Reno Creek pre-feasibility shows good return for Bayswater

Vancouver – A pre-feasibility study for Bayswater Uranium‘s (BAY-V) newly-acquired Reno Creek project indicates a small mine at the Nevada project could provides a strong rate of return.

The study examined the merits of an in-situ recovery (ISR) mine composed of at least five wells feeding into a central processing facility. The operation would produce up to 2 million lbs. U₃O₈ each year on its own; in addition, the plant would have capacity for uranium-loaded leach solutions or loaded resins from other nearby deposits that could increase output.

Over the mine’s 6-year lifespan it would produce 7.6 million lbs. U₃O₈, based on a 70% recovery factor estimate. Operating costs come in a US$13.72 per lb. U₃O₈, rising to US$26.39 per lb. when complete operating and capital costs are included.

Initial capital costs, including the processing facility, the first two field wells, and costs relating to permitting and engineering, come in at US$48.2 million. For that investment Bayswater can expect a 79% internal rate of return (undiscounted and pretax), based on a average uranium price of US$67.57 per lb., allowing capital payback in two years. Using that uranium price the Reno Creek project carries a pretax net present value of US$164 million, using an 8% discount rate.

The pre-feasibility study only assessed Reno Creek’s measured and indicated resources, which currently sit at 8.27 million tons grading 0.066% U₃O₈ for 10.96 million lbs. U₃O₈. The project’s 3.8 million inferred tons grading 0.063% U₃O₈ were excluded from the study, as inferred resources cannot be considered in economic analyses. And Reno Creek also hosts 5 million tons averaging 0.083% U₃O₈ containing another 8.4 million lbs. U₃O₈ in historical resources that are not complaint with National Instrument 43-101 regulations and so were also excluded from the study.

For Baywater, the next step from here is to conduct baseline environmental, hydrological, and engineering activities. The company plans to submit its applications for permits and licences by the end of 2011, advance to project to feasibility stage by 2014, and commence production in 2015.

Before any of that, though, Bayswater needs to complete its purchase of the property. It was only in late August that Bayswater announced a letter of intent to buy Reno Creek from Strathmore Resources (STM-V) and American Uranium (ACUC-O). The US$32-million deal valued each pound of uranium oxide in the ground at just over US$2. The majority of the purchase price – US$30 million – Bayswater will pay to Strathmore, in cash, in exchange for ownership of the property. The other US$2 million will go to American Uranium, in the form of US$1 million cash and US$1 million worth of Bayswater shares, in exchange for its option rights to the property, its data base, and its deep well injection permit. The permit allows the owner to dispose of ISR waste in deep wells; the property is already home to an abandoned dry oil well that can serve as one of the deep-injection wells.

The Reno Creek deposits sit between 50 and 140 metres depth, which is below the water table, and are considered highly amenable to in-situ uranium recovery because of their compact shape, good continuity, and high permeability, porosity, and transmissivity. Metallurgical testwork and a pilot plant operation in the 1980s and 1990s projected uranium recoveries of up to 76%.

The project, which is in northeast Wyoming in the western part of the Powder River basin, is in an area that already claims significant uranium production. Several mines or development-stage projects lie within a 40-mile radius, including Uranium One’s (UUU-T) recently acquired Christensen Ranch project, which has permitted ISR and satellite plants; Uranerz Energy‘s (URZ-T) Nichols-Hank project, currently under development; and Cameco‘s (CCO-T) operating Smith Ranch-Highland mine.