Discovering the World’s Next Uranium Mines
The Athabasca basin in Canada continues to place itself as Kazakhstan’s closest rival for uranium production and development
There has been a relentless decrease in the number of junior companies in the mining space in recent years, as the juniors, so necessary to feed the mining industry’s project pipeline, have suffered from difficulties in raising funds. For explorers in the uranium spectrum, the hit was double, as they also had to confront the low uranium cycle over the last decade. The silver lining for investors is that crises help separate the wheat from the chaff so, in theory, those companies still in business are the ones with the more compelling stories in terms of new project potential. “Prior to Fukushima, there were about 700 companies in the uranium space globally and a lot of tier-two and tier-three projects, which we call ‘zombie’ projects that never led anywhere,” said Cory Belyk, COO of CanAlaska Uranium (TSXV: CVV), a project generator. “Those 700 companies shrunk down to about a dozen serious players with true tier-one uranium discovery potential,” he continued.
While Kazakhstan continues to dominate the uranium segment with 40% of the world’s primary production, the Athabasca basin in Saskatchewan has been the world’s other production hub with the large Cigar Lake and McArthur River mines, operated by Cameco (TSE: CCO) and affected by shutdowns, and has also been the host to some significant uranium deposit discoveries. The companies with the most advanced projects currently are NexGen (TSE: NXE), with the Arrow deposit; Denison Mines (TSE: DML), advancing its Phoenix and Gryphon deposits; and Fission Uranium (TSE: FCU), with its Triple R deposit – all of which are at the pre-feasibility (PFS) stage.
NexGen, the mega deposit
NexGen Energy was established right after the Fukushima disaster and it had exploration success early on. The Arrow deposit was discovered in 2014, and has since grown to a mega deposit hosting a resource of 350 million pounds (lb) of uranium. The PFS in November 2018 defined a mine plan of approximately 25.4 million lb/y over nine years, which would place Arrow as the world’s largest producer of uranium. The company is now working on the final feasibility study planned for the end of 2020, and expects no major changes to the parameters of the PFS.
The other major milestone coming up for NexGen Energy will be the submittal of the environmental impact statement during H1 2021, according to the company’s president and CEO, Leigh Curyer. Arrow will be a conventional mining operation so the authorities in Saskatchewan are already familiar with the process, although the operation will incorporate a novelty, namely an underground tailings facility.
“The underground tailings facility is not the cheapest option both in terms of capex and opex, but the quality of the deposit allows for it,” assured Curyer. “This method is new in Canada but there are a lot of paste backfill operations throughout the world where this is run very successfully. We want to have the world’s leading mine from an environmental management perspective, and underground tailings management will be a large component of that.”
According to Curyer, the current mine plan is just the tip of the iceberg, as the company has only explored 10% of the conductor that hosts Arrow. Development capex is estimated at C$1.25 billion (US$950 million). While estimated after-tax payback is exceptionally low at just 1.2 years, the capex size still raises the question of the potential need for joint venture partners. Curyer addressed this: “On the financing side, the net cash flow that will be generated by Arrow will place us into the top 15 mining companies worldwide, just from a single asset – so we have had great support from some of the world’s leading investors […] How we will structure the financing is something that time will tell, but our goal is to put Arrow into production ourselves.”
Denison, the ISR bet
While NexGen’s Arrow deposit is west of the Athabasca basin, close to the Alberta-Saskatchewan border, Denison Mines’ flagship Wheeler River is located on the eastern part of the basin, the more traditional uranium production region. Wheeler River consists of two deposits, Phoenix and Gryphon, and Denison Mines, part of the Lundin Group, has 90% ownership of the project. The plan for each deposit is quite different –while Gryphon is expected to become a conventional mining operation, Phoenix is poised to be the first in-situ recovery (ISR) uranium producer in the Athabasca basin.
With an average grade of 19.1%, Phoenix has 59.7 million lb U3O8 contained in 141,000 mt of probable reserves. It is the highest-grade undeveloped uranium deposit in the world, according to Denison Mines’ VP commercial, Tim Gabruch, who explained the rationale of choosing an ISR production method: “ISR mines typically have lower capital and operating costs given the lack of large-scale infrastructure. There is no open pit or shaft to access the ore body underground, and no mechanical excavation or handling of waste rock to access the ore. Moreover, ISR allows for more flexibility to ramp up or reduce production levels.”
The PFS shows there is potential at Phoenix for ground freezing technology to be used together with ISR, so mining is expected to require little or no discharge of treated effluent to the environment. And, most importantly, there is no need to construct a conventional uranium mill or tailings management facility, noted Gabruch. The result is a competitive capex of C$322.5 million (US$241 million) for an estimated 10-year mine life and an average production of 6 million lb/y U3O8.
With “proof of concept” for the application of ISR at Phoenix demonstrated by independent consulting firm Petrotek Corporation, Gabruch suggested this could be a game changer for the Athabasca basin: “The lowest-cost mining method available for uranium may now be applicable to certain deposits in the jurisdiction hosting the world’s highest-grade uranium deposits. It is a powerful combination.”
Fission, a large discovery
Back to the basin’s west, Fission Uranium holds the Triple R deposit, part of the company’s PLS project. The deposit is not as high grade as Arrow or Phoenix, but it is large in size, with 102.4 million lb U3O8 contained in the indicated category (2.10% U3O8 grade), plus 32.8 million lb U3O8 in the inferred category (1.22% U3O8), figures that should increase with further exploration according to Fission Uranium’s CEO and chief geologist, Ross McElroy: “About 30% of the resource is classified as inferred and thus not yet part of the mine plan. We are confident that we can convert these inferred resources virtually on a one to one basis to the indicated category.”
The company completed a PFS in 2019 that favors an underground only scenario, even if the deposit is quite shallow. According to that mine plan, mine life would be seven years with an average annual production of 11.3 million lb/y. Initial capex would be C$1.18 billion (US$886 million) and operating cost is estimated at C$9.57/lb U3O8 (US$7.21/lb U3O8), with a 2.5-year payback period.
Now, as both NexGen’s Arrow and Fission’s Triple R are shaping up a new mining district within the basin, would it make sense for both companies to share a mill and other infrastructure? “These projects in the Athabasca basin are all capital intensive because the area does not have a lot of infrastructure,” explained McElroy. “Ultimately, we see some advantages by working with NexGen sharing major facilities. Even though we have two separate deposits with two separate owners at this point, there would be many synergies that could be created.”
Fission Uranium already has an off-take agreement for up to 35% of future production with Chinese state-owned utility CGN, who is a 20% shareholder in Fission. The company is now working on the feasibility study and the environmental assessment process at Triple R, with an estimated timeline of four to five years to complete permitting, and a goal to be in production by 2027.
“ISR mines typically have lower capital and operating costs given the lack of large-scale infrastructure. Moreover, ISR allows for more flexibility to ramp up or reduce production levels.”
Finding the next uranium projects
The Athabasca basin is populated by a number of junior exploration companies that have a history in the area, such as UEX Corp (TSE: UEX), CanAlaska (TSXV: CVV) and Purepoint Uranium Group (TSXV: PTU). The latter currently has a total of six projects but is focusing its efforts on Hook Lake, located in the Patterson uranium district, where the company made its Spitfire high-grade discovery. The area, west of the basin, is home to the large discoveries done by NexGen and Fission. “The same geological structures continue across our property for over eight kilometers and we have made several discoveries along the way,” said Chris Frostad, president and CEO of Purepoint Uranium Group.
While Purepoint is the operator of Hook Lake, Cameco and Orano finance nearly 80% of the exploration work there. Frostad provided more details on the project’s next steps: “The Spitfire deposit sits right at our southernmost claim line adjacent to NexGen Energy. Since then, we have moved to the north. In our most recent drill program, we continued to identify what we now recognize as a typical setting, mirroring the geologic model we see in the southernmost deposits.”
Meanwhile, CanAlaska Uranium positions itself as a project generator. Its current flagship project is West McArthur, previously operated by Cameco, that hosts a discovery of over 5% grade close to Cameco and Orano’s Fox Lake deposit. Now, the company is looking for joint venture partners to continue advancing the project. Cory Belyk, COO of CanAlaska Uranium, highlighted the project’s potential: “The West McArthur project has every indication of the presence of a tier-one event with similarities to the Cigar Lake or McArthur River deposits. The mineralization is open in most directions and we have about a dozen holes into the main target.”
The company’s other projects are Cree East, which is at an earlier stage as the high-grade area has still not been identified, as well as some grassroots concessions close to Cameco’s former Rabbit Lake operation.
Finally, UEX has tried to diversify risk during the low cycle by investing in both early-stage and advanced projects, and today has 10 uranium projects either 100%-owned or in joint ventures, as well as a cobalt project. The company is currently focusing on mid-stage resource level projects; at least until the uranium price picks up and makes the advanced projects more attractive. “In uranium, you can invest in producers and developers and move up and down with the price of uranium, or invest in ‘hope-to-hit the big grand slam’ juniors with grassroots projects,” affirmed Roger Lemaitre, president and CEO of UEX Corp. “We are probably the only company that sits right in the middle,” he added.
The company’s main projects are Shea Creek, a joint venture with Orano that would require higher uranium prices; Horseshoe-Raven, a conventional mining opportunity off the edge of the basin; and Christie Lake, where the company already has the drilling permits in place.
Saskatchewan is consistently ranked by the Fraser Institute as one of the world’s top mining jurisdictions. Beyond the exceptional geological potential for uranium, the Canadian province offers other advantages, as Lemaitre of UEX Corp highlighted: “In Canadian mining, the provincial government is supreme when it comes to decision-making and support, and I could not be happier with the way the province of Saskatchewan has responded. We have an annual requirement to do work per hectare and, from an access point of view, we maintain a great relationship with the Saskatchewan government directly and also through the Saskatchewan Mining Association.”
The Athabasca basin already offers a pipeline of high-grade advanced projects of significant size, as well as a history producing uranium using conventional methods. The mining-friendly nature of the province should also favor the permitting process for the potential ISR operation at Denison’s Phoenix deposit, even if ISR has never been used for uranium production in the Athabasca basin. “Every time a new technology is introduced to either a regulator or a community, it creates some angst,” noted Mark Liskowich, principal at SRK Consulting’s Saskatoon office. “It is our duty and the duty of operators to educate communities on the new methods. One of the advantages of ISR is that it does not create a long-term waste product; the uranium mine can be closed for good with minimum environmental concern,” he said.
Recently, large uranium consumers like the US have been increasingly relying on supplies from Kazakhstan, where one state-owned company controls uranium production. This is seen by many as a geopolitical risk that should be mitigated, therefore Saskatchewan should maintain its role as the world’s second largest uranium hub. While Cameco's restart at Cigar Lake is probably the most important highlight for the province in 2020, the next five to ten years promise to be quite eventful in terms of new project development.
Photos in this article courtesy of NexGen Energy and Fission Uranium Corp.