L2 Capital Podcast #05: Chat with Brandon Munro – Bannerman Resources

L2 Capital

In this episode, Marcelo Lopez spoke with Brandon Munro, CEO of Bannerman Resources Limited, a company listed on the Australian Stock Exchange, ASX, focused on the exploration and development of uranium mines.

Munro begins by telling a little about the company's history, as well as about his trajectory within the company, from the acquisition of the Etango Project in Namibia, various studies and licenses and the way the company handled the accident at Fukushima nuclear power plant in 2011.

Asked by Marcelo about the country where the company's activities are concentrated, Brandon explains with the knowledge of those who had lived there for several years, mentioning that Namibia contradicts the stereotype that the West has about the African continent. He highlights the characteristics that differentiate Namibia from other countries, emphasizing the quality of its road and port infrastructure, its political stability and the inheritance of German colonization.

Next, Munro provides a detailed explanation of the recent dynamics of uranium spot prices in the face of the trajectory to the current US$30/lb, highlighting events that have modified the demand, such as the emergence of specialized investment vehicles in the acquisition of the commodity . He also shows how he sees price behavior going forward, the levels that may be decisive for the reaction of market participants, and their impact on industry action.

Munro then shares a thorough analysis of how long-term contracts have always dominated the scene, while the spot was negligible and served only as a balancing mechanism. According to him, the Fukushima incident created a huge distortion in the market, profoundly altering the dynamics of the contracts. Brandon points out that we are in an unprecedented situation for this industry, which could significantly boost the bull market of the commodity.

Asked about the latest bull market, Brandon points to how prices rose from about US$20/lb to US$136/lb very rapidly and talks about the similarities with the 1970s. He emphasizes that current prices are unsustainable in view of production costs and that the only way out would be a huge increase in prices, possibly to multiples of current levels. He bases his argument with an estimate for the minimum price that would bring the market back to equilibrium.

Munro brings some of his vision about sentiment in relation to the commodity, going from the recent lack of interest from investors and getting to a situation in which more and more attention is given to the sector. He still explains and cites examples of why the stock prices did not follow the commodity price over the last few months.

Asked about Section 232, Brandon outlines different scenarios of what Trump's response to the request might be, on the grounds of strategic and national security point of view. He also mentions what he believes will be the implications for the companies in the uranium sector.

Munro also talks about his perspective on pricing scenarios and the performance of the two largest companies in the industry, KazAtomProm and Cameco. Regarding the latter, he still discusses the impacts of Cameco’s decision to put its largest mine in care & maintenance and to buy uranium on the spot market to honor its contracts, instead of producing.

Brandon then gives a real lesson on how uranium stocks work, highlighting the operational characteristics of each type, levels, potential for enrichment and its impacts on the market and price volatility.

Munro also talks about what the stock investor should look for when looking for uranium-related assets. He points out that there are few companies that are accessible in the industry and that many have specific risks, not related to the commodity itself, but to jurisdiction, for example.

Brandon concludes by commenting on the feeling about uranium and atomic energy as an alternative energy, comparing i