Peninsula Energy (ASX:PEN) has finalised the Wellfield Optimisation Study (WOS) at its Lance uranium operations in Wyoming, USA, following the Central Processing Plant Optimisation Study (NYSE:CPP) completed in March 2013.
Key takeaways from study
- NPV increased by 6% to US$323 million
- Capital expenditure to steady state production reduced by 12.5% to US$114 million
- Steady state operating cost reduced by 12% to US$30.65 per lb U3O8
- Lance all-in production cost ranked in first quartile amongst all global producers
Significantly as a result, when benchmarked against global producers and planned production, the Lance projects will rank in the lowest cost producers.
As well, the Lance Projects rank as the equal lowest production cost producer with one other project.
Executive chairman, Gus Simpson commented: "This release and the UxC report re-affirms our strong belief that the Lance Projects compare well to other uranium operations across the globe, further supporting the commercial viability of the Lance Projects at the current long term contract price of US$56/lb."
The WOS has delivered a significant reduction in wellfield capital and operating costs, together with increased wellfield production, complementing the capita cost savings delivered by the CPP study.
Notably, the WOS sees NPV increased by 6% to US$323 million, capital expenditure to steady state production down 12.5% to US$114 million, and Lance all-in production cost ranked in first quartile amongst all global producers
Both were undertaken as part of Peninsula's detailed engineering in preparation for the Lance Projects construction, and the combined effect of this optimisation process adds substantial economic value to the project.
Detailed design of the first mining unit within the Ross Production Unit, together with the results of lixiviant optimisation testing, are the catalysts that have enabled the WOS results to be achieved.
The operating parameters modelled in the WOS are the same as those applied to optimisation and feasibility studies, namely the Ross, Kendrick and Barber Production Units feeding a central processing plant with a permitted capacity up to 3 million pounds per annum.
Optimisation of lixiviant solution enables a faster rate of mineral extraction from the ore body, decreasing the overall life of mine by 4 years, whilst maintaining life of mine production at over 28 million pounds of uranium, based on existing JORC resources.
The first production unit will be at Ross with a capacity of up to 1.25 million pounds per annum followed by Kendrick, ramping up over several years to a steadystate 2.3 million pounds per annum.
As a result of the increased wellfield production capacity for each unit, the inclusion of Barber is able to be deferred until the the Ross Production Unit commences its natural decline.
The WOS adds significant value to the Lance projects and supplements the optimisation and feasibility studies which will together form the basis for securing development finance.
Permitting and Timeline
The US Nuclear Regulatory Commission (NYSE:NRC), following the conclusion of the public review period, has now notified the company of the issuance date of the final Supplemental Environmental Impact Statement (SEIS) and the Source Material Licence (SML) for the Ross permit area.
Respectively the dates are now 31 January 2014 and 3 March 2014.
This now provides greater certainty for the company's goal of producing U3O8 concentrate in 2014. Peninsula has already obtained the requisite permits and licenses required to commence site construction activities which now enables the ordering of long lead equipment items for the CPP.
Project Development Funding
The company said it will be receiving project finance proposals from multiple groups in October 2013. The financial groups that have expressed interest in providing funding for the Lance Projects include international banks and investment funds.
Today' study results are timely, further improving project returns and demonstrating that the Lance Projects, as among the lowest planned or current producers of uranium, are even more likely to attract financing from major banks or other groups currently in discussions.
With steady state operating cost reduced by 12% to US$30.65 per lb U3O8 against a current long term contract price of US$56/lb, there is a significant profit margin for Peninsula.
With a recent pull-back in uranium sector valuations, Peninsula has not been spared. However, with an aggressive production timeline, there are a number of significant catalysts for re-rating ahead for Peninsula.
At this stage, we see nothing to alter our earlier estimate of valuation of Peninsula of $0.08.