Confidence boost for new Erongo uranium project

Following a week of intensive meetings with investors in Toronto, the director and CEO of uranium explorer Forsys Metals Marcel Hilmer emerged confident that the company would be able to secure finance and build its flagship US$432.8-million (N$5.2 billion) Norasa project in Namibia’s Erongo Region. In an interview with Mining Weekly Online, Hilmer underlined that “there is interest in the project, part and parcel with the renewed interest in the uranium space”. After completing a positive feasibility study on the twin-deposit project in March, the TSX-, Frankfurt- and Namibia-listed company was now determined to put in place the funding to construct the project, an amount Hilmer thought was achievable given the project’s size and scope. “We think it is economic,” he said. Hilmer noted that there was “something in the wind” for uranium and he expected a market rebalance to take place “sooner than some people would say”. He pointed to several newsworthy events in recent months that had heightened market momentum, including Canadian producer Cameco recently striking a C$350-million supply agreement with the Department of Atomic Energy of India to provide 7.1-million pounds of uranium concentrate under a long-term contract through to 2020. Forsys was not currently in active discussions with potential future off-take partners, but Hilmer noted that he was encouraged that the region’s dominant economy, South Africa, had announced its commitment to advance nuclear power. “It is still early days, but the government, banks and institutional investors are very supportive of this. There is a definite need in South Africa to improve the power supply for the commercial and residential sectors. Norasa feasibility Forsys had in March reported a 14.8% rise in reserves, higher yearly and life-of-mine (LoM) output and lower operating costs for its Norasa uranium project, following the completion of a feasibility study. Norasa comprises the Valencia main and satellite pits as well as the Namibplaas deposits and is considered as potentially one of the next big uranium-producing mines of the near future. The economic treatment had resulted in an estimated after-tax net present value at a discount rate of 8% of US$383.4-million (N$4.6 billion). Using the initial investment and operating cash flows from inception, the after-tax internal rate of return was estimated to be 26%. The project’s capital outlay would amount to US$432.8-million, up from the US$392-million estimated in the key performance indicators in the National Instrument 43-101-compliant technical report on the project, released on March 27 last year. Updated cost estimates represented a significant reduction from the 2013 Engineering Cost Study estimates of US$34.76/lb and US$38.20/lb of U3O8, respectively. The Norasa production schedule had been modified to incorporate the updated mineral reserves and to include a processing rate increase to 11.2-million tonnes a year, up from 8.2-million tonnes a year envisioned in 2010. The project was expected to produce about 5.2-million pounds of uranium a year over its mine life. “Norasa is one of the very few uranium projects in the world that is construction ready with a mining licence. “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,” Hilmer explained. TORONTO MINING WEEKLY