Ur-Energy study finds potential at Lost Creek

A preliminary economic assessment on Ur-Energy’s (URE-T, UREGF-O) Lost Creek uranium deposit in Sweetwater Cty., Wyo., found that the project would be economic at uranium prices above US$40 per lb.

The base case scenario predicts a pretax internal rate of return of 43.6% with production of 1 million lbs. U3O8 per year, using a uranium price of US$80 per lb. A 20% contingency was applied to capital and operating costs for the life of the mine.

Operating costs are forecast at US$23.36 per lb. U3O8, while capital costs to build a 2-million-lb. in-situ recovery plant are estimated at US$30 million.

Production would start in the fourth quarter of 2009 from six different mine units containing about 1.2-1.4 million lbs. U3O8 each for a total of 8.1 million lbs. U3O8.

Those numbers were based on an indicated resource, however, and the report says Ur-Energy can expect to produce about 6.4 million lbs. U3O8 from the mine.

Ur-Energy president and CEO, Bill Boberg, anticipates much more from Lost Creek.

“I expect the Lost Creek project to operate beyond the six mine units used in this model,” Boberg said in a statement. “(The study) does not consider the real potential for expanding our resources at Lost Creek.”

The model also doesn’t include all of the current resources — indicated resources actually stand at 8.5 million tons grading 0.058% U3O8 totalling 9.8 million lbs. U3O8, while inferred resources are 700,000 tons grading 0.076% U3O8 containing 1.1 million lbs. U3O8.

Even though the study looked at mining only 1 million lbs. U3O8 per year, the company plans to build a mill with the capacity to produce 2 million lbs. per year, which the study estimated would cost US$30 million.

The company hopes to operate the mill in part as a toll milling facility for nearby deposits.

Development of the project up to the start of production, including drilling, environmental permitting, engineering, construction, management, disposal wells and ponds, and header house is projected at US$32.5 million.

Of this total, US$5.5 million was already spent during 2007 and US$17 million has been budgeted for 2008.

Sustaining capital is estimated at US$4-5 million per year.