Published on Thursday February 06 2014 (AEST)
With so many uranium companies at play in the current market,
it can be difficult to know which ones present investors with the best
opportunities. And while investors are strongly encouraged to do their
own due diligence, it’s worth having a peek at which companies have
landed on our readers’ radar.
By Vivien Diniz - Exclusive to Uranium Investing News
Based on a recent reader request, Uranium Investing News (UIN) reached out to John (Gus) Simpson, executive chairman of Peninsula Energy (ASX:PEN), to learn more about what sets the company apart from other uranium exploration and development companies vying for investor attention.
Peninsula Energy has set its sights on becoming a diversified uranium producer. The company plans to accomplish this feat through the development of its large uranium assets in both Wyoming and South Africa.
UIN: Recently Peninsula Energy was identified as one of the uranium companies our readers are watching. In your opinion, what is it about Peninsula that sets it apart from other companies in its class?
JS: I think two things set us apart. The first is the scale of our deposits. Most teams in Wyoming are looking at production levels of around half a million to a million pounds a year, and we’re looking at 2 to 3 million pounds. We’re licensing our central processing plant to do that.
The second is that we have two project groups. We’ve obviously got Wyoming, as I just mentioned, where we’ve currently got 54 million pounds, but we believe ultimately we’ll have several hundred million pounds.
The other project group is a very large South African projects in the Karoo where we have about 8,000 square kilometers of mineral tenements, 100 million pounds of resources — we believe that there’s probably close to 300 to 350 million pounds within the tenement holding. The scale of that project — if and when it gets into production — will be 3 to 4 million pounds a year for production.
Our projects are big and not something typically you find in a junior. We’ve been fortunate enough to have enormous exploration success in Wyoming, and we’ve discovered 50 million pounds for less than a dollar a pound.
As for South Africa, post-Fukushima AREVA (EPA:AREVA) was unloading of a lot of assets around the world due to a combination of factors, the largest one being the performance of uranium. When they tried to get rid of them in early 2012, there wasn’t much interest, so we managed to do a good deal with them.
UIN: Peninsula has assets in both the United States and Africa. Can you share a little about how these jurisdictions compare?
JS: Obviously the United States is a much more regulated environment but a much more stable environment. South Africa, on the other hand, is one of the world’s great mining economies and subsequently has enormously good infrastructure and a very large pool of skilled labor with expertise in the mining field.
UIN: Being in these different jurisdictions, you also have a fair amount of diversification. How important is diversification of assets in the grand scheme of things?
JS: Diversification is very important. We are trying to model the requirements of utilities — end users of products. For them, it’s all about security of supply. Utilities are looking, in my opinion, for producers that have got geographical and jurisdictional diversity. Within that diversity they want long life and low cost, which reside in first-tier jurisdictions. That diversity and those qualifications, in my opinion, make for very stable relationships.
UIN: Peninsula’s main project, Lance, is located in Wyoming. What is it about the state that makes it attractive for uranium mining?
JS: Wyoming is attractive in that it’s been in continuous uranium production since 1951.The big players are there with Cameco (TSX:CCO,NYSE:CCJ) and Uranium One (TSX:UUU) and Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO) (but it isn’t actually operating). There have been three new mines that have come into production in the last eigthteen months, and several others are in the final stages of permitting and construction. Overall, it’s a very uranium-friendly environment. There is also a long history of successful production from ISR, which is what we’re doing there.
UIN: Speaking of ISR, Marin Katusa recently said that the success stories in the current uranium market will come from companies with the lowest cost of production, namely ISR operations. What are your average production costs?
JS: Our operation costs are about $11 a pound. Our total all-in costs, excluding capital, are sub-$30.
The difference for us and why costs are low — or expected to be lower — compared to other companies, is due of the impact of capital. Because we have a very large resource, 50 million pounds, we’re amortizing the capital cost over a longer period and more pounds.
UIN: What are some of the key features investors should know about the Lance project? What kind of expansion potential does the project have?
JS: Long mine life, low cost, good grade, first-class production team, very experienced production team, very strong shareholder support from groups like Blackrock, Pala and others.
Our planned production is 2.2 million pounds, ramping up over several years. Central processing facility is licenced for 3 million pounds, and our plan is to look for satellite orebodies — of which there are several — within the Powder River Basin that we can incorporate with a separate ion exchange operation and truck loaded resin to our central processing plant. So that being said, we have about a 30 percent capacity for expansion.
With South Africa coming on as a second project probably three or four years behind it, we have the potential there for another three or four million pounds.
And I think that that is how we are perceived by the utilities. As a potential mid-tier producer filling that space that currently is being vacated by Uranium One as a public company.
UIN: Briefly can you tell us a little more about your South African projects?
JS: They’re the next in line for production. We have to go through feasibility, engineering, financing, but there’s a lot of interest in South Africa to provide the funding and uptake for these.
The projects will be mined through conventional open-pit then underground mining, again with a central processing plant. We have a very big holding there, it’s an amazing project.
If you look at our latest presentation, there’s some scale of it. We’ve got three palio channels where we’ve got mineralization occurring over 50 miles for each of them. It’s very heavily mineralized and high-grade material that is near-surface and open-pittable material that you put a decline in and go into. We’re talking between 1,000 and 1,400 ppm.
UIN: Can you help our readers understand a little more about what the nuclear landscape looks like in South Africa?
JS: South Africa only has about two nuclear power stations, and they intend to build another six — which I believe the Russians are lead contenders for.
There’s a requirement of Eskom if they purchase South African fuel. That’s a regulatory requirement in South Africa, but that will not restrict us where we sell it. What’s more important is that South Africa is very well versed in the mineral recovery and mineral sales and has all the infrastructure to facilitate the growth of mining, and specifically uranium. It’s a very good place to be operating.
UIN: So, Peninsula is strategically placed to take advantage of several markets?
JS: I’d say so.
UIN: What else do you have planned for the future?
JS: Our intention is to acquire and build a project in Australia and look into the growing Asian market as well.
One of the biggest assets that we have outside of our projects is our strong production team in the United States, which has unique skills in ISR. We’ve also got a very strong global exploration team in South Africa and Australia.
These teams and these people are going to turn opportunities into success. That’s overlain by a strong board and financial expertise within the group. We think that we are very well positioned to become a major player in the game as the market improves for uranium and for us to have a significant increase in value. We believe that we can ultimately become a multi-billion dollar company and that’s the plan.
UIN: Well, that wraps up my questions. Thank you for taking the time to speak with me.
JS: Thank you.
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