While many uranium juniors are spinning wheels in over-regulated mining jurisdictions, Tournigan Energy has moved from exploration to prefeasibility in just a few short years in Slovakia. The company’s Kuriskova project has inferred and indicated resources, encouraging initial metallurgy and ongoing drilling continues to prove up high grade mineralization. Tournigan’s President and CEO Dorian L. (Dusty) Nicol has a B.Sc. in geology from M.I.T. and a Master’s Degree in Geology from Indiana University.
Resource Intelligence: We’ve been watching your company for a long time. Compared to many other uranium explorers you’ve really stuck it out, explored, proved up a resource and are clearly moving toward feasibility. And yet sentiment for the uranium sector has cooled somewhat since it’s wild ride a few years ago. Do you think the sentiment is going to come back soon?
Dusty Nicol: Yes, and analysts point to a few reasons for this: A doubling of nuclear reactors before 2030, a diminishing amount of secondary supply from nuclear warheads and other sources, and few sources of new primary supply. So the mid-term and long-term outlook for uranium are very good. The debate is exactly when that kicks-in to take the spot price of uranium up again. Many say later this year.
RI: Let’s talk about your flagship project, Kuriskova. You’ve got an excellent resource here with quite high grade uranium mineralization. How many pounds have you proved up so far?
DN: Our last resource estimate includes about 15 million pounds uranium oxide indicated at 0.558% U3O8 and about 18 million pounds inferred. We’ve been very pleased with the high-grade results of our 2009 drilling. One intercept hit 4.5 metres of 0.977% U3O8.
We’ve also announced the results of four exploration drill holes which intersected high grade in what appears to be a new zone of mineralization adjacent to, but at shallower depth, than the Kuriskova Main Zone.
RI: You’ve already got a sense of what this mine will look like. Can you describe it’s shape and size?
DN: The high grade Main zone is a 45 to 65 degree vertical plane with average widths of 2 to 8 metres. It runs from 150 metres to 650 metres in depth with a 650 metre strike. Additionally there is lower grade material in the hanging wall where mineralization is associated with stockwork veining in andesite flows. The deposit is open at depth and along strike.
We’re looking at an underhand cut-and-fill mining scenario at about 800 tonnes per day. This is the advantage of having such a high-grade deposit: Small footprint, lower production rate of 800 tonnes per day to yield 21 million pounds over the 15 year production life of the mine.
RI: How much will you generate in cash flow?
DN: Modeling at base case metals prices with U3O8 at $65 and molybdenum at $12.50 with 90% recoveries indicates that the project could generate a cumulative before-tax cash flow of $378 million, a 35.8% IRR and a net present value of $135M discounted at 12%.
RI: What is the cost structure of building a mine through to reclamation?
DN: According to the recent preliminary Assessment, preproduction costs for the project are estimated at $168M, with a 30 percent contingency. Of the preproduction costs, $24 million of contingency and $7.3 million of working capital are also included. Life-of-mine sustaining capital is estimated to be $60.7M with $10M estimated for reclamation at closure.
RI: How sensitive is this deposit to changes in the price of uranium?
DN: A key advantage to having such high grades is the ability to maintain robust economics even at lower commodity prices. This deposit remains viable even at ranges down to about $50/lb U3O8. If one was to use a lower price range, a higher U cut-off grade would be used and an entirely different life of mine production plan would be used to remain economically feasible.
RI: Let’s talk about your forecast IRR of 35%. This basically means that you could increase your discount rate up to 35% and still have a positive net asset value.
DN: In our initial preliminary assessment, the operating costs in the first five years of underground mining were US$17 per pound of uranium. Over the 15 year mine-life, this averages $32 per pound. However, we believe, with the high grade infill drill results we’ve received we will significantly extend that five-year $17-per-pound term. And that will also bring down the life-of-mine average cost per pound. This will also significantly improve the IRR and NPV in our upcoming prefeasibility study.
RI: Well, investors should also know that in your last study, you actually did use a very high discount rate of 12% and still come up with a significant net asset value of $135 million or over $1.10 per share. Why such a high discount rate—don’t we normally use something between 5 and 10%?
DN: We wanted to maintain higher level of confidence in our preliminary assessment and stay on the conservative side. Therefore, in the PA our capital costs have a 30 percent contingency built in and the higher discount was used by our independent consultant.
RI: What are the prospects for growing this deposit?
DN: In addition to targets immediately adjacent to the defined resource, recently completed ground radiometric and radon gas-in-soil surveys indicate the presence of anomalies extending up to 300 metres northwest and 200 metres southeast of the currently defined resource. Further interpretation of these new survey results may lead to identification of drill targets with potential to increase the size of the Kuriskova deposit or indicate the presence of satellite deposits.
RI: What is the objective of the current drill program?
DN: We want to continue expanding the resource, to upgrade a significant portion of the inferred resource to the indicated category, to increase the overall grade of the deposit and to provide subsurface geotechnical and hydro-geological data to be used for engineering design. The resulting updated resource estimate will provide the basis for the reserve estimate in the Kuriskova Project prefeasibility study. The 17 holes (excluding two abandoned holes) drilled in 2009 total 5,298 metres of a planned 15,000 metre program to provide sufficient data for the prefeasibility study.
RI: What is the size of your land package in Slovakia?
DN: We hold 150 sq. km of the what we know to be the most prospective uranium licence along a 60 km uranium/molybdenum belt along the Carpathian mountains.
RI: So with all this exploration at an advanced stage, when do you expect to be through the feasibility stage?
DN: By 2012.
RI: There was some talk about concern from special interest groups about uranium mining here. Has that been resolved?
DN: Whenever you have industry around communities there are special interest groups who want to voice their opinions. We’ve found Slovakia, a member of the EU to operate much like most developed nations in this regard. There’s a development and environmental process to follow, which includes public consultation. We’ve operated in the country for more than 6 years and have recently renewed our 4 year exploration licences, so we’re pleased with our progress in Slovakia and we’re optimistic for the future.
RI: Slovakia has nuclear reactors. Is this a potential market for you?
DN: Slovakia has four operating nuclear reactors producing approximately 50% of its current energy needs. Currently these reactors require 312 tonnes of uranium per year. About 30 percent of the annual production of Kuriskova—at its current resource level—could accommodate this for 15 years. Obviously this is worth a consideration for a government that is expanding its nuclear energy capacity.
RI: Let’s talk about cash position. You just did a deal with SA Resources to divest of some Irish holdings. What did you gain from that? What do you have in the bank?
DN: Since I became CEO in the summer of 2007, we set a goal to focus on our Slovakian uranium assets. Since that time, we’ve successfully sold off all of our non-core assets and trimmed our company size, overhead and internal burn rate significantly. Most significantly, we’ve sold the Curraghinalt, gold deposit in Northern Ireland to SA Resources for $5.5 million cash. As of December 31, 2009, we’re sitting at $5.5 million in the bank, after completing over 5,000 metres of infill and step out drilling in 2009, so we’re in a very solid position financially.
RI: How should investors evaluate Tournigan Energy?
DN: They should consider the size and grade of Kuriskova and the robust economics we continue to shed light upon as we move towards prefeasibility. We have substantial cash to take the company to the next stage with a trimmed down team of highly specialized individuals who are ideally suited for the tasks ahead. Investors should also understand that Slovakia is a sophisticated EU-member nation with world-leading nuclear energy program already in place, and as such this is not only an outstanding place to do business but also a potential market for any final product from Kuriskova.
RI: What aspects and members of your team do you think are inspiring investors?
DN: We’ve trimmed our team down to the essentials and have reduced our internal burn-rate significantly. After my appointment, I was very pleased to enlist the services of Al Kuestermeyer, our VP Engineering and Environmental. Al has 35 years of operational and consulting experience in the minerals industry with extensive uranium experience and has worked on over 30 uranium projects and mines around the world. Our country Director and geologist in Slovakia, Dr. Boris Bartalsky has remained with Tournigan since we started operating in Slovakia in 2004. Boris has been a key component in our ongoing relationships with the local communities and governments at all levels in Slovakia.
- New resource estimate, with significantly more uranium oxide in the indicated category at the higher grade: Q1-2010
- A completed Feasibility study by 2012
Disclosure: No Positions