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General Market Commentary
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General Market Commentary
Uranium snapshot: Energetic juniors with attractive assets
While the price of uranium suffered a steep decline after the 2011 Fukushima Daiichi nuclear accident, growing pressures to decarbonize power generation provide support for the commodity, which is currently priced at cyclical lows. Below, we provide an overview of eight companies active in uranium exploration and development.
Appia Energy
Appia Energy (CNSX: API; US-OTC: APAAF) is involved with rare earth and uranium exploration in the Athabasca basin of Saskatchewan. It holds a 100% interest in the 143.3 sq. km Alces Lake property, 34 km east of Uranium City. Alces Lake is located in the Beaverlodge geological domain with a history of uranium production. A number of near-surface, high-grade, monazite-hosted rare earth element (REE) zones have been found at the property.
The company completed 44 diamond drill holes on the property in 2019, with 40 intersecting monazite, which presents potential for relatively simple metallurgical processing and extraction. In addition, Appia completed channel and grab sampling at Alces Lake last year that led to the discovery of eight new outcrops and showings. These discoveries have expanded the known footprint of mineralization within an area of 500 by 500 metres and identified the Biotite Lake zone, which potentially extends the mineralized strike to 1.8 kilometres.
In its 2019 exploration program, Appia applied its current understanding of the REE system to target more mineralization, which led to the discovery of the high-grade Richard zone, returning 9 metres of 7.58% total rare earth oxide (TREO). The Richard zone might be a connection of the previously defined Wilson and Charles zones at Alces Lake.
Additional intercepts from 2019 drilling at the Ivan zone included 16 metres of 16.06% TREO and 12 metres of 16.1% TREO. All of the zones remain open on strike and at depth.
Appia has started metallurgical testing of the REE mineralization from Alces Lake and is continuing with its geological modeling of the REE system. More geophysical modelling is planned to define drill targets for this year.
Appia also holds 100% interests in the Eastside, Loranger and North Wollaston properties in the Athabasca basin, and owns 100% of the Elliot Lake property in Ontario, with U3O8 and REE resources that are open on strike and at depth.
James Sykes, the company’s vice-president of exploration and development, has over 10 years of experience in uranium exploration and was involved with NexGen’s (TSX: NXE) Arrow and Hathor’s (now Rio Tinto’s [NYSE: RIO; LSE: RIO]) Roughrider deposits.
Appia has a $14.5-million market capitalization.
Blue Sky Uranium
Blue Sky Uranium (TSXV: BSK) is focused on uranium and vanadium exploration at its 2,500 sq. km Amarillo Grande project in Argentina’s Rio Negro province, where it has made uranium discoveries over the past 12 years. The Amarillo Grande project runs along a 145 km long uranium trend and features the Santa Barbara, Anit, Ivana and Bajo Valcheta properties.
The Ivana deposit is the most advanced and features a 5 km long mineralized trend with a high-grade core. The mineralization is 200 metres to over 500 metres wide and up to 23 metres thick. A resource estimate for this deposit was released in September 2018 and features total inferred resources of 28 million tonnes grading 0.037% U3O8 and 0.019% vanadium oxide (V2O5) for a total of 22.7 million lb. contained U3O8 and 11.5 million lb. V2O5.
The results of a preliminary economic assessment on the Ivana deposit were released in February 2019, and outlined an open-pit mine with a 13-year life producing an average of 1.35 million lb. uranium per year at all-in sustaining costs of US$18.27 per lb. U3O8, net of vanadium credits. The pre-production capital was estimated at US$128.1 million with an after-tax net present value of US$135.2 million, at an 8% discount rate.
Blue Sky has found more exploration targets both nearby the Ivana deposit and extending into its wider Amarillo Grande holdings. Current exploration efforts are targeting three areas with uranium and vanadium anomalies at Ivana, with potential to expand the existing deposit and find new mineralized areas. Auger drilling and down-hole radiometric measurements are ongoing, with more reverse-circulation drilling planned for the first half of this year.
The company is a member of the Grosso group, which has been involved with exploration in Argentina since 1993, and played a role in finding Pan American Silver’s (TSX: PAAS, NASDAQ: PAAS) Navidad deposit and SSR Mining’s (TSX: SSRM, NASDAQ: SSRM) Chinchillas mine.
Blue Sky Uranium has a $13.8-million market capitalization.
Denison Mines
Denison Mines (TSX: DML; NYSE-AM: DNN) is focused on uranium exploration and development in the Athabasca basin in northern Saskatchewan. It has a 90% interest in the Wheeler River project, 35 km northeast of Cameco’s (TSX: CCO; NYSE: CCJ) Key Lake mill. The two deposits on-site are Phoenix and Gryphon. Total probable reserves at the project stand at 1.4 million tonnes at 3.5% U3O8 for a total of 109.4 million lb. U3O8, with Phoenix, the world’s highest-grade undeveloped uranium deposit, contributing 59.7 million lb. U3O8 based on 141,000 tonnes grading 19.1% U3O8.
In December, the company reported that it has completed an in-situ recovery (ISR) field test program at Phoenix and started metallurgical testing for uranium recovery. Denison would be the first to use ISR mining in the Athabasca basin. The in-situ testing evaluated the permeability of the Phoenix deposit and collected data on potential in-situ mining conditions.
The test wells installed confirmed significant hydraulic conductivity within the Phoenix ore zone. In-situ mining of Phoenix will require the installation of 300 large-diameter, commercial-scale wells. Denison has installed two such wells at Phoenix. In addition, preliminary tests suggest low permeability of the basement rock units, supporting an in-situ mining scenario for the asset.
A September 2018 prefeasibility study outlined an in-situ mining operation at Phoenix with underground mining planned for Gryphon. Upfront capital costs of $322.5 million were estimated for Phoenix, with production averaging 6 million lb. U3O8 at expected all-in operating costs in the range of $11.57 per pound. Plans include building a mine to extract the Phoenix deposit, with Gryphon as a potential second operation. In-situ recovery test work is ongoing at Phoenix, with plans to install commercial-scale wells. The company also holds a 22.5% interest in the McClean Lake mill (70% Orano Canada and 7.5% OURD Canada), with a processing capacity of 24 million lb. U3O8 per year.
Denison also owns 80% of the 242.2 sq. km Hook–Carter property (20% ALX Uranium [TSXV: AL]), which is transected by three corridors prospective for uranium mineralization.
Denison is part of the Lundin group of companies and has a $299-million market capitalization.
Energy Fuels
Energy Fuels (TSX: EFR, NYSE-AM: UUUU) is a U.S. uranium and vanadium producer with significant optionality to its output levels. The company is the country’s largest producer of the two metals. In the first nine months of last year, it produced 56,000 lb. U3O8 and1.3 million lb. vanadium oxide (V2O5).
The company’s assets include the Nichols Ranch ISR mine and processing facility in Wyoming and the White Mesa mill in Utah, the only producing uranium and vanadium mill in the country, with an annual licensed capacity of over 8 million lb. U3O8. White Mesa features a separate circuit for vanadium recovery.
Last year, the Nichols Ranch project was Energy Fuels’ primary uranium contributor, with expected output of 50,000 to 70,000 lb. U3O8. Based on a November 2019 release, the company has deferred the development of more uranium-extracting header houses at Nichols, and is operating the asset at lower levels due to uranium market conditions. Increased output is possible from Nichols Ranch within six months of a decision to increase production.
In November last year, the company also announced that due to weak vanadium prices, it would evaluate winding down its near-term production of vanadium pentoxide.
The La Sal complex in Utah is a series of uranium and vanadium mines in proximity to the White Mesa mill. Test mining at the complex was completed in April, and three of the mines within La Sal were refurbished last year.
The Alta Mesa ISR facility in Texas, currently on standby, produced 4.6 million lb. U3O8 between 2005 and 2013. Energy Fuels expects this asset to remain on standby until uranium market conditions improve. Additional assets on standby (which are permitted, and, for the most part, developed) include the Canyon, Whirlwind, Tony M and Daneros mines.
The company’s other assets, in the permitting stage, include Roca Honda, Sheep Mountain and Bullfrog.
On a company-wide basis, Energy Fuels’ measured and indicated uranium resources total 81.3 million lb. U3O8, with additional inferred resources of 49.1 million lb. U3O8.
Energy Fuels has a $214.5-million market capitalization.