Just thought i'd post an earlier minesite article. The NMR forum...

Just thought i'd post an earlier minesite article.
The NMR forum here is a bit quiet ( just like Bishkek on a saturday night :)
--------------------------------------------------------------------------------------------
June 09, 2009

Mining At Nimrodel’s Newest Uranium Project In Kyrgyzstan Is Shaping Up To Be A Simple Backhoe Exercise.

By Our Man in Oz

Uranium mining is supposed to be a complex business. So it was curious recently when the chief executive of a small company described the mining process at a recently acquired project as a “backhoe exercise”, and the processing as “a walk in the park”. Those colourful descriptions from the boss of Australia-based Nimrodel Resources, John Hebenton, apply to the Kamushanovskoe uranium deposit in northern Kyrgyzstan. In fact, he could have gone further in singing the praises of the latest tongue-twisting Kyrgyz venture of Nimrodel, including mention of the remarkably low capital cost, access to an ex-Soviet uranium production facility which will keep processing costs down, and direct access to uranium-hungry China via the long land border China shares with Kyrgyzstan.

The secret to Kamushanovskoe (actually, let’s do the Aussie thing and abbreviate it to Kamu in all future references) is the nature of orebody, peat. Yes, the uranium at Kamu is contained in the same stuff they burn for heat in Ireland. In fact, burning the peat could be one stage in Nimrodel’s separation process, though deciding how to get the uranium out is currently one of the issues under consideration. “We’re looking at that question right now,” Hebenton told Minesite’s Man in Oz in his Perth office. “We have a number of decisions to make, but essentially this is a very easy orebody to mine and treat, and potentially very profitable.”

Nimrodel, which has a number of other more technically complex uranium projects in Kyrgyzstan, is in the process of acquiring an 80 per cent interest Kamu from the privately-owned British company, Pangaea Energy. When the deal is settled, Pangaea will emerge with a 19.9 per cent stake in Nimrodel via an issue of shares and options. Alongside the paperwork, a due diligence exercise is underway as well as fresh testing to boost the JORC-code compliant status of the resource. This is expected to lead directly into a six-month bankable feasibility study. If all goes well, construction could start soon after, with first uranium produced in the second half of 2010.

The speed at which Kamu could move from acquisition to production is one of the eye-catching features of a deal which might very well reinvigorate Nimrodel, and its share price. Since clearing the $1.00 mark in early 2008 the stock has been a lacklustre performer, sliding to as low as A4 cents early this year. In recent days there has been a spring in the share price which got as high as A13 cents in mid-May but then slipped back to around A9 cents, a price which capitalises the company at a very untaxing A$7.5 million. And that’s a number worth remembering as the economics of Kamu are examined.

The starting point is the early work done by Pangaea which established an indicated and inferred resource of 2.5 million pounds of uranium in the peat at Kamu which grades 360 parts per million, but is located within 3.4 metres of a very flat surface. Mining, or back-hoe digging, will easily extract the peat at a cost Pangaea estimates at between US$7 a pound and US$9/lb. The uranium in the peat is then concentrated by a simple gravity circuit which lifts the content to around 1000pm (0.1 per cent). The plan then is to send the concentrate to the Kara Balta uranium processing plant 60 kilometres to the south. At that plant, Nimrodel is likely to install its own processing facilities, which might start with something as simple as burning off the peat, and then treating the ash, effectively another concentration stage.

For investors, the important questions are not so much about mining and treatment, they’re about finances and markets. Using the early Pangaea studies Hebenton is able to point to a capital cost estimates for the entire operation of US$13 million, and processing costs of between US$10-and-US$12 per pound. When those costs are added to the US$7-to-US$9/lb for mining you’re left with a total cost per pound of uranium of somewhere between US$20 and US$30, depending on fine tuning and how you allocate the cost of capital.

Given that the spot uranium price is a shade under US$50/lb a fat profit margin can be seen on a project which should be capable of producing around 500,000 pounds of uranium for a minimum of six years. A back of the envelope estimate by Minesite’s Man in Oz is that Nimrodel could generate around US$20 million a year from Kamu, which explains why it was worth remembering the current A$7.5 million market capitalisation of the company. More work is required, which is why all that’s on the table today is a proposal to buy Kamu subject to due diligence. One essential step, and a reason for Nimrodel’s low share price, is the need to raise more capital, starting with an initial A$500,000, to be followed by a bigger raising of around A$5 million in August.

The Kamu deal might turn out to be a turning point for Nimrodel. It retains highly prospective exploration tenements in the south of the country which have attracted the attention of major mining groups. On Monday the stock also caught the eye of gold bugs who noted the results of a promising trenching exercise at the Tyuz-Ashuiskaya project in the far west of Kyrgyzstan. Best assays included 4 metres at 4.1 grams a tonne of gold, plus 22 grams a tonne of silver and 0.96 per cent copper. That result confirms gold and copper mineralisation at a number of locations along the 7.5 kilometre Saraysay limestone horizon. When the gold discovery is included with the strengthening uranium portfolio Nimrodel become an interesting stock to watch.