Vimy's Mulga Rock uranium project is not what it says on the wrapper. Briefing for shareholders, investors and journalists.

Background

Vimy Resources is a WA-based uranium company with no operating mines. For twelve years Vimy has raised capital hoping to mine and process uranium at Mulga Rock 300 kilometres northeast of Kalgoorlie. Vimy has carried out two financial studies of Mulga Rock: a ’Definitive Feasibility Study’ (DFS)¹ in 2018 and a DFS refresh² in 2020. Investors should note that the Mulga Rock uranium project is not what is claimed in these documents.

Vimy’s investment history

The twelve years since Vimy started indicates the commercial problems with Mulga Rock. 

• The Vimy share price has declined 98%³ in the last ten years and 85% since the current Vimy CEO was appointed in 2014. Few CEOs retain their position after such a decline. The CEO receives a $300,000+ salary⁴.
• Since its inception Vimy has raised $114 million in capital and run through that by accumulating $107 million in losses with mining still yet to commence⁵.
• Vimy directors note Vimy has “going concern” issues⁶.
• At 30 June 2020, Vimy had net cash of $4 million. An average net operating cashflow of -$5.6 million per year in the last two years indicates another capital raising is imminent⁷.

Vimy’s commercial difficulties are caused by low cost Canadian and Kazakhstan mines and the declining economics of nuclear power. Since 2012 forecasters have predicted a big jump in the uranium price but these factors have meant it hasn’t happened.

A mine is a hole in the ground….

“A mine is a hole in the ground. The discoverer of it is a natural liar. The hole in the ground and the liar combine and issue shares and trap fools.”⁸ While not as scathing as this apocryphal Mark Twain quotation, economics does indicate to be wary of claims by project proponents. The financial studies of Mulga Rock, DFS and DFS Refresh, are optimistic and misleading:

• The DFS Refresh relies on a uranium price that has only been seen during the commodities boom and an exchange rate that has only been reached for a few months in the last ten
• There is little mention of the mines potentially large rehabilitation
• Studies of mining projects find they run an average of 40-60% over ⁹
• DFS Refresh claims the Mulga Rock project is worth $560 million. However, Vimy’s market capitalisation is only $25 million¹⁰. Despite this apparently very attractive gap in valuation, Vimy management and board only own 3% of Vimy shares and ASX announcements show no Vimy director has bought Vimy shares for over two years despite the share price hitting record
• Applying the recent ten-year average uranium price (US$35/lb) and exchange rate (AUD/USD 84) the NPV of the project is negative.¹¹

^{For the full report click here.}