quakes99 wrote: Been asking yourself how it is that Arrow came in at a lower OPEX than PLS? I've started doing a comparative analysis of the 2 projects now that I have the published PEA's for both. The results might surprise you!
Here are a few preliminary points for your consideration, as I will be amassing all this info into a spreadsheet that can provide a detailed side-by-side comparison. BUT, before I start, REMEMBER that the Preliminary Economic Assessment done on PLS is from September 2015... 2 years ago! A lot has changed since then with the discovery of multiple high-grade zones ON LAND and significant growth in the Resource (estimated at 60%+ by David Talbot of Eight Capital).
First off... let's look at the Life of Mine expectations for both.
PLS (2015) has a 14 year estimated mine life producing a total of 100.8M lbs of U3O8.
Arrow has a 15 year estimated mine life producting a total of 267.2M lbs of U3O8.
PLS (2015) is estimated at about 14M lbs/year of production for the 1st 6 years of high-grade Open Pit mining followed by 8 years of around 3M lbs/year of production when conducting the slower underground mining portion below R780E, with lower grades.
Arrow is estimated at about 25M lbs/year of production for the 1st 6 years of underground high-grade shear zones mining followed by declining production rates for the next 15 years mining the lower grade zones deep underground... from about 20M lbs/year down to 3M lbs in the last year.
Now, this is where it gets really interesting.
For PLS the Operating Costs for Open Pit mining are just
CA$1.94/lb for the first
72.4M lbs that are mined from the ROOE and R780E high-grade cores. That's ~72% of production. The remaining
28.4M lbs has Operating Costs of
CA$21.07/lb for the more expensive underground mining of the lower grade zones below R780E. That's about
28% of production at an operating cost that is over 10x per lb more expensive than the Open Pits. For Arrow, the entire project is Underground mining at estimated Operating Costs of
CA$3.61/lb for all
267.2M lbs.
Given that the annual production level for Arrow is nearly double that of PLS, the mill processing costs and associated G&A per year are considerably lower per lb than they are for PLS... almost one-half what RPA estimated for PLS on a per lb basis.
Here's a table providing those numbers with PLS on the Left, Arrow on the Right.
| Estimated Production and efficiency | 100.8 M lbs @ 95% | 267.2M lbs @ 96% |
| Estimated Life of Mine | 14 years | 15 years |
| Estimated Initial CAPEX - Mill and Mines | $1,095.1 M | $1,189.2 M |
| Estimated OPEX for Open Pit Mining | $1.94/lb for 72.4M lbs | n/a |
| Estimated OPEX for Underground Mining | $21.07/lb for 28.4M lbs | $3.61/lb for 267.2M lbs |
| Estimated Combined Mining OPEX | $7.33/lb for 100.8M lbs | $3.61/lb for 267.2M lbs |
| Estimated OPEX for Processing | $5.44/lb | $3.03/lb |
| Estimated OPEX for G&A | $3.73/lb | $1.73/lb |
| Estimated Total OPEX | $16.50/lb | $8.37/lb |
From this you can see that, if PLS did not have the low-grade Underground zones to mine, the OPEX would be far far lower than $16.50/lb average.
It's that $21.07/lb OPEX for those 28.4M lbs that pushes it up so much higher. NOW, look at those Recovered Uranium Schedules for the 2 projects and imagine that the dip in the 7th year of PLS production could be completely offset by adding Arrow's production into the mix. Or imagine how Arrow's production profile (based on a mill that can produce 29M lbs/year) could be greatly improved over the last 9 years by adding in PLS Open Pit production.
Think about it... OPEX for mining the PLS R780E zone of just $1.94/lb... about one-half the OPEX for underground mining of Arrow. That's confirmation of our longstanding belief that Open Pit mining is cheaper than Underground, just as everyone has been saying.
Then think about the new R600W/R840W zone ON LAND, and the new R1515W zone ON LAND, which will have far lower initial CAPEX costs (no dykes to build) than R780E. Both the initial CAPEX and OPEX could come in even lower... OPEX lower than $1.94/lb?... mind-blowing!
The upcoming Resource Update will likely see a lot more growth in the Open Pit side as well, with much of the new expansion in those land-based zones.
SO, talk about Synergy!
If the CAPEX costs for the 2 projects were substantially reduced by having a shared mill and new infrastructure (town, airport, power plant, water treatment, etc.), then the synergy gets even better. Combining the 2 projects would see (based on PLS 2015 PEA) a total production of 370M lbs... which could climb much higher towards 450-500M lbs combined as both projects continue expanding and updating their resource estimates.
What does that spell to me? M-E-R-G-E-R
Any Major Producer looking at these 2 PEA's ia going to see gigantic dollar signs flashing before their eyes. Adding in a minimum 72M lbs of $1.94/lb OPEX from PLS would make that Arrow PEA even more attractive... reducing the Total OPEX and increasing the Cash Flow and NPV. If the updated PLS resource gets to over 100M lbs of Open Pit at $1.94/lb then the combined resources of both projects, with shared costs for a new Mill and Infrastructure, would make it profitable to mine at very low Uranium prices. What major producer could ask for more?
Seeing how cheap it will be to Open Pit mine PLS compared to Arrow has got to be setting off M&A bells to a number of major producers. Areva, BHP, Cameco, CGN... seems more and more likely that some kind of consortium will come in and merge the 2 projects into one mega mining project with the lowest costs and highest profits worldwide... bar none.
If you don't own shares in both, you should, imho.
How this unfolds is anybody's guess... one mega merger offer to both... or sequential offers that will drive up each other's share prices... or ???
Can't see this current situation of 2 separate projects lasting much longer.
Good luck with your own due diligence in comparing these 2 PEA's... while we wait for an updated PLS Resource Estimate any time now.
Here's links to them so you can get caught up on your own reading:
Fission NI 43-101 Preliminary Economic Assessment - SEDAR - 15 Sept 2015 NexGen NI 43-101 Preliminary Economic Assessment - SEDAR - 14 Sept 2017 Cheers!