The Northern Miner: U308 to meet Argentinian Uranium Demand U3O8 aims to help meet Argentinian uranium demand
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2016-02-01
VANCOUVER — It's been a bumpy ride for Canadian junior companies in Argentina over the past three years, but explorers like U3O8 Corp. (TSX: UWE) saw the light at the end of the socio-political tunnel in late October when the Andean country elected the center-right Republican Proposal (PRO) party.
The newly-elected government should mark an economic shift from President Cristina Fernndez de Kirchner's time in office, which is perhaps best encapsulated by the expropriation of partially state-owned energy company YPF SA from Spain’s Repsol YPF in mid-2012. The previous regime also imposed a variety of financial instruments that restricted capital flows, and generally caused uncertainty in terms of foreign investment conditions.
President Mauricio Macri's government has moved quickly to liberalize market conditions and normalize its economic situation. Argentina has relaxed exchange controls and allowed its Peso to float, eliminated export taxes on mining products, and lifted restrictions on the repatriation on earnings and dividends.
“It's been a tough couple of years for us since our flagship project is in Argentina, but we perceived there would be a change in attitude. And it is the strongest nuclear energy market in South America because of the pure quantity of reactors and plans for new ones,” explained U3O8 president and CEO Dr. Richard Spencer during an interview.
“So we took a long-term view. Thus far the government is on very positive track, and the nuclear component looks to be heavily integrated into the energy strategy alongside hydro and renewables. Our impression is that it is a very business oriented government that wants to get things moving quickly,” he added.
According to filing from the World Nuclear Association, Argentina has three nuclear reactors generating about 10% of its electricity. The country re-started uranium enrichment at its Pilcaniyeu plant in early December, and budgeted around US$2 billion for construction of a fourth reactor in 2010.
U308's lead asset is the Laguna Salada uranium-vanadium project in Argentina's Chubut Province. Mineralization occurs within three metres of surface in soft, unconsolidated gravel that should equate to low-cost mining techniques with no blasting and crushing required.
Meanwhile, simple screening separation of the pebbles and coarse sand will concentrate the uranium and vanadium in the fine material and increase head grades. Alkaline leach tests In the Guanaco area of the project resulted in recoveries of 94% uranium and 51% vanadium from screened fines after four hours of leaching.
The Guanaco and Lago Seco sectors of the Laguna Salada deposit host 6.3 million lbs. U3O8 and 57.1 million lbs. V2O5 based on indicated resources of around 47.3 million tonnes grading 60 parts per million (ppm) U3O8 and 550 ppm V2O5. Inferred resources total roughly 21 million tonnes at 85 ppm U3O8 and 590 ppm V2O5.
The company filed a preliminary economic assessment (PEA) on the project back in 2014 that models a US$136-million operation that would produce 640,000 lbs. of uranium and 960,000 lbs. of vanadium annually over a ten-year mine life. Based on prices of US$60 per lb. U3O8 and US$5.50 per lb. V2O5 the mine would feature a US$55 million net present value (NPV) at a 7.5% discount rate and a 24% internal rate of return (IRR).
In early November U3O8 closed a $622,625 non-brokered private placement where it issued 25 million units priced at 2.5¢, which consist of one share and one purchase warrant priced at 3.5¢ for three years. The proceeds will go towards expanding Laguna Salada’s resource and potentially kick-starting a pilot operation to test unit cash costs. The PEA assumes average life-of-mine cash costs of US$21.62 per lb. of U3O8 — net of a vanadium credits.
"There are two key priorities at the project for us. Firstly, the economics are very strongly geared towards deposit size, so expanding the resource is a priority. We've already done exploration work that shows in excess of twenty-million pounds of uranium potential immediately adjacent to our deposit," Spencer elaborates, noting that doubling Laguna Salada's resources could theoretically triple the project's NPV.
"With the money we can certainly generate results that move us toward expanding that resource. Secondly, we're moving toward a proof-of-concept pilot plant, which is currently in the permit stage. Since the deposit is at surface and essentially mineralized gravel we think we can add shareholder value by nailing down the processing costs," he adds.
In late 2015 the company's board and management agreed to waive fees and salaries owing in light of tough market conditions. Spencer took a 45% salary reduction, while no further fees will be paid to directors until markets improve. U3O8 has traded within a 52-week window of 2¢ and 7¢, and closed at 2.5¢ at the time of writing. The company maintains 266 million shares outstanding for a $6.8 million press-time market capitalization.
"I think what's motivating people is a real belief that one can get into production in a relatively short time frame in Argentina," Spencer concluded. "Our project is very simple from a technical point of view, and I'd note that though the new discoveries in the Athabasca Basin are extremely high grade it does take a long time to move from discovery to production. We're offering an opportunity that could go into production much earlier."
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