VANCOUVER — Rio Tinto’s (RTP-N, RIO-L) Rossing mine in Namibia already produces roughly 8% of the world’s annual supply of uranium. Now the country looks set to increase its presence on the uranium market further with a new resource from Extract Resources’ (EXT-T, EXRLF-O) Rossing South deposit and expansion plans at Paladin Energy’s (PDN-T, PALAF-O) Langer Heinrich mine next door.
Extract’s Rossing South saw its first drill holes in early 2008 and an initial resource estimate one year later. Now an updated resource estimate for Zone 1 has increased contained U3O8 by 34%.
Zone 1 now hosts 21 million indicated tonnes grading 0.0527% U3O8, as well as 126 million inferred tonnes averaging 0.0436% U3O8. Total contained uranium oxide comes in at 145 million lbs.
On news of the new resource, Extract’s share price lost 35¢ to close at $6.05. The company has a 52-week trading range of 85¢-$6.75 and 213 million shares outstanding.
An initial resource estimate for Zone 2 is expected in August. Both zones host near-surface, granite-hosted uranium amenable to open-pit mining. Extract is currently advancing a feasibility study to quantify the potential of Rossing South, which is developing into one of the largest uranium deposits in the world.
Rossing South sits on the southern border of Rio Tinto’s Rossing mine, which has seen 30 years of production based on reserves averaging 0.03% U3O8. From airborne magnetics data, it is apparent that Rossing and Rossing South share the same stratigraphy; specifically, the mineralization at Rossing South is hosted in folded extensions of the stratigraphy hosting the Rossing deposit alaskites. Overlying sands and gravels obscure both deposits.
Both zones at Rossing South have been traced along roughly 2.5 km of strike, across 180 metres width, and to 300 metres depth.
Rio Tinto, which owns 69% of the Rossing mine, owns roughly 15% of Extract. In late 2008, Extract and Kalahari Minerals (KLA-V, KAH-L) called off merger plans over concerns Rio would have too much power in the merged entity without having to pay a premium for it. Rio also owns roughly 15% of Kalahari.
Langer Heinrich
And at Paladin’s Langer Heinrich mine, another open-pit, granite-hosted uranium mine in Namiba just 30 km east of Rossing and Rossing South, the pieces are in place for a third expansion. Paladin just approved the third-phase expansion based on a new plan that achieves 87% of the planned output increase with only 41% of the original cost.
The initial third-phase expansion plan targeted a production rate of 6 million lbs. U3O8 annually; the expansion to reach that target was expected to cost US$174 million, as significant upgrades to both the power and water supply infrastructures were necessary.
Instead of moving ahead with that proposal, Paladin developed a revised expansion plan based on making maximum use of the current water allowances. Eliminating the need to upgrade water supply levels reduced cost and shortened the expansion timeline considerably. In addition, in the new plan, the current grid and onsite generator capacities are sufficient so an expansion of the power supply facilities is also not needed.
With the new plan, the mine should reach annual output of 5.2 million lbs. U3O8, or 87% of the original output increase, with a capital investment of only US$71 million. The company should be able to pay back its investment in 15 months.
The investment will pay for key upgrades across the processing plant: the expansion will add a complete second feed line, an additional leach tank, two new counter-current decantation units, and increased adsorption and elution capacity.
Paladin says the procurement and delivery of a new scrubber is the biggest challenge in terms of advancing the expansion; it is expected to take 12 months. The company is also updating the existing environmental impact assessment and expects to have the new version approved by the end of September. Overall, the company expects the expansion to take 15 months, including commissioning.
As of the end of March, Paladin had A$149 million in its treasury. The company is also commissioning its new Kayelekera uranium mine in northern Malawi, which it expects will reach full production of 3.3 million lbs. U3O8 annually by early 2010.
On news of the Langer mine expansion plans, the company’s share price gained 5¢ to reach $4.55. Paladin has a 52-week trading range of $1.30-6.64 and 624 million shares outstanding.
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