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Peninsula Energy on track for commercial-scale low-pH uranium at Lance Projects in 2019

The Australian USA-uranium producer is targeting lower cost extraction methods at its project.
The central processing plant for Lance Uranium Projects
OVERVIEW: PEN The Big Picture
The central processing plant for Lance Uranium Projects
  • One of two key regulatory approvals for low-pH uranium extraction has been received
  • A pilot phase is in progress and is expected to continue in the June quarter
  • Commercial-scale low-pH uranium extraction will reduce Peninsula’s per-pound costs, pushing the uranium group down the cost curve

What does Peninsula Energy do?

Peninsula Energy Ltd (ASX:PEN) specialises in uranium production in the US state of Wyoming. It is run by Wayne Heili, a metallurgical engineer who has spent the bulk of his 30-year career in the uranium industry. Heili was previously the president and CEO of Ur-Energy, Inc where he oversaw the design, construction, commissioning and ramp-up of the Lost Creek in-situ uranium project, also in Wyoming. He is a past president of the Uranium Producers of America.

What does Peninsula Energy own?

The key uranium asset is the wholly-owned Lance Projects in Wyoming, USA.

Production started at Lance in December 2015, with the project being dubbed the largest defined uranium resource of any producing asset in the US.

The Western Australian company was named as the only US-uranium producer on the Australian Securities Exchange earlier this year.

A previous estimate of Subiaco-based Peninsula’s Lance resource, modelled for when low-pH extraction started, estimated a 53.6 million pound resource with 90% recovery and a targeted 62% extraction of 33.4 million pounds.

Measured and indicated resources in that estimate were 15.5 million pounds at a 90% recovery and a targeted 81% extraction of 12.8 million pounds.

Inferred resources were 38.1 million pounds at a 90% recovery and a targeted 81% extraction of 30.8 million pounds.

Since the estimate, used in a September 2018 feasibility study for low pH extraction, Peninsula has been following a process to transition from an alkaline-based chemistry to a low-pH-based chemistry for the lixiviant, or liquid medium, it uses to leach uranium from ore at its recovery operations.

The transition is expected to help it reach the lower end of the cost curve for uranium and improve the attractiveness of its project during a period of uranium market improvement.

Last week the company achieved a milestone towards its game-changing transition, securing a mining permit amendment approval for its Lance Projects.

Wyoming Department of Environmental Quality (WDEQ) issued the permit to mine (PTM) amendment approval for low-pH in-situ recovery (ISR) to Peninsula’s wholly-owned subsidiary Strata Energy Inc.

The PTM approval had followed a technical review of the application by WDEQ and a public comment evaluation and assessment period.

Strata’s PTM amendment allows it to roll out low-pH operations in Lance’s Ross Permit Area in four phases.

The six-to-eight-month phase I trial began in December 2018 and is a low-pH field demonstration phase for the project that was permitted with a non-significant revision' (NSR) to the subsidiary’s mining permit granted in November 2018.

This demonstration has been taking place in Mine Unit 1 at Ross area.

The first stage of this work has been dedicated to bringing the pH level within the pattern area down to 2.0 standard units. This is the pH level proven in laboratory testing to deliver greatly enhanced uranium recoveries.

Peninsula’s feasibility study last year modelled a low-cost operation rolled out with a three-stage expansion.

Some 33.4 million pounds were modelled to be produced over a 17-year mine life at Lance in the study, with direct operating expenses of US$15.59 a pound and life-of-mine (LOM) AISCs of US$31.77 a pound.

The uranium price was at US$27 a week ago after it closed December 2018 at US$29, a high for last calendar year.

LOM real revenues would be US$1.7 billion, while LOM operating cashflows would be US$925 million before tax.

The project’s base case was valued at US$156.5 million at a US$49 a pound average price when the net present value (NPV8) was calculated at an 8% discount.

The corresponding internal rate of return (IRR) for the base case was 30% at the average price.

If assuming an average price of $57 a pound, the NPV8 is US$254 million and IRR is 39%.

Average annual cashflows at the $49 a pound would be US$26.9 million or US$40.4 million at the $57 a pound price.

Wyoming’s WDEQ agency is conducting a separate Uranium Recovery Program review of Lance Projects after subsidiary Strata’s October 2018 request to amend the existing source materials and by-product licence (SML).

Once an SML approval is added to the PTM milestone, commercial-scale low pH operations can start at Lance Projects.

Heili reported last Thursday the PTM amendment had added to the parent company’s confidence Strata would receive the requested SML and necessary approvals so the group could start commercial-scale low-pH operations at Lance this calendar year.

What is Peninsula Energy’s capital backing?

Peninsula had US$13.6 million at the end of the December quarter of 2018 and a US$17 million convertible note facility after it repaid US$3 million of an originally $20 million facility.

In January 2019, the company tipped it expected US$6.5 million of cash outflows in the March quarter of 2019.

Production costs were expected to make up US$3.3 million of the sum, with another US$1.7 million for uranium purchases and US$150,000 for exploration and evaluation.

The company’s next quarterly reports are expected at the end of April 2019.

Inflection points

  • SML regulatory approval news from WDEQ

  • Progression to phase II and beyond at Lance

  • Improved uranium market sentiment and U3O8 price recoveries

  • Outcomes of US Department of Commerce Section 232 investigation into uranium imports

Peninsula managing director & CEO Wayne Heili confident of 2019 timetable

“This approval from the WDEQ of the permit to mine amendment is the most significant regulatory milestone to date in our transition to a low-pH ISR operation at the Lance Projects,” Peninsula managing director and CEO Wayne Heili reported last Thursday.

“While the SML amendment deals with some different matters to the PTM amendment, receiving this approval gives the company added confidence of a positive outcome for the source material licence amendment.

“Together with the results to date from our low-pH field demonstration, which is progressing according to expectations, the company is confident that it will have all approvals required to allow commencement of commercial-scale low-pH operations during the 2019 calendar year.”

 

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