Forum Energy Metals Corp. (FDCFF)

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Yellowcake to top $80/lb by ’14 – Forsys boss

By: Henry Lazenby
17th May 2012

JOHANNESBURG (miningweekly.com) – Namibia-focused uranium junior Forsys Metals on Thursday said it was rapidly advancing studies to consolidate its Valencia and Namibplaas landholdings to potentially develop the world’s next significant uranium mine.

The Toronto-, Frankfurt- and Windhoek-quoted firm has one of the most advanced uranium exploration projects in the country, and is currently focused on developing and optimising the wholly owned Valencia property, while it is looking to increase its interest in Namibplaas by acquiring the 30% it does not already own.

Speaking to Mining Weekly Online, CEO Marcel Hilmer said the company’s projects were generating significant investor interest in North America, where he was recently on a road show to promote the company’s projects.

Hilmer has over 25 years of management experience with global public and private organisations, specifically in the field of international mergers and acquisitions in Africa, Europe, Asia and Australia. Previously, he spent six years with First Quantum Minerals as a business development executive.

Located in central Namibia, west of the capital Windhoek, the world’s fourth-largest uranium producer's properties are located close to infrastructure such as electricity, water – through a desalination plant – a main trunk road, with a harbour at Walvis Bay, less than 100 km to the west.

Hilmer said mining accounts for about 8.8% of the country’s gross domestic product, and up to 44% of its merchandise exports, such as uranium, gold, diamonds, zinc, copper and lead. Namibia is an attractive mining jurisdiction, owing to its stable multiparty democratic political environment and its stable business environment.

RESOURCE DEVELOPMENT

Forsys Metals initially focused on its Valencia uranium oxide (U3O8) project and had acquired a 25-year mining licence, making it one of only two fully permitted development-stage projects in the country, and completed a heap leaching optimisation process.

The Valencia project has an after-tax net present value of about $273-million, with about 77.2-million pounds of uranium in the measured and indicated categories.

Forsys plans to develop the Valencia deposit through openpit mining, owing to the low strip ratios necessary to access the ore.

Meanwhile, the Namibplaas uranium project needs to “catch up”. It is situated seven kilometres from Valencia, with a 2011 maiden resource report stating that the resource could hold more than 41-million uranium-equivalent pounds in 169-million tons of ore. Work continues and an updated resource report is expected by the third quarter.

Currently Forsys is engaged with Phase 2 drilling on the Namibplaas deposit, which it says is progressing to schedule and within its C$2.5-million budget.

“There exists significant potential to link the two projects and develop them as one, with processing facilities located centrally to the two sites. We expect the consolidated project could yearly produce at least six-million pounds of the nuclear fuel,” Hilmer said.

He had previously stated Forsys was considering building a seven-kilometre conveyor belt to transport ore from Namibplaas to Valencia, where the mill would be located.

The company is also looking at updating the resource at Namibplaas before starting work on updated feasibility studies at both projects, consolidating them as one.

“We are developing both the Valencia and Namibplaas deposits to expand the potential resource to more than 85-million pounds of uranium. A low level of additional capital expenditure would be needed to accommodate the increased throughput from Namibplaas and additional potential expansion zones at Valencia.

“We expect a definite feasibility study for both projects by 2013 and project development to start from that time onwards,” he said.

He added that the company had enough cash to see it through to the next deliverable, which is a feasibility study.

SUPPLY CONSTRAINED

Hilmer foresees a significant uranium supply gap to the world’s nuclear power generators. The current global requirement for uranium is 180-million pounds a year, while production is only at about 140-million pounds a year. This gap is forecast to increase over the next decade, particularly after the supply of mixed oxide fuels from military warheads from the US and Russia ends in 2013/14.

The number of reactors worldwide is also forecast to increase 30% by 2020. Currently there are 435 reactors in operation, while there are 62 under construction, 160 more planned and 329 proposed. China’s nuclear-power capacity alone is expected to double to 80-million kilowatts.

“This may also result in higher prices for uranium in the medium term, possibly costing more than $80/lb from 2014 onwards,” Hilmer said.

Yellowcake, another name for U3O8, has hovered around $51/lb over the past two months.

To secure future supplies, China has shown great interest in Namibia’s uranium sector in recent months, snapping up Extract Resources and its Husab project. Hanlong, last year failed in an attempt to buy Bannerman Resources, which owns the Etango uranium project.

http://www.miningweekly.com/article/yellowcake-to-top-80lb-by-14-forsys-boss-2012-05-17