- September 13, 2017
Near term production with substantial exploration upside.
Near term production with substantial exploration upside.
The Honeymoon Uranium Project (“Project”) is located in South Australia, approximately 80km north-west from the town of Broken Hill near the SA / NSW border. In addition to holding a mining lease and exploration licences, there exists infrastructure on site to the value of $170M which incorporates an 880,000 lb per annum solvent extraction plant, currently placed on care and maintenance.
The Project is fully permitted with a 3.3Mlb U3O8 per annum export licence.
The Project has a combined JORC 2012 Mineral Resource across three main Project areas of 43.5 Mt at an average grade of 660 ppm eU3O8 (for 63.3Mlb eU3O) above the 250ppm lower cut-off. See original announcement dated 15 March 2017 for further information.
The Project also has a combined Exploration Target of between 32Mt to 78Mt at a grade of between 450ppm and 1400ppm eU3O8 with a potential target endowment of between 42Mlb and 100Mlb of contained uranium. This Exploration Target is conceptual in nature and there has been insufficient exploration to estimate a Mineral Resource. It is uncertain if further exploration will result in the estimation of a Mineral Resource. See original announcement dated 8 December 2015 for further information.
The Honeymoon processing plant was placed into care and maintenance over the summer of 2013/14 due to several factors; primary of which was a decline in uranium price. During the 18-month commissioning period the plant successfully produced and exported over 670,000lbs of uranium. To optimise processing performance Boss’s assessment of the plant also identified:
Accordingly, Boss has taken the considered approach that:
An endorsed restart strategy is in place following the successful development work undertaken in the expansion study and Pre-Feasibility Study (announced 31 May 2017). Final technical confirmation will be provided by the current Field Leach Trial to validate assumptions made regarding wellfield production rates and production profiles to attain the planned 2Mlb U3O8/annum and 3.2Mlb U3O8/annum considered in the Pre-Feasibility Study (see original announcement dated 31 May 2017). All material assumptions underpinning these production targets as announced on 31 May 2017 continue to apply and have not materially changed. These staged developmental steps are to ensure Honeymoon can operate in the lowest cost quartile of competitive global producers. As underlying uranium prices rise, Honeymoon is arguably being positioned to be Australia’s next uranium producer.
|Contained metal (U3O8, K t)||Contained metal (U3O8, M lb)|
|Jasons (March 2017)|
|Goulds Dam (April 2016)|
|Honeymoon* (January 2016)|
|Project Total (All deposits)|
|* Quoted resources have been adjusted to exclude previous production of approximately 335t of U3O8.
Note: Figures have been rounded.
Boss Resources purchased Uranium One Australia (Pty) Ltd from Uranium One Inc in December 2015, and thereupon changed the business name to Boss Uranium Pty Ltd. The Uranium One Australia assets consist of the Honeymoon Mining License ML6109, which incorporate the Honeymoon solvent extraction processing plant, four existing ISR wellfields, support infrastructure, operational and export permits, and five uranium exploration licences within South Australia.
The Honeymoon Uranium Project is located in South Australia between the Olary Ranges and Lake Frome, and forms part of the south-eastern extremity of the Lake Eyre drainage system. It is approximately 80km north-west from the town of Broken Hill near the South Australia / New South Wales border and approximately 490 km by road from Adelaide.
Construction of the Honeymoon Mine started in mid-2009 and was completed in Q1 2011. The mine commenced commissioning shortly after this and produced the first dried and drummed final product in August 2011. Despite this achievement, the mine was not able to achieve the nameplate capacity and only produced approximately 335t of U3O8 equivalent from 2011- 2013. Owing to the low uranium prices at the time and the production issues, Uranium One took the decision to place Honeymoon into ‘care and maintenance’ in early 2014. The plant was systematically cleaned out and shut-down in a manner such that it could be recommissioned in a relatively short period of time if needed, however it has not been re-started since.
Currently, the Honeymoon Project is one of only four fully permitted uranium projects in Australia, and already has an existing 880,000lb per annum plant, developed wellfields and the necessary infrastructure to restart in a relatively short timeframe. The project also consists of 2,595km2 of prospective land tenure made up of the granted mining lease, 5 granted exploration licenses, 8 retention leases and 2 miscellaneous purposes licenses. The two main exploration regions are the Eastern Region (EL’s 5215 and 5621) which hosts the Honeymoon, Brooks Dam and East Kalkaroo Resources (Figure 1); and the Western Region (EL’s 5043, 5623 and 5622) which hosts the Goulds Dam and Billeroo deposits, all of which have historical Mineral Resource estimates.
The Project has a combined JORC 2012 Mineral Resource across three main Project areas of 43.5 Mt at an average grade of 660 ppm eU3O8 (for 63.3Mlb eU3O) above the 250ppm lower cut-off.
The Project also has a combined Exploration Target of between 32Mt to 78Mt at a grade of between 450ppm and 1400ppm eU3O8 with a potential target endowment of between 42Mlb and 100Mlb of contained uranium.
The Honeymoon Uranium Project is located in the southern part of the Callabonna sub-basin in South Australia. Uranium mineralisation within the project area is hosted by the Yarramba and Billeroo paleochannels. These consist of Paleogene age palaeovalleys filled by a sequence of inter-bedded sand, silt and clay. Thickness of the paleochannels at Honeymoon deposit area reaches a maximum of 55m thick. All Mineral Resources are located below the water table at the depth of only +/- 100m.
The uranium mineralisation represents a classic basal channel type sandstone-hosted uranium roll-front model. This model implies the movement of oxidised, uranium-bearing fluid through a largely reduced aquifer, with mineralisation occurring at the redox front of the fluid. A geochemical zonation is associated with the roll front, including oxidation of the sands upstream (orange and yellow limonite) and abundance of pyrite/marcasites and organic matter downstream. Distribution of the uranium accumulations within the paleochannels is controlled by fluid pathways that have transported the dissolved uranium and the distribution of organic matter which served as reductants causing precipitation of uranium. Interplay of these two main factors has created a stacked geometry of the “uranium rolls” commonly distributed as elongate pods along the strike of the palaeovalley. These features are similar to the uranium deposits of the Great Divide basin in Wyoming.
The principal economic minerals are uraninite (UO2) and coffinite U(SiO4)(OH)4. The deposit also contains appreciable quantities of autunite Ca(UO2)2(PO4)2.12H2O. The texture of mineralisation implies that uranium phases have a very large surface area which is a favourable feature for in-situ leaching. The observed ultra-fine grained nature of the mineralisation is compatible with the laboratory tests which have demonstrated that Honeymoon’s uranium mineralisation is highly amenable to leaching using sulfuric acid and oxidants.
The Honeymoon deposit, contained within the existing mining lease, is one of the higher grade ISR deposits around (6.5Mlbs measured resource at 1720ppm eU3O8) and is the primary feed source for the plant for the first few years of operation. The deposit, although high grade, has a relatively complex structure requiring thorough planning and detailed wellfield design to maximise production.
Other geological characteristics that need to be considered are the high salinity of the associated groundwater (specifically chlorides) and the presence of small, but appreciable, amounts of calcite and pyrite / carbonaceous materials which impact gypsum formation and oxidant consumption respectively. The high chloride levels in the groundwater (~8-9g/l) are not significant, and may even be beneficial, from a leaching perspective but do require the selection of specific reagents / technologies in the case of the solvent extraction and ion exchange upgrading stages.
The uranium mineralogy, including the fine texture, is ideal for acid leaching with the presence of the phosphate minerals indicating that portions of the deposit should have low oxidant reagent demands. The presence of the calcite in the deposit requires strategies for managing gypsum precipitation (which for the Preliminary Feasibility Study (“PFS”) has been considered as a dedicated water treatment process on a bleed stream). Managing oxidant levels to minimise pyrite dissolution will also be required to ensure reagent consumptions are not excessive.
The high chloride levels required the selection of appropriate solvent extraction and / or ion exchange systems. The existing Honeymoon plant has successfully demonstrated the use of a modified extractant for solvent extraction, while extensive testwork in both the initial Expansion Study and the recently completed PFS have identified a resin that is suitable for the proposed ion exchange expansion.
Previous hydrogeological testwork including; field leach trials, solvent extraction piloting and associated mining studies carried out by the previous owners as well as the actual Honeymoon operation have confirmed that the Mineral Resources at Honeymoon are amenable to exploitation using in situ leach technologies.
To ensure a pathway for continued success a staged approach to restart the Project has been implemented by the Boss Resources Board to address the challenges which the previous owners had encountered. Within a relatively short period of time Boss has successfully proven up a significant increase in the global uranium resource to 43.5 Mt at an average grade of 660 ppm eU3O8 (for 63.3Mlb eU3O8) above the 250ppm lower cut-off.
A better understanding of the geology, mineralisation continuity and volume was gained from advanced 3D geostatistical modelling over the three deposits that cover 5km of the 50km mineralised trend hosted by the Yarramba Paleochannel. Boss understands that this is the first time that the combined Honeymoon, East Kalkaroo and Brooks Dam resources have been modelled in 3D which will be invaluable in assisting the technical and development teams to understand the orebody from both an exploration and mining perspective, and will allow for more precise designs of production wellfields, boreholes and specific screen placement in these holes.
In September 2016, the Company completed a successful Expansion Study which identified the preferred core processing route and provided the basis for a highly successful PFS, a key milestone for continuation of the restart strategy for the Honeymoon Project.
The PFS was commissioned with an approach focused on de-risking the Project, taking into account the issues previously identified in the due diligence work and the Expansion Study, accurately defining the wellfield operations and identifying the optimal production schedule, including subsequent processing plant expansions. Specifically, the Study set out to:
Metallurgical testwork was carried out on selected resins and extractants for the proposed ion exchange and solvent extraction circuits was undertaken, along with leaching work on core samples collected during the drilling program.
The impressive PFS results confirmed the technical and financial robustness of the Honeymoon Project. A combination of low upfront capital requirements and low operating costs have ensured that the Project is unrivalled amongst our ASX peer group.
The Study effectively proved an increase in the existing capacity of the processing plant from 0.88Mlbs / annum through a staged development incorporating ion exchange to initially 2Mlbs / annum, with a subsequent increase to 3.2Mlbs delivers a low risk, cost effective and financially robust option for Boss Resources.
Furthermore, the PFS highlighted the upside associated with further increased uranium feed tenors from the wellfields. Such increases can be achieved by optimised leach conditions, improved wellfield design and possibly utilising a solution stacking concept, all of which will be tested during the Field Leach Trial (“FLT”) which is currently underway.
On 11 August 2017, the Company successfully completed the construction and officially commenced the FLT, an integral technical validation step for the process and a significant milestone in the staged development approach being progressed by the Company. The FLT incorporates both a wellfield leach trial and ion exchange pilot plant using the resin identified in the PFS testwork program.
The next 12 to 18 months will focus on the delivery of the following:
The overall staged approach for the Project is based on restarting the operation with the existing facilities (with some minor modifications to achieve nameplate throughput) in conjunction with constructing the first stage of the ion exchange plant. After successfully ramping up and verifying the new process a further ion exchange upgrade is planned. Accordingly, the re-start of the Honeymoon project will be executed as follows:
Stage 1: Restart of the existing operation; which will involve the use of existing wellfields, and restarting the existing solvent extraction (SX) plant with minor modifications to rectify identified operational issues, during the period of construction of the ion exchange (IX) plant;
Stage 2: Ramp up of plant capacity to 2Mlb/annum U3O8 equivalent using the combined SX / IX system; and
Stage 3: Ramp up of plant capacity from 2Mlb/annum to ~3.2Mlb/annum U3O8 equivalent (after validating the IX technology) through the addition of further IX columns.
Current market conditions are not supportive of Honeymoon recommencing production, particularly when encountering sustained low uranium market prices.
Ultimately the investment decision to recommence production at Honeymoon will depend on the anticipated market price of uranium and ensuring the project’s positive NPV over Life of Mine satisfy all stakeholders. This critical aspect underpins the motivation for pursuing a staged development approach as the Company technically de-risks the Honeymoon Project to ensure all assumptions surrounding the deposit and process plant are fully evaluated prior to recommencing production, and thereby ensuring Honeymoon can operate in the lowest cost quartile of competitive global producers.
The Company’s expectations for the market remain positive and in the meantime strict cost consciousness and budget control is being adhered to. Whilst difficult to accurately predict the timing of favourable catalysts on price the industry consensus indicates prices will have to rise before 2020 to bring on new prospective mines or demand will significantly outstrip supply.
As underlying uranium prices rise, Honeymoon is arguably being positioned to be Australia’s next uranium producer.
All licensing and permitting required for the production of 880,000lbs /annum U308 from Honeymoon are currently in place, requiring only notification of a restart. The existing permits specify a maximum export limit of 3.3Mlbs / annum and the staged development plan proposed is inline with these quantities, however depending on the source of the uranium for the expanded production further permitting or modifications to existing permits may be required before this higher production is considered.
The PFS has demonstrated that a 9-month time period is required to restart production at Honeymoon, with a comparatively low development costs for upgrading the mine, processing plant and infrastructure. The fact that there already exists a number of developed wellfields that can be brought back online relatively easily, coupled with a fast ramp up in production capability, provides a distinct advantage compared to peers.
A further benefit of the Project is the low CAPEX requirements to restart the existing SX plant, allowing a positive cashflow stream whilst IX extension is constructed. The culmination of which will ensure high cash flow and a rapid repayment of investment during initial years of production, thereby utilising positive net cash flow to fund development of the mine instead of being reliant on debt financing.
Having multiple wellfields available and online (combined with a modularised plant) allows some flexibility as wellfields can easily be operated and turned off or brought back online depending on target production and more importantly target operating costs. It follows, that as a uranium mining method, ISR has significant flexibility in production capacity to seize upon upswings in market prices and readily adjust during the downswings.
Insitu Leach Recovery (“ISR”) currently accounts for over 50% of the world-wide uranium production due to its comparatively lower uranium mining cost and enviable economic parameters to counter cyclical uranium prices. Specifically, the ISR operation has sufficient flexibility to operate under various “regimes” that allow the operating costs to be managed, but this comes at the expense of metal recovery and resource utilisation.
As the Project contains high grade zones, with low initial CAPEX outlay, and is planned to be in the lower cost quartile of existing producers, there is some protection afforded to it from any low-price swings.
The main technical issues associated with the Project are:
South Australia is a major exporter of uranium oxide to the world and currently attracts many companies (including global majors) exploring, developing and mining uranium in the state.
The South Australian Government has made clear that it openly and actively supports exploration for uranium as it forms a significant part of South Australia’s mineral resource. Despite having 23% of the world’s uranium resources, South Australia produces around 10% of the world’s uranium, indicating there is significant potential for long term production, expansion and demonstrated geology with high potential for further discoveries.
South Australia has demonstrated experience with technologies for processing uranium ore, developed from the state’s uranium mines using different ore beneficiation processes. The state government’s royalty rates are competitively low (2% for new mines, and 5% after the first 5 years), and the state boasts over 30 years of proven safe uranium handling and transportation systems though the Australian approved uranium export port of Port Adelaide. There have been over 10,000 shipments of uranium from South Australia to date, with no effects to the public or the environment.
Internationally viewed as a supply destination of choice, South Australia exports to the United States, Japan, China, South Korea, Taiwan, Canada, France, Germany, Sweden, Belgium and potentially India and the United Arab Emirates.
5 Key Points:
1. Fully Permitted with Export Licence of 3.3M lb pa with a JORC compliant Resource of 63.3M lb U3O8
2. Existing plant valued at $170M in good condition which has successfully produced and exported uranium
3. AISC of < US$24 /lb , ranking the Honeymoon Project in lowest cost quartile of world-wide producers
4. Significant exploration target of 100M lb U3O8, with huge 80km potentially mineralised strike
5. Team is highly skilled in the industry with an extraordinarily successful track record