Mega Uranium Boosts Resource, Finds Partners For Lake Maitland

VANCOUVER — In the space of a month, Mega Uranium (MGA-T, MGAFF-O) took two significant steps towards becoming a producer: the company signed a $49-million joint-venture agreement and upgraded most of the resource at its flagship Lake Maitland project to indicated status.

The resource upgrade followed a year-long drilling program at Lake Maitland, in Western Australia, that included 794 aircore infill holes, 42 sonic core verification holes, down-hole radiometric gamma logging of all holes, and bulk-density measurements on 214 samples.

Using a cutoff grade of 0.02% U₃O₈, Lake Maitland now contains 27.6 million indicated tonnes averaging 0.0378% U₃O₈ and 3.6 million inferred tonnes grading 0.0274% U₃O₈. Compared with the last estimate completed in 2006, the resource has grown by 17% in terms of contained uranium and 92% of the resource is now classified as indicated.

The calcrete-style Lake Maitland deposit sits near infrastructure in the Eastern Goldfields of central Western Australia, just over 100 km southeast of Wiluna. Mineralization at Lake Maitland is contained in a single, coherent layer that is 1 to 3 metres thick (1.7 metres average) and lies 1 to 2 metres below surface.

The overburden and ore are both soft, which means drilling and blasting will not be required. And metallurgical test work indicated uranium recoveries of greater than 90% using atmospheric alkaline leaching.

In October, a preliminary economic assessment of Lake Maitland investigated the economics of producing 1.65 million lbs. U₃O₈ annually, assuming 90% recovery and a long-term Australian dollar exchange rate of US80¢.

At Mega Uranium’s preferred cutoff grade of 0.02% U₃O₈ and a sale price of US$75 per lb. U₃O₈, the project carries a net present value (NPV) of US$181.4 million, using a 10% discount rate, and delivers a 43.4% internal rate of return (IRR). Capital costs come in at US$85.1 million and operating costs at just US$16.61 per lb. U₃O₈. The life of mine is 10 years.

At US$60 per lb. U₃O₈, the NPV falls to US$99.9 million and the IRR to 30.8%.

Those economics were enough to woo two suitors, and after months of negotiations Mega Uranium now has two joint-venture partners at Lake Maitland. Japan Australia Uranium Resource Development (JAURD), a Japanese company mandated to acquire uranium resources in Australia, and Itochu, one of the world’s largest uranium trading houses, are together earning a 35% interest in Lake Maitland.

To earn the interest, JAURD and Itochu will first finance feasibility studies, which are currently under way. Subsequent payments, subject to favourable feasibility results, bring the total price to US$49 million.

JAURD’s shareholders comprise three Japanese utility companies — Kansai Electric Power, Kyushu Electric Power, and Shikoku Electric Power. Together, the three utilities have an installed nuclear capacity of 17,050 megawatts from six nuclear power plants; through the joint venture, they will have access to Lake Maitland uranium for their own use.

At the end of March, Mega Uranium had $33.8 million in cash and equivalents. On news of the updated resource, the company’s share price fell 12¢ to $1.39. The company has a 52-week trading range of 39¢-$2.48 and 187 million shares outstanding.