Corpus Christi, Texas-based Uranium Energy (NYSE-MKT: UEC) has completed a promising preliminary economic assessment (PEA) on its Slick Rock uranium–vanadium deposit, which is one of its many projects in Colorado.
The study shows Slick Rock could produce an average 438,000 lb. uranium, plus 2.6 million lb. vanadium a year for at least 21 years. Life-of-mine production would total 7.4 million lb. uranium and 44.3 million lb. uranium.
Start-up costs to get Slick Rock up and running are relatively low at US$21 million, assuming a production rate of 100,000 tons (90,700 tonnes) a year.
At first glance, economics for the deposit appear encouraging, with an after-tax internal rate of return of 29% and after-tax net present value of US$31.9 million, using a 10% discount rate and spot prices of US$60 per lb. uranium and US$10 per lb. vanadium.
However, those prices are almost double the current spot prices of US$33.75 per lb. uranium and US$5.80 per lb. vanadium, but in-line with future price predictions.
“The positive PEA is based on uranium prices that are roughly in-line with our forecasts . . . based on the view that there will be a large uranium price upswing coming due to compelling supply and demand fundamentals — albeit at prices that are higher than what they are today,” Cantor Fitzgerald analyst Rob Chang notes.
Slick Rock hosts an inferred resource of 11.6 million lb. uranium oxide and 69.6 million lb. vanadium oxide from 2.5 million tons grading 0.228% eU3O8 and 1.37% V2O5, using a cut-off grade of 0.15% eU3O8.But the PEA only incorporated part of that resource, namely 7.4 million lb. uranium oxide and 44.3 million lb. vanadium pentoxide.
The junior uranium producer says the project benefits from sitting in a brownfield area that has seen mining. The U.S. Department of Energy has noted that part of the project is suitable for long-term isolation of uranium-mill tailings. This could help Uranium Energy permit and license the project.
The company says Slick Rock has low technical risks, as it is amenable to conventional uranium mining, which was used before at the site.
Slick Rock is one of the five conventional-mining properties that the company holds in the Colorado Plateau’s Uravan district. The junior’s main assets are in South Texas, including the Hobson processing plant, the operating Palangana in-situ recovery (ISR) mine, along with the Goliad and Burke Hollow ISR projects.
Given Slick Rock is in Colorado, the company has a limited “ability to leverage synergies from its existing operating assets in Texas,” Chang of Cantor Fitzgerald says.
He has a “buy” and $2.10 price target on the stock.
Uranium Energy ended April 22 up nearly 3% at US$1.15. It has a US $103-million market capitalization.