mad not to own summit, page-11

Changing tide to reach Summit

Friday, March 10, 2006

THREE Senators will visit Summit Resources' Mount Isa uranium project in Queensland next week in order to cast their eyes over the ground that currently hosts 77 million pounds of uranium oxide, though this number is set to rise with upgraded resource estimates for eight deposits not too far away.

Queensland Senators Russell Trood, Brett Mason and George Brandis approached Summit with a request to add their names to the list of decision makers who have demonstrated their support of uranium mining by visiting the Mt Isa project.

Summit managing director Alan Eggers told MiningNews.net he firmly believes the wave of support for uranium mining in Australia is growing every day, noting that about 1 billion people in India added their voices to the chorus of support when John Howard visited the country last week.

Eggers also says he believes a shift is underway within the Labor Party, with new party president Warren Mundine openly supporting uranium mining, along with Resources spokesman Martin Ferguson and a number of smaller players at both a state and federal level.

"The crunch date is April 2007 when the Labor Party has its next conference to set policy and we're very confident that at that meeting the (no new mines) policy will be reviewed and will be dropped," Eggers said.

"The Labor Party will drop it."

Eggers said trade unions have backed uranium mining, a fact likely to add weight to a policy shift within Labor.

"We've got support within the Mount Isa City Council, the Mt Isa Chamber of Commerce, the traditional owners have come out and supported us … we've got the Mount Isa community's support and the Queensland coal producers have come out and supported us," Eggers said.

"So it's not just Summit who's saying this is about to happen – it's across the board."

But until the floodgates open and mining is approved in Queensland, Eggers says the best thing the company can do is increase the size of its resource base and identify the best areas to start when development can proceed.

"At the moment we're drilling eight known deposits at Mt Isa – Valhalla, Andersons, Skal, Bikini, Mirrioola, Tjilpa, Warwai and Watta," Eggers said.

"All of these deposits have historic resources on them and we are now drilling those to release new JORC-compliant resources this year on each one of these deposits."

Eggers declined to go on the record about how much bigger he thought the 77Mlb of resources would grow by the end of 2006, other than to say they would be "substantially" larger.

He pointed out 15 other areas within Summit's 7500 square kilometre land holding in the Mount Isa region have returned ore grade rock chip samples or drill intersections. But due to the amount of work the company already has on its plate, it won't get to them this year.

Eggers says if there is a silver lining to not being able to mine its uranium resources right away, it is that Summit is now able to finetune the economics and development schedule of the Mount Isa district in order to maximise returns.

"In a way we're going to have a better idea of what we've got and some of these other satellite deposits we're drilling now have much better grades at surface so they would be fairly open-cutable material for instant payback," Eggers said.

"So in a way it's not all negative."

A pre-feasibility study looking at a stand-alone 4 million tonne per annum operation producing 6Mlb of uranium oxide annually for the first three years before increasing production to 9Mlbpa has shown a capital cost of $A400 million.

The first six years of the project would not only generate more than $1.5 billion in operating surplus for Summit, but it would also mean more than $2.5 billion in export revenue for Australia and provide more than $80 million in royalties to Australian governments.

Eggers said the pre-feasibility was conducted in a conservative manner and the numbers would have changed in today's operating environment, but he has no doubt about the extremely robust economics of the project.

One of the major factors that could have a big impact on the project's economics is the uranium price.

While the strongest bulls in the market are forecasting spot prices of $US400/lb and upwards, the price has recently risen to $US39.50/lb and the projected supply-demand dynamics of the market continue to point in favour of yellowcake producers.

There are currently 440 nuclear reactors operating worldwide, 24 under construction and a further 65 planned to be built in the next decade, all of which require a steady source of fuel.

Currently, supply reportedly caters for about 70% of global demand, with the balance being sourced from depleted stockpiles and weapons grade material, a situation considered unsustainable by Eggers and others.

"There's room for a number of other key (uranium) producers to come in," Eggers says.

"The market wants it, and we have the resources, and they're worldwide competitive resources … so we're going to do this."

Focus Feature by Michael Vaughan