Just trawling the web in search of news on BMN. Came across an...

Just trawling the web in search of news on BMN. Came across an old piece in the WA news
http://au.news.yahoo.com/thewest/opinion/post/-/blog/13390362/no-sweeteners-for-yellowcake-players/

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No sweeteners for yellowcake players

Kate Emery | View ArchiveApril 11, 2012, 8:18 am

A little over a year after the Fukushima nuclear disaster and despite endlessly positive outlook statements from the uranium industry, the fact remains it’s a still a tough time to be in the yellowcake business.

Just ask Bannerman Resources, which rolled out the definitive feasibility study for its flagship Etango project in Namibia yesterday.

The headline numbers look fine, with forecast operating cashflow of $US923 million after tax, cash operating margins of 24 per cent and a six-year payback.

That’s until you realise that the study’s base case is a long-term uranium price of $US75 a pound — as much as 50 per cent higher than current spot prices — with a break-even point of $US61/lb.

The capital cost of Etango has crept up 24 per cent since the group’s pre-feasibility study 15 months ago to $US870 million but that’s little surprise, given not only industry cost pressures but changes to the scope of the project, such as increasing the plant size from 15 million tonnes a year to 20mtpa and lifting average forecast production by 22 per cent.

What’s more pertinent is that forecast operating costs are also up, albeit by a smaller 8 per cent, to $US41/lb for the first five years and $US46/lb over the life of mine.

The current uranium spot price is close to $US51/lb although contract prices (which, uranium players say, are the ones that matter) are more like $US60/lb.

This puts Bannerman in the somewhat uncomfortable position of sitting on what is one of the few advanced uranium projects of its scale in the world but a project that is nonetheless not profitable at current prices, thanks largely to its comparatively low grade.

Essentially that means Bannerman has become, more than ever, a bet on where the uranium price is going.

Bannerman believes it’s going up, citing encouraging statistics like the 495 planned and proposed new nuclear reactors worldwide (there are currently 443 operating and another 61 under construction) and ambitious nuclear programs in China and India in particular.

A string of recent deals — China paid $2.2 billion to take over Extract Resources (also in Namibia) and Rio Tinto bid $C654 million ($636.7 million) for Canada’s Hathor Exploration — suggest the WA junior is not alone in taking a bullish stance.

Uranium bulls have spent much of the past 12 months arguing there is a serious disconnect between the way the sharemarket and short-term investors view the outlook for uranium and the way long-term industry players (the CGNPCs and Rios of the world, for example) see it.

The real test of whether that’s true for Bannerman may be how it fares in attracting a partner to help it develop Etango, something it will likely want to do before making a final investment decision.

Bannerman has also reached an agreement with Namibia’s state-owned mining company, Epangelo, to acquire 5 per cent of its Namibian subsidiary on “commercial terms”, dropping Bannerman’s stake down to 76 per cent.