Ambitious uranium developer SXR Uranium One (SXR-T, SXRFF-O) has given the go-ahead at its Honeymoon in situ-leach (ISL) uranium project in South Australia
A recently completed feasibility study by Mayfield Engineering and Aker Kvaerner Australia focuses on a revised indicated resource of 1.2 million tonnes grading 0.24% U3O8, or around 2,900 contained tonnes of uranium oxide.
The new estimate includes some 29,200 metres of drilling in 236 holes on the Honeymoon deposit. The drilling more than doubled the grade of the deposit, while the amount of contained U3O8 decreased by 12% owing to the exclusion of some thin, low-grade intercepts believed not amenable to ISL mining.
Plans at Honeymoon call for annual production of around 400 tonnes of U3O8 over 6 to 7 years. The operation will entail six injection wells surrounding a central production well that would send pregnant leach solution to a plant where uranium would be recovered via solvent extraction. Recovery rates are assumed at 70%, despite laboratory tests that returned more than 90%.
SXR says the recent drilling has also improved its understanding of the deposit, which will allow for potential improvements to the well field design and recoveries.
Work has already begun on the project, and SXR has begun talks aimed at lining up contracts for long lead items and infrastructure development. Honeymoon is slated for commissioning in 17 months; production during the first year is expected to reach around 75% of capacity.
The scheme carries an estimated price tag of US$35.9 million, with another US$5.6 million earmarked for working capital. Average life-of-mine operating costs are forecast at US$14.13 per lb. The spot uranium price is currently US$48.50 per lb.
The company plans to fund the project with debt and a portion of the US$50 million recently raised via a futures-related term facility with South Africa’s Nedcor Securities. SXR’s 75% stake in Aflease Gold has been pledged as security.
The 12-month facility bears interest at a rate of 9%, and can be extended or terminated at any time. SXR retains all voting, distribution, and dividend rights associated with the Aflease shares.
The proposed project generates a net present value of US$37.7 million, at an 8% discount rate, and an after-tax internal rate of return of 40%, based on a life-of-mine uranium price of US$46.50 per lb. At that rate, the project would pay for itself in 2.9 years.
SXR recently gave the thumbs up to development of its Dominion uranium project near Klerksdorp, South Africa. The twin-decline operation is expected to produce 1,700 tonnes U3O8 annually at US$14.50 per lb., beginning in early 2007. An existing carbon-in-leach gold plant would chip in some 60,000 oz. of byproduct gold each year (T.N.M., Aug. 11-17/06). The mine is expected to operate for at least 30 years.
Dominion’s total capital budget is pegged at US$244 million. A second phase, currently being studied, could see a US$98-million expansion add another 19 years to the mine’s life.
Shares in SXR were 26, or 3.2%, better at $8.38 in late-afternoon trading in Toronto on Aug. 30. The company’s 112 million outstanding shares trade in a 52-week range of $1.11-$11.80.
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