UraMin seeks big-league status in African uranium

When gold prices rose sharply in the early years of this decade, companies came along whose purpose was to assemble projects that didn’t make the grade at low prices, but had potential to go to production in better times. New, higher gold prices having proved durable, and a good number of those projects have gone on to development.

Naturally, there’s no reason the same logic wouldn’t work for other metals, which is why many old uranium projects are being dusted off in a time when uranium is at its highest prices ever, at least in nominal dollars.

Credit UraMin (UMN-T, UMN-L) with having learned the lesson of the gold boom well. The company now has three uranium projects in southern and central Africa ready to catch any wave in the uranium market.

UraMin has been “built to operate,” says Ian Stalker, the company’s chief executive, whose own experience is from the operating side of the gold industry at Gold Fields (GFI-N, GFI-L, GFI-J) and AngloGold Ashanti (AU-N, AGG-A, ANG-J). When UraMin was put together, both the projects and the people were selected with the idea of bringing projects with established, subeconomic resources into production when the time and price were right.

Not many juniors start with a plan to crash the middle or upper tier of their sector in four years, but uranium is a tight little world, different from gold or copper; a few Western producers dominate the market, along with three in the old Soviet Union. Producing 6,000 tonnes uranium annually, as UraMin hopes to do by 2010, would put it in the same league as all the large producers except Cameco (CCO-T, CCJ-N).

UraMin’s near-term bet is the Trekkopje deposit in the Central Desert of Namibia, where the company expects to have a final feasibility study in the third quarter of this year. The property licence, granted last November, takes in about 1,290 sq. km.

Two low-grade surficial deposits in calcrete sediments, Trekkopje and its neighbour Klein Trekkopje, have a measured and indicated resource of 61.1 million tonnes grading 0.014% U3O8, and a very large inferred resource — 502 million tonnes at 0.013% U3O8. Despite its name, Klein Trekkopje is much the larger of the two, boasting 43 million tonnes at 0.014% U3O8 in its measured and indicated resource, and 454 million tonnes at 0.013% in its inferred resource.

Because the uranium is held in carnotite, a potassium-uranium vanadate, there is also some vanadium, and test work has established that it can be recovered. About a third of a tonne of vanadium pentoxide (V2O5) comes out for every tonne of U3O8.

Trekkopje is about 30 km off the main highway between Swakopmund and Windhoek and was originally detected in an airborne radiometric survey by the South West African government in 1970. A couple of major companies kicked some dirt, but the first serious exploration was by French interests — subsidiaries of oil company Elf Aquitaine — between 1979 and 1984. Like many uranium projects of the ’80s, it was killed by low prices; like many Namibian projects of the ’80s, it was also killed by political instability.

The Namibian civil war and low prices having receded from sight, Trekkopje now makes sense as an open pit; most of the resources are within 15 metres of surface, as is typical of known calcrete-type deposits. Metallurgical tests have shown recoveries around 90% in a tank-leach process, but UraMin plans to use a less efficient heap-leach plant (with recoveries around 75%) in production. The compensating advantages are lower capital cost and, in an arid area, one-quarter the water consumption. Once the uranium is in solution, the “back end” of the process, to produce U3O8 yellowcake, is straightforward chemistry used in other uranium mills.

Environmental concerns are always an issue for uranium mines, but Trekkopje has the advantage of sitting in a desert nearly devoid of biota. The Namibian government is also historically pro-mining.

A trial of mining is slated for late 2007, soon after UraMin gets a definitive feasibility study from its consultants. From there, UraMin hopes to be in production by the end of 2008, at an estimated capital cost of US$280 million.

Next in line would be the Ryst Kuil uranium deposit in the Karoo sediments of South Africa. Ryst Kuil is about 60 km southeast of Beaufort West in Western Cape province, and previous work by Union Carbide and partners put its resource at 29 million tonnes grading 0.1% U3O8. Licences actually in UraMin’s hands amount to about two-thirds of that, and it has applied for licences over the rest. It holds the smaller Riet Kuil deposit, west of Beaufort West, as well, and on the ground it has applied for there is a third resource at Tanqua, just across the provincial boundary in Northern Cape province. The project is held as a joint venture with two Black Economic Empowerment companies, Mago Resources and Lukisa Investments, which hold 35% between them.

With two down-hole probe systems operating on Ryst Kuil, the company has set a date of May 2007 to have a resource estimate compliant with modern regulations, and a date of March 2008 to have a final feasibility study, though it has not yet named a consultant for that. The deposit is a classic sandstone-hosted type in the lower Karoo sediments, and again the mineralization is mainly near-surface, averaging about 6 to 8 metres deep. Mining scenarios, based on an open pit, suggest Ryst Kuil could be put into production at about 1,500 tonnes U3O8 annually for US$100 million.

Cash costs are estimated at US$20.11 per lb. U3O8 (US$44,000 per tonne) but Ryst Kuil may have a secret weapon: a grade of about 0.07% molybdenum, which, credited at current prices, cuts the project’s operating costs almost in half.

UraMin’s third project is in the southern part of the Central African Republic at Bakouma, about 500 km northeast of the capital, Bangui. A final feasibility study there, by South African consulting firm GRD Minproc, should be ready in late 2008.

As UraMin’s time scales lengthen, the grades of the deposits go up: where Trekkopje is a very large low-grade deposit, and Ryst Kuil a low-grade sandstone resource, Bakouma shows grades reminiscent of Beaverlodge or Port Radium: historical estimates put its size at 7 million tonnes grading 0.27% in two zones, named Patricia and Mpatou. UraMin plans to have an estimate complying with National Instrument 43-101 before the end of March.

The old drilling, by Cogema, now part of nuclear fuel producer Areva (ARVCF-O), tested no deeper than 100 metres in Late Proterozoic siltstones and argillites at Bakouma. The deposits are still open at depth and UraMin’s program will test to 130 metres, as well as along strike. Besides Patricia and Mpatou, there are eight other known prospects.

UraMin’s licence at Bakouma gives the Central African Republic’s government a 10% carried interest in the project, under a mining convention the government signed in May that also provides for external arbitration between UraMin and the government in case of a dispute.

Recent drilling on Bakouma has intersected several wide mineralized zones at grades comparable to the historical resource figure. A 59-metre core length in drill hole PRC-018 graded 0.34% U3O8, with an 8-metre-long interval that ran 0.88%. Another 64-metre interval, in hole PRC-010, averaged 0.3% U3O8, with an 8-metre length running 0.61%.

Other drill holes encountered zones between 6 metres and 33 metres long, at grades between 0.14% and 0.41% U3O8.