The vanadium advantage in U3O8’s pathway to uranium production
U3O8 Corp. (TSX: UWE | OTCQB: UWEFF) is a Canadian exploration company and a green resources company that mainly focuses on discovering and developing uranium and other mineral deposits that contain battery commodities. The company seeks out potential low-cost projects, particularly in South America (Argentina, Columbia, and Guyana). Their flagship project is Laguna Salada located in Argentina, which aims to be able to produce uranium and vanadium by ~2021.
Laguna Salada Project – Argentina
Laguna Salada is U3O8 Corp.’s number 1 priority uranium-vanadium deposit. The Company’s 2014 Preliminary Economic Assessment (PEA) showed that uranium could be produced at a cash cost of US$22 per pound of uranium – one of the lower-cost potential producers in the uranium industry. It is the only uranium deposit in Argentina to have a resource estimate made in compliance with NI 43-101. Most notably the Laguna Salada CapEx estimate to get into production is a low US$136 million.
Berlin Project – Colombia
The 2013 Preliminary Economic Assessment (PEA) on the Berlin Project estimates that the deposit would generate revenues of US$2.8 billion over the 15-year mine life. Estimated revenue from by-products alone would be US$1.8 billion, which would cover the estimated operating cost of US$1.6 billion. In other words, estimated by-product revenue completely pay for the mining and extraction of uranium – and so uranium can be considered to be extracted at no cost, excluding initial CapEx.
Kurupung Project – Guyana
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The Kurupung project in Guyana has the biggest uranium resource with exploration upside; however it will require higher uranium prices above US45/lb to be economic. At Kurupung U3O8 Corp. has identified 10 uranium-zirconium bearing zones with a further 2 having been drilled by a prior explorer of the property. Four of the zones drilled by U3O8 Corp. contain a 16 million pound uranium resource, and the other 8 zones are ready for resource estimation. U3O8 Corp. aims to show that the Kurupung could host a large uranium resource of comparable size to peer deposits elsewhere in the world.
Source of revenue by percentage for Laguna Salada and Berlin
The chart below shows that uranium is the key economic driver at Laguna Salada, and is less important at Berlin due to by-products. Of course the recent vanadium price rise will assist economics further.
Catalysts for Laguna Salada include the immediate goal to double the uranium resource to 20 million lb & upgrade to Measured & Indicated, metallurgy & pilot plant work, social/environmental & permitting, and a Feasibility Study.
U3O8 Corp. has a market cap of only C$ 7.75m.
U3O8 Corp. has a wise strategy that investors can benefit from. That is, they plan to bring on their low CapEx Laguna Salada project first, as this is the easiest to achieve (provided uranium spot prices are above USD 22/lb). Once achieved, they can use surplus cash flow to help fund their larger CapEx low running cost Berlin Project in Colombia. This project has a zero dollar cost of production due to a large amount of valuable by-product credits. This will mean once operational it will be extremely profitable.
U3O8 should be on investors radar, as it has several near term catalysts and a relatively clear and simple pathway to production provided uranium prices improve only slightly from the current US$23 level.
Matthew Bohlsen holds a Graduate Diploma in Applied Finance and Investment (similar to CFA), and a Graduate Diploma in Financial Planning. He has 30 years ... <Read more about Matthew Bohlsen>