Peninsula Energy (ASX:PEN) has re-engineered its Lance Uranium Projects in Wyoming that would reduce initial capital expenditure to a bite sized US$33 million.
The redesign would allow Peninsula to crucially get Lance into production, while allowing an extended ramp up of production and defer capacity and sales to be in line with expected higher uranium prices over time.
A lower proportion of the resource would be sold between 2015 and 2018, reducing the need to sell into a reduced price environment.
So that initial capital expenditure for Peninsula to reach positive cash flow at Lance is significantly reduced.
Peninsula's exec. chairman Gus Simpson has been working with funding partners to achieve project financing and a number of international funders are known to be near completion of due diligence.
The reconfigured three stage production ramp up would see steady state all in sustaining costs at less than US$30 a pound of uranium. This is a strong result as Peninsula has in place contracts over the next five years at a weighted average price of $73-$75 a pound. The current spot price of uranium is around US35.50 a pound.
These contracts represent 34-50% of annual sales during the initial years of production between 2015 and 2020.
This would generate a project pre tax NPV of US$288 million.
Stage 1 production would be between 500,000 and 700,000 pounds of uranium while stage 2 would see output of 1,200,000 pounds and the third stage of 2,300,000 pounds of uranium.
All told, this is a solid outcome for Peninsula, with greater capacity to move Lance uranium projects into production while tailoring output to a higher projected uranium pricing model.
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