Uranium producer Denison Mines (DML-T, DNN-X) will kick-off production at its Arizona 1 uranium deposit in north-central Arizona in the first quarter of next year.
Denison owns 100% of Arizona 1, about 72 km from Fredonia and 506 km from the company’s White Mesa processing facility near Blanding, Utah.
The fully permitted deposit is one of several of the Toronto-based company’s breccia-type deposits in Arizona, which include Pinenut, EZ-1, EZ-2 and Canyon.
The deposits will be developed sequentially over the years ahead and are forecast to produce more than 4.7 million pounds of U3O8.
Resources in the current mine plan for Arizona 1 are 72,121 tons at an average grade of 0.66% U308 (after providing for 10% mining dilution at zero grade). The deposit remains open and unexplored at depth. Exploration to increase resources and extend mine life will be carried out from underground.
The mine will be an underground operation utilizing the existing 382-metre-deep, two-compartment shaft. The company plans to use long hole and shrinkage stoping methods at a mining rate of 335 tons per day for four days per week, employing 32 workers.
Ore will be hauled by truck to the White Mesa mill. The ore will be batch treated in the mill as soon as 17,000 tonnes are available for processing. U3O8 recovery is expected to be about 95%.
Production is anticipated to total roughly 857,000 pounds U3O8, of which 156,000 pounds will be available for sale in 2010, 461,000 pounds in 2011 and 240,000 pounds in 2012.
Capital development costs to bring the Arizona 1 deposit into production are budgeted at US$2.3 million. These costs are low because so much of the infrastructure is already in place, including the mine shaft, head frame and hoist, as well as portion of the underground development work, which was completed before 2008.
The capital expenditure (US$2.3 million) will be used to finish underground development, build an ore pad at surface and to purchase US$0.4 million of underground equipment.
Cash operating costs are expected to total $30.50 per pound of U3O8 sold. That is broken down into $13.52 per pound for mining and ore haulage, $10.88 per pound for milling, $5.36 per pound for overhead and sales and US74¢ per pound for reclamation.
At spot and long-term U3O8 prices of $53 and $65 per pound respectively, revenue is expected to reach $50.8 million, net cash flow $22.2 million and net present value (at a 10% discount rate) $17.6 million.
In addition to Arizona 1, Denison has assets in Canada’s Athabasca Basin and the southwestern United States including Colorado, Utah, and Arizona.
The company also has ownership interests in two of the four conventional uranium mills in North America and it has an exploration and development portfolio in the U.S., Canada, Mongolia and Zambia.
At presstime in Toronto Denison was trading at $1.60 per share. Over the last year the company has traded in a range of 69¢-$2.90 per share. Denison has 339.7 million shares outstanding.
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