Bannerman Resources Ltd (ASX:BMN; NSX:BMN) continues to maintain its Etango Uranium Project in Namabia at the forefront of the global uranium development pipeline.
Bannerman has now revealed details of the successfully completed Etango Processing Optimisation Study (Processing OS), by its independent technical consultants, AMEC Foster Wheeler.
And the timing couldn’t be better with Cameco Inc announcing the suspension of production at the world’s largest uranium mine, McArthur River, which will lead to a reduction of almost 10% of world uranium supply in 2018.
Uranium investors are watching this development very closely, with many viewing this closure as the catalyst that will finally pull uranium up from current decade low prices.
Bannerman leveraged to uranium rebound
Bannerman is particularly well positioned for a recovery in uranium price, demonstrated by its dramatic share price run in January 2017 when the uranium spot price increased from current levels to US$26 a pound.
Etango is globally significant, and is the largest, unaligned advanced uranium project in the world.
The project is technically de-risked with a simple bulk tonnage open-pit operation and a successful two-year pilot plant proving the effectiveness of its heap leach processing route.
While the price of uranium sits just off decade lows of US$20 a pound, these prices are unsustainable considering the industry’s average cost of production sits well above this price.
Further, demand growth is strong but an under-investment in uranium over last 20 years leaves very few development projects ready to commence production to meet this demand.
Considering the current Chinese nuclear build-out which is creating unprecedented demand growth, enhanced by the further sharp nuclear growth in India and Russia, this provides the ingredients for an increase in the uranium price based on a supply / demand dynamic that appears to have improved dramatically following Cameco’s announcement.
Etango is located within the Erongo uranium province of Namibia, which also hosts Rio Tinto's (ASX:RIO) Rössing, Paladin Energy Ltd's Langer Heinrich and China General Nuclear’s Husab uranium mines.
The importance of Etango
A uranium development project faces longer time frames than other commodities, due to the unique political, environmental and social challenges involved in permitting uranium exploration and mines.
Coupled with underinvestment in the uranium sector over the past two decades, this has resulted in very few uranium projects of scale that are ready to commence construction when the uranium price correction comes.
Etango is the largest of these advanced projects, and also benefits from its location in uranium-friendly Namibia, environmental permitting in place and secure tenure under a retention licence.
The effect of this lack of production-ready projects is that the nuclear industry will be exposed to the risk of supply inertia – in other words, the risk that there will be insufficient new mine supply regardless of how high the uranium price gets.
This is where Etango’s positioning as a shovel ready project – enhanced by the Processing OS – becomes so significant.
The study is the first completed stage of the Etango DFS Update, with key highlights:
US$73 million estimated Etango processing-related capital cost savings (+/-30%).
- Largest capital reductions from a simplified crushing circuit and confirmation that Ion Exchange is a viable and superior alternative to Solvent Extraction; and
- Process plant design and flowsheet remains low risk by industry standards.
Etango operating costs reduced, with DFS Update to target improvements of US$3+ per pound of uranium.
- Improved recovery and reduced reagent consumption are key drivers; and
- Key capital reductions captured without trading off against higher operating cost.
Further upside potential to be tested.
- Membrane Study to test nano-filtration technology in processing circuit; and
- Use of existing leachate solution and internal expertise ensures modest additional cost.
Adding value through continued technical enhancement of Etango uranium project.
- Initial Etango DFS completed in 2012, optimised in 2015 (mining) and 2017 (processing); and
- DFS Update to be continued in 2018.
The Etango Heap Leach Demonstration Plant was constructed in 2014, following which the company ran a six-phase pilot program that concluded in January 2017.
The completed Processing OS and initiated Membrane Study will provide valuable input into a DFS Update, to be continued in 2018.
The DFS Update will include:
- Definitive standard engineering incorporating the enhancements from the mining Optimisation Study (2015), the Processing Optimisation Study (2017) and the Membrane Study (2018);
- Definitive level procurement to capture the full value of the mining sector deflation experienced since the 2012 DFS and to incorporate the competitive benefits from a broader range of technology and equipment vendors;
- Further possible improvements to mine design, mining approach and, if feasible, potential adoption of new mining technologies; and
- Updated external/financial costs and potential infrastructure improvements.
The continued technical enhancement since the 2012 DFS repositions Etango and has confirmed the technical robustness of the project metrics.
The Mining and Processing Optimisation studies and the extensive confirmatory testwork conducted at the Etango Demonstration Plant and external laboratories places Etango at the forefront of the global development pipeline of large projects.