Like coal, uranium will continue to be a valuable energy source across global territories – despite perceived environmental dangers.
The uranium market has retracted in recent years on the back of negative perception, but this will undoubtedly drive prices higher as supply quantities have moved into a deficit.
This is good news for TSXV-listed uranium junior GoviEx Uranium who is looking to take advantage of changing market fundamentals and use its first mover advantage in Africa, CEO DANIEL MAJOR tells LAURA CORNISH.
GoviEx’s commitment to its Niger-based Madaouela uranium project is unwavering, which is impressive considering the company has been working to advance and develop the asset since acquiring it back in 2007.
This article first appeared in Mining Review Africa Issue 2, 2020
Unfortunately, the U₃O₈ (uranium) market has not been in the company’s favour to date, but this has not detracted the company or Major from working towards establishing a mine which offers market value and a return on investment.
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“Uranium inventories from American and European utilities are declining and, with recent production cuts, will lead to a uranium supply deficit, driven further by growth in demand for nuclear power generation,” Major states.
“This gives us every confidence that the price will ultimately improve, which we would ideally like to see settle around US$55/lb – making our project financially viable,” he continues.
What is the plan until then?
Any junior mining company knows that a depressed commodity pricing environment has its benefits, and this is certainly the case for GoviEx.
The company is using its time advantage to re-evaluate and improve Madaouela’s project economics – preparation that will make it fund-raising and construction-ready as soon as prices shift.
“We want to be seen as having a first mover advantage to develop a new uranium project when the time is right,” Major highlights.
Consequently, the last 12 months saw GoviEx introduce a programme to revisit the entire project from a technical perspective to de-risk and reduce operating and capital costs considerably.
The results of this work is due in Q2, 2020 and will form part of the feasibility study currently underway, which once completed, will enable the company to open up discussions to start securing project finance and offtake agreements.
Outlining some of the work conducted over the past year, Major indicates that the company has focused largely on changing the front and end circuits of the process plant that were established during the pre-feasibility study.
This has seen the company change its upfront process technique from a commercially unproven ablation technique to gravity recovery. This is not only recognised as a successful recovery technique, but will further reduce the contained calcite and sulphuric acid required, which are the project’s major consumables.
Towards the back end, the company has also elected to replace solvent extraction with ion exchange, which will allow for an easier and more cost effective process of extracting its molybdenum by-product.
“We believe the combination of these changes has the potential to reduce our costs and we consider this a significant incentive for potential investors,” Major notes.
Madaouela project advantages
The fully permitted Madaouela project has much to showcase for interested investors and has the support of the local government, which is important in a country not well recognised or understood by global markets.
In July 2019, GoviEx’s wholly-owned subsidiary GoviEx Niger entered into definitive agreements with the Republic of Niger to finalise the commercial terms to progress Madaouela.
The key commercial terms covered by the signed definitive agreements between the State and GoviEx include:
- A Nigerien operating company to be named Compagnie Minière Madaouela SA (the Madaouela Mining Company) is to be incorporated by the company into which the Madaouela I mining permit will be transferred.
- Pursuant to the Mining Code, the State is to receive a 10% free carried interest from the capital of Madaouela Mining Company.
- The State is to receive an additional working interest of 10% in exchange for approximately $14.5 million of claims due by the company to the State, comprised of the final €7 million Madaouela I mining permit acquisition payment and settlement of previously challenged, three years of area taxes ($6.6 million). The company is to receive a final, complete and unconditional release without reserves in respect of the debt, upon the transfer the additional working interest.
- The State has agreed that the payment of surface rights required under the Niger Mining Code, with respect to the Madaouela I mining permit, shall be deferred, without interest, penalties or fees, from the period commencing 1 January 2019, until the earlier date of GoviEx closing a financing for the construction of a mine for the Madaouela I mining permit or three years from the incorporation of the Madaouela Mining Company.
- The State has agreed to issue new nine-year exploration permits for the areas previously covered by Madaouela 2, Madaouela 3, Madaouela 4 and Anou Mélé exploration permits, as well the as the renewal of the Eralrar exploration permit, in order to allow GoviEx to continue its exploration activities on the Madaouela project.
Reviewing the project, Major reveals that the pre-economic assessment study outlines a 2.7 Mlbpa uranium production target, which equates to 65 Mlb over a 21-year lifespan at a 0.14% grade. This is “above average” for Africa, Major notes.
Based on the current project, before the proposed optimisations, GoviEx would require $360 million to build the project and, once operational, would operate at an all-in sustaining cost of $30/lb. It has a two-year construction timeframe.
While getting Madaouela to a construction-ready point is the priority, Major notes the greater potential the area has to offer, “we have six licences – we have exploration upside.”
GoviEx is positioned, subject to increasing uranium prices, to obtain project financing to move towards the development of its flagship Madaouela project.
“Our team has been operating in Niger for more than 10 years and benefits from much of the key infrastructure (road access, skilled mine labour, ground water and grid power) necessary to develop this strategic asset,” Major emphasises.
Even though the spot uranium price declined slightly in 2019, the company sees reason for optimism in the uranium market fundamentals. The World Nuclear Association‘s (WNA) Fuel Report issued in September 2019 highlights improving market dynamics, and demand expectations have improved in an environment of supply constraint and drawdown of utility inventories.
The WNA 2019 Fuel Report forecasts an improvement in nuclear energy demand of 2% compound annual growth rate in the reference case from the demand forecast in its previous report in 2017.
This improved forecast is supported by the reported 55 new reactors currently under construction and government policy changes resulting in extended reactor lives in the United States and France.
The supply constraint shouldered by the major uranium producers has resulted in the supply of uranium being in a deficit in all of the forecast scenarios in the WNA 2019 Fuel Report.
“Projected increased demand and supply constraints have already been noted in the long-term with rising prices, and we believe this will extend through to uranium prices in 2020,” Major concludes.