Uranium miners outperforming in 2013; look at Athabasca Basin in 2014

At the end of 2012, the investment community laughed at my prediction that 2013 will produce phenomenal gains in the uranium miners (URA).  Read my interview with The Energy Report at the end of 2012 which may have signaled the bottom in the uranium miners. 

In 2013, our uranium bellwethers Areva (ARVCF) and Cameco (CCJ) have significantly outperformed the S&P 500 (SPY) by a significant margin.  The uranium price has been making a very bullish turnaround since early November.  Cameco is on the verge of a breakout at $22 and we may soon witness a golden crossover of the 50 and 200 day moving average.  Now those who ridiculed me claiming uranium was dead are now coming to the realization that the uranium sector which was reviled by investors a year ago is now coming back in favor.  Areva and Cameco are significant outperformers in 2013 as well as the small nuclear modular reactor manufacturers such as Babcock and Wilcox (BWC) and Fluor (FLR) which I have highlighted over this past year.  

For years I have predicted that the recent low price in uranium which hit 8 year lows in 2013 may actually be the catalyst to look for higher grade and more economic uranium deposits particularly in the Athabasca Basin in mining friendly Saskatchewan and in low cost in situ uranium operators in the United States as the Russian Megatons to Megawatts expired in 2013.  This low uranium spot price may actually be causing a uranium rush for these lower cost production capabilities.  Higher cost uranium mines are being shut down or delayed all over the world.  However new uranium discoveries are receiving a lot of attention especially in the Athabasca Basin which is the highest grade uranium mining district in the world.  Some of the older mines such as Rio Tinto’s low grade Rossing and Ranger Mine have been facing technical challenges.

This low price in uranium is possibly the reason why Cameco (CCJ), Rio Tinto (RIO) and Denison (DNN) have been buying junior uranium explorers in the Athabasca Basin trading at bargains due to the weak resource sector. These assets are high grade meaning potentially lower production costs in a stable jurisdiction.  Smart money knows nuclear power is here to stay as there are more reactors operating and under construction now post-Fukushima than from before the once in a millennium natural disaster.

Even after Fukushima, the Athabasca Basin has been the one bright light in a resource sector covered with darkness.  Right after Fukushima, Cameco and Rio Tinto, both with billions of dollars of market cap went into a bidding war over Hathor.  Rio won with a bid of $642 million.  Eventually, Denison bought out Fission for their J-Zone asset next door to Roughrider making themselves a target for either Cameco or Rio.

Now, Fission’s new spin out is buying Alpha for $180 million for the new Patterson Lake South Discovery.  What does all this M&A activity in Athabasca uranium miners mean in a bear market in the resource sector?   Smart money is telling us that the Athabasca Basin represents one of the great areas to make wealth in discovery of uranium.  Companies can go from a  $3 million market cap to a $180 million if a new discovery is made.

Look at the Athabasca Basin bellwethers such as Cameco, Rio and Areva whose share price has moved significantly higher to pay top dollar for the best discoveries in the Basin. The Athabasca Basin is attracting capital that is looking for 10-20 fold increases. The key to invest in early stage exploration is to find the right people. Look for the best personnel who have proven track records of success in this area with this commodity.

Jody Dahrouge was instrumental in the discovery of Fission’s J-Zone Discovery which was bought by Denison and the Patterson Lake Properties where Fission and Alpha have made a massive discovery.

Jody is now the exploration manager for Lakeland Resources (LK.V).  Lakeland just announced an option agreement with another junior.  This junior is well financed with an experience technical team.  They announced a partnership that increases the probability of a discovery without major dilution as the partner will spend $1.2 million over the next 12 months and $6.5 million over 48 months.  This will make Lakeland one of the more aggressive explorers in the Athabasca Basin with anticipated drilling beginning in the first quarter of 2014.

Lakeland’s share structure may be one of the best in the Athabasca Basin with close to 30 million shares outstanding. Close to 40% is owned by management and institutions. There is a very small float for retail investors.

When everyone was looking at the Eastern part of the Basin, Jody suggested to look west which was underexplored and Patterson Lake was discovered. Now Jody is telling Lakeland to go to the northern part of the basin for the next major discovery as this area has been totally neglected by explorers.

Lakeland has acquired a large land package across the Northern part of the Basin. Lakeland just announced that exploration is active on the Riou Lake Uranium Property located in the Northern Part of the Basin. They are doing the initial work for a winter drilling program for the first quarter of 2014, which I am very excited about.

Lakeland believes there will be strong news flow over the coming several months that could build significant value in this early stage situation. Although this is early-stage and ground floor, this company has the people, the properties and the share structure to potentially create a lot of wealth for early stage uranium exploration investors. Look for a cup and handle breakout at $.15 which could lead to a major move.

Doorway to opportunity: B.C. coal town hopes for revival

Inside the Dinosaur Discovery Gallery in Tumbler Ridge, B.C., a set of two large doors symbolize past pain and future optimism for the coal industry in northeastern British Columbia and the region’s ties to Asia.

After years in storage, the doors finally went on display this past summer, with the entrance handles together forming the Quintette coal project’s logo. The Quintette mine opened in 1982 and supplied Japanese steel mills, but it closed in 2000 amid low coal prices.

The local economy seemed so depressed that the mine’s owner, Vancouver-based Teck Resources Ltd., donated the doors for museum purposes because the company’s executives thought the closing would be permanent and no longer needed for the glass office building on Quintette’s sprawling site near Tumbler Ridge.

“These doors originally were worth roughly $100,000 and they are quite heavy,” said Richard McCrea, curator at the Peace Region Paleontology Research Centre, which houses the gallery. He marvels at the thick aluminum doors, featuring a pewter exterior with artwork that depicts trucks at an open-pit mine in British Columbia and blast furnaces used for steel making in Asia.

Local leaders admit the historic exhibit is a painful reminder of dashed dreams in the past, but they quickly add that they see hope for the future and a fresh opportunity to restart Quintette and increase coal exports to Asia from nearby mines.

While the coal market has been in a slump for the past couple of years, prices are still much healthier than a decade ago. Vancouver-based Teck believes the economics might make sense to breathe new life into the old Quintette project and create 2,000 construction jobs and 500 full-time mining jobs.

But first, the company is waiting for prices to strengthen for metallurgical (or coking) coal – used in the production of steel. There is excitement in Tumbler Ridge over the prospect that Teck could revive Quintette through an $860-million mining project, located about 700 kilometres northeast of Vancouver.

“We are continuing to proceed with detailed engineering work at the Quintette project so that if market conditions are favourable, we will be in a position in early 2014 to decide to proceed with the reopening, which could result in commercial production in mid-2015,” Teck spokesman Chris Stannell said. A subsidiary of China Investment Corp. has held a 17-per-cent stake in Teck since 2009.

Coal projects seemed to be an endangered species in northeastern British Columbia after Quintette closed in 2000 and the nearby Bullmoose mine shut down in 2003. The coal industry is intertwined with Tumbler Ridge, an instant community of modern homes carved out of the forest in the early 1980s.

“Coal mines are one of my favourite places to be. I wouldn’t get to see the dinosaur tracks if it weren’t for the mines,” Mr. McCrea said.

Tumbler Ridge, after almost becoming a ghost town a decade ago, has proven to be resilient. The community’s roots trace back three decades to development spurred by $1.5-billion in rail and other infrastructure subsidies from the B.C. and federal governments. It is a case study in the benefits and risks for the private and public sectors when making massive investments to pursue regional development. It hasn’t been easy creating an industry and community out of the remote, forested foothill wilderness.

While the governments’ investment seemed wasted after Bullmoose closed in 2003, new projects such as Anglo American PLC’s nearby Trend project emerged in subsequent years as coal prices slowly recovered. In 2011, coal prices soared to $300 (U.S.) a tonne. For Tumbler Ridge, the rally added insult to injury from Teck’s bleak decision to close Quintette.

Benchmark prices for metallurgical coal have since tumbled to about $150 a tonne. Even with recent depressed prices, however, the market is still much stronger than in 2000, when prices dipped to $40 a tonne.

Far from panicking about coal markets, Tumbler Ridge Mayor Darwin Wren believes that the community will survive, mature and come of age, though it won’t likely become a boom town again like it was in the 1980s. “Three-quarters of the housing in town is from the 1980s,” he said. “We know we’re here to stay.”

He expects the municipality of more than 3,300 residents to thrive in the long term. “For a single-family dwelling, houses start at $200,000 [Canadian] and go up beyond $400,000. Prices have definitely gone up in the past dozen years,” Mr. Wren said in an interview in his office.

He moved from Fort Nelson, B.C., to Tumbler Ridge in 2001, when he bought his home for $28,000 – one of hundreds of spacious homes on large lots that sold for less than $35,000 in 2000 and 2001. Mr. Wren, who has been mayor since 2008, keeps a hard hat and steel-toed boots close by, in case he ever has to drop by a mine or local construction site.

The vision three decades ago by the public and private sector was to mine coal in northeastern British Columbia while sparking the economy in the northwest part of the province, where the Port of Prince Rupert would serve as a crucial gateway to Asia. Only in recent years has the port started to fulfill some of its promise, notably with coal and grain exports, but also imports of consumer goods in containers from Asia finding their way onto Canadian National Railway Co.’s tracks to the U.S. Midwest.

One of the sources of coal shipped from the port to steel mills in Japan, South Korea and China, is the Anglo American Trend mine, where large trucks are loaded up with metallurgical coal.

On a recent chilly day, an employee driving around the sprawling property points out that just one tire on a massive truck costs more than $10,000, underscoring the enormous capital costs required for mining.

“For every eight trucks of rocks, there is one truck hauling coal,” said Jackie Caldwell, an environmental technician at Anglo American. Her pickup is dwarfed by the huge vehicles that go back and forth on the Trend mine’s long and winding roads.

Anglo American has started a $200-million expansion project that will effectively broaden its mining territory by nearly 500 hectares and provide job security for the current work force of 420 employees.

London-based Anglo American’s current output is 1.5 million tonnes of coal a year at its existing Trend operation, but after finishing the Roman mine expansion this spring, it forecasts that production will climb to a rate of 2.5 million tonnes a year.

Near Anglo American’s property, HD Mining International Ltd. is considering plans for a $300-million coal venture.

Another company, Walter Energy Inc., has suspended its Willow Creek mine, but remains a major coal producer in the area through two other mines, Brule and Wolverine.

Coal to fire NewLead

NewLead Holdings of Greece has added to its burgeoning commodities portfolio after finalising a deal for a coal wash plant in Kentucky.

The struggling New York-listed owner said the purchase, which it first flagged in September, will provide earnings with a much needed shot in the arm.

Despite securing a recent debt-for-equity deal, the company has warned investors over its cash position and raised doubts over its ability to remain a going concern.

The plant has a contract in place to process up to 150,000 tonnes of coal per month until 2016 though it has only averaged 59,000 monthly since April 2011.

Michael Zolotas-led NewLead did not put a final price on the transaction but three months ago it said it would invest a total of $68m in two mines and the coal wash facility.

"The completion of the acquisition of the wash plant is an important step in developing our vertically integrated shipping and commodity model,” Zolotas said in an exchange filing.

"The acquisition.....greatly enhances NewLead's commodity arm because it is a vital part of coal production process.

"It ameliorates the quality of the coal produced and it produces profits from washing coal for third parties.”

The plant is serviced by a rail road allowing delivery of the coal direct to market, reducing the cost of transportation and giving NewLead a competitive advantage, Zolotas added.

Situation still precarious

NewLead continues to invest in new assets despite the precariousness of its financial position.

New York’s supreme court approved a debt-for-equity swap earlier this month that saw the Magna Group investment fund take a 9.92% stake.

However, just days later, NewLead raised a red flag over its ability to remain a going concern for much longer without improving its cash flow.

In addition to the new plant the company has purchased stakes in several US mines and recently returned to the sale and purchase market for a handysize newbuilding.

The 35,000-dwt eco-type vessel is due for delivery from an unnamed yard in the third quarter of next year, suggesting a resale.  

Tertiary Minerals up after encouraging fluorspar drilling results

Tertiary Minerals' (LON:TYM) shares rose after it reported that early results from drilling at the MB fluorspar project in Nevada were highly encouraging, particularly the regular occurrence of thick intervals containing more than 10% fluorspar. 

The results were for the first 13 of 22 holes drilled in Phase 2 of its first drill programme.

Highlights at the Southern Area included:

- Results from first 10 holes drilled in Southern Area confirm potential for definition of open-pit mineable fluorspar resource.

- Thick zones of mineralisation intersected between surface and the maximum depth of drilling (125m) - all holes end in mineralisation. 

- Mineralisation remains open in all directions so far (over 300m x 400m area). 

Highlights at the Central Area included:

- Results from 5 wide spaced holes are awaited.

- Significant results expected based on sample logging. 

Tertiary Minerals added that the drill permit has been modified to allow further drilling between Southern and Central areas, which may connect in undrilled areas.

EMED Mining Public Limited (LON:EMED) has conditionally raised £5.5m, before expenses, through a private placement of 68,750,000 new ordinary shares at 8p apiece in the UK and Canada. 

This includes the issue of placing shares to Orion Mine Finance Fund I LP (formerly Red Kite Mine Finance (Master Fund) II LP) who wished to maintain its pro-rata shareholding of 5.4%.

The net proceeds of the placing will be largely applied in funding engineering and related works in connection with the re-start of the Rio Tinto copper project and for general working capital.

Stratex International (LON:STI) reports very positive intersections from the first phase of the follow-up diamond and reverse circulation drill programme of the Faré South prospect at the Dalafin project in Senegal.

"These are excellent results from the second phase of our drill campaign, which is focusing on the multiple gold occurrences identified by the 33,000 metre RAB drilling programme completed earlier this year," said CEO Bob Foster in a statement.

"We are extremely encouraged by these initial results from what is the first RAB target to be drilled. We await further assays results from the remaining one RC and five diamond drillholes and these will be released in due course. 

"We also intend to evaluate the very high-grade RC intersection further by twinning with a diamond drillhole as a priority.

"It is particularly exciting to note that the high-grade zone was intersected in an area where the near-surface RAB drilling had only returned intersections of 7 m @ 0.11 g/t Au and 4 m @ 0.14 g/t Au."

Highlights included:

- RC drillhole FARC-07 returns 7 m @ 86.39 g/t Au from 19 m and 1 m @ 10.19 g/t Au from 36 m

- Other RC drill intercepts from Faré South include: 10 m @ 2.34 g/t Au from 50 m (FARC-01); 1 m @ 22.15 g/t Au from 46 m (FARC-04); 1 m @ 10.19 g/t Au from 36 m (FARC-07); 4 m @ 0.49 g/t Au from 56 m (FARC-07); 3 m @ 0.94 g/t Au from 26 m (FARC-08)

- Diamond drillhole FADD-01 returned the following: 4.5 m @ 0.85 g/t Au from 8.6 m; 19.0 m @ 2.20 g/t Au from 68.6 m. 

Centamin (LON:CEY) issued an update to its resources and reserves for the Sukari gold mine.

The total measured and indicated resource has increased to 13.4 million ounces (Moz) (previously 13.1Moz) comprising open pit resource of 12.6Moz and underground resource of 0.8Moz.

The total combined open pit and underground reserve at 8.2Moz, is down 19% from 10.1Moz at 31 December 2011 due to mining depletion and increased mining and processing costs associated with a change from subsidised to international fuel prices.

Chairman Josef El-Raghy said: "As expected there has been some impact on the overall reserve from the higher international fuel price environment that Sukari has operated under since Q1 2012.

"However, it is pleasing to note that the underground drilling campaign, which has escalated steadily during 2013, has started to outline substantial regions of high grade ore. 

"It is our expectation that this trend will continue as underground development is expanded and the multiple high-grade drill targets at Sukari are tested and defined over the coming months and years."

Jubilee Platinum (LON:JLP) has received formal approval to start trading on the Johannesburg Stock Exchange's Alternative Exchange with effect from tomorrow (19 December). 

This move is in-line with the company's current trading history with the majority of trades occurring on the London AIM market and allowing the London AIM exchange to become the company's primary listing. 

Ncondezi Energy (LON:NCCL) has raised aggregate gross proceeds of about £3.03 million through an open offer and placing.

It received valid acceptances for 18,516,087 offer shares from qualifying participants, or 30.58% of the offer shares.

In addition, Ncondezi confirm that the remaining 42,041,753 new shares not taken up by qualifying participants, or 69.42%, were placed at the offer price to new and existing investors.

The sector's biggest riser was Bisichi Mining (LON:BISI) - up by 15% - while the biggest faller was Eurasia Mining (LON:EUA) - down by more than 9.5% in late afternoon trading. 

Uranium Energy Reports Progress at Goliad Project

Uranium Energy Corp. (NYSEMKT:UEC) reported progress on its fully-permitted Goliad ISR Project where construction continues as planned, and the previously ordered processing equipment has arrived on schedule.

As quoted in the press release:

The Ion Exchange (IX) vessels were received in late November, and the material to construct the IX pipe and valve system has been ordered and received. The recovery of uranium is set to be available to come online in fiscal 2014.

… As noted in the Company’s quarterly report, the EPA had earlier filed a Motion to Remand without Vacatur with the 5th Circuit Court of Appeals (the “Fifth Circuit”). Without vacatur simply means that the EPA-approved AE remains in force. The EPA’s stated purpose was to supplement the record in response to the opponent’s prior complaints. In requesting the remand without vacatur, the EPA denied the existence of legal error and stated that it was unaware of any additional information that would merit reversal. Consistent with the EPA and the TCEQ, the Company is not aware of any new information that would change the current AE approval.

Uranium Energy Corp. President and CEO, Amir Adnani said:

The Company’s scalable hub-and-spoke strategy, a proven model for increasing uranium extraction and maintaining a low-cost profile, will continue as planned and production at Goliad will be available to come online in fiscal 2014. We are executing on this plan with the Company’s Goliad, Burke Hollow, and Palangana projects.

The US considers change to crude oil export policy

Signalling a possible break with 40 years of energy policy, Energy Secretary Ernest Moniz has suggested it may be time for the Obama administration to reconsider the United States' ban on exporting crude oil.

Congress made most oil exports without a licence illegal in the 1970s to conserve supplies at a time when Organisation of the Petroleum Exporting Countries embargoes produced long lines at petrol stations and threatened the US economy. But over the past five years, a frenzy of oil drilling in shale rock formations in Texas and North Dakota have produced a glut of crude in the Midwest and Gulf of Mexico states.

''Those restrictions on exports were born, as was the Department of Energy and the Strategic Petroleum Reserve, from oil disruptions,'' Dr Moniz said on Thursday. ''Lots of energy issues deserve new analysis and examination in the context of what is now an energy world that is no longer like the 1970s.''

The Energy Department does not have the power to relax restrictions on exports, but Dr Moniz said that it would be willing to produce technical analysis on the issue for the Commerce Department, which issues the export licences.

Oil companies are lobbying to allow exports, arguing that the US could substantially increase export earnings from selling high-quality crudes abroad. That type of crude oil is not easily refined by US refineries that were outfitted for processing lower-quality crudes imported from Mexico, Venezuela and the Middle East.

The lobbyists argue that such exports could lower global oil prices, which would bring relief for US consumers. But others, including influential members of Congress, say that oil exports would actually raise domestic petrol prices and threaten domestic oil supplies at times of crisis in the Middle East or Africa.

''If the Department of Energy and others push on Commerce, then maybe they can get it over the hump,'' said Chip Johnson, president of Carrizo Oil & Gas, a midsize Texas oil company active in the shale oil fields. ''I think we should keep national security first, but we should export oil just like anything else.''

Oil companies are already beginning to export more oil to Canada because those export licences are relatively easy to obtain. Canada is the largest exporter of oil to the US, but because many grades of US oil are selling at a discount to global benchmarks, eastern Canadian refiners are buying US crude to process into diesel and petrol.

In the first 10 months of the year, the US exported an average of 95,000 barrels of crude oil a day, mostly to Canada. Over the same period in 2012, the US exported an average of 67,000 barrels a day and 23,000 barrels a day in 2007, when US oil production began its expansion.

Some analysts predict that exports to Canada will soon approach 200,000 barrels a day.

But some Democratic lawmakers are already voicing concerns about exports.

''The growing chorus from the oil industry to change long-standing US law to permit the export of American crude oil is a disturbing trend,'' Senator Edward Markey said. ''This oil should be kept here in America, to benefit our consumers and to reduce our dependence on imports from the Middle East.''

Uranium miner halts Virginia plan

A company is suspending its campaign to mine one of the world’s largest known deposits of uranium ore located in Virginia, concluding that Gov.-elect Terry McAuliffe’s opposition presents a significant challenge over the next four years.

Virginia Uranium Inc. said it will not back the introduction of uranium mining legislation in the 2014 session of the General Assembly, which would be a first step to tap a 54-million-kg deposit of uranium in Pittsylvania County known as Coles Hill.

Read more: Toyota to enter settlement talks on acceleration suits

Toyota, after a four-year legal battle, is entering settlement talks on nearly 400 U.S. lawsuits that allege sudden unintended acceleration problems with its vehicles led to deaths and injuries.

Joint motions filed late Thursday in U.S. District Court in Santa Ana and Los Angeles County Superior Court indicated both sides would begin an “intensive settlement process” next month.

The Japanese automaker, which has recalled millions of cars since 2009 over the acceleration issue, agreed to the negotiations to make resolving the cases more efficient, spokeswoman Carly Schaffner said on Friday.

“We continue to stand behind the safety and quality of our vehicles,” she said.

Cases that don’t settle after a two-stage mediation process will go back to court for trial, said plaintiffs’ co-lead counsel Mark Robinson Jr., but most of the 375 claims will likely get resolved.

“It’s not practical to try all these cases,” he said. “You’ve got two chances to get your case settled and if you’re a plaintiff, at least you’re not just sitting in some file in the courthouse.”

The settlement negotiations come less than two months after an Oklahoma jury awarded a total of $3 million in damages to the injured driver of a 2005 Camry and to the family of a passenger who was killed.

The ruling was significant because Toyota had won all previous unintended acceleration cases that went to trial. It was also the first case where attorneys for plaintiffs argued that the car’s electronics — in this case the software connected to the Camry’s electronic throttle-control system — were the cause of the unintended acceleration.

At the time, legal experts said the Oklahoma verdict might cause Toyota to consider a broad settlement of the remaining cases. Until then, Toyota had been riding momentum from several trials where juries found it was not liable.

Robinson said attorneys for plaintiffs had been discussing a streamlined settlement process with Toyota before that verdict, but the Oklahoma case “couldn’t have hurt” those talks.

Toyota has blamed drivers, stuck accelerators or floor mats that trapped the gas pedal for the acceleration claims that led to the big recalls of Camrys and other vehicles. The company has repeatedly denied its vehicles are flawed.

No recalls have been issued related to problems with onboard electronics. In the Oklahoma case, Toyota attorneys theorized that the driver mistakenly pumped the gas pedal instead of the brake when her Camry ran through an intersection and slammed into an embankment.

Sean Kane, president of Massachusetts-based Safety Research & Strategies, said the Oklahoma verdict likely moved Toyota to the negotiating table because it targeted electronics.

“Nobody did until that case and they got hammered — and they got hammered in a conservative venue,” said Kane, who researches consumer safety in motor vehicles for plaintiff attorneys and has been closely following the Toyota litigation.

“The evidence that came out in that trial has attracted global attention that is remarkable,” he said.

After the verdict, jurors told AP they believed the testimony of an expert who said he found flaws in the car’s electronics. They also pointed to 50 meters of skid marks on the road as evidence the driver was desperately trying to brake.

“What makes the accelerator open? The computer,” juror Vickie Potter said after the verdict.

STUDY: Mining investors wary of Quebec

The Fraser Institute reports that uncertainly about protected areas and environmental restrictions, combined with tougher regulation and tax changes, has mining investors increasingly wary of doing business in Quebec.

The institute's study, Quebec's Mining Policy Performance: Greater Uncertainty and Lost Advantage, outlined the four key barriers to investment in that province.

Uncertainty over policy change involving protected areas such as wilderness zones, parks and archeological sites is the primary deterrent for investors. It has a multiplier effect in that activity is discouraged at the exploration level, and without exploration, the industry is at a standstill.

Uncertainty over environmental regulations has created the perception that special interests, not good science, guide policy decision. Such politization is deterring investors.

Increasing taxes threaten to make mining in Quebec unprofitable. Since 2010, the province increased mining duty rates to 16% from 12% of annual profits, and now bases "profits" on an individual project basis. Losses at one operation can no longer be used to offset profits at another of an owner's operations.

Red tape – in regulatory duplication and inconsistencies – is also choking off investment in Quebec's mineral industry. Notably, the province has steadily increased levels of red tape for mineral projects over the past five years.

The defeat of changes to Quebec's Mining Act, Bill 43, at the end of October 2013 does little to reassure would-be investors. The government has announced its intention to make minor changes and retable the legislation.

PEA confirms Macusani Yellowcake’s low-cost potential

 A new preliminary economic assessment (PEA) by Canadian uranium exploration and development firm Macusani Yellowcake on Thursday confirmed that its uranium properties located on the Macusani Plateau in the Puno district, of south-eastern Peru, have the potential to become a large, low-cost uranium mining operation.

Speaking to Mining Weekly Online from Johannesburg, where he lives, CEO DrLaurence Stefan said the PEA treatment delivered robust financials, which potentially placed the project firmly on the map and made it a target for prospective uranium majors.

The operation’s cash operating costs during the first five years was calculated at $19.45/lb of uranium oxide (U₃O₈) placing it in the lowest quartile in the world when using 2012 production figures. Cash operating costs over the entire ten-year mine life were estimated to average $20.57/lb of U₃O₈.

“If I was one of the major uranium players in Russia, China or Kazakhstan, I would not think twice about partnering with us on this project. When they are producing at price around $50/lb, why would they not consider adding such a low-cost operation to their portfolios?” he asked.

The results from the PEA demonstrated that at an 8% discount rate, the project had a pre-tax net present value (NPV) of $708-million, and an after-tax NPV of $417-million. It also has an internal rate of return of 47.5% before tax, and after taxes had been paid, the internal rate of return stood at 32.4% when using a uranium price of $65/lb of U₃O₈, which the company said was considered as the long-term price by many industry analysts.

The PEA, prepared by GBM Minerals Engineering Consultants in conjunction with The Mineral Corporation and Wardell Armstrong International, estimated that the $331-million capital expenditure could be paid back in about 3.5 years on an after-tax basis.

The yearly output during the first five years of operations was expected to average 5.17-million pounds of yellowcake, which would have ranked the mine as the sixth-largest uranium mine in 2013. The life-of-mine U₃O₈ output was estimated to average 4.3-million pounds a year.

The PEA provided the operation with an 8.5-million-tonne-a-year process plant and the operation would require total life-of-mine sustaining capital costs estimated at $228-million.

“The completion of the PEA is a significant milestone for the company on a number of levels. Firstly, the estimated production cost of $20.57/lb demonstrates that we have a project that has the potential to be one of the lowest-cost uranium producers in the world due to a low stripping ratio in the openpit operations, anticipated low acid consumption, and high process plant recoveries expected to be achieved in a short period of time.

“Secondly, the PEA demonstrates that the Macusani plateau has significant potential to become a major uranium producing district considering that only small areas have been explored to date. And finally, the PEA paves the way for further development of our project and the completion of a prefeasibility study, which we expect to initiate in 2014,” Stefan said.

Potentially economic ore for the project would at first come from multiple target deposits including Colibri 2 & 3/Tupuramani, Chilcuno Chico, Quebrada Blanca, Corachapi and Triunfador 1. Conventional openpit and underground mining methods were proposed, and the PEA contemplated building a mine and centralised processing facility operating over a ten-year mine life at a throughput of about 23 400 t/d.

A simple heap leach would be used to extract uranium into an acidic aqueous leach solution and recovery would be achieved through ion exchange (IX) with a solvent extraction acid recovery circuit. Stefan explained that IX technology was preferred as the simplest and most cost-effective option considering the almost pure uranium mineralisation available within the Macusani rhyolites and the absence of any contaminants such as thorium, molybdenum and vanadium.

The project currently has a National Instrument 43-101-compliant measured and indicated resource of 47.9-million tonnes grading 253 ppm uranium, containing 14.3 t of U₃O₈. The inferred resource stood at 40.5-million tonnes grading 286 ppm uranium, containing 13.6 t of U₃O₈.

Together with a joint venture between Vena Resources and uranium major Cameco, the Macusani Plateau currently hosts about 110-million pounds of uranium, of which YEL owns between 60-million to 70-million pounds. This does not compare with Canada’s Athabasca basin in northern Saskatchewan and Alberta, which is the world’s top source of high-grade uranium, but would more likely be comparable with the resources of Namibia, Niger or Kazakhstan.

He added that the proposed operations had significant “blue sky” potential and would play a significant part in the economic development of the region.

“I believe mining is the first step toward the industrial revolution. With Peru’s significant emerging uranium resources, the country is potentially well positioned to play an increasingly important role of supplying uranium, and even possibly enriched uranium in the future, to its neighbours on the South American continent,” Stefan said.

FORTESCUE IN A HURRY TO SQUEEZE NEW ASSETS

Barely two weeks after bringing its latest mine into production and shifting gear from construction to operations, the world's fourth largest iron ore miner is already talking about increasing capacity.

Fortescue showed off its new Kings mine as well as its rail and port operations this week, hinting that it's looking to export up to 175 million tonnes per annum (mtpa) from the Pilbara.

For the foreseeable future, any extra capacity will have to come from squeezing existing assets beyond the company's stated goal of 155 mtpa by March next year.

Chief executive Nev Power says he wants to run the company efficiently and avoid building infrastructure and loading up on more debt.

"Our first strategy is to drive what we've got as hard as we can, sweat the assets and get that maximum out," Mr Power told reporters during a tour of the company's Pilbara operations this week.

"We think that's 15 to 20 million tonnes that we might be able to squeeze out of it."

He said Fortescue had originally designed the layout of its Port Hedland operations to cater for a capacity of up to 200 million tonnes.

The design of Herb Elliot Port would allow Fortescue to keep expanding without outlaying too much capital.

Official estimates put the overall export capacity of Port Hedland, Australia's largest bulk commodities port, at 495 million tonnes.

But Mr Power believes the real capacity is somewhere between 600 million and 700 million tonnes.

Any future decision to build a fifth berth at Herb Elliott Port would be significant, given the company's debt profile, he said.

Fortescue is trying to reduce its $12 billion debt pile by around $4 billion to $5 billion over the next couple of years while the iron ore price remains buoyant and as the company delivers on its production targets.

The talk of extra capacity comes after mining giant Rio Tinto recently committed $400 million to upgrade its port facilities in the Pilbara as part of its plan to reach 360 million tonnes.

While Fortescue has some way to go to compete with the likes of Rio and BHP Billiton, the company says it is now a lower cost producer than Brazil's iron ore giant Vale.

Improving productivity and efficiency with berths and ship loaders at Port Hedland is key.

Mr Power says such improvements should be a high priority for all Pilbara iron ore producers.

"The more efficient they are and the more efficient we are, the more tonnes are going to go out through the port," he said.

"It's in everyone's interests."

He also gave an insight into Fortescue's plans to automate part of its trucking workforce, taking the media to view a dozen massive unmanned autonomous trucks as they collected iron ore from an excavator.

But it wasn't all smooth sailing as a computer glitch caused the trucks to stop for about an hour.

If a six-month trial of the futuristic Caterpillar trucks is successful, Fortescue plans to purchase up to 45 vehicles valued at $5 million to $6 million each.

Those trucks would carry around a third of the company's iron ore and do the job of 55 manual trucks.

But for now, Fortescue is stripping back its workforce for the production phase and monitoring its multinational competitors for further expansion plans.

Mr Power says Fortescue will only look at bringing forward future expansion plans if the iron ore market becomes heavily undersupplied.

"Our objective is to make sure that we've got a pipeline of projects that's ready to do when the time is right," he said.