Ground Breakers: Big Boss will spend $113m to turn Honeymoon into Australia’s third uranium mine
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Uranium and nuclear power are back in the news in Australia, where new Nationals leader David Littleproud has made the end of the moratorium on nuclear energy a weird cause celebre in the early days of the Coalition’s latest stint in opposition.
It was promptly knocked back by freshly-crowned Opposition Leader Peter Dutton who said it wasn’t on the table.
But as the new Nats measure support for Net Zero with their love of all things regional, expect this talking point to remain hovering around in the air somewhere.
That nuclear energy has a role in the transition from conventional fossil fuels to green energy has been strongly promoted by the industry for a while now.
A looming undersupply issue, buying on the spot market by investors led by the Sprott Physical Uranium Trust, the Russian invasion of Ukraine and the continued support for nuclear power in the green energy transition from the American Biden Administration have all helped foster a situation which saw spot prices rise above the key US$60/lb mark for the first time in over a decade in March.
They have since retreated to US$47.38/lb according to Numerco, but confidence is rising across the once downtrodden uranium mining sector.
Today delivered a significant moment for that cohort, with $785 million capped Boss Energy (ASX:BOE) formally announcing its plan to rebuild the Honeymoon uranium mine in South Australia.
The 2.45Mlb per annum yellowcake mine, which will cost around $113 million to construct and refurbish, will be just the third operating in Australia alongside BHP’s (ASX:BHP) Olympic Dam and the privately owned Beverley mine, also in SA.
Boss plans to be in production by the fourth quarter of 2023 with a three-year ramp-up to its full production rate, timed for a looming nuclear supply shortage expected from 2024.
Honeymoon is set to operate for an initial life of 11 years, with an IRR of 47% at a uranium price of US$60/lb.
It would deliver its 2.45Mlb output at a cost of US$25.60 using an ion exchange processing technology similar to the nearby Beverley.
While Honeymoon will be Australia’s first new uranium mine since the recent closure of the Rio Tinto-backed Ranger mine in the Northern Territory it is actually a restart project.
Honeymoon was put into care and maintenance by previous owner Uranium One in 2013, two years after the meltdown of a nuclear reactor at the Fukushima Daichii power plant in Japan hammered sentiment and prices for uranium.
Boss MD Duncan Craib said company is in a strong negotiating position with utilities ahead of the project’s redevelopment.
“This Final Investment Decision puts Boss firmly on track to be Australia’s next uranium producer,” he said.
“We are fully-funded with no debt, fully-permitted and extensive infrastructure in place. Our front-end engineering studies are completed and we are ready to order key equipment and start construction immediately.
“This puts us in an extremely strong negotiating position with utilities and ensures we can capitalise on the looming uranium supply deficit.”
Boss flagged the FID in March with a $125 million share placement which, along with a strategic uranium stockpile of 1.25Mlb worth an estimated US$59.38m, should help fund it into production.
Materials sector stocks fell over 1% powered by a savage selloff in lithium stocks, with Pilbara Minerals (ASX:PLS) losing around a fifth of its value and others following suit.
IGO (ASX:IGO), Mineral Resources (ASX:MIN) and Allkem (ASX:AKE) were among the big lithium players to suffer.
Commentators are pointing to a bearish note from Goldman Sachs that chemical prices could drop to US$16,000/t from current prices of around US$70,000/t as the source of the discord.
Other market watchers are scathing of Goldman’s position (though it should be noted the doomsayers at Morgan Stanley were right about the last lithium bear market).
Interesting times. The demise of high #lithium prices has been greatly exaggerated. @GoldmanSachs call for an average price of ~ $16K per MT in 2023 will look increasingly foolish as the months pass. The laws of supply & demand will dictate price. pic.twitter.com/WTociw6fGa
— Joe Lowry (@globallithium) May 30, 2022