| Fri 28 Jul 2006, 16:56 | | sxr Uranium One Inc.. - Uranium One Completes Phas |
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SXR
SXR
sxr Uranium One Inc.. - Uranium One Completes Phase I Feasibility Study
sxr Uranium One Inc.
26 Wellington Street East, Suite 820
Toronto, Ontario M5E 1S2
Share code on the JSE: SXR & ISIN: CA87112P1062
Share code on the TSX: SXR & ISIN: CA87112P1062
("Corporation")
26 Wellington Street East, Suite 820
Toronto, Ontario M5E 1S2
sxr Uranium One Inc.
26 Wellington Street East, Suite 820
Toronto, Ontario M5E 1S2
Trading Symbol: SXR - Toronto Stock Exchange, Johannesburg Stock Exchange
NEWS RELEASE
July 28, 2006 Toronto, Ontario
Uranium One Completes Phase I Feasibility Study
on its Dominion Project and Confirms a 30 Year Mine Life
Toronto, Ontario and Johannesburg, South Africa - sxr Uranium One Inc.
("Uranium One") is pleased to announce the results of the feasibility study
conducted by Turgis Consulting (Pty) Ltd. ("Turgis") and independently
audited by SRK Consulting South Africa (Pty) Ltd. ("SRK") on Phase I of its
Dominion Reefs Uranium Project ("Dominion Project") located near
Klerksdorp, South Africa.
Highlights of the Dominion Project feasibility study include:
* Phase I, which only contemplates the first 11 years of the mine
life, is financially robust and technically viable
* Phase I Probable Reserves are 31.3 million pounds of uranium
oxide (U3O8) contained within 18.5 million tonnes at an average
head grade of 0.77 kg/t
* Production at steady state (2011 to 2014) will average 3.8
million pounds U3O8 per annum
* Average cash operating cost for Phase I is US$14.50 per pound of
U3O8, net of gold by-product credits
* The after-tax, all equity IRR for Phase I is 32% and the after-
tax, all equity NPV is US$184 million at an 8% discount rate at
June 1, 2006
* Project payback from commencement of Phase I is estimated to be 5
years
The feasibility study values Phase I of the Dominion Project as an
underground mine and a metallurgical plant with a designed production
capacity of 200,000 tonnes per month. The uranium processing plant will be
integrated with Uranium One"s existing carbon-in-leach gold plant. The
Dominion Project will process 18.5 million tonnes through the plant over an
11 year period at an average mill head grade of 0.77 kg/t of U3O8 and will
recover a total of 27.2 million pounds of U3O8 and 0.5 million ounces of
gold. The mine plan has been developed by applying a selective mining cut
to all areas exceeding 160 cm channel width in order to optimize metal
recovery and reduce operating costs, resulting in the tonnages and grades
as stated above. Phase I will focus on mining ore between surface and an
approximate depth of 500 metres. The feasibility study has used as a base
case a U3O8 price of US$46.50/lb, a gold price of US$629/oz and an exchange
rate of ZAR6.585 per US$1. The analysis has been completed in real terms,
and the valuation date is June 1, 2006.
In addition, Turgis has prepared a conceptual study for Phase II of the
Dominion Project, which has been independently audited by SRK, to assess
the viability of extending production from 11 to 30 years by mining the
remaining Indicated Resource as well as a portion of the additional
Inferred Resources. While this analysis has not been conducted to the
level of accuracy contained in the feasibility study for Phase I, the
nature of the geological characteristics of the ore body confirms a mine
life in excess of 30 years. Phase II will begin production in 2012 as
Phase I production levels begin to decline, ensuring a 200,000 tonne per
month throughput is maintained.
The results of the feasibility study have enabled the Board of Directors of
Uranium One to endorse the previous decision made by the Board of Directors
of Aflease Gold and Uranium Resources Limited to proceed with the
development of the Dominion Project toward a start-up of production in Q1
2007.
Uranium One"s President and CEO, Neal Froneman commented: "It is very
pleasing to declare our first reserve at the Dominion Project of 31.3
million pounds of uranium oxide. We are advancing well with development of
the Dominion Project. 68% of the work required to commission the new
uranium plant has been completed and we remain on target for production of
uranium oxide in the first quarter of 2007. I am also delighted that we
are able to demonstrate a convincing and sound case for a mine life in
excess of 30 years."
Dominion Project Overview
The Dominion Project covers an area of approximately 120 km2 and is located
approximately 20 km to the south west of Klerksdorp in the North West
province of South Africa. The Dominion Project is a brownfields
development project consisting of the Dominion and Rietkuil Sections which
include two former uranium and gold mining operations.
Uranium One completed an initial mine study in May 2005 on the Dominion
Project and subsequently conducted an extensive exploration program in
order to confirm an Indicated Resource for the purposes of completing the
feasibility study on Phase I.
Mineral Resources and Reserves
Uranium One published a revised Mineral Resource for the Dominion Project
on June 14, 2006, declaring: (i) a uranium resource of 47.5 million pounds
U3O8 in the indicated category and 199.2 million pounds U3O8 in the
inferred category; and (ii) a gold resource of 0.9 million ounces in the
indicated category and 3.6 million ounces in the inferred category. Table
1 below summarizes the previously released resource estimate by category as
audited by SRK. The Mineral Resources have been determined using a uranium
price of US$45.00/lb, a gold price of US$528/oz and a ZAR per US$ exchange
rate of 6.50:1, resulting in lower cut-offs than previously reported.
Table 1 - SRK Audited Mineral Resource Estimate at the Dominion Project
(June 1, 2006)
Indicated Mineral Resources
Reef Unit Tonnes U3O8 Grade Contained Gold Contained
(thousands) U3O8 Grade Gold
(kg/tonne) (k/lb) (g/tonne) (k/oz)
Rietkuil 8,575 0.78 14,721 0.89 245
Upper
Rietkuil 1,194 1.02 2,694 0.79 30
Lower
Dominion 11,240 0.83 20,652 0.99 358
Upper
Dominion 4,981 0.86 9,425 1.73 277
Lower
Total 25,990 0.83 47,492 1.09 910
Indicated
Inferred Mineral Resources
Reef Unit Tonnes U3O8 Grade Contained Gold Contained
(thousands) (kg/tonne) U3O8 Grade Gold
(k/lb) (g/tonne) (k/oz)
Rietkuil 52,949 0.52 61,096 0.39 664
Upper
Rietkuil 39,076 0.75 64,214 0.81 1,018
Lower
Dominion 54,977 0.35 42,713 0.55 972
Upper
Dominion 31,420 0.45 31,171 0.95 960
Lower
Total 178,422 0.51 199,194 0.63 3,614
Inferred
(1) The Mineral Resources have been reported in accordance with the
classification criteria of the South African Code for Reporting of
Mineral Resources and Mineral Reserves (the SAMREC Code).
(2) The Mineral Resource was estimated by Dr. Carina Lemmer of Geological
& Geostatistical Services and reported to a cut-off of 29 cmkg/t U3O8
for Dominion and 35 cmkg/t U3O8 for Rietkuil and 0.00 g/tonne gold and
was audited by Dr Mike Harley of SRK.
(3) Mineral Resources are not Mineral Reserves and do not have
demonstrated economic viability.
(4) Mineral Resources are inclusive of Mineral Reserves
The Indicated Resources detailed in Table 1 have been converted into a
Probable Reserve, as shown in Table 2, through a process of mine planning
and the application of appropriate modifying factors and is reported as
delivered to the plant.
Table 2 - SRK Audited Mineral Reserve Estimate at the Dominion Project
(June 1, 2006)
Probable Mineral Reserves
Reef Unit Tonnes U3O8 Grade Contained Gold Contained
(thousands) U3O8 Grade Gold
(kg/tonne) (k/lbs) (g/tonne) (k/oz)
Rietkuil 6,308 0.68 9,471 0.71 144
Upper
Rietkuil 639 0.89 1,252 0.50 10
Lower
Dominion 8,005 0.83 14,613 0.93 239
Upper
Dominion 3,502 0.78 5,991 1.74 196
Lower
Total 18,454 0.77 31,327 0.99 589
Probable
(1) The Mineral Reserve was estimated by Pat Willis of Turgis and audited
by Roger Dixon of SRK.
(2) Tonnes and grade are stated on the basis of delivery to the plant.
Phase I: Mine Design and Production Levels
The mine has been divided into two operating areas, the Rietkuil and
Dominion Sections. Phase I contemplates mining from surface to a depth of
approximately 500 metres, initially using two trackless declines on the
Dominion Section and one trackless decline at the Rietkuil Section. All
declines and footwall roadways will be developed using mechanized loading
and hauling. Haul trucks used in the development operation will be used to
transport ore, loaded from stope chutes, to surface via the footwall
roadways and main access declines. Mining on the reef horizon will be
undertaken using traditional South African breast mining methods with face
cleaning using scraper winches or water jetting. Based on Uranium One"s
operational experience, it is expected that this method will provide a
flexible, relatively low cost and low risk approach.
A new uranium plant is being established for the Dominion Project and is
being integrated with the existing carbon-in-leach gold recovery plant.
Ore from the Dominion Project will be crushed and milled at the existing
plant, after which both uranium and gold will be extracted. The plants
will be operated as a single facility which will give preference to ore
from the Dominion Project.
Phase I of the project is designed to treat 2.4 million tonnes per annum,
yielding an annual average of 3.8 million pounds of U3O8 during steady-
state production, with a maximum production of 4.3 million pounds of U3O8
in 2012. The metallurgical recovery determined for Phase I of the Dominion
Project averages 87% for U3O8 and 89% for gold.
Project Status
Three portals have been excavated, and the associated declines are being
developed under the prospecting right. The trackless equipment required
for initial development has been delivered, and the necessary capital
equipment is being procured according to schedule. Staff recruitment and
training is in progress.
The existing incline shaft at the Rietkuil Section has been partially re-
commissioned to facilitate underground development, and some 390 metres of
development has been completed from surface in the new R1 decline at the
end of June 2006. Two new declines, D1 and D2, at the Dominion Section are
in progress, with some 380 metres and 210 metres of development
respectively having already been completed.
Bateman Africa (Pty) Ltd has been awarded the engineering, procurement,
construction and management (EPCM) contract for the erection and
commissioning of the uranium plant. Construction commenced in November
2005 and 68% of the work required to commission the plant in Q1 of 2007 has
been completed.
Contracts have been signed with the South African electricity provider
ESKOM for the up-grade of the applicable sub-stations. The supply of
service and potable water to the mine has been secured from the local
municipality.
The Dominion Project is on schedule for the commencement of production in
Q1 2007.
Phase I: Operating Costs
Total operating costs include mining, processing and administrative costs.
Administrative costs include environmental and mine site central services.
The operating cost summary, inclusive of a contingency of 3%, is shown in
Table 3.
Table 3 - Phase I Operating Cost Summary
Item US$ per tonne milled
Mining 18.5
Processing 12.6
Administration 3.5
Bulk Services (water, power) 3.8
Contingency 1.1
Total 39.5
Cash operating costs average US$14.50/lb of U3O8 from the completion of
mine construction in December 2007, after deducting gold by-product
credits.
Phase I: Capital Costs
The start up construction capital, which will be spent prior to the
commencement of production in Q1 2007, is US$152 million (R1,001 million).
Of this amount, US$38.8 million (R255 million) has been spent up to June 1,
2006. A further US$27.8 million (R183.1 million) is the construction
capital required to establish the full design capacity of 200 000 tonnes
per month by the end of 2007. Ongoing capital over the life of mine will
be incurred from January 2008 amounting to US$63.8 million (R420 million),
which is equivalent to US$2.4/lb of U3 08 produced over the life of Phase
I. Increases in capital estimates from previous figures are the result of
escalation and design improvements that are intended to minimize the cash
operating costs for the Dominion Project. Capital Costs are summarized in
Table 4 below.
Table 4 - Summary Capital Costs for Phase I
Item Construction Capital to Ongoing Capital 2008 to
end of 2007 2016
(US$ mm) (US$ mm)
Mining 57.1 60.5
Plant 111.0 0.0
Administrative 3.7 0.8
Contingency 8.0 2.5
Total 179.8 63.8
Phase I: Financial Evaluation
The project has been valued in real terms as at June 1, 2006. At a real
discount rate of 8%, Phase I is estimated to yield an after-tax, all equity
NPV of US$184 million (R1,212 million) and an after-tax, all equity IRR of
32%. Project payback from commencement for Phase I is estimated to be 5
years. Table 5 below summarizes the results of the feasibility study. In
addition to the significant NPV of Phase I, this phase of the Dominion
Project pays for the infrastructure and processing facilities to be used in
the contemplated 19 year Phase II extension.
Table 5 - Summary of Phase I Feasibility Study Results
Total / 2006(1 2007 2008 2009 2010 2011
Average )
Tonnes 18,455 466 1,902 2,126 2,404 2,396
milled
(000"s)
U3O8 Mill 0.77 0.58 0.78 0.75 0.69 0.81
head
grade
(kg/tonne
)
U3O8 87% 83% 87% 86% 85% 87%
Recovery
U3O8 27,187 491 2,817 3,045 3,106 3,722
produced
(lbs
000"s)
Gold 534.8 20.2 55.1 46.1 58.0 78.0
produced
(oz
000"s)
Sales 1,600.6 24.0 145.0 167.4 180.2 214.9
revenue
(US$
million)
Opex (US$ 747.8 7.3 29.3 79.2 84.3 98.5 96.4
million)
Construct 141.0 79.9 61.1
ion
Capital
(US$
million)
(2)
Ongoing 63.8 21.5 15.0 11.8 8.1
Capital
(US$
million)
Taxes and 245.5 2.5 4.0 31.6
royalties
(US$
million)
Cash flow 375.1 -87.7 -73.0 10.7 66.1 62.9 68.2
(US$
million)(
3)
US$ 39.5 41.6 39.7 41.0 40.2
cost/tonn
e milled
(4)
US$ 14.5 15.8 18.2 20.0 12.7
cost/lb
produced
(4) (5)
Tota 2012 2013 2014 2015 2016 2017
l /
Aver
age
Tonnes 18,4 2,331 2,194 2,202 1,38 1,05
milled 55 0 4
(000"s)
U3O8 0.77 0.93 0.88 0.77 0.64 0.56
Mill
head
grade
(kg/tonn
e)
U3O8 87% 89% 88% 87% 84% 82%
Recovery
U3O8 27,1 4,290 3,746 3,260 1,63 1,07
produced 87 7 3
(lbs
000"s)
Gold 534. 64.0 72.0 75.6 41.5 24.4
produced 8
(oz
000"s)
Sales 1,60 233.1 225.8 204.8 121. 71.8 12.5
revenue 0.6 1
(US$
million)
Opex 747. 92.5 84.7 83.1 52.2 40.3
(US$ 8
million)
Construc 141.
tion 0
Capital
(US$
million)
(2)
Ongoing 63.8 4.3 1.7 1.4
Capital
(US$
million)
Taxes 245. 58.6 57.8 49.9 25.9 12.0 3.2
and 5
royaltie
s (US$
million)
Cash 375. 67.3 83.9 72.9 59.0 24.7 20.1
flow 1
(US$
million)
(3)
US$ 39.5 39.7 38.6 37.7 37.8 38.2
cost/ton
ne
milled
(4)
US$ 14.5 12.2 10.5 10.9 16.0 23.2
cost/lb
produced
(4) (5)
The numbers in the above table have been rounded, and any resulting
discrepancies should not be regarded as material.
(1) June 1 to December 31, 2006 only
(2) Construction capital excludes US$38.8 million spent prior to valuation
date
(3) Cash flow shown is after tax, royalties and other adjustments
(4) Costs shown are from the completion of construction in December 2007
(5) Cost quoted after gold credits
Phase I: Sensitivity Analysis
An analysis of the after-tax, all equity 8% NPV for Phase I of the Dominion
Project shows that the mine operation is leveraged to both the uranium and
gold price, as well as to changes in the Rand per US dollar exchange rate.
The project is less sensitive to changes in capital expenditures and
operating expenditures.
Table 6 - Phase I: 8% NPV Sensitivity (Assuming ZAR7.500 Rand per US$1)
Fixed NPV Fixed NPV Change Construction Cash
U3O8 Gold Capital (NPV Operating
Price (US$ mm) Price (US$ US$ mm) Costs (NPV
(US$/lb) (US$/oz) mm) US$ mm)
60.00 348.9 850 259.8 +10% 200.1 180.4
55.00 298.5 750 238.6 +5% 204.9 195.1
46.50 209.8 629 209.8 0% 209.8 209.8
35.00 87.5 550 192.6 -5% 214.6 225.9
30.00 31.8 450 170.8 -10% 220.9 241.2
Table 7 - Phase I: 8% NPV Sensitivity (Assuming Base Case ZAR6.585 per
US$1)
Fixed NPV Fixed NPV Change Construction Cash
U3O8 Gold Capital (NPV Operating
Price (US$ mm) Price (US$ US$ mm) Costs (NPV
(US$/lb) (US$/oz) mm) US$ mm)
60.00 324.4 850 232.2 +10% 173.7 152.8
55.00 274.0 750 210.4 +5% 178.9 168.4
46.50 184.0 629 184.0 0% 184.0 184.0
35.00 60.5 550 166.8 -5% 189.2 199.6
30.00 3.4 450 145.1 -10% 194.4 215.2
Table 8 - Phase I: 8% NPV Sensitivity (Assuming ZAR5.500 per US$1)
Fixed NPV Fixed NPV Change Construction Cash
U3O8 Gold Capital (NPV Operating
Price (US$ mm) Price (US$ US$ mm) Costs (NPV
(US$/lb) (US$/oz) mm) US$ mm)
60.00 238.1 850 144.9 +10% 80.7 54.7
55.00 186.4 750 120.9 +5% 87.2 74.2
46.50 93.7 629 93.7 0% 93.7 93.7
35.00 -37.9 550 75.9 -5% 100.1 113.1
30.00 -109.5 450 53.4 -10% 106.6 132.6
Phase II: Mine Life
Turgis has also prepared a conceptual study to assess the viability of
extending the mine life at current production rates from 11 years to 30
years by mining the remaining Indicated Resource as well as a portion of
the additional Inferred Resource at the Dominion Project. This study has
also been independently audited by SRK.
Given the geological characteristics of the ore body, the ongoing
exploration program and the history of conversion, it is expected that the
Inferred Resources will be re-categorized and increased in the future.
This will necessitate the revision of the existing plans, which is expected
to result in a mine life in excess of 30 years.
Phase II: Mine Design and Production Levels
The mine design strategy for Phase II will be the same as for Phase I with
the addition of a new trackless decline at the Dominion Section, and at the
Rietkuil Section a vertical shaft will be sunk to access the down-dip
extensions of the resource to a depth of approximately 1,000 metres.
Production from Phase II will maintain a constant plant throughput of
200,000 tonnes, extending the life of mine to at least 30 years.
The Phase II study is based on the modelling of a selected portion of the
Inferred Resource, totalling 60.8 million tonnes at a grade of 0.74
kg/tonne of U3O8 of the total declared Inferred Resource of 178.4 million
tonnes at a grade of 0.51 kg/tonne U3O8. The anticipated tonnage available
for mining will be 48.1 million tonnes at an average head grade of 0.69
kg/tonne of U3O8, and a gold grade of 0.85 g/tonne, assuming similar
modifying factors as in the Phase I study.
The Phase II study has been conducted on Inferred Resources, so it has not
been possible to apply a selected mining cut and therefore the grades
quoted above are likely to be enhanced when a selected mining cut is
applied. The processing facility used for Phase I will treat the tonnage
mined during Phase II. The recoveries will remain grade dependent and will
therefore be similar to those described in the Feasibility Study.
Phase II: Operating Costs
The study shows that the operating cost per tonne (excluding royalties),
adjusted to take into account the depth of mining and changes in mine
layout during Phase II, will be approximately US$41/tonne milled
(R264/tonne milled) over the 30 year production plan.
Phase II: Capital Costs
It is expected that Phase II will require additional construction capital
of approximately US$98 million (R645 million) in 2006 dollar terms, to be
spent over an 8 year period commencing in 2008, to establish a fourth
decline, sink a vertical shaft, and a new tailings facility.
Update on Status of Dominion Project Permits
Uranium One has secured a prospecting right for the Dominion Project, which
is in the process of being converted into a new order mining right. In
accordance with the mining right application, all environmental planning
requirements have been complied with. A water use licence has been
approved. An application for registration with the National Nuclear
Regulator has been made. All the necessary surface rights for the project
have either been purchased or secured.
Qualified Person
Roger Dixon of SRK Consulting South Africa (Pty) Ltd. is the qualified
person for the purposes of NI 43-101 and has supervised the preparation of
the information that forms the basis of all of the above information.
Update on Status of Honeymoon Feasibility Study
Uranium One is currently awaiting the completion of an agreement regarding
the amendment of a legacy uranium sales contract, the commercial terms of
which have already been agreed to by the parties. It is anticipated that
the definitive contract will be signed as soon as practicable, after which
a formal announcement detailing the results of the feasibility study will
be made.
About sxr Uranium One
sxr Uranium One Inc. is a Canadian uranium and gold resource company with a
primary listing on the Toronto Stock Exchange and a secondary listing on
the Johannesburg Stock Exchange. The Corporation owns the Dominion Reefs
Uranium Mine in South Africa and the Honeymoon Uranium Project in South
Australia, as well as a number of exploration projects. The Corporation
holds a 79% interest in Aflease Gold Limited, which owns the Modder East
gold project in South Africa. Through a joint venture with Pitchstone
Exploration Ltd., the Corporation is also engaged in uranium exploration
activities in the Athabasca Basin of Saskatchewan.
For further information please contact:
Neal Froneman Chris Sattler
Chief Executive Officer Vice President, Investor Relations
Tel: + 27 11 482 3605 Tel: +1 416 350 3657
Cautionary Statement
No stock exchange, securities commission or other regulatory authority has
approved or disapproved the information contained herein.
This News Release includes certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 and
"forward-looking information" within the meaning of applicable Canadian
legislation. All statements other than statements of historical fact,
included in this release, including, without limitation, statements
regarding potential mineralization and reserves and future plans and
objectives of Uranium One, are forward looking statements (or forward-
looking information) that involve various risks and uncertainties. There
can be no assurance that such statements will prove to be accurate and
actual results and future events could differ materially from those
anticipated in such statements. Important factors could cause actual
results to differ materially from Uranium One"s expectations. Such
factors include, among others, the actual results of exploration
activities, actual results of reclamation activities, the estimation or
realization of mineral reserves and resources, the timing and amount of
estimated future production, costs of production, capital expenditures,
costs and timing of the development of new deposits, availability of
capital required to place the the company"s property into production,
conclusions of economic evaluations, acceptance of the Dominion feasibility
study by lending institutions, changes in project parameters as plans
continue to be refined, future prices of commodities, possible variations
in ore grade or recovery rates, failure of plant, equipment or processes to
operate as anticipated, accidents, labor disputes and other risks of the
mining industry, delays in obtaining governmental approvals, permits or
financing or in the completion of development or construction activities,
Uranium One"s hedging practices, currency fluctuations, title disputes or
claims limitations on insurance coverage, as well as those factors
discussed under "Risk Factors" in Uranium One"s Annual Information Form and
Management"s Discussion and Analysis as filed with securities regulatory
authorities in Canada. Although Uranium One has attempted to identify
important factors that could cause actual results to differ materially,
there may be other factors that cause results not to be as anticipated,
estimated or intended.
There can be no assurance that such statements will prove to be accurate as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue
reliance on forward-looking statements. Uranium One undertakes to update
any forward-looking statements that are included herein, except in
accordance with applicable securities laws.
To receive the Corporation"s news releases by email, please register on the
Corporation"s website: www.uranium1.com
Date: 28/07/2006 04:56:54 PM Produced by the JSE SENS Department
