UEX Receives Positive Horseshoe and Raven Preliminary Assessment Reporting an EBIT of $394 Million and a Discounted NPV (5%) of $267 Million at Current Market Price for U(3)O(8)
VANCOUVER, Feb. 23 /CNW/ --
VANCOUVER, Feb. 23 /CNW/ - UEX Corporation ('UEX') (TSX: UEX) is pleased
to announce that it has received the results of the Preliminary
Assessment Technical Report (the 'PA' or the 'Report') on the Horseshoe
and Raven deposits ('Horseshoe and Raven') prepared by SRK Consulting
(Canada) Inc. of Vancouver, BC. The PA will be filed on SEDAR at www.sedar.com and posted on UEX's website at www.uex-corporation.com.
The National Instrument 43-101 ('N.I. 43-101') compliant Report finds
the economics of mining the 100%-owned Horseshoe and Raven deposits to
be very robust and recommends the project be advanced to a preliminary
feasibility level, and that this next phase of study also include the
100%-owned West Bear Deposit.
The PA assumes that uranium processing and tailings management will be
conducted through a toll arrangement at one of the two nearby mills,
one operated by Cameco Corporation ('Cameco') and the other by AREVA
Resources Canada Inc. As Cameco's Rabbit Lake mill is located within 4
km of Horseshoe and Raven and has excess capacity, the Report has
focused on this facility.
The PA was conducted utilizing cut-off grades calculated on the basis of
$60 (US) per pound ('/lb') of U(3)O(8 )in the mine optimization plan under which 16.6 million pounds ('Mlbs')
of uranium resources would be extracted over a seven-year mine life
(the 'Base Case'). References to currencies herein are in Canadian dollars unless
otherwise stated.
Sensitivity Analysis
Under the Base Case and at $70 (US) /lb of U(3)O(8) the Horseshoe and Raven deposits would have Earnings Before Interest
and Taxes ('EBIT') of $394 million, a pre-tax Net Present Value ('NPV') at a 5% discount rate of $267 million and a pre-tax Internal Rate of Return ('IRR') of 55%. The Report presents three economic scenarios utilizing the Base Case
and using uranium prices ranging from $60 (US) to $80 (US) /lb of U(3)O(8 )as shown in the following price sensitivity table:
Uranium Price Sensitivity (Base Case)
Pre-Tax
Price U(3)O(8)
EBIT NPV(5%) IRR
($M) ($M) (%)
$60 (US) /lb 246 163 42
$70 (US) /lb 394 267 55
$80 (US) /lb 542 371 66
The current spot price of uranium is $68.75 (US) /lb of U(3)O(8) and the long-term price is $73.00 (US) /lb of U(3)O(8 )as quoted by Ux Consulting Company, LLC.
The Report shows that the NPV is most sensitive to uranium price and
grade. Under the Base Case an increase in the price of uranium of 20%
[for example, from $70(US)/ lb to $84(US) /lb] will result in an
increase in NPV(5%) of over 55% ($267 million to $413 million). A 20% increase in grade
will produce an identical increase in NPV. Conversely a drop in either
uranium price or grade will reduce the NPV. The PA also concludes that
the economics are moderately sensitive to operating costs and are not
particularly sensitive to capital costs.
A detailed Base Case sensitivity analysis using EBIT NPV(5%) is provided in the Report as follows:
Sensitivity Analysis Results (using the Base Case mine plan)
EBIT NPV(5%) (M$)
Price U(3)O(8 ) Variable
-20% 0% 20%
Variance Variance Variance
Capital Cost 187 163 138
Operating Cost 232 163 94
$60 (US) /lb
Metal Price 38 163 288
Grade 38 163 288
Capital Cost 291 267 242
Operating Cost 336 267 198
$70 (US) /lb
Metal Price 121 267 413
Grade 121 267 413
Capital Cost 396 371 346
Operating Cost 440 371 302
$80 (US) /lb
Metal Price 205 371 537
Grade 205 371 537
'We are extremely pleased with the preliminary economics associated with
the development of the Horseshoe and Raven deposits, using relatively
conservative uranium prices' said Graham Thody, President and CEO of UEX, who further noted that 'as the price of uranium increases, our mine design will change and
provide the opportunity to extract a significantly higher proportion of
the total resources at the deposits.'
In addition to the Base Case sensitivity tables shown above, which are
estimated using $60 (US) /lb U(3)O(8) in the cut-off grade calculation, the PA also contains a simple,
preliminary exercise which was conducted to estimate the potential
increase in mineable tonnes and NPV(0%) if lower cut-off grades established by a price of $80 (US) /lb U(3)O(8) were used in the mine optimization plan and the economic model. This
exercise showed an increase to 23.6 Mlbs of potentially mineable U(3)O(8) together with a potential increase in the EBIT NPV(0%) from $542 million (Base Case) to approximately $620 million. This expanded tonnage contains a small proportion of Inferred Mineral
Resources which are considered speculative and have no guarantee of
being converted into Measured or Indicated Mineral Resources.
Project Opportunities
The Hidden Bay project has many opportunities for improvement of
economics including:
-- Expansion of mineable tonnes due to an increase in U(3)O(8)
price or a reduction in operating costs which would result in a
lower cut-off grade and thus the conversion of a higher
proportion of the existing resource base to reserves;
-- Expansion through discovery of additional resources and
potential inclusion of Raven underground mineralization in the
mine plan;
-- The potential use of the Raven pit as a regional toll tailings
management site and potential use of tailings as underground
backfill thereby further increasing regional tailings capacity;
and
-- The inclusion of UEX's 100%-owned West Bear Deposit in the
overall project mine plan and economics.
The PA notes there is a shortage of tailings storage volume in the
region and the use of the mined-out Raven pit could provide a minimum
of four to five million cubic metres of tailings storage and
potentially much more. The Report assumes a tailings deposition cost of
$35 per tonne milled by using Cameco's facilities. The use of the Raven
pit to store tailings, and elimination of the toll tailings deposition
fee, could significantly reduce the tailings deposition costs,
potentially up to $50 million over the life of the mine. These savings
could be further increased if the improved economics allowed for use of
a lower cut-off grade, which in turn would allow economic extraction of
a significantly larger open pit resource.
Mine Plan
Horseshoe and Raven are proposed to be developed by conventional ramp
access underground methods and open pit mining methods, respectively.
Total blended operating costs, including mining, trucking, ground
support, ventilation, toll milling, general and administrative
expenses, water treatment and tailings management, based on late 2010
figures, are estimated at $201 per tonne.
Under the Base Case (cut-off grade calculated using $60 (US) /lb U(3)O(8)) scenario, mining of the deposits is proposed to produce a total of
2.49 million tonnes of mill feed and 15.0 million tonnes of waste over
a seven-year mine operating life at a cut-off grade of 0.15% U(3)O(8) and a diluted average mining grade of 0.30% U(3)O(8) containing 16.6 Mlbs of U(3)O(8). The preliminary $80 (US) /lb U(3)O(8) mine optimization case is estimated to a lower cut-off grade of 0.12% U(3)O(8) and a diluted average mining grade of 0.21% U(3)O(8), which would potentially allow profitable mining and processing of
mineralization containing 23.6 Mlbs U(3)O(8).
Capital Requirements
Capital and owner's costs for pre-production, inclusive of a 25%
contingency, are estimated to be approximately $88 million and $28
million, respectively. Owner's costs include environmental studies and
permitting, engineering, design, resource upgrade and data collection.
Sustaining capital costs and mine closure costs, inclusive of a
contingency, are estimated at $29 million. In all three scenarios the
capital payback occurs within a one-year period from the commencement
of production.
Working capital is anticipated to be the equivalent of four months
operating costs in the first production year, or $20.4 million. The
working capital costs will be recovered in the final production year.
Metallurgy
Metallurgical testing was completed at SGS Canada Inc.'s Lakefield
Research facility in Lakefield, Ontario under the direction of Melis
Engineering Ltd. Based on supporting metallurgical test work, process
uranium recoveries are estimated to be 95% with a noted absence of
deleterious elements.
Recommendations
The PA finds the economics of mining the Horseshoe and Raven deposits to
be very robust and recommends the project be advanced to a preliminary
feasibility level, which would include the West Bear Deposit.
The PA also recommends that UEX conduct an infill drilling program at
the Raven Deposit to upgrade Inferred resources to Indicated resources.
This is particularly important as the price of U(3)O(8) increases, thereby allowing for the lower grade mineralization, some of
which is in the Inferred category, to be included in the mine plan. The
Report also recommends that further expansion drilling be conducted at
the Raven Deposit where it appears the resource can be increased. UEX
is currently planning a summer drilling program in 2011 to follow up on
these recommendations.
In furtherance of the recommended Preliminary Feasibility Study ('PFS'),
UEX intends to conduct additional field work and information gathering
for geotechnical, environmental, metallurgical and hydrological
studies. The PA further recommends that the project description be
compiled and submitted to the government for review and advisement of
specific guideline requirements. It is anticipated that the PFS and
associated information gathering will cost up to $1.5 million.
The technical information in this news release has been compiled by R.
Sierd Eriks, P.Geo., UEX's Vice President of Exploration, and reviewed
by Gordon Doerksen, P.Eng., of SRK Consulting (Canada) Inc., the PA
Project Manager, who are both Qualified Persons as defined by N.I.
43-101.
Cautionary Statement
The PA is preliminary in nature and includes a small proportion of
Inferred Mineral Resources that are considered too speculative
geologically to have the economic considerations applied to them that
would enable them to be categorized as Mineral Reserves. Consequently,
there is no certainty that the PA will be realized.
About Hidden Bay
The Horseshoe and Raven deposits are located in the central portion of
UEX's 100%-owned Hidden Bay Project which also contains the West Bear
Deposit. The combined N.I. 43-101 compliant resource estimate at a
0.05% U(3)O(8) cut-off for the Horseshoe, Raven and West Bear deposits is:
-- 10.37 million tonnes containing 36.623 million pounds of U(3)O
(8) with an average grade of 0.160% U(3)O(8) in the Indicated
Mineral Resource category; and
-- 1.11 million tonnes containing 2.715 million pounds of U(3)O(8)
with an average grade of 0.111% U(3)O(8) in the Inferred
Mineral Resource category.
Note that Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability.
A PFS for the West Bear Deposit upgraded the West Bear resource estimate
to a Probable Mineral Reserve estimate of 72,347 tonnes containing
1,492,261 pounds of U(3)O(8) grading 0.94% U(3)O(8) at a cut-off of 0.18% U(3)O(8), which represents 96% of the Mineral Resource. The high conversion rate
reflects the near-surface nature of the West Bear mineralization which
is amenable to open cast mining in a shallow pit. Metallurgical testing
resulted in an estimated overall uranium recovery of 95%.
About UEX
UEX is a Canadian uranium exploration and development company actively
involved in 18 uranium projects, including six that are 100% owned and
operated by UEX, one joint venture with AREVA that is operated by UEX,
as well as ten joint-ventured with AREVA and one under option from JCU
(Canada) Exploration Company, Limited, which are operated by AREVA. The
18 projects, totaling 338,972 hectares (837,618 acres), are located in
the eastern, western and northern perimeters of the Athabasca Basin,
the world's richest uranium belt, which accounts for approximately 22%
of the global primary uranium production. UEX is currently developing
several uranium deposits in the Athabasca Basin which include the
Kianna, Anne, Colette and 58B deposits at its 49%-owned Shea Creek
Project, a joint venture with AREVA in the western Athabasca Basin, and
the Horseshoe, Raven and West Bear deposits located at its 100%-owned
Hidden Bay Project in the eastern Athabasca Basin. With a cash position
of approximately $16.8 million at December 31, 2010, UEX is
well-financed to carry out its 2011 exploration and development
programs, budgeted at approximately $9.6 million.
Forward-Looking Information
This news release may contain statements that constitute
'forward-looking information' for the purposes of Canadian securities
laws. Such statements are based on UEX's current expectations,
estimates, forecasts and projections. Such forward-looking information
includes statements regarding UEX's plans for the Hidden Bay Project,
resource estimates, outlook for our future operations, plans and timing
for exploration activities, and other expectations, intention and plans
that are not historical fact. The words 'estimates', 'projects',
'expects', 'intends', 'believes', 'plans', or their negatives or other
comparable words and phrases are intended to identify forward-looking
information. Such forward-looking information is based on certain
factors and assumptions and is subject to risks, uncertainties and
other factors that could cause actual results to differ materially from
future results expressed or implied by such forward-looking
information. Important factors that could cause actual results to
differ materially from UEX's expectations include uncertainties
relating to interpretation of drill results and geology, additional
drilling results, continuity and grade of deposits, public acceptance
of uranium as an energy source, fluctuations in uranium prices and
currency exchange rates, changes in environmental and other laws
affecting uranium exploration and mining, and other risks and
uncertainties disclosed in UEX's Annual Information Form and other
filings with the applicable Canadian securities commissions on SEDAR.
Many of these factors are beyond the control of UEX. Consequently, all
forward-looking information contained in this news release is qualified
by this cautionary statement and there can be no assurance that actual
results or developments anticipated by UEX will be realized. For the
reasons set forth above, investors should not place undue reliance on
such forward-looking information. Except as required by applicable law,
UEX disclaims any intention or obligation to update or revise
forward-looking information, whether as a result of new information,
future events or otherwise.
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Graham C. Thody
President & CEO
(604) 669-2349