Valencia not economic..deal wont closeUranium is currently $43 per lb. Given the low grades at Valencia, the proposed mine will not be economic at prices below $75 per ton. This was the price used in the 2007 feasability study.
Valencia's grades are 0.125 kg/t U3O8 and the mine is designed to producing 1.09 M kg (2.4 million lbs) U3O8 per year.
Metallurgical tests identified estimated an overall process recovery of 86%, with operating cost estimated at US$10.08/t delivered to the plant.
The numbers are as follows. About 0.235 lbs of uranium will be recovered per ton of ore delivered to the plant.
This is valued at $10.15 per ton , against a cost of $10.06 per ton.
Now, there are significant other costs such as treatment, transportation, overhear and admin , amortization etc that would boost the overall cash costs per haps to twice the cost of delivering ore to the mill.
These numbers now show why GFI is having trouble raising the necessary cash from its investors.
Simply put, they dont see the mine being profitable unless uranium prices nearly double from current levels.
It might be that they expect the Uranium price to increase by July , but that seems unlikley.
Which means that GFI will not pursue the deal and will take the break-up fee charge of $11 million on March 31.
In this light, it is understandable why the share price never reached near the $7 takeover price.
A lot of large holders probably knew this and sold their holdings at prices above $6.
This also explains why the original offer was described as not conditional on financial availability , whereas the deal actually fell thru due to financial inability by GFI.
Something smells here and it is not a nice smell.