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Azarga Uranium Files Robust PEA for Dewey Burdock Project

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Azarga Uranium Files Robust PEA for Dewey Burdock Project

 

 

 

 

 

AZARGA URANIUM CORP. (TSX:AZZ) (OTCQB:AZZUF) (FRA:P8AA) has filed its National Instrument 43-101 Technical Report and Preliminary Economic Assessment for its flagship Dewey Burdock In-situ Recovery Uranium Project in South Dakota, USA following the Company’s press release dated 4 December 2019.

 

Highlights:

 

  • Pre-income tax IRR of 55% and NPV of US$171.3 million (at US$55 per pound uranium sales price and 8% discount rate)
  • Post-income tax IRR of 50% and NPV of US$147.5 million (at US$55 per pound uranium sales price and 8% discount rate)
  • 14.3 million pounds of U3O8 production over 16 years; steady state production of approximately 1 million pounds per year achieved in year 3
  • Low initial capital expenditures estimated at US$31.7 million
  • Direct cash operating costs estimated at US$10.46 per pound of production

 

Summary of Economics

 

The base case economic assessment results in a pre-income tax internal rate of return of 55% and a pre-income tax net present value of US$171.3 million when applying an eight percent discount rate. Using the same discount rate, the post-income tax IRR is 50% and the post-income tax NPV is US$147.5 million.

 

 

Life of Mine Cash Flow Line Items
  Units Total or average US$ per pound of production
Uranium production (U3O8) Lbs ‘000s 14,268
Base case uranium price US$/lb 55.00
Uranium gross revenue US$ ‘000s 784,740
Less: surface and mineral royalties US$ ‘000s 38,060 2.67
Taxable revenue US$ ‘000s 746,680
Less: severance and conservation tax US$ ‘000s 35,393 2.48
Net gross sales US$ ‘000s 711,287
Less: plant and well field operating costs US$ ‘000s 108,084 7.58
Less: product transaction costs US$ ‘000s

US$ ‘000s

11,889

5,362

0.83

0.38

Less: administrative support costs
Less: D&D and restoration costs US$ ‘000s 16,659 1.17
Less: property tax US$ ‘000s 7,200 0.50
Net operating cash flow US$ ‘000s 562,093
Less: pre-construction capital costs US$ ‘000s 1,025 0.07
Less: plant development costs US$ ‘000s 52,140 3.65
Less: wellfield capital development costs US$ ‘000s 136,190 9.55
Net pre-income tax cash flow US$ ‘000s 372,738
Less: income taxes US$ ‘000s 48,386 3.39
After tax cash flow US$ ‘000s 324,352

 

The projected cash flows for the Dewey Burdock Project PEA are positive in the second year of production, two years after the commencement of construction. Initial capital expenditures are estimated at US$31.7 million.

 

Direct cash operating costs are estimated to be US$10.46 per pound of production, royalties and local taxes (excluding property tax) are estimated to be US$5.15 per pound of production and the total pre-income tax cost of uranium production is estimated to be US$28.88 per pound of production. Income taxes are estimated to be US$3.39 per pound of production and have been calculated on a project basis in accordance with NI 43-101 requirements; therefore, certain tax shelter balances, such as tax loss carry forwards available at the corporate level, have not been considered.

 

Pre-income tax NPV and IRR Sensitivity to Alternative Uranium Price Scenarios

 

 

Uranium price scenario NPV IRR

 

US$35/lb US$26.6m 17%

 

US$40/lb US$62.8m 28%

 

US$45/lb US$98.9m 37%
US$50/lb US$135.1m 46%
US$55/lb (base case) US$171.3m 55%
US$60/lb US$207.4m 64%
US$65/lb US$243.6m 72%
US$70/lb US$279.7m 80%

 

US$75/lb US$315.9m 88%

 

Cautionary statement: The results of the Dewey Burdock Project PEA are preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimated mineral recovery used in the Dewey Burdock Project PEA is based on site-specific laboratory recovery data as well as Azarga Uranium personnel and industry experience at similar facilities. There can be no assurance that recovery at this level will be achieved. There is no certainty that the Dewey Burdock Project PEA will be realized.

 

Updated Mineral Resource Estimate – 3 December 20191

 

 

Dewey Burdock Project ISR Mineral Resource Estimate
  Measured Resources Indicated Resources Measured plus Indicated Resources Inferred Resources
Tons 5,419,779 1,968,443 7,388,222 645,546
Average grade (% U3O8) 0.132 0.072 0.116 0.055
Average thickness (feet) 5.56 5.74 5.65 5.87
Average grade-thickness (“GT”) 0.733 0.413 0.655 0.324
Uranium (pounds) 14,285,988 2,836,159 17,122,147 712,624
  1. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

 

In addition to the ISR mineral resource estimate, the NI 43-101 resource estimate includes a non-ISR (located above the water table) resource estimate containing Measured resources of 857,186 pounds at 0.060% U3O8, Indicated resources of 407,851 pounds at 0.053% U3O8 and inferred resources of 114,858 pounds at 0.051% U3O8. These resources are not included in the ISR resources presented in the table above and are not included in the economic analysis for the Dewey Burdock Project PEA.

 

Both the ISR and non-ISR resources were determined using the GT contour method and met the following criteria:

 

  1. 0.02 percent grade cutoff;
  2. Occur within the same mineral horizon (roll front);
  3. Fall within the 0.20 GT contour; and
  4. Extend no farther from the drill hole than the radius of influence specified for each category, i.e., measured, indicated or inferred.

 

For the purpose of the PEA, the uranium recovery is estimated at 80% for all categories of ISR resources. Therefore, life of mine U3O8 production is estimated to be 14.3 million pounds.

 

Technical Report and PEA

 

The Dewey Burdock Project Technical Report and PEA has been prepared in accordance with the requirements of NI 43-101 and was independently prepared by Woodard & Curran, Douglass Graves, P.E., a qualified person as defined under NI 43-101 and Roughstock Mining Services, Steve Cutler, P.G., a QP as defined under NI 43-101. The Technical Report and PEA titled “NI 43-101 Technical Report, Preliminary Economic Assessment, Dewey-Burdock Uranium ISR Project, South Dakota, USA” has been filed on SEDAR at www.sedar.com and Azarga Uranium’s website www.azargauranium.com.

 

Qualified Person

 

The disclosure of a scientific and technical nature contained in this press release was approved by Douglass Graves, P.E. and Steve Cutler, P.G., qualified persons as that term is defined under NI 43-101.

 

About Azarga Uranium Corp.

 

Azarga Uranium is an integrated uranium exploration and development company that controls ten uranium projects and prospects in the United States of America (“USA”) (South Dakota, Wyoming, Utah and Colorado), with a primary focus of developing in-situ recovery uranium projects. The Dewey Burdock in-situ recovery uranium project in South Dakota, USA (the “Dewey Burdock Project”), which is the Company’s initial development priority, has received its Nuclear Regulatory Commission License and draft Class III and Class V Underground Injection Control (“UIC”) permits from the Environmental Protection Agency and the Company is in the process of completing other major regulatory permit approvals necessary for the construction of the Dewey Burdock Project, including the final Class III and Class V UIC permits from the EPA.

 

Posted January 18, 2020

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