Uranium developer Deep Yellow (ASX: DYL) says it will defer the final investment decision on its main Tumas project in Namibia for the second year running, this time until market conditions improve. Last year it cited delays in engineering design.
In a news release Tuesday, the Australian miner said it would now take a staged development approach to the project instead of a full-scale project development, beginning with early works infrastructure development and detailed engineering to ensure the project is “shovel ready.”
However, it said construction of the processing plant, which involves a majority of the $474-million (C$674-million) capital spending estimate updated on Tuesday, will be postponed.
“We have a situation where the long-term uranium market is essentially broken,” managing director John Borshoff said. “This is due to more than a decade of sector inactivity, persistently depressed uranium prices, and utility offtake contracting practices which are yet to support the development of greenfields uranium production.”
Uranium price low
The spot price of uranium was at $64.40 per lb. on Tuesday, the lowest it’s been in about 18 months, continuing a slide from the heavy metal’s highest price level in 17 years at $106 per lb. early last year.
The Trump administration’s potential to remove sanctions on uranium from Russia, where nearly half of the global uranium conversion and enrichment capacity is located, combines with plentiful supply of yellowcake for the West and more efficient artificial intelligence lowering data centre power demand, according to Trading Economics.
Deep Yellow repeated that the key element to making a decision on Tumas “was always going to be the prevailing uranium market conditions” to justify the development of what it considers to be one of the most advanced greenfield uranium projects globally.
Despite the delayed decision, the company’s shares closed Tuesday’s session 4.9% higher with a market capitalization of A$826.7 million. The stock bounced off a 52-week low on Monday after recovering from last week’s global market selloff.
22-year mine
Deep Yellow has been working on the Tumas project since 2016, and has to date delineated a resource totalling 118 million lb. of uranium oxide (U3O8) at a grade of 255 parts per million (ppm) U3O8. Within the resource is an estimated ore reserve of 79 million lb. grading 298 ppm U3O8. The reserves are expected to support a long mine life of at least 22 years, with annual uranium production of 3.6 million lb.
According to the company, the additional detailed engineering carried out in the past three months has confirmed Tumas as a project with a post-tax net present value of $577 million with an internal rate of return of 19%.
“Although the Tumas project is economic at current long-term uranium prices, these prices do not reflect or support the enormous amount of production that needs to be brought online to meet expected demand,” Borshoff said.
The latest optimization work by the company was based on a uranium price of $82.50 per lb., while uranium futures are currently trading at around $64 per lb.
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