Boss Resources Limited (ASX: BOE) believes that Feasibility Study (FS) results have confirmed its Honeymoon Uranium Project in South Australia as one of the world’s most advanced uranium development projects.
Managing Director and CEO Duncan Craib said the “outstanding” results, based on a conservative uranium price, position the restart and expansion of Honeymoon as a project that can be fast-tracked to re-start production in 12 months with low capital intensity to seize an anticipated rally in the uranium market.
“Our FS base case results confirm we will be Australia’s next uranium producer,” Mr Crain said.
“The 100%-owned Honeymoon Uranium Project offers an unparalleled investment opportunity; an impressive IRR with low capital intensity and short time to re-start production, with excellent leverage to the anticipated upswing in uranium fundamentals.
“Reflecting a conservative base case uranium price of $50/lb U308 over LOM, the FS demonstrates Honeymoon’s advanced development can rapidly respond to a market rally, given the low capital barrier.
“It’s average all-in-cost of US$32.3/lb U308 over LOM positions Honeymoon as one of the lowest operating uranium production costs world-wide.
“Completion of the FS milestones offers investors a real and near-term uranium supply prospect and allows us to progress off-take contracts with utilities world-wide.
“The FS base case was designed for fast-tracked production by recommissioning the existing SX process within 12 months before expanding production to 2Mlbs U308 equivalent per annum. Our team has technically de-risked the Project and ensured there is no timeline drag from onerous tasks of securing permits and approvals needed to restart production.
“With A$170 million of historical expenditure on infrastructure and plant in place which previously produced and exported uranium, Honeymoon has one of the lowest restart capital intensities in the uranium sector, with a base case pre-tax NPV to capex ratio of 2.6x, and minimal construction risk.
“The FS base case utilises only a portion of Honeymoon’s JORC resource, excluding 36Mlb of JORC resource outside the Restart Area, which could expand the mine life, and Boss’ defined exploration target could potentially extend the mine life beyond the initial 12 years and increase the production profile. Honeymoon’s Federal EPIP Act approvals allow export of more than 3Mlbs/annum U308 equivalent.
Recognised industry endorsement of Honeymoon is providing opportunities for Boss to progress off- take contracts with utilities world-wide, and commercial discussions continue.”
Boss’ FS provides a base case to fast-track uranium production from the Honeymoon Restart Area to achieve a 12-year LOM at 2Mlb/annum U308 equivalent, from only 35.9Mlb of the Project’s global mineral resource (JORC 2012) of 71.6Mlb.
A total of 94% of the Restart Area Measured and Indicated resource is located within the boundaries of Mining Licence (ML) 6109, which has mining approval. ML6109 has a Uranium Mineral Export Permission for 3.3Mlb/annum U308 as renewed by the Australian Federal Government in April 2019. No new permitting is required on ML6109.
Mr Craib said the FS indicates a technically sound and financially viable project, capable of generating more than A$492 million in pre-tax free cash flow over the Project life. Total pre-production capital is estimated at A$92.9 million, including a project contingency of A$8.1 million. The FS is based on in-situ recovery (ISR) mining with an average uranium tenor of 49 mg/l targeted over the LOM from the wellfields. All base case financial analyses were completed assuming an average US$50/lb U308 price over the LOM.
He said sensitivity analysis at a lower and higher industry referenced prices of US$40/lb U308 and US$60/lb U308 demonstrates downside and upside to the Project (Table 2).
The company considers a base sales price of US$50/lb U308 over the LOM is reasonable given that current spot and term uranium prices are well below the price required to guarantee viability of a large proportion of the world’s existing production.
Mr Craib said uranium analysts predict that a long-term spot price in the mid US$40’s (anticipated from 2023) will incentivise restarts whilst a price closer to US$60/lb will be needed for most new mines.