TORONTO (miningweekly.com) – Takeover target Fission Uranium has completed a preliminary economic assessment (PEA) on the high-grade uranium resource identified to date on the Triple R uranium deposit, at its 100%-owned Patterson Lake South (PLS) property, in Canada's Athabasca basin region of Northern Saskatchewan.

The PEA had established a base case after-tax net present value, at a 10% discount rate, of $1.02-billion for the $1.1-billion project, as well as an after-tax internal rate of return (IRR) of 34.2%.

"This PEA is an incredibly important milestone and shows the viability of development and profitability of the unique, shallow, large and high-grade Triple R uranium deposit. The study confirms [that] this unique deposit is a robust project with very strong economics,” Fission president, COO and chief geologist Ross McElroy said on Thursday.

With expected operating costs of $14.02/lb and a pre-tax IRR of 46.7%, the project was expected to achieve low-cost production with a low payback and highly profitable life of mine (LoM).

McElroy emphasised that the recently discovered, high-grade R600W zone, which was not included in the PEA, had the potential to add a great deal to the company's bottom line as the Triple R continued to grow.

The PEA envisioned that a mill at PLS had the potential to become a key centrepiece for the Western Athabasca basin – with the potential to process ore from other high-grade projects in the region as they were taken into production.

The mine would potentially produce 100.8-million pounds of yellowcake over a 14-year mine life, at a metallurgical recovery of 95%. The operation could produce 77.5-million pounds of uranium oxide in the first six years of production. Average output would be about 7.2-million pounds of uranium oxide over LoM.

The PEA study considered the PLS project as a standalone mine and mill operation, which included development and extraction of the R00E and R780E zones (Triple R deposit). Owing to the early stage of the drill definition, the PEA did not include the recently discovered R600W zone.

The study foresaw a combination of openpit and underground mining with a dyke system (dyke and slurry wall) for water control. High-grade mineralisation (above 4% uranium oxide) was captured within the openpit, eliminating the need for expensive, specialised underground mining methods.

This hybrid of openpit and underground mining was forecast to result in Triple R potentially being one of the lowest-cost uranium producers in the world.

TAKEOVER TARGET
In July, Canadian uranium exploration and development company Denison Mines agreed to buy rival Fission for about C$483-million, creating a new diversified Canadian uranium company with a portfolio of projects in the prolific Northern Saskatchewan mining region.

Under the terms of the deal, Fission shareholders would receive 1.26 Denison shares for each Fission share held and C$0.0001 a share in cash.

The offer implied a price of C$1.25 a Fission share, an 18% premium to the average volume-weighted price of Fission's shares over the past 30 days. With some 386.23-million shares outstanding, the offer translates into a price of about C$483-million for Fission.

Following the merger, the new entity would be named Denison Energy, have a market value of about C$900-million and be equally owned by Denison's and Fission's shareholders.

Headlining the asset portfolio of the combined company would be two world-class uranium exploration and development projects, including Fission's PLS project and Denison's 60%-owned Wheeler River project, both in the prolific Athabasca basin.

An emerging 15% supply gap could signal a prolonged upturn in the uranium price through to 2024, Canadian uranium major Cameco said recently. A decline in secondary sources of yellowcake was forcing the market to increasingly rely on primary suppliers, which, when coupled with unprecedented growth in the nuclear reactor industry, foretold improved market conditions over the medium to long term.

Closing of the arrangement were expected to occur in October.

The restart of reactor No 1 at the Sendai nuclear plant, in Japan, last month was potentially a harbinger of a rising tide for the uranium industry, underpinned by China’s rapidly expanding fleet of nuclear reactors and other countries seeking to expand their nuclear capabilities as their economies developed.