Storied investor Rick Rule often talks about how he bought into Paladin Energy (ASX:PDN) at 10c per share back in the mid-2000s.

It went down to 1c … then all the way to ~$10 a share, creating fortunes in the process.

John Borshoff is the geologist who founded Paladin Energy in 1993, before taking it from a junior explorer to a $4bn uranium mining company with two operations – ‘Langer Heinrich’ in Namibia, and ‘Kayelekera’ in Malawi.

This puts Borshoff and his team in rarefied air.  Paladin is one of only three small cap uranium companies outside of the US to have gone into production over the past 75 years, he says.

In October 2016, Borshoff joined then-$10m market cap uranium explorer Deep Yellow (ASX:DYL) as managing director and chief exec.

Deep Yellow, which has three uranium projects in Namibia – Reptile, Nova and Yellow Dune — is now one of a select group of ASX uranium stocks set to enter production once the impending boom hits.

In February this year, a PFS was completed on a ‘Langer-Heinrich-style’ 3mlb per annum open-pit mining operation at the ‘Tumas’ project at Reptile.

Namibian Uranium Province.

With about $50m in the bank, DYL is now neck-deep in a DFS – the most advanced of all studies prior to a decision to mine – which should be completed late next year.

The company expects it will take ~3.8 years to pay back the initial project capex of $US320m. Over an initial 20-year life, DYL is anticipating a project net present value (NPV) of $US407m, based on a uranium price of ~$US65/lb. Its breakeven uranium price would be about $US41.62.

Borshoff tells Stockhead why his ex-Paladin team at DYL is one of the few with experience to develop and operate a uranium project during the upcoming boom.


What sets Deep Yellow apart from other near-term uranium project developers?

“Not one of them [other ASX project developers] has been involved in the complete cycle of making a uranium company,” Borshoff says.

“That is a factor that differentiates Deep Yellow. Here, the whole team is conversant in the A-Z of the uranium nuclear business.

“Having pounds in the ground is meaningless unless you have ability and mechanism to get it out, drum it, and have the confidence of the consumer that you will deliver it.

‘There is no future energy mix model that I have seen that is believable or sustainable’

“This industry is in a complete broken-down state. How much expertise has been lost since Fukushima? Who the hell is going to build a mine when you have these boards who have done nothing for five years, have no experience, and no team?

“Over 75 years, only three small cap companies outside of the US have gone into production. One of those was Paladin.

“In 75 years, they are the ones that have achieved. That’s why I put so much reliance on the team over all else.

“The Deep Yellow group truly understand and appreciate the business on a whole range of levels, and we have the confidence of the utilities that we can deliver when so few have.

“There is hardly any uranium expertise anymore. And why should there be? The only other developer that produced a huge amount of uranium in the period Paladin was putting itself on the map was KazAtomProm, and that was a in situ-leach venture.

“In conventional, it was only Paladin, and I have that team [at Deep Yellow].

“We are driving not the repeat history but improve on it. Where are we improving? We are improving on all areas of process, applying innovation, which is going to give us even more efficiencies. That’s why we end up with the numbers.”



You say there is a lack of operational experience in the industry. Meanwhile, analysts talk about the fact new operations will have to come online to meet future demand. What  is going to happen?

“Analysts really have start questioning – where is this uranium going to come from?” Borshoff says.

“If you have ounces of gold in the ground, or tonnes of copper in a deposit, there’s no real question around how that goes from in situ to the finished product. That’s because there is so much expertise, so much experience that it isn’t the question people ask.

“But with uranium pounds in the ground is not necessarily pounds in the drum.

“Project development is tough. Of the six or seven conventional deposits that were started around the same time as Paladin, only two got into design – both of which were Paladin operations.

“All the rest failed.

“At the moment it is a very theoretical thing to say, ‘here is a company, here are their pounds, here is their annual production’. It is ‘Simple Simon’ stuff.

“The utilities [nuclear power plants] are so mesmerised by the belief that these juniors can supply 3 million pounds, 4 million pounds, as promised.”


So, not only is demand going to be higher than projected, but everyone is overestimating how much new supply will come online.

“The demand is assured; the supply is not,” Borshoff says.

“There are many people building reactors that know what they are doing, that have expertise. Meanwhile, there are many companies with uranium deposits who don’t know what they are doing.

“That is no one’s fault. Historical volatility in the market [has just removed experience from the sector].

“Meanwhile everyone is focused on their own little deposit. The big players like Cameco have multiple deposits — you must assure your customers that you have 30, 40 years of supply.”


Do think we will see some merger and acquisition activity in the industry?

“Sector consolidation will be key,” Borshoff says.

‘How much expertise has been lost since Fukushima? Who the hell is going to build a mine when you have these boards who have done nothing for five years, have no experience, and no team?’

“There are very few companies that can participate in that or have the appetite and the expertise. We are not going to get the Camecos doing this, because they have their pantry full.

“And you are not going to get the utilities doing this, because they got so burnt [last time].

“Sector consolidation is key, and while Deep Yellow has been working below the radar, we are looking at projects through our lens to see how we would operate them. We do see 6-7 opportunities.”


Anything else to add?

“There is no future energy mix model that I have seen that is believable or sustainable,” Borshoff says.

“This will work to the favour of nuclear, I have very little doubt about this. It is such a powerful, safe system that more and more people are coming onside that were negative before.

“I think consolidation will be part of the industry going forward.

“It is an exciting time, and equities have already reacted; perhaps overreacted.

“Incentive pricing is going to probably start clicking late next year – enough pricing to incentive new development.”