Emerging South African metals company First Uranium Corporation, ironically only producing gold at the moment, is poised to move into its first uranium production at its two South African operations by April 2009.
Our top priority is to get into production in South Africa and to prove to the world that we can produce uranium,” Vice president investor relations Bob Tait says, but he mentions that the company is examining other opportunities in Southern Africa, as well as exploring certain options relating to its North American growth strategy. “While not a priority right now, we certainly do want to know where we are going next.”
Listed on the Toronto Stock Exchange and the JSE, First Uranium has two South African long-life uranium and gold assets. These are Ezulwini, which is an underground mine about 40 km southwest of Johannesburg, and Mine Waste Solutions (MWS), a tailings recovery operation further towards the Klerksdorp area.
“We definitely classify as a near term producer with gold production already underway and uranium production about to happen,” Tait says.
“We began to account for gold production at MWS with the acquisition of a gold plant in June 2007, and we began to produce gold at our new plant at the Ezulwini mine in July 2008. The uranium plant at Ezulwini, originally scheduled to start up in July 2008, is now due to launch production by the end of 2008, and the first two modules of the uranium plant at MWS are on plan for a launch by April 2009.
“Strangely enough for a uranium company,” he adds, “looking at life of mine production over the next 18 years, about 60% of our revenue will actually come from gold.”
First Uranium’s forecasts show gold production at the two operations reaching 144,000 ounces in 2009 (87,000 from Ezulwini and 56,000 from MWS). This is expected to peak at 557,000 ounces in 2012 (375,000 ounces from Ezulwini and 182,000 from MWS) before settling down to 400,000 ounces or more a year from 2013 to the final year of MWS production in 2023.
Average gold production from Ezulwini over an 18-year life of mine to 2025 is calculated at 306,000 ounces a year, while MWS life of mine average production over 16 years to 2023 is expected to be 115,000 ounces a year.
“In the case of uranium, we expect a much stronger contribution from the tailings recovery project than from Ezulwini,” Tait observes. Life of mine average from MWS is calculated at 1,162,000 lbs a year until 2023, while the figure for Ezulwini until 2025 is 952,000 lbs a year. Total uranium production from the two operations is estimated at 454,000 lbs in the first year of production in 2009, rising to 2,894,000 lbs by 2011, and remaining above two million pounds a year until the last year of production at MWS in 2023.
Ezulwini mine, which was mothballed in 2001, has a 10 million tonne resource defined as measured and indicated, which represents about two million ounces of gold and 6.7 million pounds of uranium. However there is a huge inferred resource of 200 million tonnes, representing 32 million ounces of gold and 218 million lb of uranium.
“We are moving a significant portion of this inferred resource to measured and indicated, although we are not at reserve status yet,” Tait says. “We’ve also done a bit of drilling and check-sampling of old data, and it is clear that the total resource will improve. At this stage, however, we are still reckoning on an 18 year mine life.
“We started the plants from scratch, rebuilt everything, commissioned the 200,000 tonne per month (tpm) gold plant in July. We will have the four 50,000 tpm mills to feed both the gold and plants installed by December, with the uranium plant scheduled to start production before the end of the year.”
The tailings recovery project – Mine Waste Solutions (MWS) – where the tailings are hydraulically mined and reprocessed is economic because it produces both gold and uranium. “To accelerate the processing of the large tailings resource that we acquired in the spinoff from parent company Simmer & Jack Mines, we bought a neighbouring tailings recovery project over a year ago as an ongoing business that already had a gold plant in place, and we have run it successfully since June 2007,” he says.
“You can see that the gold and uranium grades here are considerably lower than Ezulwini, but we have high volume. If you look at the measured and indicated total plus the inferred, you’ve got about 350 million tonnes of ore in the system. We are processing 21,000 tonnes a day now, and it will be three times that much when we are in full production in early 2010.”
“We’ll double gold production and start uranium production with the first two modules in place by the end of the first quarter of 2009. The last modules will be in place by 2010.”
First Uranium stresses to investors that it is a low-cost operator. “The reason we are low-cost is that we have a dual commodity mix of gold and uranium so to a certain extent we get both products for the effort of mining one,” Tait claims.
“Also, the underground mine operation is a brownfields project; we picked up the entire infrastructure and saved a lot of initial investment usually required to start a mine. The tailings recovery project is low cost because it is a hydraulic mining operation which requires a smaller labour force compared to the five or six thousand people that will be required to operate our underground mine, and you don’t have to hoist or transport the ore in any way other than by pumping the ore in a liquid slurry along a pipeline.”
Life of mine costs at Ezulwini are expected to be US$376/oz for gold and US$33/lb for uranium. And the tailings recovery project’s costs are US$347/oz for gold and US$22/lb for uranium.
Ezulwini’s expected capital costs equal about US$6.2/t, its operating costs are expected to be US$74/t and this assumes a total mill feed of 35.7 million tonnes. At MWS (with capital costs of US$0.78/t and operating costs of US$3.44/t) the assumption is a total mill feed of 323.9 million tonnes.
First Uranium has considered the major aspects of risk management that uranium and gold miners face. It is ensuring smooth operations by using proven technology; it has started an initiative to examine the prospects for geopolitical diversification in the United States; it has assembled strong board and management teams with many years of mining experience; it is ahead of schedule with shaft rehabilitation with plans to complete this in January 2009; it has organised contracts and purchased a plant to ensure that it can meet its power requirements and suffer no loss of production; and it is considering construction of a sulphuric acid plant to meet its own requirements and possibly look at the export market as well.
“We also believe there are things we can do at both of our operations to increase production,” Tait adds. “If we prove sufficient resource here, we could someday sink another shaft to increase or even double production.
“There are also ways in which we could improve the recovery at our tailings recovery project. It does not give the best return on your dollar right now, but if we were to obtain a high enough guaranteed price for our uranium, we might decide to increase recovery,” he says.