The global energy crisis is causing chaos in 2022. This is a key topic at this year’s climate conference (COP27), currently underway in Egypt; never mind the Critical Minerals Summit I just hosted on scalability challenges in Toronto yesterday for the Critical Minerals Institute. FACT: The world needs to switch to renewables but right now is suffering energy price shocks as Russia and OPEC hold the world to ransom. Global natural gas prices have roughly doubled the past year, and have risen even faster in Europe. Coal prices have skyrocketed higher the past year from US$148/t to US$339/t. Oil prices have also risen significantly in 2022. Little wonder we have a global inflation problem, as energy and oil prices push up the price to produce and deliver everyday items.

Climate change enthusiasts would say the answer is solar, wind, hydro and energy storage; however the truth is right now we rapidly need more baseload power and to move away from coal and gas as quickly as possible.

The answer is smart nuclear. This idea is supported by President Biden and even Elon Musk. Now to boost nuclear energy we need more uranium, ideally sourced not from Russia or Kazakhstan, which is another potential problem.

Western uranium producers have been idling their mines for years waiting for the uranium surplus to decline, leading to higher uranium prices. Judging by the 2022 uranium price action (now at ~US$50) and forecasts for uranium deficits in the next few years, that time has now arrived.

Today we look at a promising uranium company that also thinks uranium’s time has finally come.

The company is Western Uranium & Vanadium Corp. (CSE: WUC | OTCQX: WSTRF).

Uranium demand is set to potentially exceed supply from now to 2040

Source: Western Uranium & vanadium company presentation

Western Uranium & Vanadium Corp. (“Western”)

The world is short of affordable energy and demand is only set to grow further, especially as we rapidly move to electrification of the transport sector. The quote below sums up the current situation very well.

In a November 2022 market update Western President & CEO commented:

“Western currently is observing positive catalysts across multiple levels of the nuclear fuel and uranium markets. At a micro-level the projected supply / demand imbalance is expanding…….There are multiple data points pointing to a depletion of the secondary supply overhang, which was prevalent for the last decade. At a macro-level, the electrification transition and climate change initiatives have increased global support for nuclear. Further, Russia’s invasion of Ukraine and the ensuing global energy crisis has focused attention on security of supply and supply chain risks.”

Right now in the U.S, there are less than a handful of uranium producers. Western is probably the lowest market cap of them all and is ready to quickly scale up uranium production.

Sunday Mine complex mining operations are targeted to restart in January 2023

In some very good news for investors, Western announced only last week, that as of January 2023 they will restart mining operations at their Sunday Mine Complex. Western stated:

“Western has completed the build-out of its in-house mining capability. Additional employees for the first mining team have been hired over the last two months, facilities have been upgraded, and equipment and vehicles have been acquired and readied for deployment……..Mining operations are targeted to restart in January 2023.”

Western’s Sunday Mine Complex in Colorado USA

Source: Western Uranium & vanadium company presentation

The Western Uranium & Vanadium market cap is C$64 million, InvestorIntel will follow up in early 2023 to update our audience on how progress is going at the Sunday Mine Complex restart. Stay tuned,

Micro-cap companies are typically defined as organizations with below $250 million market capitalization, which these days is a pretty big club. About 60% of the public company acquisitions throughout the equity market involved micro-cap companies. These acquisitions can represent an opportunity for an investment exit at substantial premiums for investors and executives alike.

Six months ago, dealmakers were optimistic about the year ahead. Global M&A had just had its best year on record, and there was no sign of the market slowing down. However, fast-forward to today, and the picture looks very different. Inflation and interest rates are rising, stock prices are falling, and the Russia-Ukraine conflict has deepened the energy crisis.

These challenges have put a sizable dent in M&A activity in 2022. Compared to the first half of 2021, deal values declined by 20% and could fall even further. Deal activity has decreased to pre-pandemic levels, and deals above $5 billion have decreased by almost 40% in the first half of 2022 compared to the last half of 2021.

Navigating this tricky time period can be difficult for small-cap space executives. Executives at small-cap companies who are being targeted for acquisition may struggle with how to move forward. With low market caps and share prices, CEOs don’t want to upset shareholders by exiting at the bottom of the market. However, cash-strapped companies may be forced to sell if they cannot raise enough capital to continue operating. Executives need to reset their strategic priorities and focus on areas where they can be successful and score a win. With careful planning and execution, deals can be successfully completed in today’s environment.

1. Public-to-Private Transactions

Executives at small-cap companies can look towards taking their companies private through private equity (PE) deals. Deals to take public companies private have increased by more than 50% in 2022 as compared to 2021.

This market trend is mainly due to the tremendous growth in PE “dry powder” – capital available for investment – reaching a record $2.3 trillion globally. With this vast pool of capital available, PE firms have been increasingly active in M&A and now account for approximately half of all M&A deal value. Small cap executives can find deals to take their companies private.

2. Long-Term Focus

In today’s rapidly changing world, it is more important than ever for leaders to take a long-term view. Short-term thinking can lead to missed opportunities and poor decisions while focusing on the long term can help create value and generate successful outcomes. This focus is especially true in mergers and acquisitions, where a downturn can present solid growth opportunities.

A PWC analysis shows that deals done during a downturn are often the most successful, so it is crucial for leaders to be bold and pursue M&A with a strong capability fit. Leaders can position themselves to create value and achieve success by taking a long-term view.

3. Embrace Inflation

Today’s small-cap executives need to be inflation-prepared. As companies face a different set of challenges in an environment where prices are increasing, it is essential to consider both present and expected future rates for economic growth when making decisions on valuation techniques or M&A strategies.

In order to approach valuations from a proper perspective, executives must understand how companies are affected by inflation and what repercussions this has for business decisions and shareholder value.

4. Talent Management

Workforce strategy should not be an afterthought in the M&A process. There is an increasing recognition that human capital issues are key in M&A deals. To get acquisition ready, executives should assess the impact of the deal on their company’s workforce. This analysis includes questions on workforce composition, compensation and benefits, and future organization design and culture.

These factors can all impact future business performance. In addition, post-deal integration plans should take into account the role of the workforce in achieving desired outcomes. By taking workforce matters into account from the outset, executives can increase the chances of a successful M&A deal.

With the right approach, small-cap executives can manage an increasingly complex business environment and potentially secure an acquisition.

In this episode of the Critical Minerals Corner, Tracy Weslosky is joined by Critical Minerals’ industry expert and InvestorIntel Editor-in-Chief, Jack Lifton, and Critical Minerals Corner Co-Host & InvestorIntel Columnist, Byron King, to discuss how the world is heading towards an energy crisis as covered in Byron’s recent column published on InvestorIntel titled – Energy Rundown: 2022, A New Year of Living Dangerously.

In this InvestorIntel interview, which may also be viewed on YouTube (click here to subscribe to the InvestorIntel Channel), the panelists discussed how energy security ties in with economic development, and why the world is presently not in a position to reduce its dependence on fossil fuels to zero. They went on to discuss the global push towards green energy and electric vehicles, which has caused a significant increase in prices for critical materials such as lithium, nickel, and the rare earths. Explaining why there is “nothing green about green energy”, the panel also discussed solutions to the impending energy crisis.

To watch the full interview, click here.