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Forsys Releases Feasibility Study Results for Norasa Uranium Project in Namibia

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Forsys Releases Feasibility Study Results for Norasa Uranium Project in Namibia

 

 

 

 

 

Forsys Metals Corp. (TSX:FSY) (FRANKFURT:F2T) (NAMIBIAN:FSY) is pleased to announce the results of a Feasibility Study(1) (“FS”) for its wholly-owned Norasa Uranium Project located in the Erongo region of Namibia. The FS completed by engineering consultants, Amec Foster Wheeler together with reliance on other experts in the fields of mining and environment and Company Qualified Persons, has confirmed the robustness and economics of Norasa. All amounts are in US currency. A copy of the FS can be found under Forsys’ filings on SEDAR.
 

Highlights of the FS:

 

 
 
--  A material increase in Mineral Reserve estimates to 90.7 million lbs of
    U3O8, up 14.8% from 79.0 million lbs U3O8 as of October 2013. The
    changes to the Mineral Reserve estimates are primarily as a result of
    the addition of 10.7 million lbs of U3O8 of Reserves from the Namibplaas
    deposit, using a 140ppm cut-off grade. 
    
--  The operating costs per pound are estimated to average $32.96/lb U3O8
    over the first 5 years of production and $34.72/lb U3O8 over the life of
    the mine. The updated cost estimates represent a significant reduction
    from the 2013 Engineering Cost Study ("ECS") estimates of $34.76 and
    $38.20/lb U3O8,respectively. 
    
--  The economic analysis results in an estimated pre-tax net present value
    (NPV) at a discount rate of 8% of $622.6 million (post-tax NPV $383.4
    million). Using the initial investment and operating cash flows from
    inception, the pre-tax internal rate of return is estimated to be 32%. 
    
--  The Norasa production schedule has been modified to incorporate the
    updated Mineral Reserves and to include a processing rate increase to
    11.2 million tonnes per annum (Mtpa), up from 8.2 Mtpa in 2010.
    Estimated annual production over the 15 year life of mine (LoM) is
    approximately 5.2 million lbs of U3O8.
 

 

 

“Norasa is one of the very few uranium projects in the world that is construction ready with a Mining Licence,” said Marcel Hilmer, CEO of Forsys Metals. “The completion of the FS confirms the robustness of Norasa’s economics. The FS delivered a number of outstanding results, including increases in tonnage, annual and life of mine production whilst lowering operating costs. We believe that the study results will attract strategic partners and investors, and provide us with alternatives for the next phase of Norasa’s development.”
 

  1. The Feasibility Study cannot be classified as a “definitive feasibility study” under NI 43-101 disclosure standards, but represents the definitive basis by which Forsys intends to seek to develop the Norasa Project, and has been conducted to an accuracy of +/-15% for Class 3 Capital and Operating Cost estimates.

 

The Mineral Reserve estimate is summarised in Table 1.

 

 
 
----------------------------------------------------------------------------
                 Table 1. Reserves Estimate (February 2015)                 
----------------------------------------------------------------------------
Classification                     Tonnes (M)       U3O8(ppm)     U3O8(Mlbs)
----------------------------------------------------------------------------
Proven                                     16             200            7.1
Probable                                  190             200           83.6
Total Reserve                             206             200           90.7
----------------------------------------------------------------------------
Cut-off grades of 100ppm for Valencia and 140ppm Namibplaas
 

 

 

The Mineral Resource estimate is summarised in Table 2.

 

 
 
----------------------------------------------------------------------------
          Table 2. Norasa Mineral Resource Summary (February 2015)          
----------------------------------------------------------------------------
Category                           Tonnes (M)       U3O8(ppm)     U3O8(Mlbs)
----------------------------------------------------------------------------
Measured                                   16             200              7
Indicated                                 249             196            108
Measured + Indicated                      265             197            115
Inferred                                   26             200             11
----------------------------------------------------------------------------
Cut-off grades of 100ppm for Valencia and 140ppm Namibplaas                 
Resources are reported inclusive of Reserves
 

 

 

Mineral Resources that are not Reserves either haven’t demonstrated economic viability or don’t meet the cut-off grade criteria. The Reserves come from three deposits, resulting in three distinct pits: the Valencia pit, a small satellite pit adjacent to Valencia and the Namibplaas pit.
 

Key Financial Model Outputs
 

The key outputs from the financial model are reported for the first 5 years of the modelled operation and for the life of mine in Table 3.

 

 
 
----------------------------------------------------------------------------
                    Table 3. Key Financial Model Outputs                    
----------------------------------------------------------------------------
                                                   Project                  
----------------------------------------------------------------------------
Project Economics                                                           
NPV at a Discount Rate of 8% (USD                                           
 Millions) - (Excl. Tax)                            $622.6                  
           - (Incl. Tax)                            $383.4                  
----------------------------------------------------------                  
Internal Rate of Return (%) - (Excl.                                        
 Tax)                                                  32%                  
           - (Incl. Tax)                               26%                  
----------------------------------------------------------                  
Payback Period from Start of Production                                     
 (years)                                               4.4                  
----------------------------------------------------------                  
Capital Costs (USD Millions)                        $432.8                  
----------------------------------------------------------------------------
Production                                    Life of Mine     First 5 Years
                                        ------------------------------------
Quantity Ore Treated (Million tonnes)              206.1Mt            66.7Mt
Recoveries (%)                                       92.4%             92.2%
Uranium sold (Kg U3O8)                            35,288Kg          11,710Kg
Uranium sold (Million lbs U3O8)                    77.8Mlb           25.8Mlb
----------------------------------------------------------------------------
Revenue and Cash Flow                                                       
U3O8Base Price (USD/lb U3O8)                        $65/lb            $65/lb
Net Revenue (USD Millions)                          $5,056            $1,678
Operating cash flow (USD Millions)                  $1,751              $440
Net cash flow after tax (USD Millions)              $1,007              $165
----------------------------------------------------------------------------
Operating Unit Costs (USD /lb produced)                                     
Mining                                           $16.83/lb         $14.65/lb
Processing                                       $16.27/lb         $16.67/lb
Owners costs                                      $1.63/lb          $1.65/lb
----------------------------------------------------------------------------
Total Operating Costs                            $34.72/lb         $32.96/lb
----------------------------------------------------------------------------
 

 

 

Sensitivity Analysis
 

The financial sensitivity analysis further reflects the robustness of the project as detailed in Table 4. The project is most sensitive to changes in the uranium price. A decrease of 8% or more from the base case assumption of $65/lb U3O8, results in a measurable decline in Pre and Post-tax NPV (DR 8%). Conversely, the Project would benefit greatly from increases in U3O8 prices above the base case assumption. It is encouraging that break-even NPV is at or about $50/Lb U3O8 for both pre and post-tax scenarios.
 

Capital costs are least sensitive to change and although the project is sensitive to changes in operating costs, increases in the base case operating cost assumptions produce changes in the pre and post-tax NPV’s that remain positive at even the highest sensitivity of -30%.

 

 
 
----------------------------------------------------------------------------
           Table 4. Sensitivity Analysis (Pre and Post-tax Basis)           
----------------------------------------------------------------------------
Parameter/                           Pre-tax NPV ($M.   Post-tax NPV ($M. DR
 Variation                   Value             DR 8%)                    8%)
----------------------------------------------------------------------------
U3O8Price         U3O8Price ($/lb)                                          
----------------------------------                                          
-23%                         50.00               70.1                   17.7
-15%                         55.00              254.2                  143.5
-8%                          60.00              438.4                  264.6
Base                         65.00              622.6                  383.4
8%                           70.00              806.7                  500.6
15%                          75.00              990.9                  617.4
23%                          80.00             1175.0                  733.3
----------------------------------------------------------------------------
Capital Costs    Capital Cost ($M)                                          
----------------------------------                                          
-30%                        561.60              562.6                  321.9
-20%                        518.40              582.6                  342.5
-10%                        475.20              602.6                  363.0
Base                        432.00              622.6                  383.4
10%                         388.80              642.6                  406.9
20%                         345.60              662.6                  436.9
30%                         302.40              682.6                  466.9
----------------------------------------------------------------------------
                 Average Operating                                          
Operating Costs     Costs ($/lb)                                            
----------------------------------                                          
                  First 5  Life of                                          
                    Years     Mine                                          
                ------------------                                          
-30%                42.85    45.14              203.5                  122.2
-20%                39.56    41.66              343.2                  211.3
-10%                36.26    38.19              482.9                  298.0
Base                32.96    34.72              622.6                  383.4
10%                 29.67    31.25              762.2                  473.2
20%                 26.37    27.78              901.9                  562.5
30%                 23.08    24.30             1041.6                  651.0
----------------------------------------------------------------------------
 

 

 

The FS assumes a schedule of approximately 24 months from the start of detailed engineering to the commencement of plant production. While this timeline is predicated on confirmation of suitable financing for the Project, Forsys expects to optimize this timeframe during the detailed engineering phase.
 

Namibia
 

Namibia is a mining friendly jurisdiction that is consistently ranked highly for its investment attractiveness by the Fraser Institute; currently ranked first for mining in Africa. Namibia has a long history of uranium mining and ranks as the world’s fifth largest uranium producer. Norasa, Forsys’ uranium project, is located approximately 35km from the Rossing Mine, one of the largest uranium mines in the world.
 

Qualified Persons
 

Amec Forster Wheeler

 

 
 
--  Peter Nofal - Technical Director Studies for AMEC, is responsible for
    the process plant related sections of the study. Mr Nofal is a Fellow of
    the Australasian Institute of Mining and Metallurgy. Mr Nofal has 35
    years of operating and management experience in the minerals industry
 

 

 

Forsys

 

 
 
--  Dag Kullmann - General Manager and Mining Manager for Forsys, is
    responsible for the mine plan, capital and operating costs and owners
    costs. Mr Kullmann, M.Sc. Mining Engineering from the University of
    Alberta, a Fellow of the Southern African Institute of Mining and
    Metallurgy (SAIMM), is the designated Qualified Person responsible for
    the reporting of Mineral Reserves. Mr Kullmann has sufficient experience
    in the assessment and application of modifying factors required for the
    determination of reserves for open pit operations to qualify as a QP
    under NI 43-101. 
    
--  Martin Hirsch - Chief Geologist for Forsys, is responsible for the
    geology and mineral resource definition. Mr Hirsch, M.Sc in Geology and
    a Member of the British IMMM, is the designated Qualified Person
    responsible for the Company's exploration programs and reporting of
    Mineral Resources. Mr Hirsch has sufficient experience that is relevant
    to the style and mineralization, type of deposit and the use of
    radiometrics in resource estimation to qualify as a Qualified Person
    under NI 43-101.
 

 

 

About Forsys Metals Corp.
 

Forsys Metals Corp. is an emerging uranium producer with 100% ownership of the Norasa project that comprises the fully permitted Valencia uranium project and the Namibplaas uranium project in Namibia, Africa a politically stable and mining friendly jurisdiction. Information regarding current National Instrument 43-101 compliant Resource and Reserves at Valencia and Namibplaas are available on the Company website. Shares outstanding: 119.3M

Posted March 18, 2015

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