uranium upside - Azarga Uranium Corp.
Transcription
uranium upside - Azarga Uranium Corp.
AMERICA’S NEXT URANIUM DEVELOPER Investor Presentation – June 2015 TSX: AZZ / FRA: P8AA / OTCMKTS: PWURF DISCLAIMER / SAFE HARBOR STATEMENT Certain statements in this presentation are forward-looking statements. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative and grammatical variations) of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. Such forward-looking statements may include, but are not limited to, statements with respect to the future financial or operating performance of the Company and its mineral projects, the estimation of mineral resources, the timing and amount of estimated future production and capital, operating and exploration expenditures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Azarga Uranium Corp.’s (“Azarga” or the "Company”) actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. These forward-looking statements reflect management's current views and are based on certain expectations, estimates and assumptions which may prove to be incorrect. A number of risks and uncertainties could cause its actual results to differ materially from those expressed or implied by the forward looking statements, including, but not limited to: global economic conditions; uranium price fluctuations; public acceptance of nuclear energy and competition from other energy sources; the Company will require significant amounts of additional capital in the future; competition for properties and experienced employees; uranium industry competition and international trade restrictions; possible loss of interests in exploration and development properties; mining and mineral exploration is inherently dangerous and subject to factors beyond the Company’s control; the Company’s mineral resources are estimates; the nature of exploration and development projects; environmental regulatory requirements and risks; currency fluctuations; government regulation and policy risks; public involvement in the permitting process; Native American involvement in the permitting process; political risk; the Company has no history of mining operations; property title rights; dependence on key personnel and qualified and experienced employees; delineation of mineral reserves and additional mineral resources; insurance coverage; dilution from further equity financing and outstanding stock options and warrants; the market price of the Company’s shares; the Company has never paid dividends and may not do so in the foreseeable future; litigation and other legal proceedings; technical innovation and obsolescence; disclosure and internal controls; conflicts of interest; exposure to emerging markets and the resolution of contentions pertaining to the Dewey Burdock United States Nuclear Regulatory Commission license. These forward-looking statements are made as of the date of this presentation and, except as required by applicable securities laws, the Company assumes no obligation to update these forward-looking statements, or to update the reasons why actual results differed from those projected in the forward-looking statements. Additional information about these and other assumptions, risks and uncertainties are set out in the "Risks and Uncertainties" section in the Company's MD&A filed with Canadian security regulators. Certain technical data in this presentation was taken from the technical report entitled “NI 43-101 Technical Report Preliminary Economic Assessment Dewey-Burdock Uranium ISR Project, South Dakota, USA” dated 29 January 2015, prepared by Douglass H. Graves of TREC Inc. and Steve E. Cutler of Roughstock Mining Services (the “Technical Report and PEA”) and is subject to the assumptions, qualifications and procedures described therein. The Technical Report and PEA is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would categorize them as Mineral Reserves. There is no certainty that the results of the Technical Report and PEA will be realized. Mineral Resources that are not mineral reserves do not have demonstrated economic viability. Mr. John Mays, P.E. is the Qualified Person who supervised the preparation of the exploration technical data in this presentation. This presentation shall not constitute an offer to sell or the solicitation of an offer to buy securities. 2 WE… ARE EXPERIENCED MINE DEVELOPERS BELIEVE IN URANIUM UPSIDE OWN THE HIGHEST GRADE UNDEVELOPED ISR URANIUM PROJECT, DEWEY BURDOCK, AMONG PEER GROUP1 ARE PROGRESSING A PIPELINE OF PROJECTS ARE TSX MAIN BOARD LISTED AND RESOURCED TO SUCCEED Notes: 1. Various company announcements and research notes; refer to slide 12 for additional details. 3 MINE DEVELOPERS Alexander Molyneux Chairman and CEO Richard Clement Deputy Chairman John Mays Chief Operating Officer Former CEO SouthGobi Resources (Ivanhoe Group) with 10-years+ prior experience as resources banker Professional Geologist with 35-years+ experience in uranium and former CEO of Azarga Uranium 20-years+ experience in design, construction and operation of ISR uranium mines and formerly Chief Engineer, UrAsia Energy Blake Steele Chief Financial Officer Curtis Church Vice President and Director Former SouthGobi Resources Finance Director and previously with Deloitte in Audit and Financial Advisory practices 18-years mining and exploration experience, 8-years based in Central Asia 4 URANIUM UPSIDE Analysts’ forecast a recovery in Uranium price US$/lb 80 70 Analysts’ forecast Fukushima incident 67 60 57 48 50 39 40 30 Uranium at nine-year low 20 2011 2012 2013 2014 2015 2016 2017 2018 Source: TradeTech for historical spot. Analysts’ forecast is based on average of 16 analyst forecasts as shown in latest available reports (analysts include: BAML; BMO; Cantor; CIBC; CIMB; Comark; CS; Dundee; JPM; Raymond James; RBC; RFC Ambrian; Salman; Scotiabank; TD; and UBS). 5 URANIUM UPSIDE Strong demand growth is now expected at a time when supply has been cut back NUCLEAR MAKES SENSE § § Unlike solar or wind, nuclear supplies reliable base load power Unlike coal, oil or natural gas, nuclear is carbon free URANIUM DEMAND IS GROWING1 § § § 2017 will see nuclear power generation pass its pre-Fukushima high 65 reactors under construction – 59% of them in Asia Demand growth of 4-5% per year to 2020 SUPPLY HAS BEEN CUT BACK § § § Supply reduced 10% in 20142 Mined supply cut back in price downturn – Kaylekera and Honeymoon shutdown, Areva and Cameco on growth moratoria3 Secondary supply from historical deal between Russia and America to down blend Russian highly enriched uranium eliminated Notes: 1. World Nuclear Association. 2. Raymond James research note of 20 May 2015. 3. Company announcements. 6 URANIUM UPSIDE A 40% increase in mined supply is needed by 2020 and prices need to move to achieve that HIGHER PRICES ARE NEEDED US$/lb 100 80 60 40 20 0 80-85 36 Spot § 49 Long-term contract A JPMorgan analysis of March 2015 estimates the average price required to induce meaningful new supply is US$80-85/lb Supply incentive price FUEL CYCLE IS LONG SO MARKETS REACT EARLY Mining / milling UF6 conversion U-235 enrichment Fuel fabrication Fuel loading 12-18 months 7 HIGHEST GRADE UNDEVELOPED ISR PROJECT DEWEY BURDOCK SOUTH DAKOTA, USA 8 HIGHEST GRADE UNDEVELOPED ISR PROJECT What is in-situ recovery (ISR) mining? § § § § § Produces >47% of global uranium Injection wells add oxygen and carbon dioxide to groundwater creating a lixiviant solution in the layer of earth containing the uranium ore Uranium dissolves into the solution Recovery wells pump the solution back to the surface to a processing facility and then returned to injection wells after removal of uranium Monitoring wells are checked regularly to ensure uranium and lixiviant is not escaping the uranium deposit Source: United States Nuclear Regulatory Commission (www.nrc.gov) 9 HIGHEST GRADE UNDEVELOPED ISR PROJECT Why we like ISR so much?... It’s cheaper and more reliable § No movement of rock, no dust or tailings § Average global cash costs are c. 25% cheaper than non-ISR § § § Capital costs per lb of production around 65% cheaper ISR VS CONVENTIONAL – GRADE AND CASH COST COMPARISON USING CAMECO AS A GUIDE Conventional 20 Ave = 17.3% Reserves grade 10 (% U3O8) Ave = 0.1% 0 New projects in Athabasca can be high-grade but in general fail to achieve project economics of ISR Only sandstone hosted deposits with the right hydrological and geological conditions are amenable to ISR ISR McArthur River & Key Lake 30 Cash cost (US$/lb) Cigar Lake Ave = US$23/lb Inkai Nebraska & Wyoming Ave = US$21/lb 20 10 0 Grades of Athabasca assets average 200x more than ISR… BUT ISR has 10% lower cash cost! Notes: Data sourced from Dundee’s Cameco research note of 29 October 2014. Cash cost numbers are 2016’F to take into account when all comparable assets are in steady state production (i.e., after Cigar Lake has ramped up to 8m lb per annum). 10 HIGHEST GRADE UNDEVELOPED ISR PROJECT Dewey Burdock: Location and infrastructure § Edgemont uranium district in south west South Dakota, approximately 60 miles from Cameco’s Crow Butte mine in Nebraska § Mineral rights and surface rights covering approximately 17,800 acres and 13,880 acres, respectively § Well served for infrastructure Sixteen miles from Edgemont, serviced by two lane, all weather gravel road 10 miles Residential / light use power already at site will supply first two years, then 15 miles of 69kV line to be built to nearest substation to provide upgraded power for central processing plant in third year Two 3,000 foot wells to be drilled on site to pump water from the Madison Formation Source: Technical Report and PEA. 11 HIGHEST GRADE UNDEVELOPED ISR PROJECT Dewey Burdock: Highest grade among peers NI 43-101 COMPLIANT RESOURCE § Measured & Indicated: 8,582,000 lbs at average grade of 0.25% § Inferred: 3,528,000 lbs at average grade of 0.05% 0.30 DEWEY BURDOCK2 0.25 Grade (U3O8%) Source: Technical Report and PEA. Only includes ISR amendable resources. Mineral Resources that are not mineral reserves do not have demonstrated economic viability. . HIGHEST GRADE AMONG PEERS1 0.20 0.15 0.10 CENTENNIAL3 0.05 0.00 0 5 10 15 20 25 30 Life of mine project size (lbs) Notes: 1. Peers include: Uranium Energy Corp.’s Golliad and Burke Hollow, Uranerz’s Nichols Ranch, UR-Energy’s Lost Creek and Shirley Basin, and Peninsula Energy’s Lance. Peer grade data is sourced from latest NI 43-101 compliant published average grade for Measured plus Indicated Resources for all except Lance, where the grade was published according to the Australian JORC Code for Measured plus Indicated Resources. Life of Mine project size data comes from the latest published stated life of mine production from each project. 2. Source: Technical Report and PEA; includes some 12 Inferred Resources in production. 3. Source: NI 43-101 Preliminary Assessment Powertech Uranium Corp. Centennial Uranium Project Weld County, Colorado, SRK, 2 June 2010; includes some Inferred Resources in production. HIGHEST GRADE UNDEVELOPED ISR PROJECT Dewey Burdock: 2015 PEA demonstrating robust economics ROBUST PROJECT ECONOMICS1 Annual U3O8 production 1.0m lbs Mine life (incl. two year ramp-up) 11 years Total LOM production 9.7m lbs Initial capital expenditure US$27.0m or US $2.80/lb Cash operating costs - Plant and well field operating - Restoration / de-commissioning - Site management / overhead - Production taxes and royalties US$18.86/lb US$8.50/lb US$1.25/lb US$2.06/lb US$7.05/lb Sustaining capital costs US$14.00/lb Free cash flow pre-tax / post-tax NPV (8% disc) pre-tax / post-tax IRR pre-tax / post tax US$284.2m / US$220.9m US$149.4m / US$113.8m 67% / 57% § Initial capital of US$27m is ‘sector leading’ for a project of this size § Cash costs below peers’ projections from Peninsula Energy, Uranerz and Uranium Energy Corp. § Pre-tax IRR of 67% at US$65/lb longterm uranium price (note: post-Federal tax IRR of 57%) § At US$49/lb uranium, which is current long-term price as assessed by UxC, pre-tax IRR is 38% § Vanadium income has not been incorporated but assays and historical data indicate significant vanadium is present Notes: 1. Source: Technical Report and PEA, which is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would categorize them as Mineral Reserves. There is no certainty that the results of the Technical Report and PEA will be realized. Mineral Resources that are not mineral reserves do not have demonstrated economic viability. 13 HIGHEST GRADE UNDEVELOPED ISR PROJECT Dewey Burdock: Status of key permits Final Source and Byproduct Materials License § § Issued April 2014 ASLB partially dismissed the contentions on NRC license 30 April 2015 § Remaining contentions concerning historical site preservation have a clear process to completion § Expected publication of draft permits on completion of ASLB contentions process § Water Rights Permit Applications complete and recommended for approval § Large Scale Mine Permit Preliminary decision in late-2013 contending that under SD Law, SD will issue permits after federal regulators approve § State hearings could be convened once EPA permit is published UIC Class III UIC Class V 14 PIPELINE OF PROJECTS Summary of projects USA ASIA Dewey Terrace (WY) Savageton (WY) Aladdin (WY) Dewey Burdock (SD) Centennial (CO) Kyzyl Ompul (Kyrgyz) Development projects with NI 43-101 Resources and PEAs Exploration projects with NI 43-101 Resources Green fields exploration 15 PIPELINE OF PROJECTS Centennial: Second project for development NI 43-101 COMPLIANT RESOURCE § Indicated: 10,371,571 lbs at average grade of 0.09% § Inferred: 2,325,514 lbs at average grade of 0.09% Source: NI 43-101 Preliminary Assessment Powertech Uranium Corp. Centennial Uranium Project Weld County, Colorado, SRK, 2 June 2010 PROJECT ECONOMICS1 Annual U3O8 production 0.7m lbs Total LOM production 9.5m lbs Initial capital expenditure Cash operating costs2 Pre-tax NPV (8% discount)3 US$71.1m or US$7.5/lb US$34.95/lb US$51.8m Notes: 1. Source: NI 43-101 Preliminary Assessment Powertech Uranium Corp. Centennial Uranium Project Weld County, Colorado, SRK, 2 June 2010, which is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would categorize them as Mineral Reserves. There is no certainty that the results of the Technical Report and PEA will be realized. Mineral Resources that are not mineral reserves do not have demonstrated economic viability. 2.Includes US$10.63/lb of satellite/well-field development costs. 3. At US$65/lb uranium price and including a 20% contingency on costs and capital expenditure. 16 RESOURCED TO SUCCEED Financial resources and capital structure FINANCIAL RESOURCES Cash and listed securities1 SHARE PERFORMANCE C$/share US$5.7m 0.55 Note: 1. As at 31 March 2015 (last quarterly filing). Includes cash of US$1.7m plus: Black Range Minerals (ASX: BLR) shares at US$1.7m; and Anatolia Energy Shares (ASX: AEK) at US$2.3m. It should be further noted that for accounting purposes the shareholdings in the two ASX-listed companies are considered non current assets. 0.50 CAPITAL STRUCTURE Shares outstanding1 Share price (TSX: AZZ)1 0.45 59.4m 0.40 C$0.375/share Market cap (CAD) C$22.3m Market cap (USD)2 US$18.1m 0.35 Notes: 1. As at 2 June 2015. 2. Based on 1 CAD = 0.81 USD exchange rate. 0.30 1 Nov 14 2 June 15 Source: Quotemedia. 17 RESOURCED TO SUCCEED Investment summary DEVELOPMENT ASSETS WITH COMBINED PRE-TAX NPV >US$200m CLASS LEADING ‘FLAGSHIP’ DEWEY BURDOCK § § Highest grade undeveloped ISR uranium project among peer group1 Robust economics at low uranium prices PORTFOLIO OF PROJECTS AT VARIOUS DEVELOPMENT STAGES § Two economically assessed development projects, two exploration projects with established resources and two green fields exploration projects VARIETY OF POTENTIAL UPCOMMING CATALYSTS § § § § Finalization of Dewey Burdock permitting Off-take or sales agreements over future uranium production Results of geological work on exploration assets Dewey Burdock moving to the construction phase Notes: 1. Various company announcements and research notes; refer to slide 12 for additional details. 18 Corporate office Powertech (USA) Inc. Suite #140, 5575 DTC Parkway Greenwood Village, Colorado USA 80111 International operations Azarga Uranium Corp. Level 5-1, Suite 9, Sun’s Group Centre 200 Gloucester Road Wanchai Hong Kong SAR Email: [email protected] Web: www.azargauranium.com Twitter: @AzargaUranium
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