Kristie Batten: Pivotal weeks ahead for uranium hopeful Aura Energy

One of Australia’s top mining journalists, Kristie Batten writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene.

Aura Energy (ASX:AEE) could be the next ASX-listed uranium hopeful to start construction on a new mine.

Chairman Phil Mitchell last week described 2024 as the most transformative year for Aura, but the biggest milestone could still be achieved before year-end.

Aura owns the shovel-ready Tiris uranium project in Mauritania, which is getting to the pointy end of the financing process.

The project is fully permitted and Aura is aiming to making a final investment decision in the March quarter of 2025.

“We’re getting ready for FID and funding is the next biggest leg for the business,” Aura managing director Andrew Grove told the RIU Uranium Investment Day two weeks ago.

The company is running a dual-stream funding process to secure the US$230 million in capital costs for Tiris.

Advisory firm Orimco was appointed in June to arrange debt funding, while Macquarie Capital is running a process to secure a potential strategic investor.

Reports from the technical due diligence team are due shortly, following a recent visit to site.

“Some of the potential investors have been onsite so we’re hoping by the end of December, we have term sheets from all these parties and we’ve got a clear pathway through to development,” Grove said.

“We’re talking a US$250 million package. We think the debt will support US$150 million so potentially with the strategics, we could fill that whole gap or some of the strategics will be looking at maybe access to the whole project. We’ll wait and see.”

The company is well-funded with $16 million in cash, which will see it through to FID.

Aura recently successfully renegotiated a historical offtake agreement with Curzon Uranium.

“Essentially, our average fixed contract price pursuant to the Curzon offtake arrangements has increased 70% to US$74.75 per pound of uranium, up from US$44.09/lb – subject to FID by early 2025, which we’re confident of achieving,” Mitchell said.

“Total contracted volumes reduce from 2.6Mlb to 2.1Mlb over the same seven-year term, delivering US$41 million of additional potential revenue to Tiris at a uranium price of US$80/lb.”

Low-cost production

Aura owns 85% of Tiris with the supportive Mauritanian government holding a 15% free-carried interest.

The Tiris project sits in the remote Sahara Desert.

The most recent economics for the project, released in September, were based on the resource of 91.3 million pounds of uranium oxide.

The operation is expected to produce 43.5Mlb of uranium, or 1.8Mlb per annum, over 25 years at all-in costs of US$41 per pound.

RBC Capital Markets acknowledged Tiris as a major uranium project last week and forecast an incentive price of US$100/lb.

But Aura doesn’t need to wait for the price to return to those levels due to low operating costs.

“Really driven by the nature of the mineralisation,” Grove said.

“It’s a calcrete-hosted mineralisation and I guess the analogue is Paladin’s Langer Heinrich except our mineralisation is from surface to only 5m deep. It’s in the weathered granites and it’s free-dig so there’s no drill and blast or crushing and grinding.

“The mineralisation is very fine, so we can dig it up, put it through a simple scrubber, which is like a cement mixer with water, put over a set of screens, and take the fine size fraction, and 91% of the uranium deports to 13% of the mass.

“So you’re upgrading what’s an in-situ grade of about 255ppm in the first 10 years to 2200ppm into a very small alkaline leach plant and we can do that for about US$9/lb.”

Using an US$80/lb uranium price, the project has a post-tax net present value of US$499 million, an internal rate of return of 39% and payback period of just 2.25 years.

Construction is expected to take 18 months from the time of FID, which should result in first production in late 2026 or early 2027.

A project update from Aura is imminent.

A standout project

Argonaut recently released its 2024 Best Undeveloped Projects report, highlighting 18 projects owned by ASX-listed companies.

Tiris was one of two uranium projects to make the cut, the other being NexGen Energy (ASX:NXG) ’s large Rook I project in Canada.

The broker expects Tiris to achieve first production in 2027 and ramp-up to peak production of 2.25Mlbpa in 2030.

Argonaut analyst Jon Scholz recently initiated coverage of Aura with a speculative buy rating and 40c price target – 158% upside to Friday’s closing price.

“We believe the timing of Tiris development and ramp-up coincides with tightness in the uranium market, driving economic upside from our near-term bullish price outlook,” he said.

Argonaut expects the spot uranium price to rally back to more than US$100/lb for the next two years before it moderates over the remainder of the decade as the market starts to balance.

At Stockhead we tell it like it is. While Aura Energy is a Stockhead advertiser at the time of writing, it did not sponsor this article.