quakes99 wrote: Hi clement3. The answer to your question is published in the NI 43-101 PEA, showing that PLS is economic even at today's Term Contract U price and USD Exchange Rate.
Industry standard for PEA's of Uranium deposits is to project the commodity price out to the time when production is likely to begin... 8 to 10 years hence. Makes no sense to use the current commodity price because no product is being sold to the market today. The consensus on future U contract prices for 2020-2025 made by analysts ranged from US$65 up to US$80/lb. RPA took the most conservative projection and used that in their economic analysis. They also had to forecast what the USD/CAD exchange rate might be at the time of production (to more accurately determine profit margins in CAD) as all U3O8 in the world is sold in US$/lb. They chose a conservative figure of 0.85 CAD/USD, far higher than today.
As to the economic value of PLS at today's prices, let's use the most recently published Long Term contract price of US$41/lb and look at RPA's sensitivity table as published in the PEA. Using today's CAD/USD exchange rate of 0.776 puts that at
CA$53/lb of U3O8 sold to market. Now, refer to that Sensitivity Analysis Table under the 2nd column ($C/lb U3O8) and you see that $53 falls halfway between $47 and $59, yielding a Net Present Value of about $350M today. That indicates that at today's Term price and FX rate, PLS is very economic and worth around $350M to shareholders... which is about $0.72/share.
BUT, the PEA is way out of date (as described in the Feature Article yesterday in Mining Journal) and estimates are that the Resource is already 40% higher, and that the discovery of 2 new land-based high grade zones will significantly reduce the upfront CAPEX and defer the high cost of the open pit in Patterson Lake until years later, using Cash flow to finance that development cost... which signficantly raises the NPV of the project. With those 2 factors combined, the NPV could easily double when the PEA is updated. That would put the NPV at today's Contract U price at around $1.40/share.
Due Diligence involves reading regulator-compliant NI 43-101 reports as the basis for decision making on investments. That's why the NI 43-101 reporting standards were created... to ensure that investors are receiving factual information published by Independent mining consultants like RPA.
Doing your due diligence on Uranium Prices would also help you to understand why the U Spot Price is completely irrelevant to the Asset Value of PLS.
Unlike other commodities, Uranium is sold through 2 different markets... The U Spot Market and the Mid to Long Term U Market.
The U Spot Market is where small quantities of U3O8 are sold by secondary supply sources with small inventories, ISR miners, and groups such as government agencies with excess inventory they wish to sell. The small quantities involved also allow traders to come in and buy/sell small quantities in order to impact the U spot price, so it can be volatile at times.
The Mid to Long Term Market is where major producers sell the production from large producing mines, through contracts that are usually 5 to 10 years in length. They use experienced Uranium brokers (UxC and TradeTech) to facilitate those contracts. At the end of each month the average prices of all Contracts negotiated that month are averaged and published as the monthly Term Uranium Market Price.
Cameco provides a web page that shows the U Spot and U Term Prices in both a table form and graphs.
https://www.cameco.com/invest/markets/uranium-price Uranium Price
Uranium does not trade on an open market like other commodities. Buyers and sellers negotiate contracts privately. Prices are published by independent market consultants Ux Consulting and TradeTech.
TradeTech $28.25 US$/lb June 03, 2016 UX Consulting CO. $28.50 US$/lb May 23, 2016 Spot Price
| | 2012 | 2013 | 2014 | 2015 | 2016 |
| Jan | 52.13 | 43.88 | 35.45 | 37.00 | 34.70 |
| Feb | 52.00 | 42.00 | 35.38 | 38.63 | 32.15 |
| Mar | 51.05 | 42.25 | 34.00 | 38.36 | 28.70 |
| Apr | 51.63 | 40.50 | 30.43 | 37.13 | 27.50 |
| May | 51.63 | 40.45 | 28.25 | 35.00 | 27.25 |
| Jun | 50.75 | 39.60 | 28.23 | 36.38 | - |
| Jul | 49.50 | 34.75 | 28.50 | 35.50 | - |
| Aug | 48.25 | 34.50 | 31.50 | 36.75 | - |
| Sep | 46.50 | 35.00 | 35.40 | 36.38 | - |
| Oct | 41.75 | 34.50 | 36.38 | 36.13 | - |
| Nov | 42.25 | 36.08 | 39.50 | 36.00 | - |
| Dec | 43.38 | 34.50 | 35.50 | 34.23 | - |
Long-term Price
| | 2012 | 2013 | 2014 | 2015 | 2016 |
| Jan | 61.00 | 56.50 | 50.00 | 49.50 | 44.00 |
| Feb | 60.00 | 56.50 | 50.00 | 49.50 | 44.00 |
| Mar | 60.00 | 56.50 | 46.00 | 49.50 | 43.50 |
| Apr | 60.50 | 57.00 | 45.00 | 49.00 | 43.00 |
| May | 61.25 | 57.00 | 45.00 | 47.50 | 41.00 |
| Jun | 61.25 | 57.00 | 44.50 | 46.00 | - |
| Jul | 61.25 | 54.50 | 44.00 | 44.50 | - |
| Aug | 60.25 | 54.00 | 44.00 | 44.00 | - |
| Sep | 60.50 | 50.50 | 45.00 | 44.00 | - |
| Oct | 59.50 | 50.00 | 45.00 | 44.00 | - |
| Nov | 59.50 | 50.00 | 49.50 | 44.00 | - |
| Dec | 56.50 | 50.00 | 49.50 | 44.00 | - |
Cameco calculates industry average prices from the month-end prices published by Ux Consulting and TradeTech.
Cameco calculates long-term industry average prices from the month-end prices published by Ux Consulting and TradeTech. Long-term prices prior to May 2004 are not industry-averages, but from TradeTech only.
When it comes to assigning a Net Asset Value or Net Present Value for Fission's PLS asset, it's the Long-term Uranium Price that is used. U Spot price is irrelevant (unless you are a company like Energy Fuels that is an ISR producer selling small quantities on the U Spot market... which is why so many ISR miners are under pressure right now.
Cheers and good luck with your reading!
clement3 wrote:
it all comes down to the product you are hoping to mine.
as long as there is no demand for the product -----------you know the rest.
how much has a pound of uranium to cost to make this project visible.?
https://www.barchart.com/commodityfutures/Uranium_Futures/UX
jmrv