A preliminary economic assessment (PEA) of Anfield Energy's (TSXV: AEX; US-OTC: ANLDF) Charlie uranium project in Wyoming's Pumpkin Buttes uranium district, outlines a low initial capex in-situ recovery (ISR) mine with a life span of seven years.
The PEA forecasts initial capex of US$6.7 million during a two-year pre-production period. The first year's capex of US$1.7 million includes initial mine permitting, along with wellfield delineation and a US$450,000 contingency. The second year's capex, forecasted at US$5 million, includes further permitting, well installation, header-house construction and trunk-line construction.
"The cost to get into production is very low," Anfield's CEO Corey Dias says in an interview on the sidelines of Red Cloud's 2019 fall mining showcase in Toronto.
Dias attributes the project's low capital requirements to the ISR method and Anfield's existing agreement with Uranium One that will allow it to process up to 500,000 lb. uranium per year at the company's adjacent Willow Creek ISR mine. Mined material from Charlie will be sent to Uranium One's Christensen Ranch ion exchange facility for initial processing and the resulting resin will then be shipped to Willow Creek's Irigaray central processing plant for final processing.
The project is expected to produce an average of 297,400 lb. of uranium annually. Total life-of-mine operating costs are estimated at US$23.09 per lb. uranium.
The after-tax net present value ranges between US$7 million and US$21.7 million at an 8% discount rate, while the after-tax internal rate of return hovers between 35% and 67%. The projections are based on uranium prices ranging from US$55 to US$75 per pound. The spot price for uranium at press time was US$25.70 per pound.
Dias explains that uranium spot prices, which are typically lower than long-term prices, are of little relevance to uranium mining companies from the perspective of economics and notes most uranium sales are negotiated in long-term contracts that span five to ten years. "Those contracts are not as visible in the marketplace, but they tend to be higher price than the spot price," he says.
Charlie, which Dias says can be brought into production in two years' time, has indicated resources of 1.26 million tonnes grading 0.12% uranium oxide (U3O8) for 3.1 million lb. U3O8. Inferred resources add 411,000 tonnes grading 0.12% U3O8 for 988,000 lb. U3O8.
Charlie will be the frontrunner to kickstart a pipeline of 24 uranium projects that Anfield owns in six mining and exploration regions in Wyoming: Black Hills; Great Divide Basin; Laramie Basin; Powder River Basin; Shirley Basin; and Wind River Basin.
"We create this pipeline, and so we will have 20 years of production life amongst these projects or more," explains Dias. "So we are going to be focusing on project financing for Charlie and then creating resources and economics for a handful of other projects."
Dias is confident that the company can secure financing for Charlie. "Given how low the cost is to get into production, we can secure that relatively easily," he says. "Any project that can be done using an ISR method, the upfront costs tend to be cheaper."
In May, Anfield closed the second tranche of a non-brokered private placement that raised a total of $3.67 million through the sale of 18.4 million units at 20 ? per unit. Each unit consists of one common share and one common share-purchase warrant that entitles the holder to buy an additional common share at 30 ? for three years. The second tranche saw the placement of 4.6 million units and the first tranche, which closed in April, placed 13.8 million units. Proceeds from the private placement will be used for the development of the Charlie project, property costs and general working capital.
Anfield acquired the Charlie project in March along with nine past-producing uranium and vanadium properties in Colorado - collectively known as the West Slope project - from Cotter Corporation, a subsidiary of General Atomics, a defense technology company in San Diego. Cotter, which received 11 million of Anfield's common shares as part of the transaction, owns 19.9% of Anfield.
Exploration drilling at Charlie by previous owners has resulted in a database of more than 1,300 drill holes, as well as several hydrological, analytical and mineralogical reports. Previous reports have indicated that the uranium mineralization underlying Charlie is narrow and has sinuous, multiple roll-fronts. Roll-front deposits are formed when oxidized, uranium-bearing groundwater encounters a redox boundary to create a crescent-shaped orebody.
Derek Macpherson, vice president of research with Red Cloud Securities, says in a Sept. 25 research note that he expects the Charlie project to be one of the first U.S.-based projects to be built when the uranium price starts to rise.
Following the release of Anfield's PEA, Macpherson reduced his target price on Anfield from 40 ? per share to 30 ? per share, due to higher than expected capital and operating costs.
"Our prior estimates were based on similar ISR projects' underestimated sustaining capital and operating costs. We have updated our estimates to reflect the PEA, with the most notable change being a 36% increase in operating costs and a 16% hike in sustaining capital," Macpherson says.
Production at Charlie, which is expected to start in 2023, resulted in a 25% decrease to Macpherson's estimate of Anfield's net asset value per share to 41 ? - down from his prior estimate of 56 ? based on a one-year construction period.
Dias says uranium is an important part of the energy mix both in the United States and worldwide. "You look at what happens in China. China is moving away from coal because the pollution is ridiculous, so they need to have another source. That is why they are turning to nuclear because it is clean. The greenhouse gases are minimal."
The United States Nuclear Fuel Working Group, which is expected to report its findings on Oct. 10, could be a positive catalyst for Anfield to re-rate and outperform if the working group delivers a recommendation that is favourable to uranium miners in the States, he adds.
U.S. President Donald Trump created the U.S. Nuclear Fuel Working Group in July to make recommendations for reviving and expanding domestic nuclear fuel supply and production, after the Section 232 Petition by the U.S. Department of Commerce highlighted challenges that the industry faces in producing uranium domestically.
The Section 232 Petition recommends that Washington take measures to protect domestic uranium production. The U.S. currently imports most of its uranium from Canada, Kazakhstan, Australia and Russia.
At press time, Anfield's shares were trading at 10.5 ? per share with a 52-week range of 9.5 ? to 44 ?. The company has 82 million common shares outstanding for an $8.6-million market capitalization.