A definitive feasibility study on Khan Resources’ (KRI-T, KHRIF-O) Dornod uranium project in Mongolia estimates an after-tax internal rate of return (IRR) of 29.1%.
The IRR was calculated based on a long-term uranium price of US$65 per lb. U3O8 and a throughput of 3,500 tonnes per day over a 15-year mine life, which would result in an average production rate of 3 million lbs. of U3O8 a year at a cost of US$23.22 per lb. uranium oxide or US$58.26 per tonne of ore.
Under those assumptions, the project would also yield a net present value (NPV) at a 10% discount rate of US$276 million.
At a uranium oxide price of US$70 per lb., the after-tax NPV at a 10% discount rate would reach US$339 million and the after-tax IRR would increase to 32.5%.
The study was based on a National Instrument 43-101 indicated resource of 25.3 million tonnes at an average grade of 0.116% U3O8 for 64.3 million lbs. U3O8 and an inferred resource of 2.2 million tonnes grading 0.05% U3O8 for 2.4 million lbs. uranium oxide.
A separately prepared reserve estimate for the No. 2 open pit and No. 7 underground deposits pegged probable reserves at 18 million tonnes averaging 0.133% U3O8, accounting for 52.9 million lbs. U3O8 out of the 64.3 million lbs. of indicated mineral resources.
Khan owns an overall interest of 69% of the uranium held in both deposits.
In a release, president and chief executive Martin Quick said the company would proceed in negotiating an investment agreement with the Mongolian government as soon as possible.
James Doak, Khan’s chairman, said the long-term price of uranium is likely to increase significantly over the coming years and that the feasibility study demonstrated that the company is trading “at a substantial discount to the intrinsic value of its assets.”
At presstime, Khan was trading at 38.5¢ per share.
The Toronto-based company has a 52-week trading range of 14.5¢-$1.53 per share and 54 million shares outstanding.
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