Wheeler River Preliminary Economic Assessment Upbeat Even with Cautious Uranium Price Forecast

Uranium (Nuclear Minerals) / Exploration, Mining, Marketing, & Acquisitions

Date posted: 04/05/16

Greg Klein reports that two high-grade eastern Athabasca Basin uranium deposits could form a single mining operation producing over 16 years, according to the Wheeler River joint venture PEA. Operator Denison Mines released the figures from a study that incorporates the McClean Lake mill and bases its numbers on a conservative price forecast. McClean Lake expansion should provide excess capacity of six million pounds a year. Using an 8% discount rate, the pre-tax NPV comes to $513 million with a 20.4% IRR. The company holds a 60% stake in the JV with Cameco Corp (30%) and JCU (Canada) Exploration (10%). Initial capex would come to $560 million and sustaining capex another $543 million. Payback was reckoned at about three years. Those numbers assume a uranium price of $44 per pound U3O8, the current long-term contract price according to Denison. (In lieu of a spot price, UEX Consulting provided a very low March 28 price indicator of $29.15.) By comparison, Fission Uranium PEA for Patterson Lake South considered a price of $65 per pound. Cameco average realized price for 2015 came to $57.58, partly bolstered by the weak Canadian dollar. But should uranium reach $62.60, Wheeler River PEA projects a pre-tax NPV of $1.42 billion and a 34.1% IRR. The conventionally mined basement-hosted Gryphon deposit would enter production first. The unconformity-hosted Phoenix, located below water-saturated sandstone, would require Cigar Lake techniques of ground-freezing and remote-control jet-boring. The two Wheeler River deposits lie three kilometres apart on the 11,720-hectare property. The Phoenix resource used a 0.8% cutoff to show ... Indicated: 166,400 tonnes averaging 19.14% for 70.2 million pounds U3O8 Inferred: 8,600 tonnes averaging 5.8% for 1.1 million pounds U3O8 Gryphon resource used a 0.2% cutoff ... Inferred: 834,000 tonnes averaging 2.31% for 43 million pounds U3O8 Cutoff grades were based on an assumed price of $50 per pounds U3O8.