Published on Thursday February 06 2014 (AEST)
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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