U3O8 Corp. (TSX:UWE)(OTCQX:UWEFF), a Canadian-based company focused on
exploration and development of uranium resources and associated commodities in
South America, reports a favourable Preliminary Economic Assessment ("PEA") on
its Laguna Salada Deposit in Argentina. The PEA shows that uranium at Laguna
Salada would be produced at an average life-of-mine ("LOM") cash cost of $21.62
per pound ("lb") of U3O8, net of a vanadium by-product credit (Figure 1), and
the total capital cost of $134 million would be paid back in 2.5 years. All
figures in this press release are in US$, unless otherwise noted.
"The PEA achieved our main goal of showing that Laguna Salada's cash cost would
be well within the lower quartile of the uranium industry - an important
achievement that bodes well for the deposit's potential to ride out cyclical
lows in the resource sector," said Dr. Richard Spencer, U3O8 Corp's President
and CEO. "With a life-of-mine cash cost of $22/lb, Laguna Salada would be
competitive with low-cost in-situ recovery uranium projects and with high-grade
deposits in the Athabasca Basin. Secondly, the project has a short payback with
an average cash cost of $16/b of uranium over that period. This is because the
shallow, flat-lying nature of the Laguna Salada Deposit allows us to start
production in the higher grade zones where profit margins are greatest. Thirdly,
the project's economics would be significantly enhanced by increasing the
resource size - therefore, our immediate goal is to expand the current resource
into our adjoining La Susana area."
PEA Highlights (Pre-Tax Base Case at $60/lb U3O8):
-- Low cash cost: average cash cost of $16.14/lb of uranium over the
payback period; LOM cash cost of $21.62/lb, net of a vanadium credit,
and including a 3% net smelter royalty ("NSR") payable to the State.
Therefore, the project would have a healthy operating margin even at
current uranium prices and is favourably leveraged to a strengthening
uranium price (Figure 2);
-- Value of initial current resource: net present value ("NPV"), at a 7.5%
discount rate, of $55 million, and a pre-tax internal rate of return
("IRR") of 24% and post-tax IRR of 18%;
-- Return on capital: total capital cost of $134 million (including start-
up capital of $109 million to build the mine and processing plant plus
$3 million in sustaining capital for the life-of-mine and $22 million
for a 20% contingency on the total capital cost estimate). The payback
period is 2.5 years; and
-- Initial production: 1.3 million pounds ("Mlb") of uranium produced in
year 1, while the average annual production would be 0.64Mlb per year
over the 10-year mine life from a continuous surface mining operation.
Average annual vanadium production would be 0.96Mlb over the life of the
mine.
Dr. Spencer added, "The Laguna Salada PEA marks a key milestone towards
positioning U3O8 Corp. among the few companies that could be in production
heading into a sustained and growing global uranium supply deficit forecast to
start in 2019. Furthermore, the study shows that Laguna Salada is well placed as
one of the most advanced uranium projects in Argentina that could satisfy the
immediate needs of the country's current nuclear reactors that presently rely on
imported uranium for fuel. Argentina's third reactor has just come on-stream and
deals were signed in the last month related to building a fourth reactor, with
talks underway on a fifth. And with district-scale uranium potential evident in
the Laguna Salada region, we could serve Argentina's growing nuclear fleet as
well as export to other utilities, supported by the large number of nuclear
co-operation agreements that Argentina has signed."
The PEA is preliminary in nature as it includes inferred mineral resources that
are considered too speculative geologically for economic consideration that
would enable them to be classified as mineral reserves. Mineral resources are
not mineral reserves and do not have demonstrated economic viability. There is
no certainty that the results of the PEA will be realized.
Low Cost of Uranium Production
The PEA estimates a LOM cash cost of $21.62/lb of uranium, net of a by-product
credit from vanadium, and including a 3% NSR to the State. The vanadium
contributes an average of 14% of revenues. This would put the Laguna Salada
Deposit well within the lower quartile in terms of cash costs in the uranium
industry (Figure 1) and competitive with operating costs of uranium mines in the
Athabasca Basin and low-cost in-situ recovery ("ISR") operations.
A beneficial feature of Laguna Salada is that the mineralization is contained in
an unconsolidated, flat lying sheet just below surface, which allows production
to start in the richest part of the deposit where revenue would be maximized so
that the capital cost can be paid back in 2.5 years. This attribute of the
deposit also provides us with flexibility to maintain positive operating margins
by tailoring the mining plan to prevailing uranium prices throughout the life of
the mine. By taking this approach, initial uranium cash cost averages at
$16.14/lb during the payback period or $11.66 in year 1 and $14.05 in year 2,
gradually rising as uranium grades decrease over the 10-year mine life for an
average cash cost of $21.62 (Figure 2).
Analysts estimate the average marginal cost of production for today's uranium
producers is approximately $40/lb, and that some 50% of the world's current
production is likely to be uneconomic at the present spot price of $28.50/lb(1).
The PEAs on U3O8 Corp's Laguna Salada Deposit and its Berlin Deposit in Colombia
show that our lead projects have a combined weighted average cash cost of
$6.08/lb - one of the lowest in the industry.
To view "Figure 1 - Cash Costs of U3O8 Corp's Projects Compared with Other
Uranium Producers(1)," please visit the following link:
http://media3.marketwire.com/docs/uwe_pr_aug005_fig01.pdf
To view "Figure 2 - Laguna Salada Cash Cost Per Pound Relative to Forecast
Uranium Prices(2)," please visit the following link:
http://media3.marketwire.com/docs/uwe_pr_aug05_fig02.pdf
Net Present Value ("NPV") and Internal Rate of Return ("IRR")
The PEA demonstrates that the project should generate healthy operating margins
relative to analysts' uranium price forecasts (Figure 2). The economic model was
based on a $60/lb uranium (U3O8) price and $5.50/lb for vanadium (V2O5) to yield
a NPV of $55 million at a 7.5% discount with a pre-tax IRR of 24% and post-tax
IRR of 18%. At the consensus uranium price forecast of $70/lb, the project's NPV
(at a 7.5% discount rate) would increase to $98 million, the IRR would increase
to 35% and the payback period would shorten to 1.9 years (Table 1).
U3O8 Corp. undertook this PEA before the full extent of the deposit is known in
order to have independent verification that Laguna Salada's production cost
would be comparable with the uranium industry's lowest-cost producers. As both
of the IRR and NPV are sensitive to deposit size, our next step is to increase
the resource, which would significantly improve both of these economic measures.
For example, doubling the size of the Laguna Salada resource from mineralized
areas that have a similar grade profile to the current resource and doubling the
production rate, would result in the NPV (at a 7.5% discount) increasing to $180
million and the IRR to 44%. The capital cost of a plant and mining operation
that has double the capacity would be approximately $55 million more than the
current plant design (or a total of $189 million including contingency and
sustaining capital) and would produce an average of 1.2Mlb of uranium and
approximately 2Mlb of vanadium per year over a 10-year mine life. Therefore, the
clear priority is to double the resource - and our immediate target to achieve
this is the contiguous La Susana area (December 4, 2013 press release).
Our La Susana exploration area has the potential to increase the current
resource to 20-25Mlb(3) of uranium (Figure 3) with an exploration budget of
approximately $1.8 million. La Susana lies adjacent to the current resource and
appears to be an extension of the Laguna Salada Deposit. The La Susana footprint
is about the same size as the current Laguna Salada resource and exploration
indicates that it has a similar grade profile to Laguna Salada.
(3) Based on the initial resource and exploration of the La Susana
mineralized area, there is an initial conceptual uranium target of 150-
225 million tonnes at 50ppm to 60ppm U3O8 (approx. 20-25Mlb U3O8)
identified in the Laguna Salada district to date. Potential quantity and
grades are conceptual in nature. There has been insufficient exploration
to define a mineral resource beyond the current resource, and it is
uncertain if further exploration will result in additional mineral
resources being delineated in the region.
Table 1 - Discounted Cash Flow Estimates on the Laguna Salada NPV and IRR to
Uranium Price
----------------------------------------------------------------------------
$60
(Base
Uranium Price $45 $50 Case) $70
----------------------------------------------------------------------------
0% $16 $47 $109 $170
----------------------------------
5% ($3) $22 $70 $118
Discount Rate ----------------------------------
(in $ millions) 7.5% ($10) $12 $55 $98
----------------------------------
10% ($16) $4 $43 $82
----------------------------------
15% ($25) ($10) $23 $55
----------------------------------------------------------------------------
IRR 4% 11% 24% 35%
----------------------------------------------------------------------------
Pay-back period (years) 4.7 3.7 2.5 1.9
----------------------------------------------------------------------------
Value per Fully Diluted Share of U3O8 Corp.
U3O8 Corp. has now demonstrated positive economics on its lead projects in
Argentina and Colombia with both deposits open for further expansion. Based on
an initial NPV of $55 million (7.5% discount) as estimated in the current PEA,
Laguna Salada equates to a value of $0.23 per fully diluted U3O8 Corp. share. In
addition, the company's flagship Berlin Project in Colombia has an NPV (7.5%
discount) of $338 million based on only one-third of its resource potential for
a value of $1.41 per fully diluted U3O8 Corp. share. These two projects together
equate to a value of $1.64 per fully diluted U3O8 Corp. share.
To view "Figure 3 - District-Scale Potential in the Laguna Salada Region,"
please visit the following link:
http://media3.marketwire.com/docs/uwe_pr_aug05_fig03.pdf
Mineral Resources(4)
The Laguna Salada(i) PEA is based on the below initial resource prepared in
accordance with National Instrument 43-101 ("NI 43-101") by independent
consulting company, Coffey Mining Pty Ltd. ("Coffey Mining"), 2011 (Table 2).
Table 2 - Resource Estimate for the Laguna Salada Deposit
----------------------------------------------------------------------------
Summary of Resource for the Laguna Salada Project using recommended cut-off
grades for the Guanaco and Lago Seco areas
----------------------------------------------------------------------------
Average Grade Contained Metal
--------------------------------------
Lower Average
cut-off Grade U3O8 V2O5
Category of (ppm Tonnes U3O8 V2O5 (millions (millions
Resource (U3O8 (millions) (ppm) (ppm) of lbs) of lbs)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Indicated Resources
----------------------------------------------------------------------------
Guanaco 25 44.6 55 530 5.5 52.0
Lago Seco 100 2.7 145 840 0.9 5.0
Total Indicated 47.3 60 550 6.3 57.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Inferred Resources
----------------------------------------------------------------------------
Guanaco 25 19.4 80 555 3.4 23.7
Lago Seco 100 1.3 130 1,065 0.4 3.1
Total Inferred 20.8 85 590 3.8 26.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The recommended cut-off grades for the two mineralized areas, taking into
account their distinct beneficiation characteristics, are: 25ppm U3O8 for
Guanaco and 100ppm U3O8 for Lago Seco.
(i) Removal of pebbles and coarse sand by screening results in uranium
grades increasing by 11 times over the in situ grade of gravel from the
Guanaco area and seven times from the Lago Seco area. Vanadium grades
increase 3.8 times through beneficiation of gravels from both areas.
(4) May 2011 technical report: "Laguna Salada Project, Chubut Province,
Argentina: NI 43-101 Technical Report: Initial Resource Estimate", which is
available at www.u3o8corp.com and on SEDAR at www.sedar.com.
Mining and Processing Methods
Laguna Salada would produce an average of 0.64Mlb per year over the 10-year mine
life. The mining operation contemplates the use of two Wirtgen SM2200 (400 tonne
per hour ("tph") capacity) continuous surface miners that cut a 30-40 centimetre
layer of unconsolidated gravel with each pass along a trench. Gravel cut from
the leading edge of the trench would be trucked a short distance by 50-tonne
("t") truck-trailers to one of two mobile beneficiation units (360tph capacity)
where the gravel would be washed over screens to separate the pebbles and coarse
sand from the fine uranium-bearing material. Approximately 90% of the damp
gravel would be returned to the trailing edge of the trench to be levelled to
the land's original topography and replanted with indigenous flora. This
reclamation would be continuous throughout the mine life and ensures that no
open excavation would be left on completion of mining.
The fine mineralized material derived from the gravel (8% of the original mass
from the Guanaco area of the deposit and 11% from the Lago Seco area) would be
mixed with water and pumped to a central hydrometallurgical plant. Fine material
from Lago Seco would enter a hydrocyclone system for further beneficiation and
the fine material in the overflow, containing the majority of the uranium, would
then be mixed with fine material from the Guanaco sector for further processing.
Residual gypsum in the combined fines would be leached with saline shallow
groundwater from the property and the sulphate would be separated from that
solution in a membrane system so that the saline water can be recirculated.
Extraction of uranium and vanadium would be by alkaline leach at a temperature
of 80 degrees C, followed by the precipitation of a uranium-vanadium
intermediate product. The PEA contemplates separation of the uranium and
vanadium and calcining of the uranium to produce a high-grade uranium oxide as
well as recovery of the vanadium as ammonium metavanadate (calcining of which
would produce vanadium pentoxide).
The next steps toward development of the Laguna Salada Deposit would be further
hydrometallurgical test work and an on-site pilot plant in which beneficiation
tests would be undertaken, both of which would be to feasibility standards.
Capital Costs
The PEA estimates a $134 million capital cost, the main constituents of which
are $14 million for mining and beneficiation equipment, $79 million for the
processing plant, indirect costs of $11 million and contingency of $22 million
(Table 3).
Table 3 - Summary of Capital Costs
----------------------------------------------------------------------------
Items (in $millions)
----------------------------------------------------------------------------
Working capital $2.5
----------------------------------------------------------------------------
Mining $14.3
----------------------------------------------------------------------------
Sustaining capital $3.3
----------------------------------------------------------------------------
Mine closure(i) $2.0
----------------------------------------------------------------------------
Process plant and infrastructure $79.1
----------------------------------------------------------------------------
Indirect costs (EPCM, insurance, temporary works,
first fills & spares etc.) $10.9
----------------------------------------------------------------------------
Contingency of 20% $21.9
----------------------------------------------------------------------------
TOTAL $134.0
----------------------------------------------------------------------------
(i)Mine site reclamation and closure would be ongoing during the life of the
mine and the majority of this cost is captured in operating costs.
Operating Costs
Revenue of approximately $10/t of mineralized gravel against operating costs of
$5.56/t would generate operating cash flow of $4.43/t (Table 4).
Table 4 - Summary of Operating Costs
----------------------------------------------------------------------------
Items Per tonne of mineralized gravel
----------------------------------------------------------------------------
Revenue $9.99
----------------------------------------------------------------------------
Operating Costs:
----------------------------------------------------------------------------
Revenue-based royalties $0.25
----------------------------------------------------------------------------
Mining $0.99
----------------------------------------------------------------------------
Processing & G&A $4.32
----------------------------------------------------------------------------
Total Operating Costs: $5.56
----------------------------------------------------------------------------
Operating Cash Flow $4.43
----------------------------------------------------------------------------
The Laguna Salada PEA technical report, prepared in accordance with NI 43-101,
will be filed on SEDAR within 45 days of this news release.
Qualified Persons and Accreditation
The PEA was conducted under the supervision of Mr. Louis de Klerk, Pr. Eng.
(South Africa), at Tenova Mining & Minerals (formerly Bateman Engineering N.V.)
("TMM") in Perth, Australia. TMM is part of the Techint Group, a leading global
engineering firm that has been providing process design, development and
construction services to the resource sector for over 90 years and has extensive
and specific process and engineering experience in the extraction of uranium and
vanadium. Projects undertaken by TMM include AREVA's Imouraren, Cameco's Key
Lake, by-product uranium from Harmony Gold's mines, Rio Tinto's Rossing mine,
Kazatomprom's Honeymoon ISL uranium mine, Sinosteel's Crocker Well uranium
project, an alkaline leach facility at UCIL's Gogi uranium project, a
feasibility study on Bannerman's Etango uranium project and most recently, a
feasibility study on Toro Energy's Wiluna project, which has many similarities
with the Laguna Salada Deposit. For more information, see www.tenovagroup.com.
Mr. Pedro Pino Veliz, Director of PEK Teknep Overseas Engenharia Ltda ("PEK"),
was responsible for the mine design and financial model. Mr. Veliz is a Civil
Mining Engineer (P.E.) (Brazil), Eng. Dr. (IT) SME with over 35 years of mining
operations experience. PEK has extensive experience serving its Brazilian and
international clients with rock mechanics, rock characterization, underground
stability and hydrological studies, feasibility studies and designing and
planning of surface mining, open pit mines and underground mines. This has
included detailed design of tunnels and stations, methods of excavation and
specifications for support methods in the expansion of the Rio de Janeiro subway
system for the 2014 World Cup and 2016 Olympic Games. Numerous projects for Rio
Tinto included the Salobo Copper open pit mine, the Fortaleza de Minas open
pit/underground nickel project, Rossing Uranium expansion project and study of
surface Voest Alpine Continuous Miners for the Morro do Ouro gold mine.
Mine and tailing facility design was by PEK, with associated operating and
capital cost estimates, as well as related general and administrative costs. TMM
was responsible for the PEA design of the hydrometallurgical plant from receipt
of the beneficiated slurry from the scrub-screen units, as well as for the
associated operational and capital expenditure and general and administrative
cost estimates. Pricing of reagents was done by TMM and U3O8 Corp. Product price
assumptions were made by U3O8 Corp. The economic model was constructed by PEK
using capital and operating cost estimates from TMM for the hydrometallurgical
plant and from PEK for the mine plan and beneficiation units.
Mr. John Goode, P.Eng (Ontario) is an independent consultant with 50 years of
experience in metallurgy and related test work. He oversaw the metallurgical
test work carried out on the Laguna Salada Project. Mr. Goode is a Fellow of the
Canadian Institute of Mining, Metallurgy and Petroleum (CIM) and a Fellow of the
Australasian Institute of Mining & Metallurgy (AusIMM).
Mr. Johann van der Westhuysen (PrEng (Chem)), Managing Director of Synexus (Pty)
Ltd. ("Synexus"), was responsible for the membrane separation developments and
their integration in the overall process for the Laguna Salada Project. Mr. van
der Westhuysen is a Professional Engineer with the Engineering Council of South
Africa and a Chartered Chemical Engineer with the Engineering Council of the
United Kingdom. Synexus is a process engineering company specializing in the
application of membrane systems in hydrometallurgical and related processes.
Each of the individuals named above is a qualified person as defined in NI
43-101 of the Canadian Securities Administrators ("QP"), is independent of U3O8
Corp. and has verified his related technical disclosure presented in this press
release.
The PEA has relied on the NI 43-101 resource estimate prepared by Mr. Neil
Inwood, a Fellow of The Australian Institute of Mining and Metallurgy and a QP,
who was employed by Coffey Mining at the time of the writing of the report. Mr.
Inwood is independent of U3O8 Corp. As Mr. Inwood is no longer with Coffey
Mining, Coffey Mining has reviewed the information related to the mineral
resources as derived from the original report and consents to its inclusion,
form and context in this press release.
Dr. Richard Spencer, Ph.D,, BSc(Hons), P.Geo. (Ontario), C.Geo. (UK), is
President & CEO of U3O8 Corp. and a QP, and has supervised the preparation of,
and verified the technical information contained in this press release relating
to the Laguna Salada Project.
About U3O8 Corp.
U3O8 Corp. is focused on exploration and development of uranium resources and
associated commodities in South America. The company's uranium resources
comprise three deposits defined in accordance with NI 43-101 located in
Colombia, Argentina and Guyana:
-- Berlin Deposit, Colombia - a PEA shows that Berlin could be a zero cash
cost uranium producer thanks to revenue from by-products of phosphate,
vanadium, nickel, rare earths (yttrium and neodymium) and other metals
occurring in the same deposit;
-- Laguna Salada Deposit, Argentina - a near surface, free-digging uranium,
vanadium deposit that is potentially amenable to low-cost mining and
processing methods; and
-- Kurupung Deposit, Guyana - an initial uranium deposit in a large
emerging uranium district.
Additional information on U3O8 Corp., its mineral resources and technical
reports are available at www.u3o8corp.com. Follow U3O8 Corp. on Facebook:
www.facebook.com/u3o8corp, Twitter: www.twitter.com/u3o8corp and Youtube:
www.youtube.com/u3o8corp.
Forward-Looking Statements
Certain information in this release are forward-looking statements with respect
to the development plans, economic potential and growth targets of U3O8 Corp's
current projects. Forward-looking statements consist of statements that are not
purely historical, including statements regarding beliefs, plans, expectations
or intensions for the future, and include, but not limited to, statements with
respect to: (a) the low-cost, near-term production goal of Laguna Salada, (b)
the Laguna Salada and Berlin PEAs, (c) the market opportunities for uranium in
Argentina and internationally, and (d) the potential of the Kurupung district in
Guyana. Basis for such assumptions include that: (i) actual results of our
exploration, resource goals, metallurgical testing, economic studies and
development activities will continue to be positive and proceed as planned, and
assumptions in the Laguna Salada and Berlin PEAs prove to be accurate, (ii)
requisite regulatory and governmental approvals will be received on a timely
basis on terms acceptable to U3O8 Corp., and (iii) economic, political and
industry market conditions will be favourable. However, such statements are
subject to risks and uncertainties that may cause actual results, performance or
developments to differ materially from those contained in the statements,
including, but not limited to: (1) that a mine will be achieved on the Laguna
Salada Project in compliance with current Chubut mining law, (2) that a mine
will be achieved on the Berlin Deposit and other exploration projects, (3) that
beneficiation test work will continue to be favourable and results from small
scale metallurgical testing can be duplicated on a larger scale, (4) the
inherent uncertainties and speculative nature associated with exploration
results, resource estimates, potential resource growth, future metallurgical
test results, changes in project parameters as plans evolve, (5) volatility of
commodity prices; (6) dependence on regulatory approvals and changes in
legislation, environmental compliance, community support and the political and
economic climate, (7) availability of future financing, and (8) exploration risk
and other factors beyond the control of U3O8 Corp. including those factors set
out in the "Risk Factors" in our Annual Information Form available on SEDAR at
www.sedar.com. Readers are cautioned that the assumptions used in the
preparation of such information, although considered reasonable at the time of
preparation, may prove to be imprecise and, as such, undue reliance should not
be placed on forward-looking statements. U3O8 Corp. assumes no obligation to
update such information, except as may be required by law.
FOR FURTHER INFORMATION PLEASE CONTACT:
U3O8 Corp.
Richard Spencer
President & CEO
(416) 868-1491
richard@u3o8corp.com
U3O8 Corp.
Nancy Chan-Palmateer
Vice President, Investor Relations
(416) 868-1491
nancy@u3o8corp.com
www.u3o8corp.com
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