Marenica Energy snares A$5m financing from China's Hanlong Group

Marenica Energy (ASX:MEY) has taken sigificant steps toward underwriting the future development of its flagship Marenica Uranium project in Namibia by securing $5 million of debt and  equity funding from China’s Hanlong Energy Limited.

In something of a coup for Marenica's CEO John Young, the agreement will encompass longer-term feasibility and development funding, off-take arrangements and potential cooperation on future strategic acquisitions in the uranium sector up to December 2011.

For Hanlong the deal provides the company with a seat at the uranium network table and become a participant in and join the global uranium network.

A definitive feasibility study relating to the indicated resources at the Marenica project is expected to be completed by the end of 2012.

The funding deed signed with Hanlong will provide immediate funding of $3 million through a $2 million convertible note and $1 million share placement at A$0.07 per share.

It will also fully underwrite a A$2 million rights issue at A$0.07 per share, to existing shareholders,increasing the total funds raised to $5 million.

Hanlong will also be given the opportunity to appoint one representative to the Board of Marenica.

John Young, CEO, said “the MOU sets out a timeframe for the negotiation of a future funding arrangements and off-take for uranium product from Marenica. The successful conclusion of an agreement on these fundamental components of the project will deliver Marenica shareholders the value benefits of a substantial funding package and a major project partner with a strong balance sheet, diversified operations and mining interests."

He said Marenica could be in the enviable position of being fully funded and be in production by 2014. This could coincide with "the beginning of the next major upswing in the uranium  cycle, benefitting from higher uranium prices in the mine’s early production years.”

The funding paves the way for Marenica to progress to the next stage of evaluation and development of the Marenica Project, where it has recently completed a Scoping Study on a potential US$260 million heap leach development.

The study concluded that the project could deliver 3.5 million pounds of uranium per annum at a competitive operating cost of US$38/pound, based on the recently upgraded resource of 648 million tonnes at 97ppm, for 138M lbs U3O8.

Work is scheduled and underway for the remainder of 2010 and early 2011. Key activities leading to a final decision on the Pre-Feasibility Study will include:

- Metallurgical testwork for Heap Leach process route
- A Reverse Circulation (RC) exploration drilling program
- Completion of an HLEM survey at Target MA7
- Environmental and social impact baseline studies
- Development of a detailed OH & S Radiation Management Plan

Key activities as part of the Feasibility Study scheduled for 2011 will include:

- Technical Economic Model update and review
- Trial mining/pitting for further bulk Metallurgical testwork at larger scale for optimisation of process route
- A Reverse Circulation (RC) drilling program to optimise the conversion of Inferred Resources to reserves
- RC exploration drilling to further define and increase resources
- Updated Resource Calculation / Mining Optimisation Study
- Environmental and social impact studies for inclusion in the Definitive
Feasibility Study

Hanlong’s Managing Director, Steven Xiao, said “globally, the number of nuclear power plants is expected to double over the next 20 years, with China and India driving a large portion of the new developments. The uranium market fundamentals are strong, supporting favourable long-term uranium prices.'

“We believe that supplies from existing and near-term uranium mines will be insufficient to meet future demand. Hence, investing in promising uranium developers such as Marenica is a critical step towards evening out future demand and supply imbalances."

Hanlong is a subsidiary of the privately-owned China-based Sichuan Hanlong Group Co., Ltd, a large diversified group with a broad portfolio of investments in mining resource development, electricity production, infrastructure development and real estate.

The Group has over 12,000 employees worldwide and annual revenues of more than US$2.5 billion.

Article Highlight

Marenica has ensured momentum at the Marenica Uranium Project is maintained with $5m financing from one of China's largest private resource investors - with potentially more finance in the offing as well as potential off-take agreement.