Betting on the jockey: ISO Energy (ISO.V) is an intriguing operation

Uranium bamboozles me. I mean, I get it, but it always seems like the industry is ‘just about to pop’, while any actual popping comes without warning, and in places that I might not have expected.

Deals come in for mega prices and then there’s no more deals for a while, then comes another biggie, and another slow period. Reactors restart, stocks drop, reactors close and they rise. It’s one of those industries where you really need to know what’s happening under the sheets to get ahead.

And I’m just not connected in that way.

But as I was going through the investor deck for ISO Energy (ISO.V) recently, a guy I haven’t seen in a while wandered past my office. Mitch Adam, who has put more Vancouver deals in play than I’ve had good dates, looks at mining maps and data and grades and knows who’s behind the deals and whether there’s gold in them thar hills – all the stuff that makes my eyes cross.

So I dragged him in and sat him down and made him look this one over for a while. His reaction: “These guys are not playing around.”

Between 2011 to late 2015, when the state of the mining industry caused more suicidal CEOs than broken marriages and cocaine combined, there was one small bright spot in Saskatchewan’s Athabasca basin, where uranium companies were pegging off properties and vowing to bring in ‘the future.’

“There were so many companies staking and rushing into the Uranium space, even after the 2011 Fukushima disaster,” says Adam. “The start of all that was the Roughrider deposit. Hathor Exploration was bought out in an all cash bid for around $650 million by Rio Tinto and it got real.”

“The smart money guys on the street, Ben Ainsworth at Alpha, which ended up part of Fission (FCU.T), and Tim Young and Dale Wallster, they knew there was more to be had and began the rush in creating Alpha, Fission and Nexgen (NXE.T). This got the street rumbling and before lithium was even in the conversation, everyone had a uranium play.”

Fast forward two years and NXE has a market cap of $490 million off the work on their next discovery, the Arrow project. NexGen owns a portfolio of highly prospective uranium exploration assets in the Athabasca, including a 100% interest in Rook I at the Arrow discovery from February 2014, the Bow discovery from March 2015, and the Harpoon discovery in August 2016. The Arrow’s maiden inferred mineral resource estimate is 201.9 million lbs of U3O8 contained in 3.48 million tonnes, grading 2.63 %.

So NXE is legit. But why do you care? Stay with me here, because Adam is going to connect some dots for you.

“ISO Energy is a spin out of the non-core assets of NexGen, and is managed by Ben Ainsworth and Leigh Curyer of the Nexgen team, which already brings ISO a level of managerial sophistication and track record that other small players can’t match. And Nexgen just announced the appointment of Dr. Mark O’Dea.”

“If you haven’t heard of him, you’re not paying attention,” he says.

Clearly, I haven’t been paying attention.

“Dr. O’Dea has founded, financed, and built numerous mining companies. We’re talking several billion in shareholder value. As co-founder, CEO and director, he grew Fronteer Gold from start-up to a $2 billion-plus sale to Newmont [Mining (NYSE:NEM)], and in the process spun-out Pilot Gold. He was behind True North Nickel which was sold to Royal Nickel in 2014, and then co-founded True Gold Mining which was sold to Endeavour Mining in 2016.”

There’s more; O’Dea is the founder of Oxygen Capital Corp., chairman of the aforementioned Pilot Gold, and director of Pure Gold Mining. He was in The Globe and Mail’s top 40 under 40, he won the EY Entrepreneur of the Year award in 2014, and picked up the AMEBC Murray Pezim award for Perseverance and Success in Financing Mineral Exploration.

So he’s a ‘shut up’ kind of operator in resources. And ISO Energy just added him to the mix.

Of a $4m market cap junior.

A junior that is 76% owned by NexGen.

ISO quietly went public in October and raised a private placement of $2.38 million at $1.10 a share. You didn’t hear about it because you don’t hear about deals like these, where the minted gents take most of it for themselves because they know what’s up.

Says Adam, “Once the Uranium market turns around and my guess is it will very soon, this is one of those deals that you stick in the bottom drawer and wait for the fun.”

I’m going to go talk to them next week and see what’s under the covers behind power players.

Not a client. Don’t own it. But I hear rumblings about uranium’s imminent return, and if it does make a move, I want to be on the cheap play that is owned by a monster, run by the monster’s team, and sits on a tight float with little to no free trading stock.

Watchlist.

– Chris Parry