Don’t need to think too hard here…The key is tonnage and...

Don’t need to think too hard here…

The key is tonnage and grade….likely profitability…and obvious upside given their significant ground position, which should result in a fast-track to production AND significant development upside!

Relatively small tonnage existing at 300,000t @ 0.3% (6.2lb/t)...but this is equivalent to say 2,000,000t @ 0.045% …which is not far off what a few Aussie hopefuls are looking at.

The only difference of course for our little uranium hopeful is you get the same amount of contained uranium metal, yet it only needs to be extracted from 1 tenth of the total tonnage = highly economic.

In short, each tonne of ore will contain some US$700 (based on US$113/lb), of uranium value and whilst not disclosed, will also likely contain vanadium credits?

Having processing mills within short trucking distance, I envisage a relatively low-tech underground dig, condition, concentrate, truck and deliver operation, with toll-treatment capacity available at several nearby mills, including White Mesa.

Cap-ex hard to determine, but assuming production of just 100,000t of ore per year, for starters, it will not be significant with costs likely to be under $20m for all preparations, infrastructure and first delivery to the mill (for toll-treating).

If however they opt for ISL methods, you can effectively halve the operating costs

Even some of the larger operations who are building their own processing mills are looking at cap ex requirements of only $50-$100m all up...so it may well be that my $20m cap ex is way over the top?

So what might be the profits?

My research into underground uranium mining in the Utah region puts costs in the $50-$110 per tonne range for underground mining operations (including basic milling operations), depending on grade, depth, strata and scale...interestingly, higher grade often results in higher costs per tonne due to the increasingly prohibitive safely requirements resulting from higher radiation.

I have found several smaller operations however which are maintaining costs in the $50/t range.

The following reference is from David Miller, President of TSX listed Strathmore Minerals...

"...that the operating costs for an underground mining and milling operation would cost about $80 to $120/ton. An average grade of 0.1 percent U3O8 would yield two pounds per ton, but a feed grade averaging 0.2 percent would yield four pounds per ton. Uranium ore yielding four pounds per ton would cost about $25/pound."

So I think using $100/t production costs for our uranium spin off would seem fair to conservative.

On this basis, assuming a modest 75,000t per year mining operation and subsequent recovery of some 420,000lbs u3o8 (from 465,000lbs endowment using 90% recovery), we get net profits of some US$40m per annum for a minimum four year mine life, with obvious upside due to various expansion scenarios.

Seems a lot for so little…lol

Anyway, that's $12m for GDN's 30%...and annual profits of some $40m for holders of the new uranium listing, with cash flows starting in as little as 6-12 months…which should pretty much result in future value numbers brought forward fairly quickly!

Using my previous "assumed" configuration for the IPO of 75m shares (fully diluted)...from yesterday, which interestingly would just about fund the above cap-ex scenario to get us to production…we are looking at profits approaching some US$0.53 per IPO share.

A PE of just 5 would result in a share price of US$2.65 per share...which interestingly, some may remember is not far off my $2.56 target from last night, before the numbers were at hand.

Don't you just love it when things come together nicely…lol

Anyway…clearly decent value here in my view…perhaps more so due to the potential fast-track to production and likely resource upside, which should result in this little “last on the boards” spin-off being one of the first to actually produce an income from uranium!

Cheers!