Uranium Energy sketches out uranium mine in AZ

Uranium Energy (NYSE-MKT: UEC) acquired the Anderson uranium project in May 2011 through an all-stock merger with Concentric Energy valued at US$4 million.

UEC has now completed a preliminary economic assessment (PEA) of the project, 121 km northwest of Phoenix, Ariz., that maps out 14 years producing 16 million lb. uranium oxide (U3O8) — or just over 1 million lb. U3O8 per year. 

Capex for the project is estimated at US$8 million for pre-production costs and US$43.9 million for initial capital, with total life-of-mine capital adding up to US$139.2 million. In the PEA life-of-mine direct-operating costs are an estimated US$30.68 per contained lb. U3O8.

Anderson’s after-tax net present value (NPV) at a 10% discount rate is US$76.4 million with a 42% post-tax internal rate of return (IRR), based on an optimistic US$60 per lb. U3O8. Those numbers rise to a US$101.1-million NPV and 50% IRR at US$65 per lb. U3O8. (The current spot price is US$34 per lb.)

Metallurgical test work has shown that uranium recovery could use conventional heap-leach methods. This would produce a loaded resin for shipping to the White Mesa mill near Blanding, Utah, which is owned by Energy Fuels (TSX: EFR).

The PEA is based on a mine design that includes open-pit mining and a combination of highwall and room-and-pillar underground mining. The deposit occurs at surface in the north and reaches depths of more than 1,800 feet (550 metres) south, and parts of the deposit are amenable to open-pit mining, while others are suited for underground methods, the company explains.

In addition to Anderson, UEC owns assets in southern Texas along the 300-mile South Texas uranium belt, including the operating Palangana in-situ recovery (ISR) mine; the permitted Goliad ISR project; and the development-stage Burke Hollow ISR project; as well as the fully licensed Hobson processing facility, which is central to all of the company’s Texas projects.  

Rob Chang of Cantor Fitzgerald says the project “demonstrates that UEC does have viable uranium projects in the asset portfolio to go along with the bulk of its in-situ recovery assets located in South Texas.”

David Talbot and Aaron Salz of Dundee Capital Markets increased their target price on the stock from US$1.80 per share to US$2 per share, pointing out that, among other things, UEC acquired Anderson inexpensively.

“This pipeline project deviates from a core competency of ISR projects,” Talbot and Salz  penned in a research note after releasing the PEA on Sept. 16. “But if there’s one thing UEC can do, it’s pick up good projects on the cheap. It bought Anderson in May 2011, as Fukushima uncertainty gripped the industry.”

The analysts say that investors should buy the stock. “While U3O8 prices are depressed, UEC moves forward, economically developing its pipeline and preparing projects, for the [in our view] inevitable upswing in uranium prices.”

Over the last year UEC’s shares have traded within a range of US94¢ to US$2.30. At press time they changed hands at US$1.41 per share.