Offtake financing turbocharges Aura Energy as the highest leverage uranium stock to invest in on the ASX
Aura Energy has secured a key piece of the puzzle to progress its Tiris uranium project towards production, a US$20m offtake financing agreement.
Funding under the agreement with London-based Curzon Uranium Trading, forms an important part of the Tiris Uranium Project construction funding and paves the way for the full funding package to be obtained. Curzon, which currently holds a diversified portfolio of offtakes in the uranium sector around the world, has used this late stage project construction and production funding previously.
Notably, it secures the required funding without further diluting shareholders’ interests.
This agreement follows Aura Energy’s (ASX:AEE) recent resource upgrade of 10% for the Tiris project in Mauritania to 56 million pounds of uranium oxide.
The financing agreement allows for the interest charge to be paid in uranium concentrate is a variation of the original deal that the company reached with Curzon in January 2019.
This gives the ability for Aura Energy to undertake further offtake finance agreements and be exposed to potentially higher uranium prices.
“We are delighted to have entered the Offtake Financing Agreement with Curzon, as this perfectly positions Aura Energy with a low capex and low operating cost project, financing agreement and offtake agreement to rapidly progress Tiris Uranium into production,” chairman Martin Rogers said.
“Sentiment towards uranium and nuclear power is shifting rapidly amongst investors and we see considerable potential to expand our resource, production throughput and undertake further offtake finance agreements.
“The implications of a potential doubling in electricity demand over the next three decades, along with pressure to decarbonise our power sector could prove huge for uranium.”
Uranium term contract prices rose last week with TradeTech’s mid-term price indicator for September 30 rising US$8 per pound to US$43.57/lb, indicating that recent spot price increases may be grounded in reality.
This is thanks to the shift towards zero carbon energy, which is expected to drive a 2.6% annual growth for nuclear power, or 56% in total by 2040.
Tiris is an advanced stage project that Curzon head of uranium Bram Vanderelst described as being a “compelling low-cost and low-CAPEX project in an attractive mining continent and region”, reasons that led to its extending finance to Aura.
In the company’s updated Definitive Feasibility Study, it estimated capital expenditure at a very palatable US$74.8m and cash costs of US$25.43/lb of U3O8, which is well under current prices.
This low cost is due to the shallow orebody, soft material, no crushing grinding and an innovative beneficiation step which lowers the volume of material to be processed.
The project will produce 12.4 million pounds of U3O8 over 15 years and have a payback period of four years.
After-tax net present value and internal rate of return, both measures of a project’s expected profitability, are estimated at US$79.9m and 22% respectively using an assumed price of US$60/lb. However these numbers are based on only 20% of the inferred resource so the potential for expanding the project and increasing the revenue is significant.
Both the environment permit and the development permitting for the proposed mine is already in place and production is expected to start 18months post full financing.
Tiris also has the potential for exploration discovery, resource and production expansions.
With a number of uranium market tailwinds performance is expected to continue leading up to Christmas.
1) a deficit in uranium supply;
2) a decade of underinvestment in supply;
3) improving political sentiment; and
4) potential for increasing demand.
Aura Energy has the highest leverage of its domestic peers to an improving uranium market.
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.