Forsys Metals (FSY-T) has updated the resource estimate for its Namibplaas uranium deposit, and says it makes sense to combine its Namibplaas and nearby Valencia uranium deposit 7 km southwest to feed via conveyor a single, optimized process plant.
The company’s two deposits in Namibia are 50 km north of Paladin Energy’s (PDN-T) Langer Heinrich mine and 35 km along strike from Rio Tinto’s (RIO-N, RIO-L) Rossing uranium mine. The Rossing mine supplies about half of Namibia’s total output of uranium oxide.
“We now have two orebodies where the geology is similar, and we are able to blend the ore,” Forsys CEO Marcel Hilmer says in a telephone interview.
Namibplaas and Valencia contain 243.3 million tonnes grading 175 parts per million (ppm) (0.0175%) uranium oxide (U308) for 93.9 million contained lb. U308 in the measured and indicated category, at a cut-off grade of 100 ppm.
“We have a large deposit in global terms . . . it’s in the top quartile in terms of size . . . so we have the capability to develop a large plant and become one of the largest producers in the world,” Hilmer says.
A technical report confirming the merits of combining the deposits will be completed in next year’s second quarter, with a feasibility study to follow before the end of 2013. Hilmer believes consolidating the two projects will mean faster execution of a feasibility study, better economics and a shortened time frame to construction.
Production could start as early as 2015, he says, just in time to meet demand from new nuclear power plants that are expected to come on stream in China, Russia, India and the United Arab Emirates.
“We are a short-term proposition in terms of getting into production,” he says, noting that Valencia is one of the only deposits in Namibia that has a mining licence and all permits required to start construction.
Valencia has a 25-year mining licence, and the deposit supports a 17-year mine life that offers a post-tax net present value of US$273 million.
Of the combined resource, Valencia contains 60.5 million lb. U308 in the measured and indicated category, while Namibplaas has 44.4 million lb. At Namibplaas, two new high-grade zones will be the focus of pit-design optimization, and the company points out that there is extensive mineralization along a 1.7 km strike length.
Hilmer, who has spent many years working in Africa, and was most recently in charge of business development at First Quantum Minerals, describes Namibia as a country that looks favourably on the uranium mining industry, with no restrictions on uranium exports or on the development of uranium mines that meet its stringent safety requirements.
Namibia is the world’s fifth-largest uranium producer and the industry drives its economy, Hilmer continues. He comments that the government is “proactive and competent” and invests in infrastructure, including a commitment to build a second desalination plant and another coal-fired power plant. The two projects are expected to be completed in 2014 or 2015.
Namibplaas and Valencia already have access to water, power and roads.
Looking ahead, Hilmer says the company would eventually need a strategic partner who is interested in offtake. “We have 100% of that available, and we would be entering into discussions with interested parties to participate at the project or company level, providing project finance and/or an equity issue, and a right to offtake.”
Hilmer forecasts the contract price of uranium should bounce back to the US$70 per lb. range in the not-too-distant future. “We think there will be improvement next year and strong improvement in 2014,” he says.
At press time Forsys was trading at 64¢ a share within a 52-week range of 51¢ to $1.14. The company has 110 million shares outstanding.
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