Ambitious uranium developer SXR Uranium One (SXR-T, SXRFF-O) is looking to cash in on the uranium hungry U.S. market, inking an exclusivity agreement to finalize a deal to pick up some Wyoming assets from Rio Tinto (RTP-N, RIO-L).
SXR is eyeing Rio’s Sweetwater uranium mill, 65 km northwest of Rawlins in the Great Divide basin, in the south-central portion of the state. The mill is just one of four conventional uranium mills in the U.S.
The 3,000-ton-per-day, acid-leach facility processed some 2.3 million tons of ore from an adjacent (and now depleted) orebody to produce just shy of 1.3 million lbs. of U3O8 between 1981 and 1983. The facility was mothballed soon thereafter owing to a sharp decline in uranium prices.
SXR says the mill remains in excellent condition, and comes complete with a recently renewed performance-based operating licence that is valid through 2014.
The deal also covers some 77 sq. km worth of land in the basin, including the Jackpot deposit, which hosts a historic of 14.8 million tonnes running 0.195% U3O8. SXR believes the estimate is reliable. The project includes a pair of declines driven some 2,000 feet into Green Mount; the declines were plugged and the portals reclaimed in 1998.
The company is less certain of the reliability of historic resource estimates on the Phase II, Desert View and Jan properties also included in the portfolio.
In return for US$1 million, SXR has been granted up to 9 months to complete due diligence and strike a definitive deal. As it stands, the proposed acquisition would see SXR pay Rio US$65 million in cash accompanied by 6.1 million shares (worth around US$45 million). SXR would also fork over 2.5 million warrants exercisable at $9.50 per share over around 3 years, beginning in September 2007. Rio would also retain a 1% gross royalty on uranium revenue.
The deal also includes a one-time payment of up to US$0 million, based on uranium prices during the first 5 years of production.
“Today’s announcement is a significant step towards one of the key strategic goals we set for ourselves as a company in 2005 – acquiring the capacity to mine and process uranium in the United States,” said SXR chief executive Neal Froneman.
Froneman says the acquisition will allow his company to play a significant role in supplying the ever increasing demand for U3O8 in the U.S. He says the country is currently the world’s largest consumer snapping up some 26% of annual global production, most of its from outside the country.
He adds that other deposits around the mill could provide a source for additional cash flow via toll milling agreements.
SXR Uranium One is also advancing its large Dominion uranium project, near Klerksdorp, South Africa toward an early 2007 production start up. Annual production is expected to exceed 4 million lbs. U3O8 by 2011. The project boasts indicated resources of 26 million tonnes averaging 0.083% U3O8 and 1.1 gram gold per tonne in four zones.
A production decision for the Honeymoon in situ-leach uranium project in Australia is expected later this year. Indicated resource there total 2.8 million tonnes grading 0.12% U3O8, for a total of 7.3 million lbs. Capital costs are pegged at US$30.9 million.
Shares in SXR were 35, or more than 4%, better at $8.80 in late afternoon trading in Toronto following the news on July 10.
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