production cost blowout?

While the greenies continue to give shareholders indigestion, the attention has been deflected from some very obvious challenges going forward.

In Warwick Grigors Uranium Sector review Feb 2011, he outlines cash costs of around US$13.52lb, and a production cost estimate of " US$21.42lb ".

I believe Warwick has a close association with PEN, but I am sure his professionalism, and many previous years of experience, soley as a uranium analyst affirm his abilities.

The DFS EES when released shows an estimated production cost of" US$31.50lb ", significantly a 47% blowout of the original estimate. In fact the highest production cost compared to all ISL/ISR companies in Warwicks report.

What is more worrying, is that this US$31.50lb is based on full production from Ross,Kendrick,& Barber whilst sharing the cost for the CPP.

PEN state that they will start with Ross at 750 000lb (Production unit max) per year, and then bring Kendrick & Barber on, over the next 2 years, to total 2.25 million lbs per year.

The original projected 1.5 million lbs production ( Warwick Grigor) in the first year has fallen by 50%

It stands to reason that if Ross is bearing total costs of the 3 production units and the CPP in the first year, the real cost of production per lb is going to be massively higher than US$31.50lb.

Where is the short fall going to come from, until all three are up and running? Cash + shareholders?

If you can't get a lot more resource into M & I, and increase the average grade substantially in the Ross,Kendrick & Barber production zones. . . . . . PEN could have some cash flow problems.

Permitting may end up being the least of your worries.

SwissB