Peninsula Energy (ASX: PEN) expects the key Source Material Licence for its Lance Uranium Projects in Wyoming to be awarded after a key agreement current being circulated is formally accepted.
“We are pleased to see the circulation of the Programmatic Agreement for formal acceptance and we anticipate receiving the Source Materials License shortly,” Peninsula chairman Gus Simpson said.
The U.S. Nuclear Regulatory Commission has forwarded the Programmatic Agreement for Section 106 consultations to the Wyoming Attorney General’s office for formal review and approval.
Section 106 consultations is a process that is designed to ensure that vested historical and cultural stakeholders are engaged in the development of protocols that are designed to protect sites of historical and cultural significance that may reside within a project area.
Work on the PA was initiated in October 2013 and its development involved the U.S. NRC, U.S. Bureau of Land Management, Advisory Council on Historic Preservation, Wyoming State Historic Preservation Officer, Consulting Native American Tribes and Strata Energy.
Once the PA is signed by the signatory parties, NRC staff will be able to issue the Combined Source and Byproduct Materials License for the Lance Central Processing Plant and Ross Permit Area to Peninsula’s wholly-owned subsidiary Strata Energy.
Lance Uranium Projects
Peninsula had in March received the key final Supplemental Environmental Impact Statement for the Lance projects and expects to start production in the second half of 2014.
The Lance Projects in Wyoming host at least five roll front deposits with about 53.7 million pounds of U3O8. There is also further exploration potential of 158 million to 217 million pounds.
The Lance Uranium Projects are envisaged as producing 2.3 million pounds of U3O8 per annum with an NPV of US$328 million and a capital expenditure of US$146 million to reach steady state production. Initial capital expenditure is US$68 million.
Ross will be the first production unit with capacity of up to 1.2 million pounds of U3O8 per annum followed by Kendrick, ramping up over several years to a steady state 2.3 million pounds per annum.
Project NPV is estimated at of US$328 million while a capital expenditure of US$146 million is required to reach steady state production. Initial capital expenditure is US$68 million.
It is expected to be cashflow positive from the fourth quarter of 2015 with payback within 3.4 years.
Analysis
With the award of the Source Materials Licence pending, Peninsula Energy is on track to start uranium production during the second half of 2014.
In December 2013, Proactive Investors wrote:
"We see if differently - a long term buying opportunity in [Peninsula] at a current market cap. and valuation of circa $67 million - which takes into account little of projected re-ratings from reaching milestones and moving up the curve toward production and revenue generation. For long term investors, at the current share price of $0.021 the rewards could be sweet."
While the share price has almost doubled since December 2013, we believe that the upcoming award of the SML, the start of construction and onset of production will render even the current market cap "light" on a medium term outlook.
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