The only ship worth a damn is friendship… nuclear friendship. Pic: Getty Images
Aura ups fixed price uranium contract 70% as buyers get anxious about impending nuclear fuel shortage
Energy
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- Aura Energy has delivered a shot in the arm to the economic potential of its Tiris uranium project in Mauritania
- A recut offtake deal which bumps up fixed prices by 70% will add US$22m to NPV and over US$40m to life of mine revenues
- Analysts are ratcheting up uranium price forecasts in response to an imposing supply shortage of the nuclear fuel
Special Report: Think the uranium boom isn’t the real deal? A key Aura Energy customer is accepting a 70% hike in future contract prices to secure pounds from the planned Tiris uranium mine in Mauritania.
Aura Energy (ASX:AEE) will now receive US$74.75/lb U3O8, more than double its expected US$34.50/lb production cost, on 150,000lb of yellowcake to be sold annually over seven years to experienced uranium trader Curzon Uranium.
Another 150,000lb will be sold each year to Curzon at a 4% discount to the prevailing spot price, providing Aura with upside on the terms of the deal.
U3O8 is currently running at almost US$90/lb, around 80% up over the past year.
A shot in the arm
Previously Curzon’s fixed price component of its Tiris offtake agreement was going at US$44.09/lb.
The 70% increase is a shot in the arm. Total contracted volumes have also been pared back from 2.6Mlb to 2.1Mlb.
With an early 2023 DFS ramping production up from 800,000lb to 2Mlb, that means the vast bulk of production remains uncontracted to capture further upticks in the uranium price.
Those appear likely with experts at Canaccord Genuity this week saying “we cannot stress enough the fragility of primary mine supply”.
That prompted the corporate advisory firm to ratchet up 2024 price forecasts 15% to US$105/lb. Their long-term price assumption is up from US$75-80/lb to US$90/lb.
By way of comparison, Aura has calculated its valuation for Tiris at just US$80/lb.
If AEE can make an investment decision before March 31 next year, the contract terms will remain as announced today. That would see post-tax NPV8 rise from US$366m to US$388m, with IRR up 2% to 36%.
Life of mine revenue will rise from US$2.354b to US$2.395b over a 17-year mine life.
“We are very pleased with the cooperation and consideration received from Curzon – a leading global trader in uranium – on this restructured offtake agreement and welcome Curzon as an important partner and Aura shareholder for the development of the Tiris Uranium Project which will have significant mutual benefits for both parties,” Aura MD and CEO Andrew Grove said.
“The restructured offtake agreement releases significant value in the Project and is another important step in the development of the Tiris Uranium Project.”
Long term investor
The arrangement also intertwines the fortunes of Aura and Curzon, with AEE to pay Curzon US$3.5m in either cash or Aura shares to broker the deal.
Curzon will also make a US$3.5m placement at 18c a share with an escrow arrangement that will ensure it remains leveraged to the uranium developer’s success.
Tiris represents one of two developments Aura has in the pipeline to feed an imposing supply shortage in the global nuclear fuel market.
It also holds 100% of the Haggan project in Sweden, which contains 2.5Bt of vanadium with large co-products of sulphate of potash and uranium.
A new government in Sweden is investigating the loosening of restrictions on the mining of uranium in the Scandinavian country, which already operates nuclear power plants.
This article was developed in collaboration with Aura Energy, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
