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Mining
Uranium miners have treaded a fair bit of water in 2022, with prices ebbing and flowing across the year after a dramatic run in late 2021 powered by Sprott’s buying spree on the lightly traded spot market.
According to Numerco, uranium is currently paying US$48/lb, below the long term incentive price of US$60/lb generally accepted as the entry point to bring new production online.
Most uranium is traded on long-term contracts between miners and utilities, meaning the spot market is more a guide than a measurement of what the price of yellowcake is actually doing.
Inflation has also moved the goalposts somewhat as well with famed resources investor Rick Rule calling for a uranium price of US$75/lb as the new incentive price back in June.
Bannerman Energy (ASX:BMN) CEO Brandon Munro, the former chair of the World Nuclear Association Demand Working Group, said today a price of US$80/lb would be needed to satisfy demand out to 2030, following on from warnings from uranium experts that utilities who have not invested in new supply could be caught out like lithium converters amid the current electric vehicle boom.
Munro’s comments came as Bannerman released a definitive feasibility study on the Etango-8 project in Namibia, which would carry an NPV of US$209m post tax and IRR of 17% at base pricing of US$65/lb, doubling to US$436m and 25% at a US$80/lb upside.
“The DFS has confirmed, to a definitive level of study, that the Etango-8 Project firmly warrants development. At a base-case uranium price of US$65/lb, Etango-8 delivers attractive projected returns from a development that has been heavily de-risked via deep prior technical and demonstration plant activity,” Munro said.
“Underscoring Etango’s impressive leverage, the projected NPV8 more than doubles at a uranium price assumption of US$80/lb.
“Whilst the Etango-8 economics are robust at US$65/lb, we believe a number closer to US$80/lb will be necessary to incentivise sufficient production across the industry to meet uranium demand this decade.”
Munro says the $270 million capped junior is “moving firmly down the path towards production at the precise moment the world wakes up to the essential role of nuclear power”.
Bannerman hopes to make an FID, market conditions permitting, during the second half of next year.
Paladin Energy (ASX:PDN), recently green lit the refurbishment of the Langer Heinrich mine in Namibia, while Boss Energy (ASX:BOE) has approved construction of the Honeymoon restart in South Australia.
The uranium market has been trying since 2011, when the Fukushima nuclear incident sucked the life out of the sector and sent prices to loss-making levels.
However, it has seen a turnaround of sorts, with potential impacts to Russian supply, inflation in oil, coal and gas prices and a rethink on the positioning of nuclear power in the transition away from fossil fuels have stoked hopes demand will boom in the coming years and decades.
Bannerman plans to produce 3.5Mlbs of uranium oxide a year at an all in sustaining cost of US$38.1/lb and processing rate of 8Mtpa over a 15-year mine life at Etango-8.
While pre-production capex has increased 16% from US$274m to US$317m since a PFS in August 2021, opex has dropped 5% from US$40.3/lb.
Bellevue Gold (ASX:BGL) says it remains on schedule for the opening of one of Australia’s largest gold developments, its Bellevue mine near Leinster in the northern Goldfields, tapping the market for fresh funds.
$1.3 billion capped Bellevue will raise $60m in a placement priced at $1.05 per share, a 13.2% discount to its last closing price, along with a $10m share purchase plan.
It will use the cash to accelerate 4000-5000m of underground development to open new production fronts and “derisk” its post-production ramp up, and bring forward the Tribune mining front where open pit mining equipment will be used to construct a new portal.
BGL also says the cash will provide “balance sheet flexibility”, combined with $47m cash in the bank as of November 30 and an undrawn $200m project finance facility rom Macquarie Bank.
“Every aspect of the project is going to plan or better. Development rates, grade control drilling results and exploration are all exceeding our expectations,” BGL managing director Steve Parsons said.
“The success is providing us with an opportunity to unlock the value of the project sooner and to a greater extent than originally planned.
“This additional funding will enable us to capitalise on this opportunity by bringing forward some of the underground development, de-risking the production outlook in the process.
“It will also ensure we have a robust level of working capital as we ramp up production.”
BGL thinks it will cost another $219m before hitting commercial production at the 200,000ozpa gold operation, due in the second half of 2023.
Ramp-up is expected to take two months after first gold, with contractor Develop Global (ASX:DVP) expected to ramp up to four jumbos (drills, big ones) by April having introduced a second in October.
Miners have been bathing in the summer warmth so far in December, but received a frosty reception from investors as strong US economic data prompted a run on the US dollar and fears of sustained rate hikes from the Fed.
Gold fell 2.3% to US$1767/oz, while most of the base metals also fell and Singapore iron ore prices are down slightly in early trade.
On the other hand thermal coal prices hit the US$400/t level again, with the coal majors defying a 0.37% fall in the materials sector and 0.66% fall for energy stocks.
Yancoal (ASX:YAL) rose 3.74%, Whitehaven (ASX:WHC) was up 2.77% and New Hope (ASX:NHC) and Coronado (ASX:CRN) were among the strongest mid-tier performers.
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