Denison sees lower 2011 uranium output, targets 10Mlb/y by 2020

1st February 2011 By: Petronel Smit

JOHANNESBURG (miningweekly.com) – TSX-listed Denison Mines expects to produce 14% less uranium oxide (U3O8) in 2011, with output set to fall to 1,2-million pounds from the 1,4-million pounds produced last year.

The midsized uranium producer also said on Monday, that uranium sales would decrease by 27% to a forecasted 1,3-million pounds of U3O8 in 2011, of which just over 500 000 lb would be sold into long-term contracts and the remainder on the spot market.

Denison, which owns three active mines in the US, sold 1,8-million pounds of U3O8 in 2010.

Vanadium oxide (V2O5) production was expected to fall by 4% this year to 2,2-million pounds, against the 2010 output of 2,3-million pounds from its White Messa mill in Utah.

However, vanadium sales were expected to pick up from 2,4-million pounds of V2O5 sold in 2010, to a projected 2,8-million pounds of V2O5 in 2011.

The cash cost of production was expected to average at about $43,50/lb of U3O8 net of vanadium credits, excluding sales royalties. The cash cost a pound reflects the impact of an increase of over 200% of the cost of sulphuric acid as compared with 2010.

GROWTH TO BOOST OUTPUT

Meanwhile, CEO Ron Hochstein said that Denison’s 2011 plan and budget was focused on growth, with the largest exploration programme ever undertaken on its Canadian Wheeler River project, the recommencement of drilling on its Zambian project and the development of its second mine on the Arizona Strip.

The company, which would also search for new potential acquisitions, aims to increase its uranium production to at least ten-million pounds a year by 2020.

Hochstein said that Denison would participate in exploration programmes in Canada and the US.

“The total budget for these programmes will be $15-million, of which Denison's share would be $8,8-million. The Wheeler River programme, of which Denison's share is $6-million, represents the most significant of these programmes,” he noted.

A 35 000-m drilling programme has begun at Wheeler River to test additional areas with known uranium mineralisation along the same mineralised trend hosting the Phoenix deposit.

Exploration work in Canada would also be carried out on the Moore Lake, Hatchet Lake, Murphy Lake, Bell Lake, McClean Lake and Wolly projects at a total cost of $3,8-million, with Denison's share at $1,6-million.

In the US, drilling was planned on the Beaver mine trend and at the Sunday Complex to outline potential resources, which could extend the life of existing operations on these properties. An exploration programme on the company's DB1 breccia pipe in Arizona was also planned, bringing the total cost of the US exploration programme to $1,3-million.

Meanwhile, Denison reported that exploration and development activities would be restarted at its Mutanga project in Zambia. A 17 000-m exploration drill programme would follow up on positive drilling results obtained in 2009 and metallurgical test work would be undertaken to further define process design criteria and operating costs. The Zambian programme would total an estimated $6,2-million.

In Mongolia, a $7,4-million exploration and development programme was in the pipeline. The company reported that a $3-million, 38 000-m exploration programme was anticipated to be undertaken on licence areas that currently do not have defined resources, to confirm resources and support future work.

Development activities on more advanced licence areas would include the drilling of initial test patterns and pilot plant design. The implementation of the Mongolian programme was contingent on the resolution of outstanding issues with the Mongolian government regarding the Nuclear Energy Law and the structure of the Gurvan Saihan joint venture.

“The company remains hopeful that these issues would be resolved early in 2011, such that the planned programmes can be completed,” said Hochstein.

Denison would also spend $6,4-million on development stage projects in Canada and the US in 2011.