VANCOUVER — Uranium prices have taken a beating over the past few years, but Australia-based Bannerman Resources (TSX: BAN; US-OTC: BNNLF) hasn’t lost faith in its wholly owned Etango open-pit asset, 38 km from the coastal town of Swakopmund in Namibia. In fact, the company has taken the past three years — since U3O8 prices tanked in 2012 — to optimize the project, and the future looks bright.
On Nov. 10, Bannerman released an optimized feasibility study on Etango that marks the first economic update at the project since 2012.
Uranium mineralizaton at the site occurs within a stacked sequence of leucogranitic sheets that have intruded the host Damara sequence of metasedimentary rocks. Uranium-bearing minerals are mainly uraninite and uranothorite, within granitic intrusions.
Etango is considered one of the world’s largest undeveloped uranium plays, with 303 million tonnes of proven and probable reserves at a grade of 0.0195% U3O8 for 130 million contained lb. U3O8. Indicated resources tack on another 362 million tonnes at 0.0188% U3O8, for 150 million contained lb. U3O8.
Much of the optimization in the study comes from a better understanding of Etango’s geology.
The company has kept planned plant throughput at 20,000 tonnes per day, while holding mine life steady at 15 years. But Bannerman has dropped costs across the board. The open-pit operation would cost US$793 million to develop, and produce 7.2 million lb. U3O8 annually, at cash costs of US$38 per lb.
“Etango has really withstood the test of time. Not only has it grown in terms of resources and reserves — we’ve improved the project across all facets,” CEO Len Jubber said during a conference call.
“We’ve exploited the resource in a more scientific way, reduced our cash-operating costs and boosted annual production, without compromising our mine life,” he said. “As we raise our profile over the next few months, people will acknowledge it as a viable source of uranium for years to come.”
The company dropped its cut-off grade to 0.0055% U3O8 and altered its pit design to lower Etango’s life-of-mine stripping ratio 15% to 2.78:1. The deposit outcrops at surface, so Bannerman can process within three months of mining, and a variable cut-off grade strategy will increase grades during the early years of production. Around 40 million tonnes of lower-grade ore would be stockpiled for processing near the end of Etango’s life.
The optimized study features an after-tax net present value of US$419 million at an 8% discount rate, along with a 15% internal rate of return. Bannerman’s base case assumes US$75 per lb. U3O8, and defines a “break-even” price point at US$50 per lb. (The current spot price is US$36 per lb. U3O8.)
“The optimization is based on the proven practice of radiometric scanning. We’ve spent time working with this large deposit, and the key driver is scanning the content of a haul truck — and therefore your standard mining unit is one-truck payload,” Jubber said.
“That’s unique in the mining space, since we’re able to measure to get our grade control optimized. We flowed that into the mine scheduling to fully exploit variable cut-off strategies throughout the life-of-mine. It’s an example of using proven techniques in a systematic way to de-risk project planning.”
Bannerman acknowledges that Etango will need an improved uranium market to hit production, but management notes that half of 2020 uranium demand is uncovered, while “current price levels remain insufficient to incentivize adequate project development to meet demand forecasts.”
Bannerman is at least taking a conservative approach to Etango’s development timeline. The company will continue what it calls “value engineering” through the first quarter of 2016, while monitoring its heap-leach demonstration plant. Current models assume an 86% recovery rate. Construction could begin at Etango by the second half of 2017, but would not hit full production until early 2020.
“The big question is: ‘How do we move forward with the project today?’ In simple language, our momentum depends on how uranium prices behave moving forward,” Jubber said. “We look to progress the demonstration plant over the next six months, and a focus will be to raise our profile in terms of uranium marketing and project financing. We need to move the project upward in terms of recognition, because we’re well positioned to benefit when the uranium market recovers with a real world-class project.”
Bannerman shares have traded in a 52-week range of 2.5¢ to 8.5¢, and last closed at 3.5¢ per share. The company reported cash and equivalents of $1 million at the end of September, and has 388 million shares outstanding for a $13.6-million market capitalization.
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