U3O8 issues ‘NI 43-101’ PEA and promises ‘0’ Cost Uranium Production
U308 Corp. (TSX: UWE | OTCQX:UWEFF) is filed a National Instrument 43-101 (“NI 43-101″) Preliminary Economic Assessment (“PEA”) on its flagship Berlin Project in Colombia’s province of Caldas. The project is developing uranium, phosphate and vanadium deposits along a 10.5 km long mineralized trend with potential for further mineralization. While, excluded from the PEA, rhenium has also been touted as potential by-product but U3O8 plans to study this further before including it in the financial models. Rhenium is a rare and very valuable metal – one of the most expensive – having many potential applications in the aerospace field due to its high melting point and temperature resistance.
This is very significant, given that the project’s mineral deposits are said to be richer than expected. The PEA hinges on a three-step mineral recovery process and a host of recoverable minerals, including some additional ones derived directly from the chosen extraction process, which should result in highly favorable project economics thanks to multiple revenue streams. Accordingly, U3O8 believes that the Berlin Project has excellent economics as it could produce uranium “at zero cash cost” because of the additional revenue generated by the additional minerals with potential for further improvement to achieve even lower production costs. Shares of U3O8 have not been trading at a level reflecting the project’s value and potential. The market should, rather, appreciate U3O8’s approach to the project, which has been considered with a view to manage and reduce risks while maximizing potential. The ‘zero’ cash production cost is the direct result.
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The key ‘ingredient’ to U3O8’s strategy has been its environmental management, which has led it to adopt a novel metallurgical process yielding commercially viable by-products. Apart from the by-products, U3O8 has less clean up costs to confront because its processing method helps to lower the amount of acid needed for the leaching and the eventual extraction of the various targeted minerals including phosphate, rare earths vanadium and, of course, uranium. The adoption of an additional leach step using a variety of vinegar is what allows for the 50% reduction of acid, leaving behind commercially viable materials such as gypsum which can be used in the making of fertilizer or plaster. The company’s commitment to sustainability has also led to a 50% reduction of tailings through a more selective approach to the lifting of carbon minerals from the ore.
The PEA results have proven that the environmental precautions are not mere ‘public relations’; rather, they have helped, in a very practical and economically advantageous manner, to reduce project liabilities and raise value for investors. U3O8 has also pursued social sustainability, seeking an overall practical approach to improve all aspects of the lives of the community, thus helping to mitigate the risks of social disruptions such as experienced by several miners who have neglected these aspects in regions of South America at their peril. The sustainable approach also shows that the Company cares about needs of investors. Sustainability is evidence of an overall superior company management. In turn, the Colombian government has made it easier for businesses such as U308 Corp to adopt a sustainable investment approach, having made important strides in improving the business regulatory system and private property.
U3O8 has also considered an alternative route, which avoids the vinegar leaching altogether, with equally promising economic results whereby the “as-mined rock is crushed and processed without the beneficiation step”. This scenario is estimated to produce revenue of about USD 406/ton of mineralized material against an operating cost of USD 201/ton according to the PEA. Uranium, however, has experienced significant price volatility; indeed, its current price of USD 43/lb (as of February 11) is not even the lowest of the past 20 years (in the USD 20/lb range). From 1982 to 2004 Uranium spot prices hovered around the USD 20/lb mark, reaching a high in 2008 of close to USD 140/lb. That peak, in fact, was spurred by the spiking oil prices of that same period. The post-tsunami meltdown in Fukushima accelerated the price descent. Nevertheless, uranium has already started to bounce back. It is now trading at USD 43/lb and all indicators point to a solid recovery given that nuclear energy is going to become more rather than less popular.
No other substance can yield as much energy per unit as uranium and several countries from China to Russia or Japan have plans to increase nuclear energy generation. As proof of Japan’s need, consider that natural gas prices have spiked on Japanese demand alone as the country tried to compensate for the – temporary – loss of its nuclear power. Even if the developed economies (except for France, the leading consumer of nuclear energy) shun nuclear power for deceptive political convenience, the developing world is growing at a rate that will generate increasing demand for reactors and uranium.
Sooner rather than later uranium prices will return to a reasonable plateau (the immediate pre-Fukushima levels), around the USD 60-70/lb benefiting fortunes of uranium plays like U3O8. As evidence for this optimism, Europe needs more uranium supplies as there is only one mine in the continent – Czech Republic – and, in January, Russia’s state owned Rosatom acquired Canada’s Uranium One gaining access to its Kazakh uranium projects and the opportunity to bid in a tended for two reactors in the Czech Republic, the world’s largest user of atomic energy pro-capita.