TORONTO (miningweekly.com) – Toronto-based uranium-miner Denison Mines plans to start production in 2010 at its Arizona 1 deposit, in north-central Arizona, the firm announced on Tuesday.

Denison is the sole owner of Arizona 1, which contains mineral resources of 72 121 t, at an average grade of 0,66 U3O8, after providing for 10% mining dilution at zero grade.

However, the deposit remains open and unexplored at depth, and exploration to increase resources and extend the mine life will be carried out from underground.

The Arizona 1 deposit, which is located about 315 miles from Denison's White Mesa processing facility, will be developed as an underground operation, with ore hauled by truck to White Mesa.

A shaft was originally sunk at the property in the mid-1980s, reaching around 365,7 m below surface, before activity was halted because of low uranium prices.

Denison began rehabilitating the shaft in mid-2007, and completed the work, as well as some underground development and the sinking of an internal raise and ventilation shaft in September 2008, but the project was put on care-and-maintenance while the company waited for an air-quality permit.

The permit was eventually issued on September 1 this year by the Arizona Department of Environmental Quality.

The project will be low cost, at just $2,3-million, because the mine shaft, head frame and hoist are already in place, and a portion of the underground development work was completed before work was frozen in 2007.

The capital is mainly needed for the remaining underground development, an ore pad at surface and to buy $0,4-million of underground equipment, Denison said.

The total production from Arizona 1 is forecast at about 857 000 lb of uranium, of which 156 000 lb will be available for sale in 2010, 461 000 lb in 2011 and 240 000 pounds in 2012.

Cash operating costs are estimated at $30,50/lb.

Sales from the project will be made through a combination of existing contractual obligations and spot sales “as appropriate”, the company said.

The deposit is hosted in a subvertical breccia pipe which crosscuts the surrounding sediments with uranium oxides pitchblende or uraninite being the ore minerals.

Arizona is the first of several breccia-type deposits that Denison plans to develop over the next several years, CEO Ron Hochstein said on Tuesday.

The projects, including  Pinenut, EZ-1, EZ-2 and Canyon, will developed sequentially and together are expected to produce more than 4,7-million pounds.

Denison has uranium mining assets in the US and Canada, as well as exploration properties in Zambia and Mongolia.

However, the firm has curtailed some operations because of lower uranium spot prices.

Denison shares rose 1,3% on Tuesday, to C$1,60 apiece by 15:59 in Toronto.

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