Following a positive prefeasibility study at the Tumas uranium project in Namibia, Deep Yellow (ASX: DYL) has confirmed it will begin definitive feasibility work this month.
The PFS examined the viability of open pit mining and processing of the four Tumas deposits, within Deep Yellow’s wholly-owned Reptile project.
Tumas 1, Tumas 1E, Tumas 2 and Tumas 3 are within a 30km radius of the proposed purpose-built processing facility with a capacity of 3.75 million tonnes per annum of uranium-bearing ore.
It evaluated the potential of calcrete-associated uranium deposits within the Tumas palaeochannel and delivered strong results in line with assumptions determined in a scoping study completed in January 2020.
When the scoping study was unveiled last year, Deep Yellow called it a “critical milestone” in identifying a project with potential to meet investment criteria, including a 20-year minimum mine life and an annual production between 2-3 million pounds (Mlb) uranium oxide.
The prefeasibility study gave the project a post-tax net present value of US$207 million and a 21.1% post-tax internal rate of return.
Based on a break-even uranium price of US$47.33/lb, the project’s forecast gross life of mine revenue is US$1.89 billion to generate undiscounted after-tax cash flow of US$447.4 million.
Definitive feasibility study to begin this month
With the scoping study and prefeasibility studies both returning positive results, Deep Yellow has now committed to a definitive feasibility study, which will begin this month.
The study will be underpinned by the combined reserves of Tumas 1, Tumas 2 and Tumas 3. These total 40.9Mt at 344 parts per million uranium oxide for 31Mlb of contained uranium metal.
Deep Yellow noted the reserve estimate was only calculated from measured and indicated resources, which account for just 50% of the entire resource identified within the project.
As part of the definitive feasibility study, Deep Yellow aims to convert the remaining inferred resources to indicated status.
Following this, Deep Yellow will assess the resources for incorporation into the reserve estimate.
Infill drilling during the PFS established a 95% benchmark rate for converting inferred resources to indicated, and a 63% benchmark rate for converting indicated resources to probable reserves in the Tumas project area.
Deep Yellow said the benchmark ratios had been an important guiding input in establishing targets for the definitive feasibility study.
Deep Yellow managing director John Borshoff said the starting the definitive feasibility study represents a significant step forward in the company’s evolution.
“Tumas is one of very few development opportunities globally over the last four years which has progressed from brownfields exploration to completion of a prefeasibility study, now moving on to a definitive feasibility study,” he said.
“This is testament to [our] entire team who have proven uranium credentials and [who] understand what it takes to develop a world-class uranium operation.”
He said the development of Tumas would capitalise on expected improvements in the uranium price during 2022, following the realisation by nuclear utilities of a looming shortage over the next five years.
“Development of Tumas is a critical element in the execution of our stated dual-pillar growth strategy,” he said.
“The impressive results from our prefeasibility study clearly justify advancing this project to definitive feasibility study status, appreciating that uranium prices are expected to improve strongly over the next two to three years.”
The definitive feasibility study is due for completion by the end of 2022, advancing Deep Yellow towards its stated ambition of becoming a multi-platform, low-cost, global uranium producer.
Securing project funding
Mr Borshoff said the Tumas development would have little trouble attracting project funding when required, given existing global interest to drive down greenhouse gas emissions and meet targets set by the Paris Accord climate change treaty.
The selling point will be Deep Yellow’s growing expertise in a relatively small sector – the company’s executive team members have strong combined experience in defining, funding, developing and operating uranium mines in Namibia.
“Over the past decade, there has been a significant reduction in the number of companies which have either a viable resource to be developed or the expertise to do it,” he said.
“Deep Yellow is debt-free and has total ownership of the Tumas project which we now know is economically-robust and therefore highly-attractive [to potential financing partners].”
A combination of debt and equity will likely be utilised to fund the project’s development.
At the start of the Reptile exploration campaign in 2016, Deep Yellow announced it would chase an exploration target of up to 150Mlb grading between 300ppm and 500ppm uranium oxide.
This target was based on the company’s extensive experience in exploration, mining and production of surficial calcrete-associated and channel-related deposits.
Deep Yellow’s management and technical team claim to be the only group to have established two conventional uranium operations in two African countries after a 20-year global uranium industry hiatus.
One of these is the Langer Heinrich project owned by Paladin Energy (ASX: PDN) – a company which they were instrumental in establishing and which has mined deposits similar to those within the Tumas palaeochannel system.
Uranium price outlook
The global uranium market has entered a phase characterised by anticipated growing demand as new reactors enter commercial operation, offsetting expected retirements as uranium supply deteriorates due to production closures and cutbacks driven by persistent low uranium prices.
A recent report by the World Nuclear Association concluded that the global market is already in deficit, with stockpiles being consumed to meet uranium requirements.
“Looking forward, new uranium production facilities are needed to meet demand,” Mr Borshoff said.
“These projects will only be forthcoming at much higher uranium prices to incentivise the potential restart of currently shut-down uranium mines and the development of new production projects.”