Aura Energy to enhance uranium, estimate vanadium resource
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After a massive year of buildup at the already viable Tiris Uranium Project, Aura Energy shareholders are staring down first half returns as AEE readies for a regional exploration program aimed at enhancing resources as the company continues to transition from a uranium explorer to producer.
Aura Energy’s (ASX:AEE) fully permitted Tiris Uranium Project is now positioned to upgrade Inferred resources to the Measured and Indicated categories by reducing drillhole spacing within the Tiris East project area.
Drilling is set to commence in the first half of the year on areas of the current Inferred resource within the catchment area of the proposed plant site, as the company leans into its transition towards becoming a fully-fledged uranium producer.
The previous resource drilling programme in 2017 focused on converting Inferred Resource to Measured and Indicated status to support the Tiris Definitive Feasibility Study, with the areas not included in 2017 program expected to be upgraded following similar drilling as part of the new programme.
Aura will cover the Tiris West resources in a separate future program.
The once forgotten commodity is fetching upwards of US$44/lb on the spot market, slightly down on the more than US$50/lb uranium hit last year, driven by investment purchases off the spot market by the urgency of the Sprott Physical Uranium Trust.
But with prices up around 40% since the start of 2021, spot and term prices are on track to rise to the US$60/lb – a level widely regarded as the margin above and beyond the incentive for new production.
Aura is also deep into the completion of a resource estimate for the vanadium contained within the project, which could reduce cash spend on a project AEE has already designed for lower operational costs.
“We are excited to announce the proposed Resource Enhancement Programme, seeking to expand the Tiris uranium resources whilst concurrently progressing towards uranium production,” acting chief executive officer Will Goodall said.
“We will focus on expanding the existing Measured and Indicated resources and locate additional exploration targets that have been underexplored.”
The Tiris Uranium Project in Mauritania currently has a resource of 56 million pounds of U3O8 following a 10% upgrade in August 2021.
Tiris has been the subject of a recently updated Definitive Feasibility Study to bring capital estimates in line with 2021 figures, factoring in impacts of the global COVID-19 pandemic, promising robust economics with after-tax net present value and internal rate of return – both measures of a project’s profitability – estimated at US$79.9m and 22% respectively. The project is viable at current uranium pricing and well placed to benefit from any market upside.
Capex is an unchallenging US$74.8m while cash costs are expected to be just US$25.43/lb of U3O8, which promises strong returns for shareholders given those buoyant uranium prices, with analysts looking at prices this year which easily double AEE’s cash costs.
Aura has also secured a key part of the project construction funding through an offtake financing agreement with London-based Curzon Uranium Trading that was finalised in October last year, which complements the uranium offtake agreement executed with Curzon in 2019.
The US$10m financing agreement includes a facility for an additional US$10m that could be accessed at the lender’s discretion.
Additionally, water drilling carried out late last year has confirmed the presence of water at the project, which will serve to keep operating costs low.
Work is also underway to further increase resources and lower operating costs.
On the ESG front, the company has completed the first stage of its Net Zero Emission Study, which confirmed that Tiris would generate total Scope 1 and Scope 2 baseline Greenhouse Gas (GHG) emissions of 16,600 tonnes of carbon dioxide equivalent (tCO2e) per annum, or about 0.15% of Mauritania’s total GHG emissions.
Aura recently revitalised its board with a focus on uranium production by appointing Phil Mitchell as its chairman along with Warren Mundine and Bryan Dixon as non-executive directors. Dr Will Goodall, was appointed as acting CEO in January 2021 to maintain momentum for the project while the search for a permanent Managing Director is undertaken.
It is also planning to spin-off its Tasiast South Gold and Base Metals Project held by its subsidiary Archean Greenstone Gold via a planned IPO with an in-specie distribution to existing shareholders.
Goodall told Stockhead, the timing and attractive capitalisation – in comparison to AEE’s legacy uranium peers – provides strong upside potential for investors.
And all this is planned for early 2022, bringing together a year-long strategic execution which will give shareholders the opportunity to realise value from a project that’s moved seamlessly and quietly beneath the radar.
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.