Peninsula Energy Ltd (ASX:PEN, OTCQB:PENMF) is making progress toward the planned restart of commercial-scale uranium production at its flagship, Lance Projects in Wyoming and is completing pre-production capital construction and preparation activities.
The company is continuing with low pH transition construction activities ahead of the restart and despite modest delays in delivery of certain long lead-time items, expects commercial production to begin in mid-year 2023.
Aside from the delay, the pending restart is progressing well.
Peninsula has achieved the following:
- capital expenditures are in line with August 2022 definitive feasibility study (DFS) projections;
- Mine Unit One (MU-1) is prepared for operational restart; and
- limited scale wellfield operations have commenced and are ongoing.
"Remarkable results"
“The Lance Project team has been delivering remarkable results in the effort to transform the project facilities and to become the first commercial low-pH uranium ISR operation in the United States," Peninsula managing director and CEO Wayne Heili said.
"The current inflationary economic environment and very real supply-chain constraints, in combination with an unusually difficult Wyoming winter, have presented challenges but the team has demonstrated their professional capability and resolve.
“Despite encountering some delivery delays that are outside of our control, the team continues to complete the transition construction work on a short timeline and within the projected capital framework.”
Construction progressing well
During the quarter, Peninsula’s project team has been preparing the existing production plant and wellfield facilities for low pH ISR operations and has made excellent progress in the wellfield areas where the preparation of MU-1 has been completed.
MU-1’s flow capacity exceeds the early requirements for commercial production operations.
Notably, Wellfield transformation activities have advanced to Mine Unit Two (MU-2), and three contract drilling rigs are preparing the new Mine Unit Three (MU-3), with this unit expected to see construction start during the North American summer.
A construction firm is working at the MU-3 site to install large-capacity sulphuric acid and hydrogen peroxide storage and delivery systems, with the first of two large-volume acid storage tanks already delivered and available for installation immediately after the concrete foundations are ready.
A second acid tank has been delayed due to inclement weather at the fabrication facility but the delay shouldn’t affect operational activities.
Parts of the existing uranium recovery plant require conversion to accommodate the new process chemistry and plant pumping, piping and ion exchange systems are being rebuilt to be compatible with the low-pH solutions.
Peninsula has been preparing the plant for the installations while it waits for key pump systems and new ion-exchange resins to be delivered. It has also put a contractor in place to finish the required plant piping system modifications. Work will start in the coming weeks.
As for costs, expenditure is well under control, with overall capital expenditures closely tracking with the August 2022 DFS projection.
The DFS projected capex of US$8.4 million for the low pH transition and stage-1 upfront costs.
Operational update and guidance
Limited pre-production activities in MU1 have been successful and meet operational expectations, while well patterns are being pre-acidified and readied for production operations.
Currently, the process stream is not being directed to the production plant and no uranium is being recovered in the plant circuits.
MU-1 will be fully activated once the new chemical storage and delivery systems are available for use, with the large volume acid storage and distribution systems expected to be available for use around the end of April 2023.
Once that occurs, limited-scale pre-production flows will be expanded to commercial-scale wellfield pre-conditioning operations.
The company expects to activate the process plant for commercial uranium production activities around mid-year 2023, while the sales portfolio includes a commitment for the delivery of Lance production in Q4 2023.
Initial production derived from Lance will be sold into existing contracts with supportive pricing structures.
Increasing project licensing
There is a great deal going on in Wyoming with the Ross Project Area within the Lance Projects now fully approved for commercial low-pH ISR operations. Mine Units 1, 2 and 3 are all within the Ross Project Area and additional mine units may also be located at Ross.
The estimated resource is 5.88 million pounds U3O8 of which 4.1 million pounds are estimated to be produced in the future.
In late December 2022, Peninsula submitted applications to the State of Wyoming regulatory authorities to expand the licensed area of the Lance Projects to include the Kendrick Area, with regulators completing an acceptance review and deeming the applications to be administratively complete.
Regulators will now complete the first-round technical review.
Uranium sales continue
All of this comes as Peninsula completed delivery of 300,000 pounds of yellowcake to the US Strategic Uranium Reserve and received payment for the delivered product in 1Q 2023.
Peninsula also recently delivered 200,000 pounds of yellowcake to an existing utility customer under the terms of its sales agreement, bringing the total sales and deliveries for the current quarter to 500,000 pounds.
Payment for the second delivery is pending.
A purchase agreement is also in place to receive 200,000 pounds from a vendor prior to the end of the current quarter with payment scheduled to follow receipt of proceeds from the quarterly sales, which will bring Peninsula’s inventory balance to approximately 210,000 pounds at March 2023 quarter end.
Peninsula has recently completed a purchase option exercise and restructure with one of its long-standing utility customers, with the annual delivery volume of the option pounds significantly reduced, allowing the total volume to be delivered over a longer period.
It is a good outcome for PEN as the option pricing is structured below current spot price levels.
In conjunction with the option exercise and restructure, the utility agreed to a new contract involving delivery of additional uranium starting in 2028.
The completion of recent sales, the option exercise and new commitments puts PEN’s sales portfolio at firmly committed future sales of 5.25 million pounds of U3O8, which extends through 2033.