Berlin takes U3O8’s breath away

Revenue from by-products phosphate, vanadium and yttrium will more than pay for the mining and extraction of uranium oxide at U3O8 Corp.’s (UWE-T, UWEFF-O) Berlin project in Colombia, according to a preliminary economic assessment (PEA).

The deposit, which is 140 km west of Bogota and 100 km southeast of Medellin, is expected to be mined from underground and produce 1.2 million lb. uranium annually over a 15-year mine life, from a 500,000-tonne-per-year operation.

At a uranium oxide price of US$60 per lb. — the average reported price for long-term contracts over the previous 12 months — the mining operation would produce revenue of US$430 per tonne against operating costs of US$240 per tonne, according to the PEA, which was six months in the making.

The base-case post-tax net present value would be US$260 million at a 5% discount rate, and the post-tax internal rate of return would be 12%.

Capital costs of US$437 million would include sustaining capital of US$31 million and a US$41-million contingency.

The Berlin mine is expected to generate US$3 billion in revenue, with free cash flow of US$892 million over its life.

The PEA is based on a resource delineated over roughly a third of the property. Indicated resources stand at 1.5 million lb. uranium oxide (U3O8) from 600,000 tonnes grading 0.11% U3O8, 8.4% phosphate, 0.4% vanadium, 461 grams yttrium per tonne, 110 grams neodymium per tonne, 0.2% nickel, 570 grams molybdenum per tonne and 6 grams rhenium per tonne. 
In the inferred category are 19.9 million lb. contained in 8.1 million tonnes grading 0.11% U3O8, with grades similar to the indicated resource for the other commodities.

The resource is defined on 3 km of the Berlin trend, which spans 10.5 km. Company president and CEO Richard Spencer says that exploration drilling demonstrated similar grades and mineralization style extend over a further 3.3 km.

“This is the most astounding deposit,” Spencer tells The Northern Miner. “You can take two pieces of core from 5 km apart, put them together, and they’re absolutely consistent. It’s mind-boggling. The only place that comes close to it is the Wits basin in South Africa, where you have uranium and gold-bearing conglomerates that go on for miles and miles.”

Spencer is confident that the company can boost the resource substantially by taking into account a 3.5-km portion of the trend that was excluded in the estimate, and by drilling 4 km north. “We haven’t drilled there yet, but we’ve got exploration trenching that shows the same mineralization style, so we feel this is going to be a really, really big deposit.”

Meanwhile, metallurgical work is paying off with a process route designed to extract the deposit’s multiple commodities: uranium (33% of revenue), phosphate (29%), vanadium (9%) and yttrium (10%). 

The first step is to beneficiate the mineralized material using acetic acid to remove calcite and concentrate the valuable commodities into 40% to 47% of the original mass, which helps extraction and recovery, reduces capital and operating costs and decreases the volume of tailings by 50% to 60%. 

The second step involves extracting the metals and phosphate into a pregnant liquor solution by an acidic ferric iron-leach method. 

The third step is recovering the individual elements by conventional ion exchange, solvent extraction and direct precipitation.

“The reason flotation is so important is that it would take a lot of the calcite out of the system right upfront, and the calcite is what pushes up the operating costs, because it consumes acid,” Spencer explains. “Then ferric leach would deal with extraction of the metals [yttrium, neodymium and vanadium] from the phosphate.”

“What is unusual about Berlin is that it has this strange mix of metals with the phosphate, so we use a mixture of ferric leach and sulphuric acid to extract the metals,” Spencer continues, adding that the company has patented ferric leaching. “The two principal components have been used in other industries for many years, and it’s just putting them together — that is what makes the process developed for Berlin a little different.”

Spencer adds that when his team saw the first assays coming back, they didn’t intend to report the rare earths, because they didn’t think they would extract them. They only noticed the rare earth recoveries after getting the initial tests back from the ferric iron and sulphuric acid-leach process.

“We immediately repeated the tests to make sure there wasn’t some mistake, because we were quite astounded,” Spencer continues. “And that’s why we made the patent application — we think that ferric leach, combined with sulphuric acid, could be a good way for other companies to separate rare earths from many of the other phosphate-bearing rare earth deposits around the world. It’s a no-brainer to add a second step to the ferric leach process, but it hadn’t been done before, for whatever reason. We got a bit lucky.”

The project also benefits from surrounding infrastructure, including a hydroelectric power plant 12 km away. U3O8 Corp. expects to produce three quarters of its electricity needs internally from the steam that comes off its sulphuric acid plant, but it will also link into the grid for more electricity, at a commercial cost of less than US10¢ per kilowatt hour.

The Berlin project is 60 km west of the town of La Dorada, which sits on the principal paved road between Bogota and Medellin, with port facilities on the Magdalena River. From La Dorada, U3O8 Corp. could send its product by barge to the coastal port of Barranquilla, the largest port in the country, and ship product to neighbouring countries.

Spencer says that the company hopes to drill 15,000 metres in 2013 to get the area that’s already been explored into the resource, but admits drilling is expensive, and that at current share prices it’s too dilutive to raise capital. “We are going to look for partners, and if we can find a deal that would make sense, we would go for it,” he says. “Otherwise, we have to hold off on the drilling until the share price, or markets, get a bit better.”

At press time in Toronto, the company was trading at 22¢ per share within a 52-week range of 19¢ to 70¢. The junior has 124 million shares outstanding.