Laramide ticker lights up on positive update of Westmoreland PEA

TORONTO (miningweekly.com) – Dual-listed explorer and project developer Laramide Resources has completed an updated preliminary economic assessment (PEA) on its flagship Westmoreland project, in Australia’s Northern Territory, bumping-up its Toronto-listed stock by almost 36% on Thursday.

Laramide reported improved project metrics compared with a 2007 PEA based mainly on information acquired from Rio Tinto, following the Westmoreland asset purchase. Since then, Laramide had completed several drilling campaigns, re-estimated the resource and gained improved knowledge of the metallurgical conditions required for cost-effective uranium extraction on the project, the company advised.

Based on an assumed uranium price of $65/lb, Westmoreland had a calculated after-tax net present value of $400-million, using a 10% discount rate, while the internal rate of return was calculated at 35.8%, after tax.

Analysts recently stated that the incentive price for new uranium projects to start had, for the last decade, been around the $60/lb to $70/lb mark, including a minimum 14% return on capital deployed. However, significant weakness in producer currencies had resulted in that incentive price falling closer to $50/lb or lower.

TradeTech's weekly uranium oxide spot price indicator had declined 11% since April 8, and 25% so far in 2016. Before the spot price settled at $27.50/lb on April 1, the previous ten-year low was $28.10/lb on June 20, 2014.

With an initial capital cost of $268-million, plus a $49-million contingency, the PEA assessed the construction of a mine and a two-million-tonne-a-year mill, with a nameplate capacity to produce four-million pounds of yellow cake a year. Sustaining capital would total $58-million over the 13-year life-of-mine (LoM).

Completed by Lycopodium Minerals, the PEA calculated that Laramide would be able to produce uranium at a cash operating cost that would average $21/lb uranium oxide for the first five years of operation and $23.20/lb uranium oxide over the operation's lifetime.

The operation would have a low strip ratio of 2.3:1 for the first five years and 4:1 over the LoM, making use of simple, opencut mining techniques.

Laramide advised that mine scheduling would allow for best practice in-pit tailings storage to be employed without the requirement for a temporary tailings storage facility.

Importantly, the PEA detailed further opportunities to reduce operating cost through reagent recycling. Further testwork would be required to confirm this assumption before incorporating it into the process model, the company advised.

"Westmoreland has always been a beacon in the Australian uranium project pipeline for me and this PEA has highlighted the low technical risk and robust nature of the project. The PEA has highlighted multiple opportunities to further improve the project through process optimisation and additional resource drilling, which I look forward to investigating as the project moves towards a prefeasibility study,” stated COO Bryn Jones.

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Earlier this month, the company had entered into a definitive share purchase agreement to buy Uranium Resources’ subsidiary Hydro Resources, in a deal valued at $12.5-million. Hydro Resources held the Churchrock and Crownpoint properties, in the US state of New Mexico.

“The PEA on Westmoreland demonstrates the project to be one of the best in Australia with attractive economics. The PEA and the Churchrock acquisition reiterates Laramide's strategy of growing a portfolio of lower technical risk, low-cost uranium projects in stable political environments,” stated president and CEO Marc Henderson.

The transaction was thought to provide both companies with an opportunity to realise value from the assets, while providing Laramide with a low-cost production opportunity in a tier-one jurisdiction.

The agreement with Laramide was subject to a number of conditions, including the completion of financing and regulatory approval.

Laramide’s TSX-listed stock on Thursday reached a new 12-month high at C$0.38 a share.