The company attributes most of the increase to a weakening U.S. dollar but also cites higher costs for construction, concrete, structural steel, and labour.
Also, operating costs have climbed on higher power costs.
Still, the company is betting uranium prices will continue to rise and make the project more economic in the short term. “As time progresses, the uranium price is forecast to increase, and Honeymoon can be brought on-stream relatively quickly and in the context of the [current] large regional exploration opportunity,” the company states.
At the end of October, the spot price for uranium was US$20.25 per lb., up from US$14.50 at the end of 2003.
At last count, the Honeymoon project was home to an indicated resource of 2.8 million tonnes grading 0.12% U3O8, for a total of 7.3 million lbs. U3O8 with an average grade thickness of 0.84 metre per cent U3O8.
The 400-tonne-per-year plant is the maximum size that can be built, given the resources available on the mining lease, says Southern Cross CEO Mark Wheatley. “And higher uranium prices are needed to make this option attractive to shareholders.”
The latest review pegged the cost of a 400-tonne-per-year plant at A$44.1 million, with cash operating costs projected at A$17.70 per lb. The mine life is estimated to be 6-8 years.
Earlier this year, after a 49-hole drilling campaign failed to boost resources, the company said it would consider building a plant that is smaller and more durable than the one originally planned 750-tonne-per-year operation.
In the meantime, Southern Cross intends to focus its efforts on exploration at Goulds Dam and the surrounding region, about 80 km to the northwest. Resources there total 13.4 million lbs. U3O8, with an average grade thickness of 0.29 metre per cent U3O8.
Based on positive exploration results, the company may consider building a 750-tonne-per-year plant at Honeymoon. In 2002, a cost and engineering study by Australian-based Ausenco pegged capital costs for such a plant at A$48 million, with cash costs estimated at A$11.80 per lb. The latest review boosts those figures to A$56 million and A$15 per lb.