bgp equities commentary august 2010 (91.13 kb)

BGP Equities Commentary August 2010 (91.13 Kb)

Peninsula Minerals Commentary on ASX Release 17/8/10
Significant Resource Upgrade 67% Increase to 25 Mill. lbs (11,400 t U3O8)
ISL Mine Life of > 10 Years Assured, at > 700 tpa U3O8
Announcement: PEN announced a 67% increase in the JORC-compliant resource at the Lance
Uranium Project in Wyoming, with the following highlights;
Total JORC Resource now 25.2 Mlbs (11,400 t U3O8), categorised as follows;
3.6 Measured
5.6 Indicated
16.0 Inferred
25.2 Mlbs Total
Upgrade was based on a grade/thickness model, and another 386 holes
Grades and Grade/Thickness figures for the three locations at Lance are;
Grade Grade/Thickness
Ross Area 487 ppm 0.43
Ross 423 ppm 0.33
Barber 407 ppm 0.31
Potential for 72-120 Mlbs., based on the observation that the Lance Project
covers at least 305 line km of known stacked roll fronts. Over 90% of the
drilling has concentrated on the Ross and Barbara areas alone. Grade
potential is 360-500 ppm.
Comments:
This is another very positive announcement, showing that the Lance Project is
meaningful in scale and mine life. The ultimate size is a function of drilling, with
total available resource targeted to be 30-50,000 t U3O8. This is exactly what
utilities are looking for potential for a 20 year mine life.
The reference to the Grade/Thickness figure is useful and instructive. ISL leaching
is different to conventional mining where the ore is extracted and treated, with an
ability to calculate head and recovered grades. In an ISL operation the relevant
parameter is the grade/thickness, with the economic minimum regarded as 0.20
G/T. As the above table above shows, the Lance Project G/T is well ahead of the
minimum. The next set of factors to be considered include permeability, which
relates to the ability to flow solutions through the deposit, and depth of drilling for
development arrays.
Pre-Feasibility Study:
Back on 14 July, PEN released the results of a pre-feasibility study that gave initial
capex at US$53m and opex at $US$22/lb, including royalties and taxes.
Commissioning was estimated for Dec Half, 2011
Annual capacity was 680 tpa U3O8, but potential to double in size
Recovery rates were estimated at 80% from mine into solution, then 95% recovery
Comment:
PEN is well placed to come on stream just when the megatons to megawatts
program winds down, which will leave the USA scrambling to buy uranium from
mine producers. Being in the US, and knowing the protectionism for which USA
industry is notorious, PEN will have a sympathetic market on its doorstep.
At the spot price of US$46/lb, the Operating Surplus could be A$40m p.a., but at
the long term price of $60/lb it jumps to A$63m p.a. Given the market capitalisation
is $61m today, the projected economics make the share look very cheap.