Peninsula Energy Ltd (ASX:PEN) has delivered its first drummed uranium from the Lance Projects in the U.S. state of Wyoming.
The first shipment delivered to the conversion facility contained 16,000 pounds of uranium.
Shipments are expected to continue regularly going forward as the production ramp up continues.
The fourth header house, used in the mining of uranium, is coming online in early June, 2016.
Revenue of US$120 million is forecast from delivery commitments of 2.15 million pounds of U3O8 over the next 5 years alone.
Production ramp up
Lance expects to achieve targeted Stage 1 production of 600,000-700,000 pounds of uranium in 1H 2017.
Production to date indicates 200,000-300,000 pounds of uranium will be produced for 2016.
The company expects the fourth header house online in June, the fifth header house online in the September quarter and the remaining two header houses by the end of 2016.
Recent capital raising
During April, Peninsula raised $15 million in funding from its major shareholders, Resource Capital Fund and Pala Investments Ltd.
Funding is to drive expansion and reduce future cash costs by US$9-10 a pound at Lance.
In addition, it has a term sheet in hand for a streaming financing facility for US$25 million for Stage 2 expansion at Lance that is signed and due diligence is at an advanced stage.
Analysis
The first delivery of drummed uranium is a positive sign in the ongoing development of production at the Lance Projects.
Peninsula has contracted 75% of Stage 1 production at an average price of US$56 per pound, which reduces downside risk.
The Stage 2 expansion of the Lance Projects is forecast to reduce all-in sustaining cash costs from US$41 per pound to US$31-32 per pound.
Peninsula is leveraged to further upside at Lance through production growth, exploration and the uranium price.
Projected revenue under existing long term contracts at Lance is an estimated US$440 million.
The strong support from major shareholders RCF and Pala is indicative of the future growth ahead in earnings through Stage 2.
The Lance Projects have a minimum mine life of at least 20 years, underpinned by 53.7 million pounds, the largest uranium ISR JORC-Code compliant resource in North America.
The recent capital raising will fund general well field development activities at the Lance Projects, resource development drilling, final stage 2 engineering design, feasibility studies at the Karoo Projects in South Africa and for general working capital purposes.
Peninsula was recently ascribed a price target of A$1.00 as part of an initiation report by broker BMO Capital Markets. Peninsula shares are currently trading at $0.60.
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