Uranium producer Peninsula Energy Ltd (ASX:PEN) has clinched a long term uranium concentrate sale and purchase agreement with a major European utility and nuclear industry leader diversifying its client portfolio.
The agreement is for the sale and purchase of 4.0 million pounds of U3O8 from the Lance Projects over a 10 year period beginning at the end of 2020 and contemplates increasing this to 50% of annual mine production from 2026 onwards.
Lance is located in Wyoming in the U.S., and has significant mine life upside given untapped exploration potential.
The project already has a 54 million pound resource base and licenced mining rate of 3 million pounds annually, which allows the ability to increase production quickly.
No pre-stripping or mining development required, and production wells access the ore body directly.
Gus Simpson, managing director and CEO, commented:
“Peninsula is very pleased to execute this contract as it adds geographical diversity to our sales portfolio.
"It is an important vote of confidence in our projects, management and ability to deliver uranium well into the future.
"In addition we have worked with the utility for several years during the evaluation period and we anticipate a long and mutually beneficial relationship."
Analysis
The securing of such a significant contract is an achievement for the company and comes after several years of negotiation and extensive due diligence on Peninsula and its projects.
It also delivers on the company strategy of aligning with major utilities requirements.
While price and annual quantities are subject to commercial confidentiality, the terms of the agreement provide certainty of sale and a committed revenue stream.
This agreement and the establishment of a long term relationship with this large customer is a major catalyst for the company, underpinning stage 2 production levels and its long term plan to become a significant and profitable global supplier of uranium.
Uranium market outlook
There are several key drivers for a potential lift in the uranium price in 2016/17, such as:
- Return of utility contracting;
- Japanese restarts increasing;
- China construction – domestic;
- China construction – export;
- India – strategic reserve established; and
- Strong global demand growth.
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