Impressive numbers of new nuclear plants in construction, or being planned, suggest there will be a new renaissance for the uranium sector. You all know that also the US may need more nuclear power plants to supply its energy needs. Due to this development we took the opportunity to have a look on Uranerz Energy’s (AMEX: URZ, Stock Forum)/ (TSX: T.URZ, Stock Forum) development within the last few months. Uranerz owns two projects within the uranium-rich Powder River basin of Wyoming, which should be brought into production within 24 months.
We spoke with Uranerz‘ chairman Dennis Higgs about the impressive development Uranerz went through in the last few months and about how Uranerz could profit from a anticipated supply deficit in the uranium sector.
DYOR: Dennis, since our last meeting, many things have happened. Some parts of the permitting process have been granted. What parts are already granted and what is still missing towards a full production licence?
DH: The two most important regulatory approvals for an ISR [in situ recovery] mine in Wyoming are the Source Material License from the US Nuclear Regulatory Commission (NRC) and the Permit to Mine from Wyoming Department of Environmental Quality (DEQ). Applications for the Source Materical License and the Permit to Mine were submitted by Uranerz Energy in December 2007 and they are currently being processed by the respective agencies. We are in the phase where the agencies ask questions and Uranerz responds. The NRC, as part of the review process, is having a Supplemental Environmental Impact Statement prepared on our project as well as the two other ISR projects that are in the permitting stage in Wyoming. Neither the NRC nor the DEQ have indicated that there are any significant deficiencies in our application that would cause them to deny us the license and the permit. Based on the information provided by the NRC, the best estimate we have for when the NRC license will be issued is mid-2010. It is expected that the DEQ permit will be issued at about the same time as the NRC license. Minor permits that are needed for our project include the DEQ Air Quality Permit (which we have obtained), the DEQ Deep Disposal well permit which is in preparation and will be submitted soon, and the DEQ Underground Injection Control Permit which is also in the application preparation stage. It is expected that all of these minor permits will be issued on a timeline that will not delay construction activities.
DYOR: Currently, US mines are producing around 4 million pounds of uranium per annum. How much could Uranerz produce via ISR?
DH: We are licensing our main processing plant to be built at the Nichols Ranch unit for an annual yellowcake output of 2 million pounds. Inially, we are planning to produce at the 600,000 to 800,000 pound annual rate and, depending on various factors, may ramp up to the 1.5 million pound per year rate or higher.
DYOR: You have recently done a 17 million USD financing. Will this be enough for a production start?
DH: The short answer is No. We had a preliminary assessment performed by a third-party on our Nichols Ranch ISR project (Nichols Ranch & Hank) which is posted on our website and in that report it states we will need about $35 million to construct the facilities and put in the first wellfield at each site. After this recent financing we currently have a little over $30 million in our treasury so we will need additional funds to complete construction.
DYOR: What are the most recent plans for a production start and the production capacity?
DH: If we receive our permits and license on the timeline indicated by the agencies, we could be in production in the second half of 2011. To reemphasize, our startup date is dependent on when we receive the major permits and we are at the mercy of the regulatory agencies as to when they will issue the permits. As previously stated, we have had no indication from the agencies that our applications are going to be denied; in fact there has never been a commercial ISR application in Wyoming that has been denied. We plan to ramp up over a year to 18 months, with an initial production level of 600,000 to 800,000 pounds yellowcake per year.
DYOR: You recently signed several contracts for sale of uranium. What size do these sale contracts have?
DH: Uranerz has entered into agreements for the sale of uranium to two of the largest nuclear operators in the US, including Exelon (NYSE: EXC, Stock Forum). Exelon operates the largest nuclear fleet in the U.S. and the third largest fleet in the world. The agreements are long-term contracts with deliveries over a five year period. One of the agreements is a long term contract with defined pricing in each year. The other contract has a uranium pricing formula which contains market referenced prices, with combined spot and long term indicators, to set the final sales price. This agreement's pricing structure contains floor prices to provide Uranerz with downside protection and ceiling prices which protect the buyer from unlimited upside price risk.
The uranium industry has traditionally been very secretive. The U.S. utlilities continue that tradition, so we are not able to disclose any more details. However, the total sales from these two contracts represent less than 50% of our anticipated production level. This gives Uranerz the ability to balance long term contract sales prices and spot market transactions.
DYOR: Currently there are 436 nuclear reactors operating in 30 countries, which are only providing 15% of the world’s electricity. 50 reactors are currently under construction, 137 being formally planned and for 295 more there are reported proposals seekingconstruction approval. What could this mean for Uranerz Energy?
DH: The more new plants that are being built and put on-line worldwide (and particularly in the U.S.) the better things will be for Uranerz. This creates more demand for uranium, which should drive the price of uranium higher.
DYOR: What is your opinion about the future development of the worldwide uranium market?
DH: Uranerz is optimistic that more and more the public and governments will shift their support to nuclear power as global warming becomes an even bigger issue, and that demand for uranium will be even greater than currently predicted.
Raymond James Ltd., a Canadian investment dealer, sent out a report this morning (November 10, 2009) which states that:
“… positive news on longer‐term demand and the nuclear renaissance. UxC’s feature story this week centers around China’s rapidly expanding nuclear energy program, which now boasts 11 operating reactors, 17 under construction, 34 planned and 90 proposed. China plans to achieve an impressive 70 GWe of nuclear capacity by 2020 (up 75% from 40 GWe in 2007). In Germany, the new Merkel‐headed coalition government has agreed on a much‐debated extension to its program (recall, a previous Social Democrat government had legislated a phase‐out of all 17 reactors by 2021), while State‐side, many utilities are choosing to uprate their reactors as a cheaper and less risky alternative to building new units. For example, Exelon Energy is planning to gain 1.3‐1.5 GWe of power by 2017 by spending US$3.5 bln on uprates (vs. US$4 bln – US$8 bln for a new reactor with less output). UIW reports that since 1977, uprates at 129 reactors have yielded an additional 5,726 MWe capacity (equal to six average Generation III reactors). Lastly, Middle Eastern countries (some of which are not yet on the nuclear‐build radar) are starting to add to the chorus. Leading the way is UAE with three reactors planned and 11 proposed. Turkey, Algeria and Jordan are other countries with nascent plans.”
DYOR: What else do you want to let (potential) investors know?
DH: - Uranerz has been aggressively exploring and drilling its projects to expand the resource base. We drilled 933 holes in 2008 (total of over 640,000 feet of drilling!) and have had an aggressive drilling program for 2009. This is to continue the expansion of the resource base. For example, this aggressive drilling program culminated in the first new resources to be found in the Powder River Basin in 30 years at South Doughstick in the Arkose Mining Venture (81% Uranerz).
The South Doughstick deposit (Part of Arkose Mining Venture; 81% Uranerz) has a Measured and Indicated resource of:
2,287,241 lbs at a grade of 0.121% with an Inferred resource of: 189,305 lbs at 0.096% for a total of: 2,476,555 lbs.
- Uranerz Energy has an excellent mangagment team and has been bringing on the next generation of engineers and geologists to design and operate our properties. Uranerz’ management has a history of permitting commercial ISR projects in Wyoming.
- Due to the economic situation of the past year, delivery times and cost of equipment has been coming down.
- In 2009 Uranerz Energy was included in the Russell family of indexes, including the Russell 3000® Index, the Russell 2000® Index, the Russell Microcap® Index, and the Russell Global Index. Russell indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for both passive and active investment strategies.
- The Company is advancing two ISR development projects in the Powder River Basin of Wyoming to production. Uranerz has a large and strategic land position in the Powder River Basin, an area well-known for hosting uranium-mineralized roll fronts often amenable to ISR mining techniques.
- Wyoming has had continuous uranium production since 1957. Since that time the state has produced more than213M pounds of uranium. It is the largest U.S. uranium producer with two commercial ISR processing plants (controlled by Cameco and Areva), both of which are in the Powder River Basin. Wyoming has a transparent and straightforward permitting environment with experienced regulators.
- ISR in Wyoming has some real important advantages.
The capital costs and the operating costs are very low, so is the environmental impact.
- The grades of the Uranerz Energy projects are considered good for ISR mining of uranium:
- Nichols Ranch: Indicated: 2,949,546M lbs (0.114%).
- Hank: Measured & Indicated: 2,236,050M lbs (0.123%)
Inferred: 246,753 lbs (0.087%).
- West North-Butte: Measured & Indicated: 2,837,015M lbs (0.153%)
Inferred: 2,681,928 lbs (0.120%).
ABOUT DYOR:
Kai-Helmar Klein is the founder, owner and technical operator of http://www.dyor.de which provides both German- and English-speaking interviews and articles and a closed community board.
DYOR-co-founder is Tim Roedel, who provides IR-services for commodity companies withinGerman-speaking Europe.
He is a co-organizer of the largest commodity conference within German-speaking Europe, the Precious Metals and Commodities Conference Munich, which took place on November the 6th and 7th 2009, and writes its own commodity newsletter http://www.rohstoff-woche.de and he is a co-founder www.dyor.de.
We do not give any recommendation to buy or sale!!!
Read more Stockhouse articles by DYOR
