Deep Value, Long Only, Contrarian
Contributor Since 2011
Peter Epstein runs a company-sponsored advertising website called Epstein Research. It focuses mostly on small cap natural resource companies such as (lithium, cobalt, copper, gold, silver, uranium). He has an MBA from a top-rated business school, New York University (NYU); Stern School of Business.
He publishes investment articles & written CEO interviews, on a number of [Metals & Mining] / [Investment] websites.
On Twitter: @peterepstein2 Email: firstname.lastname@example.org
The following article appeared online at The Northern Miner. Blue Sky Uranium gave me permission to reprint it. Blue Sky is an advertiser on Epstein Research. See disclosures at the bottom of the page.
Blue Sky Uranium (TSXV: BSK; US-OTC: BKUCF) has unveiled a Preliminary Economic Assessment (“PEA“) for its Ivana uranium-vanadium deposit at its wholly owned Amarillo Grande project in Rio Negro, Argentina, highlighted by low operating costs.
“For the last three months, we’ve been busy finalizing our PEA,” Blue Sky President & CEO Niko Cacos says in an interview with The Northern Miner. “It’s a very positive PEA. It shows that the Ivana deposit is economic in today’s environment.”
According to the study, the project would produce 1.35 million lb. uranium oxide per year over a 13-year mine life at US$18.27 per lb. uranium oxide all-in sustaining costs (AISCs). The project would require US$128.05 million in pre-production capital and US$35.46 million in life-of-mine sustaining capital. It has a US$135.2-million, after-tax net present value (NPV) at an 8% discount rate, and a 29.3% after-tax Internal Rate of Return (IRR) at US$50 per lb. uranium oxide and US$15 per lb. vanadium oxide. The project would achieve after-tax payback in 2.4 years.
“At US$18 AISCs, even if we sold it at spot, we’d be making money,” Cacos says. “So if the uranium price starts to move up, this is going to be very profitable.”
At US$60 per lb. uranium oxide, the project’s after-tax NPV improves to US$202.3 million at an 8% discount rate. The after-tax IRR jumps to 37.3%.
“The goal was, since the beginning, trying to be in the lower quartile of operating costs, and we achieve it very well,” Blue Sky vice-president of exploration & development Guillermo Pensado says. “The metallurgical process looks very simple and common, as well.”
The PEA proposes an open pit that would extend to 30 metres depth. It would be 3 km long, with widths ranging from 400 metres to 1 km. The Company would mine 13,000 tonnes per day with two excavators, a front-end loader and six 31-tonne articulated trucks. The materials are contained in unconsolidated gravels & sand, so the Company would not need drill or blast operations. Recovery rates stand at 84.6% for uranium and 52.5% for vanadium.
“You just use an excavator, and then you do a scrubbing of the pebbles to remove the large, un-mineralized ones,” Cacos says. “And then you put it on the leach pad. You don’t get a simpler process than that.”
Mineralization occurs at Ivana within 25 metres of surface in two stacked zones. It is the southernmost of three target areas at Amarillo Grande.
“What’s exciting now is the upside,” Cacos says. “The potential expansion from there is this 145 km strike length zone, which we know is mineralized. It’s got potential to be 100 million lb. plus.”
Pensado adds that “our goal was: let’s try and show in this sector that we have something that could be economic. Now that we understand the geological model, we understand how to explore the other sectors.”
He goes on to say that with Blue Sky’s greater understanding of the area’s geology, it needs to retrace its steps and re-examine previously overlooked areas of the property.
The study uses an updated resource estimate for the project that Blue Sky tabled in late 2018. It includes 61 reverse-circulation holes totaling 1,043 metres the Company drilled in September 2018. In total, the Company has drilled 7,600 metres at Ivana to an average 15 metres below surface.
“You say, well, 7,600 metres — that doesn’t look like much drilling,” Pensado says, “but, in fact, it’s 488 holes, because they are very shallow. And due to the spacing that we have, most of them could be converted into the indicated category.”
The updated resource outlined a 17% increase in total tonnes, as well as a 19% increase in contained uranium oxide and a 13% increase in contained vanadium oxide. The updated resource totals 28 million Inferred tonnes grading 0.037% uranium oxide and 0.019% vanadium oxide for 22.7 million lb. uranium oxide and 11.5 million lb. vanadium oxide.
The company will spend the next six months drilling and expanding its resource area. It aims to spend between $2 million and $3 million, drilling 8,000 metres. Towards year-end, it will begin work on a prefeasibility study for the project.
“To drill there is very low cost,” Pensado says. “It’s a flat area. We don’t need to build roads or anything. We are in the bottom of the basin, with no connection to other basins.”
“This area is less densely populated than Siberia,” Cacos adds.
Even so, the Company has a paved road going all the way to its project, a railway 30 km away, a deepwater port within 100 km, and gas and electricity at site. Cacos says the Argentine government supports uranium mining, and makes and exports small, portable nuclear reactors.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.