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Uranium prices ‘are turning the corner’ – Canadian developer

24th February 2017

By: Ilan Solomons

Creamer Media Staff Writer

     

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Despite uranium prices remaining weak, Canadian mineral resources company GoviEx Uranium CEO Daniel Major believes that they are turning the corner and he is optimistic about more price improvements.

In an interview with Mining Weekly earlier this month, he acknowledged that the past few years had been “extraordinarily difficult” for the uranium industry and 2016 was no exception.

He recounted that the uranium spot price had fallen from $34.70/lb of triuranium octoxide (U3O8) in January to $18/lb in November, decreasing nearly 50%. Major elaborated that this price decline was against a background of sizeable inventories, covered contracts and excess enrichment capacity. “In December, however, we started to see the first signs of the long-expected uranium price recovery.”

He highlighted that the spot price closed the year at $20.44/lb of U3O8 – a 20% increase on last year’s low. “Producers cannot make money at the current uranium spot price and we, thus, expect long-term demand for uranium to grow, with demand forecast to rise from about 180-million pounds of U3O8 in 2016 to between 220-million pounds and 260-million pounds by 2025 based on the lower and upper case scenarios.”

Major commented that there have been uranium supply cuts in recent times, but that there had not been substantial supply reductions as yet. In January, Kazakhstan – which is a major uranium-producing nation – started cutting back on production, which has helped improve prices. He believes that demand growth and supply shortages will soon result in a gradual uptick in uranium prices, particularly as many of the older uranium mines would soon be reaching the end of their operating lives.

Major remarked that enrichment overcapacity was bringing in underfeeding; however, since the start of the year, enrichers had reduced their capacities. He said that another factor was that long-term contracts were coming to an end and would soon need to be replaced, which would provide new opportunities for emerging uranium miners.

Further, Major highlighted that, recently, the US and a number of European countries had indicated their intention to introduce new nuclear energy supply and/or bolster their existing supply. He added that Japan was moving forward on expanding its nuclear power sector and had about 20 reactors in the approval process.

Major also pointed out that, in China and India, the forecast was for a planned increase in nuclear capacity from 35 GWe to 190 GWe by 2020.

GoviEx continues to focus on initiatives aimed at reducing the incentive price required for the development of its flagship Madaouela uranium project, in Niger.
The company attained a major milestone last year with the issuance of a mining permit for its Madaouela tenement. The project is essentially development ready; however, GoviEx is working continuously to improve the cost structure for the asset.

“We have placed a priority on keeping costs low in 2017, while increasing the value or beneficiating our portfolio of uranium assets and positioning them for development,” said Major. He highlighted that drilling at the Miriam deposit, at the Madaouela project, would focus on increasing the resources amenable to openpit mining. If successful, this is forecast to reduce capital costs in the first five years, decrease mining costs and considerably simplify the project to a Phase 1 openpit, further reducing risk for debt providers and potential offtake and equity partners.

Major informed Mining Weekly that the company had already been engaging potential project financiers. “We felt that the best option to raise the required capital was to approach export credit banks. There is no real mining project finance market available to companies seeking investment currently, as most commercial banks will look at Niger as a risky investment jurisdiction and will likely reject investing in a project based in that country.”

He said that the export credit institutions that the company had engaged with to date had been supportive of the Niger project.

The company is seeking to raise the required $360-million in project finance over the next 18 months. GoviEx is seeking to raise two-thirds of this through debt financing and the remaining one-third through equity.

Meanwhile, in Zambia, the company is working to re-examine project economics to better understand the commercial requirements to incentivise the future development of its Matunga project.

“We are confident that, with ever-improving uranium prices and growing interest in nuclear power generation, particularly with its ability to offset carbon emissions, our projects will be well placed to meet the demand of the global industry in the not- too-distant future,” Major concluded.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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