trends are you seeing in this sector/industry?
There have been a lot of conversations in the past two years about the rise of uranium, but I think 2022 will be the year it leaves the preparation platform. I am not sure if “Lift-Off” is the word to use for the trend, but I think this is the year to position yourself in this sector.
People may argue that it is too late, but as many wise investors will say, if your thoughts are that this will be an evolutionary change in humanity/sector, then we are still in the infancy stage. Why do I say that? Well, the word Uranium or Nuclear Energy is now positive these days. The social media information super-highway is now driving a positive narrative. My level of optimism is that it is not less negative but positive.
The anticipation of a rising uranium price has been doing its slow and steady rise which is a good sign for sustainability. If my thoughts are correct in a evolutionary move to nuclear energy, then the valuation of some for the companies involved will be multiples where it is now.
The issues with metal extraction for uranium is no different than any other metals. The lag time from discovery to production or even resource to production will be lengthy. The onset of the ESG movement will ensure that this process is more compatible with current levels of requirements and expectations.
ESG will be a major component factoring the viability of projects and in some degree limit the number of potential projects. This in turn will create a supply limitation and can and most likely cause a rise in demand.
3. What are your top 3 stock picks in this sector/industry and why?
Stock picks are always a hard one to mention as there are so many factors that come into play for the viability of the project. There are some that have all the bells and whistles but then fall over with regulations or funding or some environmental matter. Sometimes, like the 2011 Tsunami in Japan, something outside the typical issues creates a negative theme.
My strategy in this sector is to have a position in either nearly production or good exploration projects. It is all about leverage and upside. The producers will be safest but I like leverage.
In saying that, my money is with Vimy Resources Limited (ASX: VMY). I have liked Vimy for a very long time. In fact, I looked at their geology way back in 2010 and I thought it was credible. Over the years, that project has developed into a real player in this space. Don’t misunderstand, to get a uranium project to become viable is extremely hard. Many participants in the uranium industry will attest to this statement.
Why do I like Vimy? Well, they have basically passed all the hard hurdles and they are still very cheap. Recently, Deep Yellow Limited offered to take over the company for a 10% premium of the then current price which, if my memory serves me well, was AUD$0.29. This offer was rejected. The current market capitalisation of the company (@ AUD$0.24) is AUD$232M.
There is a shift in political thinking relating to recent issues with China and the COVID-19 pandemic, so I believe the movement for a change is closer to reality now than it has ever been in the last 20 years. The next tier down for me is Valor Resources Limited (ASX: VAL) and Thor Mining Plc (ASX: THR). These are a greenfield play for me as they will have good leverage. I like the projects and they are in the US region. The market is nearby, and the projects are not a geophysical target. They have known mineralisation so that is a big plus for me. Uranium geology, to me, is all about the presence of the metal. If you have it, then you are in the game.
What I like with VAL is that they are in the Athabasca Basin. For those that don’t know, this is the Mecca of uranium deposits. This is synonymous with finding uranium. They are finding float (rocks on the ground, meaning could come from anywhere) with good grades of U3O8 and that is a good thing but their issue is finding the source.
What convinced me to put my money into VAL was the acquisition of the Smitty Uranium Mine and the Lorado Uranium Mine. These are great uranium projects positioned for success.
Then there is the Hook Lake project. When you look at the Hook Lake project, you see a multi-element project with good Uranium, Silver, Lead, REE and Molybdenum. What that tells me is that there is some serious cooking happening. Now if they can define the source, the chances of a decent range of results is high. For investors, this will create excitement and who knows where the share price will go?
The negative will be the higher market capitalisation value of AUD$50M. Now, this is not your typical AUD10M play but with what they have as potential, I can accept that figure.
Thor has their uranium-Vanadium project in the Uravan Mineral Belt in Utah/Colorado. A sandstone paleochannel play which will be a lot cheaper to process. A combination of uranium and vanadium which will be great when the time comes to valuing extra credits. Again, a place well known for uranium mining historically. Thor is planning a drilling program in 2022 and as its paleochannel, it will not be a costly exercise.
The great part about the THOR project is that it has a strong history of uranium mining hence, there will not be any issues to future development.
I hold shares in both VMY and VAL and THR is a client of Samso.
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