minesite article

Nimble In Tanzania, Strategic In Australia: Uranex’s Uranium Game Plan


By Our Man in Oz



Ever get the feeling that no-one is listening to you? If so, the chances are that you’re the chief executive of a small mining company trying to compete with a cacophony of background noise ranging from the global banking meltdown, to tennis at Wimbledon and cricket at Lord’s. Next month, it gets worse with the Beijing Olympics coinciding with Europe’s traditional month-long siesta. These are at least some of the reasons why people such as John Cottle from Uranex are finding it hard to garner attention, no matter how good the story, and in Cottle’s case there is an excellent story to tell. It might even include a prize for being the world’s next uranium project to move off the drawing board and into construction.
The Bahi project in Tanzania is currently shaping up as the first cab off the Uranex rank. Others may follow. Though Bahi is the company’s most promising prospect, there’s also Thatcher Soak in Western Australia, but that has a political hurdle to clear in the form of a state government ban on uranium mining. A change of government in WA might see plans for Thatcher Soak accelerated, but that’s a long shot. The area of immediate interest, and what attracted most interest in a talk Cottle gave at a uranium conference last week, is the potential for an early move in Tanzania.

However, before getting around to analysing what Cottle said it’s worth considering where he said it. The venue was the Esplanade Hotel in the WA port city of Fremantle. More than 300 delegates battled heavy rain to attend. No-one told the audience to show up, but remember this was a uranium conference in an Australian state where uranium mining is illegal. If ever there was an example of investors saying to government “we don’t believe you” this was it. Of added interest in WA’s “illegal” uranium industry was awareness that a week earlier Canada’s Cameco and Japan’s Mitsubishi had teamed up to buy Rio Tinto’s Kintyre uranium project for US$500 million – with a reasonable interpretation being that no-one splashes out half a billion dollars unless they believe a uranium mining will eventually be allowed in a part of the world littered with the stuff.

When the barriers are removed Uranex will be one of the big winners, because Thatcher Soak has been waiting patiently for a mine plan for decades. Uranex is just the latest in a long list of owners. In theory, and without political interference, Thatcher Soak will be a very profitable, medium-sized, development. A fresh resource estimate from the independent consultants, Hellman and Schofield, released on 30th June, revealed a project containing 17 million tonnes of ore assaying 229 parts per million of uranium (ppm). Boiled down that equates to 4,900 tonnes of the metallic fuel, or 11 million pounds, valued at around US$700 million at the current spot uranium price, or almost US$1 billion using the long-term uranium price – a difference which underlines one of the odd aspects of uranium, that the long-term price remains stubbornly higher than the spot price.

Cottle told Minesite on the sidelines of the Fremantle conference that he was very pleased with the latest confirmation that Thatcher Soak contains a viable volume of uranium, and with the confirmation that it will be easy to mine and process. But he was even happier with the news from Bahi, which Hellman and Schofield found contained 14 million tonnes of ore assaying an average of 218 ppm for a contained 3,000 tonnes of uranium, or 6.7 million pounds of the metal. “Both reports, on Thatcher Soak and Bahi were excellent documents, and we accept both their conclusions and recommendations,” Cottle said. “In both cases we’re dealing with resources which are extremely shallow, between four metres and 20 metres in depth. They will be easy to mine and easy to process.”

Given a choice there is little doubt that Uranex would prefer to push ahead initially with Thatcher Soak, but the politics of the situation mean that it’s virtually certain that Bahi will be first away. Cottle told the Fremantle conference that Bahi fitted perfectly into a strategy of “one plant, multiple ore sources”, ore sources which would further enhance its economics. “Bahi is a series of Playa Lake deposits of unconsolidated material with a high-grade starter zone which will ensure an early payback on capital outlay. The location is well serviced by rail, power and nearby townships”, he said.

Up to this point, Bahi seems like just another potential uranium development. What makes Cottle’s plan different is that it focuses on the business case rather than the simple mining potential. “It’s our way of quickly making the jump from explorer to producer,” he said. “It’s not a big project, but it will be very profitable, and it will get us into the uranium industry with a minimum of fuss. What we’re doing is matching the geology to the business - looking at the Playa Lake structures and saying this could be quick, profitable and expandable.”

The next six months promise to be very significant for Uranex. It is shifting Bahi into the pre-feasibility analysis phase, taking it to the same level as Thatcher Soak. The difference is that the Tanzanian project does not face political obstacles to its development. “We can see a slot emerging for a range of players in the uranium market,” Cottle said. “Our portfolio caters for what we call nimble short-term plans, backed by strategic long-term projects.”

With the market effectively on holiday (or shell-shocked) Uranex has been sold down heavily. From around A50 cents in early June the stock dropped as low as A21.5 cents last week. It has since been in a modest recovery mode, recently trading up to A23.5 cents, a price which values the company at a somewhat untaxing A$19.6 million. That’s an interesting number given that Uranex still has A$10.7 million in the bank.