FORT MCMURRAY, Alberta (miningweekly.com) – Since the November 2012 discovery of a new high-grade uranium deposit just outside the south-western corner of Saskatchewan’s famed Athabasca basin, where the world’s highest-grade uranium mines are found, explorer Fission Uranium has succeeded in stringing together new uranium discoveries “like pearls on a necklace”.
The TSX-listed company’s Patterson Lake South (PLS) project now stretches some 3.17 km over an east-to-west strike length, in five separated mineralised zones, which sparked a staking rush in the area soon after the first discovery was revealed, in an area initially thought to host coal, not high-grade uranium mineralisation.
“This is a typical setting for high-grade uranium deposits and they occur in long sinuous occurrences that pinch shut, before opening up again,” Fission president, COO and chief geologist Ross McElroy told Mining Weekly Online during a recent sponsored project site visit (see attached video).
PROJECT FOR THE TIMES
Fission chairperson and CEO Dev Randhawa noted that, with a preliminary economic assessment (PEA) on the project’s Triple R deposit in hand, PLS is ideally positioned to enter production around 2025, when demand is expected to spike on the back of significant nuclear reactor build-out plans across the globe, especially in China.
Randhawa, the longest-running CEO in the Canadian uranium business, said power utilities are currently not contracting future supplies, but adopting a ‘wait-and-see’ approach and taking advantage of low spot prices that are hovering around the $20/lb mark.
He pointed to the fact that, currently, nearly 60% of the global uranium supplies come from politically unstable sources, with Kazakhstan, Russia, the Czech Republic and Ukraine accounting for about 51.7% of the market.
Randhawa pointed out that, globally and in the US, about 20% of electricity is generated from nuclear reactors, however, that means about half of the radioactive metal is sourced from Russia-controlled sources.
“While there are about 60 new nuclear reactors currently being built, no new mines are under construction. Nearly one-billion pounds of uranium pentoxide [will be] uncovered in the next eight years but, owing to a supply glut, production is still being cut,” he explained.
While large producers such as Cameco have shuttered several mines in the wake of falling prices, with the largest uranium producer, Kazakhstan-based Kazatomprom, announcing a more-than-10% cut in output earlier this year, the outlook for uranium remains uncertain.
Impacted by a supply glut, and the slow reactivation of nuclear reactors in Japan following the 2011 incident at the Fukushima Daiichi plant, it will take about two years for these mothballed mines to restart once prices recover, exposing utilities to risk higher contracting prices if they wait longer to enter deals.
“Pressure is growing to return to contracting, as a lack of long-term contracting leaves utilities exposed,” said Randhawa.
For contracting to return, prices will have to rise, but the longer the wait, the stronger the upwards pressure on pricing, as shown in 2006 and 2007, when near-historic volumes of uranium were sold under contract, at a time when prices rocketed to record highs around $140/lb.
Despite the uncovered requirements not being expected to ramp up significantly in the near term, the current price-sensitive sentiment is expected to give way to increasing utility concerns about the security of future supply. That uncertainty creates an opportunity for producers who can weather current weak market conditions, or enter the market at a low cost point.
Randhawa highlighted PLS as representative of one of the last remaining "low-hanging fruit" in the global uranium industry, as it possesses a high-grade deposit, only 50 m from surface, similar to erstwhile major mines in the Athabasca basin like Key Lake, Cluff Lake, Rabbit Lake and McLean Lake.
However, unlike Canada’s largest uranium producer Cameco’s operating McArthur River mine – the world's largest high-grade uranium mine – and the Cigar Lake mine – the largest high-grade uranium deposit in the world – Fission's Triple R deposit is amenable to openpit mining, something not seen in the Athabasca basin for years.
Moreover, having concluded a strategic partnership with China’s biggest nuclear builder CGN, Fission has another advantage over its rivals. The Chinese energy giant has 19 operating nuclear reactors and a further 23 under construction. CGN, which owns a 19.9% stake in Fission, will buy 20% of PLS’s yearly output, with an option to buy a further 15% at industry standard terms.
The PLS discovery hole of what is now referred to as the Triple R uranium deposit, was first announced on November 5, 2012, with drill hole PLS12-022, which is considered part of the R00E zone.
Through Fission’s successful exploration programmes completed to date, the project has evolved into a large, near-surface, basement-hosted, structurally controlled high-grade uranium deposit.
From west to east, these zones are: R1515W, R840W, R00E, R780E and R1620E.
Thus far, only the R00E and R780E zones have been included in the Triple R deposit resource estimate which, at a cutoff grade of 0.2% uranium pentoxide (U3O8) for the openpit and 0.25% U3O8 for the underground portion, is estimated to contain 81.11-million pounds U3O8 in the indicated resource, based on 2.01-million tonnes grading 1.83% U3O8. Triple R also has an inferred resource of 785 000 t grading 1.57% U3O8, for 27.16-million pounds of U3O8.
According to Ross, mineralisation remains open along strike in both the western and eastern directions, and at depth.
A 2015 PEA has 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%.
With expected operating costs of $14.02/lb and a pre-tax IRR of 46.7%, the project is expected to achieve low-cost production with a low payback and highly profitable 14-year mine life.
The PEA envisions that a mill at PLS will have the potential to become a key centrepiece for the emerging Western Athabasca basin – with the potential to process ore from other high-grade projects in the region as they are taken into production.
The mine will potentially produce 100.8-million pounds of yellowcake, at a metallurgical recovery of 95%. The operation could produce 77.5-million pounds of U3O8 in the first six years of operations. Average output would be about 7.2-million pounds of U3O8 over the life of the project, excluding ongoing resource expansion.
The PEA study considered the PLS project as a standalone mine and mill operation, which includes development and extraction of the R00E and R780E zones (Triple R deposit).
The study foresees 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) is captured within the openpit, eliminating the need for expensive, specialised underground mining methods.
This hybrid of openpit and underground mining is expected to result in Triple R potentially being one of the lowest-cost uranium producers in the world.
Fission is targeting the end of 2018 to complete work necessary for a prefeasibility study (PFS) on its Triple R deposit, which will place it well ahead on the value curve.
A significant focus of this summer's drill programme will concentrate on data collection and analysis of various areas required for an advanced PFS study, including metallurgical pit-wall perimeter geotechnical drilling, and hydrogeological hole monitoring.
"PLS has the potential to be the first openpit uranium operation in the Athabasca basin in decades and, with mineralisation at such a shallow depth, we are able to simultaneously accelerate our progress towards PFS stage – a key step on the road to possible future production – whilst continuing to expand our known mineralisation at PLS,” noted McElroy.
With the decision to target the end of 2018 for a PFS study, this programme will include a variety of metallurgical and geotechnical work. At the same time, it will be drilling several holes to grow R1515W – the new, high-grade zone that was discovered during the most recent winter drill programme, as the company moves further west from the Triple R deposit, towards the high-grade boulder field that led to the Triple R discovery in the first place.