The Honeymoon Uranium Project

Near term production with substantial exploration upside.

Project Highlights

  • Honeymoon FS confirms Boss Resources as Australia’s next uranium producer
  • Boss Resources Limited (ASX: BOE) (Boss or the Company) is pleased to report results of Honeymoon’s Feasibility Study (FS or the Study) for the base case restart and expansion of its Honeymoon Uranium Project (Honeymoon or the Project) in South Australia.
  • Outstanding FS results, based on a conservative uranium price, position Honeymoon as one of the world’s most advanced uranium development projects that can be fast-tracked to re-start production in 12 months with low capital intensity to seize an anticipated rally in the uranium market.

 

Download complete Honeymoon Uranium Project Feasibility Study

 


Figure 1
Boss’ Honeymoon Uranium Project, 80km north-west of Broken Hill in South Australia.

 

First Mover Advantage

  • Honeymoon fully permitted to export 3.3Mlbs/annum U3O8 equivalent.

  • Fast-tracked production, within 12-months, utilising A$170m of historical infrastructure expenditure and existing plant which previously produced and exported uranium.

  • Market forecasts indicate an improvement in the underlying U3O8 price. Honeymoon is one of a few advanced uranium projects ready to take advantage of market improvement.

 

Demonstrated Growth Potential

  • FS Base Case is limited to the Honeymoon Restart Area only, comprising 36Mlbs JORC resource with a restart plan comprising of: Stage 1 (refurbishing the existing Solvent Extraction plant with significant process improvement), and Stage 2 (adding an Ion Exchange circuit), to achieve an annual production of 2Mlbs U3O8equivalent.

  • A further 36Mlbs of JORC resources sits outside the Restart Area, in addition to a defined exploration target range, providing Boss with genuine growth opportunities for Honeymoon’s mine life and production profile.

  • As the anticipated upswing in uranium fundamentals occurs, Boss will restart operations and exploit these additional resources to maximise shareholder value.

 

Strong Financial Results

  • Estimated average all-in cost (AIC) of US$32.3/lb U308 over LOM, and an all-in sustaining cost (AISC) of US$27.4/lb U308 over the life of mine (LOM) (payback period of approximately one third of LOM).

  • FS base case Net Present Value (pre-tax) (NPV8%) of US$163m (A$240m) and 42.9% Internal Rate of Return (pre-tax) (IRR) (at an average U3O8 price of US$50/lb).

 

Low Capital and Operating Costs

  • FS demonstrates a very low upfront capital requirement to restart Honeymoon and become one of the lowest cost uranium producers globally.

  • Honeymoon base case scenario results, compared to the Preliminary Feasibility Study (PFS) completed in 2017, include a ~71% increase in LOM to 12 years, and a ~7% decrease in upfront capital expenditure of US$63.2 million (A$92.9m) (excluding offsite power provider upgrades).

 

Ready for Restart

  • FS is the final independent validation for Honeymoon’s restart, having technically de-risked the asset and optimised the process flowsheet through multiple phases of test work and study.

  • Strong bank balance, with no debt, to fully fund 2020 operations to optimise capital and operating expenditure.

  • Boss will avoid dilutive capital raisings while engaging with utilities for off-take and continuing commercial discussions.

 

Commentary

Boss Managing Director and CEO Duncan Craib said

“Our FS base case results confirm we will be Australia’s next uranium producer. The 100%-owned Honeymoon Uranium Project offers an unparalleled investment opportunity; an impressive IRR with low capital intensity and short time to re-start production, with excellent leverage to the anticipated upswing in uranium fundamentals.

“Reflecting a conservative base case uranium price of $50/lb U308 over LOM, the FS demonstrates Honeymoon’s advanced development can rapidly respond to a market rally, given the low capital barrier.

 “It’s average all-in-cost of US$32.3/lb U308 over LOM positions Honeymoon as one of the lowest operating uranium production costs world-wide.

“Completion of the FS milestones offers investors a real and near-term uranium supply prospect and allows us to progress off-take contracts with utilities world-wide.

“The FS base case was designed for fast-tracked production by recommissioning the existing SX process within 12 months before expanding production to 2Mlbs U3O8 equivalent per annum. Our team has technically de-risked the Project and ensured there is no timeline drag from onerous tasks of securing permits and approvals needed to restart production.

“With A$170m of historical expenditure on infrastructure and plant in place which previously produced and exported uranium, Honeymoon has one of the lowest restart capital intensities in the uranium sector, with a base case pre-tax NPV to capex ratio of 2.6x, and minimal construction risk.

“The FS base case utilises only a portion of Honeymoon’s JORC resource, excluding 36Mlb of JORC resource outside the Restart Area, which could expand the mine life, and Boss’ defined exploration target could potentially extend the mine life beyond the initial 12 years and increase the production profile. Honeymoon’s Federal EPIP Act approvals allow export of more than 3Mlbs/annum U3O8equivalent.

“Recognised industry endorsement of Honeymoon is providing opportunities for Boss to progress off-take contracts with utilities world-wide, and commercial discussions continue.”

 

Project Overview

Boss’ FS provides a base case to fast-track uranium production from the Honeymoon Restart Area (Restart Area) to achieve a 12-year LOM at 2Mlb/annum U3O8 equivalent, from only 35.9Mlb of the Project’s global mineral resource (JORC 2012) of 71.6Mlb. A total of 94% of the Restart Area Measured and Indicated resource is located within the boundaries of Mining Licence (ML) 6109, which has mining approval. ML6109 has a Uranium Mineral Export Permission for 3.3Mlb/annum U3O8 as renewed by the Australian Federal Government in April 2019. No new permitting is required on ML6109.

The FS indicates a technically sound and financially viable project, capable of generating more than A$492 million in pre-tax free cash flow over the Project life (Table 1).  Total pre-production capital is estimated at A$92.9 million, including a project contingency of A$8.1 million.  The FS is based on in-situ recovery (ISR) mining with an average uranium tenor of 49 mg/l targeted over the LOM from the wellfields.  All base case financial analyses were completed assuming an average US$50/lb U3O8 price over the LOM.  Sensitivity analysis at a lower and higher industry referenced prices of US$40/lb U3O8 and US$60/lb U3O8 demonstrates downside and upside to the Project (Table 2). The Company considers a base sales price of US$50/lb U3O8 over the LOM is reasonable given that current spot and term uranium prices are well below the price required to guarantee viability of a large proportion of the world’s existing production. Uranium analysts predict that a long-term spot price in the mid US$40’s (anticipated from 2023) will incentivise restarts whilst a price closer to US$60/lb will be needed for most new mines.

Table 1: Summary of Financial Outcomes (assuming a US$50/lb U3O8 price)

Measure

Unit

A$M

US$M4

Uranium Produced (Stage 1+2 LOM total)

Mlbs

20.74

Gross Revenue (over LOM)

$M

1,480

1,006

Free Cash flow (Pre-tax)

$M

492

334

Free Cash flow (Post-tax)

$M

365

248

EBITDA margin (avg over LOM)

%

50.11%

IRR (Pre-tax)

%

42.90%

IRR (Post-tax)

%

33.29%

NPV 8% (Pre-tax)1

$M

240

163

NPV 8% (Post-tax)1

$M

166

113

Stage 1 & 2 Capital Cost

$M

92.9

63.2

AISC2

$/lb U3O8

40.2

27.4

AIC3

$/lb U3O8

47.5

32.3

Total Project Payback (post tax, after production commences)

Years

4.5

  1. 8% discount rate applied

  2. AISC = wellfield operating, processing, site G&A, freight, marketing, royalties and sustaining capital expenditure

  3. AIC = AISC + development and deferred capital expenditure

  4. A$:US$ exchange rate A$1:US$0.68

 

 


Figure 2
Project revenue and costs (A$’000’s) at a U3O8 price of US$50/lb

About 35.7Mlb of the Project’s global mineral resource of 71.6Mlb (using a 250ppm U3O8 cut-off) is outside the Restart Area.  In addition, there are genuine resource growth opportunities from a defined Exploration Target, comprising 28Mt to 133Mt of mineralisation at 340ppm to 1,080 ppm U3O8 for 58Mlbs to 190Mlbs U3O8 (26,300 to 86,160 tonnes of contained U3O8), using a cut-off of 250ppm.  Note the potential quantity and grade of the Exploration Target is conceptual in nature. There has been insufficient exploration to estimate a Mineral Resource and it is uncertain whether future exploration will result in the definition of a Mineral Resource. Boss has used geophysical exploration techniques to identify new drill-ready targets. Subsequent drilling of these targets has the potential to significantly increase the global resource and expand Honeymoon’s production profile and LOM.

Boss designed the FS to fast-track production from Honeymoon’s existing solvent extraction plant (SX) within a 12-month period, following a decision to mine, to capitalise on any improved market fundamentals. It plans to increase production to 2Mlbs/annum U3O8 equivalent through the addition of the Ion Exchange (IX) plant which will take approximately 20 months to design, construct and commission. The envisaged final stage of the production is to ramp up plant capacity from 2Mlbs/annum, with Honeymoon permitted to produce more than 3Mlb/annum U3O8 equivalent, contingent on market conditions and U3O8 price. Stage 3 does not form part of the current FS, but will be investigated when the source of additional uranium production has been better defined.

The FS has been evaluated at a long term US$50/lb U3O8 price (FS Base Case).  The Project is highly leveraged to the uranium price, as identified in Table 2, which displays comparable potential financial performance at U3O8 prices of US$40/lb (FS Downside) and US$60/lb (FS Upside). In the FS Upside scenario, the Project generates an additional A$264m (+54%) in pre-tax cash flows while the pre-tax NPV increases by 63% to US$266m (A$392m).

Table 2: Key Financial Summary and Sensitivities with U3O8 prices of US$40/lb, US$50/lb, US$60/lb

Financial Metric

Unit

FS Downside

US$40/lb

FS Base Case

US$50/lb

FS Upside

US$60/lb

A$

US$

A$

US$

A$

US$

Revenue

$M

1,196

813

1,480

1,006

1,764

1,200

EBITDA

$M

477

324

742

504

1,007

685

Free Cash flow (Pre-tax)

$M

227

154

492

334

756

514

Free Cash flow (Post-tax)

$M

175

119

365

248

551

375

EBITDA margin

%

39.86%

50.11%

57.06%

IRR (Pre-tax)

%

22.10%

42.90%

62.11%

IRR (Post-tax)

%

17.25%

33.29%

47.97%

NPV 8% (Pre-tax)

$M

88

60

240

163

392

266

NPV 8% (Post-tax)

$M

57

39

166

113

273

185

NPV 6% (Pre-tax)

$M

113

77

286

194

459

312

NPV 6% (Post-tax)

$M

78

53

202

138

323

220

AISC1

$/lb

39.3

26.7

40.2

27.4

41.1

27.9

AIC2

$/lb

46.6

31.7

47.5

32.3

48.4

32.9

Total Project Payback

yrs

9.3

4.5

3.0

  1. AISC = wellfield operating, processing, site G&A, freight, marketing, royalties and sustaining capital expenditure

  2. AIC = AISC + development and deferred capital expenditure

The FS was compiled with the assistance of several independent and reputable Australian-based engineering companies, industry experts and qualified Boss personnel.