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UCOMPARABLES – Uranium Developers’ Stage

EXCLUSIVE TO SIGHTLINE U3O8 –This month’s UComparables edition will focus on the Uranium Developers and the simple metrics of their key project’s stage of development – specifically, resource size, grade and mining method.

As stated in the past, it is not our intention to provide analysis or opinion as to the investment potential of these companies.  We are merely compiling and sharing metrics and data points, common across the companies that investors can utilize in their decision-making process. 

We did encounter some challenges in gathering the information due to reporting formats (ie: NI 43-101 Resource Calculation vs JORC calculation for Australian Companies), however, we believe that we have been able to present this information in a consistent, comparable and useful manner.

 

Mining Method

The method in which a mining company intends to extract ore greatly affect the construction and operational costs of the project as well as the execution risks involved.  In the case of uranium, mining is accomplished through conventional methods (open pit or underground mining) or via In Situ Recovery (ISR).  Having said that, it is also important to remember that depth and mining method are only two of the factors used in establishing the economic value of a project and in and of themselves do not necessarily reflect a direct implication in the profitability of a mine.

Open Pit Mining*

When uranium ore is found near the surface, generally less than 100 metres deep, it is typically extracted by the open-pit mining method.

Open-pit mining begins by removing soil and waste rock on top of the ore, to expose the hard rock. Then a pit is excavated to access the ore. The walls of the pit are mined in a series of benches to prevent them from collapsing. To mine each bench, holes are drilled into the rock and loaded with explosives, which are detonated to break up the rock. The resulting broken rock is then hauled to the surface in large trucks that carry up to 200 tonnes of material at a time.

Underground Mining*

When ore is located more than 100 metres below the surface, underground mining methods are more economical than mining by open pit.

The first step in underground mining is to access the ore. First, miners dig vertical shafts to the depth of the ore, then cut a number of tunnels around the deposit. A series of horizontal tunnels offer access directly to the ore and provide ventilation pathways. All underground mines are ventilated, but extra care is taken with ventilation in uranium mines, to minimize the amount of radiation exposure and dust inhalation. In most underground mines, the ore is blasted and hoisted to the surface for milling.

ISR Mining*

In a few places, geologic conditions allow uranium to be dissolved from ore directly, by pumping mining solutions underground, bringing it back to the surface, and extracting the dissolved uranium. With this in-situ recovery process (“in situ” meaning “in the original position or place”), there is limited environmental disturbance of the surface. The surrounding rock remains in place, while the dissolved uranium is pumped to the surface, and then circulated through a processing plant for extraction.

Within our UComparables list, there are eight companies planning to recover uranium via open pit mining, two companies combining open pit and underground methods, two companies using strictly underground and three companies using the ISR method.

 

Resource Size and Grade

Within the universe of uranium developers, it is a broad spectrum when it comes to size.  One important distinction for investors is the differentiation between resource categories.  These categories indicate the level of confidence and understanding as to the true size, measure, geology and economic viability.

First, let’s look at economic viability.  While a “Resource” is any measured deposit that is potentially viable for mining (under consistently accepted standards), a “Reserve” has had adequate work performed to demonstrate that it is legally, economically and technically feasible to mine.  Only once it is in the reserve category can it be referred to as “ore”.

Within these two categories, it breaks down further. A Reserve is categorized as “Proven” or “Probable” denoting high and reasonable confidence levels respectively. Similarly, Resources can be categorized as “Measured” or “Indicated” again indicating high and reasonable confidence levels respectively.

A Resource can include one additional category – “Inferred”.  An Inferred Resource has been calculated with the least amount of evidence and confidence and has not been verified as to geological or grade continuity.

Therefore, while investors can get significant comfort in stated Proven and Probable, or Measured and Indicated numbers, Inferred resources must be taken with a grain of salt and viewed only as an indication of what is potentially available.

In the table below, we have listed the flagship project for each development company, detailing their resources and grades.  Resources have be split between M&I and Inferred.  For the four companies that are shaded (Bannerman, Forsys, Berkley and Vimy) the amounts listed as M&I contains, in fact, Proven and Probable.

The standout in the crowd is clearly NexGen ranking as the largest and highest-grade deposit at 6.88% U3O8, compared to the group average of 0.66%. If we were to remove NexGen, the group average would be M&I Resources of 54.4 million pounds at 0.22% U3O8 and Inferred Resources of 39.4 million pounds at 0.17%.

Some companies will provide grades as a percentage or as parts per million (ppm), therefore to keep this report consistent, we have converted ppm into %U3O8for the following companies: BMN.AX, FSY.TO, BKY.AX, PLU.V, VMY.AX, ACB.AX and AEE.AX.

Once again we want to be clear that for the small community of mining companies currently producing uranium around the world, there are many resources available to investors to analyze, evaluate and compare opportunities. For the smaller uranium development and exploration companies, however, similar evaluations require extensive research. For that reason, we have chosen to focus solely on those companies.

We are defining Development Companies as any public company (without a producing uranium asset) that has announced plans to prepare an economic evaluation of a known uranium deposit.

Some companies are transitioning to other metals, have divesting their key assets, or calculated uranium as a by-product, For simplicity sake, we have kept the following companies out of these comparables:

  • Westwater Resources: as they transition to Battery Metals selling their key uranium project to Laramide; and
  • Greenland Minerals and Energy Limited: here, Uranium is a byproduct and their resources measurements contain other elements which will confuse our comparison

Investors should not ignore and should be able to find significant detailed analysis and discussion on the larger producing companies that include: Cameco Corp, Denison Mines Corp., Energy Fuels Inc, Energy Resources of Australia, Uranium Energy Corp, UR-Energy Inc, Paladin Energy Ltd, Peninsula Energy Ltd, Uranium One, Rio Tinto plc and BHP Billiton Limited.

 

UCOMPARABLES TABLE

 

In the attached table, we have assembled the results at a high level. For simplicity sake, we have identified those companies in the top quartile of any particular metric with a green dot.  For those in the bottom quartile we have indicated that with a black dot.  The rest, falling within a safe margin of the average, are noted with a yellow dot.

Under “Mining Method”, we classified Open Pit in green, Underground and the combination of Underground and Open Pit in Yellow and ISR as black.

Under resource, we only account for M&I resources.

Again, we must stress that investors need to take care in evaluating any information pertaining to their investments and that this information is being provided only as a starting point to that evaluation.  We will continue to add new comparable categories and update these as necessary.

We invite any comments or questions pertaining to the information provided or companies we may have missed.  Such questions and comments can be sent to editor@sightlineu3o8.com.

For detailed data on each category, click on the colored dots.

* Source: Canadian Nuclear Association