The feasibility study for Canadian uranium exploration and development company Forsys Metals’ wholly owned Norasa project, in Namibia, has found the project’s mineral reserves to be higher than initially expected, confirming the economic viability of the project.
As of October 2013, the project’s mineral reserves were estimated at 79-million pounds of uranium oxide (U3O8); however, the feasibility study, released in March, estimated that the project site contains 90.7-million pounds of U3O8, otherwise known as yellowcake.
The increase is primarily the result of the addition of 10.7-million pounds of U3O8 from the mine’s Namibplaas deposit.
At full production, the mine will produce 5.2-million pounds of U3O8 a year, which will be a significant contribution to Namibia’s thriving uranium mining, explains Forsys CEO Marcel Hilmer, adding that the mine is expected to have a life span of 15 years.
Hilmer notes that the mine’s processing plant has been improved through a leach-time reduction, a throughput increase and a shortening of the crushing process from three to two stages.
The increase in estimated mineral reserves, in conjunction with the upgraded processing, resulted in a change to the mine’s production schedule, with Norasa’s yearly throughput rate now estimated to be 11.2-million tonnes, up from an estimated 8.2-million tonnes in 2010.
Further, owing to the enhancement of the process plant, the feasibility study also indicated reduced operating costs.
The mine’s 2013 engineering cost study estimated that, on average, it would cost $34.76/lb of U3O8 mined for the first five years, with the price increasing to $38.20/lb of U3O8 thereafter, owing to lower-grade veins and a deeper pit.
However, both these figures dropped after the release of the latest feasibility study. The average cost for the first five years is now estimated at $32.96/lb of U3O8 mined, after which it is expected to increase to $34.72/lb.
Further, at a discount rate of 8%, the feasibility study estimated that the pretax net present value (NPV) of the mine is $622.6-million, with an internal rate of return of 32%.
The feasibility study also contained a sensitivity analysis, which reported that the project is most sensitive to changes in the uranium price. A significant decline in the NPV of the mine could be caused by anything exceeding a 15% drop from the base case assumption of $65/lb for U3O8. The current spot price of yellowcake is about $38/lb and the contract price is $49/lb.
Hilmer, however, remains positive, highlighting that demand and, therefore, the price of uranium are expected to rise, given the number of nuclear reactors being built worldwide.
He also believes that Forsys has its ducks in a row to participate in the global uranium market.
“Namibia has a long history of uranium production; existing infrastructure, established permitting processes, a positive uranium outlook and other mines nearing their end of life provide advantages for Forsys,” he concludes.